§ (1) Where a person (in this section referred to as "the owner or seller") lets goods under a hire-purchase agreement to which the principal Act applies, or sells goods under a credit sale agreement to which that Act applies, any representations with respect to the goods to which the agreement relates which were made, either orally or in writing, to the hirer or buyer by a person other than the owner or seller in the course of any antecedent negotiations conducted by that other person (in this section referred to as "the dealer") shall as between the hirer or buyer and the owner or seller be deemed to have been made also by the owner or seller and as between the dealer and the owner or seller be deemed to have been made also to the owner or seller.
§ (2) Where an owner or seller lets goods under a hire-purchase agreement to which the principal Act applies or sells goods under a credit-sale agreement to which that Act applies and such agreement has resulted from negotiations between the hirer and a dealer and pursuant to such negotiations the dealer has sold the goods to the owner or seller so that they may be the subject matter of the agreement, then the conditions and warranties implied by section 8 of the principal Act (as amended by section 12 of this Act) and by section 13 of this Act in so far as they apply as between the owner or seller and the hirer or buyer shall apply also as between the hirer or buyer and the dealer and as between the dealer and the owner or seller and the hirer or buyer shall be entiled to enforce them as against the dealer as if the same had been contained in a contract of sale between the dealer and himself and notwithstanding any agreement between the dealer and the hirer or buyer to the contrary.
§ (3) Nothing in this section shall exonerate any person from any liability (whether criminal or civil) to which he would be subject apart from this section.—[Mr. Silkin.]
§ Brought up, and read the First One.
§ Mr. Speaker
I think that it would be convenient to the House to discuss with this Clause Amendments No. 11, in page 11, line 30, to leave out Clause 10, and No. 39, in Clause 26, page 27, line 32, to leave out "and 23" and insert:23 and (Representations with respect to goods)".
§ Mr. Silkin
The purpose of this Clause is to make a difference in the Bill, as it would stand in relation to misrepresentations, and to bring in an entirely different principle in connection with them. The present position is that under Clause 10, in every hire-purchase 748 agreement the dealer is considered to be an agent of the finance company, that is to say the owner, for the purpose of litigation in respect of express representation, or the question of fitness of purpose expressed or implied. To some of us this seems to be a rather curious method of dealing with the matter.
Under the Bill the dealer is the agent of the finance house. When a dispute arose between the hirer and whoever sold him the motor vehicle, or whatever the goods might be, would not it be more logical for him to sue the dealer rather than the finance house? For this reason we propose that this Clause be accepted. The dealer is the much more logical person to be sued. He is the person who has made the misrepresentation and who, technically, knows about the motor car or whatever it may be. He is the person to whom the hirer would naturally turn.
The finance house is not equipped, technically, to be able to deal with questions of misrepresentation of this sort. It may not even be equipped to deal with them geographically or territorially. It may be that a finance house in Nottingham or Birmingham is advancing money to a hirer in London or in South Wales. Presumably the dealer is just round the corner. In case it is felt that to make the dealer alone responsible might create difficulties—a back-street dealer might be involved, who, having supplied the motor car and arranged or observed that the hirer had got his finance to pay for it, then disappeared—the effect of the Clause is to make both the dealer and the finance house jointly and severally liable.
This seems to us a more logical way to deal with the matter. First, it puts the onus, legally as well as morally, exactly where it ought to be. It enables the customer, the hirer, to sue the man who has made the misrepresentation—to sue the dealer. If he gets no satisfaction from the dealer—if the dealer disappears or is a man of straw—he still has the finance house to fall back on, because the finance house is jointly and severally liable with the dealer.
When we consider what a very thin margin of legal distinction separates the workings of Clause 10, this I think gives some force to the idea behind the new Clause. For example, if the 749 hirer, instead of going to his finance house chooses to go to a bank and borrow the money to buy a motor car, the law simply says that his rights are rights against the dealer and not against the bank. The same is true if it is a credit sale rather than a hire purchase. There again, under a credit sale, the property will have passed and his rights are against the dealer and not against the finance house. This Clause is a much more logical Clause than the existing Clause 10. I hope that it will commend itself to the Government.
