Jones v Impala Finance Co Pty Ltd

[1974] HCA 6

HIGH COURT OF AUSTRALIA

. McTiernan, Menzies, Gibbs, Stephen and Mason JJ.

JONES v. IMPALA FINANCE CO. PTY. LTD. ; McLEOD v. IMPALA FINANCE CO. PTY. LTD.

(1974) 130 CLR 51

4 March 1974

Money-lenders (N.S.W.)

Money-lenders (N.S.W.)—Bill of sale over motor car given by buyer to dealer—Power of sale in event of default under separate loan agreement with financier—Action on loan agreement—Whether security "made or taken to secure loan" by financier—Money-lenders and Infants Loans Act, 1941-1965 (N.S.W.), s. 24*. *Section 24 of the Money-lenders and Infants Loans Act, 1941-1965 (N.S.W.) provides: "(1) If any security is after the commencement of this Act made or taken to secure the payment of any money lent by a money-lender or any interest thereon, the money-lender shall not be entitled to institute any proceedings other than for the enforcement of the security, to recover any amount payable under the contract or payable pursuant to any guarantee for the repayment of the loan or any interest thereon. (2) In this section 'security' includes bill of sale, mortgage, lien, and charge of any real or personal property, and any assignment, conveyance, transfer or dealing with any real or personal property to secure the repayment of any loan."

Decisions

1974, March 4.
The following written judgments were delivered :-
McTIERNAN J. On 22nd February 1969 the appellants, Mr. and Mrs. Jones, purchased a Holden Station Sedan, FB.1960, Model 1961, from Autobahn Motors Pty. Ltd. (hereinafter called "Autobahn") for $800. At the time of the sale some discussion took place between the appellants and the salesman about "a noise in the motor". The salesman said that this would be rectified and he took the car to the rear of the sales premises. The appellants drove away in the car. (at p53)

2. In order to finance the purchase two loans were made available to the appellants. These loans were arranged by the salesman at the sale-yard at the time of the sale. The finance company, Impala Finance Co. Pty. Ltd. (hereinafter called "Impala"), advanced the sum of $625. This amount, plus interest, was to be repaid by twenty-four consecutive monthly instalments of $35.22. The first instalment was to be paid on 8th March 1969. Another amount of $100 was advanced by Autobahn. This amount, together with interest, was to be repaid by three consecutive monthly instalments each of $33, and the final instalment of $23.63. The first payment of this advance was to be made on 8th April 1971, that is, one month after the last payment made on the loan advanced by Impala. The advance was secured by a bill of sale over the motor vehicle. (at p54)

3. The appellants were dissatisfied with the performance of the vehicle and, after some discussions between representatives of Autobahn and the appellants, the car was returned to Autobahn. This was not done pursuant to any agreement between the parties. The car was later auctioned on behalf of Autobahn at which auction it was sold for $75. (at p54)

4. The appellants did not make a repayment of any part of the loan made by Impala and on 27th March 1969 that company arranged for the issue of a default summons out of the District Court at Campbelltown claiming $641.02, being the amount due under the agreement dated 22nd February 1969. The cause of action was stated as "moneys payable by the Defendant to the Plaintiff, for money lent by the Plaintiff to the Defendant". (at p54)

