HIRE‐PURCHASE AGREEMENTS AS BILLS OF SALE (II)

Published date01 September 1960
DOIhttp://doi.org/10.1111/j.1468-2230.1960.tb02771.x
Date01 September 1960
HIRE-PURCHASE AGREEMENTS AS BILLS
OF
SALE (11)
(Continued
from
p.
409)
IN
the first part of this article the meaning of
bill of sale
and
the effect of the Bills of Sale Acts,
1878
and
1882,
were described.
The stage is now set for
a
discussion of how far, if at all, the Bills
of Sale Acts apply to hire-purchase agreements.
PART
I1
:
HIRE-PURCHASE
AGREEMENTS
It
is clear that there are important similarities between the position
under a security bill of sale and the position under a hire-purchase
agreement.
In
both, the person in possession of the goods is not
the owner, although he may appear to be the owner to the outside
world. In both, the person in possession is under an obligation to
pay money to the owner of the goods.
In
both, the owner is entitled
to take possession of the goods
if
default is made in payment.
But these similarities do not bring the hire-purchase agreement
within the Bills of Sale Acts, for those Acts, as we have seen, are
concerned not with factual situations but with documents of
a
certain type. “The Bills of Sale Act relates to assurances
or
assignments
or
rights to seize given
or
conferred
by the person who
oms
the property.”
The essential facts of the hire-purchase agreement which
distinguish
it
from
a
bill of sale are these: the owner’s title to the
goods is independent of the hire-purchase agreement, and necessarily
arose before the hire-purchase agreement was entered into
;
the
hirer’s right to possession of the goods arises solely out of the hire-
purchase agreement; and the owner’s right to recover possession is
a right against his
own
goods, and does not arise out of the hire-
purchase agreement.* Under a bill of sale,
on
the other hand, the
grantee’s title to the goods stems from the bill
of
sale itself, since
the goods were originally the property of the grantor, who remains
in possession of them.
In
McEntire
v.
Crossley Brothers, Ltd.
:
S
agreed to sell“ a gas engine to B, payment to be made by
1
Per
Lord Herschell L.C.
in
McEntire
v.
Crossley
Brothers,
Ltd.
[1895]
A.C.
457,
H.L., at
p.
462.
2
See,
e.g.,
Smart
Brothers,
Ltd.
v.
Holt
[1929]
2
K.B.
303,
D.C., especially
per
Wright
J.
at
p.
308;
and
Bowmakers,
Ltd.
v.
Barnet Instruments,
Ltd.
[1945]
K.B.
65.
C.A.
3
[la951
A.C.
457,
H.L.
(Italics added.)
4
The agreement
was
drafted
as
a
hiring agreement, but-it
was
clearly
a
con-
ditional sale
of
goods
as
in
Lee
v.
Butler
[l893] 2
Q.B.
318,
C.A.
See
per
Lord Herschel1 L.C.,
[1895]
A.C.
at pp.
465-466,
and Lord Watson at
p.
467.
516
SEPT.
1960
HIRE-PURCHASE AGREEMENTS AS
BILLS
OF
SALE
517
instalments. The property was to remain in
S
until all instal-
ments had been paid, and
S
was entitled to recover possession
on
B’s
default. On
B’s
bankruptcy
S
claimed to recover the
engine.
B’s
trustee in bankruptcy claimed that the transaction
was a void bill of sale.
The House of Lords unanimously held that the transaction was not
a bill
of
sale, and that
S
was entitled to recover the engine, since
B
had never become the owner of the goods and therefore could
not have granted
a
bill of sale in respect of them.
Although the agreement in this case was a contract for the sale
of goods where the property did not pass to the buyer until pay-
ment
of
the last instalment,
a
fortiori
similar principles must apply
to the ordinary form of hire-purchase agreement where the property
does not pass to the hirer until he exercises the option to purchase
the goods.
SALE
AND
LEASE BACK
It
is hardly surprising that persons lending money
on
the security
of goods seized
on
the principle in
McEntire
v.
Crossley Brothers,
Ltd.‘
to concoct a transaction which would evade the Bills of Sale
Acts, which were unpopular with lenders because
of
the technicali-
ties which might unwittingly be infringed and with borrowers because
of
the stigma which undeniably attached to grantors of bills of sale.
If
B[orrower] wishes to borrow money from L[ender], giving L a
right to seize
B’s
goods
on
B’s
default in repayment, why not
arrange for
B
to sell his goods outright to
L
for the money needed
by B? Of course, B wishes to continue to use his goods, and to
regain their ownership on repayment: this can be achieved by
L
immediately entering into a hire-purchase agreement whereby B
hires the goods, the hire-purchase price amounting to repayment of
the original sale price with interest added.
If
B defaults in repay-
ment, L will enforce, not a loan
on
the security of goods, but his
rights as owner under
a
hire-purchase agreement.7
If
it
is not surprising that this transaction was attempted,
it
is
still less surprising that the courts were not deceived by the pro-
cedure.
I
do not deny,” said Lord Esher
M.R.
in a leading case,
that people may evade an Act
of
Parliament
if
they can, but,
if
they attempt to do
so
by putting forward documents which affect to
be one thing when they really mean something different, and which
are not true descriptions
of
what the parties to them are really
doing, the court will go through the documents in order to arrive at
the truth.
The court ought never to let a sham document,
5
[1895] A.C. 457,
H.L.
6
Or a conditional sale agreement: the principles to be discussed apply equally
7
Similar transactions had, indeed, for different reasons, anticipated the Bills
of
8
Re
Watson
(1890)
25
Q.B.D.
27,
C.A., at p.
37.
to both types
of
transaction.
Sale Acts. See
Cooper
v.
Willomatt
(1845)
1
C.B.
672
(C.P.).

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