Dáil Éireann debate -
Tuesday, 4 Jun 1946

Vol. 101 No. 9

Hire-Purchase Bill, 1946—Report.

Minister for Industry and Commerce (Mr. Lemass)

I move amendment No. 1:—

In page 8, Section 13 (4), lines 22 to 24, to delete paragraph (c), and substitute the following paragraph:—

(c) make an order for the transfer to the hirer of the owner's title to a part of the goods and for the specific delivery of the remainder of the goods to the owner, subject, if the court thinks fit, to the condition that the hirer or any guarantor pays to the owner within a specified time such further amount in respect of the hire-purchase price as the court, having regard to the amount already paid in respect thereof, the price of that part, the use which the hirer has had of the remainder of the goods and their depreciation in value, thinks just.

This amendment might be discussed with amendments Nos. 2 and 3. I think the purpose Deputy Martin O'Sullivan had in mind in amendment No. 3 is, in fact, met by amendment No. 1 in my name. Amendment No. 1 and amendment No. 2 are, however, linked together. It was Deputy O'Sullivan who raised various queries upon Section 13 of the Bill when discussing it in Committee. It is, perhaps, the most important section of the Bill and it was right, therefore, that the Dáil should examine it with particular care. Arising out of our Committee Stage discussion, I agreed to re-examine the section to ascertain whether any alteration in its provisions was necessary or desirable. One of the provisions of Section 13 is designed to ensure that, where the hirer of goods is unable to complete the contract and the contract comes before the court, the court may make an order transferring to the hirer of the goods the owner's title in part of them. But sub-section (6) limited the court in this way: that it prohibited the court from making an order transferring to the hirer the owner's title in part of the goods unless it was satisfied that the amount which the hirer had paid in respect of the hire-purchase price exceeded the price of that part of the goods transferred to the hirer by at least one-third of the unpaid balance of the purchase price.

It was argued in Committee that the provision was not completely fair to the hirer of the goods. Personally I do not think that argument was well-founded. It will, I think, be agreed that, where a hire-purchase agreement comes to grief and the goods are being disposed of at the discretion of the court, the owner of the goods is entitled to get reasonable compensation for the deterioration in the value of the goods when returned to him and also compensation for the fact that the hirer had the usage of the goods during the period when the contract was in operation. I pointed out during the course of the earlier discussions on the Bill that it is generally agreed that such articles as motor cars lose a substantial portion of their value immediately they are used. It is a common theory that a new motor car loses one-third of its value when it is driven home to the buyer's house. The same is, to a large extent, true of other goods sold under hire-purchase agreements, such as wireless sets, bicycles, furniture, books and commodities of that kind. Their second-hand value is very much below their value as new goods and, consequently, the mere fact that the goods are returned to the owner by the hirer after only a small part of the hire-purchase price has been paid is not sufficient compensation to the owner. He is also entitled to get compensation for the fact that he had been deprived of the opportunity of selling the goods to some other person while the hirer had them and reasonable compensation for the substantial deterioration in the value of the goods while in the possession of the hirer. The Dáil will, I am sure, appreciate that the rate of deterioration in value is much greater during the initial period of their use by the hirer than later on. I went, however, very carefully into the whole provisions of the section and decided that a good case could be made for the changes which I am proposing by these two amendments.

Deputy O'Sullivan raised another point during the course of the Committee Stage discussion and that related to the case where the value of goods which the court could allocate to the hirer under the provisions of the section as it stood might be less than the value of any one article included in the transaction. If, for example, the goods purchased under the agreement consisted of a suite of furniture and the hirer was unable to complete the transaction, he might desire to keep the table or the sideboard or some other item of the suite, but the court might find it impossible to arrange accordingly because the value of that one article would exceed the value of the goods which the court might transfer from the owner to the hirer. The Deputy in his amendment proposes to deal with that question by empowering the court to require the owner to make a cash payment to the hirer. I thought that was undesirable. There is no other provision in the Bill for the refund of cash by the owner arising out of the transaction and I think it would be unreasonable to provide for the possibility of the closing of the transaction by the repayment of cash to the hirer by the owner.

