GETTING STARTED
Somewhere around 1989, at the height of the boom, and having enjoyed the paperwork side of running a Business Expansion Scheme company which bought and sold V12 Ferraris, I decided to try building a legal practice in the old car field. I held myself out as an expert in expensive car transactions. After three deals I probably was an expert, because no other lawyer to my knowledge was doing this. After ten deals I became the world's expert - all of which is fine, as long as you don't start believing your own propaganda.
WHO NEEDS A LAWYER FOR CARS?
So, you may ask, why would you need a lawyer when buying or selling an old car? My reply is to pose another question: if you were dealing with an estate agent and agreed to buy a house they had on their books for 500,000 pounds, would you simply write a cheque in favour of the estate agent? Of course not, the agent would ask who were your solicitors, the vendor's solicitors would contact yours, and the matter would proceed, with all the normal searches, enquiries and formalities, to exchange of contracts and completion.
If we examine why this is, the main answer is TITLE. Your solicitor's primary task is to determine who is the legal owner of that property, because only the legal owner can pass good title to you. By definition the agent does not own the house. If you simply paid the price to the estate agent, you would not get good title to the property. Your lawyer will want to check who is the legal owner (normally registered at HM Land Registry), make sure that all mortgages or other charges registered against that title are released, and ensure that against payment of the price a transfer document is signed by the person who genuinely owns the property.
The same principles apply to buying cars. Only the legal owner of the car can pass title to the buyer, either by giving a receipt or bill of sale for the price paid, or by the owner's authorised agent doing so on his behalf. Unfortunately, when the DVLA computer-based vehicle registration system was set up by the British Government in the late 1970s, they missed the opportunity (which most sophisticated countries have taken) to create a system of registered title and mortgages as to cars. We all know that the DVLA V5 registration is not a document of title. So why do Buyers rely on it, without independent verification? And, why do experienced business people frequently pay substantial sums to car-dealing middlemen, without checking that the dealer really has authority to sell the car, and that the money will reach the legal owner, so that title will pass?
AVOIDING EXPENSIVE MISTAKES
Whether you are planning to spend 10,000 or a million pounds on a car, there are many ways in which you can slip up and make an expensive mistake. When you negotiate with a car dealer, how do you know that he has the owner's authority to sell the car? He might simply be looking after it for someone who is abroad. Then again, how badly will you feel if you pay the price to the wrong person? For instance what if the car really belongs to a leasing company, or is the property of a company, and the registered keeper is a former director who never handed it back?
Or what if the car is registered in the name of the 80 year old father who still looks after it, but 15 years ago he gave the car to his son by deed of gift? The father then fell out with his son, who will make your life Hell when he discovers that his car is gone, and the old man has given away the money to his former mistress. Or what if you buy a car which turns out to be a complete fake; or there are two cars of the same chassis number, and the genuine car of that identity turns up in Japan, and you have bought the clone? In this last situation, what constitutes the genuine car is a fascinating subject, too detailed for this article, but generally the owner of the car that can show continuous history under that identity will win the day. Suffice it to say that the lawyer's task in representing buyers is not only to act as scribe and help to get the deal done quickly and smoothly, but also to avoid these big mistakes.
Let me give you an example of a typical problem deal: a sports racing car arrives in Italy for a rally; the non-European owner is persuaded to sell it by a bill of sale to a European dealer; that dealer is acting as agent for a secretive Italian collector, who insists that all paperwork be in the dealer's name. Two years later, with the Italian's approval, the dealer negotiates a sale of the car to a buyer, who agrees to pay the price to the dealer, but only after the car has left Italy, because the import VAT was not paid on the car's entry into Italy, and he does not want it stopped at the Italian border. However, the Italian will not let the car out of his garage until the money is in his account. Impasse!
