Warnakulasooriya, D. V. Transport And General Finance Co., Ltd.

1953 Present: Gratiaen J. and Weerasooriya J.

D. WARNAKULASOORIYA, Appellant, and TRANSPORT &
GENERAL FINANCE CO., LTD., Respondent

S. C. 105-D. C. Colombo, 18,213 M
 

Contract---Illegality-Effect as between the parties-Hire-purchase-Ownership of goods-Is it a material factor ?

A transfer of property made in pursuance of an unlawful agreement cannot be upset merely on the ground of illegality.

Quaere whether a condition precedent to a hire-purchase agreement is that the person who lets goods on hire should be the lawful owner of such goods at the time the agreement is entered into.

APPEAL from a judgment of the District Court, Colombo.

E. B. Wikramanayake, Q .C., with N. Nadarasa and S. Canagarayar, for the second defendant appellant.-The plaintiff was at no stage the owner of the motor car. The evidence was that the first defendant " was buying the car through the plaintiff company". It was the first defendant who bought the car from Rajapakse. It is, besides, an implied condition of every hire-purchase agreement that the person who lets the thing on hire is the owner-Karflex v. Poole1[(1933) 2 K. B. 251.]. That case was decided before the English Hire-Purchase Act of 1938. Nor could the plaintiff company become owner of the vehicle in view of section 3 (1) of the Defence (Motor Cars) (Special Provisions) Regulations, 1943, which prohibited any person from " purchasing or otherwise acquiring " any registered motor car without a permit, and a person who contravenes these regulations was guilty of an offence punishable under regulation 52 of the Defence (Miscellaneous) Regulations. The plaintiffs represented they were the lawful owners which they were not and could not be. P1 refers to the plaintiff company as the " owners " and expressly provides in art. 11, "The vehicle being the property of the owners shall not be subject to any lien, &c." A contract founded on an illegal transaction will not be enforced. The claim here is for the hire and the return of the car. Boissevain v. Weil2[(1950) 1 All E .R. 728 at 734.]. The 2nd defendant is only a guarantor and is discharged if the creditor fails to acquire and preserve his rights against the debtor. Wessels on Contract, paras. 4361, 4363.

H. V. Perera, Q .C., with P. Navaratnarajah and G. D. C. Weerasinghe, for the plaintiff respondent.-PI, the hire-purchase agreement, is not governed by the English law. It is not a simple contract of sale of goods. It is also a hire and as such is governed by the Roman-Dutch law. The transaction as a whole falls to be governed by the Roman-Dutch law. Under that law, a person other than the owner can hire goods. There is no warranty that the seller is the owner of the goods-Diemont's

Law of Hire-Purchase in South Africa, p. 54. Even under an illegal contract property in the goods may pass-Benjamin on Sale, 8th edn., p. 494 ; The American Restatement of the Law of Contract, Vol. 2, section 580. For the nature of the contract of hire-purchase in English law see Scammell v. Ouston1[ (1941) A. C. 271.].

Counsel also cited Scarfe v. Morgan2[ (1838) 4M.&W. 270 at 281] and Benjamin on Sale, f. 498.

E. B. Wikramanayake, Q. C., in reply.-The prohibition applies to all claims connected with or directly founded on the prohibited transaction- Mackeurtan on Sale of Goods in South Africa, p. 123.

Cur. adv. vult.

August 31, 1953. GRATIAEN J.-

The plaintiff Company had, in terms of a hire-purchase agreement dated 24th April, 1946, let on hire to the first defendant a second-hand motor car, granting him at the same time the option of purchasing the vehicle provided that he duly complied with the conditions of the agreement. The appellant guaranteed the performance by the first defendant of his obligations under the agreement, and in doing so waived certain privileges to which a guarantor would normally be entitled. Contemporaneously wi

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