Northern Credits Ltd v Williams

[1987] TASSC 80

Serial No B10/1987
List "B"

COURT:  SUPREME COURT OF TASMANIA

CITATION:              Northern Credits Ltd v Williams [1987] TASSC 80; B10/1987

PARTIES:  NORTHERN CREDITS LTD
  v
  WILLIAMS, B

FILE NO/S:  367/1984
DELIVERED ON:  31 March 1987
JUDGMENT OF:  Green CJ

Judgment Number:  B10/1985
Number of paragraphs:  11

Serial No B 10/1987
List "B"
File No 367/1984

NORTHERN CREDITS LTD v B WILLIAMS

REASONS FOR JUDGMENT  Cox CJ

31 March 1987

1. This is a claim for money due under a contract of indemnity.

1. On 18 August 1979 G. A. and J. H. Ackerly, whom I shall refer to as “the hirers”, made an offer in writing to the plaintiff to take furniture on hire purchase. The offer contained the words:

“This offer is irrevocable by me for thirty days. It shall not become a binding contract unless and until the acceptance below has been signed by you or on your behalf. The signing of such acceptance shall of itself constitute a binding acceptance of my offer without notice to me.”

On the same date the defendant signed a document headed “Indemnity” which was addressed to the plaintiff, part of clause 1 of which reads:

“THE UNDERSIGNED hereby undertake and agree as follows:

1.        THAT I will at all times hereafter indemnify you and keep you indemnified against any loss resulting from or arising out of the Hire Purchase Agreement dated the 18th day of Aug. 1979 and made between Geoffrey Arthur and Janice May Ackerley and Northern Credits Ltd.....“

I find that both documents were signed on the same day and that they were received by the plaintiff on some date between 18 August and 31 August. On 31 August the plaintiff accepted the hirers’ offer to enter into the hire purchase agreement.

1. The hirers made default under the hire purchase agreement and the plaintiff now claims the amount of its loss from the defendant. The defendant did not give or adduce evidence.

1. The defendant contends that he is not liable because the indemnity agreement is not supported by consideration. The defendant accepts that the plaintiff‘s acceptance of the hirers’ offer at his request would have been capable of constituting sufficient consideration to support the indemnity agreement. But the defendant submits that there is insufficient evidence to show how the contract of indemnity came into existence. The defendant also submits that the indemnity agreement referred to a hire purchase agreement dated the 18 August 1979, whereas the hire purchase agreement referred to in the evidence did not, by virtue of the clause referred to above, become a binding agreement until the plaintiff‘s acceptance of the hirers’ offer on 31 August 1979.

1. In considering my findings I take into account that although the failure by the defendant to give or adduce evidence cannot be used to supply basic defects in the plaintiff‘s case, it is capable of making the drawing of inferences against him less unsafe than might otherwise have been the case: May v. O’Sullivan (1955) 92 C.L.R. 654 at 658.

1. I am satisfied that the hire purchase agreement referred to in the indemnity agreement is the same hire purchase agreement which is before me in evidence. Although the agreement before me was not concluded until the 31 August1979, the hirers‘ offer was made on 18 August 1979 and that date appears on the hire purchase agreement, so that to describe the agreement as being ”dated the 18 August 1979“ is not entirely inapt; the dealer gave evidence without objection that the defendant signed the indemnity agreement as ”guarantor of that particular contract“ which contract I find was the hire purchase agreement; there is no evidence to suggest that by coincidence on 18 August 1979 the hirers entered into some other hire purchase agreement with the plaintiff through the same dealer.

1. I find that both the dealer and the hirers knew that the plaintiff would not enter into the hire purchase agreement unless an indemnity agreement was entered into. In the absence of any evidence to the contrary and in the absence of any cross–examination of the dealer upon the matter, I find it probable that before the defendant signed the indemnity agreement the dealer followed his usual practice of fully informing the defendant of the nature of the agreement and, in doing so, I find that it is probable that he referred to the hire purchase agreement which at that stage was incomplete. I find it probable that the defendant knew that the indemnity agreement would be used to induce the plaintiff to accept the hirers’ offer. I hold that the defendant‘s act of signing the indemnity agreement should be regarded as an implied request to the plaintiff to accept the hirers’ offer and that the plaintiff‘s acceptance of that offer was sufficient consideration to support the indemnity agreement.

1. The plaintiff claims $4,515 together with interest at the rate of 8 per cent. per annum. Para. 2 of the indemnity agreement reads as follows:

”2. THE AMOUNT of your loss for the purpose of this indemnity whether or not the said Hire Purchase Agreement shall have been terminated by any party thereto shall be the total amount which the Hirer would have had to pay under the said agreement to entitle the Hirer to exercise the option of purchasing the chattels plus all costs charges and expenses which you may incur in the exercise or enforcement of your rights under the said Agreement less the amount actually paid to you under the agreement by the Hirer provided that in the event that the chattels shall come into your possession you will credit me with the net amount realised on the sale thereof or on payment by me of the full amount of your said loss you will transfer the said chattels to me at my expense“

1. The amount of $4,515 claimed represents the difference between the sum of $5,040 being the total balance payable under the hire purchase agreement and the amount of $525 which is the total amount of the instalments which have been paid by the hirers. The claim for that amount is plainly unsustainable because, by virtue of s.15 of the Hire Purchase Act 1959, the amount payable by the hirers had they wished to finalise the agreement would have been reduced by the statutory rebate of terms charges and possibly by some other deductions.

1. The defendant submits further that the hire purchase agreement does not specify a date upon which the hiring is deemed to have commenced as required by s.6(1)(c)(i) of the Act and thus by virtue of s.7(1), the liability of the hirer is by operation of law reduced by the amount of the terms charges and that, therefore, the liability of the defendant under the indemnity is correspondingly reduced.

1. The plaintiff does not submit that the agreement complies with s.6(1)(c)(i), but contends that as this is a contract of indemnity and not a contract of guarantee, the defendant’s liability is not dependent upon the rights and liabilities of the parties to the hire purchase agreement. In my view, that submission has no relevance to the issue before me. Regardless of whether the agreement is characterised as a contract of indemnity or a contract of guarantee, by virtue of clause 2 it is the amount which the hirers would have been liable to pay to the plaintiff in the event of their exercising their option to purchase the goods which determines the amount of the loss against which the defendant is obliged to indemnify the plaintiff.

1. I reject the plaintiff‘s further submission that I should not entertain the defendant’s contention on the ground that it was not pleaded. The plaintiff carries the burden of proving the quantum of its claim. The amount of the plaintiff‘s entitlement is dependent, inter alia, upon the amount of the ”balance originally payable“ within the meaning of s.15 of the Act and that in turn depends upon the provisions of ss. 15, 4(1), 6(1)(c)(i) and 7(1) of the Act and upon the terms of the hire purchase agreement and of the indemnity agreement. The defendant’s submission is not a defence which he is obliged to plead, but is only a submission about the application of the law to the facts as pleaded and proved by the plaintiff.

1. I reject the claim for 8 per cent. interest. The plaintiff has not shown that the hirers would have been liable to pay this interest in order to exercise their option to purchase the goods and thus it has not been shown to be part of the plaintiff‘s loss as defined by clause 2 of the indemnity agreement.

1. I hold that the plaintiff is entitled to judgment for $2,440, made up as follows:

Balance originally payable  $ 5,040.00

Less terms charges             2,075.00

Less instalments paid             525.00          2,600.00

$2,440.00

1. There will be judgment for the plaintiff for $2,440.00.