Lawrence v Keenan [1935] HCA 50; (1935) 53 CLR 153 (9 July 1935)

HIGH COURT OF AUSTRALIA

Lawrence Appellant; and Keenan Respondent.

H C of A

On appeal from the Court of Bankruptcy.

9 July 1935

Rich, Dixon and McTiernan JJ.

Fahey (with him Larcombe), for the appellant.

Macrossan, for the respondent.

Fahey, in reply.

The Court delivered the following written judgment:—

July 9

Rich, Dixon and McTiernan JJ.

The bankrupt, whose estate is now vested in the respondent, the official receiver, was until a few days before the order of sequestration in possession of a motor car which he had obtained under a hire-purchase agreement from the appellant, a garage proprietor carrying on business at Rockhampton.

The agreement provided for a payment of £80 upon delivery of the car to the hirer and for payment of twenty monthly instalments of rental or hire of £8 10s., making in all £250. Upon payment of this amount in full, the property was to pass to the hirer, who, however, did not engage to buy it and in the meantime was a bailee only, and entitled at any time to return the chattel and determine the bailment. Although the agreement bound the appellant to sell the car in the event of the hirer paying up the instalments of hire at any time, a condition of the agreement provided that until payment in full of the rental the car should continue to be the property of the appellant. The condition also provided that, if, as we construe it, before such payment in full, the hirer made default in paying an instalment, or did or suffered some other things that are specified, including exposing himself to insolvency proceedings and becoming the subject of such proceedings, thereupon the appellant should be entitled to the redelivery of the car and should be entitled to determine the hiring and to retake possession of the car. We think it clear that this clause gave the appellant an election to determine the hiring and did not operate so that ipso facto, on the occurrence of any of the specified defaults or events, the bailment came to an end. Of the instalments the hirer, the bankrupt, paid all but five. The fifth last fell due on 1st May 1933 and this he failed to meet. In response to a letter from the appellant the bankrupt called upon him on 9th May, and informed him that he was unable to pay the instalment and did not expect to be able to pay any more. There-upon the appellant obtained possession of the car. There is a dispute as to whether the bankrupt spontaneously surrendered the car, or whether it was retaken in the exercise of the power reserved to the appellant by the agreement. The evidence on the subject is exiguous and unsatisfactory, but, having regard to the correspondence, we think the proper conclusion is that the car was retaken pursuant to the power of repossession, the bankrupt acquiescing. On 11th May 1933 a sequestration order was made on the bankrupt's own petition. It is said that the bankruptcy commenced by relation back on 3rd May 1933, because, on that day, as it is alleged, the bankrupt committed an act of bankruptcy under sec. 52 (k) of the Bankruptcy Act 1924-1934 by giving notice to one of his creditors that he had suspended or was about to suspend payment of his debts. It is, however, disputed whether the evidence establishes such a notice.

Upon this state of facts the respondent, the official receiver, claimed that he was entitled to the motor car, on paying up or offering to pay up the five remaining instalments of hire. He accordingly offered to pay the required sum, and commenced proceedings in bankruptcy to recover the car or the net money equivalent.

The proceedings came before Brennan J. in the Supreme Court at Rockhampton. He decided that the official receiver was entitled to the car subject to the payment of the five remaining instalments of hire, and ordered the appellant to deliver it to him, or to pay its value after the deduction of that amount of hire unpaid. From that order the present appeal is brought. The ground of his Honor's decision, as we understand it, was that an act of bankruptcy had been committed on 3rd May 1933; that the bankruptcy had commenced, therefore, on that date, and that sec. 91 (iv.) of the Bankruptcy Act 1924-1934 operates to vest in the official receiver or trustee the claim or right of the bankrupt under a hire-purchase agreement as from the commencement of the bankruptcy.

We do not think that under sec. 91 (iv.) the claim or right with which it deals becomes as at the commencement of the bankruptcy part of the property of the bankrupt divisible amongst his creditors. Sec. 60 provides that upon sequestration the property of the bankrupt shall vest in the official receiver and shall be divisible among the creditors of the bankrupt. Sec. 90, which deals with relation back, does not itself refer to property, but is concerned only with fixing the commencement of the bankruptcy. Sec. 91, in effect, defines the property of the bankrupt which vests under sec. 60. In the case of property or rights of the description contained in pars. i., ii. and iii. of the section, the definition expressly fixes the commencement of the bankruptcy as at the time at which the description is to be applied. But par. iv., which was introduced in 1932 by amendment, contains no such expression. The paragraph is as follows: "The claim or right of the bankrupt to property under any contract, bill of sale, hire-purchase agreement, mortgage or lien made by or with the bankrupt or debtor on his trustee discharging or offering to discharge any legal liability with respect thereto."

