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16 BAILMENT

A. Definition and General Character (1) (2) (3) (4) (5) (6)

Introduction The Essential Role of Possession Consent to Possession Redelivery Subject Matter of Bailment Bailment Distinguished from Other Transactions

B. Principles Common to All Bailments (1) The Bailee’s Estoppel (2) Possession as Title (3) Insurance

C. Gratuitous Bailments and Bailments for Reciprocal Advantage D. Gratuitous Bailments (1) Gratuitous Custody (2) Gratuitous Work and Labour

16.01 16.01 16.06 16.11 16.13 16.15 16.16 16.21 16.21 16.25 16.31 16.32 16.35 16.35 16.41

(3) Loan for Use

E. Bailments for Reward or Reciprocal Advantage (1) (2) (3) (4)

Custody for Reward Work and Labour for Reward Hire Pledge

F. Attornment, Sub-bailment, and Other Ambulatory Bailments (1) (2) (3) (4)

Attornment Sub-bailment Substitutional Bailment Quasi-bailment

G. Involuntary and Undisclosed Bailment (1) Involuntary Bailment (2) Undisclosed or Unconscious Bailment

16.45 16.48 16.48 16.55 16.61 16.67 16.78 16.78 16.82 16.84 16.85 16.86 16.86 16.91

A. Definition and General Character (1) Introduction (a) Bailment as voluntary possession Bailment is a legal relationship distinct from both contract and tort.1 It exists whenever 16.01 one person (the bailee) is voluntarily in possession of goods which belong to another (the bailor).2 The bailee gets a special property while the bailor retains the general property.3 Common forms of bailment are carriage of goods, delivery for custody or repair, hire, pledge

1 Building and Civil Engineering Holidays Scheme Management Ltd v Post Office [1966] 1 QB 247, 261, CA, per Lord Denning MR; Th e Pioneer Container [1994] 2 AC 324, 341–342, PC, per Lord Goff of Chieveley; Sutcliffe v Chief Constable of West Yorkshire [1996] RTR 86, 90, CA, per Otton LJ. 2 The Pioneer Container [1994] 2 AC 324, PC; East West Corp v DKBS 1912 [2003] EWCA Civ 83, [2003] QB 1509; Sandeman Coprimar SA v Transitos y Transportes Integrales SL [2003] EWCA Civ 113, [2003] QB 1270; Marcq v Christie Manson & Woods Ltd (t/a Christie’s) [2003] EWCA Civ 731, [2004] QB 286. In East West Corp v DKBS 1912 at 1530 Mance LJ approved the statement in NE Palmer, Bailment (2nd edn, 1991) para 1285, and see now Palmer on Bailment (3rd edn, 2009) para 1-016, that: ‘Th e important question is not the literal meaning of bailment but the circle of relationships within which its characteristic duties will apply. For most practical purposes, any person who comes knowingly into the possession of another’s goods is, prima facie, a bailee.’ 3 Th us, ‘it is of the essence of a bailment that the general property in the goods concerned remains in the bailor, while only a special property passes to the bailee’: Re Bond Worth Ltd [1980] Ch 228, 247, per Slade LJ.

883 English Private Law. Third Edition. Andrew Burrows. © Oxford University Press 2013. Published 2013 by Oxford University Press.

Chapter 16: Bailment and loan. The concept of bailment underlies many modern commercial transactions such as title retention,4 marine salvage5 and finance leasing.6

(b) Basic obligations common to all bailments 16.02 Bailment imposes certain basic obligations on every bailee. Th e bailee must take reasonable

care of the goods and abstain from converting them.7 He must not deviate from the terms of the bailment and becomes an insurer of the goods if he does so.8 In most cases he must also refrain from denying the bailor’s title.9 These obligations can normally be varied by special agreement,10 and in some cases they are superseded by statute.11 Where goods are lost or damaged while in the bailee’s possession the bailee is liable unless he can show that the misadventure occurred independently of his fault.12 In this and other respects13 bailment is an independent legal relation14 having qualities not complemented by the normal law of contract or tort.15 It is a relationship sui generis.16

(c) Bailment and delivery, contract, agreement 16.03 A bailment can arise without any physical delivery of goods from the bailor to the bailee.17 A seller of goods who remains in possession after property has passed to the buyer holds as a bailee.18 A bailee of goods whose bailor sells them during the bailment becomes the bailee of the new owner once he attorns to the new owner. 19 Bailment can also arise without any contract or agreement between the parties and without the bailor’s consent.20 A gratuitous

