Classic Sports Car


Better protection for buyers is becoming a hot topic across the classic car industry


One of the classic world’s most publicised and important court battles, which brought about the demise of JD Classics, has recently concluded with one of the highest awards in such a case. But the man who successful­ly sued JD founder Derek Hood believes more must be done to regulate the industry.

Mike Tuke FRENG was awarded multiple judgements against Hood in January 2021 amounting to more than £12.6m. Tuke’s call has found support from different corners, not least from the auction industry, which had its own headline case in 2020 when Coys collapsed with a list of creditors owed a combined £6m. The money is unlikely to be returned, leaving some missing six-figure sums. The two cases are very different, but both reached national newspapers usually devoid of classic cars and both revealed trails that were a tangled web.

Tuke proved that he had been deceived by Hood claiming partexchan­ges with fictitious buyers and by years of emails ‘littered with untrue, false and misleading statements’. Having invested in 41 classic cars through JD Classics in 2010, including the ex-juan Manuel Fangio Jaguar C-type and an original XKSS, Tuke later that year looked to fund the purchasing back of his pioneering orthopaedi­c hip and knee company. When the cars failed to sell, Tuke was drawn into more and more desperate and complicate­d deals that severely limited his liquidity. “The court had held in a preliminar­y case in 2018 that JDC had acted as my agent,” explains Tuke, “and therefore owed me a duty of care and full disclosure of the deals.”

Hood had agreed to a 10% uplift on values Tuke had paid for the cars as commission, but was later found to have inflated prices on exchange cars that were owned or financed by JDC or Hood, and some that were replicas. The case reinforces the importance of outlining, in writing, each party’s role in any transactio­n.

Hood was replaced as a director and JDC entered administra­tion in 2018, which prevented Tuke’s next step of suing the firm. In March 2020 proceeding­s began against Hood, beset by legal delays and the pandemic, and the judge found in Tuke’s favour. He is yet to receive any of the money and now expects to need further, costly, action in addition to the £2.1m already spent to get justice. In closing, the judge said: “I consider that Mr Tuke should be put in a position whereby he can take immediate steps to secure his rights. Those steps will likely include the need for action against third parties to whom

valuable assets appear to have been transferre­d by Mr Hood.”

“It has been hard on my family’s life and on my business,” admits Tuke of the battle. “The advances in prosthetic­s technology that would have better improved active lives for patients has been seriously curtailed. The fallout is immense.”

The one sale that was handled correctly, Tuke says with hindsight, was that of a genuine Lightweigh­t Jaguar E-type through Morris & Welford in America: “There, classic car sales are done more like a house sale. That is how it should be here.”

“All 50 states have different regulation­s,” says RM Sotheby’s president Kenneth Ahn, explaining the country’s auction formalitie­s. “But all have to have a dealer’s licence because you are transferri­ng the title from the seller as an intermedia­ry to the buyer. There is clear regulation about the transfer of title and funds: you’re effectivel­y working as an escrow.”

No such set-up exists in the UK and ring-fenced accounts are not mandatory, allowing events such as what happened at Coys to play out. “It’s nothing short of irresponsi­ble as an industry,” says Sam GrangeBail­ey of Manor Park Classics, which uses an escrow account. There are currently no regulation­s at all governing auctions and auctioneer­s in the UK, with no licensing or insurance requiremen­ts should parties fail to pay, unlike in many major EU countries.

Richard Calleri, whose family recently purchased the Coys name, believes stipulatin­g insurance and an escrow account would eliminate 90% of the problems: “Coming from banking, it’s the other end. You can’t even talk to a customer unless you’ve had your SFA [Securities and Futures Authority] exams, you can’t even sign a piece of paper until you’ve been triple checked. If you want to trade shares you have to have an escrow account.

“If it’s government mandated it will be complex and take five years to figure out. The industry players need to do it themselves, to be self-regulated in a sense. Many industries are like that: when the big four or five guys decide how they are going to do it, everyone else has to fall into line.”

While the system would have protected the many who lost out with Coys, it is not something Tuke could have completely relied upon. It may have been easier to follow the money, but it was more elaborate and required the building of trust. Abuse that and the house of cards falls; part of the deception revolved around provenance, such as a Lightweigh­t E-type that was sold to Tuke as a £2m original but transpired to be a replica and a Ford GT40 that was overstated to £5.5m.

There is also the tricky matter of tracing the deception. “How do you go back if the person selling it didn’t know and is a victim?” asks Ahn. “And the person that sold it to that person is a victim, and the person that faked it is no longer alive? No regulation can help with that. At that point it’s a question of how the loss gets resolved.”

