Review of the Hire-Purchase Act 1959

Chapter Three

THE HIRE PURCHASE ACT

3.1 The HPA is commonly referred to as being part of consumer protection law. The introduction of the Act in 1959 and was the result of conferences of state and Commonwealth Ministers called upon to draft uniform hire-purchase law for adoption in all states and territories.[1] New legislation with substantial uniformity was introduced in each state and territory.

3.2 In summary, the Act regulates three aspects of hire-purchase transactions. First, it specifies the information which must be given to prospective hirers and governs the form and content of agreements. Secondly, it implies into hire-purchase agreements a set of conditions and warranties relating to such matters as title, quality of goods and fitness for purpose. Thirdly, the Act deals with termination of agreements, spelling out the procedure for repossession and providing a formula for calculating the amount payable by the hirer on repossession[2].

3.3 The HPA[3] provides--

"hire-purchase agreement" includes a letting of goods with an option to purchase and an agreement for the purchase of goods by instalments (whether such agreement describes such instalments as rent or hire or otherwise) but does not include any agreement--

(a) whereby the property in the goods comprised therein passes at the time of the agreement or upon or at any time before the delivery of the goods;
(b) under which the person by whom the goods are being hired or purchased is a person who is engaged in the trade or business of selling goods of the same nature or description as the goods comprised in the agreement; or
(c) that is a regulated contract within the meaning of the Credit Act 1984
(d) a credit contract within the meaning of the Consumer Credit (Victoria) Code.

3.4 For the Act to apply the goods must be in existence when the agreement is entered into and the amounts payable must be ascertainable at that time. The Act does not allow for agreements for the supply of goods to be supplied in the future; nor does it allow for the payment of instalments commencing at a time later than the agreement.[4]

Formation and contents of hire-purchase agreements

3.5 Part 1 of the HPA regulates the formation and contents of hire-purchase agreements[5]. The Act provides that before any hire-purchase agreement is entered into the prospective hirer must be given a notice in accordance with the First Schedule of the Act. The cash price, terms charges, other charges including stamp duty, insurance and maintenance charges, freight and vehicle registration costs, the total amount payable, the difference between the cash prices and the amount payable and the instalment amount must be stated in writing. Additionally, a copy of the agreement and a Second Schedule notice - Advice to Hirers must be served on the hirer.

Protection for hirers

3.6 Part II of the HPA provides certain protection for hirers. Section 5 provides that in every hire-purchase agreement there is an implied warranty that the hirer shall enjoy quiet possession of the goods which will be free of encumbrances when the property is to pass.[6] An implied condition in the agreement is that the owner has a right to sell when the property is about to pass. Another condition is that the goods are of merchantable quality and where a purpose is made known to the owner, that the goods are reasonably fit for the purpose. Section 6 defines the liability of an owner (or dealer) for misrepresentation and creates remedies in favour of the hirer.[7] Exclusion of the operation of section 6 is prohibited.

3.7 Sections 7 to 10 define the statutory rights of the hirer. The hirer is:- entitled to a copy of the agreement and a statement of account; that where a hirer is liable for more than one hire-purchase agreement to the same owner and is making a payment less than the total amount due, the hirer may direct how the payments may be distributed across the amounts due; the hirer may assign their right, title and interest with the consent of the owner which shall not be unreasonably withheld; on the application of a hirer the court may order that the goods be removed to a location other than that stated in the hire-purchase agreement.

3.8 Section 11 provides for the early completion of agreements in that the hirer is entitled to finalize the agreement at any time by tendering the net balance due. The hirer may pay-out the agreement and complete the purchase of the goods.[8] The net balance due is the balance originally payable less any amounts paid and less the statutory rebate for terms charges, insurance and maintenance.[9] In circumstances where the owner has taken possession of the goods, the reasonable costs incurred by the owner and those incidental to taking possession as well as any cost of repair storage or maintenance are costs payable by the hirer.[10]

3.9 In circumstances of a voluntary return of goods by the hirer, Section 12 provides that the agreement may be terminated by the return of the goods. The owner is then entitled to recover the lesser of the amount stipulated in the agreement for such a termination or the actual amount due under the agreement[11].

3.10 In the event of non-payment of instalments and where goods are to be repossessed section 13 provides that a statutory notice (not less than seven days) of an intention to repossess must be served on the hirer. Within twenty-one days of the repossession the owner must serve a further notice of advice to the hirer.[12] The options for the hirer are to make payments to re-instate or finalise the agreement. An owner cannot without the consent of the hirer dispose of or sell the repossessed goods until after twenty-one days.[13] Within the twenty-day notice period of the owner's repossession of the goods, the hirer may require the owner to re-deliver or to sell the goods.[14] The net balance due is the balance originally payable less any amounts paid and less the statutory rebates and less the value of any goods the owner has re-possessed. The value of the goods is the best price which could be reasonably obtained by the owner at that time. The owner is not entitled to recover any sum which would amount to more than the net amount payable on the goods.[15]

FOURTH SCHEDULE
Hire Purchase Act 1959

Advice to Hirers

Now that the goods you hired have been repossessed you will be entitled to get them back--

