Cases on Hire Purchase

1. Prince Ganaku Cases on Hire Purchase By Prince Ganaku

2. Prince Ganaku Afriyie v Guardian Assurance • Appiah took a vehicle from Assad & Co. on hire purchase. The agreement provided that if he parted possession with the vehicle or he tried to sell it, the company would terminate the agreement. • This notwithstanding, Appiah sold the vehicle to one Osei, who insured it with Guardian Assurance Co. Ltd. • Somewhere in 1961, Afriyie was involved in an accident with the vehicle in question. This time, it wasn’t Osei driving, but one Kofi Fofie.

3. Prince Ganaku Afriyie v Guardian Assurance • She sued both Emmanuel Osei and Kofi Fofie for the injuries she sustained and was given judgment in her favour. • This is where it gets tasty • Guardian Assurance, with whom Osei had insured the vehicle, refused to indemnify Osei, which was contrary to s. 10 of the Motor Vehicles (Third Party Insurance) Act, 1958.

4. Prince Ganaku Afriyie v Guardian Assurance • The reason they gave was that the vehicle, at all material times was the property of Assad & Co. • Recall that the hire-purchase contract had said that any purported sale or parting of possession with the vehicle would operate to terminate said agreement. • Thus, when Appiah purported to sell the car to Osei, the agreement was determined, and so Osei could not have acquired any property in the vehicle or any insurable interest in it.

5. Prince Ganaku Afriyie v Guardian Assurance • One of the issues considered was whether the terms of the hire purchase agreement between Assad & Co. and Appiah operated to terminate the Appiah’s rights under the agreement. • On this, the Court held that Assad & Co. had the option to terminate the agreement, but whether or not they did is immaterial, as Appiah never actually owned the vehicle. • He, thus, had no legal title in it to transfer to Osei.

6. Prince Ganaku Afriyie v Guardian Assurance • Another issue agreed on was whether at the time that the agreement between Appiah and Osei was effected, Osei had an insurable interest in the vehicle. • To this the Court answered that despite not having legal title, Emmanuel Osei did, in fact, have an insurable interest.

7. Prince Ganaku Insurable interest in property is not confined to absolute legal ownership. Generally, any person who is so situated that he will suffer a loss as the proximate result of damage to or destruction of the property has an insurable interest. There must be some direct relationship to the property itself, otherwise then, the interest would be too remote, and therefore not insurable. Afriyie v Guardian Assurance Co. Ltd. Afriyie v Guardian Assurance

8. Prince Ganaku The mere possession of property is probably sufficient to give a person in possession an insurable interest in it. Even if the possession is wrongful as against the true owner, it is a right which is recognised by law against the whole world, except those who can show a better title. A person in possession may sue a third party who has damaged it, and may recover, from him, the full amount of the damage. Thus, it would seem to follow that a person in possession of property has, on that ground alone, an insurable interest to the full value Afriyie v Guardian Assurance Co. Ltd. Afriyie v Guardian Assurance

9. Prince Ganaku Afriyie v Guardian Assurance • The final issue was whether Guardian Assurance was bound to indemnify Osei. • The Court held that a policy of insurance is a personal contract between the insurers and the insured. • In the instant case, Oseihadan insurable interest, he had been accepted by Guardian Assurance, who had also accepted the vehicle. On that basis alone, pactasuntservanda!

10. Prince Ganaku Transport Hire v Dede • Dede had tried to buy a Bedford Truck from Transport Hire Purchase Ltd. and had paid 300,000 in respect of it. • Unfortunately, for one reason or the other, that agreement did not materialize, and she didn’t receive a refund, but she didn’t forfeit the money either. • When she tried to buy a Toyota truck later, that 300,000 was treated as a deposit for it.

11. Prince Ganaku Transport Hire v Dede • Indeed the agreement for the Toyota Truck was one of hire purchase. The cash price of the truck was 750,000. • The agreement also provided that the money be paid in monthly instalments, and the company would have the right to seize the vehicle if she defaulted in the payments of any of the instalments. • Further, the agreement provided for additional expenditure, independent of the cash price of the vehicle.

12. Prince Ganaku Transport Hire v Dede • For example, since the vehicle was not in roadworthy condition, she had to make some repairs. The Company authorized her to repair the engine. However, as there were other repairs to be made, she effected them, and paid for insurance. • However, when she missed a payment deadline, the company purported to exercise their rights under the hire purchase agreement and seized the vehicle. • They subsequently brought an action for an order for the return of the vehicle.

