Financings Ltd v Baldock
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,RD JUSTICE UPJOHN,LORD JUSTICE DIPLOCK |
| Judgment Date | 18 December 1962 |
| Judgment citation (vLex) | [1962] EWCA Civ J1218-3 |
| Date | 18 December 1962 |
| Court | Court of Appeal |
[1962] EWCA Civ J1218-3
The Master of The Rolls (Lord Denning)
Lord Justice Upjohn and
Lord Justice Diplock
In The Supreme Court of Judicature
Court of Appeal
From Master Harwopd.
A. D. RAWLEY (instructed by Messrs Lawford & Co.) appeared as Counsel for the Appellants
HE RESPONDENT did not appear and was not legally represented.
In this case we have had the great advantage of hearing Mr Rawley, who knows much about hire purchase matters, and he has presented the case very fairly before us in the absence of Mr Baldock or anyone on his behalf
The facts are those: on the 25th January, 1960, Mr Baldock entered into a hire purchase agreement with Financings (Southern) Ltd. Whereby he agreed to take on hire purchase a Bodford 5-ton truck. The cash price of the truck was £675. He paid £100 down as the first instalment of rent. The hire purchase company charged as interest the sum of £97. 16s.0d. the result was that altogether, in addition to the £100, they wanted £672. 16s.0d. to be paid to them. They stipulated that it was to be paid to them over a period of two years by 24 monthly instalments of £28. 0s.8d. each, the first payment being on the 25th February, 1960, and thereafter monthly. If he paid all those instalments, then at the end of the two years he had an option to purchase for £1. 10s.0.
The hire purchase agreement was in familiar terms. I must point out at once that it was ot for two years certain. It was for two years "punless determined by the hirer or teh owner" and there was a provision that interest be paid at 10 per cent. on all overdue instalments. Clause 8 ran: "Should the hirerf fail to pay the initial instalment or any subsequent instalment within ten days after the same shall have became due…or if he shall die… the owner may by written notice forthwith and for all purposes terminate the hiring". Clause 10: "The hirer may at any time terminate the hiring by returning the goods at his won expense and risk to the owner". Clauses 11: "Should the hiring be terminated by the hirer under Clause 10 or by the owner under Clause 8 hereof, 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 toal hiring cost shewn in the schedule asagreed compensation for the depreciation of the goods or (b) the amount of all instalments and othor moneys then already duo hereunder, whichever is the greater". Those are all the clauses I need road
The initial instalment of rent of £100 was paid, but the first payment due thereafte on the 25th February was not paid. Then the Company on 22nd March wrote this letter to Mr Baldock: "We have to remind you that your account shows arrears of £28.osd." – that was the instalment of the 25th February – "with a further amount due on the 25th inst. Please ensure that your remittance for £56. 1s.4d. reaches us on the 26th inst". He did not pay, with the result that on the 7th April, 1960 – that is, after he had had the lorry 10 weeks – the hire purchase compnay sent a messenger, Mr Walters, to him with this notice of termination: "As you are in default in payment of Moneys due under this agreement, we give you notice that in exercise of our powers under this agreement, we now put an end to the hiring, and will forthwith retake possession of our property. You must understand that this is entirely without prejudice to our remedies against you for any moneys, damages, or expenses recoverable from you under this agreement". The messenger, Mr Walters, handed that notice to Mr Baldock; he collected the lorry from Mr Baldock's premises and took it away. Mr Baldock said he could not possibly pay the arrears at the time but might possibly be able to raise the money within the next three days. Mr Walters said they would hold the lorry for seven days to give him that opportunity. They held it for a fortnight but heard nothing. The company then put the lorry into the hands of the doaler who originally handled it, but they did not do what one would have thought would be the reasonable thing to do try and let it on hire purchase again. They asked these dealers to try and sell it. They did not sell it for eighteen months,until eventually on the 20th October, 1961, they sold it for 40. Then on the 27th November, 1961, they issued the writ in this action claiming a total sum of £538. 1s.0d. In the result they have already had the £100: Mr Baldock had the lorry for 10 weeks; and they sued in addition for £538. 1s.0d. Mr Baldock did not enter an appearance. But they did not get final judgment. They got judgment for damages to be assessed. The matter was referred to the Master. Master Harwood (applying, as he thought, the latest case in this Court of Ovorstone Ltd. v. shipway, reported in 1962, 1 Weekly Law Reports, page 117) held that the hire purchase company had not acted reasonably in terminating the agreement as they did; and he was not prepared to give them the damages for which they asked. He awarded them the arrears of the two instalments amounting to £56. 1s.4d. and interest at 10 per cent. from the time that they became due.
The hire purchase company appeal to this Court.
Undoubtedly the cases in the past give rise to some conflict, and therefore I will try to state the matter on principle. It seems to me that when an agreement of hiring is terminated by virtue of a power contained in it, and the owner retakes the vehicles, he can recover damages for any breach up to the date of termination but not for any breach thereafter, for the simple reason that there are no breaches thereafter. I see no difference in this respect between the letting of a vehicle on hire and the letting of land on a lease. If a lessor, under a provise for re-entry, re-enters on the ground of non-payment of rent or of disrepair, he gets the arrears of rent up to date of re-entry and damages for want of repair at that date, but he does not get damages for loss of rent thereafter or for breaches of repair thereafter.
In this and many hire purchase agreements the owners have sought to avoid that general principle by inserting a "minimum payment" clause such as we see in Clause 11(a) herewhich provides that, should the hiring be terminated, whether by the owner or the hirer, the hirer has got to pay at loast two-thirds of the total hiring cost. By a series of cases starting with the decision of the Court of Appeal in Cooden Engineering Co. Ltd. v. Stanford, 1953, 1 Queen's Bench, p. 86, and culminating in the decision of the House of Lords in Campbell Discount Co. Ltd. v. Bridge 1962 Apprsl Cases, p. 600, such a clause has now been held to be a penalty clause. The owners by such a clause are really seeking, on an early termination of the hiring, to recover damages for loss of future rentals, when they have not lost any. They have no right to future rentals after they have terminated the agreement and got the vehicle back. They cannot, therefore, pray Clause 11(a) in aid. And Clause 11(b) cannot help them: for that applies only when the hiring lasts so long that the instalments are greater than two-thirds of the total hiring cost. The owners in that event are entitled to the unpaid instalments or other moneys due. There can be no objection to such a provision, but it adds nothing to the general principle I have stated. It has no application to this case.
Seeing that they can no longer rely 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 get damages for any breaches up to the date of termination but not thereafter. That principle is implicit in what Mr Justice Salter said as long ago as 1926 in the case of Elsey & Co. Ltd. v. Hyde, an unreported case quoted by Lord Justice Jenkins in Cooden Engineering Co. Ltd v. Stanford, 1953, 1 Queen's Bench at page 102. Mr Justice Salter took the very case "where the hire is determined by the owner, because the hirer is in arrear with his payments. It isproved 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 these things. The reason that they have suffered is that they have secondhand goods put as 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 with his payments – it is result of their own election to determine the hiring". That passage is in my view good law: and Lord Justice Jenkins seems to have accepted the reasoning in it as correct
In applying this principle, I asked Mr Rawley: What were 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 these circumstances the only moneys which teh Company can recover are those two instalments which are in arrear and unpaid with the interest thereon. If the Company could prove damages for breach of contract to repair, they could recover them. But no more. When you remember that Mr Baldock only had the vehicle 10 weeks and that they have already received the initial instalment of £100, it seems to me that if they get these two instalments amounting to £56. 1s.4d. with interest at 10 per cent. up to the date of judgment, it meets the justice of the case.
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