Lancaster & Anor v Esanda Finance Corporation Limited

The parties to this application before the High Court of Australia were Arnorld Murrell Lancaster and Max Murrell Lancaster (the applicants) and Esanda Finance Corporation Limited (the respondent). The dispute concerned two hire purchase agreements entered into by a farmer. The applicants sought special leave to appeal from a decision of the Full Court.

The central legal issue before the High Court was the proper construction and application of section 28 of the Hire Purchase Act, specifically its provisions concerning the avoidance of certain contractual clauses. The applicants argued that a variation of the original hire purchase agreements, which incorporated arrears into a new principal amount and recalculated future payments, contravened section 28. This section is designed to protect hirers by preventing the exclusion or restriction of rights conferred by the Act.

The applicants contended that the variation agreement, by effectively re-characterising arrears as part of the principal for a new financing arrangement with a higher interest component, sought to circumvent the protections afforded to the hirer under the original agreement and the Act. The court was required to determine whether the recalculation of the agreement, including the incorporation of unpaid instalments and the application of new terms charges, constituted a prohibited provision under section 28, thereby rendering the variation void or ineffective in relation to the original agreement's terms. The facts indicated that the original agreement involved four yearly instalments of $31,516.16, with a first instalment due on 12 February 1983, which was not paid. A subsequent revision agreement dated 8 July 1983 reduced the amount owing by $6,000.00, but then added terms charges calculated at 22 per cent, leading to new annual payments.