§ Mr. Bingham
There is only one point on which I wish to intervene, but before raising it I wish to say that to me Clause 10 seems very much superior to new Clause 7. I say that with respect to the hon. Member for Deptford (Mr. Silkin). I detect—this may appeal to him a little more—a point of weakness in Clause 10 which the hon. Member may be inclined to agree may apply also to his new Clause. That is the use of the word "representations".
I imagine that the drafter of the new Clause may possibly have borrowed the word "representations" from Clause 10. I ask my hon. Friend the Parliamentary Secretary when he replies to consider the effect of this word in the fourth line of Clause 10 and as it occurs in the third line of the new Clause. There is a distinction in law between representations and warranties. An action for a wrong representation is in practice of very little value to a purchaser. A purchaser is not concerned with the misrepresentation as such unless he can prove it to have been fraudulent.
If it happens to be a perfectly innocent misrepresentation, the remedies are not very strong. For that reason most purchasers are anxious to know whether they have an action or warranty or not. The wording of the Hire Purchase Act, 1938, sought to avoid a practice which was prevalent at that time of making the owner's servants and agents notionally the servants or agents of the buyer, to enable the responsibility for the seller's own agent to be in a different form. I have before me Halsbury's Laws of England. The provision is in Section 5(d) of the 1938 Act:Any provision—(d) whereby any person acting on behalf of an owner…in connection with the formation"—
§ It being Ten o'clock, the debate stood adjourned.
That the Proceedings on Government Business may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—[Mr. Hughes-Young.]
§ Question again proposed, That the Clause be read a Second time.
§ Mr. Bingham
For a moment I thought that I was out of order. Perhaps I may read that again:Any provision—The interesting note which occurs in Halsbury's Laws of England is:(d) whereby any person acting on behalf of an owner…in connection with the formation or conclusion of a hire-purchase…agreement is treated as or deemed to be the agent of the hirer…".Such provisions have quite frequently been inserted in hire-purchase agreements to protect finance companies from any "—and these are the important words—warranties or representations given or made by dealers".Having regard to the exhaustive attention which will be given to Clauses of this nature by litigants and their legal advisers, I am not at all satisfied that "representation" will mean anything more than representation as excluding warranty. If that is the effect, we might have the extraordinary position that a dealer might make a statement, "This car is a 1956 car," in circumstances in which it amounted both to a representation and to a warranty. For the purpose of the representation he would be the agent of the finance house. For the purpose of a warranty he would not. The purchaser would find himself deprived of any reasonable remedy against a finance house.
It is a small point and I do not want to labour it. It may or may not have been considered in detail. But I ask my hon. Friend to consider the point, because it seems to me that the word "representation" may have a different effect in law from that which is intended.
§ Mr. A. J. Irvine
I rise to support the new Clause and to emphasise the force of the arguments which have been put forward. I do not think that I can usefully add to it because my hon. Friend the Member for Deptford (Mr. Silkin) 751 has covered the ground. We are grateful to the hon. and learned Member for Liverpool, Garston (Mr. Bingham), who has undoubtedly raised a point of importance. Indeed, I thought that in the latter part of his observations he was not attaching sufficient importance to his own proposition, because we shall want an assurance that a representation in this context means a warranty or condition. I follow the criticism, and I want the point pursued.
It is surely extremely difficult for the Parliamentary Secretary to deal with this kind of thing at this stage. The hearts of all of us go out to him. He wants to do justice, and the forces of the matter are not helping him. In my thinking about Clause 10 as I have been concerned with the Bill, I thought that representation had a meaning covering a warranty, but I quite see now that there may be a doubt about that as a matter of interpretation of the Statute. It will be interesting to hear what the Parliamentary Secretary says on this important point.
§ Mr. John Robertson (Paisley)
I shall not enter too deeply into this discussion on the niceties of English law concerning warranties or representations, because they have no standing in Scottish law. If we were to discuss Scottish law, we should need to speak about stipulations.
The House would do better to consider the matter in another way. One of the great evils of the growth of hire purchase has been the separation of the hirer from the person who is normally looked upon as the person selling him the goods—the shopkeeper or the garage proprietor. The hirer finds himself in a relationship with a distant finance company with which it is difficult to communicate and from which it is difficult to obtain any satisfaction. The law has failed to keep pace with the facts of hire purchase.
