Download bailment - Tutor Tales

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BAILMENT
DEFINITION: Voluntary assumption of possession of goods by one person (bailee) from another
(bailor) for a definite or indefinite period, with an obligation to redeliver.
Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220, per Windeyer J at 238:
o A bailment comes into existence
 upon a delivery of goods of one person, the bailor,
 into the possession of another person, the bailee,
 upon a promise, express or implied, that
 they will be redelivered to the bailor or dealt with in a stipulated way
Bailee must have possession:
• Transfer of possession – distinguishes bailment from licence
• Difficult to distinguish  examples below.
• Greenwood v Council of the Municipality of Waverley (1928): C not responsible for lost goods from
locker at sheds at Bondi Beach. Locked but C not given key – just colored disc to match locker.
HELD: possession had not passed to Council  had merely let the locker to G.
• Cf Ultzen v Nichols (1893): waiter took a customer’s coat and hung up behind customer. Missing.
Question was it a bailment or just act of good nature? HELD: bailment.
Distinction between bailment and licence
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‘...control over the subject chattels is the key to distinguishing between bailments and licenses. In
the present case, the facts suggest that the plaintiff surrendered control of her goods to the
defendants and a bailment relationship was created’: Robertson v Stang (1997) 38 CCLT (2d) 62
Car park examples:
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Diverging views between distinction of licence to park and bailment.
Tinsley v Dudley [1951] 2 KB 18: Publican (hotel) not responsible for lost customer’s motorcycle
in carpark that was unattended closed yard next to hotel.
UK cases: tend to regard as merely license: Ashby v Tolhurst [1937] 2 All ER 837 (‘owners are
requested to show ticket when required’)
Aus courts more inclined to find bailment ie. Control over vehicle, esp where card or ticket
presented upon return of vehicle: Council of the City of Sydney v West (1965)
Obligation to redeliver?
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Motor Mart Limited v Webb [1958] NZLR 773, per Turner J: h/p agreement to buy truck.
‘A bailment does not necessarily entail upon the bailee the obligation of redelivering to the bailor
the thing bailed.’
Types of Bailment
Lord Holt in Coggs v Bernard (1703):
 Gratuitous/reward (free or fee):
 Deposit of goods for safekeeping eg. leave with bank
 Delivery of goods for work done on goods eg. repairs
 Delivery of goods for loan eg. lend/hire car
 Delivery of goods to be held as security for load (eg. pledge/pawn).
 Deposit of goods for safekeeping
Distinction between bailment and agency
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Petrifond Midwest Ltd v Esso Resources Canada Ltd (1996) 42 Alta LR (3d) 157
Agent performs service for his Principal  represents him to the outside world, can acquire rights
for his Principal and subject Principal to liabilities.
1. Bailee does not represent the bailor. Merely exercises (with leave of the bailor) certain powers of
the bailor in respect of his property.
2. Bailee has no power to make contracts on the bailor's behalf. Nor make the bailor liable for any
acts he does.
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BAILEE OBLIGATIONS
PREV: gratuitous bailee only liable for “gross negligence”
NOW: all bailees have duty – different degrees: Houghland v RR Low (Luxury Coaches) Ltd: P
passenger on D coach had suitcase lost. Held gratuitous bailment.
o To take reasonable care of the goods: Tottenham Investments Ltd v Carburettor Services
Pty Ltd)
o Not to depart from the scope of the bailment
o To return the goods or deal with them as directed: Mitchell v London Borough of Ealing
o Not to dispute the bailor’s title to the goods (NB just tertii)
o Onus of proof is on the bailee (to demonstrate absence of negligence): Houghland v RR
Low, Bowden
Reasonable Care
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Depends on:
o GOODS: value of the goods, nature of the goods eg. jewellery given to a hospital for
safekeeping – Martin v LCC (bailment for reward)
o RELATIONSHIP of the parties – gratuitous or commercial bailment
o Circumstances of the deposit - scope of the bailment. eg. jeweller gave def ring to show his
wife, stolen from his coat – def was not negligent and not liable – WGH Nominees Pty Ltd
v Tomblin
Tottenham Investments Ltd v Carburettor Services Pty Ltd
• P left valuable car with garage for repair. Thieves came in thru skylight and stole car (keys left in).
After, D install alarm and bars.
• Kirby P: “In modern circumstances…reasonable to impose on a bailee the duty to take positive
steps to deter would-be thieves and to prevent them from gaining access to building in which bailed
goods are kept.” HELD: liable.
• THUS: Not insurer type obligation BUT just to take reasonable steps of careful and vigilant person
would exercise for their own property.
Martin v LCC:
 Go to hospital, where jewellery handed over for safe custody. Stolen.