13. Prince Ganaku Transport Hire v Dede • Dede, for her part, contended that she had paid some monies in respect of the vehicle that needed to be refunded, including monies she had expended on repairs and insurance. • The company counter-argued that they had only authorized Dede to repair the engine, and challenged her claim that she had spent upwards of 100,000 on the engine. • Dede also denied the company’s right to seize the vehicle and counter-sued for a lien over the vehicle until the monies have been refunded

14. Prince Ganaku Transport Hire v Dede • The first issue concerned the existence of an agreement, the Court thought that clearly there was an agreement. • The second issue concerned how much the vehicle was to be sold for. The Court found that the vehicle itself was sold for 750,000. However, the company had charged extra costs and overheads that Dede had agreed to. The relevance of these extra costs is addressed later. • The third issue concerned how much Dede had paid to the company.

15. Prince Ganaku Transport Hire v Dede • This issue was in contention because of the earlier 300,000 that Dede had paid in respect of the vehicle that never materialized. • If one added that 300,000 to the monthly instalments actually paid, the entire amount would come to 721,000. The Court held this to be the case. • There was also the issue of how much Dede had spent repairing the vehicle. This issue was in contention because the company had only authorized Dede to repair the engine. However, she had made other repairs, in respect of which, she was seeking refunds

16. Prince Ganaku Transport Hire v Dede • The Court held that it would have been impractical for her to only have repaired the engine if other parts of the vehicle were faulty. • This brings us to the issue of whether the company was entitled to add expenses not made at the time of the sale to the purchase price. • Counsel for Dede argued that Section 2 of NRCD 292 provides that before any agreement is made, the seller and owner shall state orally and in writing to the prospective buyer or hirer, the price at which the goods may be purchased by him for cash (in this Decree referred to as the "cash price") and the hire-purchase price or total purchase price, as the case may be.

17. Prince Ganaku Transport Hire Purchase Ltd. v Dede • For this reason, counsel for Dede contended that Transport Hire Purchase Ltd. is not entitled under the Hire Purchase Decree to add expenses not made at the time of the sale to the purchase price. • In answering this, the Court distinguished between the cash price, which is the price at which the goods may be purchased for cash, and the hire-purchase price, which is the cash price + the extra charges and overheads. • The hire-purchase price thus came to 1.4M, and was agreed to by both parties. Consequently, the contention that the extra charges were unlawful was untenable.

18. Prince Ganaku Transport Hire Purchase Ltd. v Dede • Finally - and this is the meat of the matter – there was the issue of whether the company had the right to seize the car. • Indeed the company argued that the hire purchase agreement gave them the right to seize the vehicle in question. • The Court began with section 8, stating that although it prohibited the owner or seller from enforcing any right to recover possession of protected goods from the hirer or buyer, unless by an action….

19. Prince Ganaku Transport Hire Purchase Ltd. v Dede • …, section 23 clearly allows the parties to a hire purchase agreement to vary their rights, duties and liabilities by express agreement, course of dealing or by a custom, which the parties may be taken to have agreed to be applicable to their agreement, subject to the Decree. • The import of these two sections is that the clause in the agreement which gave the company the power to seize the vehicle would only be lawful where it could be shown that the clause itself was not inconsistent with any part of the Decree.

20. Prince Ganaku Transport Hire Purchase Ltd. v Dede • The Court then turned its attention to Section 17 of NRCD 292 which prohibited the seller from enforcing any provision for the payment of damages or forfeiture or penalty for the acceleration of the payment of an instalment, or for the termination of the agreement or for repossession, unless he has made a written demand to the hirer or buyer to carry out the obligation within a specified period of not less than 14 days beginning with the date of the demand, and the hirer or buyer has failed to comply with the demand in the specified period. • Thus, in spite of the legality of the clause, the right given by the clause had been exercised in contravention of the decree, and so the seizure was unlawful.

21. Prince Ganaku • Prince Ganaku Transport Hire Purchase Ltd. v Dede • Again, the right to seize the goods, given under the clause in the agreement had to be read in light of the provisions of Section 8(1) & (4). • The import being that although the plaintiff had the right to seize the vehicle where there had been a default, that right became limited at the point where the vehicle attained the status of a protected good. At that point, he could only repossess the goods by an action. • Under Section 8(4) a protected good is one which is the subject matter of an active hire purchase agreement or a conditional sale agreement, in respect of which at least 50% of the hire purchase price has been paid.