I am proposing to deal with that point, but in a different way. I am proposing to give the court discretion to make an order for the transfer of the owner's title in a part of the goods and for the delivery of the remainder of the goods by the hirer to the owner, but subject, if the court thinks fit, to the hirer of the goods or any guarantor of the hirer paying to the owner within a specified period such further amount in respect of the hire-purchase price as the court thinks just, but requiring the court, when determining the amount so to be paid, to take into account the use which the hirer had of the remainder of the goods and their depreciation in value. In the circumstances which I have described, therefore, where the whole transaction relates to a suite of furniture, and where the hirer of the goods does not make the payment required and it goes to the court, if the hirer of the goods desires, say, to retain the table, but the value of the table exceeds the value of the goods which can be transferred to him, the court can, nevertheless, provide for the transfer of the owner's title in the table to the hirer of the goods, provided the hirer pays an additional sum, which in the court's opinion is just, representing the value of the table and which takes into account the fact that the hirer of the goods had the use of them for a period and that they have depreciated in value by reason of that use.

Deputy O'Sullivan's main objection was, however, I think, to the provisions of sub-section (6). I am proposing to change that sub-section also. The effect of the change which I am proposing is to delete from the sub-section entirely the reference to one-third of the value. If the amendment is accepted the court will have discretion to make an order under the amendment to which I have referred already, and where it makes such an order the following provisions will have effect in relation to the part of the order which refers to the transfer of the title in the goods to the hirer. First of all, the part of the order relating to the transfer of the goods to the hirer will not come into effect until the hirer has complied with the condition decided by the court. If the condition is not complied with, the court shall revoke that part of the order and make such further order as it considers to be just. If the order is complied with, then that part of the order comes into effect. The effect of these two amendments is to remove some of the rigidity from the Bill and to leave a wider element of discretion to the court. That, I think, meets what was the main objection to the provisions in Section 13, and meets the objection in a way that does not give rise to further objections such as, I think, would follow from the adoption of Deputy O'Sullivan's amendment No. 3. I gave this matter very careful consideration. I am satisfied that these two amendments will, in fact, improve the section, and that they go a long way, if not the whole way, to meet the criticism of the section which was expressed here in Committee.

Mr. M. O'Sullivan

My reason for putting down this particular amendment is based on the difficulties I saw arising out of discussion upon the section in Committee. I felt at the time that it would be a physical impossibility to give effect to sub-section (6) of the section, particularly in relation to a single article. On the Committee Stage discussion, we had the illustration of the suite of furniture and the table. We disposed of that, but I am glad to see that the discussion has had its effect in the amendments which the Minister is proposing to-day. A further examination of the Bill, as introduced, proves rather interesting because of its effect elsewhere, in this way, that once you began to apply the formula provided in sub-section (6) you found that it was absolutely impossible to apply it in relation to a single article. Take the simple illustration of the bicycle, the piano or the sewing machine. Having got your formula as provided in sub-section (6), you found that the hirer, having broken down in his payments—he could not continue to make them any longer—was credited by the court with a certain sum. That sum was met by £13, whereas the original article cost £30. He was credited with £13, but how was he to get £13 worth of goods from a single article costing £30? That, of course, would be physically impossible. As the Minister is meeting that point, it is rather interesting to note that the law in England at the present day—the Act there was passed in 1938—is line for line with sub-section (6) of Section 13 in this Bill, but it has not been in practical operation because, I understand, it has been suspended since 1939 under an Emergency Powers Act. It would appear to me that the protection which that particular section afforded hire-purchasers—it is, by the way, the most important section in the Bill—has proved to be valueless, so far as the British people are concerned. In the light of what we are discussing here to-day, it would appear to me that an amending Act will be necessary to give to the people on the other side the protection originally intended.

