Charterhouse Credit Company Ltd v Tolly
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DONOVAN,LORD JUSTICE UPJOHN,LORD JUSTICE ORMEROD |
| Judgment Date | 15 March 1963 |
| Judgment citation (vLex) | [1963] EWCA Civ J0315-2 |
| Court | Court of Appeal |
| Date | 15 March 1963 |
[1963] EWCA Civ J0315-2
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Ormerod
Lord Justice Upjohn and
Lord Justice Donovan
MR JOHN SHAW (instructed by Messrs Ormerod, Morris & Dumont, Croydon) appeared on behalf of the Plaintiffs.
MR LEONARD CAPLAN Q. C., and MR J. SOPER (instructed by Mr. Peter Kingahill, Norwood) appeared on behalf of the Defendants.
This is an appeal by Mr. Tolly against a decision of His Honour Judge Cohen given at Croydon County Court on 7th May, 1962. There is a cross-appeal by Charterhouse Credit Company, whom I will call the Company.
The dispute arises out of a hire-purchase agreement.
On the 30th December,1960, Mr. Tolly entered into such an agreement with the Company for the hire-purchase of a second-hand Vaushall motor-car. The cash price was £410. The hire charges were £57. 12s.0d. There was the usual conditional option to purchase for a final payment of £1. The hire-purchase price was therefore £468. 12s.0d. This was to be paid by an Initial payment of £90 plus 23 monthly "hire rentals", of £16. 14s.8d. and one final such rental of £16. 14s.8d.
Mr. Tolly paid the initial payment of £90. He paid, however, none of the monthly Instalments. He refused to do so on finding, when he took the car on to the road, that it had a serious defect in the back axle. This, apparently, had been damaged in a previous collision and badly repaired. According to the findings of the learned County Court Judge Mr. Tolly contemplated having the car properly repaired himself. The cost would have been in the neighborhood of £50, but he could not meet this outlay and keep up the monthly instalments as well. He, therefore, asked the Company for some indulgence in the matter of time, and in all some three months was given. In the meantime Mr. Tolly fell ill and had to go to hospital. The car remained unused in his front garden. He had, in fact, driven it on two occasions only from Norwood to Greenwich and back; and his son-in-law had, after the second of these Journeys, partially stripped the back axle and discovered the "botched" repair.
No monthly installments having been paid, the Company, pursuant to its right under the hire-purchase agreement in these circumstances so to do, terminated the hiring and retook possession of the car on the 24th April, 1961, and a few days later it was sold by the Company for £250.
On the 28th June, 1961, the Company commenced theproceedings whom have led to the appeal and cross-appeal. By their Particulars of Claim they asked for a further sum from Mr. Tolly of £127. 12s.0d.,and they described this as "damage, being the total hiring charges less the amount paid and proceeds of sale of the said car." This claim was rested upon the Common Law. There was a clause in the hire-purchase agreement purporting to give the Company a right, in effect, to recover a larger sum sufficient to make Mr. Tolly's payments up to three-fourths of the total hiring charges under the agreement; but at the hearing before the County Court Judge the Company, though it had pleaded the clause, abandoned any claim under it, no doubt because they apprehended that it would be regarded as penal.
Mr. Tolly delivered a Defense alleging that the Company was in breach of a fundamental term of the contract that the car should be reasonably fit for the purpose for which it was hired; and that on discovering that the car was, as he alleged, unusable, unroadworthy and unsafe, he had refused to accept it in that state. He also counterclaimed for the return of his initial payments of £90 as being money paid for a consideration which had wholly failed; for the cost of two new tyres he had fitted to the cap: and for damages.
It is not now disputed that at Common Law it was an implied term of the contract that the car should be reasonably fit for the purpose for which it was hired. Yeoman Credit Ltd. v. Apps infra
The findings of the learned County Court Judge were these: 1. There had been a fundamental breach of the contract on the part of the Company in hiring out a car to Mr. Tolly which was "not fit to be driven", Completely unroadworthy", and not fit to be used on the road." 2. Mr. Tolly had not taken up the position that by this fundamental breach the Company had repudiated the contract, and that he himself, therefore, would no longer be bound by it. 3. instead he had elected to treat the contract as still subsisting, and as still binding upon him,without prejudice, however; to his right to sue the Company for damages in respect of their fundamental breach of the contract. 4. In the circumstances the Company were entitled to recover as damages the sum they claimed, namely, £127. 12S.0d., subject, however, to a deduction of £30 for accelerated payment, that is, £97. 12s.0d. net. 5. Mr. Tolly on his Counterclaim was entitled to recover a sum of £81, made up as follows: £45, the estimated cost of repairs to the back axle; £25 for other defects - there were some others, though less serious; and £11 for two new tyres which Mr. Tolly had fitted, and of which the Company had the benefit when they retook the car and sold it.
