Australian Guarantee Corporation Ltd v Balding

43 CLR 140

---

(Judgment by: Isaacs J)

Australian Guarantee Corporation Ltd
v Balding

Court:

Judges:
Isaacs JStarke J
Dixon J

Subject References:
Contract
Hire purchase agreement
Assignment
Future debts
Non-registration
Invalidity of assignment

Legislative References:
Instruments Act 1915 (Vic) No 2672 - ss 127, 180, 181
Instruments Act 1928 (Vic) No 3706 - ss 27, 80, 81

Hearing date: MELBOURNE 20 February 1930;
Judgment date: 14 April 1930;

Sydney

---

Judgment by:
Isaacs J

The following written judgments were delivered:

ISAACS J. The argument gives rise to several interesting and important considerations. The hiring agreement on which the question at issue arises is in a form which introduces considerable complication, because, read literally as isolated provisions, several of its clauses are irreconcilable. What is the proper course for the Court to take in such a case? In Helby v Matthews ^[F1] it is distinctly stated that the substance of the agreement must be looked at as a whole. That is true of every agreement. But we have to come a little closer to the point here, which is, how far are we to depart from the literal sense of a particular clause, if read by itself, when we find the effect of the literal sense of another clause, similarly segregated, inconsistent with the first? There are two cases of supreme authority which settle this point. One is the case immediately preceding Helby v Matthews, namely, McEntire v Crossley Bros. ^[F2] , and is the converse of the first-mentioned case. One question there, was whether a written agreement respecting a gas engine was one of hire or one of sale. The respondents were described as "owners and lessors," the other party to the agreement was described as the "lessee." The agreement declared it was to "take and hire" the engine; certain payments were described as "rent"; a provision was made that on full payment the engine should become "the property of the lessee as purchaser," and that until full payment the engine should "remain the sole and absolute property of the owners and lessors," and "let on hire ... until all sums of money due under this agreement are paid." But then there were other provisions which had a different aspect. Lord Herschell L.C. said ^[F3] :"Coming then to the examination of the agreement, I quite concede that the agreement must be regarded as a whole-its substance must be looked at.

The parties cannot, by the insertion of any mere words, defeat the effect of the transaction as appearing from the whole of the agreement into which they have entered. If the words in one part of it point in one direction and the words in another part in another direction, you must look at the agreement as a whole and see what its substantial effect is. But there is no such thing, as seems to have been argued here, as looking at the substance, apart from looking at the language which the parties have used. It is only by a study of the whole of the language that the substance can be ascertained." Lord Watson ^[F4] expressed the same views, and said: "The duty of a Court is to examine every part of the agreement, every stipulation which it contains, and to consider their mutual bearing upon each other." The House held that, notwithstanding the language already quoted, the rest of the document showed that it was a transaction of sale and not of hiring. The other case is more recent. In Forbes v Git ^[F5] the Judicial Committee, speaking by Lord Wrenbury, stated very distinctly the principle of construction where repugnant provisions exist in a contract. If a later clause cannot be reconciled with an earlier one creating an obligation, then if it altogether destroys the obligation it must be treated as void, but if it only qualifies the former the two are to be read together and effect given to the intention of the parties as disclosed by the instrument as a whole.

That, then, is the principle of construction to be applied, and it leads me to reject the contention, so forcibly presented by Mr. Menzies, that clause 2 of the present agreement must be given its own independent force, regardless of the equally distinct language of clauses 3 and 9. Those clauses are qualifications only, and must be reconciled so far as possible with clause 2. When, therefore, the agreement is so approached, we find that the initial and dominant statement in the document is that "the owner has delivered the said motor-cycle to the hirer, who has received the same from the owner on hire subject to the terms and conditions hereinafter mentioned, that is to say," etc The basis of the transaction, therefore, is declared to be the familiar bailment on hire. There is an option of purchase given on certain conditions, but that is immaterial here.