I would like to point out to the Minister that there is still a slight difficulty where there are a number of items in a purchase as, for instance, in the case of a suite of furniture consisting of a couch and two chairs. When you come to apply this formula you must, of necessity, have the foundation of the individual unit price. The Bill makes no provision for an individual unit price. Therefore, it would appear to me that when the purchaser is making his purchase it will be necessary for the trader to indicate the price of the couch and the chairs separately so as to enable the court to assess what portion of the goods shall be retained. The Minister says that is met, to a great extent, in his first amendment. In his second amendment, however, he provides that "if the condition is not complied with". The Minister is providing a way out in this matter, that suppose the amount of the goods to which the hire-purchaser is entitled is £13, that one item is a table costing £20— the illustration that we had the last day—that the whole suite of furniture cost £80, that the hire-purchaser has paid £35 and is anxious to retain the table for which he has paid £20, he is only entitled in a case such as that, to goods to the extent of £13. Obviously, in that case the trader is not going to give him the table which was invoiced at £20, or the suite of furniture which was invoiced at £80. The Minister is now providing a solution for that. The solution is that the court may direct that the difference between £13 and £20 shall be paid by the hirer or by some guarantor on his behalf; but paragraph (a), in the second amendment which the Minister is proposing, provides:—

"that part shall not, in any event, come into operation before the condition is complied with."

That is, presumably, the condition where either the hirer or the guarantor pays the intervening balance. Paragraph (b) of the Minister's second amendment provides:—

"if the condition is not complied with, the court shall revoke that part and make such further order in relation to the goods as it thinks just."

Am I to understand that, in that case, the court need not necessarily order the return of all the goods to the owner, but that as in the case of the table due allowance will be made for all the circumstances, and that the court will have a rather wide jurisdiction in meeting the equities of the case?

Mr. Lemass

The reference to one-third of the value is being deleted. It is now left entirely to the discretion of the court to make such order as it considers just, but the court must have regard to something more than the value of a single item or a couple of items in relation to the total cost of all the articles purchased. The court must also, in determining the amount to be paid before title to the goods is transferred, take into account the depreciation in the value of the goods that are being returned to the owner, as well as the fact that the hirer had the use of the goods for a period of time.

Mr. D. Morrissey

Does not the question of depreciation in the value of the goods that are being returned to the owner arise, apart from the depreciation that arises out of their use over a period of time? I think that is a question that is going to cause many difficulties. This matter is not quite as simple as it would appear. Take the illustration that Deputy O'Sullivan gave. There are a couch and two armchairs. There is the danger that the contract may break down and that the hirer may elect to retain——

Mr. Lemass

It is not a case of the danger of a contract breaking down. This is a case where the contract has, in fact, broken down.

Mr. Morrissey

Perhaps I have not made my point quite clear. Take the example that was given by Deputy O'Sullivan of the Chesterfield suite, consisting of three pieces. Deputy O'Sullivan's point was that the owner, at the time of the sale, should indicate not only the price of the suite but the price of each individual article in that suite. If he does not, what guide is the court to have? It would be a difficult matter to decide the value of the couch and of each armchair. The taking away of the couch from the two armchairs would, definitely, depreciate the value of the two armchairs. That is the point I want to make. Let me give another illustration. Take a bedroom suite, consisting of three pieces— wardrobe, dressing table and washstand. The court decides that the hirer should pay up whatever the balance is, that the wardrobe should be retained by him and that the dressing table and washstand should be returned to the owner. The value of those two articles without the wardrobe will be depreciated.

Mr. Lemass

That is the point. The court will not take into account merely the difference between what the hirer has paid and the value of the article he wants to keep. It will also have to take into account depreciation of the goods which are to go back and the fact that the hirer had the use of them. The amount fixed will represent not only the difference between the amount paid and the value of the article but fair compensation to the owner of the goods in respect of the depreciated value of the articles returned to him and the fact that the hirer had the use of them for a certain period.

Mr. D. Morrissey

That will put a disproportionate value on the article retained.

Mr. Lemass

The court will take all the circumstances into account. I tried to frame the Bill on the lines of British Bill which provided for a fixed formula—one-third of the difference between the hire-purchase price and the unpaid balance—and, in any of the illustrations I took to ascertain how that provision would work, it seemed to me that it would work reasonably well. The objection which was voiced here was that the amount of the value which the court might allow in respect of the goods transferred might not represent any single item of the goods—that it was too rigid a method of determining the amount of the value of the goods to be transferred. I met that by putting on the court the whole onus of deciding what would be a fair settlement but putting on the court also the obligation of taking into account not merely the amount the hirer has paid but also the amount which the owner has lost by reason of the depreciated value of the goods and the fact that he had not the use of them for a period. The court can then arrange for the transfer of one or the other of the articles to the hirer either without any further payment, if it thinks that that is reasonable provision, or subject to such additional payment by the hirer as the court thinks would represent a just settlement. If that amount is paid, the whole transaction will be completed.

