Forthright Finance Limited v Ingate and Carlyle Finance Limited
Court of Appeal 14 May 1997

In 1990, Mrs Ingate agreed to buy an Austin Metro from a car dealer. The deal was financed by a hire-purchase agreement with Forthright Finance. A year later, she went to another dealer, Matthew Phillipsons Limited in Cardiff, to buy a Fiat Panda. The salesman undertook that, if she bought the Panda, they would take the Metro in part-exchange, and would discharge the balance of money due to Forthright Finance. (This made no difference to the deal on the Panda, because the balance of credit outstanding was almost exactly equal to the value ascribed to the Metro.) Mrs Ingate wanted the new finance agreement to be with Forthright, but in fact the salesman introduced her to a conditional sale agreement with Carlyle Finance.

The dealer subsequently went into liquidation, without settling the £1992 outstanding with Forthright Finance. Forthright then took proceedings against Mrs Ingate, and consent judgement entered, but stayed pending the outcome of third party proceedings against Carlyle Finance. Mrs Ingate won these in the County Court, but the finding was reversed in a subsequent appeal - this led to the current hearing.

The findings at the lower court clearly show that, if Matthew Phillipsons had not agreed to purchase the Metro from Mrs Ingate and discharge the balance to Forthright, she would not have entered into the conditional sale agreement with Carlyle. Further, in the course of argument during the current hearing, it became clear that the value ascribed to the Metro (£2000) applied only if the sale of the Panda was made. If she had not agreed to buy the Panda, it is clear that they would have offered considerably less. It follows that the sale of the Metro was an integral part of the transaction.

Section 56(1)(b) clearly has a restriction - in that not all negotiations are deemed to be made with the creditor, but only negotiations in respect of "goods sold or proposed to be sold by the dealer". However, the Act does not define the extent of such liability. Looking at the historical background, the Consumer Credit Act 1974 does not follow the narrow definition of antecedent negotiations in the Hire Purchase act 1965, and clearly should be interpreted widely.

Whether negotiations are caught by Section 56(1)(b) is a matter of fact in any case, and here there is no doubt that all negotiations related to one transaction. Accordingly the finance company is liable to discharge the debt.