Bailment and Agency- topic 4 PDF

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Topic 4: Bailment and Agency Legal obligations which arise from transfer of possession of goods from one to another with the expectation that they will be returned. ‘A bailment comes into existence upon 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 re-delivered to the bailor or dealt with in a stipulated way.’ - Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220, 238 (Windeyer J) INTRO & TERMINOLOGY Bailor: party who gives possession of goods to another Bailee: takes possession but not ownership of goods Sub-bailee: takes possession from bailee    

Can only arise in relation to chattels, not choses in action No intention that there will be a transfer of ownership. Typically, this will involve either keeping the goods for safe custody or transporting the goods or doing something to the goods and returning them. The voluntary assumption of possession is key; there must be knowledge of the goods and the bailee’s consent to hold them: WD & HO Wills (Aust) v State Rail Authority of New South Wales (1998) 43 NSWLE 336, 353-4.

TYPES OF BAILMENT Bailment for reward (Consideration)  Bailment for reward can only be terminated in accordance with the contract giving rise to the bailment  Custody for reward – e.g: carparks – only if car left in custody and control of the carpark owner  Hire of work and labour: eg o agistment of cattle on land – can be bailment but only if cattle left in the custody and control of the landowner: see Big Top Hereford Pty ltd v Gavin Thomas [2006] NSWSC 1159 o Car left with a mechanic for repairs o Clothes left with a drycleaner o Contract to move furniture from one house to another  Pledge – e.g. pawnbroker: Palgo Holdings Pty Ltd v Gowans (2005) 215 ALR 253 [17].  Hire-purchase – delivery of goods from the owner to the hirer who holds them for use by the hirer

Gratuitous Bailment (No Consideration)  Bailment can also arise outside contracts where the subject of the contract is the custody or control of goods for redelivery for reward by the bailee. Gratuitous bailment is terminated on demand  Deposit – delivery of goods for gratuitous safekeeping by the bailee  Mandate – delivery of goods for work to be done on the goods without reward  Loan – delivery of goods for use by bailee under gratuitous loan- e.g. when a person lends their car to another to use and return. Other examples:  Under a sale of goods where title to property does not pass with transfer of possession, such as where there is a Romalpa clause and title will not pass until payment made in full: Hospital Products Ltd v United States Surgical Corp (1985) 156 CLR 41, 105. Purchaser a bailee until payment. Note that the term Romalpa from this case which discusses reservation of title clauses: Aluminium Industrie Vaasen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676.

ESSENTIAL ELEMENTS OF BAILMENT    

Goods must be delivered to the bailee, or possession transferred in some other way Bailee must voluntarily accept responsibility for the goods Bailee must exercise due care and skill in handling the goods Bailee must be under an obligation to return or deliver the goods

‘It is well settled that to constitute a bailment there must be a transfer of possession of the goods from one person to another without any intention on the part of the bailor to transfer the ownership of the goods to the bailee. The bailee receives the goods for the purpose of fulfilling the instructions of the bailor, which may be to keep the goods in safe custody or to carry the goods from one place to another or to do something to the goods and then return them.’ – Carlton International plc v Crayford Freight Services Ltd (1998) 162 ALR 119

BAILMENT V LICENCE A Licence is a grant of permission to another to do something and includes a grant of permission to another use property or leave goods at property without an acceptance by the licensor of control or responsibility for the goods. – textbook [3.480] (where there is no control/possession of the goods – the obligation to take reasonable care does not arise)   

Greenwood v Waverley Council (1928) 28 SR (NSW) 219: not bailment but rather license to use locker - no attendant present. Ultzen v Nicols [1894] 1 QB 92 (bailment over coat taken by waiter in restaurant where waiter made request and selected place for safekeeping) Ashby v Tolhurst [1937] 2 All ER 837 –it was held that leaving the car in the defendant’s carpark was a mere licence to leave the car on the premises and there was no evidence to point to delivery into the possession of the owners to amount to bailment

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Compare Sydney Corporation v West (1965) 114 CLR 481 which did amount to bailment of the vehicle. (see next)