One of the reasons why amendment No. 2—new sub-section (6)—is in the form it is, is the desirability of having the whole transaction completed. One of the objections I had to the suggestions put forward here was that the thing might go on indefinitely, coming back again and again to the court, without the owner of the goods getting any satisfaction, if the hirer continued to default in carrying out the court's order. The provisions of sub-section (6) seem to me to afford a reasonable method of ensuring that the business can be completed. If the hirer of the goods defaults in the payment, one-third of the total price having been paid, and the matter goes to the court, the court can deal with the issue with a very considerable amount of discretion. It can order the return of the goods to the owner, or it can make an order for the delivery of the goods and postpone the operation of the order, subject to some adjustment of the price in relation to the means of the hirer. That would give an opportunity of having the transaction completed on less onerous terms, subject to some conditions which the court might impose, which would, ordinarily, be conditions designed to protect the goods against damage. The court can also divide up the goods, transferring the ownership of some of them to the hirer and ordering the return of the balance to the owner. When dividing up the goods, the court can decide what additional payment should be made and, in doing that, must take into account not merely the relative value of the two portions of the goods but the right of the owner to compensation for depreciation of the goods and for the loss of the use of the goods for a period.

Mr. D. Morrissey

I see the difficulty in getting anything in the nature of a completely satisfactory section but it seems to me that, even with the new amendments to be put in, the court will be coerced into doing an injustice either to the hirer or the owner.

Mr. Lemass

I do not follow that. After all, the only case in which the original formula might have worked harshly was where one-third of the purchase price had been paid and had been paid quickly, so that the length of time during which the owner was deprived of the use of his goods was not very long. In such cases, there could be hardship. Such cases are not unusual. People who buy furniture or bicycles or other goods by hire-purchase sometimes make a substantial payment initially on the purchase price. If they have a stroke of luck at the "dogs", or elsewhere, they may pay off a substantial portion of the purchase price in order to get rid of it. If they found themselves unable to continue the payments, they might have been caught by the provisions of the Bill in a manner which would not be completely fair. It is to meet that type of case that some alteration is necessary. In such cases, it should not be beyond the power of the court to make an arrangement fair to each party. There are not many alternatives to leaving the matter to the discretion of the court. We cannot really put into the Bill provisions which would be so complete as adequately to meet the circumstances of every case. In the last analysis, we must give the court power to dispose of the matter in one or two ways and rely on it to be fair to all the parties.

Mr. M. O'Sullivan

In Committee, I suggested that the court might have such powers. I take it that, in view of the insertion of the words, "as the court thinks fit", the value of the goods accruing to the hirer will, in the last analysis, be determined with advertence to all relevant circumstances.

Mr. Lemass

Yes.

Amendment agreed to.

Mr. Lemass

I move amendment No. 2:—

In page 8, to delete Section 13 (6), lines 29 to 33, and substitute the following sub-section:—

(6) Where the court makes an order under paragraph (c) of sub-section (4) of this section subject to a condition, the following provisions shall have effect in relation to that part of the order which relates to the transfer of the owner's title to any goods to the hirer:—

(a) that part shall not, in any event, come into operation before the condition is complied with,

(b) if the condition is not complied with, the court shall revoke that part and make such further order in relation to the goods as it thinks just,

(c) if the condition is complied with, that part shall come into operation upon such compliance.

Amendment agreed to.

Amendment No. 3 not moved.

Mr. Lemass

I move amendment No. 4:—

In page 10, Section 20, line 62, to add a new sub-section as follows:—

(2) Paragraph (a) of Section 53 of the Courts of Justice Act, 1936 (No. 48 of 1936), shall not apply to an action to which sub-section (1) of this section relates.

This amendment deals with a somewhat different point. It arises out of an observation made by Deputy Coogan on Second Reading. I had the Bill examined in connection with his observation and decided that an amendment was desirable. I intimated on Committee Stage that I would bring forward the amendment now, and the amendment is moved accordingly.

Amendment agreed to.

Question:—"That the Bill, as amended, be received for final consideration"—put and agreed to.

Agreed to take the Fifth Stage now.

Question:—"That the Bill do now pass."—put and agreed to.