 HELD: hospital liable  patient paid for costs of care (also includes care of jewellery)
Scope of the Bailment
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If deviate from bailment  bailor can:
o Repossess
o Sue for CONVERSION if goods are lost (bailee becomes an insurer)
To return the goods
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If bailee not obliged to return goods  no bailment: Chapman v Verco Bros
Bailee only liable if fail to return goods – and could have been avoided if they did “reasonable
care”
Must be returned when requested
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Mitchell v Ealing London Borough: M evicted. Council and M arrange for C to store her
furniture in lock-up garage. M’s husband arranged to collect but Council Officer wrongly told
place to meet  no meeting or pickup and then the M’s could not be contacted for a while.
Arranged pickup again – furniture gone.
HELD: neg (not in lock up garage), but mistiming of Officer.
LAW: If bailee fails to deliver upon unequivocal demand  strictly liable for loss after.
Graham v Voight (1989): landlady liable for not returning former boarder’s possessions incl
valuable stamp collection (gratuitous bailment).
Uncollected Goods Act 1995 (NSW)
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Applies to: bailed chattels personal
Purpose: allows bailees means of disposing goods without being liable by:
o Obtaining court order; OR
o Giving note, then disposing.
If goods ready to deliver, but uncollected  bailee gives notice (unless bailor untraceable):
Need to give notice of:
o 28 days if goods worth less than $100 in any manner
o 3 months if goods worth $100 - $500 by public auction of private sale
o 6 months if goods worth $500-$5000 by public auction
o Perishable goods –verbal notice with reasonable time to collect and can be disposed of in
any manner
BAILOR OBLIGATIONS
FOR REWARD
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Entitlement (right) to bail goods
Goods are safe and suitable for bailment: Cottee v Franklin
To pay agreed rate for storage
Not to interfere with the bailee’s possession for the term of the bailment
GRATUITOUS BAILMENT
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Entitlement (right) to bail goods
To warn of the dangers that might arise from goods – Coughlin v Gillison (exploding ship’s boiler)
Make good any damage caused by the goods
Instruct on proper use of the goods – Pivovaroff v Chernabaeff: gratuitously lent onion sorting
machine without a guard. Told not to be used near children. 13 year old had hand mutilated. HELD:
bailor was not liable as had warned. Bailee was found liable in negligence.
Revocable at will – Parastatidis v Kotaridis
Implied conditions into bailments
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COMMON LAW:
o Goods reasonably fit for their particular purpose as known to bailor – Derbyshire Building
Co Pty Ltd v Becker; Star Express Merchandising v V G McGrath
o Eg Cottee v Franklins Self-Serve Pty Ltd: P injured when wheel of trolley collapsed. Held:
implied term that trolley would be reasonably fit for its contemplated purpose.
TPA (Cth):
o Implied terms in “supply” of goods – which include hire/lease: s4(1)
o Implies: merchantable quality, correspondence with description, fitness for purpose.
o Applies: if consumer (incl. corporation) gets good for < $40,000 or goods ordinarily for
personal, domestic or household use (not for the purpose of resupply): s4B
o Liability can’t be excluded if good usually for domestic/personal/household use. Otherwise
liability may be limited to replacement/repair of good – s68
o If dealer supplies to finance company which then leases/hires to consumer  fc may be
jointly/severally liable: s73-73B.
BAILMENT AND CONTRACT
Rules of bailment  law  can be implied into contract.
Legal obligations can be modified by contract.
Bailment may operate more broadly than contract (constrained by privity)
Bailment and contract
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The terms of this writing [ie the contract] qualify the obligations that would be created by the mere
fact of bailment.
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The case must therefore, it seems to me, be considered as simply one of a contract in which the
rights and obligations of the parties depend upon the combined effect, or reconciliation, of the
terms of the writing and the terms that apart from the writing the law would imply.
City of Sydney v West (1965) 114 CLR 481 per Windeyer J at 500
Bailment rights do not only operate between two parties
Rights against third parties:
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If a third party does a wrongful act (eg steals it)  bailor can sue the third party in conversion.
Bailee can ALSO sue  bailee’s rights are good against all except bailor: Goodwin v Ron Heath
Tyre Services (SA) Pty Ltd
 Against the wrongdoer  possession is title: The Winkfield
 BUT: generally, in bailment for REWARD  only bailee can sue (bailor’s right is suspended)
UNLESS goods are going to be adversely affected (eg. destroyed): Penfolds Wines Pty Ltd v Elliot
Goodwin v Ron Heath Tyre Services (SA) Pty Ltd
 Tyre retailer (bailee) of vehicle. Ron services bailee. G collides with vehicle.
 ‘A wrongdoer had no concern with relationship between the bailor and the bailee and must treat
the bailee as owner of the goods’ [85]
SUB BAILMENTS
Morris v CW Martin & Sons Ltd
 M sent mink to furrier for cleaning. Furrier said not within their expertise and sent to D (with M’s
consent). D’s employee stole mink. D not neg in  still held liable.
