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Kay's Leasing Corporation Pty Ltd v Fletcher

116 CLR 124

(Judgment by: BARWICK CJ, McTIERNAN J, TAYLOR J)

Between: KAY'S LEASING CORPORATION PTY LTD
And: FLETCHER

Court:
High Court of Australia

Judges:
Barwick CJ
McTiernan JKitto J

Taylor JMenzies J

Subject References:
Bailment
Hire-purchase
Statutory requirements
Agreements entered into in Victoria
Action brought in New South Wales

Legislative References:
Hire-purchase Agreements Act 1941 (NSW) - s 26C; s 31
Hire-Purchase Act 1959 (Vic) (No 6531) - s 2

Hearing date: 2 September 1964; 3 September 1964
Judgment date: 17 December 1964

SYDNEY

Judgment by:
BARWICK CJ
McTIERNAN J
TAYLOR J

This appeal and cross-appeal raise two substantial questions with respect to two agreements made on 22nd June 1960. The first of these was an agreement, called a leasing agreement, whereby the appellant undertook to supply on hire to the respondents a Caterpillar D4 Tractor equipped with an overloader for a period of three years. The second was an agreement made between the same parties which, after briefly reciting the first agreement, gave to the respondents, subject to certain conditions not material to be set out, an option to purchase from the appellant goods of the same general description as the hired goods. It is of some importance to set out the relevant clauses of this agreement:

"1.
... the Optionee shall have an option to purchase such goods of the same general description as the goods described in Schedule A (1) hereof as the Owner in its uncontrolled discretion shall select but so that the goods so selected shall be of a type quality and condition at least equal on the date of the delivery thereof (as hereinafter provided) to the type quality and condition on such delivery date of the actual goods leased under the Leasing Agreement.
2.
In the event of the Optionee exercising the said option to purchase, the Owner shall specify the specific goods the subject of such option and nominate a date for delivery thereof (being a date not later than the date of expiration of the unextended term of the Leasing Agreement or, as the case may be, not later than the date of expiration of the extended term thereof), by a notice in writing to reach the Optionee in the ordinary course of post at least one month prior to the expiration of the term (unextended or extended as the case may be) of the Leasing Agreement.
3.
The Owner may at its uncontrolled discretion select as the specific goods the subject of such option either the actual goods leased under the Leasing Agreement or such other goods as in the opinion of the Owner satisfy the requirements of Clause 1 hereof.
...
5.(a)
The Owner shall be bound to deliver the goods so specified in the Owner's notice under Clause 2 hereof on the date nominated in such notice, or in the event of the Owner pursuant to Clause 3 hereof selecting the actual goods leased under the Leasing Agreement as the subject of the said option then subject to payment of the purchase price the actual goods leased under the Leasing Agreement shall be deemed to have been delivered by the Owner to the Optionee under this Agreement on the date so nominated.
(b)
Upon the Owner specifying the specific goods under Clause 2 hereof and delivering the same to the Optionee and upon payment of the purchase price thereof the property in the goods shall pass to the Optionee.
...
6.
...
(b)
Upon the passing of the property in the goods to the Optionee in accordance with Clause 5 (b) hereof all rights of the Optionee under the Leasing Agreement shall cease and determine and the Optionee shall be under no further liability under the Leasing Agreement other than such as shall have accrued at such rate.
...
8.
Nothing herein contained shall give to the Optionee any right title or interest in any of the actual goods the subject of the Leasing Agreement save and except such right title or interest as the Optionee has by virtue of the operation of the Leasing Agreement and any right of the Owner to sell assign transfer mortgage encumber or otherwise deal with the actual goods the subject of the Leasing Agreement shall not be affected by this present Agreement and in particular no term shall be implied in this present Agreement that the Owner shall not so act as to make it impossible for the Owner to select the actual goods the subject of the Leasing Agreement pursuant to Clause 3 hereof.
...".

The questions which now have to be decided arose in an action in which the appellant sued the respondents for arrears of hire to the extent of PD3,134 and in which the respondents sought to recover by way of cross-action the sum of PD1,099 which they had paid to the appellant for hire pursuant to the hiring agreement. The parties reached agreement concerning the relevant facts and an order was made by consent which set out those facts in the form of a special case and stated the following series of questions for the Full Court:

"(1)
Is the law applicable to the interpretation of the agreements of 22nd June 1960, between the plaintiff and the defendants the law of the State of Victoria or the law of the State of New South Wales?
(2)
If the law of the contract is that of the State of Victoria, do the two said agreements of 22nd June 1960, or either of them, constitute a hire-purchase agreement within the meaning of the Hire-Purchase Act 1959 (Vict.)?
(3)
If the law of the contract is that of the State of New South Wales, do the two said agreements of 22nd June 1960, or either of them, constitute a hire-purchase agreement within the meaning of the Hire-purchase Agreements Act, 1941-1957 (N.S.W.)?
(4)
Is the plaintiff entitled to recover from the defendant the sum of three thousand one hundred and thirty-four pounds three shillings and five pence (PD3,134 3s. 5d.)?
(5)
Is the defendant entitled to recover from the plaintiff the sum of one thousand and ninety-nine pounds (PD1,099)?"