22. Transport Hire Purchase Ltd. v Dede • According to Section 8(2), where the owner violates the Section 8(1) by repossessing a protected good without resorting to an action, the agreement is terminated, and the hirer shall not only be released from all liability, he/she shall also be entitled to recover from the owner or seller all sums paid by the hirer and security given by him/her in their respect thereof, and this right extends further to a guarantor who shall also be entitled to recover all sums paid by him under the contract of guarantee or under any security given by him in respect thereof. • After adding all the amounts she had paid, including what she spent on insurance, the Court found that she had paid more than 50% of the hire-purchase price, the good was a protected good, and the company had violated section 8(1). The provisions of section 8(2) would thus apply. Decision for Dede

23. Prince Ganaku Ekuona v Bank for Housing & Construction • The story begins with the a World Bank loan to the Government of Ghana earmarked for the maintenance of roads in the country. • The maintenance of the roads were to be done by the Ghana Highway Authority (G.H.A) and the Bank for Housing & Construction (B.H.C). • Under one of the projects, B.H.C was to find contractors to carry out works on contracts handed out by the G.H.A. • Under the system, a contractor would apply to B.H.C for a loan. If they were credit worthy, B.H.C would direct them to the G.H.A.

24. Prince Ganaku Ekuona v Bank for Housing & Construction • If a particular applicant for the loan got handed the contract by the G.H.A, then B.H.C would give them the loan in the form of equipment and other machinery. • So basically: Apply to B.H.C for loan. B.H.C will review your finances to see if you’re in good standing. If they find that you’re in good standing, they direct you to G.H.A. G.H.A is the one that hands out the contracts. If G.H.A refuses you the contract, for one reason or the other, there is no reason for B.H.C to give you the loan, so you don’t get it. However, if G.H.A does give you the contract, then B.H.C would give you the loan. The loan did not come in the form of money, but rather in the form of equipment and other machinery.

25. Prince Ganaku Ekuona v Bank for Housing & Construction • The contractor would then pay the for the equipment, whenever the Ghana Highway Authority paid them for the work done. • Ekuona, in this case, went through the processes. They got the contract awarded to them, and then they were given the B.H.C loan. • Among other things, the agreement provided that B.H.C would have the right to seize or take possession of the equipment only if Ekuona defaulted on their payments of the loan + interest

26. Prince Ganaku Ekuona v Bank for Housing & Construction • Subsequently, and after the terms had been agreed, B.H.C, facing problems with defaulters on other loans it had given out, convened a meeting with the G.H.A. • At the meeting, it was agreed that further terms should be added to the agreements that had been executed with the loanees. • Consequently, a letter was circulated by B.H.C, in which they purported to add the following terms;

27. Prince Ganaku Ekuona v Bank for Housing & Construction • The equipment would be seized if an assignor or loanee defaulted for three consecutive months, received a reminder, and did not react accordingly • The equipment would be seized if B.H.C and G.H.A agreed that there had been a failure to perform the contract for which the equipment had been released. • After three years of performing the contract, Ekuona was ousted from the project, and relieved of their possession of the equipment by B.H.C, who cited a breach of contract.

28. Prince Ganaku Ekuona v Bank for Housing & Construction • To this effect, G.H.A wrote to Ekuona informing them that steps were being taken to terminate the contract with them. Thus, they (G.H.A) were inviting Ekuona for a final inspection of the work done. • Subsequently, B.H.C seized the equipment, and Ekuona sued, denying along the way that they had breached any contract. • Now, let’s change tack a little. Recall that the release of the equipment to Ekuona, by B.H.C, was dependent on them securing a contract from G.H.A.

29. Prince Ganaku Ekuona v Bank for Housing & Construction • So let’s begin from the point of the agreement between Ekuona and G.H.A. • The Court submitted that although all the contracts signed (i.e. the two agreements between B.H.C and Ekuona for the loan; the agreement between G.H.A, B.H.C and the Government of Ghana and; the Government of Ghana and the World Bank) all existed to implement maintenance of the road, which was one objective, it had to be remembered that each one was a separate agreement on its own.

30. Prince Ganaku Ekuona v Bank for Housing & Construction • The agreement between G.H.A and Ekuona provided inter alia that if Ekuona failed to execute its duties under the contract, G.H.A would take over the job and then they would deduct whatever they spent finishing the job from whatever they were supposed to give Ekuona. • Recall that G.H.A sent a letter to Ekuona saying that they were taking steps to terminate the agreement. The Court found that they hadn’t actually terminated the agreement, they had merely taken steps to do so. • Thus, in the view of the Court, insofar as B.H.C was basing their seizure of the equipment on the termination of the agreement, they were wrong, and the seizure of the equipment was premature.

31. Prince Ganaku Ekuona v Bank for Housing & Construction • But there was another alternative to consider. Recall that the loan agreement between B.H.C and Ekuona gave B.H.C the right to seize the equipment if the assignor defaulted on payments of the loan + interest. • The Court however argued that the right to do this, and the manner in which it could be done hinged on the nature of the transaction. • Was it a loan simpliciter or a hire purchase agreement?

