Mather v. Somasunderam.
Present: Dalton A.C.J. and Koch S.
MATHER v. SOMASUNDERAM et al.
66—D. C. Jaffna, 27J05.
Hire purchase agreement—Agreement to pay monthly rent—Initial deposit—Termination of agreement—Action for recovery of arrears—Claim toset off deposit.
Under a hire-purchase agreement the owner of a motor car hired itin consideration of an initial deposit of a certain sum and an undertakingby the hirer to pay a monthly hire for a period of 24 months. Theagreement further provided that if the hirer failed to pay the hire for
KOCH J.—Mather v. Somasunderam.
any month on the due date, the owner could, without any prejudiceto his right to recover arrears of hire and damages, terminate the hiringand retake possession of the car, and that in that event the hirer shouldnot on any ground whatever be entitled to any allowance, credit, return,or set off for payment of hire previously made. Owing to the default ofthe hirer in paying the monthly instalments the owner terminated theagreement.
Held, (in an action by the owner to recover instalments of rent dueunder the agreement) that the hirer was not entitled to set off the depositagainst the claim.
jAlPPEAL from a judgment of the District Judge of Jaffna.
H. V. Perera (with him Kumarasingkam), for defendants, appellant.
L. A. Rajapakse (with him H. W. Tambiah), for plaintiff, respondent.
Cur. adv. vult.
July 9, 1936. Koch J.—
The plaintiff sued the defendants on an agreement P 1 of September28, 1929, alleging that a sum of Rs. 932 was paid him in monthly instal-ments under the said agreement and that a sum of Rs. 2,922.60, withinterest at 9 per cent, per annum, was due and owing to him. By thisagreement the plaintiff agreed to let to the first defendant a PontiacTourer Car in consideration of an “ initial deposit ” by the first defendantof Rs. 1,072.50 and an undertaking on the part of the latter to pay tothe plaintiff a hire of Rs. 155.40 on October 28, 1929, and regularly onthe 28th day of each and every successive month for a period of 24months. The agreement further provided that if the first defendantfailed to pay hire for any month on the due date, the plaintiff withoutany prejudice to his right to recover arrears of hire and damages couldterminate the hiring and retake possession of the car, and also that in theevent of the hiring being terminated the first defendant should not onany ground whatsoever be entitled to any allowance, credit, return, orset off for payment of hire previously made.
It would therefore follow that if this so called “ initial deposit ” ofRs. 1,072.50 can be regarded as an advance hire-deposit, the firstdefendant will not be entitled to credit in that sum in the event of thehiring being terminated by the plaintiff as the result of a default on thepart of the first defendant*.
There happened to be a clause in the typed form of this agreement,viz., 2 (a), which runs thus : —
“ That the hirer may at any time during the hire terminate the hiringby delivering to the owners at Jaffna at his own expense thesaid …. in through good order and condition.”
Before P 1 was signed, however, that clause was deleted, the effectof which deletion apparently was to prevent the hirer himself fromterminating the contract. P 1 further provided that at any time duringthe hire the first defendant could become the purchaser of the aforesaidcar on payment in cash of the “ endorsed price ”, viz., Rs. 4,802.10,provided he was not in default in regard to the regular payments ofhire due under the agreement. This was followed by a clause thatif such a purchase was effected credit will be given for all payments ofrent previously made under this agreement.
KOCH J.—Mather v. Somasunderam.
The second and third defendants who are the appellants in this casesigned the agreement as guarantors. It is argued by Mr. H. V. Per erawho appeared for them that they were therefore entitled to advanceevery argument in their defence which the first defendant could rightlyadvance in favour of his own defence. I shall assume that thiscontention is correct and will decide this appeal on that footing.
The learned District Judge gave judgment for the plaintiff for the sumof Rs. 777 without giving the defendants credit for the “ initial deposit"of Rs. 1,072.50, which was in plaintiff’s hands. He also dismissed thedefendant’s claim in reconvention for Rs. 500 based on an alleged wrongfulconversion of the car by reason of a seizure effected by the plaintiff. TheDistrict Judge further reserved to the plaintiff the right to make a furtherclaim in a subsequent action for hires that may have accrued to himbeyond the period for which he had already claimed in his plaint. Mr.Perera does not dispute the correctness of the finding of the learnedDistrict Judge in regard to the sum of Rs. 777 or to the dismissal of thefirst defendant’s claim in reconvention or to the right of the plaintiff tofile another action for balance rent. But what he strongly contendsis that the defendants should have been given credit for the sum ofRs. 1,072.50 cfn the ground that that sum was merely a deposit and hadto be returned in the event of the hiring being determined before thecompletion of the 24 months, whatever may have been the reason forsuch determination ; especially so as the agreement (P 1) did not speciallyprovide for the forfeiture of that sum.