As appears from the case the two agreements were made in Victoria and the hiring agreement contained a provision that it should take effect and be construed in accordance with the law of the State of Victoria. Walsh J., who published the leading judgment in the Full Court, considered that the proper law of each agreement was the law of Victoria and in the result the Full Court answered question (1): Victoria. After some discussion concerning the ambit of the operation generally of the Hire-purchase Agreements Act, 1941-1957 (N.S.W.) Walsh J. said: "There is in the Act no express statement of the criterion upon which is to be determined to what hire-purchase agreements out of all such agreements throughout the world the Act should be regarded as intended to apply. In that situation I am of opinion that in so far as the Act regulates and changes the rights and obligations of the parties to a contract it should be treated as applying to all contracts of which the proper law, that is the law by which the parties intended or are to be presumed to have intended that their rights and obligations should be governed, is the law of New South Wales. To such contracts the provisions of the Act affecting the obligations of the parties are to be applied by a Court in New South Wales whether or not the contract was made in New South Wales. But they will not be applied to contracts which are to be governed by some other law, even if those contracts are made in this State." But with respect to that learned judge we think that, having regard to the relevant facts, question (1) was stated in a form which obscured the particular problem which arose in the case and this led to a much more general consideration of the operation of the Act, and its many and varied provisions, than was either necessary or desirable. We say this because it was agreed by the parties that if the agreements together were deemed to be a hire-purchase agreement either according to New South Wales law or Victorian law, which in this respect contained substantially identical provisions, they were void and the appellant's claim in the action was bound to fail whichever law was applied. But what remained for consideration was whether the respondents were entitled to succeed on their cross-action and this depended upon whether particular provisions of the Hire-purchase Agreements Act, 1941-1957 (N.S.W.)-provisions which do not appear in the Victorian Act-were applicable in the circumstances of the case. The question, therefore, was not one concerned with the ascertainment of "the law applicable to the interpretation" of the agreements in question but as to the ambit of the operation of these particular provisions.

The first of these provisions is s. 31 (3) and it is in the following terms: "(3) A hire-purchase agreement entered into ... in contravention of this section shall be void: Provided that all moneys paid and the value of any other consideration provided by the purchaser under the agreement shall be recoverable as a debt due to him by the vendor". Now the leading provision of this section, which is sub-s. (1), provides that a vendor who enters into a hire-purchase agreement without having first obtained from the purchaser or proposed purchaser thereunder in current coin or bank notes or by cheque drawn by a banker or by the purchaser or proposed purchaser or the spouse of the purchaser or proposed purchaser on a banker a deposit of a specified amount shall be guilty of an offence. What sub-s. (3) treats as a hire-purchase agreement entered into in contravention of the section is, therefore, a hire-purchase agreement entered into by a vendor who commits in relation thereto the offence created by sub-s. (1) and the relevant question for determination is the intended scope of the operation of that sub-section. This is, we think, not a problem to be decided by ascertaining the proper law of the contract for the offence must be taken to have been committed if, in New South Wales, a vendor enters into a hire-purchase agreement without having first obtained from the purchaser or proposed purchaser a deposit of the specified amount. But it can have no application to the case of a hire-purchase agreement entered into outside that State.

The second provision in question is s. 26C (4) of the New South Wales Act which provides that a hire-purchase agreement to which s. 26B of the Act applies and which is entered into in contravention of sub-s. (2) of s. 26C shall be void and there is then added what is called a proviso in similar terms to that contained in s. 31 (2). Contravention of s. 26C (2), which specifies maximum "hiring charges", is not, however, a punishable offence as in the case of a contravention of s. 31 (1). Nevertheless the avoiding provisions of s. 26C (4) operate as a consequence of a contravention of the earlier sub-section and, as such, a sanction for the observance of the provisions of that section. In our view whether or not there has been such a contravention does not in any way depend upon the proper law of the contract; it falls to be determined by considering whether, within New South Wales, a person has, in relation to a hire-purchase agreement made defined "hiring charges" in excess of those prescribed by s. 26C (2) (cf. per Lord Radcliffe in Boissevain v Weil. [F1] As the agreements in this case were made in Victoria and the "hiring charges" were made in that State we are of opinion that it is impossible to say, even if the two agreements together constituted a hire-purchase agreement, that the appellant contravened the provisions of s. 26C (1). In these circumstances we do not think it proper to answer the first question as framed and we proceed, therefore, to consider the substance of the second, fourth and fifth questions.