Experience­d collectors have been caught out, but rarely does it make the news. Caveat emptor also only goes so far when so much work has been done to build a strong relationsh­ip. As Tuke says: “If you went to JD, you’d see they did a lot of things very well, it was just with other people’s money.” Any financial due diligence would have shown a reputable company always in the public eye, with millions apparently in the bank; not one that would set alarm bells ringing.

Advising Tuke throughout was solicitor Michael Grenfell, since retired, whose investigat­ions were responsibl­e for uncovering the scale of the frauds. A collector himself, in a 30-year career he became a specialist in classic car cases, from mis-sold numberplat­es to glassfibre fakes. “The simplest and most basic frauds are when you go to see a car, you get it home and it falls apart, and you know the seller knew full well,” he explains. “If you buy through a business you have more protection – unless it goes into administra­tion. If you buy it from an individual you virtually have no protection at all. You can sue for misreprese­ntation, but you have to prove the seller made a misstateme­nt of fact and often it’s just an opinion whether it’s a nice car. A seller can’t come unstuck if they stick to generalisa­tions.”

With the rise of distance selling, that grey area has become more murky. Cars can take matters into their own hands, too, as Damian Jones of H&H Classics relates: “We sold a Mini Cooper that was driven 120 miles to the auction, and the buyer wanted to drive it home. It wouldn’t start. Simon [Hope, H&H founder] insists that it is better to under-describe cars.”

In a wider sense, perception­s change from buyer to buyer and one person’s usable classic is another’s restoratio­n project. Openness to inspecting cars for sale is key, on all sides, and most dealers

“If you buy through a business you have more protection – unless it goes into administra­tion. If you buy it from an individual you virtually have no protection at all”

and auction houses recommend using a marque expert to satisfy yourself with the car and condition.

The outlier in all of this is ebay, as Ahn explains: “It has effectivel­y fought with every state in the US, and one by one it has won the argument that ebay is not an auction house. They don’t have an auctioneer, they just happen to use an auction pricing mechanism. It is a listings platform. Using that analogy, they are not subject to any regulation­s. Once the transactio­n is done, they’re out.”

The ‘wild west’ of ebay has made life tougher for new online auction listings sites, forcing a strict transparen­cy according to Tristan Judge, one of the founders of The Market. “It took years of hard work putting in the foundation­s,” he says. “We try to promote our trustworth­iness as much as possible. We encourage people to contact the seller, we are open about viewings and half the cars are held with us. Even if they don’t come to view it, they are reassured by the fact that they could.”

He believes a code of conduct would be easier to implement. For Manor Park Classics, which has five-day viewings and an inspection ramp, a code isn’t enough and inspiratio­n should be sought elsewhere. “It wouldn’t be difficult to pick up a system from the property industry,” says managing director Roger Nowell. “You have a contract, bill of sale, the audit process, and release the funds once everything is cleared and the title passes. It wouldn’t be beyond the wit of man to put together a set of regulation­s.” Although he concedes that a V5 isn’t proof of ownership, he and Grange-bailey are adamant a solution should be found.

There is also little deterrent, with criminal proceeding­s near impossible. “Reporting fraud has to be done online,” Tuke explains, “with a poorly designed form with mandatory dropdown boxes such as the colour of the fraudster’s hair. Eventually the form gets viewed and, despite having a High Court reference appended, can be thrown back for lack of info. There are many in the industry turning a blind eye to the difference between fakes, replicas and grandfathe­r’s axe restoratio­ns – or worse, when duplicated identities are hidden.”

Grenfell blames “the inertia of the system”, and points to an investigat­ion in The Times that questioned the Serious Fraud Office’s efficiency. A recent report by the HM Crown Prosecutio­n Service Inspectora­te has since recommende­d a review.

“Normally they say it’s a civil matter,” Grenfell says, “when often that is not the case. If there is nothing in writing it is almost impossible. The key thing is what people have paid: if someone paid £500,000 for something palpably only worth £50,000, you can expect fraud somewhere along the line. If you then find the engine numbers have been filed off or the chassis plates are fake then you ought to be able to do something about it.”

Currently there is no body to report in to, unlike in the new and used car world. But that there is no easy resolution is secondary to there first being a willingnes­s to do so.

“It’s not entirely about the money,” concludes Tuke, without any hint of cliché. “It’s about justice and stopping people like Hood from ruining people’s lives.”

 ??  ?? JD Classics hit major headlines when it went into administra­tion, but the legal wrangling in the fallout rumbles on
JD Classics hit major headlines when it went into administra­tion, but the legal wrangling in the fallout rumbles on
 ??  ?? Many enthusiast­s lost out when auction house Coys collapsed into administra­tion in 2020
Many enthusiast­s lost out when auction house Coys collapsed into administra­tion in 2020

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