095-NLR-NLR-V-77-K.-S.-L.-J.-FERNANDO.-Appellant-and-S.-A.-JAWARD-Respondent.pdf
Fernando v. Jaward
659
Present : Wijesundera, J., Vythialingam, J., andGunasekera, J.
.K. S. L. J. FERNANDO, Appellant, and S. A. JAWARD,
Respondent
S. C. 163/69—D. C. Matale 1813/MR
.Hire Purchase Agreement—Clause providing for owner to re-takepossession from hirer-—Validity of such clause—Whether contraryto public policy—English and Roman Dutch Law principlesgoverning Agreement.
A hire-purchase agreement entered into between the plaintiff(hirer) and the defendant (owner) in respect of a motor vehiclecontained a clause which read as follows :—“Upon the Hiring beingdetermined under the last preceding clause : — (1) The Hirer shallforthwith deliver the said vehicle to the Owners at its RegisteredOffice or to such other persons or at such other place as the Ownersmay direct and on his failure so to do leave liberty and licenceis hereby given to the Owners, their Agents, representatives andservants or any person duly authorized by them, to enter upon
any premises where the vehicle may be or is believed to
be and take possession of the same without being liable to anysuit or other proceeding b> the Hirer or any person claiming under
hip? ”•
•
Held, that the aforesaid clause is valid and is not contrary topublig policy nor to the principles pf the Roman Dutch Law andEnglish. Law.
“ I am then of the view that the creditor (i.e. the defendant) isentitled to seize the vehicle' hfter due notice by using only reasonableforce as is necessary and that clause 9 is valid. ”
560
WIJESTINDERA, J.—Fernando v. Jaward
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APPEAL from a judgement of the District Court of Matale.S. K. Sangakkara, for Plaintiff-Appellant.
Bimal Rajapakse, for Defendant-Respondent.
Cur. adv. vult..
March 24, 1975. Wijesundera, J.—
The plaintiff instituted this action against the defendant torecover a sum of Rs. 3,091 being* the aggregate of the paymentsmade and amounts incurred in repairs to motor vehicle No. EL 147which he had purchased from the defendant. He also claimed asum of Rs. 10 per day as continuing damages until payment ofthe above sums.
The plaintiff purchased on 30th September, 1959 motor vehicleNo. EL 147 from the defendant for a sum of Rs. 2,500. He allegedthat out of this sum, he paid a sum of Rs. 500 as an advance anda further sum of Rs. 300 in October, 1959, and the balancehe undertook to pay in monthly instalments of Rs. 183.33.The plaintiff further alleged that he had paid the defendant,further sums aggregating to Rs. 2,350 and that he spenta sum of Rs. 741 on repairs to the motor evhicle. The plaintiff’s,complaint is that the defendant on the 27th August, 1961 unlaw-fully and maliciously took forcible possession of the motor vehicleand consequently he claims the sums he paid to the defendantand the monies he had spent on the repairs to the vehicle. Thedefendant stated that he let the motor vehicle to the plaintiffon a Hire Purchase Agreement subject to the terms and condi-tions set out in the Agreement. As the plaintiff defaulted in thepayment of the instalments he gave notice of it to the plaintiffand, as he lawfully might, took possession of the vehicle. Thelearned District Judge found that the plaintiff had entered intoan Agreement with the defendant and on that Agreement theplaintiff was in default in paying the instalments and, therefore,the defendant lawfully seized the vehicle on the 21st of August,1961 as he was entitled to do. Consequently he dismissed theplaintiff’s action with costs. The plaintiff appealed from thatorder and on the 29th August, 1967, the case was sent back to theDistrict Court for the limited purpose of enabling the plaintiffto raise issues and to lead evidence on the following matters,namely, whether the Agreement p'rbviding for the defendant toretake possession of the vehicle was Valid and whether the defen-dant took forcible possession of the vehicle and if so did*he use-more force than was necessary.
At this fresh trial there was evidence that the agents of thedefendant threatened the occupants*of tile vehicle witfi iron rods*when it was parked in Trincomalee Street, Matale. “ No actual
WIJESUNDEKA, J.—Fernando v. Jaward
5G1
force was used The occupants gdt down' and the vehicle wasremoved by the agents of the defendant. The learned DistrictJudge at the re-trial answered the issue “ Did the defendant takeforcible possession of the said vehicle on 27th August, 1961 ” inthe negative, held that the Agreement was valid and dismissedthe plaintiff’s action with costs. From that order the plaintiffappeals and complains that Clause 9 of the Agreement is illegal.
