Capital Finance Company Ltd (Respondents - Plaintiffs) v Donati (Appellant - Defendant)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE CAIRNS,LORD JUSTICE STEPHENSON,LORD JUSTICE WALLER |
| Judgment Date | 04 March 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J0304-1 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 March 1977 |
[1977] EWCA Civ J0304-1
In The Supreme Court of Judicature
Court of Appeal
(Appeal of Defendant from Order of His Honour Judge Humphrey Lewis, Loughborough County Court, June 8, 1976.)
Lord Justice Cairns
Lord Justice Stephenson and
Lord Justice Waller.
THE APPELLANT (Defendant) appeared in person.
MR D.R. SNEATH (instructed by Messrs, Dews Welham & Co. of Leicester) appeared on behalf of the Respondents (Plaintiffs).
This is an appeal from the judgment of Deputy Judge Lewis at the Loughborough County Court awarding the plaintiff finance company £388.23 found to be due under a hire purchase agreement which had been determined by the plaintiffs because of non-payment of instalments by the defendant.
The hire purchase agreement was for a Fiat car and was dated the 29th May 1973. The total cash price was £1,758.24, The initial payment was £350.24. The balance of £1,408 plus hire purchase charge of £542.90 was to be paid by 42 monthly instalments of £46.45 each. The hire purchase charge was calculated as 11 per cent. on £1,408 for 3½ years. So the total hire purchase price was £1,758.24 plus £542.90, equals £2,301.14. Clauses (7) (i) and (8) provided as follows: "(7) (i) If during the hiring;- (a) The Hirer shall make default in the punctual payment of any rent payable …. the Owners may without notice determine the hiring. …. (8) Upon the hiring being determined either by the Owners or the Hirer or ipso facto by the operation of Clause 7 (1) (b) hereof the Hirer shall upon demand pay to the Owners;- (a) Any arrears of Hire Rent accrued as at the date of termination. (b) Any expenses incurred by the Owners in tracing and/or recovering possession of the Goods and (c) the amount of the Owners' loss on the transaction, which loss is hereby agreed as being the difference between on the one hand the Hire Purchase Price of the Goods and on the other hand the aggregate of (i) the net proceeds of sale thereof (ii) the Hirer's payments by way of initial rent and instalments and (iii) a sum representing a reasonable proportion of theCharges shown in the Schedule applicable to that part (if any) of the Hire Purchase Price which the Owners shall by the operation of this Clause have received prematurely, ('The net proceeds of sale' shall mean the sale price loss any commission or other expenses reasonably paid or incurred by the Owners in respect of the repossession and sale of the Goods loss also any sums reasonable expended by the Owners in putting the Goods into good order and repair for the purposes of the sale)."
The defendant fell into arrears and by the end of February, 1974, £78.94 was overdue. The plaintiffs then determined the hiring and took possession of the car. They later sold it for £800, but the Judge hold that it was worth £1,000.
The plaintiffs sued in the county court for £813.79, arrived at by deducting from the hire purchase price plus the option to purchase fee of £2 sums already paid by the defendant. totalling £689.35 and the proceeds of sale, £800.
The judge calculated the sum due as follows:
| Total hire purchase price | £2,301.14 | |
| Value of car recovered | £1,000.00 | |
| 11 per cent, rebate on £1,000 | 302.50 | |
| Paid by defendant | 689.35 | 1,991.85 |
| 309.29 | ||
| Arrears | 78.94 | |
| 388.23 |
(1) That Clause 8 is a penalty clause and void; (2) that there was no breach by him except non-payment of instalments and therefore only £78.94 is recoverable. The defendant argued his own case on appeal, and did so with conspicuous ability.
Three decisions of this court were referred to in argument all dealing with hire purchase agreements containing provisions for the owner, on breach by the hirer, to retake possession and recover certain payments from the hirer.
In Financings Ltd. -v- Baldock (1963 2 Q.B. p.104) the headnote reads as follows: "Under an agreement dated January 25, 1960, for the hire purchase of a Bedford truck for the aggregate sum of £772 los. the hirer paid £100 on the signing of the agreement. The balance was payable over a period of two years by monthly instalments of £28 0s.8d. The agreement provided by clause 8 that if the hirer should fail to pay any instalment within 10 days after it had become duo the owner may by written notice forthwith and for all purposes terminate the hiring.' By clause 9; 'Should the hiring be terminated by clause 8 hereof, the owners may …..without any notice retake possession of the goods ….' Clause 11 provided that should the hiring be terminated by the owner under clause 8, 'the hirer shall … forthwith pay to the owner either (a) such further sum as with the total amount of any instalments previously paid hereunder will equal two-thirds of the total hiring cost shown in the schedule as agreed compensation for the depreciation of the goods or (b) the amount of all instalments and other moneys then already due hereunder, whichever is the greater.'