Sydney Corporation v West (1965) 114 CLR 481 Facts:  In this case concerning the loss of a car from the appellant’s carpark  Parking was at direction of attendant who indicated where to put the car, and the car owner required to show the ticket to exit Held:  the arrangement constituted a bailment and the wording of the exemption clause did not exonerate the carpark owner for misdelivery “The only inference that could properly be drawn would be that a contract of bailment was made between the parties under which the appellant was to have possession of the vehicle until the respondent should request its redelivery to him, present the ticket and pay the charges. The jury could not reasonably refuse to find that there was an implied promise by the appellant to the effect that upon the respondent's doing the three things mentioned the right to possession would revert to the respondent and he would be entitled to drive the vehicle away.” – Kitto J

DUTIES OF BAILEE AT COMMON LAW  Duty to take reasonable care of the goods  Duty to deliver the goods or deal with them as directed (unless unable where inability is not due to want of reasonable care.)  Not to depart from the terms of the bailment  To not dispute the bailor’s title to goods Obligation to re-deliver:  If the bailee is not obliged to return the goods, then no bailment has been created  Goods may be delivered to someone other than the bailor  No bailment where goods may be substituted: Chapman Bros v Verco Bros & Co (1933) 49 CLR 406  Pangallo Estate Pty Ltd v Killara 10 Pty Ltd [2007] NSWSC 1528 o contract to transform grapes into wine o issue: was it still a bailment? o Held: even if goods returned were in a different form, as long as the different form could be derived from the goods that could be identified = still bailment o Still an expectation that the goods will be returned even if derived from the goods transferred in the first place Caltex Oil (Australia) Pty Ltd v The Dredge ‘Willemstad’ (1976) 136 CLR 539  concerned an agreement pursuant to which Caltex supplied crude oil to A.O.R. for processing in its refinery and the processed products were then delivered to Caltex either by vessel or by way of pipeline to the Caltex terminal.  The crude oil and the processed products remained at all times the property of Caltex

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A.O.R. was bailee of the goods from the time of delivery to them until the time of redelivery to Caltex. The pipeline damage caused by the dredge meant that the product could not be returned by pipeline however under the terms of the agreement, AOR was not liable for Caltex’s loss caused by the damage.

Duties of Bailee – Obligation to re-deliver: Pangallo Estate Pty Ltd v Killara 10 Pty Ltd [2007] NSWSC 1528 Issue  The essential issues were whether the plaintiffs delivered their grapes to the defendant winemaker 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 the defendant).  Winemaker evicted  Lessor took  If bailment, title remains with bailor Held:  Brereton J observed that it is well established that a bailment may involve an obligation to return the goods in an altered form.  Halsbury’s Laws of England, 2nd edition, cites the definition of bailment in Bacon’s Abridgment, in which it was said (emphasis added): A bailment, properly so called, is a delivery of personal chattels in trust, on a contract, express or implied, that the trust shall be duly executed, and the chattels redelivered in either their original or an altered form, as soon as the time or use for, or condition on which they were bailed, shall have elapsed or been performed.  “[22] In my view, it is quite clear that the parties never entertained any intention that the growers sell their grapes to Ms Cecchini and then repurchase them. One of the most telling factors in that regard is that there was no suggestion that MsCecchini would pay for the grapes upon receipt, or at any other time: she was simply paid a fee per tonne for contract winemaking services. Similarly, the circumstance that the wines, once made, were sold under the name and label of the growers is telling.”  It was held at [26] that the contracts between the growers and defendant were contracts for services, and not contracts for the sale of grapes and repurchase of wine. It follows that there was no passage of property at any stage. DUTIES OF BAILOR  Not interfere with bailee’s possession (depends on term of bailment) o Bailor may be liable for trespass, conversion and breach of contract  Inform bailee of dangers they are aware of o Where the bailee accepts possession of the goods after being sufficiently warned of their dangerous qualities, the bailor will not be liable for subsequent loss or damage suffered by the bailee (See Pivovaroff v Chernabaeff (1978) 21 SASR 1)

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Comply with terms of bailment (e.g., payment of agreed fee) o Bailee has lien over goods to secure payment