The first point to observe is that the agreement in itself does not confer any property or interest in the motor-cycle upon the hirer. As was said by Shearman J. in Lewis v Thomas ^[F6] , at p. 323, the position of Hoff" (the hirer) "under both the hiring agreements was that of a bailee with an option to purchase, and nothing more." Consequently, the agreement of itself created no debt. It is true that clause 1 provides: "The hirer shall forthwith pay to the owner the sum of PD for the rent or use of the said motorcycle for the term of from the date hereof." But that does not mean an instant obligation to pay the sum, irrespective of whether he receives the machine or not. Plainly, when read with the rest of the document, and particularly the introductory words already quoted, it means that the sum mentioned is to be paid forthwith after the delivery of the machine on hire. The payment is only as "rent" for the actual use of the machine. This is very distinctly shown by the case of the National Case Register Co v Stanley ^[F7] , particularly in the judgment of Sankey J. ^[F8] It is also definitely stated in Brooks v Birnstein ^[F9] , at pp. 102, 103. The word "forthwith" is to overcome the normal common law doctrine that rent is payable only at the end of the term prescribed. Until the Apportionment Act rent was entire. Apart from the word "forthwith" there would be, arising out of the contract followed by delivery of the machine, a debt accruing and payable at the end of the prescribed period. But the word "forthwith" advances the date of payment by making the rent accrue due at the beginning of the period instead of at the end (see Ellis v Rowbotham ^[F10] , at pp. 743-744). On the sale of goods, apart from special agreement, delivery of possession and payment are concurrent conditions.

But, as shown by cases of which Bloxam v Sanders ^[F11] is the leading example, that assumes the property, that is, the title, has passed, so as to make it the duty of the buyer to pay concurrently with his receiving possession. In McEntire v Crossley Bros ^[F12] Lord Herschell pointedly alludes to this by saying:"The distinction is as well settled as it possibly can be between a debt for the price of goods the property in which has passed, and an action for damages for breach of a contract to buy and pay for the goods." That refers to the distinction between a "sale" and an "agreement to sell." Where there is a true sale, then instantly there is an obligation to pay, in other words, a "debt," which if not discharged may be enforced by an action of debt. The distinction is therefore apparent in the case of the contract of hiring, and on this distinction is founded the decision of National Cash Register Co v Stanley ^[F13] . The agreement itself recognizes this, because clause 9 begins by saying: "If the hirer shall make default in payment of the said sum payable on the delivery to him of the said motor-cycle" etc It is therefore a definite result of the law applied to the circumstances of the case, that on the mere making of the contract there was a contractual obligation to perform clause 1 (inter alia), and that was to pay at the first instant of the first period of actual use the debt that normally would accrue when the full delivery of the consideration took place, namely, at the last moment of that period. That normally is the only moment when delivery of consideration and payment therefore can be concurrent.

I have dwelt on the first clause because a fortiori the payments for subsequent periods are open to the same observations. The contract left the hirer free to continue the hiring for second and subsequent periods-but only on paying rent in advance. Now, if he did so elect and paid in advance, he was only paying in advance a debt which normally would accrue due only at the end of the current period. If he did not so pay, he would break his agreement to pay "in advance," but he could not escape the hiring liability. It is quite apparent that the owners endeavoured to achieve two inconsistent legal results:They tried to avoid registration as a bill of sale by making the transaction one of hiring, and in this they were successful. They also tried to avoid registration of book debts under the Instruments Act. In this they were, in my opinion, unsuccessful for two reasons. First, because as already shown the law regards the stated obligations to pay as "debts," and next, because the rest of the agreement shows the parties regarded them as debts. Clause 3, in referring to "all rent then accrued due for the hiring of the said motor-cycle up to the expiration of the then current term of hiring," necessarily contemplated retention of the cycle by the hirer for a term, without actually paying the rent in advance. Similarly in clause 9, in which the words "recover from the hirer all rents or moneys agreed to be paid for the hire thereof and which may be due and unpaid at the time of such seizure." It is clear that the agreement treats the obligation to pay for the first and each successive term as a debt. I include the first beyond question, because, as already stated, clause 9 includes the possibility of default of payment of the first period rent.

There only remains one further contention, namely, that at the time of the assignment there was no existing obligation to pay for any period beyond the first. I assume the assignment took place before the commencement of the second period. Even so, there are two answers. First, there was then a contractual obligation that on the happening of an event, namely, the non-determination of the hiring, which meant necessarily the continuance of the hiring, it would be paid for at the rate stipulated. The relation was that of hiring, determinable in either of two ways. It was determinable by the hirer under clause 3, but only in the manner therein prescribed. If that was not followed, then the hiring being undetermined necessarily continued. But it continued without any right in the hirer that it should continue. The owner in that case had the right to determine it under clause 9, and if he did he had the right to recover all accrued rent unpaid. This is the true reconciliation of clause 2 on the one hand with clauses 3 and 9 on the other; and that is the first answer to the objection as to future debts. The next answer is: See Tailby v Official Receiver ^[F14] , at pp. 543 and following, and apply it to the words of s. 180 of the Instruments Act.

As to the motor-cars themselves I have had the advantage of reading the observations of my learned brothers Starke and Dixon, and I entirely agree.

This appeal fails and should be dismissed.