The hirer failed to pay the first two instalments due on February 25 and March 22 respectively amounting to £56 1s. 4d. On April 7, when the hirer had had the truck for 10 weeks, the owners served a written notice on him expressed to be inexercise of their powers under the agreement which stated 'we now put an end to the hiring and will forthwith take possession of our property … this is entirely without prejudice to our remedies against you for any moneys … recoverable from you under this agreement.' The owners took possession of the truck, their agent who took the truck stating that they would hold it for seven days to give the hirer the opportunity of repaying the arrears. The truck was sold by the owners' agent on October 20, 1961, for £140. The owners claimed a total sum of £538 is. The master held that the owners had not been reasonable in terminating the agreement as they did. He awarded to them £56 1s.4d., the amount of the two instalments in arrears with interest at 10 per cent. (being the rate payable on overdue instalments) from the time when they became due. The owners appealed:-
Hold, that the failure by the hirer to pay the two instalments did not amount to a repudiation by him of the hire- purchase agreement (post, pp.112,114,120); that clause 11 was unenforceable being a penalty clause and that therefore the owners, who had retaken the vehicle, could recover damages only for any breach up to the date of termination and not thereafter (post. p.111). Accordingly, the owners were entitled only to the two instalments in arrear amounting to £56 1s. 4d. with interest at 10 per cent. up to the date of judgment." I need not read the rest of the headnote.
The Master of the Rolls in his judgment hold that Clause 11(a) was a penalty clause because by it the owners were seeking, on termination of the hiring, to recover damages for loss offuture instalments when they had not lost any. Ho continued at page 111: "Seeing that they can no longer roly with any confidence on the 'minimum payment' clause, the owners have reverted recently to a claim for damages under the general law. But they can only do so, it seems to me, subject to the general principle which I have already stated, namely, that when they terminate the hiring and retake the vehicle, they can only got damages for any breaches up to the date of termination but not thereafter. That principle is implicit in what Salter J. said as long ago as 1926 in Elsey & Co. Ltd. v. Hyde, an unreported case quoted by Jenkins L.J. in Cooden Engineering Co. Ltd. v. Stanford. Salter J. took the very case 'where the hire is determined by the owner, because the hirer is in arrear with his payments. It is proved that this is a breach of this contract, and it is proved that that breach, apart from any termination of the hirer, would give the owner a right to damages against the hirer. But what would those damages be? They would be interest on the amount unpaid and nothing more. The fact that the hirer is in arrear with his payments will not entitle the owner to any damages for depreciation of those things. The reason that they have suffered is that they have secondhand goods put on their hands before they have received very much money in respect of them. That is not the result of the hirer's breach of contract, in being late in his payments, it is the result of their own election to determine the hiring.' That passage is in my view good law; and Jenkins L.J. seems to have accepted the reasoning in it as correct.
In applying this principle, I asked Mr. Rawley: whatwere the breaches by the hirer up to the termination of the hiring? He could only point to the simple failure to pay the two instalments of rent. In those circumstances the only moneys which the owners can recover are those two instalments which are in arrear and unpaid with the interest thereon. If the owners could prove damages for breach of contract to repair, they could recover them. But no more. When you remember that the hirer only had the vehicle 10 weeks and that the owners have already received the initial instalment of £100, it seems to mo that if they got these two instalments amounting with interest at 10 per cent. up to the date of judgment to £56 1s. 4d., it meets the justice of the case.
So much for the matter of principles but now for the authorities. They are Yeoman Credit Ltd. v. Waragowski and Overstone Ltd. v. Shipway, and a passage at the end of my own speech in Bridge's case. When those cases are examined, it will be found that there was not only a failure to pay past rentals, but there was a repudiation by the hirer of his obligation to pay future rentals. Thus in Waragowski's case the hirer, by his long non-payment for six months, evinced an intention no longer to be bound by his contract. In Overstone Ltd. v. Shipway he had written a letter...
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