Wilmots Litigation succeed in McLaren F1 title dispute

MR ROBERT GRESHAM GRAY v  MR RICHARD SMITH 2013

This is a brief summary of a case in which Wilmots Litigation represented Richard Smith, defending a claim brought against him by Robert Gray. There were 2 other Defendants, JMPC Sales Ltd, which was dismissed early from the case, and Richard Edwards who took no part in the proceedings.

Mr Gray is a rich businessman living at Fawley in the south of England.

Mr Gray had become acquainted with one Richard Edwards, an entrepreneur and (unknown to Mr Gray) an undischarged bankrupt. Edwards had a detailed knowledge of the classic car market. Mr Gray decided that he would like to invest some money in a classic car collection with the hope of some tax free appreciation, and in 2008 gave carte blanche to Edwards to buy cars for him in the UK or abroad of a type that were likely to appreciate. Over the period of 2 years or so that this occurred Mr Gray gave between $11-12,000,000 to Edwards to use more or less as he wished. He did not see the cars that he was buying or ask for documents relating to them. His intention was in due course to complete garage premises at his home and have them moved there.

Edwards did indeed buy a number of cars but on some occasions he sold the cars to third parties and pocketed the proceeds, and on others he didn’t buy the car at all, and simply pocketed Mr Gray’s money.

One car that he bought using Mr Gray’s money was a McLaren F1, chassis 19R. He told Mr Gray that this was being sold by a Mr Brokaw in America and that it would cost him £1m. In fact the price was £950,000, the difference being pocketed by Mr Edwards and Mr Brokaw. Edwards fabricated invoices and emails from Brokaw and sent them to Mr Gray to persuade him that the car had been bought in his own name, whereas in fact it had been bought by Edwards (in the fictional name of Peter Williams, pretending to be the beneficiary of a trust fund, with a PA and trustees with unlimited resource to funds, all of which was false) from Symbolic Motor Company in California, who owned the car.

The McLaren, along with others was shipped back to the UK and held by CARS UK at their bonded warehouse. Notwithstanding his borrowing huge sums from other people, Edwards was continually short of money and had to borrow money to complete other transactions with Symbolic, as a result of which the cars were held in the bonded warehouse to the order of Mr Regis who had advanced money on the McLaren and other cars. Once Mr Regis’s loan had been paid off, Edwards sold the car to a respected dealer, Joe Macari, who in turn sold it to Richard Smith.

Mr Smith was a novice in the purchase of classic cars and employed solicitors to investigate the title. They found nothing untoward and Mr Smith duly purchased the car.

About a year after the purchase, Mr Gray tumbled to the fact that a number of the cars which he had been buying through Richard Edwards were missing and Edwards had no explanation as to their whereabouts. Eventually the house of cards came tumbling down and Mr Gray realised he had been defrauded. He traced a number of the cars and got one or two of them back. However when he tried to reclaim the McLaren from Mr Smith, Wilmots Litigation was instructed by Mr Smith to resist the claim.

The matter ended up in the Commercial Division of the High Court before Mr Justice Cooke. Evidence had to be given as to title in the USA and US lawyers were flown over to give that evidence.

In the States, as in the UK, the law has developed so that where one party can be shown to have been reckless or careless, and the other innocent, the law tends to prefer the innocent. In this case however there was a tortuous legal thicket, both in the States and the UK, which had to be negotiated before this conclusion could be arrived at.

The Judge found that the arrangements which Mr Gray had made with Edwards were truly bizarre. There were no accounts of any sort;  in one case Mr Gray did not even know the colour of the car which he had bought, and never asked for any documents of title or other documents as evidence that the cars had been bought. Mr Smith on the other hand had been cautious throughout, had taken an expert with him to examine the car, had bought it from a reputable dealer and had used a solicitor and had paid full price for the car.

In the circumstances therefore, he Judge rejected the claim by Mr Gray to recover the car and awarded title in the car to Mr Smith, and moreover awarded full costs in Mr Smith’s favour, to be proportioned on an indemnity basis recognising the unsatisfactory way that the case had been conducted by Mr Gray’s former solicitors.

Points of significance;

1. If you are going to check out the title of a classic car, go back through as many owners as you can until you are absolutely satisfied that there are no problems in the history.

2. Ironically, if Mr Smith had done no investigations at all, he would have been equally protected. The difficulty is that if it had turned out that the car had been stolen (rather than being bought with somebody else’s money) Mr Smith would have had no title at all and the person from whom it had been stolen would have been entitled to recover it. It is important therefore that proper investigations are made. This firm is frequently employed for such investigations and have on a number of occasions discovered problems in the title which have terminated any deal.

 

3. When buying a classic car make sure that you do not part with any money until you have made proper arrangements for possession of the car immediately the money is handed over.

4. Best not to use an undischarged bankrupt as your agent.