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The Minimum Payment Clause Muddle

Published online by Cambridge University Press:  16 January 2009

Jacob S. Ziegel
Jacob S. Ziegel
Affiliation:
Assistant Professor of Law, University of Saskatchewan.
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Extract

The value of hire-purchase transactions has remained at a fairly steady level during the past few years, and it would be pleasant to think that the law affecting them has reached a comparable stage of maturity and stability. This is unfortunately not the case. Instead, the number of legal problems continues to multiply and some aspects of the law of hire-purchase have reached a state of complexity which must baffle even the most expert lawyer. Of these none is more confusing than the law relating to the so-called “minimum payment clause.”

Type
Research Article
Information
The Cambridge Law Journal , Volume 22 , Issue 1 , April 1964 , pp. 108 - 128
Copyright
Copyright © Cambridge Law Journal and Contributors 1964

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References

1 [1953] 1 Q.B. 86 (C.A.).

2 For further elaboration of this thesis, see Ziegel (1960) 104 S.J. 996, and cf. Bridge v. Campbell Discount Co., Ltd. [1962] A.C. 600, per Denning, Lord at pp. 626–627Google Scholar.

3 It may be thought that Anglo Auto Finance Co., Ltd. v. James [1963]Google Scholar 1 W.L.R. 1042 (C.A.), discussed infra, does not support this suggestion. But this decision only came after minimum payment clauses in general had earned an unsavoury reputation, and is by no means indicative of what the courts' attitude would have been if a “deficiency” type clause had been used from the beginning.

4 For particulars of the American and Canadian case law and legislation, see Warren (1959) 20 Ohio State L.J. 289; Ziegel (1962) 14 Univ. Toronto L.J. 143, esp. at pp. 148–149.

5 [1962] A.C. 600.

6 See (1962) 112 L.J. 702.

7 See Cooden Engineering Co., Ltd. v. Stanford [1953] 1 Q.B. 86Google Scholar (C.A.). In Australia the attempt succeeded as early as 1937 in Universal Guarantee, Ltd. v. Jarvis, reported verbatim only in Dean, The Law relating to Hire Purchase in Australia (2nd ed., 1938). p. 310.

8 Cf. Booth v. Salvation Army Building Assn. (Limited) (1897) 14 T.L.R. 3 (Kekewich J.); Waldock, The Law of Mortgages (2nd ed.), p. 182.

9 [1895] A.C. 471.

10 [1895] A.C. 457.

11 [1953] 1 Q.B. 86 (C.A.).

12 [1962] A.C. 600.

13 (1926) Jones & Proudfoot, Notes on Hire-Purchase Law (2nd ed.), pp. 54, 107.

14 [1957] Vict.L.R. 68, 77.

15 [1961] 1 W.L.R. 1124.

16 [1963] 2 Q.B. 104 (C.A.).

17 [1961] N.I. 192 (C.A.).

18 [1963] 2 Q.B. 104, 113.

19 [1961] N.I. 192, 218.

20 Ibid. at p. 208.

21 See, e.g., Charterhouse Credit Co., Ltd. v. Tolly [1963] 2 Q.B. 683Google Scholar (C.A.); Brady v. St. Margaret's Trust, Ltd. [1963] 2 Q.B. 494Google Scholar (C.A.); Anglo Auto Finance Co., Ltd. v. James [1963] 1 W.L.R. 1042Google Scholar (C.A.).

22 Lord Denning's judgment in Bridge's case would seem to support the proposition that the doctrine of penalties is not dependent on the owner being able to recover his excess depreciation in a common law action, but this is because he adopted Lord MacDermott's line of reasoning in Lombank, Ltd. v. Kennedy and Whitelaw, supra. He would have directed the county court judge, when the case was remitted to him, to assess the owner's damages “according to the realities and not according to any fiction”—by which presumably he meant, on an equitable basis. See [1962] A.C. at p. 632. None of the other Law Lords adopted this line of reasoning. Lord Denning would appear, however, to have abandoned his “equitable” approach to the question of damages in Baldock's case, supra, note 16: see esp. his judgment in that case at p. 113.

23 [1938] 2 K.B. 83.

24 See [1961] 1 Q.B. 445.

25 (1962) 106 S.J. 369.

26 [1962] A.C. at p. 629.