5. The bill of sale contains the following clauses:

"5. The mortgagors covenant that they will strictly comply with the terms of any Memorandum of Contract for Loan made by them (either alone or jointly with any other person) with Impala Finance Co. Pty. Limited and that they will pay the whole of the principal sum and interest payable thereunder. 6. A default in the payment of the full amount of any instalment of principal and interest or any breach by the mortgagors of any of the covenants hereof, at the option of the mortgagee and without notice or demand, shall cause the unpaid principal balance and accrued interest thereon to become at once due and payable; and it shall be lawful for the mortgagee without further consent or concurrence of the mortgagors to enter into and upon the land and premises of the mortgagors wherein the chattels are situate and to seize and take possession of all the chattels and sell and dispose of the said chattels either by public auction or private contract for such reasonable price or prices either for cash or credit for the payment of the unpaid principal balance and accrued but unpaid interest thereon. 7. In the event that the mortgagee sells the said chattels in accordance with clause 6 hereof then it shall be entitled to deduct and retain out of the proceeds of such sale the cost of any repairs which are reasonably necessary to bring the said property to a saleable condition together with its reasonable selling expenses as certified by a registered Public Accountant. 8. In the event that the mortgagee sells the said chattels in accordance with clauses 6 and 7 hereof then the mortgagors expressly authorise the mortgagee to pay the net proceeds of any such sale (after payment of the amount due hereunder) to Impala Finance Co. Pty. Limited on behalf of the mortgagors and its receipt shall constitute a full and sufficient discharge to the mortgagee."

Clauses 5 and 8 relate to a financial arrangement which was made between parties who on the face of it do not constitute the parties to the bill of sale. The question has now arisen as to whether the inclusion of cll. 5 and 8 in the bill of sale and the application of the Money-lenders and Infants Loans Act, 1941 (N.S.W.), as amended, prevents Impala from bringing the action commenced in the District Court. (at p55)

6. Section 24 (1) of the Money-lenders and Infants Loans Act, 1941 (N.S.W.), as amended, is as follows :

"If any security is after the commencement of this Act made or taken to secure the payment of any money lent by a money-lender or any interest thereon, the money-lender shall not be entitled to institute any proceedings other than for the enforcement of the security, to recover any amount payable under the contract or payable pursuant to any guarantee for the repayment of the loan or any interest thereon."

(at p55)

7. It was submitted in argument by counsel for the respondents that the payment of money is only "secured" within the meaning of the section if the lender himself holds a security and may take action on this security to achieve payment of his loan. The mere fact that the provisions of the bill of sale increased the probability that the loan evidenced by the memorandum of loan would be repaid did not result in that loan being "secured" within the meaning of the subsection. (at p55)

8. In Attorney-General (Canada) v. Hallet &Carey Ltd., Lord Radcliffe stated (1952) AC 427, at p 449 : "there is no better way of approaching the interpretation of this Act than to endeavour to appreciate the general object that it serves and to give its words their natural meaning in the light of that object. There are many so-called rules of construction that courts of law have resorted to in their interpretation of statutes, but the paramount rule remains that every statute is to be expounded according to its manifest or expressed intention." In Barwick v. Latec Investments Ltd. (1966) 115 CLR 528, at p 535 , Windeyer J. in dealing with s. 24 of the Money-lenders and Infants Loans Act, 1941 (N.S.W.), as amended, stated : "The enactment is obviously not for the benefit of money-lenders, but for the protection of persons having dealings with them." In my view, there is no justification for interpreting the words of the sub-section other than in accordance with their generally accepted meaning. It is possible to give an interpretation to the sub-section, consistent with the object of the sub-section, without requiring implications to be drawn as to the rights of a lender. (at p56)

9. The subsection uses the phrase "made or taken". On the facts in the present case it is apparent that the appellants made the bill of sale. The question at issue is whether the bill of sale having been made secured the loan advanced by Impala. Papers relating to the registration of the companies involved in the matter indicate that, among other things, the companies have identical shareholders and directors and occupy the same place of business. It also appears that the loans to the appellants made by each company were arranged at the same time and by the same person. There can be no doubt that the personnel engaged in preparing the documents at the time of the sale were aware of the inclusion of cll. 5 and 8 in the bill of sale. Although the bill of sale purports to secure the loan of $100 by Autobahn it has also the effect of making more certain the repayment of the loan by Impala. The conclusion must be drawn that the clauses were included to protect the loan made by Impala. The bill of sale, in effect, provided security for the loan made by Impala. (at p56)

