Court dismisses illegal hire-purchase claim and refuses vehicle return to prevent unjust advantage.

[*270] 1972 February 5

(GEORGΗIOU, P. D. C., & DEMETRIOU, D.J.)

IN THE DISTRICT COURT OF FAMAGUSTA

D. I, Demades & Sons Ltd.,

Plaintiffs,

v.

Georghios Adamou Kaoullas and another,

Defendants.

(Action No. 989/71).

Contract

- Illegality - Hire-purchase agreement - Made in contravention of sections 4(l) and 10 of the Hire Purchase, Credit Sale and Hiring of Property (Control) law, 1966 (law 32/66) - Held void and unenforceable - Contract law Cap. 149 sections 10(1) and 23.

Hire purchase - Agreement - Claim for amount due thereunder and for return of vehicle subject-matter thereof - Agreement held illegal and action dismissed - Defendants' application for return of vehicle, already in plaintiffs' possession under an interim order, refused - To do otherwise would have the effect of giving defendants an unjust advantage contra the plaintiffs on an agreement which was found to be illegal.

Costs - Principles governing award of costs - Judge’s discretion - Order 59 rule 1 of the Civil Procedure Rules - Successful defendants deprived of their costs because they were equally involved with plaintiffs in an illegal transaction.

Hire-purchase Agreement - Illegality - Sections 4(1) and 10 of the Hire Purchase, Credit Sale and Hiring of Property (Control) Law 1966 (Law 32/66) - See under "Contract".

Ch. Mylonas, for the Applicants-Defendants.

N. Antoniou, for the Respondents-Plaintiffs.

JUDGMENT

The judgment of the Court was delivered by:-

DEMETRIOU, D.J.: The plaintiffs filed the present [*271] action claiming against the defendants the sum of £1,0814.630 mils, due by defendants on a hire-purchase agreement, signed by the parties on 21.7.1970; defendant 2 signed same as guarantor or surety. Plaintiffs on 21.7.1970 sold to defendant 1 a car, under Reg. No. BX.902, for the sum of £1,347.125 mils agreed to be paid as follows, as stated in paragraphs 2 and 3 of the Statement of Claim:-

£200.000 mils in advance and the balance of £1,147.125 mils in 30 monthly instalment s of which 27 at £33.375 mils, two instalments at £100.000 mils each and the last instalment £46.000 mils and for which the defendants signed and executed 30 bills of exchange of same values in favour of plaintiffs, the first payable on the 21.8.1970 and the last on the 21.1.1973. The plaintiffs further claim the return of the vehicle in question and its sale at public auction for full or part satisfaction of their claim.

The defendants by their defence, raise a preliminary legal objection, alleging that the hire-purchase agreement, the subject-matter of the action is, as pleaded in the Statement of Claim, unlawful and unenforceable, as it was made contrary to

the provisions of the "Περί Ελέγχου Ενοικιαγοράς, Πωλήσεως επί Πιστώσει και Μισθώσεως Ιδιοκτησίας Νόμου, 1966 (Law 32/66).

In fact the defendants filed the present application, based on Order 27, Rules 1, 2 and 3 of the Civil Procedure Rules, which give power to the Court to dispose of any point of law raised in the pleadings, at any stage that may appear to it convenient, [*272] claiming for an order of the Court dismissing the action on the legal ground stated in paragraph 3 of the Statement of defence. Plaintiffs filed an opposition to this application.

This application came before us before the hearing of the action, to determine as a legal point whether or not the hire-purchase agreement on which the plaintiffs base their claim and as pleaded, is unlawful and unenforceable.

The material sections with which we are concerned, are sections 4 and 10 of the said Law 32/66. Section 4(1) reads:-

*"4(1) - Επί τη εκδόσει Διατάγματος Ελέγχου, ουδείς θα διαθέτη

δυνάμει συμβάσεως ενοικιαγοράς ή συμβάσεως επί πιστώσει ή μισθώσεως την ιδιοκτησίαν

εις ην το Διάταγμα αφορά, εκτός εάν η σύμβασις συμμορφούται προς τας

προϋποθέσεις του Πρώτου Μέρους του Πίνακος".

By virtue of the First Schedule of the relevant Order, (Διάταγμα Ελέγχου δυνάμει του Άρθρου 3), published in the Official Gazette No. 533, dated

3.11.1966, P.I. 805/66, the minimum cash deposit has to be 33⅓% of the agreed price and the maximum period of time for the

balance to be paid off is 24 months. It is the contention of the applicants that the hire-purchase agreement in question contravened the law in that the cash deposit paid, to wit £200.000 mils, is by far less than the percentage required by the relevant Order, Further the period of payment of the balance was agreed at 30 months, instead of 24, and the [*273] instalments were not equal as provided by paragraph 4 of Part 1 of the Schedule and paragraph 3 of the said Order.

