Commercial Law bailment

Commercial Law

Bailment

Bailment

• What is a bailment?• Why is bailment commercially significant?• Different types of bailment• The legal obligations of bailment• Applying the law of bailment to hypothetical

scenarios

What is a bailment?

• “The delivery of personal chattels by the owner of the chattels (“bailor”) into the possession of another person (“bailee”) upon an express or implied promise that they will be redelivered to the bailor, or dealt with in a stipulated way: Hobbs v Petersham Transport Co.; Butterworths Concise Legal Dictionary.

Aspects of Bailment

• Bailee – person who takes possession of goods.

• Bailor – person who gives possession of goods to the bailee.

• Bailment by reward – where a bailment occurs in return for consideration.

• Bailment at will – where a bailor may request the goods that were “bailed” back.

Nature of bailment – Walton stores v Sydney City Council (1968) (NSWCA)

• Facts: Mr McCauley, a senior employee of Walton Stores, the Plaintiff, parked a company car in a municipal car park.

• The car park was owned and conducted by the Defendant, and was issued with a parking ticket which stated, inter alia, that the ticket must be presented to the attendant when the vehicle was removed from the station.

Walton Stores (cont.)

• The defendant claimed to not accept any responsibility for the loss of or damage to any vehicle, howsoever it may be caused.

• When McCauley returned that evening, the car was gone and it was never recovered.

• It appeared that another person, Mr Jones, had told the parking station employees that he had lost his parking ticket and was reissued with a duplicate after which he took the car.

Walton Stores (cont.)

• Held by Walsh, Asprey, Holmes JJA: The relationship between the parties was that of bailor and bailee.

• There was a bailment for reward.• There was no relationship of licensor and

licensee.• The defendant was in breach of its contract as

such bailee. Sydney City Council v West (1965) 114 CLR 481 applied.

Walton Stores v Sydney City Council

• The onus of proof is on the bailor to prove the bailment relationship existed.

• Then the onus turns to the bailee to prove that:– Reasonable care was taken by them– Proving the loss was not caused by any lack of care

on their part– That the type of damage caused was too remote

Bailee for reward – Hobbs v Petersham Transport Co Pty Ltd

• Facts: The plaintiff engaged the defendant to convey goods between two points.

• The defendant contracted with one Hobbs to undertake the carriage.

• Neither the defendant nor Hobbs was a common carrier. i.e. able to carry any goods.

• The goods were placed on Hobbs’ vehicle which was "near new", in "top condition" and suitable for its task.

Hobbs v Petersham

• It had been regularly serviced and the driver was competent and an experienced mechanic.

• The defendant never had custody of the goods.

• In the course of the journey, while the vehicle was travelling at about 25 miles per hour on level ground, the axle broke causing the vehicle to overturn, damaging the goods.

Hobbs v Petersham

• The evidence showed that the axle had suffered a "clean break".

• The Plaintiff brought an action for damages for the delivery of the goods in a damaged condition.

• The Plaintiff succeeded at trial.• The Defendant appealed.

Hobbs v Petersham

• Barwick CJ and Windeyer J found the defendant was not a bailee of the goods, and that (a) in an action for breach of contract of carriage the onus of establishing the breach rests on the Plaintiff.

• (b) the Defendant had established that the precise cause of the failure to deliver, i.e. the axel breaking.

Hobbs v Petersham

• McTiernan and Menzies JJ found that the defendant was a bailee for reward and so bore the onus of proving that the non-delivery was without its fault, the defendant had discharged that onus.

• Owen J stated that the evidence established that the non-delivery of the goods was not due to any negligence on the part of the carrier.

Hobbs v Petersham

• In Hobbs v Petersham Menzies J cited Lord Denning in Morris v Martin & Sons Ltd [1966] 1 QB 716:

• “Once a man has taken charge of goods as a bailee for reward, it is his duty to take reasonable care to keep them safe: and he cannot escape that duty by delegating it to his servant…”

Hobbs v Petersham

• Lord Denning continued: “If the goods are lost or damaged, whilst they are in his possession, he is liable unless he can show—and the burden is on him to show—that the loss or damage occurred without any neglect or default or misconduct of himself or of any of the servants to whom he delegated his duty.”

Hobbs v Petersham

• The Hobbs brothers proved that the loss or damage was not due to their fault because the axle broke notwithstanding the due care taken by the Hobbs brothers.

• Most significantly, Hobbs provides an authority for the reasonable care required in the duties of a bailee.

Bailment by finding – Armory v Delamirie (1722) 93 ER 664

• Facts: Armory was a chimney sweep's boy who found a jewel in the setting of a ring.

• He took the jewel to the shop of Delamirie, a goldsmith, to obtain a valuation of the item.

• An apprentice, the agent of Delamirie, surreptitiously removed the gems from the setting on the pretence of weighing it.

Armory v Delamirie

• The apprentice returned with the empty setting and informed Armory that it was worth three halfpence.

• The apprentice offered to pay him for it but Armory refused and asked the apprentice to return the stones and setting in their prior condition.