IF IN DOUBT, PUT IT IN WRITING
We all know that the seller (whether dealer or private individual) will be tempted to make statements about the car he is selling which may, shall we say, stretch the truth. In advising the buyer, the lawyer will seek to ensure that the seller's persuasive verbal or email statements become contractual undertakings, on which the buyer can not only rely, but for which he can in theory pursue the seller, if they turn out to be incorrect. For instance, the seller may say that the engine was rebuilt 2000 miles ago and the gearbox is fully reconditioned. Generally a mechanical inspection will not totally verify the truth of these statements unless the internals are inspected, which normally a seller will not allow. However, if those statements become conditions of the written contract, the buyer will have a remedy in breach of contract against the seller, if it turns out that either statement is incorrect. In practice the buyer will probably not want to sue, if a written statement turns out to be untrue, but the benefit to the buyer of demanding the statement in writing is that often this process will dig out the real truth.
Where the value of a car lies in its apparent provenance, particularly the originality of its components and the competition or ownership history of that car, it becomes especially important to convert the 'sales' statements into contractual terms. The Seller may state, say, that the Alfa Romeo he is selling was entered by Mussolini's chauffeur for the 1933 Mille Miglia. This statement may be very difficult to verify in the short timescale before the buyer must make up his mind. However, if it is turned into a contractual warranty, and it later turns out to be incorrect, the buyer will have a remedy, including perhaps the right to rescind the contract and get his money back, provided that the seller can still be found and still has money! What normally happens, when the buyer asks for a contractual warranty that "this car was entered by Mussolini's chauffeur..." is the seller backs off, and qualifies it by saying: "to the best of my knowledge this car was entered by...", at which point the canny buyer will negotiate a reduction in the price!
ACTING FOR THE SELLER
So much for buying, how can a lawyer help someone selling a historic car? The main issue here is to ensure that the Seller does not part with physical possession of the car or its documents until he has received cleared funds, and that he avoids giving any statements about the condition of the car that can not be verified or justified. Confidentiality of the price is often important to a seller. While it is often said that buying a car is much easier than selling it, the opposite is true on the legal side if you are selling, just stay tough!
DISPUTES
I much prefer the deals, because at the end of a deal everyone is happy. After a dispute, generally no-one is happy. However, disputes happen and need to be dealt with. Therefore, as the saying goes, litigation is part of the territory. As in most fields of activity, disputes are not usually about a principle, or honour for its own sake - for which in the case of a car read 'originality' or 'provenance'; generally disputes are about money. Examples would be: an agent sold a car, and failed to account to the owner for the proceeds; a car was sold as an original Formula 1 racing car, when in fact it only ran in period in Formula 2; or a restorer agreed a fixed price of 60,000 pounds for a body-off rebuild, and while the car is a long way from being finished the bills already total 110,000 pounds.
COST
We all know that lawyers are expensive I certainly would not want to pay for my own services at my hourly rate. Generally our work is charged for by reference to time spent, not value of the asset. Buying a 10,000 pound MGA is not much less complicated than a 10M pound Ferrari, mainly because the problems the lawyer has to deal with are rarely related to (let alone caused by) the cars themselves. Far more likely they are caused by the people involved. I normally reckon 1500 plus VAT as the minimum charge for acting for a buyer in a straightforward and quick high-value car deal. When it gets messy, lengthy or tightly negotiated this can often rise to 4/5,000 pounds, and the really difficult transactions can be three times this. However, even this pales into insignificance, when compared to the downside of paying a king's ransom to drive away your heart's desire dream machine, and then discovering that the dream machine belongs to a finance company, and you have paid a fraudster now living (on your money) in Guatemala.
Now established as a very successful lawyer specialising in historic vehicles and as an author on the subject, Martin Emmison has been a car nut since early childhood. At aged three he escaped his mothers clutches, toddled the 200 yards to the A12 main road, and crossed into the middle of the nearest roundabout. Clutching the circular railings, he stood fascinated as the cars and lorries sped past on their way to London. His imminent demise was averted by a kind soul who thought that he might be safer at home with his red faced mother. His career as a historic vehicle lawyer started in 1989 when he combined his legal knowledge and passion for collecting exotic cars. He was on his way to becoming one of the worlds leading experts in the field.
Martin is a partner in the London law firm Goodman Derrick specialising in transactions and disputes related to historic cars. Contacts: +44 207 421 7918; email: memmison@gdlaw.co.uk
The following articles are by Martin Emmison, partner in Goodman Derrick LLP solicitor, first published in Sports Car Market magazine.
FIA Historic Technical Passport
FIA Heritage Certificate