SUB-BAILMENT      

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Occurs where bailee transfers possession of goods to a third party for a particular purpose Usually, no contract between bailor and sub-bailee Sub-bailee must be aware they are bailee May be permitted or prohibited by head/original bailment Sub-bailee owes same bailment duties to bailor as owed by the head bailee (subject to contract) Rights may be varied by contract between head bailee and sub-bailee (but subject to express or implied consent by bailor to the making of the sub-bailment on those terms, and not otherwise). Issues often turn on whether bailor bound by exemption or exclusion clauses in contract between bailee and sub-bailee so that the sub-bailee can escape liability to both the bailee and the bailor o Morris v CW Martin [1966] 1 QB 716 –exclusion clause could not be relied on by cleaner as ‘customer’ was head bailee not fur owner (see next) o The Pioneer Container [1994] 2 AC 324 – shipping bailment (without limitation clause) allowed sub-bailment on any terms; subsequent subbailment contained exclusive jurisdiction clause which bound bailor

Morris v CW Martin [1966] 1 QB 716 Facts:  Morris owned a mink stole which she sent to a furrier in London, Mr Beder.  In a telephone exchange, it was agreed that the cleaning of the coat would be subcontracted to CW Martins & Sons Ltd who were 'well-known', 'reputable' cleaners.  While it was in their possession, it was lost; stolen by an employee.  Morris sued CW Martins & Sons Ltd.  On appeal, the issue was whether the plaintiff was entitled to sue the cleaners directly for the misappropriation by their servant despite the contract being between Bederand the cleaners and that there was no contract between Morris and the cleaner HELD:  a duty of care was owed by the sub-bailees to Mrs Morris to take reasonable care of the fur coat  This duty was non-delegable so that they themselves were personally liable for the conversion of their employee in stealing the coat  Denning and Diplock LJ rejected the trial judge's emphasis on contract theory as it was the existence of the relationship of bailor and bailee of a chattel that gave rise to a duty  Exclusion clause could not be relied on by the cleaner as ‘customer’ was head bailee and not fur owner  Exclusion clause didn’t bind Morris as she wasn’t a party to the contract

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Sub-bailee owes duty to the head bailee as well as the bailor

Tottenham Investments v Carburettor Services [1994] FACTS:  P left valuable car with D for repair. Overnight thieves entered D premises through skylight in roof, started car with keys left in ignition and drove off with car.  To break in skylight, thieves had a drop of 2m, there hadn’t been break in for 15yrs and shed was near a busy bus stop.  After break-in, security bars and $3000 alarm system and signs were erected outside warning of alarms HELD:  D was liable as bailee for reward for loss of car since they failed to discharge onus of est. reasonable care.  Security measures implemented subsequent to break in should have been implemented earlier; however leaving keys in ignition didn’t itself constitute failure to take reasonable care.  Kirby P set out factors that were relevant to whether reasonable care was exercised: o Value/disposability of goods bailed o Location of place of bailment o Costs paid by bailor to bailee o Extent of bailor knowledge of circumstances of safekeeping o Extent of theft of goods in vicinity of place o Availability of simple/ inexpensive/easily adopted precautions Test for reasonable: An event’s that are not probable but those that are not unlikely – Wyong v Shirt case

ROLE OF CONTRACT LAW IN BAILMENT  Contract determines scope of bailment and nature of duties and liabilities •Exclusion clauses  Implied terms in bailments for reward (hire) that goods are reasonably fit for purpose o Cottee v Franklins Self-Serve Pty Ltd [1977] 1 Qd R 469 (Franklins was liable for injuries caused by a trolley toppling over when its wheel broke)  Cottee was wheeling trolley in car park and it fell over – injured her leg  Cased turned on distinction between bailment for reward vs. gratuitous bailment  If bailment for reward – provision of the trolley would entail an expectation of fit for purpose  Franklins argued gratuitous because anyone can use them  Court held the provision of the trolley lead to transactions/purchases with Franklins and therefore was a bailment for reward  Subsequently, expectation of fit for purpose  Bailment may be broader than contract o Modifies privity rule by conferring rights against third parties o Bailee may sue third party for damages caused to bailed goods as possession is title against the wrongdoer (The Winkfield [1902] P 42)

