Kay's Leasing Corporation Pty Ltd v Fletcher

116 CLR 124

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(Decision by: MENZIES J)

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

Court:

Judges: Barwick CJ
McTiernan J
Kitto J
Taylor J

Menzies 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

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Decision by:
MENZIES J

The validity of the agreements here in question, which were made in Victoria by a Victorian company with parties in New South Wales and which were expressed to be governed by the law of Victoria, is, I agree, to be determined in accordance with that law and not that of New South Wales. I turn, therefore, to the validity of these agreements according to Victorian law.

It is provided by s. 2 sub-s. (3) of the Hire-Purchase Act 1959 (which I shall call "the Act") that: "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 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." The effect which the decision of the Full Court has attributed to this provision is to constitute as a single hire-purchase agreement two agreements with provisions such that, had they been embodied in one agreement, that agreement would not have been a hire-purchase agreement as defined in s. 2 (1) of the Act. The joint effect of the two agreements under consideration is not an agreement for the purchase of goods by instalments, nor is it a letting of goods with an option to purchase them. Accordingly, one agreement with the effect of the two would not fall within the statutory definition of a hire-purchase agreement. The reason for this is that, although by the first agreement there is a bailment of goods and by the second agreement there is an option to purchase goods, the option is not to purchase the goods let under the first agreement but unspecified goods according to description.

The appellant seeks to put a construction upon sub-s. (3) of s. 2 which, in this case, would not extend its operation beyond constituting two or more independent agreements entered into at different times a hire-purchase agreement unless the joint effect of the agreements, if it had been achieved by one agreement, would have resulted both in a bailment of goods and the right of the bailee to purchase them or to receive or obtain property in them. The construction adopted by the Full Court, disregarding altogether the definition of a hire-purchase agreement, means that the sub-section establishes, as a new category of hire-purchase agreement, an agreement which may fall altogether outside the substantive part of the statutory definition. The Full Court's reasoning would also involve, so it seems to me, treating agreements as described in the sub-section as constituting a hire-purchase agreement notwithstanding that such an agreement would actually fall within the precise exemptions (a) and (b) thereto: for instance, where the hirer, the party to the two agreements described in sub-s. (3) of s. 2, is a person who is engaged in the trade of selling goods of the same nature as the goods comprised in the agreement. This is because, in construing s. 2 (3), no necessity has been felt to pay any regard to the statutory definition. A construction which would produce such results is one which should not be given to the subsection unless some other meaning more consistent with the statutory definition of a hire-purchase agreement is not reasonably open. An additional reason for seeking an alternative construction to that adopted by the Full Court is that other provisions of the Act, such as ss. 3, 5, 11, 14, 15, 18 and 23, are clearly enough framed for transactions where it is the same goods which are both let and to be purchased. Indeed, it is not apparent to me how some of the provisions of the Act could be applied to an agreement where the goods for purchase are not the same as the goods the subject of the bailment. A hire-purchase agreement providing for the hire of some goods and the purchase of what are or may be goods other than those hired appears to me to be an unlikely monstrosity. Nevertheless, the decision under appeal fathers such a hire-purchase agreement upon s. 2 (3).

The argument for a different construction of s. 2 (3) begins with emphasis upon the statutory definition of a hire-purchase agreement as indicating that the Act is dealing with agreements having carefully defined characteristics, and, in an endeavour to accommodate s. 2 (3) as closely as possible to that indication in its application to the facts under consideration, proceeds to attribute to the words "the bailee may buy the goods or the property in the goods will or may pass to the bailee" a meaning which would not extend the operation of the sub-section beyond agreements of the kind described which, if taken together, would relate to the bailment, the purchase or the passing of property of identical goods.

As I have already said, there is not here a letting of goods with an option to purchase those goods. The option is to purchase unspecified goods by description. Nevertheless, the effect of the one agreement was to create a bailment of goods and, by reason of the transaction of sale contemplated by the other agreement, it could, in one eventuality, happen that the bailee would buy the goods bailed or the property in those goods would pass to the bailee. The eventuality is that the owner of the hired goods should, in the future, decide to appropriate those goods to the other agreement, providing as it does for the sale of goods by description. The particular question of construction here, as I see it, is whether, because of this contingency, it ought to be said that "the bailee may buy the goods" bailed or "the property in the goods" bailed "will or may pass to the bailee".

I have reached the conclusion that the possibility of the bailee buying the goods the subject of bailment because in the future the owner might appropriate them to the other contract does not establish that "by virtue of" the two agreements "the bailee may buy the goods". I am satisfied that the provision is concerned with legal rights conferred by the agreements and not with something that could happen in the future only if the owner were to do something outside his obligations under the agreements. I would, therefore, without any departure from normal usage, read the words "may buy" as equivalent to "entitled to buy", and I find support for doing so in the earlier phrase "by virtue of". Similarly, when it is said that "by virtue of" the two agreements "the property in the goods will or may pass to the bailee", I would understand the reference to be to the passing of property by virtue of the terms of the agreements and not by reason of something that the party other than the bailee may, as owner and without obligation to the bailee, do in relation to the goods the subject of the bailment. I regard the words under consideration as not going beyond a purchase or a passing of property by virtue of the agreements either without more, or by virtue of the exercise by the bailee of rights conferred upon him by the agreements in respect of the goods the subject of the bailment. I read the sub-section, therefore, as operating when the agreements, taken together, constitute a bailment and either (1) give the bailee a right to buy those goods, or (2) provide for the passing of property in those goods (i) without the exercise of any further right, as in the case of a purchase by instalments (in such a case, the property "will" pass); or (ii) by virtue of a possible exercise by the bailee of rights conferred by the agreements (in such a case, the property "may" pass). If so to construe the sub-section results in some overlapping, I regard that as of less importance than disregarding altogether the statutory definition in the construction of the sub-section. Of course, I recognize that there may be difficulty in confining the operation of the sub-section to agreements as described with a joint effect exactly that of a hire-purchase agreement as defined. It may be, for instance, that the sub-section would apply if the joint effect of two agreements were to constitute a bailment and pass the property in the goods to the bailee at the conclusion of the bailment, if he should so elect. Recognition that there may be cases of this sort which might be thought to fall outside the strict terms of the statutory definition is, however, no reason for not construing the sub-section to accord as closely as possible with the statutory definition.

To read s. 2 (3) as creating a category of hire-purchase agreement relating to the hiring of some goods and the purchase of other goods would, I think, be out of keeping with the Act as a whole and, for the reasons I have given, I do not think that the language of the sub-section itself constrains me to come to the conclusion that it has that effect in this case. It would no doubt be more difficult to limit s. 2, sub-s. (3), in a case where its actual terms are clearly fulfilled, yet the result of its literal and unrestricted application would be to constitute as a hire-purchase agreement an agreement falling within one of the exemptions to the statutory definition; nevertheless, if and when that case should arise, literalism might not prevail. In the meantime, I prefer to the construction adopted by the Full Court one which is not less literal but is, I think, much more in keeping both with the general purposes, and the other provisions, of the Act.

I would therefore allow the appeal and dismiss the cross-appeal and, in accordance with the understanding upon which these two appeals were heard, I would deal with the other appeals in accordance with this judgment.