The omission of any reference to the commencement of the bankruptcy in this very inartificially drawn provision may be due to design or to carelessness in drafting. We suspect that the latter is the cause, but reasons of policy may be suggested which would be ample to account for the absence of any relation back in the case of hire-purchase agreements. But, in any case, a Court must construe the language actually used by the legislature and give effect to the intention it expresses. So construing sec. 91 (iv.) and sec. 60, we cannot doubt that their combined operation is to vest only the right or claim of the bankrupt which exists at the time of sequestration.

In the present case the appellant retook possession of the car before the date of sequestration. According to the tenor of the agreement, retaking possession of the car would, we think, terminate the bailment and all rights of the bankrupt in reference to the car, including his right to purchase it by paying the remaining instalments of hire. The reasons given by Brennan J., therefore, cannot in our opinion be supported. But the matter does not stop there. For the question arises whether the agreement can take effect according to its tenor; whether the appellant was lawfully entitled to retake possession of the car as the terms of the agreement provided. We have come to the conclusion that he was not so entitled.

Under the Queensland Mortgagors Relief Acts 1931-1932, it is unlawful to exercise any power of rescission or of entry into possession under a hire-purchase agreement with respect to chattels, unless a month's notice is given to the hirer that it is intended to exercise such a power (see sec. 2, definitions of and of , sec. 4 (1) (a) and sec. 5). The hirer may on receipt of such a notice apply to the Supreme Court for relief, and, if he does not, the power may be exercised. The agreement in the present case purports to exclude the operation of all legislative provisions of such a nature. It was made after the commencement of the Mortgagors Relief Act 1931, but before 18th October 1932, when the amending provisions were enacted by the Financial Emergency Relief Extension Act 1932, and it is therefore included within the Acts (see sec. 3). We have felt somewhat puzzled as to the effect of sec. 18, which provides that stipulations negativing the application of the Acts shall not prevent the Court from making an order. For it is limited to preserving the power of the Courts to make an order, and does not deal with the question whether the parties may contract out of sec. 5 which requires a month's notice. But we do not think that the provision implies that the requirement of notice may be waived by contract, and, having regard to the character of the Act and the fact that it deals only with transactions of mortgage and hire-purchase which are on foot at the time when the original Act or the amendments were enacted, we think that nothing less than clear expression or necessary implication would warrant the conclusion that a contractual stipulation should have effect purporting to exclude the application of legislation of this nature.

The result is that, as the appellant did not give a month's notice of his intention to take possession of the car, it was unlawful for him to do so. The acquiescence of the bankrupt in the appellant's retaking the car did not amount to a voluntary surrender, and was in fact based, as he swore, upon the misapprehension that he could do nothing else but allow it. What the appellant did remained, as we have already said, a purported exercise of the power of entry into possession. As it was unlawful, the retaking of the car must be treated in law as completely ineffectual. Neither on the ground of default, nor on the ground of the hirer's exposing himself to insolvency proceedings, if he had then already done so, could the appellant take the car until he had given a month's notice. At the date of the sequestration order, therefore, the hire-purchase agreement subsisted, and the right or claim of the bankrupt under it vested in the official receiver who, it was not denied, proceeded under sec. 91 (iv.) to offer "to discharge any legal liability with respect thereto."

For these reasons we think the appeal fails.

Sec. 91 (iv.) presents difficulties of application in cases where under the terms of the agreement, either by reason of the hirer's default, or of some other event, the owner of the chattel is at the time of the sequestration entitled as against the hirer to determine the bailment and retake possession if he should elect to do so. A particular difficulty arises out of the provision so often contained in hire-purchase agreements, that the hiring may be determined upon the bankruptcy of the hirer, a provision the validity of which has been impugned as inconsistent with sec. 91 (iv.) or with the policy it embodies. But in the present case of necessity none of these difficulties has yet arisen and they may never arise.

We think the appeal should be dismissed with costs.

Appeal dismissed with costs.

Solicitors for the appellant, Chambers, McNab & Co. for Grant & Stumm, Rockhampton.

Solicitors for the respondent, Cannan & Peterson for Rees R. & Sydney Jones, Rockhampton.