We agree with Walsh J. that the two documents constituted a hire-purchase agreement within the meaning of the Victorian Hire-Purchase Act 1959 and we agree with his reasons for reaching this conclusion. But we propose to make some additional observations and we do so simply because, as it seems to us, an additional argument was advanced by the appellant in this Court and because we do not assent to the proposition, somewhat tentatively expressed by his Honour, that the reasons given by Jones J. in Reg. v R. W. Proffitt Ltd [F2] give some support to the appellant's argument.

Barely stated the question to be decided is whether the two agreements are fairly within the description contained in s. 2 (3) of the Hire-Purchase Act 1959: "Where, by virtue of two or more agreements, none of which by itself constitutes a hire-purchase agreement, there is a bailment of goods and ... the property in the goods will or may pass to the bailee, the agreements shall, for the purposes of this Act, be treated as a single hire-purchase agreement made at the time when the last agreement was made". Earlier, by the same section, "Hire-purchase agreement" is defined to include "a letting of goods with an option to purchase and an agreement for the purchase of goods by instalments". There are some exceptions prescribed but it is not material to refer to them. Most of the argument on this aspect of the case revolved round the expression in s. 2 (3) "and ... the property in the goods will or may pass to the bailee" and it was contended that the word "may" was not apt to embrace a situation where, as in the present case, the contingency upon which the property is conditioned to pass is in the control of the owner. The contrary view, it was said, would produce the anomalous result that the two agreements together would constitute a hire-purchase agreement whereas if the contractual relations to which they give rise had been defined in a single agreement that agreement would not be a hire-purchase agreement because it would not be "a letting of goods with an option to purchase". Accordingly, it was contended that the word "may" should be understood to mean "may" at the option of the hirer. An alternative interpretation was also suggested to cover contingencies not under the control either of the owner or the hirer and the qualification advanced by this suggestion was "independently of the assent of the owner". But we can see no ground upon which the wide language of the expression under consideration should be so qualified and reference to the legislative history of s. 2 (3) provides some affirmative ground for thinking that it should not. The sub-section is taken with the addition of one word from the definition of "Hire-purchase agreement" in s. 21 of the English Hire-Purchase Act, 1938: "... `Hire-purchase agreement' means an agreement for the bailment of goods under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee, and where by virtue of two or more agreements, none of which by itself constitutes a hire-purchase agreement, there is a bailment of goods and either the bailee may buy the goods, or the property therein will or may pass to the bailee, the agreements shall be treated for the purposes of this Act as a single agreement made at the time when the last of the agreements was made: ...". The addition made in s. 2 (3) of the Victorian Act was the introduction of "hire-purchase" between the words "single" and "agreement" which appear towards the end of the definition. The definition which is contained in the English Act appears also in the New South Wales Hire-purchase Agreements Act, 1941-1957 and, since the primary definition of hire-purchase agreement includes "not only an agreement for the bailment of goods under which the bailee may buy the goods" but also an "agreement for the bailment of goods under which the property in the goods will or may pass to the bailee", no question can arise either in England or New South Wales as to whether two agreements could constitute a hire-purchase agreement where the same composite transaction effected by a single agreement would not. What appears to have happened in Victoria is that in framing the 1959 Act, which repealed Pt X of the Instruments Act 1958, the draftsman, in substance, adopted the definition of hire-purchase agreement appearing in s. 97 of the latter Act and then adopted as s. 2 (3) that part of the English or New South Wales definition which commences with the words "Where by virtue of two or more agreements". In these circumstances we can see no reason for restricting the language of s. 2 (3) by reference to the ambit of the preceding definition. On the contrary the provision must, we think, be taken to have been adopted with its full significance and must, according to its language, be given full effect.

The question then is what meaning should be given to the words in s. 2 (3) "Where by virtue of two agreements ... there is a bailment of goods and ... the property in the goods will or may pass to the bailee"? The phrase which we have refrained from quoting- "and the bailee may buy the goods"-seems to us to contemplate a contractual right in the bailee to purchase the goods the subject of the bailment if he wishes to do so and is, of course, quite apt to cover the form of option found in conventional hire-purchase agreements. The word "will", in the phrase which we have quoted in the first instance, seems to fit the case of an agreement for the purchase of goods by instalments where the possession of but not the property in the subject goods has passed to the purchaser. The practical result, therefore, of the appellant's argument is that the word "may" really adds nothing to the phrase and contemplates merely that the holder of the option may or may not exercise it. But such a contingency is already covered by the earlier words "and ... the bailee may buy the goods". To our minds the word "may" used in contradistinction to "will" appears in order to deal with the situation where, upon the happening of some specified contingency or contingencies, the property in the subject goods will pass and we can see no reason for restricting the sub-section to cases where the contingency is solely within the control of the bailee.