Before us, Mr. Tolly, who is the Appellant, contends first that the damages awarded to the Company were computed on a basis which is wrong in law. Pursuant to the recent decision of this Court in Financings Ltd. v. Baldock (reported in 1963 2 Weekly Law Reports at page 239 and 1963 1 All England Reports at page 443) the Company were entitled to receive only those Instalments which were in arrear when the Company terminated the contract. He next contends that the damages awarded to him on his Counterclaim were too little, and were again computed on a basis which is wrong in law. He asks for damages equal to the initial installment of £90, the three monthly instalments totaling £47. 4s.0d. which he admits he must pay under the contract; and £11 for the two new tyres.
The Company resists these contentions, and on its cross appeal has argued: 1. Even though there was an implied term in the contract as to the reasonable fitness of the car for hiring purposes, nevertheless there had been no fundamental breach of the contract. 2. Alternatively, Clause 5 of the contract precluded Mr. Tolly from relying on any such breach.3. That, in any event? the damages awarded to Mr. Tolly on his Counterclaim were too high, having been computed on a wrong principle.
It will be convenient to deal with these rival contentions in a different order. First, as to whether or not the Companywas in fundamental breach of the contract. It was not urged on its behalf that a car might deserve all the epithets leveled against this particular car by the County Court Judge, and its delivery to a hire-purchaser still be a fulfillment of the contract. For example, a car with defective steering might be "unfit to be used, and "quite un road worthy" and yet the task of putting it right might be simple and inexpensive. Nobody would describe such a defect as involving a fundamental breach of the contract. This I "would accept; but am not disposed to interfere with the County Court Judge's finding in the present case.
A defect in the back axle can be an extremely serious and dangerous matter, and when Mr. Tolly agreed to take a car on hire-purchase from the Company the last thing he would want would be a car with such a defect involving what would be for him a substantial outlay on repair - If he wished to repair. I think the Judge committed no error of law when he said, in effect, that delivery of such a car was not a performance of the contract at all - in other words, that there was a fundamental breach by the Company of their contractual promise. I would not say the question is purely one of fact. The facts, of course, must be found, but Weather they amount to such a fundamental breach Involves legal considerations, and I think the question is, at the least, a mixed question of fact and law. I agree with the County Court Judge's decision that such a breach here occurred.
He went on to find, as I have said, that Mr. Tolly, nevertheless, elected to treat the contract as still on foot. Against this finding there is now no appeal by Mr. Tolly. The effect is, of course, that he must pay for such breaches of the contract as he himself may have committed. These consist, however, solely of his failure to pay the three monthly Instalments of hire due at the date when the Company terminated the hiring - a total of £47. 4s.0d. Pursuant to the recent decision of this Court in Financings Ltd. v. Baldock, this is all that the Company canrecover. Mr. Shaw, for the Company, contends that this decision is wrong, and that it is in conflict with two earlier decisions of this Court, namely, Yeoman Credit Ltd. v. Waragowski (reports in 1 Weekly Law Reports at page 1125), and Overtone v. Shipway Ltd. (reported in 1962 1 Weekly Law Reports at page 117), in each of which cases damages were awarded on a basis similar to that adopted by the County Court Judge in the present case. It is unnecessary to recite the facts of those two cases. They are epitomized in the Judgments in ( Financings, Ltd. v. Baldock supra); and the root distinction which they exhibit is that they were cases where the hirer had evinced an intention to be no longer bound by the contract - in other words, had repudiated it. In such a case, of course, the other party had the right to recover as damages what he lost by such repudiation, namely, what he would have received in hire charges had the contract been allowed to run its course. The case is quite different where the owner of the goods - in the present case the Company - terminates the contract. There can then be no breach of the promise to pay instalments falling due thereafter, for the contract has ceased to exist...
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