Esanda Ltd v Clark

[1985] HCA 74

HIGH COURT OF AUSTRALIA

Mason, Wilson, Brennan, Deane and Dawson JJ.

ESANDA LTD. v. CLARK

(1985) 159 CLR 543

28 November 1985

Hire Purchase

Hire Purchase—Agreement—Implied condition—Fitness for purpose—Condition not to be implied if goods secondhand and agreement expressly negatives all conditions of fitness—Agreement purporting to negative all conditions of fitness to maximum extent allowed by law—Effect—Hire-Purchase Act 1960 (N.S.W.), s.5(3).

Decision

THE COURT delivered the following judgment:-
The question in this appeal is whether in two hire-purchase agreements - one relating to a prime mover and the other to a trailer - the parties negatived the implied condition that the goods which were the subject of the agreements shall be reasonably fit for the purpose for which they are required where the hirer makes that purpose known to the owner or dealer. (at p545)

2. The facts are recited in the judgment of Priestley J.A. in the Court of Appeal of the Supreme Court of New South Wales. The respondent had been an owner or driver of heavy trucks for a number of years when in February 1981 he sought to acquire a heavy truck for a clay-hauling contract which he had just obtained. He made this purpose known to the dealer who supplied a secondhand prime mover and trailer that became the subject of the two hire-purchase agreements already mentioned. The appellant ("Esanda") was the vendor to him under the hire-purchase agreements. As security for performance of his obligations under the agreements he gave Esanda a mortgage over his home. (at p545)

3. The performance of the prime mover and trailer proved to be unsatisfactory. He fell behind in his payments to Esanda under the hire-purchase agreements and returned the truck to Esanda. After disposing of the units, Esanda demanded from the respondent payment of $22,835.12, being the residual amount due under the hire-purchase agreements and legal costs incurred by Esanda in respect of securities given in relation to the agreements. In September 1982 Esanda filed a summons for possession of the mortgaged premises against the respondent. In an affidavit filed on his behalf in answer to the summons he raised matters which were intended to comprise a defence to the summons. He also filed a cross-claim. (at p546)

4. In the cross-claim he raised three matters, of which one only is relevant to the present appeal. He relied on s.5(3) of the Hire-Purchase Act 1960 (N.S.W.) ("the Act") which provides that in certain circumstances there shall be implied in a hire-purchase agreement a condition that the goods shall be reasonably fit for the purpose for which they are required where the hirer makes that purpose known to the owner or dealer. (at p546)

5. Cross J. found that the respondent failed in his defence to the summons and in each of his cross-claims. His Honour concluded that the condition implied by s.5(3) was expressly negatived by the two hire-purchase agreements. The respondent appealed to the Court of Appeal which held that the implied condition under s.5(3) was not negatived in the manner required by that sub-section and that there was a breach of the condition. The Court of Appeal ordered that there should be a new trial limited to the claim for damages for breach of the implied condition of fitness. (at p546)

6. In the present appeal Esanda challenges the finding that the condition was not negatived. Section 5(3) provides:

"(3) Where the hirer expressly or by implication makes known to the owner or to the dealer or to any servant or agent of the owner or the dealer the particular purpose for which the goods are required, there shall be implied in the hire-purchase agreement a condition that the goods shall be reasonably fit for that purpose but such a condition shall not be implied if the goods are second-hand goods and the agreement contains a statement to the effect - (a) that the goods are second-hand; and (b) that all conditions and warranties of fitness and suitability are expressly negatived,

and the owner proves that the hirer has acknowledged in writing that that statement was brought to his notice." (at p546)

7. The respondent signed two documents in connexion with each hire-purchase agreement. The first document was a summary of his financial obligations under the proposed hire-purchase agreement and also a declaration to, and warranty with, Esanda made by him after the offer to enter into the hire-purchase agreement had been fully completed but before it was signed. Clause 9 of this document was in these terms:

"Where the goods are stated in the offer to be secondhand I understand that the terms of the offer provide that all conditions and warranties as to quality and as to fitness and suitability are to the maximum extent that the law allows expressly negatived and by my signature below I HEREBY ACKNOWLEDGE that the statement that the goods are secondhand and that such conditions and warranties are expressly negatived has been brought to my notice." (The words which we have emphasized were in heavier type although in the same size as the words preceding the words "I hereby acknowledge".)