32. Prince Ganaku Ekuona v Bank for Housing & Construction • To answer this, they Court examined the facts. • The money constituting the loan amount was never credited to Ekuona. Instead the Bank bought the equipment in both their names. • Ekuona did not take part in the purchasing of the equipment, as such there was no contract between Ekuona and the suppliers of the equipment. • The Bank had also referred to the agreement as a hire-purchase agreement.

33. Prince Ganaku Ekuona v Bank for Housing & Construction • The transaction, the Court concluded, was more than a loan where money is given to a borrower to purchase equipment himself on the loan, and it is secured with the equipment purchased and other securities. • In this case, the lender provided the money and used it to procure equipment which would not become the property of the borrower until full payment for the property was made. • So what was the nature of the agreement, if it wasn’t a loan?

34. Prince Ganaku Ekuona v Bank for Housing & Construction • First, the Court looked at Section 24 of NRCD 292 which defines a hire purchase agreement as an agreement for the bailment of goods, under which the bailee may buy the goods, or under which the property in the goods will or may pass to the bailee; and where by virtue of two or more agreements, none of which, by itself, constitutes a hire purchase agreement, there is a bailment of goods, and either the bailee may buy the goods or the property in the will or may pass to the bailee, the agreements shall be treated for the purposes of this decree, as a single hire purchase.

35. Prince Ganaku Ekuona v Bank for Housing & Construction • Then the Court looked at Section 3(1), which provided; • that the owner state the cash price and the hire purchase price • the amount and date on which the price is to be paid, and the date or the mode of determining the date upon which each instalment is payable • a description or a list of the goods to which the agreement relates • a notice which is at least as prominent as the rest of the contents of the agreement, in terms set out in the first or second schedule • Applying these criteria to the instant agreement, the Court found that the agreement set down the description of the equipment, their value (which was equivalent to how much was supposed to have been lent), the purchase price (which was value + interest), and the manner of payment, thus satisfying all but the last requirement.

36. Prince Ganaku Ekuona v Bank for Housing & Construction • Indeed, even if the requirements of section 3(1) had not been strictly adhered to, the Court was empowered by the Act to dispense with subsections b & c (requirements in previous slide not in bold font). • Thus, the Court having regard to the circumstances held that it was a hire purchase agreement. • It then moved to the provisions of Section 17 which contained all the necessary conditions for the termination of an agreement by an owner of goods; namely, a written demand for the hirer or buyer to carry out the obligation in question within a specified period of not less than fourteen days beginning with the date of service of the demand, and the hirer or buyer has failed to comply with the demand in the specified period.

37. Prince Ganaku Ekuona v Bank for Housing & Construction • Further, by section 8(1), the owner or seller could not enforce any right to recover possession of protected goods from the hirer or buyer, otherwise by an action. • Subsection 4 of Section 8 defines protected goods as goods that have been let under a hire purchase agreement or sold under a conditional sale agreement in respect of which, at least half of the hire purchase price or total purchase price has been paid, whether in pursuance of a judgment or otherwise, or tendered by or on behalf of the hirer or guarantor, where the buyer has not terminated the hire purchase or conditional sale agreement or, the bailment by virtue of any right vested in him.

38. Prince Ganaku Ekuona v Bank for Housing & Construction • Let’s go back a bit. If you recall, the Court said that BHC’s seizure of the equipment waspremature, because they had seized the equipment when neither they nor GHA had terminated their respective agreements with Ekuona. • This was because some time after the seizure had occurred, a cheque for upwards of 733,000 due to Ekuona was paid to BHC, by GHA. • Again, if you recall, the loan was to be paid off with the money that GHA would pay Ekuona with. This sum of over 733,000 represented more than 50% and, in the view of the court, should have been enough to bring the equipment within the definition of protected goods.

39. Prince Ganaku Ekuona v Bank for Housing & Construction • The sticking point was that the seizure was done before the payment was made to BHC by GHA. • However, the Court was off the view that the money had become due before the seizure had taken place because Ekuona had already done the work.