10. It was suggested that the above interpretation of the section may leave a lender who has no rights under a security given for a loan without a remedy for recovering his loan. However, there is nothing in the sub-section to suggest that this is not to be the case. It is obvious that once a security is made or taken for a loan it is intended by the legislature that the only remedy available to a lender is his entitlement to realize the security. (at p56)

11. I would allow the appeal and I would order that the action in the District Court be dismissed. (at p56)

12. In the appeal of McLeod v. Impala Finance Co. Pty. Ltd. the facts of the matter are similar to Jones v. Impala Finance Co. Pty. Ltd. For the reasons given in Jones v. Impala Finance Co. Pty. Ltd. I would allow the appeal in this matter also. (at p56)

MENZIES J. McLeod and Another v. Impala Finance Co. Pty. Ltd. (at p56)

2. This appeal is on all fours with the appeal in Jones v. Impala Finance Co. Pty. Ltd. and it should be disposed of in the same manner and for the same reasons. Jones and Another v. Impala Finance Co. Pty. Ltd. (at p56)

3. The 22nd February 1969 was a bad day for Mr. and Mrs. Jones, the appellants. They bought a second-hand motor car from Autobahn Motors Pty. Ltd. (Autobahn) paying a deposit of $75. At the same time they borrowed $625 from Impala Finance Co. Pty. Ltd. (Impala) to be repaid with interest at thirty-six per cent per annum repayable by twenty-four monthly instalments each of $35.22 and a final payment of $35.41 to be made on 8th March 1971. The interest would amount to $259.19. The $625 borrowed as aforesaid was paid by Impala to Autobahn as part of the price of the car. The balance of that price was $100. This sum with interest at ten per cent was to be paid to Autobahn by three monthly instalments of $33, the first to be made on 8th April 1971, leaving a balance of $23.63 to be paid on 8th July 1971. The interest would amount to $22.63. Security for this loan was taken in a bill of sale over the car. This bill of sale contained, inter alia, the following provisions:

"5. The mortgagors covenant that they will strictly comply with the terms of any Memorandum of Contract for Loan made by them (either alone or jointly with any other person) with Impala Finance Co. Pty. Limited and that they will pay the whole of the principal sum and interest payable thereunder. 6. A default in the payment of the full amount of any instalment of principal and interest or any breach by the mortgagors of any of the covenants hereof, at the option of the mortgagee and without notice of demand, shall cause the unpaid principal balance and accrued interest thereon to become at once due and payable ; and it shall be lawful for the mortgagee without further consent or concurrence of the mortgagors to enter into and upon the land and premises of the mortgagors wherein the chattels are situate and to seize and take possession of all the chattels and sell and dispose of the said chattels either by public auction or private contract for such reasonable price or prices either for cash or credit for the payment of the unpaid principal balance and accrued but unpaid interest thereon. . . . 8. In the event that the mortgagee sells the said chattels in accordance with clauses 6 and 7 hereof then the mortgagors expressly authorise the mortgagee to pay the net proceeds of any such sale (after payment of the amount due hereunder) to Impala Finance Co. Pty. Limited on behalf of the mortgagors and its receipt shall constitute a full and sufficient discharge to the mortgagee . . . ."

The proviso to the assignment of the car was in these terms :

"PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED that if the mortgagors shall pay to the mortgagee the principal sum and the interest thereon under the terms conditions and covenants herein set forth and perform all such covenants then these presents shall become void and the mortgagee, at the request of and at the cost of the mortgagors, shall reassign unto said mortgagors all those chattels hereby assigned and do all things necessary to cause a memorandum of satisfaction to be delivered to the mortgagors."