Section 10 makes it an offence for any one who does not comply with the provisions of the Law.

From the facts before us, as pleaded, we have no doubt that the alleged hire-purchase agreement was not made in accordance with the provisions of the Law, as explained hereinabove. The question we have to determine is whether such non-compliance renders the alleged contract unenforceable.

Section 10(1) of our Contract Law, Cap. 149, provides that all agreements are contracts, enforceable by law, "if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void ..." Further down, section 23 of the same law provides that:-

"The consideration or object of an agreement is lawful, unless (a) it is forbidden by law; or (b) is of such a nature that, if permitted, it would defeat the provisions of any law..."

This section goes on to say that:

"In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void". [*274]

before applying the Law on the facts of the present case, we have directed our minds to the interpretation which should be given to the language used in the relevant sections of Law 32/66, to wit, sections 3 to 10. A provision relevant to this question is found in Maxwell on the Interpretation of Statutes, 11th edition, p. 4 and was cited with approval in Kanaris v. Tossun, (1970) 1 J.S.C. p. 17. It reads:-

"The words cannot be construed contrary to their meaning as embracing or excluding cases merely because no good reason appears why they should be excluded or embraced. However unjust, arbitrary or inconvenient the meaning conveyed may be, it must receive its full effect. When once the meaning is plain, it is not the province of a Court to scan its wisdom or its policy. Its duty is not to make the law reasonable, but to expound it as it stands, according to the real sense of the words".

Having studied the said law, we find that the language used is clear and unequivocal to the effect that anything contravening with the express provisions of sections 3-8 is illegal. It is, therefore, our duty to apply the provisions of the law, without questioning its wisdom.

We proceed now to consider the question whether we should declare the alleged hire-purchase agreement unenforceable. In Anson’s Law of Contract, 18th edition, at [*275] p. 211, one reads under the heading "Contracts which are made in breach of Statute":-

"A statute may declare that a contract is illegal or void. There is then no doubt of the intention of the legislature that such a contract should not be enforced. The difference between an illegal and void contract is important as regards collateral transactions; but as between the parties, the contract is in neither case enforceable".

Atkin L.J. in Anderson Ltd. v. Daniel (l924), 1 K.B. 138 said at ap. 149: -

"The question of illegality in a contract generally arises in connection with its formation, but it may also arise as it does here in connection with its performance. In the former case where the partie s have agreed to something which is prohibited by Act of Parliament, it is undisputable that the contract is unenforceable by either party ..."

The facts of that case were that every seller of artificial fertilisers was required by Statute to give to the purchaser an invoice stating the percentages of certain chemical substances contained in the goods. In that case the seller had delivered ten tons of articifial fertilisers without complying with the statutory requirement. It was held that they could not recover the contract price [*276] since the way in which they had performed the contract was illegal.

A more

recent case on the point is the case of Snell v. Unity Finance Ltd., (1963) 3 All E.R., p. 50, which was a claim for damages

arising out of the condition of a car sold to a purchaser under a hire-purchase agreement. There the sum paid was less than the minimum deposit required under the Hire-Purchase and Credit Sales Agreement Control Order 1960. It was held that:

"Once the facts that made the hire-purchase agreement illegal had become apparent to the County Court, it was the Court’s duty ... to refuse to enforce the hire-purchase agreement"

Wilmer I. J. at p. 53 of the report states:-

"There is, I think, no room for doubt that oil the Judge's findings, this was an unlawful transaction in that it violated the terms of the Control Order to which I have already referred".

Learned counsel for the plaintiffs-respondents submitted that the Court should not declare the transaction illegal, because the relevant law does not specifically declare the said transaction void and unenforceable.

Admittedly

the law in consideration imposes a penalty on the parties to a contract not made in accordance with the provisions of the

Law, without declaring it to be either illegal or void. We have in this case looked for [*277] the intention of the legislator and have come to the conclusion that its objects were to protect the general public or some class of the general public that the contract shall comply with the said provisions and the law leaves no room for doubt that the requirements are essential to the validity of the hire-purchase agreement.

We have given his submission careful consideration, but we have failed to reach a

conclusion other than the one stemming clearly from the above-cited authorities.

The net result is that the alleged hire-purchase agreement was made in violation of the express provisions of the Law and we hold it to be unlawful. Having resolved that the agreement is unlawful, we treat the contract as void and unenforceable.

