Kingsley v Sterling Industrial Securities Ltd
[1966] 2 All ER 414Between: Kingsley
And: Sterling Industrial Securities Ltd
Judges:
Sellers LJ
Harman LJ
Winn LJ
Subject References:
Hire-Purchase
Re-financing arrangements
Loan desired by borrower on security of own car
Payment of amount of first deposit by cancellation of indebtedness
Borrower sold car to A Ltd which re-sold it to finance company, which let the car on hire-purchase to borrower
First deposit met by set-off allowed by A Ltd of its amount from price paid to borrower and by finance company deducting amount from price paid to A Ltd
Whether hire-purchase agreement void as unregistered bill of sale
Whether there was actual payment of the amount of the first deposit before entering into the hire-purchase agreement
Whether title would pass notwithstanding illegality
Money borrowed or otherwise "acquired"
Legislative References:
Hire-Purchase and Credit Sale Agreements (Control) Order, 1960 (SI 1960 No 762) - art 1(1), Sch 2, Pt 1, para 3, Pt 2
Case References:
Eastern Distributors v Goldring (Murphy, Third Party) - [1957] 2 All ER 525; [1957] 2 QB 600; [1957] 3 WLR 237; 26 Digest (Repl) 675, 77
Sajan Singh v Sardara Ali - [1960] 1 All ER 269; [1960] AC 167; [1960] 2 WLR 180; 39 Digest (Repl) 597, 1146
Stoneleigh Finance v Phillips - [1965] 1 All ER 513; [1965] 2 QB 537; [1965] 2 WLR 508
Yorkshire Railway Wagon Co v Maclure - (1882), 21 ChD 309; 51 LJCh 857; 47 LT 290; 26 Digest (Repl) 17, 55
Judgment date: 31 March 1966
K owned a car that he had bought for £2,112 in October, 1963. He wished to raise money on it. He was told on behalf of S Ltd who were motor dealers, that they could not effect the transaction by lending money, but that S Ltd would buy the car and would sell it to a finance company, who would let it back to K on hire-purchase. The terms of the documents did not in certain respects fit the proposed "re-financing" transaction, but on 13 February 1965, K signed
- (i)
- an agreement with S Ltd for S Ltd to buy the car for £1,848, authorising S Ltd to set-off moneys due from K against the purchase price,
- (ii)
- an agreement requesting S Ltd to sell the car to the finance company if they were willing to let it to K for a cash price of £1,850 on usual hire-purchase terms, and
- (iii)
- an hire-purchase agreement with the finance company (subsequently signed on behalf of the finance company on 17 February 1965) in which the cash price was stated as £1,850.
The price (£1,848) at which K sold the car to S Ltd was, on the evidence, a fair and reasonable value for the car at the time of the sale. The hire-purchase agreement provided for a first deposit of £600 being made. K handed over the log book of the car, but retained possession of the car. On 14 February 1965, S Ltd gave K their cheque for £1,248 (ie, £1,848 less the £600). The finance company paid S Ltd £1,250, being the cash price (£1,850) less the amount (£600) of the deposit. In April, 1965, the finance company took possession of the car on the ground of default in payment of hire-purchase instalments. On appeal in an action by K to recover possession of the car,
Held:
(i) although K's purpose was to raise money on the car, yet the intention of the parties to the re-financing transaction was that it should have the effect of divesting K of ownership of the car and of vesting it first in S Ltd and then in the finance company; accordingly the hire purchase transaction was not a sham and the hire-purchase agreement was not void as being an unregistered bill of sale by way of security (see p 417, letter g, p 421, letter d, and p 426, letter g, post).
Stoneleigh Finance v Phillips ([1965] 1 All ER 513) distinguished.
(ii) (per Sellers and Winn LJJ) the transaction was not illegal as infringing the Hire-Purchase and Credit Sale Agreements (Control) Order, 1960, for the following reasons
- (a)
- the retaining by S Ltd of £600 on purchasing from K the car, whose value was £1,848, and the cancellation of S Ltd's indebtedness to K in that sum on effecting the hire-purchase transaction, whereby K obtained £1,248 only from the finance company, amounted to payment of £600 by K and amounted, for the purpose of para 3 [Fa] of Pt 1 of Sch 2 to the Order of 1960, to "actual" payment of a sum exceeding the deposit required by that Order (see p 418, letter d, p 419, letters a and f, p 420, letter d, and p 428, letters g and h, post).
- (b)
- it was irrelevant to consider whether there had been payment or actual payment to the finance company (see p 420, letter e, and p 428, letter c, post).
(iii) (Harman LJ concurring) the ownership of the car passed on sale to the finance company and K.'s claim that they had wrongfully taken possession of it failed (see p 420, letter i, p 423, letter e, and p 429, letter c, post), and (Harman LJ dissenting; see p 423, letter f, post) the finance company's counter-claim succeeded for the reason stated at (ii) above.
Per Winn LJ:
- (a)
- even if the hire-purchase transaction had infringed the Order of 1960, by reason of there having been failure to make actual payment of the deposit, it would not have followed that the property in the car had not passed under the hire-purchase transaction (see p 426, letter h, post).
- Sajan Singh v Sardara Ali ([1960] 1 All ER 269) applied.
- (b)
- the word "acquired" in Pt 2 of Sch 2 to the Order of 1960 [Fb] meant "obtained otherwise than by exchange or provision of commensurate value"; and the word generally connotes getting something for nothing or getting something without giving for it any barter or services constituting a comparable return (see p 429, letter b, post; cf p 420, letter e, post).
Decision of McNair J ([1966] 1 All ER 37) affirmed on (i) and reversed on (ii) above.
Notes
The current order at the date of this report is the Hire-Purchase and Credit Sale Agreements (Control) Order 1964, SI 1964 No 942, as amended by SI 1965 No 1471 and 1966 No 113. Paragraph 3 of Pt 1, and Pt 2, of Sch 2 to the Order of 1964 are similar to the corresponding para 3 and Pt 2 of the Order of 1960.
As to the statutory control of hire-purchase agreements under emergency legislation, see 19 Halsbury's Laws (3rd Edn) 518, 519, para 834; and for cases on the subject, see 26 Digest (Repl) 663, 20, 21.
As to distinction between hire-purchase transactions and bills of sale, see 19 Halsbury's Laws (3rd Edn) 512, 513, para 827; and for cases on the subject, see 7 Digest (Repl) 16-19, 71-86.
Appeal
This was an appeal by the defendant finance company from the decision of McNair J, dated 2 November 1965, and reported [1966] 1 All ER 37, ordering the finance company to hand over a Rover motor car, Index No 52 GXX, to the plaintiff customer, Percival Kingsley (from whom the finance company had retaken possession of the car), declaring that the car was the plaintiff customer's property, referring the assessment of damages for the defendant finance company's detention of the car to a Master, and dismissing the finance company's counterclaim for £174 6s 8d arrears of rentals under a hire-purchase agreement dated 17 February 1964, by which they had let the car to the plaintiff customer. By a cross notice of appeal the plaintiff customer sought to uphold the decision of McNair J on the additional ground (on which McNair J had found in the finance company's favour) that the hire-purchase agreement was void as an unregistered bill of sale. The facts are stated in the judgment of Winn LJ (post p 423, letter g, to p 424, letter g.)