Campbell Discount Company Ltd v Bridge
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DAVIES,LORD JUSTICE HARMAN |
| Judgment Date | 01 March 1961 |
| Judgment citation (vLex) | [1961] EWCA Civ J0301-3 |
| Date | 01 March 1961 |
| Court | Court of Appeal |
[1961] EWCA Civ J0301-3
Lord Justice Holroyd Pearce
Lord Justice Harman and
Lord Justice Davies
In The Supreme Court of Judicature
Court of Appeal
Revised
Mr STANLEY REES, Q.C., and Mr ALASTAIR D. GAVIN (for Mr John D. Alliott) instructed by Messrs Ronald Brooke Co. - appeared on behalf of the Appellants (Plaintiffs).
Mr NEIL LAWSON, Q.C., and Mr JOHN G.K. SHELDOK - instructed by Messrs Edward, Son & Noice - appeared on behalf of the Respondent (Defendant).
LORD JUSTICE HOIROYD PEARCE: This is an appeal from a Judgment dismissing the plaintiffs' claim for £206. 3s.4d. The plaintiffs are a finance company from whom the defendant hired a motor car under a hire purchase agreement. The defendant, having exercised his right to return the motor car, was liable under the terms of the agreement to pay a certain sum by way of agreed compensation for depreciation of the vehicle. The learned Judge held that that sum was a penalty, and was not recoverable. Mr Stanley Rees for the plaintiffs contends that the learned Judge erred in that no question of whether the sum was a penalty arose since there was no breach. For by returning the car the defendant merely exercised an option at a certain price. Moreover even if the question of whether the sum was a penalty did arise and if it could be a penalty, it was not in fact a penalty, Mr Rees argues, but is a genuine pre-estimate of damage in circumstances that are bound to contain many imponderables.
Mr Neil Lawson contends that the Judge decided rightly. He further argues on a cross notice that even if the sum claimed is not a penalty, the court under its equitable jurisdiction should relieve the defendant of all obligations and liabilities in respect of the sum claimed, and dismiss the action. That point was never taken in the court below, nor was any evidence given as to the circumstances of the transaction.
The hire purchase agreement is dated 20th July 1959, It sets out the cash price of the vehicle as £405 of which £105 was discharged by an initial cash payment of £10 and a credit of £95 in respect of a car taken in part exchange. The total purchase price was £482.10s. Thirty-six monthly instalments of £10. 9s.2d were payable. The defendant paid the first instalment on the due date, the 20th August. On the 3rd September he wrote a letter saying; "Owing to unforeseen personal circumstances I am very sorry but I will not be able to pay any more payments on the Bedford dormobile. Will you please let me know when and where I will have to return the car? I am very sorry regarding this but I have no other alternative". There was no answer to that letter. The defendant then returned the car to the dealer on the 14th September, and in due course it came into the plaintiffs' possession.
The relevant clauses of the agreement are as follows. Clause 6 says: "The Hirer may at any time terminate the hiring by giving notice of termination in writing to the Oers, and thereupon the provisions of clause 9 hereof shall apply". Clause 9 says: "If this Agreement or the hiring be terminated for any reason before the vehicle becomes, under clause 5 hereof, the property of the Hirer, then the Hirer shall no longer be in possession of the vehicle with the owner's consent and the Hirer shall forthwith (a) at his own cost and risk deliver up the vehicle in a proper state of repair and condition together with all necessary licences, registration books or certificates, insurance policy and other documents relative to the vehicle to the owners at such address as they may direct, and (o) pay to the owners all arrears of hire rent due and unpaid at the date of termination of the hiring together with interest thereon stipulated under clause I hereof and by way of agreed compensation for depreciation of the vehicle such further sum as may be necessary to make the rentals paid and payable hereunder equal to two-thirds of the Hire Purchase price as specified in the Schedule hereto".
Clauses 7 and 8 were referred to for the purposes of the argument. By clause 7; "If the irer shall fail to pay any sum due hereunder or to observe any of the stipulations in clause 4 hereof or any other stipulations on his part contained herein the owners may thereupon and without notice terminate the hiring and/or this Agreement, and may … retake possession of the vehicle whereupon the provisions of clause 8 hereof shall apply".
Clause 8 says; "Without in any way derogating from their rights under clause 7 hereof, and without discharging or prejudicing any pre-existing liability of the hirer to the owners (including the liability of the Hirer under clause 9 hereof) this Agreement and the hiring hereunder shall forthwith and for all purposes be determined absolutely and come to an end" on certain events including death of the hirer, distress, bankruptcy, liquidation, and so forth.
The hirer exercised his option under clause 6 by giving notice. Clause 9 then applied. Under clause 9 (a) the hirer had to return the vehicle, which he has done. Under clause 9 (b) he has to pay such sum as will make up the rentals to two-thirds of the purchase price, namely, the sum here claimed. Ho breach of contract or damages are in question for the hirer is simply exercising his right to return the car with all the incidents set out under clause 9 (a) and (b). Therefore the doctrine relating to penalties does not apply.
A similar situation was considered in Associated Distributors Limited v. Hall, reported in 1938 volume 2 King's Bench Division, at page 83. There the hirer had hired a tandem bicycle under a hire purchase agreement. By clause 5 of the agreement he was given an option of terminating the hiring at any time by returning the bicycle, but he remained liable for the rent up to the date of the return and for all other sums payable under the agreement and damages (if any) for any breach of any term of the agreement. By clause 7 it was agreed that in the event of the hiring being determined he was to pay by way of compensation for depreciation of the goods, in addition to any other sums payable thereunder, such sums as, with the amount previously paid for rent, should make up a sum equivalent to not less than one-half of the total amount including the option purchase price payable under the agreement. This court held that there was no question as to the plaintiffs' claim under clause 7 "being liquidated damages or in the nature of a penalty", and that therefore the owner was entitled to recover his money.
Lord Justice Slesser at page 87, having referred to cases in which payments were made as compensation for depreciation where the hirer's default had brought to agreement to an end continued: "In such cases … the question has arisen whether the sum which the owner may claim by way of compensation for depreciation of the goods, in addition to any other sums payable as provided in clause 7, is liquidated damages or a penalty. The cases as I understand them - two in the Divisional Court and a decis on in the Court of Appeal - seem to establish the view that they are to be regarded as liquidated damages, but it is not necessary in the present instance for us to express any opinion upon those decisions, because they have nothing to do with the particular case which we are here to determine, for here the hirer, not the owner, terminated the hiring. He has exercised an option and the terms on which he may exercise the option are those set out in clause 7. The question therefore whether these payments constitute liquidated damages or a penalty in the instances mentioned does not arise in the present case".
Lords Justices Scott and Claus on agreed, but pointed out "that it would save much misunderstanding, and would certainly conduce to the reputation of honest traders and those who hired out bicycles in those circumstances, if they were to take steps, whenever this form of contract is used, to make it clear by a statement on the face of the contract" that the person who enters into it is under the liability which the court was enforcing in that case. I agree with that observation. The Hire Purchase Acts of 1938 and 1954 have secured that result in transactions within their scope, but the transaction in the present case, being over £300 in amount, is unfortunately outside their scope.
Mr Neil Lawson sought to distinguish that case in two ways. First he argued that the defendant broke the terms of the hiring agreement by not giving proper notice of termination and by returning the car not to the owners but to the dealer who was not their agent. If that be so he can argue that the sum claimed under clause 9 is damages for his own breach. He relied on ( Cooden Engineering Co. Ltd. v. Stanford 053 volume 1 Queen's Bench Division, page 86, as establishing that the sum could be and is a penalty on the facts of the present case. But in my judgment that...
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