40. Prince Ganaku The difficulty with hire-purchase agreement cases is that a member of the public imagines himself to be buying the article by installments from the dealer, whereas he is in fact a hirer of the article from a finance company with whom he has been brought willy-nilly into contract, and of whom he knows nothing, and which, on its part has never seen the goods which are the subject matter of the hire Lord Harman; Yeovil Credit Ltd. v Apps Ekuona v Bank for Housing & Construction

41. Prince Ganaku UTC v Johnson Okoro • Okoro took a vehicle on hire-purchase from UTC for a hire-purchase price of £1284. • Consistent with the provisions of the Hire Purchase Act of 1958, the schedule to the hire purchase agreement provided that after £963 had been paid, the owners could not retake possession of the vehicle without the hirer’s consent or an order of the Court. • Although, by March of 1962, Johnson Okoro had paid £963, there was still a balance of £320 which was overdue. Cost of repairs amounting to £118 and of insurance amounting to £159 was also owed.

42. Prince Ganaku UTC v Johnson Okoro • In that month, Johnson Okoro took the vehicle to UTC for repairs. On completion, UTC refused to release the vehicle to Okoro unless the cost of repairs and all outstanding accounts had been settled. • He had no money, and so was obliged to sign a second hire purchase agreement. • The schedule to this new hire purchase agreement provided that after £644 had been paid, UTC could not retake the vehicle.

43. Prince Ganaku UTC v Johnson Okoro • In January of 1963, Johnson Okoro, who, in spite of the second hire purchase agreement, had still not made a single further payment, again took the vehicle to UTC for repairs. • UTC demanded that as a condition to commencement of repairs, Johnson Okoro would have to deposit £50. He asked to take the vehicle else where for repairs, but UTC refused to release the car until all outstanding debts had been paid. • On his failure to pay, UTC instituted an action, claiming arrears of rentals, plus the cost of previous repairs, insurance and interest

44. Prince Ganaku UTC v Johnson Okoro • The Court held that the second hire-purchase agreement was null and void, because it didn’t state, in addition to anything else, that UTC recognized that they could not retake the vehicle without an order of the Court. • Further, as UTC had seized the vehicle without an order of the Court, Johnson Okoro was released from all liability under the agreement

45. Prince Ganaku Halaby v Wiredu • Halaby belonged to a class of persons / business owners who had been required by statute to leave the country, to allow indigenous business owners to take over the sectors of the economy the occupied. • He had two stores in which he carried on a spare parts business. • He entered into 2 separate agreements with Wiredu for the ‘sale’ of the two stores. • In both cases, the price was to be paid in 7 installments.

46. Prince Ganaku Halaby v Wiredu • Wiredu did not stick to the payment schedule whereupon an action was instituted by Halaby. • Counsel for Wiredu based their argument on Section 81 of the Sale of Goods Act, 1962, which provides that a hire purchase contract means a contract of sale of goods in which the price is to be paid in five or more instalments. • Consequently, since it was a hire purchase agreement, and Halaby had failed to meet the formal requirements under sections 66(1)-(3) of the Sale of Goods Act, the agreement could not be enforceable.

47. Prince Ganaku Halaby v Wiredu • The Court took issue with the notion that every contract of sale that was broken down into five or more instalments was a hire purchase agreement. • In a bid to provide backing for her opinion that not every instalment transaction that exceeded four instalments was a hire purchase agreement, the judge referenced Section 81 which defined the hire purchase price, among other things, as excluding ‘any sums payable as a penalty or as damages or compensation’. • This was particularly significant because, buyers in credit sales transactions, for example, do not pay any sums as penalty. By inference, credit sales and hire-purchase transactions were different

48. Prince Ganaku Halaby v Wiredu • Clearly then, the hire purchase price could not be conflated with what was a purchase price under a credit sale. • Furthermore, the Sale of Goods Act retained the distinction between an ordinary contract of sale, which it defined in Section 1 as ‘a contract whereby the seller agrees to transfer the property in goods to the buyer for a consideration called the price, consisting wholly or partly of money’, and a hire purchase agreement. • Section 1 made no mention of a hire purchase price.

49. Prince Ganaku Halaby v Wiredu • In fact, the Sale of Goods Act devotes sections 1-65 to ordinary sale transactions, before it comes to deal with hire-purchase contracts under Sections 66-84. • The fact that the Act is compendious does not blur the distinction between the two types of transactions. A credit sale is a type of sale distinct from a hire purchase agreement. • Again, it was not true, as Counsel for Wiredu had argued, that once the agreement was broken down into five or more installments, the intention of the parties did not matter.

50. Prince Ganaku Halaby v Wiredu • The case counsel for the defence had relied on, Domestic Electric Rentals Ltd. v Dawson, did not even support counsel’s argument. • The agreement in that case was one of hire. The parties knew it was. The only thing that made it sui generis was that the agreement was so ingeniously worded that the option to purchase, which is normal in a hire purchase agreement was left in the air, and that was done intentionally to take the agreement out of the scope of the English Hire Purchase Act. • The agreement in this case was different.