I am not competent to say whether the Clause fills the gap. By some means we should try to restore the legal relationship between the customer and the shopkeeper, garage proprietor or other person who sells him goods and makes a bargain with him. The customer believes that he has made a bargain with 752 the shopkeeper, but eventually finds that he is in relationship with a far distant and not very obvious organisation. My hon. Friend the Member for Deptford (Mr. Silkin) spoke of the distance between Nottingham and South Wales. The finance houses concerned with sales in Scotland are probably situated in London, and the distance is even greater. As the distance increases it is harder to obtain satisfaction.
As the Clause is to apply to Scotland and as we are dealing with representations and warranties, we should hear some expert opinion on its effect on stipulations. Insufficient attention has been paid to the difference between the English law of contract and the Scottish law of contract. If the Clause were accepted, it would require considerable modification to find an application in Scotland. This is a sufficiently important point to merit the Parliamentary Secretary's special attention. I hope that he will deal with the Scottish aspect.
§ Mr. Weitzman
I am somewhat troubled at the effect this suggestion will have. Having carefully read Clause 10 it seems that it makes the dealer the agent of the owner or seller and that any representations made by that dealer are representations which, presumably, will bind the owner, which is the hire purchase company. Presumably, in the case of representations, an action can be brought against both the dealer and the owner, in other words against the hire purchase company.
If my reading of the Clause is right—and I am seeking the advice of the Parliamentary Secretary in this matter—then exactly the purpose of the suggestion we are considering will be achieved by the Clause. However, I, too, recognise the force of the remarks of the hon. and learned Member for Liverpool, Garston (Mr. Bingham) about warranties. There is a distinction in law on this matter and a considerable number of cases illustrate the importance of that distinction. It is, therefore, equally important that we should know that when the word "representation" is used it includes the word "warranty".
§ Mr. D. Price
It is necessary to put the proposed new Clause into its right perspective in the Bill. It is intended to 753 replace Clause 10 and, to decide whether this should be done, we must consider what Clause 10 achieves. The House will be aware—certainly hon. Members who took part in the Standing Committee proceedings—that we included Clause 10 to implement a recommendation of the Law Reform Committee. It provides that any representation which the dealer makes to the hirer or buyer about the goods is made by him as agent for the finance house. This is necessary to remove the possibility, which now exists, that a hirer or buyer who is induced by misrepresentations by the dealer to enter into an agreement may have no remedy because his agreement is with the finance house and not with the dealer.
My hon. and learned Friend the Member for Liverpool, Garston (Mr. Bingham) asked me about the distinction between a warranty and a representation. I confess that those of us who are not learned in the law, particularly on this sort of point, do not find that answers on legal matters spring to mind. However, I have had a quick consultation with my legal advisers, who do not think that there will be a warranty given by a dealer which is not also a representation. They believe that the word "representation" is the correct one. Unfortunately, I am at a disadvantage for not being learned in the law. However, I have given the snap opinion of my legal advisers.
§ Mr. A. J. Irvine
If the Parliamentary Secretary is right, would it not have been better to have spelt this out in the Bill?
§ Mr. Price
I am advised, although I confess that I do not know, that this is clear in the present drafting. This is rather like what happens when one is taught a foreign language. One is taught that a certain English word means, say, a certain French word. Then when one goes to France one is told, "No, it does not quite mean that ". Those of us who are not lawyers are in a difficult position when finding ourselves in the strange world of the lawyer, particularly when it comes to the terminology of drafting. We humble mortals merely know the sort of things we expect our laws to do. Perhaps we should all be learned in the law before standing for 754 Parliament, although I know that a number of hon. Members do not hold that view.
§ Mr. Bingham
I appreciate what the Parliamentary Secretary is saying and I agree that nearly all warranties will import some degree of representation, although I do not believe that that is universally true. I cannot at the moment conjure up an example of where that is not the case, although I am certain that such examples exist.
Nevertheless, that is not my point. I am concerned with the words in the Clause which say that any representation will be deemed to have been made by the agent to the owner. That means that there is a notional authority being conferred on the dealer—a notional authority to make representations, but not warranties. A warranty is different and the authority is limited to representing and not to making collateral contracts such as warranties.
One cannot forecast how such an argument as this would go in the courts but, if the Parliamentary Secretary really means to improve warranties in this phrase, I would ask whether it was not possible to include some words that say, for the avoidance of doubt, that representations shall be deemed to include contractual statements and warranties.
