Motor Credits (Hire Finance) Ltd v Pacific Motor Auctions Pty Ltd

Motor Credits (Hire Finance) Ltd (the plaintiff) brought an action against Pacific Motor Auctions Pty Ltd (the defendant) in the Supreme Court of New South Wales. The dispute concerned the plaintiff's claim for damages for conversion of a motor vehicle. The plaintiff alleged that the defendant had wrongfully sold the vehicle, which had been hired by a third party, Mr. A. J. Smith, under a hire-purchase agreement with the plaintiff. The defendant, a motor auctioneer, had sold the vehicle on behalf of Mr. Smith, who had purported to sell it to the defendant.

The central legal issue before the Full Court of the Supreme Court of New South Wales was whether the defendant's actions in selling the vehicle constituted conversion. This required the court to consider the nature of the plaintiff's title and possessory rights under the hire-purchase agreement, and whether the defendant's sale, acting on the instructions of the hirer who was in default, had interfered with those rights to such an extent as to amount to conversion. The court also had to determine if the defendant had acted in good faith and without notice of the plaintiff's rights, and if such factors were relevant to the defence of conversion.

The court held that the plaintiff, as the owner of the vehicle under the hire-purchase agreement, retained title and a right to possession, even though the hirer was in possession. The defendant, by selling the vehicle without the plaintiff's authority, had exercised dominion over the vehicle inconsistent with the plaintiff's rights of ownership and possession. The court rejected the argument that the defendant's good faith or lack of notice of the plaintiff's title was a defence to conversion, stating that conversion is an intentional tort, and the intention required is the intention to do the act which constitutes the conversion, not the intention to convert the goods. The court found that the defendant had intentionally sold the vehicle, thereby converting it.

The Full Court allowed the plaintiff's appeal, setting aside the judgment of the trial judge and ordering that judgment be entered for the plaintiff for the value of the vehicle.