(at p58)

4. Clauses 5 and 8 have nothing to do with the taking of security for the loan of $100 and interest and are to be explained by the circumstances that Autobahn and Impala were twin companies : each had the same shareholding, management, premises and staff and some at least of their books of account were kept in common. Thus the entries relating to the two loans were recorded as follows : ----------------------------------------------------------------------------

FIRST LOAN
DUE DATE 8.3.69 SURNAME JONES NO. 0669

------------------------------------------------

NUMBER AMOUNT CHRISTIAN

NAME Richard C.280 D.75

24 $35.22 1 $35.41 NO. &ST.

ADDRESS 7 Verbrugghen Place

FINAL CITY ZONE
DUE DATE 8.3.71 &STATE Mt. Pritchard

DATE OF EMPD. Pride Marine Pty. Ltd.
LOAN 22.2.69 BY H'way, C'matta

---------------------------------------------------------------------------

OCUPAT. DRIVER

------------------------------------------------

PRINCIPAL AMOUNT

WIFE EMP. H/D OF LOAN $625.00 ------------------------------------------------

INT. $258.19 TOTAL $883.19

F.B. Holden S. Sedan Regn. No. EJS 656 ---------------------------------------------------------------------------

DATE PD AMT REC NO. BALANCE REMARKS -----------------------------------------------------------------------------

15.3.69 Car sold at auction 75.00 2nd Contract :

883.19 $100.00 242.17 22.63 - Int. ------ ------- 641.02 $122.63 ------ -------

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(at p58)

5. The transaction between the appellants and the two companies was, without question, the companies' normal mode of doing business and the references to Impala in the bill of sale were in print. (at p58)

6. The appellants were dissatisfied with the car and did not pay Impala the instalment due to it on 8th March 1969. The plaintiffs, it seems, returned the car which Autobahn then sold at auction for $75. Jones' evidence was that two or three weeks later he saw the car in the Autobahn yard with a notice on it - "$50 deposit". Then on 27th March 1969 Impala sued the appellants for $641.02 being the amount of the loan with interest to date. Judgment was given in favour of Impala in the District Court at Sydney and that judgment was affirmed by a majority of the Court of Appeal of the Supreme Court of New South Wales. It is from the judgment of that Court that this appeal has been brought by special leave. (at p59)

7. Impala is a registered money-lender: Autobahn is not. The first question is whether s. 24 of the Money-lenders and Infants Loans Act, 1941-1965 (N.S.W.) disentitles Impala from recovering from the appellants any amounts payable under the contract of loan. Section 24 is as follows:

"(1) If any security is after the commencement of this Act made or taken to secure the payment of any money lent by a money-lender or any interest thereon, the money-lender shall not be entitled to institute any proceedings other than for the enforcement of the security, to recover any amount payable under the contract or payable pursuant to any guarantee for the repayment of the loan or any interest thereon. (2) In this section 'security' includes bill of sale, mortgage, lien, and charge of any real or personal property, and any assignment, conveyance, transfer or dealing with any real or personal property to secure the repayment of any loan. . . . "

The problem is whether in the circumstances the bill of sale was made or taken to secure the payment of the money lent by Impala. The words "made or taken" are important. It may be that Impala did not itself take the bill of sale from the appellants but it is beyond question that the appellants made that bill of sale. Was it then made to secure payment of the loan of $625 and interest thereon? Let it be supposed that the appellants had inquired from the employee of both companies with whom they were dealing why it was that the bill of sale contained cll. 5 and 8. The only possible answer would be so that if the instalments to be paid to Impala were not paid as provided by the Memorandum of Contract for Loan, Autobahn could sell the motor car and pay to Impala the net proceeds of the sale after payment of the debt due to Autobahn itself. Upon such an answer being made the appellants could with perfect accuracy have replied that it appears that we are making this bill of sale to secure the payment of the money that Impala is lending us and interest thereon. I am in no doubt that the terms of the bill of sale were devised so that the car would be security for Impala's loan. Prima facie therefore s. 24 prevents the institution of the proceedings that were taken by Impala which resulted in judgment against the appellants. (at p60)