Clause 9 of the Agreement reads :— “ Upon the Hiring beingdetermined under the last preceding clause :— (1) The Hirershall forthwith deliver the said vehicle to the owners at itsRegistered Office or to such other persons or at such other placeas the owners may direct and on his failure so to do leave libertyand lieence is hereby given to the Owners, their Agents,fqpresentatives, and servants or any person duly authorised bythem to 'enter upon any premises, building or place where thevehicle may be or is believed to be and take possession of thesame without being liable to any suit or other proceeding by theHirer or any person claiming under him and upon such failurethe Hirer shall be liable to pay to the Owners as agreed andliquidated damages and not by way of penalty a sum equivalentto the monthly hiring rentals herein provided for each monthor part of a month commencing from seven days after the dateof such determination until receipt of the vehicle by the Owners.Provided, however, that in addition to any such sums the Hirershall be liable for and pay to the Owners any loss or damage tothe vehicle (fair wear and tear excepted) suffered or arisingbetween the date of such determination and the date of theseizure of the vehicle by the Owners. Upon the return to orrecovery by the Owners of the vehicle the Owners shall beentitled to have the entry of the Hirer as registered Ownerunder the provisions of any Law, Ordinance, Rule or Regulationfor the Lime being in force iemoved and vacated and to causeitself to be registered as owners under such provisions without(as the Hirer hereby agrees) any references to the Hirer andnotwithstanding any claim or objection by the Hirer to thecontrary
Under this Agreement the defendant is the owner of thevehicle. That is the evidence of the defendant. It is registeredin his name as owner. The plaintiff is the hirer until the entiresum agreed upon has been paid by the plaintiff to the defendantwhen the plaintiff is entitled to have the car registered in hisname. The repayment of the money is further secured by a thirdperson standing guarantor.. The clause under considerationenables»the owner to seize the vehicle On failure to pay as agreedand after due notice. This type of transaction is of recent develop-ment anc^certainly during this century. It is then futile to find aparallel in the Roman Dutch Law and* its treatment is bound to•be scanty as Howard, C.*J. pointed out in de Silva v. Ktiruppu142 N. L. R. 539 at 544.
5G2VVIJESUNDERA, J.—Fernando r. Jaward
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Then the only way of examining the validity of this clause is toascertain whether there is in the Agreement or in the clause any-thing contrary to the accepted principles of the Common Law.The transaction beween the parties has characteristics of amortgage as well as a contract of letting and hiring. In section 7
and section 9 (5) of the Motor Traffic Act this is referred to as“ Jet under a Hire Purchase Agreement ”. It is further a transac-tion relating to a movable anu not to an immovable. Consequentlythe authorities however scanty relating to immovables be it inconnection with letting and hiring or with a mortgage, will notbe of much assistance. What has been overlooked or what onetends to overlook is that in this entire transaction the defendantis the owner of the vehicle. The plaintiff had agreed that *n thecase of non-payment of the instalments due on the loan th^defendant shall be entitled to seize it. So the authority for theseizure is the Agreement between the parties. The findingof the District Judge is that no force was used in takingpossession. The conclusion then in my mind is inescapable thatthe defendant was seizing his own property and the seizurebeing in terms of the Agreement was not unlawful.
The complaint is that the Agreement, particularly Clause 9,is invalid. It was submitted that it is contrary to the principlesof Common Law. In considering what the Common Law is itmust be remembered that the Common Law includes not onlythe Roman Dutch Law but portions of the English Law as well.The Common Law of this country had not remained staticKodeswaran vs. A.G.., 72 N.L^R. 337. It is capable of growth andgrows to keep pace with modern requirements. Although thereis no statute governing Hire Purchase Agreements or transac-tions these have been recognized in the Statute Book. There ispointed reference in Sections 7 (4) and 9 (5), for instance, in theMotor Traffic Act, Vol. VII, Legislative Enactments Cap. 203 tosuch agreements, e.g. where the owner under a Hire PurchaseAgreement is required to have his name registered as owner.The Hire Purchase Agreements that have been in force in thi^"country ever since the motor vehicle was introduced are agree-ments containing provisions like Clause 9 of this Agreement*That is common knowledge. Almost all the cases from 42 N. L. R.539, de Silva v. Kuruppu that have come up for considerationhave considered such clauses. The Legislature must have beenaware of it. Hence to my mind there*is in the legislature recogni-. tion of this type of agreement though it has not directlv legisla-ted on it.