• The apprentice returned the socket of the jewel without the gems.

Armory v Delamirie

• Held by Lord Pratt CJ, that the priority of rights to possession say that a finder has better title to property that he or she finds over everyone except the true owner.

• Armory was a bailor, by way of a ‘bailment at will’ whereby he could request the jewel back at any time from Delamirie, the bailee.

• Therefore, on this basis, Armory had full title to the jewel and request the jewel back.

Sub-Bailee - The Pioneer Container

• The plaintiffs fall into three groups, which have become known as "the Kien Hung plaintiffs," "the Hanjin plaintiffs" and "the Scandutch plaintiffs."

• Hanjin and Scandutch had each engaged carriers to ship goods by sea under bills of lading which gave the carriers authority to sub-contract the whole or part of the carriage of the goods "on any terms.”

The Pioneer Container

• A Bill of lading is written evidence of a contract, providing proof of title or receipt of delivery: Ardennes SS [1951] 1 KB 55.

• The carriers sub-bailed the goods to the defendant shipowners for carriage on board their vessel, KH Enterprise (which included the Pioneer Container), for part of the voyage, from Taiwan to Hong Kong.


• These goods were carried under feeder bills of lading containing an exclusive jurisdiction clause which provided that any claim or other dispute which was to be determined in Taiwan.


• Following a collision in fog, the vessel sank with all her cargo off the coast of Taiwan.

• The plaintiffs brought an action for a failure of duty of care as bailee and the Defendant sought to rely on the exclusion clause and failed, later appealing to the Privy Council.


• The issue was whether the shipowners can rely, as against the Scandutch and Hanjin plaintiffs, on the exclusive jurisdiction clause (“clause 26”) in the feeder bills of lading to which the plaintiffs were not a party to.


• Importantly, a sub-bailee who voluntarily took goods into his custody could only invoke terms of the sub-bailment qualifying or otherwise affecting his responsibility to the owner if the owner had expressly or impliedly consented to those terms or had ostensibly authorised them.


• The Privy Council found that both Hanjin and Scandutch had consented to the Taiwanese exclusive jurisdiction clause in the feeder bills because the Hanjin and Scandutch bills expressly stated that they as carriers had authority to sub-contract 'on any terms'.

• They consented to themselves sub-bailing the goods and the Defendant possession of the goods subject to the terms of the bills of lading, including the exclusion clause.


• Their Lordships found that the incorporation of the relevant clause (clause 26) in the sub-bailment would be in accordance with the reasonable commercial expectations of those who engage in this type of trade, carriage of goods by sea, especially in a container ship, to provide a sensible resolution of disputes in a single jurisdiction.


• Privy Council held, dismissing the appeal, that where goods had been sub-bailed with the authority of the owner, the obligation of the sub-bailee towards the owner was that of a bailee for reward and the owner could proceed directly against the sub-bailee under the law of bailment without having to rely on the contract of sub-bailment between the bailee and the sub-bailee.

Bailment or passing of property – Chapman Bros v Verco Bros

• Facts: The appellants, Chapman Bros who were farmers, delivered bags of wheat to the respondent company, Verco Bros, which carried on the business of a wheat merchant and miller.


• On delivery of the wheat, storage costs were incurred, and the appellants were required to make a payment to the respondent for the expenses of storage and other expenses incidental to the contract.


• The respondent went into liquidation before the specified date on which it was to purchase the wheat remaining in storage and before any request had been made by the appellants for the return of the wheat.


• Dixon J: wheat is delivered to merchants or millers on the understanding that it will be mixed with the general stock, the property passing and the merchant or miller being obliged to return only money or equivalent wheat: Copping v Commercial Flour and Oatmeal Milling Co 1.

Pangallo v Killarra

• Facts: Whether the plaintiffs delivered their grapes to the winemaker Letitia Cecchini, who occupied the winery as tenant under lease from Killara, under a contract of bailment for labour and works (in which case the plaintiffs retained title) or whether they sold their grapes to her for resale back to the plaintiffs once made into wine (in which case there was a passing of title to Ms Cecchini).

Pangallo v Killarra

• Held: Brereton J In the present case of fungible goods, their commingling, or their manufacture into other products to be returned to the original owner, does not result in property passing from the original owner, if the parties’ intent is consistent with a bailment.

Greenwood v Waverley Council

• Facts: The plaintiff, Greenwood, paid a fee to hire a locker in the defendant council’s dressing sheds at Bondi Beach.

• Greenwood went back to his locker and the locker was empty.

• Greenwood claimed there was a bailment and that the Council fell below their duty to take reasonable care.

Greenwood v Waverley Council

• Held by Ferguson J: The council was not bailee since possession of the clothes had not passed to the council and the council had always remained in Greenwoods possession.

• The council had merely let the locker to Greenwood which did not give rise to a duty of care in respects of the contents of the locker.

Gratuitous bailment – WGH Nominees v Tomblin

• Mr Tomblin and his wife went into a jeweller's shop, where Tomblin purchased a ring for his wife.

• His wife showed interest in another ring, and subsequently came back to the shop and talked about the ring with the saleswoman.

