Kay's Leasing Corporation Pty Ltd v Fletcher

[16]

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.

[20]

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.

[22]

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.

[24]

The remaining matter with which we wish to deal is concerned with the decision in Reg. v. R. W. Proffitt Ltd. [1] . 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" [1] . 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.

[35]

Where a provision renders an agreement void for non-compliance by the parties or one of them with statutory requirements, especially where the requirements can be seen to embody a specific policy directed against practices which the legislature has deemed oppressive or unjust, a presumption that the agreements in contemplation are only those of which the law of the country is the proper law according to the rules of private international law has no apparent appropriateness to recommend it, and indeed, for a reason of special relevance here, it would produce a result which the legislature is not in the least likely to have intended. It would mean that provisions enacted as salutory reforms might be set at nought by the simple expedient adopted in the present case of inserting in an agreement a stipulation that validity should be a matter for the law of some other country. In Boissevain v. Weil [2] , Denning L.J. said: "Notwithstanding what was said in Vita Food Products Inc. v. Unus Shipping Co. [3] , I do not believe that parties are free to stipulate by what law the validity of their contract is to be determined" [4] . I would respectfully say the same. In the Vita Food Case [5] the proposition was laid down that the parties to a contract may conclusively determine for themselves what the proper law of the contract shall be, provided that their expressed intention is "bona fide or legal", and provided there is no reason for avoiding their choice on the ground of public policy. That seems to me the strongest possible reason for rejecting the proper law of the contract as the test for determining to what agreements enactments such as ss. 26C and 31 of the New South Wales Hire-purchase Agreements Act should be understood as intended to apply. In Dicey's Conflict of Laws, 7th ed. (1958) p. 759 the surmise is offered that statutes designed to implement a social policy, e.g. the Hire-Purchase Act, 1938 U.K., would in certain circumstances be applied by an English Court to a contract which, by agreement between the parties, was subject to a foreign law. A footnote refers to Mynott v. Barnard [1] . The judgment of Latham C.J. in that case [2] should be noted, as also Koop v. Bebb [3] . In these authorities I find general reinforcement for the view above expressed.

[40]

The inspiration for this provision obviously came from the United Kingdom Act (1 & 2 Geo. 6, c. 53, s. 21) and the New South Wales Act. In those Acts, "hire-purchase agreement" is defined to mean "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". To this each Act appends a provision 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 purchase the goods, or the property therein will or may pass to the bailee, the agreements shall for the purpose of the Act be treated as a single agreement made at the time when the last agreement was made. This appended provision has been carried into the Victorian Act as s. 2 (3) with the addition of the words "hire-purchase" between "single" and "agreement". This has been done notwithstanding that the definition in s. 2 (1) has not been made to correspond in terms with the main portion of the definition in the other Acts; and it has been done without repeating in s. 2 (3) two exceptive paragraphs to which the definition in s. 2 (1) is subject. The result no doubt is that cases may be imagined in which two or more agreements must together be treated as a single hire-purchase agreement although a single agreement containing all their terms would not be a hire-purchase agreement. But notwithstanding the lack of precise correspondence between the two provisions it seems as clear under the Victorian Act as it is under the United Kingdom and New South Wales Acts that the fundamental idea that pervades them is of an agreement, whether embodied in one instrument or in several, whereby one party obtains from the other (i) the possession of goods and (ii) a right to become the owner of the goods possessed, either certainly or upon the performance of conditions such as the payment of moneys. A complete desertion of this basic idea would be involved if the intention were to include the case where the bailee has no right in any event to become the owner of the goods bailed, unless the bailor chooses to appropriate those goods to a future sale to the bailee of unascertained goods by description. It is literally true that in a case like the present the property in the goods bailed may pass to the bailee; and in one sense it is true that, if they do pass to him in consequence of his exercising an option to purchase unascertained goods equal in type, quality and condition to the goods bailed and of the bailor's selecting the bailed goods to be the goods purchased, the property in those goods will pass to the bailee "by virtue of" the agreements. But it seems to me that proper force is not given to the expression in s. 2 (3) "by virtue of two or more agreements the bailee may buy the goods or the property in the goods will or may pass to the bailee" unless it is confined to the case where the agreements, by dealing with the bailed goods only, do all the selecting of specific goods that is necessary for the passing of the property therein to the bailee. The sense of the expression "by virtue of" two or more agreements seems to me to be that the selection of the goods to become the bailee's property is made by the agreements themselves, so that if the property in any goods ever passes by virtue of them it will be the property in the goods bailed. This conclusion does not depend at all upon the fact that in s. 2 (3) the expression "hire-purchase" is added before "agreement" - I should similarly construe both parts of the definition in the United Kingdom and the New South Wales Acts - but the addition seems to me to emphasize that so radical a departure could not have been intended as would be involved in erecting a single hire-purchase agreement out of two agreements which left the bailor to say whether the bailee might in any event become the owner of the bailed goods. In short, I would construe s. 2 (3) as referring only to agreements producing two results with respect to the one lot of specific goods. Some provisions in the Act, such as s. 3 (1) and the First Schedule, ss. 3 (2) (c) (v), 3 (2) (e), 18 (2), and 19 (1) (b), tend to support this conclusion. Other provisions, such as ss. 5 (1) (a) (b) (c), 5 (2), 10, 11, 14 and the Fourth Schedule, 15 and 23 (1), appear to me to make the conclusion quite inevitable.

[44]

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 not-withstanding 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 sub-section 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).

[47]

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.

Kay's Leasing Corporation Pty Ltd v Fletcher - [1964] HCA 79 - HCA 1964 case summary — Zoe

At a glance

Court

Decision date

Before

Source

Judgment (49 paragraphs)

Parties