27 Ibid. at pp. 630–631.

28 See [1961] N.I. at pp. 208–209.

29 See [1962] A.C. at pp. 633–634.

30 Ibid. at p. 622.

31 Ibid. at p. 625.

32 Its legitimacy is indeed inferentially recognised in the majority of the provincial Conditional Sales Acts, which regulate the procedure for bringing such deficiency claims. See also Humprey Motors, Ltd. v. Ells [1935]Google Scholar S.C.R. 249 (Can.).

33 [1961] 1 W.L.R. 1379 (C.A.).

34 Ibid. at pp. 1385–1386.

35 [1915] A.C. 79.

36 Ibid. at pp. 86–87.

37 [1961] N.I. 192.

38 See especially the judgment of Black L.J. at pp. 210–211.

39 [1962] 1 W.L.R. 1133.

40 [1962] C.L., § 1409.

41 [1963] 3 W.L.R. 700 (C.A.).

42 [1962] A.C. at p. 616.

43 Ibid. at p. 624.

44 [1963] 1 W.L.R. 1042.

45 [1961] 1 W.L.R. 1124.

46 Ibid. at p. 1129.

47 In passing, the curious historical fact may be noted that it was a similar error which was responsible for the Court of Appeal's judgment being reversed by the House of Lords in Helby v. Matthews [1895] A.C. 471, reversing [1894] 2 Q.B. 262.

48 [1933] 2 K.B. 536, 550.

49 Withers' case, supra; (1961) 24 M.L.R. at p. 792. Lord, Denning M.R., in Financings, Ltd. v. Baldock [1963] 2 Q.B. 104Google Scholar, also entertained doubts as to the correctness of the reasoning in Waragowski's case.

50 The decision was followed, inter alia, in Yeoman Credit, Ltd. v. McLean [1962] 1 W.L.R. 131Google Scholar and Overstone, Ltd. v. Shipway [1962] 1 W.L.R. 117Google Scholar (C.A.).

51 [1963] 2 Q.B. 104 (C.A.).

52 See Salmond & Williams, Principles of the Law of Contracts (2nd ed.), p. 541.

53 [1899] 2 Ch. 710 (C.A.).

54 Supra, note 13.

55 [1953] 1 Q.B. at pp. 96–97.

56 Ibid. at p. 116.

57 At p. 120–121. For this reason the present writer does not take quite so pessimistic a view of the finality of this case as Mr. Roy Goode appears to do in (1963) 113 L.J. 229.

58 [1962] 1 W.L.R. 131.

59 [1962] 1 W.L.R. 117 (C.A.).

60 [1958] 1 Q.B. 190, esp. at p. 195 (C.A.).

61 The writer has gathered this through informal channels.

62 [1963] 1 W.L.R. 1042, 1048–1049.

63 Cf. Ex p. Fewings, re Sneyd (1883) 25 Ch.D. 338, 355, approved in Economic Life Assurance Socy. v. Usborne [1902] A.C. 147, 149–150.Google Scholar

64 For particulars of this legislation, see (1961) 105 S.J. 394.

65 [1957] Vict.L.R. 68.

66 [1963] 1 W.L.R. 1042.

67 Ibid. at p. 1046.

68 Ibid. at pp. 1046–1047.

69 Ibid. at p. 1047.

70 See text and note 43, supra.

71 [1895] A.C. 471.

72 s. 15 (1) (c). The Bill has now been adopted, with some modifications, by all the Australian states.

73 Cmnd. 1781, para. 548. See also para. 531 of the Report.

74 For more detailed criticisms of the Committee's views on this question, see (1962) 106 S.J. 911.

75 The Hire-Purchase (No. 2) Bill, 1963, which is partly based on the Molony Committee's recommendations, adopts neither solution suggested in this paragraph. It does not deal specifically with minimum payment clauses. It would, however, extend to all agreements where the hire-purchase price did not exceed £2,000 (instead of £300) the provisions of the Hire-Purchase Act, 1938. Ss. 4 and 5 of that Act invalidate any provisions imposing on the hirer, on termination of the agreement, any liability to pay more than the amount, if any, required to make up the sums already paid or payable to one-half of the hire-purchase price. The Bill would thus do nothing to mitigate and, in most cases, much to aggravate the problem of providing for payment of the true measure of damages.