8. It is said, however, that s. 24 only applies when the money-lender making the loan can itself institute proceedings for the enforcement of the security made and that here Impala could not enforce the bill of sale. It is true that Impala could not in its own name enforce the bill of sale and upon my reading of the evidence there is not sufficient to warrant the conclusion that Autobahn's rights under the bill of sale were held either as agent of or in trust for Impala. I am however of the opinion that s. 24 can apply if a borrower makes a security to secure payments to a money-lender even if the money-lender cannot itself enforce the security so made. The effect of s. 24, as I see it, is that, if the money-lender can enforce the security made, it is limited to doing so and cannot sue upon the contract of loan ; but, if the money-lender cannot enforce a security so made it is nevertheless prevented from instituting proceedings to recover any amount payable under the contract of loan. (at p60)

9. In my opinion the course of business adopted by Autobahn and Impala and put into operation in their dealings with the appellants failed to take into account the wide scope of s. 24. (at p60)

10. In the course of argument reference was made to observations of some of the judges who decided Batchelor &Co. Pty. Ltd. v. Websdale (1962) 63 SR (NSW) 49 ; Y.Z. Finance Co. Pty. Ltd. v. Cummings (1964) 109 CLR 395 ; and Barwick v. Latec Investments Ltd. (1966) 115 CLR 528 , These cases were all concerned with security taken by a money-lender himself and read in that context they do not bear upon the matter here to be determined. (at p60)

11. Having reached the conclusion that s. 24 itself provides an answer to Impala's action it becomes unnecessary to consider the further argument advanced on behalf of the appellants that the circumstances disclosed that the bill of sale should be regarded as security taken by Impala, notwithstanding the findings made by the learned judge of the District Court that the two loans were entirely separate ones. (at p60)

12. Accordingly I would allow the appeal and in lieu of the order made by the Court of Appeal I would order that the judgment be set aside and the action be dismissed. (at p61)

GIBBS J. I have had the opportunity of reading the reasons prepared by my brother Menzies and the additional observations of my brother Mason and am in agreement with them. (at p61)

2. It may at first sight seem surprising that s. 24 of the Moneylenders and Infants Loans Act, 1941 (N.S.W.) (as amended) should have the effect of preventing a money-lender, who cannot himself institute proceedings for the enforcement of a security, from instituting any other proceedings to recover the debt. However, the expression "any security . . . made or taken to secure the payment of any money lent by a money-lender" is not qualified so as to refer only to a security given to the money-lender himself. If, in that phrase, the word "taken" means taken by the money-lender, the word "made" refers to the action of the borrower, and the fact that the disjunctive is used indicates that it is enough, to bring the section into operation, that the security was "made" by the borrower, whether or not it was "taken" by the money-lender. An instrument of a kind to which s. 24 (2) refers, whose purpose is to make the payment of the debt due to the money-lender more certain, is a security within the section whether or not the money-lender himself can enforce it. (at p61)

3. By cl. 5 of the bill of sale given by the appellants, the borrowers, to Autobahn, the borrowers covenanted to repay the money lent by the money-lender, the respondent. By cl. 6 a breach of that covenant entitled Autobahn to sell the property the subject of the bill of sale. Clause 8 then authorized Autobahn to pay the proceeds of any such sale to the respondent on behalf of the appellants. It was submitted on behalf of the respondent that this clause was a revocable mandate rather than an assignment, but in my opinion cl. 8 was not concerned with the transfer of property ; it was a provision having contractual force which authorized Autobahn as the holder of the bill of sale to dispose of the balance of the proceeds of a sale in accordance with the clause, i.e. by paying them to the appellant on behalf of the respondents. These provisions are enough to show that the purpose of the bill of sale was to secure the payment of money lent by the respondent, the money-lender, and the effect of s. 24 was therefore to prevent the respondent from instituting proceedings for debt against the appellants. (at p61)