In the present case the second agreement purports to give to the respondents an option to purchase from the appellant "goods of the same general description" as the hired goods and further provides that the owner shall have the right to select the specific goods. The goods selected are to be of a type quality and condition, at least, equal to the type quality and condition of the actual goods leased under the hiring agreement and the owner is entitled to select as the specific goods "the actual goods" the subject of the hiring. Upon such selection and upon payment of the purchase price "the property in the goods shall pass" to the hirer and the hiring agreement is to cease and determine. The passing of the property in the subject goods to the respondents is, therefore, subject to two contingencies. It will pass if the respondents exercise their option and if, thereafter, the appellant selects as the specific goods the goods the subject of the hiring. In effect, it seems to us, the agreement gave to the respondents the right, by the exercise of their option, to bring into existence a contract for the sale of unascertained goods by description leaving it to the seller to appropriate specific goods to the contract. Upon the exercise of the option the appellant may appropriate to the contract the goods the subject of the bailment and upon payment of the purchase price the property in the goods will, pursuant to cl. 5 (b) of the agreement, pass to the respondent. The subject goods "may", therefore, pass by virtue of the agreement and will, in fact, do so if, following the exercise by the respondents of their option, the appellant selects them as the specific goods. This is the critical contingency upon which the property may pass to the respondent and, in our view, the agreement is one properly described as an agreement by virtue of which the subject goods "may" pass to the respondent. The expression "may pass" contemplates a passing upon the occurrence of some event contemplated by the agreement and it is, we think, impossible to limit its significance to events solely within the control of the hirer or, for that matter, to events outside the control of the bailor.

A further subsidiary argument was addressed to us on behalf of the appellant. It was asserted that it could not be said that the property in the goods might pass by virtue of the agreement. It could, it was said, pass only by virtue of their selection by the appellant subsequently to the exercise by the respondents of their option. But the act of appropriation, or selection, would be an act contemplated by and performed in pursuance of the option agreement and would merely be the event upon the happening of which cl. 5 (b) of the agreement would, after payment, operate to pass the property in the goods.

The remaining matter with which we wish to deal is concerned with the decision in Reg. v R. W. Proffitt Ltd. [F3] There Jones J. had before him an agreement for the hire of certain goods which afforded to the hirer the opportunity "subject to the enactment of the necessary legislation" to purchase the goods the subject of the hiring. His Lordship held that the agreement was not a hire-purchase agreement within the meaning of the Hire-Purchase Act, 1938 (U.K.). He said: "The conclusion to which I have come is that, to make it a hire-purchase agreement, the hirer should either have been given a right to buy the goods if he wanted to, or there should be such a provision that if the goods might pass to the bailee they might do so only by virtue of some right which has been conferred on him by this agreement. In my view, no such right has been conferred on him, because that right would have been acquired only if this new legislation were passed, and there is no certainty whatever whether the new legislation would be passed, or when it would be passed. In view of that, it seems to me that it cannot be said that this is an agreement for the bailment of goods under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee". [F4] But, in our view, these observations have no relevance to the present case. As we understand his Lordship's observations he was merely pointing out that, in that case, the bailee had neither a present right to buy the goods nor any present right by virtue of which the goods might pass and that the accrual of any such right was dependent upon an event which might or might not happen. Such a case is clearly distinguishable from the present case where the option agreement confers a present right upon the respondents to purchase goods of the same general description as the subject goods and the property in the subject goods will pass if, following the exercise of the option, they are selected by the appellant. This very event is contemplated by the agreement as one manner in which the appellant may fulfil the obligation which the exercise by the respondents of their option will cast upon it and his Lordship's observations, in our view, have nothing to do with such a case.

For these reasons and the reasons expressed by Walsh J. on this branch of the case we are of the opinion that the two agreements together constitute a hire-purchase agreement within the meaning of the Hire-Purchase Act 1959 and, accordingly, we are of the opinion that both the appeal and cross-appeal should be dismissed. Upon the hearing we were informed that it had been agreed that the fate of these proceedings should also determine the fate of two other appeals and cross-appeals to this Court arising out of similar agreements and these should also be dismissed.


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