The respondent signed this first document immediately below the heavy type which concluded cl. 9. (at p547)

8. The second document was an offer by the respondent to hire from Esanda the goods described in the schedule to the document on the terms and conditions set out in the document. This document became the hire-purchase agreement on its acceptance by Esanda. It is in this document that s.5(3) requires the statement to the effect "that all conditions and warranties of fitness and suitability are expressly negatived". Esanda's case is that cl. 8 of the hire-purchase agreements did this. Clause 8 provides:

"If the goods are secondhand and it is so stated in the Schedule all conditions and warranties as to quality and all conditions and warranties as to fitness and suitability are expressly negatived to the maximum extent that the law allows. So far as the law permits all other conditions and warranties which might be implied are also negatived and excluded . . ." (at p547)

9. Although Cross J. accepted Esanda's submission on this point, the Court of Appeal took a different view of the clause, holding that s. 5(3) required that the agreement should state "in an inequivocal way that the conditions and warranties referred to are expressly and unqualifiedly negatived" and that cl. 8 did not comply with this requirement. (at p547)

10. Mr Mahoney Q.C. for Esanda submits that "the effect" of cl. 8 is to state expressly, in conformity with s.5(3), that in the case of secondhand goods (and the units are described as secondhand in the schedule to each agreement) all conditions and warranties of fitness and suitability are expressly negatived. The short answer to this submission is that the clause adds a qualification when it introduces the words "to the maximum extent that the law allows". The effect of those additional words is to convey to the ordinary reader that conditions and warranties of fitness and suitability may be negatived in whole or part and equally that such conditions and warranties may, to an unspecified extent, remain operative. (at p547)

11. It seems that cl. 8 was drawn with the object of conveying this very message. Sections 71 and 72 of the Trade Practices Act 1974 (Cth) imply conditions of quality and of fitness in certain transactions where a corporation supplies goods to a consumer in the course of a business. These implied conditions cannot be excluded, restricted or modified: Trade Practices Act, s.68(1). The additional words in cl. 8 of Esanda's form of hire-purchase agreement were evidently designed to accommodate the operation of the conditions which might be implied under ss. 71 and 72 of that Act. Any unqualified statement that all conditions and warranties of quality, fitness and suitability were negatived might have amounted to misleading or deceptive conduct on the part of Esanda or a false or misleading statement concerning the exclusion of a condition in the case of transactions in which the Trade Practices Act conditions were implied: Trade Practices Act, ss. 52(1) and 53(g). (at p548)

12. No such conditions were implied under the Trade Practices Act in the transactions now under consideration. This was because the price of the goods in each hire-purchase agreement exceeded the prescribed amount of $15,000 (Trade Practices Act, s.4B). Subject to a qualification not presently relevant, the Trade Practices Act conditions of quality and fitness are not implied when the price of the goods exceeds the prescribed amount. (at p548)

13. The result is that in the present case cl. 8 does not unequivocally state that all conditions and warranties of fitness and suitability are expressly negatived. Instead it conveys to the reader that some such conditions or warranties may remain on foot absolutely or in some qualified way. (at p548)

14. The clause does not conform to the requirements of s.5(3) which contemplates that the hirer will be told both that the goods are secondhand and that all conditions and warranties of fitness and suitability are expressly negatived. The object of the sub-section is to bring to his attention the fact that he lacks the benefit of all such conditions and warranties in relation to particular secondhand goods. Clause 8 does not achieve this object. (at p548)

15. Reference was made in argument to earlier statutory provisions relating to the exclusion of implied conditions and warranties in hire-purchase agreements, especially s.26(3) of the Hire-purchase Agreements Act 1941 (N.S.W.), which require that provisions excluding such conditions and warranties be clearly brought to the hirer's notice. We do not consider that this legislative history derogates in any way from the interpretation which we place on s. 5(3). (at p548)

16. It should be mentioned that it has not been submitted that the provisions of s.5(3) were, to any extent, invalidated by reason of inconsistency with provisions of the Trade Practices Act. (at p548)

17. In the result we consider that the Court of Appeal was correct, with the consequence that the appeal to this Court must be dismissed with costs. (at p549)

Orders

Appeal dismissed with costs.