When two innocent collectors each paid £1 million or more to a ‘rogue’ classic car dealer for the same McLaren Formula 1 racing car, only one of them could obtain good title to the vehicle and the other had to lose his money, the High Court has ruled.
The dealer had appeared a plausible, charming and well-connected individual and no one had doubted his honesty. Using an alias, he had purchased the McLaren from a Californian company for £950,000 before selling it on for £1 million to a businessman (buyer A) with whom he had had substantial dealings in the past.
Following the McLaren’s transportation to England it was held in storage for some time before the dealer sold it on to a classic car dealership that re-sold it to another collector (buyer B) who paid £1.2 million for it. Due to the dealer’s dishonesty, both buyer A and buyer B had paid in full for the McLaren and each claimed good title to it.
Ruling in favour of buyer B, the Court rejected buyer A’s plea that the dealer had bought the McLaren in California as his agent and that he (buyer A) was the undisclosed principal in the deal. The Court described the nature of the business relationship between buyer A and the dealer as ‘truly bizarre’ and the absence of any documentation to evidence their transactions as ‘astonishing’.
Despite his deceitful use of an alias in the Californian deal, the Court found that the dealer had purchased the McLaren in his own right and had obtained good legal title to it. He had power to pass title to the car to third parties and the equitable title that buyer A had obtained was voidable under the law of California.
The dealership and buyer B were both bona fide purchasers of the McLaren who had acted in good faith. The dealership had neither actual nor constructive knowledge of buyer A’s interest in the car and buyer B, whose honesty was unquestioned, had obtained good title by paying full value for it. It was ‘unfortunate’ that buyer A had lost his money but the only cause of action open to him lay against the dealer who had ‘duped and swindled’ him.