4. I would allow the appeal. (at p62)

STEPHEN J. I have had the advantage of reading the reasons for judgment of Menzies J. and, for the reasons there stated, would allow this appeal. (at p62)

MASON J. I am of opinion that these appeals should be allowed and I am in agreement with the reasons prepared by Menzies J. for reaching that conclusion. (at p62)

2. Initially I had been disposed to think that s. 24 of the Money-lenders and Infants Loans Act, 1941 (N.S.W.), as amended, might be confined in its application to a security which is enforceable by the money-lender. It is even possible that the draftsman proceeded upon this assumption. But it would not accord with accepted principles of interpretation to allow that speculation to influence the construction of the section. (at p62)

3. In terms, the restriction on the right or entitlement of the moneylender applies once a security is "made or taken to secure the payment of any money lent". There is in this description of the event on which the restriction arises no requirement that the security be enforceable by or at the suit of the money-lender. A security granted by a borrower to a trustee, agent or nominee of the lender is none the less a security, notwithstanding that it is enforceable by a person other than the lender and may not be enforceable by the lender. (at p62)

4. The restriction imposed by sub-s. (1) denies to the lender, once a security has been made or taken in accordance with its provisions, his entitlement to sue on the personal covenant or on a guarantee. Again, there is nothing in the language in which the restriction is expressed which implies that the lender is necessarily entitled to institute proceedings for the enforcement of the security. To deny any entitlement to sue, except an entitlement to sue to enforce the security, does not carry an implication that the denial is to have effect only in the event that the lender has an entitlement to sue to enforce the security. (at p62)

5. If, therefore, the operation of s. 24 (1) is to be limited, it must be limited by reference to considerations of policy discernible from the section itself. It is evident that s. 24, like other provisions of the Act, was enacted for the protection of borrowers and that its general purpose is to confine a lender to proceedings for the enforcement of the security once a security has been made or taken in accordance with sub-s. (1). The fulfilment of this object does not call for any limitation in the operation which the section should have according to its tenor. Indeed, it might be thought that a consideration of the object of the section, centred as it is on the protection of the borrower, supports as wide a concept of security as the language permits. (at p62)

6. This approach to s. 24 conforms with the language of the section. It plainly regards the intention of the parties or either of them in the making or taking of the security as a critical element. However, in this case it raises a consequential question which needs to be disposed of before it can be safely concluded that these appeals should succeed. (at p63)

7. An appeal from the District Court judgment in favour of the plaintiff to the Court of Appeal was limited to questions of law (District Courts Act, 1912-1972, s. 142). Counsel for the defendants did not secure a finding of fact that the bill of sale was made or taken to secure the payment of money lent by the plaintiff. Indeed, he seems to have paid little attention to exploring the facts or to securing primary findings of fact and to have contented himself with making submissions of law, when exploration of the facts would have strengthened his case. (at p63)

8. The learned judge said, "I think it is quite clear that no security was made or taken to secure the payment of the money lent by the plaintiff". However, it is evident that this finding proceeded upon an incorrect view of s. 24 and a failure, partly occasioned by the manner in which the case had been conducted, to isolate the question - Was the bill of sale made or taken to secure the loan made by Impala ? (at p63)

9. For this reason the judgment in favour of the plaintiff involved an error of law from which an appeal lay to the Court of Appeal. In other circumstances it might be thought that the appeal should be upheld and remitted to the District Court so that the facts might be found in accordance with the true interpretation of s. 24, but as the issue of fact can only be properly resolved in favour of the defendants by concluding that the bill of sale was made or taken to secure the payment of the money lent by the plaintiff (see Edwards v. Bairstow (1956) AC 14, at p 36 ), I am of opinion that these appeals should be allowed and that judgment should be given for the defendants in the action. (at p63)

Orders

Appeals allowed. Orders of the Court of Appeal set
aside and judgment entered for the defendants :
costs of these appeals and of the actions in the
District Court and of the appeals to the Court of
Appeal to be paid by the respondent.