HPI checks: how safe are they?

A recent court case has again highlighted the limitations of HPI checks. Although the system operated by HPI Limited for checking a used vehicle is not stolen, written off, or still subject to a finance agreement is incredibly useful, it is not foolproof, warns Brian Evans, of Lanyon Bowdler Solicitors.

In June 2007, Robert Clifford transferred ownership of some motorbikes to a finance company in order to raise funds on them. He kept possession of the bikes. In breach of his agreement with the finance company, he sold the bikes to a motorbike dealer called Wyder Group Limited which then sold them on to other people.

Brian Evans says “When Clifford defaulted on the terms of his agreement with the finance company, they tried to repossess the bikes. Of course, Clifford no longer had them, so instead they sued the dealer for compensation. They said, under the Sale of Goods Act, the dealer did not obtain ownership of the bikes because Mr. Clifford did not have the owner’s authority to sell them. The dealer argued that by doing an HPI check it had done all it could to verify ownership, and that because the finance company had not registered the bikes with HPI, they should lose their right to claim. Unfortunately for the dealer, in 1977 the House of Lords decided that because there is no legal duty on a finance company to register agreements with HPI the fact that they failed to do so could not be relied on by the dealer to avoid their claim, and that buying a car after receiving a clear HPI check was a ‘reasonable business risk’ for the dealer to take. The court in 2008 followed that decision and Wyder Group had to pay the finance company the value of the bikes it had sold.”

“Dealers need to be aware of this possible risk”