The Right To Repossess Hired Goods

Introduction

The practice of hire-purchase originated many decades ago with some local traders granting extended credit payable in instalments. Prior to the promulgation of the Hire Purchase Act in 1965, this type of transaction was exclusively regulated by common law principles which was unjust to the hirers and more favorable to the owners of hired goods. The common law occasioned grave hardship and injustice on the hirers and this discouraged many persons from entering into hire-purchase transaction, particularly, because the owners of goods used such arrangement to exploit their hirers.

In order to properly regulate hire-purchase transactions in Nigeria and to protect the hirer against oppressive and exploitative owners, the Hire Purchase Act of 1965 (“the Act”) was enacted. The Act was first applicable in Lagos alone and subsequently became applicable to the whole Federation by the Hire Purchase (Application) Act, 1966, which became effective in 1968. One of the commendable and innovative provisions of the Act is the restriction on the owner’s right to repossess a hire-purchase goods in the event of default by the hirer.

Indeed, since the enactment of the Act, Nigeria has witnessed a rapid increase in the execution of hire-purchase agreements and many persons now appreciate such arrangement, particularly because the Act has to a great extent, curtailed the draconian effect of the common law principles and offers protection to both the owner and hirer of hired goods. Regardless, whether a hire-purchase agreement is made under the common law principles or the Act, an owner of hired goods still has the right to repossess his goods in the event of default by the hirer, although this operates differently under both laws. The purpose of this article is therefore to critically examine the extent of the owner’s right to repossess his goods under the common law and the Act.

The Meaning and Nature of Hire Purchase

Before delving into the right of the owner to repossess, it is apposite to understand the meaning and nature of a hire-purchase. According to Section 20(1) of the Act, a hire purchase is the bailment of goods in pursuance of an agreement under which the Bailee may buy the goods or under which the property in the goods will or may pass to the Bailee. In a different but very lucid, comprehensive and simplified term, a renowned commercial law scholar, Prof Kingsley. I. Igweike1, defined a hire-purchase as an agreement for the delivery of goods under which the recipient pays a small deposit to the owner of the goods while promising to pay certain sums as instalments, usually each month, in consideration of being granted possession and use of the goods and an option to purchase them after a stipulated period having paid the stipulated total sum.

A hire purchase is different from a conditional sale, loan, mortgage and credit sale transactions, and as such, there are some essential and distinguishable points to note about a hire purchase.

First, in a hire purchase transaction, the ownership in the goods remains with the owner of the goods. This means the hirer has no proprietary interest whatsoever in the goods, but only the right to possess and use the goods. The property in the goods only passes to the hirer when he completes payment of the instalments and exercises his option to purchase.

Second, since ownership remains with the owner, he has the right to repossess the goods in the event of default by the hirer. In Lawrence v. Bentworth Finance3, the Supreme Court per Idigbe. J .S C. at page 381, dealing with the same fundamental terms of hire purchase stated thus “In a hire-purchase agreement there are two principal rights of the owner of goods let to their hirer …(1) the right to repossession of the goods, upon breach of a term of the hire agreement which exists until the hirer after payment of all hire rentals due under the agreement, purchases the same by exercising his right under the option clause and (2) the owner’s right to the hire rentals due under the hire-purchase agreement for any period which the hirer in fact made use of goods – which must always be considered separately…………….. ”

Third, under a hire purchase agreement, the hirer has an option to purchase the goods. This means that the hirer may elect to return the goods or purchase them4. Fourth, the hirer has the right to terminate the agreement and thereupon cease paying further instalments5. This is an unassailable and inalienable right of the hirer and any provision in the agreement which excludes or restricts this right is void and unenforceable6. For an agreement to constitute a hire agreement, it must contain these fundamental provisions. In Kasali A. Raimi v. Moshudi Funso Ogundana & 2 Ors (1986) LPELR-2938 (SC), the Supreme Court Nnamani, J.S.C held thus: “After examining Exhibit F closely, I have come to the conclusion, as did the Court of Appeal that it was a Hire Purchase Agreement between the 1st defendant and 2nd defendant. The right to terminate the agreement is not only provided in Clause 16, but an option to purchase can be read into the terms of Clause 9.