(a) if, within twenty-one days, you re-instate the agreement by paying the arrears and remedy the following breaches of the agreement (or pay the owner's expenses in remedying them)--

The owner's estimate of the amount you must pay to re-instate the agreement is:

Arrears of instalments $
Cost of storage, repair or maintenance Cost of re-possession $
Cost of re-delivery $

Total $

or

(b) if, within twenty-one days, you give notice of your intention to finalize the agreement by paying the balance due under the agreement and costs of the repossession--

The owner's estimate of the amount required to finalize the agreement is:

Total amount payable under the agreement $
Less deposit and instalments paid $
Balance due under agreement $
Less statutory rebates $
Add costs of repossession $
Storage, repair or maintenance $

Total $

IF YOU DON'T RE-INSTATE OR FINALIZE THE AGREEMENT you will be liable for the owner's loss unless the value of the goods repossessed is sufficient to cover your liability. If the value of the goods is more than sufficient to cover your liability you will be entitled to a refund.

The owner's estimate of the value of the goods repossessed is $

entitled to a refund of $

* On the basis of that estimate you are liable to pay the owner $

* Strike out whichever inapplicable

NOTE--You may give a written notice to the owner requiring the owner to sell the goods to any cash buyer you can introduce who is willing to pay the owner's estimate of the value i.e. +

+ Insert owner's estimate of value

DO NOT DELAY

Action to enforce your rights should be taken at once. You will lose your rights TWENTY-ONE DAYS after the service or posting of this notice if you do not take action.

If you think you have any rights under the Hire-Purchase Act 1959 you should seek advice at once.

NOTE--Where this notice is sent to a guarantor it shall be endorsed as follows:

This notice is sent to you as guarantor of

As guarantor you have certain rights under the Hire-Purchase Act 1959, and you should seek advice at once.

3.11 If the hirer pays to the owner any amount due under the agreement[16], remedies any breach[17] and pays the reasonable costs and expenses of the owner taking possession of the goods[18], the goods shall be returned to the hirer.

Guarantees

3.12 Sections 18 and 19 make certain provision for the liability of guarantors and stipulate that liability will continue even though an owner may have taken possession of the goods. However the liability is limited to the performance of obligations undertaken and does not extend to any new agreement entered into by the hirer and the owner. For an agreement to be binding on a guarantor, advice from an independent solicitor must have been obtained before the execution of the agreement in the presence of a solicitor or a registrar of the Court.

Insurance

3.13 Part IV of the Act makes provision for the insurance of goods comprised in hire-purchase agreements. Under section 20 an owner may require goods to be insured in both the names of the owner and the hirer, but is not able to stipulate the insurer of the goods. Further the owner must not unreasonably refuse to enter into an insurance agreement with an authorized insurer.

General provisions

Harsh and unconscionable transactions

3.14 By virtue of section 24 the Court has the power to re-open hire purchase transactions which appear harsh or unconscionable and may re-open any account between the parties; relieve the hirer and any guarantor from any sum which is beyond what is fair and reasonable; set aside or revise any agreement; give judgment for any party the court thinks fit and order the delivery of goods to any party.

3.15 The statutory power to reopen a transaction has been said to confer a remedy where through oppression, abuse of power or the unfair taking advantage of the necessities of a hirer, the hirer has entered into an agreement the terms of which are harsh and as such would affront the conscience of an honest and right-thinking person.[19]

Goods repossessed from a farmer

3.16 Section 25 provides that--

(1) If any harvester, binder, tractor, plough or other agricultural implement or motor truck comprised in a hire-purchase agreement under which the hirer is a farmer is repossessed by reason of a breach of the agreement relating to the payment of instalments, the farmer may, within twenty-one days after the repossession, apply to the court for an order that the goods repossessed shall be restore to the farmer.

(2) If the court is satisfied that the farmer will have a reasonable prospect of being able to pay all instalments due and owing at the time of the repossession within twelve months from the date of repossession, the court may make an order that the goods be restored to the farmer and left in his possession during such period not exceeding twelve months as the court fixes.

(3) An order under the last preceding sub-section may include such terms and conditions, including conditions as to payment of instalments, as the court thinks fit and may direct the farmer to pay to the owner any expenses reasonably incurred by the owner in repossessing the goods.

(4) In this section, "farmer" means any person engaged in agriculture, pastorage, horticulture, viticulture, apiculture, poultry farming, dairy farming or any other business consisting of the cultivation of soil, the gathering in of corps or the rearing of livestock.

The purpose of the section is to enable a farmer to retain possession of goods and equipment needed to work a farm and then trade out of financial difficulty.[20]

Repairers liens

3.17 Section 26 extends the common law lien to cover work done for the hirer of goods under hire-purchase despite the fact that the hirer is not the owner of the goods.

Fixtures

3.18 Under section 27 goods which were not fixtures to land at the commencement of a hire-purchase agreement are not treated as fixtures to land while a hire-purchase agreement remains in force.

