The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas needs an "ironclad" vehicle title system with "more teeth" to better protect consumers from unscrupulous second-hand auto sellers, major dealers urged yesterday.

Fred Albury, the Bahamas Motor Dealers Association's (BMDA) president, and other members told Tribune Business that a major loophole in the Road Traffic Department's titling structure is the absence of information disclosing whether banks and other lenders hold liens/charges over vehicles.

This weakness exposes Bahamian auto buyers, especially those purchasing second-hand or used cars, to the possibility of being ripped off by sellers who fail to disclose they took out an outstanding loan that is still secured on the subject vehicle.

With little to no ability to check whether such/liens charges exist, buyers face the possibility that lenders will repossess their new vehicle to recover debts owed by former owners - even if those persons are several steps removed in the ownership chain.

This concern has been highlighted by the Court of Appeal, which last week put Bahamian auto buyers on notice that CarFax and police checks are insufficient to determine whether a vehicle's owner can transfer good title to them.

Upholding a verdict by the Supreme Court, it ruled that Renalda Isaac had no recourse against Scotiabank (Bahamas) after it repossessed the 2005 Jeep Wrangler for which she paid $15,000 some 21 months earlier.

Ms Isaac had been unaware that, three owners prior to her, the vehicle had been mortgaged to the bank on July 3, 2008, as security for a loan. The then-owner responsible, Jason Deveaux, breached the mortgage terms by selling the jeep in April 2010 without Scotiabank (Bahamas) permission and then, just over a year later, defaulted on the loan repayments in July 2011.

This "misrepresentation and non-disclosure" was concealed from both ANCO Lands Ltd, which bought the vehicle from Mr Deveaux, and Neils Wiethuchter, who acquired it in late 2011. Ms Isaac acquired the Jeep Wrangler from the latter on January 23, 2014, and drove it until Scotiabank's agents repossessed it on October 29, 2015.

Acting appeal justice, Milton Evans, in a unanimous verdict, said of Ms Isaac: "According to her evidence she obtained a bill of sale for the said vehicle and followed all of the proper protocols required by the Road Traffic Act, as followed by the Road Traffic Department of the Bahamas Government.

"She also conducted a CarFax search to give herself extra assurance that the vehicle was in good condition, and she submitted the vehicle to Road Traffic inspectors and Royal Bahamas Police Force Central Detective Unit officers to obtain their approval that the vehicle had not been stolen. She licensed the vehicle in her name for the years 2014 and 2015."

Ms Isaac only became aware of the mortgage when Scotiabank (Bahamas) agents and the police seized the jeep in October 2015, concluding the bank's eight-month search for the vehicle. In legal filings contesting the repossession, she argued that she had good title to the jeep and was "a bona fide purchaser for value".

The bank, though, argued that it was the only one holding valid title to the Jeep Wrangler by virtue of its mortgage security and that all other claims were "invalid".

The Court of Appeal upheld the Supreme Court's findings on every point, ruling that "the absence of the title documents proved fatal" to Ms Isaac's case. Appeal justice Evans wrote: "The judge was of the view that the absence of title documents for the vehicle should have put the appellant [Ms Isaac] on inquiry.

"He opined that had the appellant insisted on back title documents she would have either uncovered the prior ownership of Deveaux or not followed through with the purchase. In these circumstances he was of the view that the appellant could not properly be considered a bona fide purchaser for value without notice.

"As we understood the rationale of the learned judge, he was of the view that having regard to the fact that the registry system will not easily reveal a chattel mortgage, a purchaser takes a calculated risk in purchasing a vehicle from someone who is not able to produce title documents for the vehicle," Appeal justice Evans added.

"The risk is that the car may have been stolen or, as in this case, mortgaged. We agreed. The fact that the appellant obtained a CarFax report and also obtained a report from the Central Detective Unit could only suffice to show previous damage to the vehicle and whether it was reported stolen."

The Court of Appeal said the doctrine of "caveat emptor", or "buyer beware", governed the case brought by Ms Isaac, and that she bore the risk of entering into the purchase.

"The appellant's misfortune, as unfortunate as it may be, did not emanate from any inaction by the respondent [Scotiabank], but from her failure to take caution in her purchase of the vehicle," Acting appeal justice Evans wrote.