Such agreements are a Necessity and countless people havetransacted on the basis that such agreements are valid. Such anagreement is valid under the English Law, vide Karunapala v.de Silva, 77 NLR at 342, where most of the authorities are
YYI.nCSUNJjE.RA, J—.Fernando v. Jaward563
examined. There have been many concepts of English Lawabsorbed into aur law and this is one such An agreement bywhich a debt is payable by instalments may contain a stipula-tion, as most .Hire Purchase Agreements do, whereby upondefault in payment of one instalment, the entire obligation istreated as discharged. A Hire Purchase Agreement may thusentitle the creditor to retake possession of the entire subjectmatter upon default in respect of a single instalment ”. Weera-mantry, Law of Contracts, prevailing in Sri Lanka, Vol II,Sec. 690 p. 666. For the view that a creditor can retake posses-sion of the subject matter, the learned author relies on Halsbury3rd Edition, Vol. 19 p. 540, 545. So that he seems to be of theview t&at the English Law on the subject is prevalent in this•country. It seems too late in the day to deny recognition to theseagreements so as to keep the law of the Netherlands of the18th century in its pristine purity in this country.
Another objection advanced to Clause 9 is that it is contraryto Public Policy because it allows the defendant to take the lawinto his own hands in seizing the vehicle. It may be argued thatthere can be a breach of the Penal Law. If the hirer (ie. the debtoror plaintiff in the case) does not consent—in this case he didnot—to the taking, has the defendant or the creditor or his^agents committed theft ? To constitute theft there must be adishonest taking. “ A person does an act dishonestly when hedoes it with the intention of causing wrongful loss to a person^or wrongful gain to. . . . ” Section 22 of the Penal Code. Hereloss has been caused to the plaintiff but it was not wrongfulbecause he agreed to it. Even if the defendant gained but it wasnot wrongful as under the Agreements he was entitled to it.He is the owner. Hence no theft was committed. In this clausethe plaintiff has agreed and consented to the defendant or hisagents entering the land (presumbly of the plaintiff) for thepurpose of seizing the vehicle. So that even if the creditor orhis agents entered the land of the debtor to seize the vehicle*n^ offence is committed because the debtor had given permi**siojfVo do so. Then the argument that it was against Public Policyfails.
I will now examine whether such a clause is contrary to the^principles of Roman Dutch Law. Let me start from the premisesstated in Osry v. Hersch Loubeer & Co. Ltd. 1922 SALR CPD 531by Kotze J.P. viz that an agj^ement for sale, by private execu-tion, of ^movables delivered to a cre^tbr by a debtor is valid inlaw. Such an arrangement as Kotze J.P. remarked has the added.advantage of avoiding unnecessary • litigation. The situationcontemplated in that case was where the debtor was the owner»f the * movable. If then^thd^parties have agreed, where themovable that has been pledged is still with the debtor, that the
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WIJKSUNDERA, .T.—Fernando v. Jumird
creditor shall be entitled to take possession of it, two situationscan arise. One is where the debtor willingly .surrenders it forsale in satisfaction of the debt when attempting to take posses-sion. The creditor has a right to sell it as the debtor has givenit to the creditor. Clause 9 covers it—it is in accord with theprinciple of Osry’s case—and I can see no reason why that jisinvalid. Second is where the debtor does not consent to theseizure and reasonable force or threats have to be used. I am inagreement with the conclusion arrived at by Howard, C.J.(Soertsz J. agreeing) in de Silva vs Kuruppu, 42 NLR 5394"andin Karunapala vs de Silva 77 NLR 337 by Udalagama, J. Thecreditor in this case is seizing his own property. In those twocases all the relevant authorities have been considered “and it isunnecessary for me to repeat them. Having examined the autho-rities in the Roman Dutch Law in de Silva v. Kuruppu HowardC. J., at p. 546 stated : “ The validity of a clause allowing theowner to retake possession cannot be challenged ”.
In Almeida vs de Zoysa, 68 NLR 517 the provisions in thatagreement did not entitle the creditor to retake possession. Evenin that case although Tambiah, J. thought the case of de Silvavs. Kuruppu should be reconsidered Alles, J. who was associatedwith him, at p. 524 said that where there is an agreement toretake possession that right can be exercised subject to theexercise of reasonable force and after notice. Tambiah, J.thought the earlier case should be reviewed because in the Rom^nDutch Law the remedy against an overholding tenant is to suefor damages. But with respect, the answer to this appears to l/ethat a Hire Purchase Agreement is strictly not a contract ofletting and hiring and as stated earlier it is impossible to finda parallel or anything near it in the early law or any opinionfrom the learned writers.
I am then of the view that the creditor (i.e. the defendant)is entitled to seize the vehicle after due notice by using onlyreasonable force as is necessary and that Clause 9 is valid. H<wicethe defendant took possession of the vehicle as he was lawfullyentitled to and consequently the findings of the Districtjudgeare affirmed and the appeal is dismissed with costs.
Vythialingam, J.—I agree.
Gunasekera, J.—I agree
Appeal dismissed.