It must be noted that the mere fact that parties to an agreement describe their transaction or agreement as a hire purchase does not ipso facto qualify such transaction as a hire purchase. In interpreting such agreement, the courts will look basically into the substance of the transaction as evidenced by the agreement and not the mere words of the agreement7.

Owner’s Right to Recover Hire-Purchase Goods:

• Under the Common Law
  At common law, the owner’s right to recover goods under the hire-purchase agreement is unrestricted. Where a hirer defaults in paying the instalments or performing any of the obligations under the hire-purchase agreement, which could be oral or written8, the owner is entitled to effectively terminate the agreement and repossess the goods, no matter how trifling the breach is. He can repossess with or without instituting an action in court, but in most cases, without an order of court. The owners are at liberty to formulate and insert terms in the agreement that are favorable to them but unjust to the hirer. For instance, most agreements under common law contained provisions for termination by the owner without notice.Furthermore, under common law, the owner has the right to repossess the goods if the hirer fails to pay the instalments punctually10. Where goods are repossessed by the owner, the hirer is denied a legal interest in the goods even when the good is subsequently sold at a price that exceeds the balance of the purchase price in the agreement11. Again, upon default by the hirer, the owner could seize the goods and sell to another party, without being accountable to the hirer, even though there was just one arrears of instalment. The hirer has no right to redeem the goods once they are seized and repossessed.The above common law principles occasioned grave hardship on the hirer. The hardship occasioned was so momentous that even though the hirer has paid nearly all his instalments regularly, the owner could still terminate the agreement and seize the goods upon default to pay the last instalments. This can best be demonstrated in the case of Atere v. Dada Amao (1957) W.R.N.L.R 176 where the hirer had paid a total sum of E995 out of a total hire-purchase price of E1000 but defaulted in paying the last installment of E5. The owner terminated the agreement, seized the goods and sold it to another person to recover the balance of E5. The court held that the owner was entitled to repossess the vehicle and that he was not accountable to the hirer for the excess recovered.It should be noted that even though the Nigerian hire-purchase transaction is now governed by an Act, the common law principles are still relevant till date because a considerable number of transactions are still governed by common law. By the provisions of Section 1 of the Act, all hire purchase agreements in respect of motor vehicles made before the commencement of the Act, and all hire-purchase agreements and credit sale agreements (other than agreement in respect of motor vehicles) under which the hire-purchase price or total purchase price exceeds N2000 are not regulated by the Act.
• Under the Hire-Purchase Act, 1965
  Under the Act, the owner’s right to repossess the hired good where the hirer defaults is now restricted. The owner can no longer seize or recover his goods at his whims and caprices. The Act mandatorily requires the owner to institute an action before he can repossess the goods once a certain percentage of the hire purchase price has been paid. Section 9 (1) of the Act provide thus: “Where goods have been let under a hire-purchase agreement and the relevant proportion of the hire –purchase price has been paid (whether in pursuance of a judgment or otherwise) or tendered by or on behalf of the hirer or any guarantor, the owner shall not enforce any right to recover possession of the goods from the hirer otherwise than by action and except as provided by subsection (5) of this section.”Unequivocally, Section 9 (1) of the Act restricts the owner from enforcing a right to repossess hired goods otherwise than by an action in court, provided the “relevant proportion” of the hire-purchase price has been paid or tendered. Contrary to the common law principles, the right to repossess by an owner is no longer absolute. In Oluwole Kolawole v. Lanre Adebodun Olorioko Nigria Limited & Anor (2015) LPELR-25005 (CA) the Court of Appeal, per Akinbami, J.C.A. at Page 66, paragraphs B-F, held as follows: “The position of the law is that once the relevant proportion of the hire purchase price had been paid, to retake possession by the owner, it must be done by a court action. The Respondents/Cross Appellants did not do this before they sold the bus. On the authority of MOGAJI V. ODOFIN (supra) the trial Court was right to have held that they acted illegally by the sale of the bus.”What then is the relevant proportion of a hire-purchase price? By the unambiguous provisions of Section 9 (4) of the Act, the relevant proportion of the hire-purchase price in the case of goods other than motor vehicles is one‐half of the hire-purchase price, while in the case of motor vehicles, it is three‐fifths of the hire-purchase price. Under Section 9 (2) of the Act, the legal and practical consequence of not complying with the requirement of Section 9 (1) of the Act is that, if the hire- purchase agreement, if not previously determined, shall be determined and the hirer as well as his guarantor will be relieved of all liability under the agreement and shall be entitled to recover from the owner in an action for money had and received, all sums paid by the hirer/the guarantor under the agreement or under any security given by him in respect of the agreement.

