Commercial Slides from my time lecturing in 2013 - Introduction to the Law of Bailment

1. Commercial Law
Bailment

2. Bailment
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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

3. 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 vPetersham Transport
Co.; Butterworths Concise Legal Dictionary.

4. 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.

5. Nature of bailment – Walton stores
vSydney 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.

6. 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.

7. 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.

8. 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

9. 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.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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…”

15. Hobbs vPetersham
• 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.”

16. 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.

17. Bailment by finding –
ArmoryvDelamirie(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.

18. ArmoryvDelamirie
• 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.

19. ArmoryvDelamirie
• 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.

20. 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.”

21. 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.

22. The Pioneer Container
• 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.

23. The Pioneer Container
• 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.

24. The Pioneer Container
• 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.

25. The Pioneer Container
• 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.

26. The Pioneer Container
• 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 subcontract '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.

27. The Pioneer Container
• Their Lordships found that the incorporation
of the relevant clause (clause 26) in the subbailment 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.

28. The Pioneer Container
• 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.

29. Bailment or passing of property –
Chapman Bros vVercoBros
• 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.

30. Bailment or passing of property –
Chapman Bros vVercoBros
• 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.

31. Bailment or passing of property –
Chapman Bros vVercoBros
• 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.

32. Bailment or passing of property –
Chapman Bros vVercoBros
• 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 vCommercial Flour and
Oatmeal Milling Co 1.

33. PangallovKillarra
• Facts: Whether the plaintiffs delivered their
grapes to the winemaker LetitiaCecchini,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).

34. PangallovKillarra
• 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.

35. 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.

36. 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.

37. Gratuitous bailment – WGH Nominees
vTomblin
• MrTomblinand his wife went into a jeweller's
shop, whereTomblin 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
MrsTomblin had been interested in the ring.

38. WGH Nominees vTomblin
• The salesman said that as he would be
seeingMrTomblinlater 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 toMrTomblinto take
it home to show it to his wife.
• On his way home MrTomblinwent to a hotel
where the ring was stolen from his coat.

39. WGH Nominees vTomblin
• The jeweller brought an action claiming
damages for alleged negligent conduct as a
gratuitous bailee.
• Held by ZellingJ: 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.

40. WGH Nominees vTomblin
• 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.”

41. WGH Nominees vTomblin
• “*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.”

42. 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.

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

44. 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.”

45. Exclusion Clauses – Sydney City Council
v West
• Per Barwick CJ and Taylor J citing Denning LJ
(as he then was) in Spurling Ltd vBradshaw:
• "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.

46. Exclusion Clauses – Sydney City Council
v West
• “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.”

47. Duty of care of bailee – Port
SwettemenAuthority
• 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.

48. Duty of care of bailee – Port
SwettemenAuthority
• 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.

49. 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.

50. Exclusion Clauses – TNT Melbourne v
May Baker
• 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.

51. Exclusion Clauses – TNT Melbourne v
May Baker
• 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.

52. Exclusion Clauses – TNT Melbourne v
May Baker
• 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.