We are inclined to take the view in interpreting section 10(1) of law 32/66, that it is not within the province of this Court to order an out and out sale, but the Court appropriate to do so would be the Court trying the case, if criminal proceedings had been Instituted,

Having found that the hire-purchase agreement is void and unenforceable, this disposes of the whole action and we dismiss it.

In relation to costs, we invite counsel to address us.

Mr. Antoniou heard on the question of costs.

Mr. Mylonas heard on the question of costs. [*278]

COURT : We wish to consider the question of costs and we shall adjourn for a few minutes.

Mr. Mylonas : There is another point which I would like to move the Court. A. certain car BX.902, has been taken away from the possession of the defendants by an order of the Court dated 9.4.1971.

COURT: Was this issue before us?

Mr. Mylonas: It will be before your Honours’ Court. If the case has concluded, your Honours may make directions on this issue as well, because this car was taken away by an interim order and directions should be made, because the order was given pending any other order or the result of the action. Since the action has come to a result, I pray that your Honours' Court give directions as to this matter as well.

Mr. Antoniou: Heard on this issue.

COURT; In view of the fact that this second question has arisen as well for our determination and the time now being one o'clock, we wish to reserve both points for consideration and determination to next Saturday, 12th February,1972.

1972 February 12

COURT : Last Saturday, we gave our decision on the issue of the validity of the hire-purchase agreement and after our decision was read, we called upon the parties to address the Court on the. issue of costs and we heard their able arguments. [*279]

In relation to award of costs to litigants, we may cite from Halsbury's Laws of England, 3rd edition, Vol. 30, p. 421, paragraph 796, under the heading "Award in favour of or against successful litigant" :-

"There is a settled practice of the Courts that in the absence of special circumstances, a successful litigant should receive his costs. A successful plaintiff may he. deprived of part or all his costs, or may he ordered to pay the costs of the defendant or part of them; and a successful defendant may he deprived of costs partly or altogether, but if wholly successful, he should not he ordered to pay the costs of the plaintiff."

Order 59, Rule 1 of the Civil Procedure Rules gives discretion to the Court or Judge as to costs. Wide though the discretion is, it is a judicial discretion that must be exercised on fixed principles, i.e. according to rules of reason and justice, not according to private opinion.

In the

case referred to us by learned counsel for the defendants, namely Haris Georghallides v. Andreas Constantinides (1961. ) C.L.R. p. 95, the Supreme Court did

not interfere with the judicial discretion of the judge in not granting costs to the plaintiff in an application by the defendant for stay of execution of a writ of possession where the trial Court granted stay, but made no order as to costs. In that case it was stated by the Court at p. 97 of the report:- [*280]

"A trial judge when dealing with the question of costs, is, expressly vested with a judicial discretion by Statute and rules of Court and unless this Court finds that he acted without judicial discretion, we cannot interfere with the order whatever this Court’s own views as to allowing the costs are and irrespective of what the judges of this Court might have done had they been dealing with the costs in the Court below".

In the case of Kanaris v. Tossun,

(1970) 1 J.S.C. p.17, decided on a similar legal point, the Supreme Court did not grant costs in favour of the successful defendant and their order was no order as to costs.

Having in mind the rules of reason and justice applicable to award of costs to litigants, we resolve that we should not grant costs to the defendants, though we have dismissed the action against them, because they are involved equally in an illegal transaction and they resisted the action by asserting in their defence a claim for the return to them of their deposit, stated in the Statement of Defence to be £266.750 mils.

Therefore, our order as to costs should be no order as to costs.

Now se proceed to deal with the matter put before us by learned counsel for the defendants on the interim order after we had read our decision. Learned counsel for [*281] the defendants advanced the contention that as the Court dismissed the action, it should proceed with the interim order and make an order returning the vehicle in question to the defendants.

In our view, if we were to accede to this application, it would have the effect of giving the defendants an unjust advantage contra the plaintiffs on an agreement which was found to be illegal. Reason and justice dictate that in view of all the circumstances of this case, we should, not grant this application. In the circumstances, we are not prepared to order that the car be returned by plaintiffs to defendants.

In the result, our judgment is as follows:-

Action is dismissed, with no order as to costs.

We make no order that the car in question, described in the Statement of Claim, be returned to defendants.

Action dismissed; no order

as to costs.

TRANSLATION

This is an English translation of the text appearing at p. 272 ante.

4.-(1) Upon the issue of a Control Order no person shall dispose by virtue of a hire purchase, credit sale or hiring agreement any property to which the Order applies unless such agreement complies with the requirements of Part I of the Schedule.

* An English translation of this text appears at p.281 post.