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Classic Car Collector Sues Car Dealer

LONDON LAW FIRM HEALYS LLP SENDS SERIOUS WARNING TO THE CLASSIC AND COLLECTORS CAR WORLD

More deliberation and responsibility needs to be brought to transactions by dealers, buyers and sellers in the classic car world, say London Solictors Healys LLP. Following the distressing news which was announced yesterday of the appointment of administrators to the troubled historic car sales, restoration and preparation business JD Classics which had publically been perceived as a beacon in the sector.

Clive Robertson leader of the firm’s classic car group said: “The administrators, Alvarez & Marsal are reportedly hoping to find a buyer for the business. In the meanwhile, there will be considerable concern amongst a diverse group of parties who will be affected, including staff, investors, lenders, trading partners and not least, those with cars at the Mayfair and Maldon premises for sale or restoration.”

Clive expanded upon the issues faced by JD, and by extension their customers and suppliers: “There had been rumours of financial irregularity at the business which were apparently confirmed in March of this year when judgement in the case of Michael Tukes v JD Classics was given, there being several cases lodged by the same claimant still pending. It may be some time before the full picture emerges, so it could be premature to be seeking to know what lessons, if any, can be learnt, but it may be no more simple than saying, that in such a relatively new and fast-growing industry, balance and reason may have been left behind, so that more deliberation and responsibility needs to be brought to transactions by dealers, buyers and sellers.”

Clive concluded by re-stating that due diligence simply has to be the key in such high value and high profile activities: “There has probably not been a more important time to make use of skilled and established legal advice. You’d not buy a house without a conveyancing solicitor, so why spend, potentially, more money without similar professional advice and guidance?”

£40m Spent on classic cars

Mike Tuke, an engineer, began investing when he sold his pioneering prosthetics company, Finsbury Orthopaedics, in 2009 for over £60 million.

The High Court heard he was “not overly impressed” with returns on standard investments and so after a “long and amiable meeting” with Derek Hood, an Essex car dealer, he decided to put his cash into classic cars.

Mr Tuke says the dealer told him classic cars were “better than banks” and that he “could double his money”.

Between December 2009 and March 2013, he bought 40 iconic motors,

including a Jaguar XKSS, Jaguar Group C racing cars, a Ferrari 250TR and Lister Knobbly, at a total cost of almost £40 million.

Mr Tuke, from Guildford, is now suing Mr Hood and his company, JD Classics Ltd, for around £9 million. Sean Brannigan QC, for Mr Tuke, said the businessman was determined to prove that Mr Hood is a “serial fraudster”.

Mr Tuke claims that, at their December 2009 meeting, Mr Hood agreed to “source” cars for him for a 10 per cent commission on profits.

In one example, he claimed Mr Tuke paid £254,000 for what he was told was a “very rare” AC Aceca Bristol Competition car in the belief that he was dealing with a third-party seller through JD Classics, but the court heard JD Classics in fact “owned the car itself”, having paid just £84,000 for it only three weeks earlier.

Mr Hood and JD Classics deny any wrongdoing. Mr Hood also denies he ever agreed to act as Mr Tuke’s “sales agent”, and says that JD Classics was always dealing “on its own account”.

 

Success against JD Classics Ltd

Mr Michael Tuke instructed Michael Grenfell to institute multiple proceedings against J D Classics Ltd and Derek Hood the first case of which (against the Company only) was concluded successfully on the 18th of April 2018.

In 2009 Mr Tuke sold his highly successful business, and had £40m to invest in Classic Cars.

He instructed Mr Derek Hood of J D Classics Ltd as a professional advisor and his agent for buying and selling cars on his behalf. Mr Hood advised him that he could double his money.

Over the next few years Mr Tuke bought and sold some 41 classic cars on the advice of Mr Hood, and, at a time when the values of classic cars was increasing, suffered catastrophic losses which nearly bankrupted him.
Mr Hood on behalf of J D Classics Ltd denied that he was Mr Tuke’s agent, or that he should produce any documents to explain fully and transparently details of the various transactions.

After we carried out detailed enquiries and analysis of thousands of  documents, we issued proceedings against J D Classics Ltd to have that issue decided. Subsequently three further sets of proceedings were issued against J D Classics Ltd, in two of which fraud and deceit are alleged against both the Company and Mr Hood, and similar allegations are being added to the third claim. Some 18 cars are involved.

The Agency case was decided in Mr Tuke’s favour as mentioned above. Although not part of that case the Judge nevertheless observed that Mr Hood had been guilty of deliberate and dishonest conduct in relation the the sale of an XKSS on Mr Tuke’s behalf.

The other three cases are to be consolidated and heard at a later date.

The Approved Judgment is available below.

We instructed Sean Brannigan QC and Alex Wright, both of 4 Pump Court chambers, to represent Mr Tuke in court.