Instances where an Owner can Recover without a Court Order under the Act

Regardless of the restriction imposed by Section 9 (1) of the Act, there are still instances where an owner of hired goods can repossess goods without a court order. First, as it relates to only vehicles in a hire-purchase, the Act empowers the owner to seize it pending the determination of any action in court, if the hirer is in default of payment of three or more instalments. For purposes of clarity and ease of reference, the relevant provision of the Act is reproduced below. Section 9 (5)12 provides thus: “In the application of the provisions of this section to motor- vehicles, where three or more installments of the hire purchase price of a motor- vehicle under the agreement are due and unpaid, the owner may remove the motor vehicle to any premises under his control for the purpose of protecting it from damage or depreciation and retain it there pending the determination of any action, and the owner shall be liable to the hirer for any damage or loss which may be caused by the removal.”

The purport of the above provision is that even though a hirer of a motor vehicle has paid the “relevant proportion” of a hire purchase agreement as required under Section 9 (1) but defaults subsequently in paying “three or more instalments”, the owner of the vehicle can still seize the vehicle pending the determination of any action in court. In Omoijuanfo v. Nigerian Technical Company Ltd (1976) LPELR-2646(SC), the Appellant entered into a hire-purchase agreement with the Respondent in respect of Steyr Tipper for a total hire-purchase price of £5,643 (N11,286.00). The Appellant paid the relevant proportion (some were paid regularly and others irregularly) but failed to pay more than three instalments. In holding that the seizure of the vehicle without a court order was lawful, the Supreme Court per Idigbe JSC stated thus:
“….We do not however, find it necessary to make a ruling on this particular issue because the appellant (although he made irregular instalment payments after August 1972) had in fact on the 4th May, 1973, when he paid N78 brought his total instalment payments to just over three-fifths of the hire-purchase price; so that when on September 25th, 1973, he made another irregular payment of a very small fractional part of the monthly instalment of N552.00 provided in the hire agreement, he was already in arrears of more than three consecutive instalment payments. In those circumstances, there is no doubt that the respondents were entitled to repossess the vehicle”

In applying the above decision, the Court of Appeal in the case of Salaudeen & Anor v. Samuel Oladele (2002) LPELR-CA/IL/24/2001, per Amaizu JCA held thus: “It is my view, that on the authority of the above judgment, the fact that the appellant seized the vehicle without a court order does not make the seizure unlawful. If the seizure is lawful the respondent is not entitled to the refund of the N195,000 he paid the appellant or recovery of any loss of earnings arising from the seizure. The issue is therefore resolved in favour of the appellant”.
It should be noted that, under Section 9 (5) of the Act, the purpose of removing the vehicle is to prevent depreciation of the vehicle pending the determination of any action. Therefore, the owner cannot dispose of the vehicle after removing same, if not, the owner shall be liable to the hirer for any damage or loss which may be caused by the removal.

The second instance where an owner can recover without a court order, as can be gleaned from section 9 (1) of the Act, is where the hirer has failed to pay the relevant proportion of the hire-purchase price. The practical and legal implication of Section 9(1) of the Act is that the owner’s right of repossession is determined by the payment of the relevant proportion of the hire-purchase price. Therefore, where a hirer has not paid the relevant proportion of the hire-purchase price, the owner can exercise his right to repossess without an action in court. This applies to all types of hire-purchase goods, inclusive of motor vehicles.
The third instance is where the hirer determines the hire-purchase agreement but refuses to deliver the goods. By the provisions of Section 9 (3) of the Act, Section 9 (1) & (2) has no effect where the hirer has exercised his right to terminate the agreement or the bailment. Under such circumstance, the owner can repossess the goods without a court order, whether the hirer has paid the relevant proportion of the hire-purchase price or not.