• The saleswoman told her husband that Mrs Tomblin had been interested in the ring.

WGH Nominees v Tomblin

• The salesman said that as he would be seeing Mr Tomblin later that day he might be able to convince Tomblin to buy the ring for his wife.

• The saleswoman gave the ring to her husband, who subsequently gave it to Mr Tomblin to take it home to show it to his wife.

• On his way home Mr Tomblin went to a hotel where the ring was stolen from his coat.


• The jeweller brought an action claiming damages for alleged negligent conduct as a gratuitous bailee.

• Held by Zelling J: That the plaintiff carried the onus of proving connivance or gross negligence on the part of the defendant.

• The defendant had an evidential persuasive onus of explaining the loss of the goods.


• Zelling J: “When goods are lost there is at least an evidential onus on a defendant bailee to point to circumstances negativing negligence on his part:

• “in their lordships' view the onus is always on the bailee, whether a bailee for reward or a gratuitous bailee, to prove that the loss of any goods bailed to him was not caused by any fault of his or of any of his servants or agents to whom he entrusted the goods for safe keeping.”


• “[The defendant] was put into a difficult and embarrassing situation.

• He was not going to a place where the ring could be carefully kept.

• It had been foisted upon him and he had to do the best he could in the circumstances.

• The actions of the defendant in those peculiar and embarrassing circumstances should not be counted as negligence against him.”

Gratuitous bailment - Kehoe v Williams

• The plaintiff made arrangements with the defendant for the storage of a significant part of his art collection at the defendant’s premises.

• The defendant held an auction at which a number of the plaintiff’s art works were offered for sale. Many sold but some did not.

• The plaintiff did not recover all of his remaining artwork and they were later lost.

Gratuitous bailment - Kehoe v Williams

• McClellan CJ: In the event of an allegation by the bailor that the bailee has breached his duty, the bailee carries the onus of proving that he has carried out his duties. Under the law of gratuitous bailment the bailee is liable only for gross negligence: Coggs v Bernard.

• A bailee is required to take reasonable care and deal with the goods in good faith: TNT Ltd v May and Baker.

Exclusion Clauses – Sydney City Council v West

• Facts: The respondent parked his motor vehicle in the appellant's parking station and received a parking ticket which bore under the heading "Parking Conditions" the following:– “The Council does not accept any responsibility for

the loss or damage to any vehicle or for loss of or damage to any article or thing in or upon any vehicle or for any injury to any person however such loss, damage or injury may arise or be caused.”


• Per Barwick CJ and Taylor J citing Denning LJ (as he then was) in Spurling Ltd v Bradshaw:

• "The essence of the contract by a warehouseman is that he will store the goods in the contractual place and deliver them on demand to the bailor or his order.”

• The warehouse staff being the bailee for reward under a contract.


• “If he stores them in a different place, or if he consumes or destroys them instead of storing them, or if he sells them, or delivers them without excuse to somebody else, he is guilty of a breach which goes to the root of the contract and he cannot rely on the exempting clause.

• But if he should happen to damage them by some momentary piece of inadvertence, then he is able to rely on the exempting clause.”

Duty of care of bailee – Port Swettemen Authority

• Facts: A consignment of 93 cases of pharmaceutical goods was shipped from Hong Kong to Port Swettenham under bills of lading nominating the plaintiffs as consignees.

• The consignment passed into the custody of the defendants (the port authority) and the port charges were paid.

• While the consignment was in the defendants' custody 64 of the cases disappeared. The plaintiffs brought an action for negligent loss by the defendants as bailees.

Duty of care of bailee – Port Swettemen Authority

• Lord Salmon: the defendants were bailees and under a duty to take as much care of the goods as a reasonable port authority would take of its own similar goods and they had lost them and had shown neither how the loss had occurred nor that they had not been negligent, they were liable to the plaintiffs for the loss.

Exclusion Clauses – TNT Melbourne v May Baker

• Facts: May & Baker, Plaintiff/Respondent, contracted with TNT for the carriage of goods.

• Pay collected the goods from May & Baker, but by the time he transported the goods to the depot of May & Baker, it was closed.

• Pay then took the goods home and placed the goods in his shed.

• The shed later burned down and the goods were destroyed.


• McTiernan, Taylor and Owen JJ Held: In order to discharge the onus of disproving negligence it is not essential for a bailee of goods which have been damaged or destroyed while in his custody to establish first the precise cause of the loss and thereafter to establish that the cause arose or operated without negligence on his part.


• It is sufficient if the bailee is able to establish that he took such care of the goods as was reasonable in the circumstances.

• On bailment, there was no contractual relationship between the respondent and Pay and his liability could not have been any greater than that of a bailee of the goods at the time when the damage occurred.


• Windeyer J (dissenting): Pay, although not himself contractually bound to May & Baker, had a duty to it to take care of its goods while they were in his custody.

• But in the present situation, having no reason to foresee a fire, he could not on the evidence be found to have failed in this duty to take reasonable care as bailee.

Commercial Law bailment

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