§ 10.15 p.m.
§ Mr. Price
My hon. and learned Friend will appreciate that I cannot argue whether he is right or whether the advice I have been given is correct; I only regret that we did not have him to assist us in the Standing Committee. But I go back to the more substantial issue, if I may say so with respect to him. That was the case made out by the hon. Member for Deptford (Mr Silkin) that, in terms of consumer protection, Clause 10 does all that is necessary. It prevents the situation in which a hirer, misled by misrepresentation, has no remedy, but it does not detract from his rights against the dealer in cases where he at present has them. But it does not seek to regulate the relationship between dealer and finance house, which is a purely commercial relationship.
The first subsection of the proposed new Clause in effect preserves Clause 10(1), but, in addition, it provides that 755 any representations made by the dealer to the hirer as well as being deemed to have been made as agent of the owner shall also be deemed to have been made by the dealer to the finance house.
I realise that if finance houses are to be liable because of misrepresentations made by dealers and, in particular, if they may find hire-purchase agreements rescinded by hirers on these grounds, they want to be sure of parallel remedies themselves against the dealer. But, for two reasons, I do not think that this subsection would have the desired result. First, an innocent misrepresentation which had induced the hirer to enter into the agreement would not have induced the finance house to buy the goods from the dealer and, even with the subsection, would not give rise to a right of rescission. Secondly, it does not follow that because a hirer can rescind a hire-purchase agreement on the ground of a misrepresentation, a finance house could rescind a contract of sale. There is considerable doubt in law, I am advised, whether an agreement that has been completed, as the contract of sale would have been, can be rescinded.
The second subsection of the proposed new Clause deals with implied conditions and warranties in hire-purchase and credit-sale agreements, and with their enforcement. It again seeks to provide that, where the hirer takes action on account of a breach of such a condition or warranty, the finance house shall have a like remedy against the dealer. It also seeks to give the hirer the same remedy against the dealer as he will have against the finance house.
There are two aspects. The first is that of consumer protection. We see no need to seek to give the consumer added rights, such as are here proposed. His rights against the finance house, which is the other party to the contract, are all he needs. Indeed, where his remedy is to rescind the agreement, I cannot see how this is appropriate as between himself and the dealer.
Secondly, there is the relationship between the finance house and the dealer. Again, I do not think that this should be regulated as an appendage to a provision designed for consumer protection. This, of course, is a matter to be deter- 756 mined between the two commercial concerns involved. I see no reason why finance houses should not, if they wish, cover in the agreements which regulate their relations with dealers such matters as the consequences to them of acts or omissions by the dealer, whether through making misrepresentations or through supplying goods that do not fulfil the terms of the hire-purchase agreement. We believe that this is a business relationship, and that it should not lie within the province of a Bill that is essentially to protect the consumer.
§ Mr. Darling
Would the Parliamentary Secretary consider some of the difficulties of interpretation which hon. Members on both sides, particularly the hon. and learned Member for Liverpool, Garston (Mr. Bingham), have raised. I know that this is the final stage of the Bill, but, judging by the way which I think the business is to be conducted, it will be possible, provided Mr. Speaker agrees, to table Amendments on this important matter at what I might call the next stage of the Bill—in other words, when we deal with the Amendments.
I will go no further than that. I merely ask the Parliamentary Secretary whether he can give us an undertaking that this matter will be considered so as to make it absolutely clear that what is intended in the Bill regarding representations is covered and to ensure that none of the difficulties which have been raised will arise in practice in the courts.
§ Sir E. Errington
Most finance houses have always accepted a moral obligation in these matters. It would be very sad if, as a result of misunderstanding about the effect of the word "representations", the Clause resulted in a large amount of litigation which has not arisen before.
§ Mr. Price
May I respond to the suggestion of the hon. Member for Sheffield, Hillsborough (Mr. Darling)? I think that the House will be aware that we are unlikely to proceed very much further tonight. Therefore, as we are still dealing with the new Clauses, we have time to have another look at Clause 10 and to consider with those more learned in the law than myself the point raised by my hon. and learned Friend the Member for Liverpool, Garston (Mr. Bingham).
§ Question put and negatived.