Conclusion
Whether a hire-purchase is executed under the common law or the Act, the owner of goods has a legal right to repossess the hired goods in the event of default. However, he must exercise this right in accordance with the requirements of the Act. It is trite that where the relevant proportion of the goods has been paid the owner must institute an action in court to recover the goods. In Oluwole Kolawole v. Lanre Adebodun Olorioko Nigria Limited & Anor, the Court of Appeal, per Akinbami, J.C.A. at Pages 63-64, paragraphs G-A held thus: “Section 9 (1) of the Act forbids the owner from recovering possession of goods let under Hire-Purchase Agreement, after the relevant proportion of the Hire-Purchase price has been paid otherwise than by action and except as provided by Section 9 (5).”

Where the relevant proportion of the hire-purchase price has been paid and the hirer has defaulted to pay ‘less’ than 3 instalments in respect of motor vehicles, the owner must institute an action to repossess the goods. In Civil Design Construction Nig. Limited v. SCOA Nigeria Limited (2007) LPELR-870 (SC), the Appellant bought 2 Ingersol Cyclone Water Well rigs from the Respondent under 2 separate hire-purchase agreements. One with Reg. No.LA 2632 WD and the other with Reg. No. LA 8509 WD. The Appellant paid fully for the rig with Reg. No.LA 2632 WD, while the other rig with Reg. No. LA 8509 WD, the Appellant paid the sum of N414,48200 out of N514.482.00 leaving a balance of “two instalments” of N50.000.00 each. When dispute occurred, the Respondent seized the 2 rigs without a court order. The Supreme Court held that the seizure was unlawful. In respect of rig LA 8509 WD, for which the Appellant had paid the relevant proportion and in arrears of only 2 instalments, the Supreme Court per Onnoghen JSC held thus: “I therefore hold that the Hire Purchase Act applies to the transaction between the parties and that as it is admitted that appellant has paid 3/5th of the purchase price of the rig in issue the respondent cannot in law repossess the rig otherwise than in accordance with the law”.

However, in the event where the relevant proportion has not been paid and the owner intends to repossess the goods without a court order, he must use utmost caution and reasonable force when entering the premises or seizing the goods so as not to be exposed to any form of criminal prosecution. To obviate exposure to criminal prosecution, owners of goods under a hire purchase are advised to institute an action in court to repossess their goods.

The author, Ayi-Ekpenyong Imah, is an expert in commercial law. For further information on this article and area of law, please contact him on +2347035270844 or vide barrwisest@yahoo.com

REFERENCES
1. Prof Kingsley. I. Igweike is a former Dean of Faculty of Law, University of Calabar, and taught the author Commercial Law
2. See Afrotec Technical Services (Nig) Ltd. v. MIA & Sons Ltd & Anor (2000) 15 NWLR (Pt 692) page 730
3. (1965) 1 All N.L.R. 378 (1966) N.M.L.R. 87;
4. In G.B. Ollivant and Co. vs. Akinsanya and Anor. (1930) 10 N.L.R. 73, Butler Lloyd J held, while distinguishing a contract of hire and a contract of purchase, that” the test is whether the so-called hirer has an option of determining the contract, if not he is a purchaser whatever the contract may call him”. See also Amao v. Ajibike (1955-56) W.R.N.L.R. 121
5. See G. B. Olivant & Co. v. Adesanya, (1930) 10 N.L.R 73; and Alhaji Ibrahim Yakassai v. Incar Motors ( Nig.) Ltd (1975) 5 S. C. 107
6. Section 3(b) of the Act
7. See. Joe Allen and Co. Ltd v. Sanni Adewale & Anor (1929) 9 NLR 111; Jajira v. Northern N.M.L.R 29 and Helby v. Matthew (1895) A. C. 471
8. Under Section 2(i) of the Act, hire-purchase agreements are now required to be on a note or memorandum
9. See Newcity Press v. Briscoe CCHCJ/11/72 where termination of agreement on such clause was upheld. See also Bentworth Finance Nig. Ltd vs. Adesina (1968) 1 A.L.R Comm.
10. See Animashawun v. C. F. A. O ( 1960) L.L.L 151
11. See D. 0. Williams v. UAC Ltd [1937]13 NLR 134
12. Section 9 (5) is a new subsection introduced to protect vehicle owners from unscrupulous and mischievous hirers who deliberately stopped paying subsequent instalments after paying the relevant proportion of the hire-purchase price. See also the case of Omoijuanfo v. Nigerian Technical Company Ltd(1976) LPELR-2646(SC), (1976) 4 S.C 53