Provisions of an agreement which are void

3.19 Section 28 provides for the avoidance of certain provisions. The Act states--

Any provision in a hire-purchase agreement whereby --

(a) any right conferred on the hirer by this Act to determine the agreement is excluded or restricted;
(b) any liability beyond the liability imposed by this Act is imposed on the hirer by reason of the determination of the agreement in accordance with this Act;
(c) the hirer is subject to any greater liability on the determination, in any manner whatsoever, of the agreement or of the bailment thereunder, that the liability to which he would be subject if the agreement were determined in accordance with this Act;
(d) the hirer is required to pay interest on any overdue instalment at a rate exceeding eight per centum per annum simple interest calculated on a daily basis;
(e) any person acting on behalf of the owner in connexion with or in the course of the negotiations leading to the entering into the agreement is to be treated as, or declares to be, the agent of the hirer;
(f) the owner is relieved from liability for the acts or defaults of any person acting in connexion with or in the course of the negotiations leading to the entering into the agreement;
(g) the owner or any person acting on his behalf is authorized to enter upon any premises for the purpose of taking possession of goods comprised in the agreement or is relieved from liability for any such entry;
(h) the operation of any hire-purchase agreement is determined or modified or any person is authorized to repossess any goods comprised in the hire-purchase agreement if the hirer becomes bankrupt or commits an act of bankruptcy or executes a deed of assignment or deed of arrangement (whether all or any of these events are named); or
(i) except as expressly provided by this Act the operation of any provision of this Act is excluded modified or restricted ---
shall be void and of no effect.

3.20 This section has been described as being supplementary to other sections in the Act in that it is directed to preventing any exclusion or avoidance of the basic rights and privileges conferred on hirers by the Act.[21]

Restrictions on payments to owners of goods by financiers

3.21 Section 29 regulates payments by financiers to the owners of goods in respect of a hire-purchase transaction. An agreement whereby a financier is to pay a dealer a commission contrary to the section is illegal. Such contracts, which give rise to a criminal offence are void.[22]

Collateral securities

3.22 Under section 30 an owner is liable to indemnify a hirer or guarantor for the sum in excess of the hirer's liability under an agreement.

False statements by dealers

3.23 By virtue of section 32 it is a offence for a dealer to make a false statement or representation in a proposal with the intention of bringing about a contractual relationship between an owner and hirer.

Hirer may be required to state where goods are

3.24 The owner may serve a notice on the hirer requiring information as to the location of the goods. The hirer's failure to supply the information within fourteen days is an offence under section 33 of the Act.

Fraudulent sale or disposal of goods

3.25 Under section 34 it is an offence for a person to dispose of, sell, remove or by any other means attempt to defraud the owner of goods.

Power to court to extend times

3.26 Section 35 provides that following notice to the other party of an agreement the Court may extend times for the serving of notice or documents or the commencement of proceedings upon such conditions as the court thinks fit.

Court to order the delivery of goods unlawfully detained

3.27 Section 36 defines certain statutory requirements of the hirer in relation to redelivery of goods. The Magistrates Court may issue a summons and may order that the goods be returned to the owner.

Service of Notices and form of agreements

3.28 Section 37 defines methods of service and section 38 defines the form of agreements statements and notices under the Act.

Footnotes
[1] Else-Mitchell, R. and Parsons, R.W. Hire-Purchase Law, 4th ed. Law Book Co. 1968 at p. 2.
[2] Law Reform Commission of Victoria, Deregulation of Hire-Purchase, 1986 at p. 7
[3] Section 2 (1).
[4] Vermeesch, R.B. and Lindgren, K.E. Business Law in Australia, 6th ed. Butterworths 1990.
[5] Sections 3, 4.
[6] The Supreme Court of Victoria in Australian Guarantee Corporation Ltd v Ross [1983] 2 VR 319 held that where a finance company was unable to give the hirer a right to possession for the whole period of the agreement the hirer was entitled to rescind the agreement and recover all payments because of total failure of consideration and/or fundamental breach of agreement.
[7] The Supreme Court of Victoria in Mihalijevic v Eiffel Towers Motors Pty Ltd [1973] VR 545 held that the section confers cumulative remedies upon a hirer which are not defeated by the discretionary nature of the doctrine of recession.
[8] Else-Mitchell, R. and Parsons, R.W. Hire-Purchase Law, op.cit. at p. 4.
[9] Section 11 (2).
[10] Section 11 (3).
[11] Section 12 (6).
[12] For the purposes of clarity the Fourth Schedule Notice is reproduced in full on the following page.
[13] Section 14.
[14] Section 15.
[15] Section 15 (2).
[16] Section 16 (a).
[17] Section 16 (b).
[18] Section 16 (c).
[19] Joske , P. E. Sale of Goods and Hire-Purchase 2nd. edition Butterworths, 1961 at p. 223.
[20] Else-Mitchell, R. and Parsons, R.W. Hire-Purchase Law, op.cit. at p. 181.
[21] Else-Mitchell, R. and Parsons, R.W. Hire-Purchase Law, op.cit. at p. 193.
[22] Electric Acceptance Pty Ltd v Doug Thorely Caravans (Aust) Pty Ltd [1981] VR 799.
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