Christopher Waite v Paccar Financial Plc  EWCA Civ 901
The Court of Appeal has recently confirmed, in a dispute over a hirer's liability following sale of an asset after expiration of a period of hire, just how important it is to stick to the terms of your own agreement.
Paccar Financial Plc (Paccar) entered into a hire agreement (the agreement) with Mr Waite (Waite) in respect of a lorry. Under the terms of the agreement, the lorry could be sold at the end of the period of hire and Paccar could appoint Waite as its sale agent, on the basis that:
- The vehicle must be sold for business use without the benefit of any warranty, representation
- Waite must indemnify Paccar against all losses, damage, costs, claims and expense arising out of the sale (including legal fees) on a full indemnity basis in connection with any proceedings against Paccar brought by any purchaser.
At the end of the period of hire, Mr Waite found a buyer for the lorry. However, the actual sale was executed between Paccar and another finance house (the financer) (who was financing the purchase on behalf of the purchaser (the purchaser).
Following the sale, the purchaser complained to the financer that the lorry was defective and issued proceedings against the financer. Paccar was made aware of the proceedings and made a payment towards the settlement of the purchaser's claim. In turn, Paccar issued a claim against Waite seeking reimbursement of this payment under the terms of the agreement (in particular, the indemnity clause summarised at point 2 above).
The issue was whether Waite was obliged to indemnify Paccar.
The Court found that although the sale of the lorry had not been concluded by Waite acting as Paccar's sale agent, both parties had conducted themselves as if the sale had been concluded in accordance with the terms of the agreement, as summarised at points 1 and 2 above. Accordingly, the parties were estopped from contending that these terms did not apply. Accordingly, Paccar was able to rely upon the term summarised at 2 above but likewise, Waite was able to rely upon term 1 above.
The Court concluded that the sale of the lorry was therefore made without warranty as to condition of the lorry and it followed that any payment made by Paccar to the purchaser could not, as a matter of law, have arisen out of the sale. Accordingly, Mr Waite was not liable to indemnify Paccar.