 Sub-bailment principles:
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o Bailor delivers goods to bailee
o Bailee with consent of bailor delivers goods to sub bailee
o Sub bailee knows of existence of original bailor
o Sub-bailment arises— sub bailor and bailee owe same duty to bailor
Liability for theft by servant: generally, if duty entrusted to servant master is answerable for
the manner in which servant carries out duty: per Denning at All ER 732
Operation of exclusion clause (sub-bailment) to bind Bailor: ‘All work at customer’s risk only’
 customer was furrier, not M. BUT: M (bailor) is bound by contract conditions  expressly or
impliedly consented to bailee making sub-bailment  containing those terms.
Bailment on Terms
The Pioneer Container
 KH Enterprises (cargo owners) contract A with the carriers. Contract permitted carrier to enter into
sub-contract to perform contract A ‘on any terms’. Contract B with the shipowners had exclusive
jurisdiction clause if the goods were lost (Taiwan). Sub-contracted ship sinks after collision.
Owner (action in HK ) argues clause does not apply to them.
 HELD: owner lost  contract A allowed contract B on any terms!
 LAW: “to the extent that the terms of the sub-bailment are consented to by the owner  does not
matter if specifics of sub bailment are not agreed to  Bailor is bound.
Gilchrist Watt & Sanderson Pty Ltd v York Products
 D (stevedores – subbailees of shipowners) had to deliver two cases of clocks to P (under bill of
lading) – no contract between D and claimant.
 Held: By voluntary taking possession of the P’s goods  assumed an obligation to “exercise due
care…although there was no contractual relation or attornment” between them.
 LAW: SB voluntarily takes into his possession  if sufficient notice that 3rd person (orig. bailor)
has interest in the goods  assumed duty towards that 3rd person.
Brambles Security Service Ltd v Bi-Lo Pty Ltd [1992] Aust Torts Reports ¶81–161
 Facts: Security company (Hunter) sub-contracts with another (Brambles) and Hunter goes into
receivership
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‘… where A enters into a contract with B to carry B’s goods and to deposit them at a particular
place and, with B’s permission, enters into a sub-contract with C to perform the actual carriage,
upon C accepting possession of the goods from B it becomes B’s bailee of those goods.’
Westrac Equipment Pty Ltd v ‘Assets Venture’ [2002] FCA 440:
 Facts: Delivery of bulldozer subcontracted to third party (SB). Bailor sues both bailee and subbailee BUT bailee never had possession.
 HELD: if there is a relationship…concurrent with a bailment relationship  quasi-bailee (never
had possession) CANNOT avoid liability by saying they never took possession.
 LAW: no substitution of bailee with sub-bailee (even where bailee never takes possession) 
bailee retains overall responsibility for carriage.
China Pacific SA v Food Corporation of India (The Winson) [1982] AC 939
 FACTS: Ship grounded. Shipper (bailee) contracts with salvors (sub-bailee) to salvage cargo.
Cargo owner (bailor) refuses to reimburse salvors for expenses – argued bailee liable to pay.
 LAW: sub-bailee cannot get remuneration from bailor.
o BUT bailor is liable to pay for EXPENSES incurred in course in fulfilment of bailment if
commercial salvage contract, service of SB preserves goods, SB keeps good as gratuitous
safekeeping after bailment ends (for Bailor’s benefit); and incurs expense because of this.
Parastatidis v Kotaridis [1978] VR 449
 Case arises out of the circumstances of a gratuitous loan
 Obiter re contract and bailment is often referred to
 ‘If it is an agreement which is defective according to the law of contract, then it seems to me that
the result is that in so far as it is defective as a contract, it cannot be operative in law,
notwithstanding the rule that it is possible to have a bailment without any contract.’
Unauthorised bailments
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Bailee (unauthorised) parts with possession  makes bailee strictly liable for the loss or damage to
the goods
May be covered by exclusion clause UNLESS goes to the entire purpose of the contract (hence
would be illusory consideration) (but see Glebe Island Terminals).
Jus Tertii
Edwards v Amos (1945) 62 WN (NSW) 204 per Herron J
 Normally bailee cannot dispute bailor’s title (very foolish to take the risk)
 Has onus to prove better title of person to whom he gave goods
 Bailee can plead jus tertii (the right of a third person) in three cases:
1. Where he defends on behalf of and by authority true owner
2. He committed the conversion by authority true owner
3. Where he has already made satisfaction to true owner by returning property
Termination of Bailment
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By expiry of the term of bailment.
By demand of a gratuitous bailee, at any time – Parastatidis v Kotaridis
By wrongful act of the bailee – jeopardise/repudiates bailor’s title (eg. selling good): Penfolds
Wines v Elliot (1946) 74 CLR 204
Re-delivery of the goods to the bailor
Transfer of ownership to the bailee
Destruction of the goods (lost, destroyed, changed)