This case illustrates how important it is for both dealers and customers to establish at the start of a relationship exactly what that relationship is, and to confirm it in writing. An agent has a duty of absolute fidelity and openness to its principal and must not make a secret profit at the principal’s expense.

Summary

Where a claimant had served a notice to prove after the original deadline for service of witness statements, the notice was out of time, pursuant to CPR r.32.19(2)(a). The fact that a judge struck out the bulk of the witness statements which had been served and set a fresh deadline for the service of replacement statements did not have the effect of setting aside the claimant’s deemed acceptance of the documents’ authenticity which occurred once the original deadline passed.

Facts

The court conducted a pre-trial review of the claimant’s claim seeking delivery up of certain documents, an account, and an order for payment of the sum shown on the account.

The claimant had an interest in classic cars. The defendant company was a classic car dealer and restorer. The claimant’s case was that the defendant, through its owner and directing mind (H), had acted as his agent for the buying and selling of 19 high-value classic cars between 2011 and 2015. He alleged that, in a meeting in December 2009, H had agreed that the defendant would: source cars for him to purchase and provide advice in that respect; undertake servicing, maintenance and restoration works to those cars; find potential buyers for his cars and provide advice in that respect. It was his case that the defendant’s remuneration would be a commission of 10% on any profit made. The claimant did not make the sort of profits that he thought H had promised. In 2016 he requested that the defendant deliver up to him all documents relating to the 19 sold cars. The defendant declined to do so, on the basis that no agency relationship existed. It was the defendant’s case that it had sold the cars to the claimant in the first instance, then the claimant had sold the cars back to the defendant; there were no third parties involved and at no point did it sell any of the cars on behalf of the claimant. As part of its case, the defendant had relied upon certain invoices which it said it had sent to third parties or to the claimant. The claimant’s case was that he never received a number of the invoices. He served a notice to prove on 7 February 2018, requiring the defendant to prove certain invoices. The defendant’s solicitors responded claiming that the notice had been served out of time, as it should have been served by 24 August 2017, which was the “latest date for serving witness statements”, pursuant to CPR r.32.19(2)(a). The claimant applied to the instant court seeking a declaration that the notice to prove was validly served in time, or alternatively an extension of time to serve the notice to prove and relief from sanctions. He also applied to cross-examine H on alleged fraudulent misrepresentations. The defendant applied for reverse summary judgment on the entire claim, arguing that in the absence of any evidence that H on behalf of the defendant had agreed to an agency relationship, the claim had to fail.

Held

Defendant’s application for reverse summary judgment – There was no express agreement to the effect that the defendant would act as the claimant’s agent. However, an agency agreement could be created by implication from the way in which the parties behaved, Branwhite v Worcester Works Finance Ltd [1969] 1 A.C. 552 considered, Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] A.C. 1130 followed. There was at least a real prospect that an observer would consider that what the parties agreed at the December 2009 meeting was an agency. Furthermore, there was sufficient evidence in the emails passing between the parties from which it could be inferred from their subsequent conduct that the claimant and H on behalf of the defendant had entered into an agency agreement. It would be open to the trial judge to conclude that at the relevant times the defendant through H was not buying and selling cars on its own account, but was doing so on behalf of the claimant as his agent. The defendant’s application was dismissed, Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch) applied (see paras 27-38, 71-72 of judgment).

Claimant’s application to cross-examine H – It would be proper to allow the claimant to cross-examine H on the alleged fraudulent misrepresentations made by him in relation to the provenance, authenticity and value of the cars. The allegations were material because they arose out of the same relationship with which the instant claim was directly concerned. H’s credibility was squarely in issue: it was proper that it be tested by reference to material which was available which went to that issue (paras 73, 84-89).

Claimant’s application re notice to prove – The claimant had argued that, on 1 February 2018, a judge had struck out certain witness statements and had ordered that any further witness statements be served by 20 February; accordingly, the notice to prove was in time, pursuant to r.32.19(2)(a), because where more than one round of factual witness statements was contemplated, then the “latest date for serving witness statements” coincided with the date for serving the final round of those witness statements. That argument had to be rejected. The judge’s striking out of the bulk of the existing witness statements did not have the effect of setting aside the deemed acceptance by the claimant of the invoices’ authenticity which occurred once the date of 24 August 2017 passed. However, it was appropriate and in the interests of justice to extend time for service of the notice to prove under r.3.1(2)(a) and to grant the claimant relief from sanctions under r.3.9 (paras 108-113).

Applications granted in part.

Full Judgment Tuke v JD Classics Ltd

 


Sources:

  • Healys is a Limited Liability Partnership, fully regulated by the Solicitors Regulatory Authority and operating from offices in the heart of London as well as on the South Coast in Brighton.
  • Wilmot & Co Solicitors LLP. 38, Castle Street, Cirencester, Gloucestershire, GL7 1QH, DX 39417 Cirencester
  • Maitland Chambers. 7 Stone Buildings, Lincoln’s Inn. London WC2A 3SZ
  • Telegraph Media Group Limited
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