The essence of a lease whether of goods or land is to allow the lessee to acquire possession and use without paying the full capital cost. At the same time it1 enables the lessor to receive a return on its investment while retaining the title and security in the goods or land. The lease is by no means a new phenomenon and indeed it is possible to trace its antecedents to Hammurabi while the extent of Roman involvement in this area is seen in Book III of the Justinian Institutes.2 However, in England, leases appear frequently only from the 13th century onwards3 and the Statute of Wales 1284 declared that the action of covenant was available for leases of moveable property as well as land. Nevertheless, it was only in the wake of the industrial revolution that the leasing of moveable property became particularly prevalent.4

In recent years the leasing of income-earning equipment has enjoyed phenomenal growth. New plant and equipment leased by members of the Equipment Leasing Association (ELA)5 in the United Kingdom during 1981 totalled £2,674 million accounting for 12% of fixed capital expenditure by British industry.6 Indeed, equipment leasing in the U.K. is said to have been growing at the rate of 30% in real terms over the last few years and such a trend is also visible in the United States. Here forecasts suggested a doubling or even tripling of an estimated 1980 $30 billion worth of annual leasing business7 as a result of the passing of the Economic Recovery Tax Act (ERTA) in 1981. This introduced the “safe harbor lease” for tax purposes which guarantees that a transaction will be characterized as a lease if certain requirements are met.8 The Commonwealth also has witnessed developments in this respect and in Australia the growth rate of equipment leasing between 1964–1978 never