"The appellant, in the circumstances of this case, had the responsibility for gathering the necessary information to make an informed purchase. This was a case where the well-known maxim, caveat emptor, applied."

Asked whether Ms Isaac's experience occurred frequently, Mr Albury yesterday replied: "It does, it does." The BMDA and Auto Mall chief said he himself had fallen victim to a "trade-in" where, despite best efforts at due diligence, a bank lien was not detected until after the seller had obtained another vehicle from him.

"We had a similar situation with a lady we sold a car to - a 2002 Camry," Mr Albury disclosed to Tribune Business. "We knew she had mortgaged it to Scotiabank, and she wanted to trade it back in six to seven years later.

"We checked with Scotiabank and they said it was fine. So we sold her the new vehicle, and then Royal Bank of Canada (RBC) comes along saying they have a lien on it [the Camry].

"We did our due diligence and checked with the insurance company to see if there were any liens registered on the vehicle, as the bank would be the loss payee [for any payout," the BMDA chief continued.

"We got shafted on the deal for $5,000-$6,000. We tried to do our due diligence to ensure they have title, and checked with the insurance company to see if there was any loss payee on the insurance document. Even now the insurance company will not give that information to me. The client has to go to the insurance company to get a letter showing that and then give it to me."

Both Mr Albury and Rick Lowe, the BMDA's secretary, told Tribune Business that the auto industry had recommended to Road Traffic two years ago, when its system was being set-up, that banks and lenders should hold the title documents for vehicles they have a mortgage lien over.

They argued that this was the only way to prevent situations such as that faced by Ms Isaac, who is faced with having to try and recover the purchase price she paid to the previous owner.

"A simple way to protect the consumer is to let the bank have the title documents for any vehicle they have a lien on," Mr Albury said, acknowledging that the current vehicle title system would not have helped Ms Isaac even had it been operating in 2014. "It needs a little more teeth with the title document for consumer protection out there.

"We'd like to see it [the titling system] to the point where, like in the US, if you go to the bank and they loan you money, the bank holds the title document until you pay for the vehicle. It's all consumer protection.

"If you owe money to the bank on a car and are selling it to me, if the bank holds the title they can't sell it. If the bank doesn't hold the title document, and they owe money, how can you check it? The bank should be in on thus, and we're asking Road Traffic to do this as well."

Mr Lowe added: "We had suggested at the time that, when giving a loan for a vehicle, the banks should hold the title document as a legitimate form of security whether they register it as a chattel or not. It would be better protection for the consumer....

"It's trying to make an ironclad system to protect consumers as much as possible. I think it's very important. It'll hold the dealers accountable, the used car dealers accountable, the insurance companies accountable and the Government accountable. Everyone will be on the same page."

Justice Ian Winder, who ruled on Ms Isaac's case in the Supreme Court, agreed that it was virtually impossible for Bahamians to uncover whether used autos they were buying via private, non-dealer sales had any liens secured on them unless this was disclosed by the vendor.

While Scotiabank's interest in the Jeep Wrangler had been recorded in the Registry of Records, Justice Winder wrote: "There is no register of chattel mortgages and, without specific information as to the interest of Scotiabank or Jason Deveaux, a search of the Registry of Records could not lead to a discovery of the bank's registered chattel mortgage."

Messrs Albury and Lowe backed Justice Winder's assessment, the former telling Tribune Business: "The problem with the Registry of Records is they are so far behind on recording that, by the time you buy a car and pay for it, the mortgage is probably not recorded."

Mr Lowe added of the Registry: "It's too costly, it's too time consuming. There are a number of issues related to that, including knowing how to do that, and that it's even a possibility [to search]. Most people are not aware of that."

Still, the BMDA secretary said Road Traffic's vehicle title system remained a major upgrade on what was there before. Auto ownership cannot now be transferred without the vehicle title document being signed by both vendor and buyer, then presented to Road Traffic.

Mr Albury, meanwhile, said the BMDA had also recommended that the title documents for vehicles badly damaged or written-off in accidents on Bahamian roads be passed to insurance companies.

He argued that this would prevent their rebuilding, and the subsequent return of unsafe vehicles to the streets. "We have suggested that any insurance claim, maybe over $500, should be recorded on the title document," Mr Lowe added, "and also if the vehicle is stolen and recovered, that should be noted."