What weighs so heavily against your ex-father in law is the delay.He's done nothing in three years.We may guess that he's now short of money (aren't we all? Credit crunch and all that! ) and is desperately looking for places to get cash.You and the car are the obvious target. The 'family' he claims to have bought the car for ceased to exist as that family some three years ago.If it truly was bought 'for the family' he'd have acted as soon as that family was no more, because the circumstances dictated then that his rights were immediately activated under the conditions of the ' conditional gift'
His other problem is that, strictly on what you say, he's claiming the purchase money, not the car.So he's saying that he loaned the money for the purchase of the car , the title to it being yours (he 'wants the money back for it').Nobody's going to agree with that claim (it's inconsistent, in logic and common sense, with the idea that the car was the subject and for a particular use).The best he could hope for is to argue that the car is still his,you being put as registered keeper, in which case he's waited for it to depreciate over three years instead of getting it back as soon as possible.That, in itself, again weighs heavily against him.It calls for an explanation for delay on his part which he'd need to prove was right.(My guess that he's short of cash seems extremely likely, in comparison )
Try to agree amicably, if you will, but on the face of it he's on to a dead loser.His account, in the absence of documentary evidence that the car was accepted on the terms he claims, looks 100 per cent certain to fail.The words 'get' and 'lost' apply, though hardly forensic, hardly legal language!