Agreement Binding Although Illegal

Press, Volume CIV, Issue 30937, 18 December 1965, Page 16

Agreement Binding Although Illegal

(New Zealand Press Association) WELLINGTON, Dec. 17. An appeal brought by Portland Holdings, Ltd., an Auckland finance company, against a Supreme Court judgment of Mr Justice Richmond has been unanimously allowed by the Court of Appeal.

The case concerned a hirepurchase agreement on a second-hand car. A motorvehicle dealer, Cameo Motors, Ltd., the respondents in the action, had entered an agreement with a purchaser who subsequently defaulted on his payments. Portland Holdings, Ltd., was the finance company which took assignment of the agreement Mr Justice Richmond held that the hire purchase agreement was void for illegality as the form had not been fully completed. Because the agreement was void, it could not be sued on, he found. Mr Justice McCarthy in the Court of Appeal found that Portland Holdings could enforce the covenant against the dealer, even though the hirepurchase agreement itself was illegal and unenforceable against the hirer. “It should be added that this is a test case, for a number of other agreements similar in all respects were sued upon in the Magistrate’s Court, and it is agreed that the result of all these cases will depend on the outcome of

the present appeal,” he said. Mr Justice North said “The assignment of the illegal hirepurchase agreement was, of course, valueless, being incapable of enforcement. But I see no reason why the covenant to pay the prescribed sum cannot be enforced.” Mr Justice Turner concurred with the Court’s finding.