I regret I am unable to accede to this argument. The respectiverights of the parties to this agreement have to be determined accordingto its terms. In my opinion there is sufficient in the terms of this agree-ment to indicate that this so called “initial deposit” was nothing morethan the payment of a lump hire in advance. I say so because clauses2 (b) and 2 (c) run respectively as follows : —
“2 (b) That the hirer may at any time during the hire become thepurchaser of the said car by payment in cash to the owners atJaffna of the herein endorsed price provided the payments ofall hire due at such time have been regularly and duly made.”(The endorsed price is Rs. 4,802.10.)
“2 (c) That if such purchase be effected credit will be given for allpayments of rent previously made under this agreement.”
It is clear that the plaintiff was not going to part with his car unlesshe received in all the sum of Rs. 4,802.10 which has been fixed as the“price” of the car. It is equally clear that the first defendant was notgoing to become the purchaser of the car if he had to pay more than theendorsed value of the car, viz., Rs. 4,802.10. If then under clause 2 (c),in the event of a purchase having been effected only the instalmentspayments of rent had to be taken into consideration (excluding the“ initial deposit ”) for the purpose of giving credit to the first defendant,the first defendant would not only be paying to the plaintiff the valueof the car, viz., Rs. 4,802.10 but also the further sum of Rs. 1,072.50already in the hands of the plaintiff. Surely this could not possibly havebeen within the contemplation of the parties.
KOCH J.—Mather v. Somasunderam.
I therefore feel that although the expression “initial deposit" wasused to describe the advance the first defendant had made to the plaintiffthat advance was paid to him not by way of mere deposit but on accountof hire in advance. For, such a construction would permit the hirerto be given credit in a sum equivalent to this so called “ initial deposit"in the event of the hirer effecting a purchase at any time either duringthe pendency of the 24 months or at their determination.
Mr. H. V. Perera in support of his argument cited the case ofBelsize Motor Supply Co. v. Cox1 and claimed that the decision arrivedat in that case was exactly in point, an,d that his position in the presentcase was even stronger because in the Belsize case the sum received inadvance by the owners was described as received on account of hire inadvance while in the present case the sum is described as an “ initialdeposit ”.
The holding in the Belsize case was that “ if the hirer had both paidthe hire in advance and all the 24 instalments he would have paid upthe full amount required to purchase the cab in question; but the hirepaid in advance would have been paid as deposit on account of purchasemoney in advance”. The judgment proceeded to state that the docu-ment relied on in that case on the face of it gave the hirer an option topurchase at any time by paying up the difference between the price ofthe cab and the sum already paid and that that option could be exercisedwhen the hirer had paid the 24th instalment, when he could also if heso desired decline to proceed with the purchase and could claim a returnof the sum paid in advance although it was described as hire. I mustconfess and I say so respectfully that I do find some difficulty in under-standing that judgment but I am of opinion that that decision will hardlyapply to the facts of the present case, for that decision was based on thefooting that every single one of the 24 instalments had been paid upwhereas in the present case the hirer has actually been in default inregard to the payment of several instalments at the date the car wasseized. Further, there is provision in P 1 (vide clause 1 (f) that in thecase of such default the owner could terminate the hiring and retakepossession of the car, and also in 1 (g) that in such an event the hirershall not on any ground whatsoever be entitled to any allowance, credit,return, or set off for payments of hire previously made.
Mr. Perera described the contract P 1 as a hire purchase agreementwhich included an obligation on the part of the owner to sell in theevent of the hirer exercising his option to buy. This may be correctlyso but such option can only be exercised according to clause 2 (b) if thehirer pays to the owner the full “ endorsed price ” of the car, viz.,Rs. 4,802.10 which has not been done in this case.
I therefore am of opinion that the learned District Judge was rightin not allowing the defendants credit in the sum of Rs. 1,072.50, the sumpaid in advance. The appeal will therefore be dismissed with costs.
Dalton A.C.J.—I agree.
■ > (1914) 1. K. B. 244.
MOTHER v. SOMASUNDERAM et al