o Bailee may sue even if bailor suffered no loss ( Goodwin (1999) 74 SASR 508 – bailor paid out in insurance, bailee could still sue for value of damage) –bailee must account for damages to bailor Interaction with Australian Consumer law  Where services are supplied to a consumer, the Australian Consumer Law provides statutory guarantees as set out in sections 60-61 o Services will be provided with due care and skill o Services will be reasonably fit for purpose o Services will be supplied within a reasonable time  These statutory guarantees may not be excluded by contract (see section 64 of the Australian Consumer Law) TERMINATION OF BAILMENT Bailment may come to an end by:  Expiry of the term  Demand of gratuitous bailee, at any time  By wrongful act of bailee  Re-delivery of goods to the bailor  Transfer of ownership to the bailee  Destruction of the goods

ENFORCEMENT BY BAILOR See S Traves, Commercial Law, 3rded LexisNexis, 2014, 299-300) A bailor who suffers loss or damage to goods may have a range of different actions: Contract  Damages for breach of contract (suing on the rights under the contract with the bailee) to put bailor in position as if the contract had been performed Tort Detinue for delivery up of the goods (useful where defendant is insolvent and unable to pay damages for conversion or breach of contract.)  Damages for conversion– dealing in a manner repugnant to immediate right of possession of person with title to property  Damages for trespass to goods –if bailee has intentionally or negligently damages goods to put the bailor back in the position as if the wrong had not occurred  Damages for breach of bailment duty to take reasonable care– restitutio in integrum general principle.

AGENCY Agency is the relationship between two parties where one (the agent), with the authority of the other (principal), can bind that other in a legal relationship with a third party. Principle gives ---> Agent enters into binding ----> authority to agent relationship with third party

Third party enforces obligation against principal

International Harvester Co of Australia v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644 FACTS:  Carrigan’s, a company established by a group of farmers, entered into a contract with Hassan’s, who carried on business in Gunnedah as “machinery and general agents” to purchase an automatic hay-baler machine manufactured by International Harvester.  Carrigan’s commenced proceedings against International for breach of warranty and breach of contract on the basis that Hassan was the “agent” of International.  Hassan was by then in liquidation. HELD:  HC noted that agency is a word used in law to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties  Agency – can be dis  But in the business world its significance is by no means thus restricted  ‘Agent’ is used in business as meaning one who has no principal but who on his own account offers for sale some particular article having a special name  HELD: the whole of the evidence was not capable of supporting an inference that the contractual relationship of vendor an purchaser arose between I.H and C. from the transactions CREATION OF AGENCY  Express: o By deed o By writing o By words  Estoppel – representation  Ratification – retrospective IMPORTANCE OF CONSENT IN CREATION OF AGENCY Garnac Grain Co Inc v HMF Faure v Fairclough Ltd [1968] AC 1130 FACTS:  Contract for delivery of 15,000 tons of lard from allied to Garnac Grain  Garnac sold the goods to Faure  Faure independently agreed to sell the goods back to allied

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Allied went into liquidation and the goods were never delivered leaving garnac and Faure with Heavy losses Garnac sought to rescind alleging Faure contracted as undisclosed principal of Allied, and the fraud warranted recission

HELD:  “The relationship of principal and agent can only be established by the consent of the principal and agent. They will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it themselves and even if they have professed to disclaim it ..” per Lord Pearson at [1137]

NATURE AND SCOPE OF AGENT’s AUTHORITY Actual authority:  Express actual authority  Implied actual authority - Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 Apparent or ostensible authority Ostensible - Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 OSTENSIBLE AUTHORITY – Freeman and Lockyer Facts:  Freeman and lockyer sued Buckhurst and its director for unpaid fees for architecture work on developing Buckhurst park estate  Companys articles said that all four directors were needed to consistute a quorum  Originally the company planned to simply buy and resell the land – fell through  Director acted alone in engaging the architects without actual authority  Company argued it was not bound by the agreement  Company formed for purchase of property. No managing director appointed. Company board acts as though K is managing director.  Without express authority of the board, director engages architects for DA. Held:  Company liable for fees as a result for fees as a result of the ostensible authority of t...