4 Clough Mill Ltd v Martin [1985] 1 WLR 111, CA; Whitecap Leisure Ltd v John H Rundle Ltd [2008] EWCA Civ 429. 5 China Pacifi c SA v Food Corp of India , (The Winson) [1982] AC 939, HL, and see ENE Kos I Ltd v Petroleo Brasiliero SA (No 2) [2012] UKSC 17, [2012] 2 WLR 976. 6 On-Demand Information plc v Michael Gerson (Finance) plc [2002] UKHL 12, [2003] 1 AC 368. 7 Morris v CW Martin & Sons Ltd [1966] 1 QB 716, 738, CA, per Salmon LJ. See now also East West Corp v DKBS 1912 [2003] EWCA Civ 83, [2003] QB 1509. 8 Lilley v Doubleday (1881) 7 QBD 510; Shaw & Co v Symmons & Sons Ltd [1917] 1 KB 799; Mitchell v Ealing London Borough Council [1979] QB 1. 9 Biddle v Bond (1865) 6 B & S 225, 122 ER 1179; Ross v Edwards & Co (1895) 73 LT 100. Th e prohibition on denying title can be avoided by procedural machinery established under statute; see Torts (Interference with Goods) Act 1977, s 8; 16.24. 10 Subject to the Unfair Contract Terms Act 1977, and the Unfair Terms in Consumer Contracts Regulations 1999, SI 1999/2083. 11 The most notable examples are bailments by way of international carriage of goods: see chs 11, 12. 12 Travers & Sons v Cooper [1915] 1 KB 73; Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd [1979] AC 580, PC; Frans Maas (UK) Ltd v Samsung Electronics [2004] EWHC 1502, [2004] 2 Lloyd’s Rep 251; Coopers Payen Ltd v Southampton Container Terminal Ltd [2003] EWCA Civ 1223, [2003] 1 Lloyd’s Rep 331. 13 eg, the binding effect of a promise given by an unrewarded bailee in relation to the goods, and the liability of such a bailee for a deviation from the terms of the bailment, despite in each case the absence of any underlying contractual relationship: see 16.38. 14 Sutcliffe v Chief Constable of West Yorkshire [1996] RTR 86, 90, CA, per Otton LJ. 15 See generally Palmer on Bailment (3rd edn, 2009) ch 1. 16 Yearworth v North Bristol NH Trust [2009] EWCA Civ 37, [2010] QB 1, at [48h], per Lord Judge CJ (a valuable summary of general bailment principle); Deakin and Wolf v Card Rax Ltd [2011] EWPCC 3, at [112], per His Honour Judge Fysh QC (Patents County Court). 17 Palmer on Bailment (3rd edn, 2009) paras 1-023–1-024. 18 Union Transport Finance v Ballardie [1937] 1 KB 510; Worcester Works Finance Ltd v Cooden Engineering Co Ltd [1972] 1 QB 210. 19 F Pollock, and RS Wright, An Essay on Possession in the Common Law (1888) 134; 16.78 et seq. See now also East West Corp v DKBS 1912 [2003] EWCA Civ 83, [2003] QB 1509. 20 Th e Pioneer Container [1994] 2 AC 324, PC; Palmer on Bailment (3rd edn, 2009) paras 1012–1046; East West Corp v DKBS 1912 [2003] EWCA Civ 83, [2003] QB 1509.

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A. Definition and General Character loan of goods is not a contract21 but is still a bailment.22 Where a bailee sub-bails,23 three bailments are likely to arise: between bailor and head bailee,24 between head bailee and sub-bailee,25 and between bailor and sub-bailee.26 A finder of goods is treated as a bailee,27 as is a person who assumes possession without the owner’s express or implied consent.28 But an involuntary bailee (ie, someone in possession without his consent)29 is not strictly a bailee because he is not voluntarily in possession.30 The same can be said of an ‘unconscious bailee’ who is unaware of his possession of goods, or of the fact that goods in his possession belong to another.31

(d) Bailment and prior possession and ownership A bailment can arise without any previous possession on the part of the bailor.32 A bailment 16.04 exists where goods are sold to one person but delivered directly on his instructions to another, who has agreed to hold them as his bailee.33 From the moment that he receives possession the recipient is the bailee of the new owner.34 Bailments can arise where the bailor is not the owner.35 All that is necessary is that the 16.05 bailor should have some superior right to the possession of the goods.36 Subject to that

21 Walker v Watson [1974] 2 NZLR 175; cf Blakemore v Bristol & Exeter Rly (1858) 8 E & B 1035, 1051–1052, 120 ER 385, 391, per Coleridge J. 22 See further 16.45. 23 The Pioneer Container [1994] 2 AC 324, PC (the leading modern authority). See now also East West Corp v DKBS 1912 [2003] EWCA Civ 83, [2003] QB 1509; Sandeman Coprimar SA v Transitos y Transportes Integrales SL [2003] QB 1270. 24 Morris v CW Martin & Sons Ltd [1966] 1 QB 716, CA; cf Metaalhandel JA Magnus BV v Ardfi elds Transport Ltd [1988] 1 Lloyd’s Rep 197 (quasi-bailment). 25 Th e Hamburg Star [1994] 1 Lloyd’s Rep 399. 26 The Pioneer Container [1994] 2 AC 324, PC; and see for earlier authority Morris v CW Martin & Sons Ltd [1966] 1 QB 716, CA; Gilchrist, Watt and Sanderson Pty Ltd v York Products Pty Ltd [1970] 1 WLR 1262, PC; James Buchanan & Co Ltd v Hay’s Transport Services Ltd [1972] 2 Lloyd’s Rep 535. 27 The Pioneer Container [1994] 2 AC 324, 336–338, PC, per Lord Goff; Southland Hospital Board v Perkins Estate [1986] 1 NZLR 373, 375–376, per Cook J; cf Parker v British Airways Board [1982] QB 1004, 1017, CA, per Donaldson LJ; and see generally Palmer on Bailment (3rd edn, 2009) ch 26. 28 Burns v Roff ey (HC, 16 March 1982); Ngan v The Queen [2007] NZSC 105 (police lawfully took possession, as ‘bailees of necessity’, of banknotes left unattended and unprotected in aftermath of car crash). 29 See generally 16.86 et seq. 30 Lethbridge v Phillips (1819) 2 Stark 544, 171 ER 731; Howard v Harris (1884) Cab & Ellis 253; Neuwith v Over Darwen Co-operative Society Ltd (1894) 63 LJQB 290 (possessor owes no general duty of care); and see Robot Arenas Ltd v Waterfi eld [2010] EWHC 115 (QB). 31 AVX Ltd v EGM Solders Ltd The Times , 7 July 1982; Consentino v Dominion Express Co (1906) 4 WLR 48; 16.91 et seq; Marcq v Christie Manson & Woods Ltd (t/a Christie’s) [2003] EWCA Civ 731; [2004] QB 286; Robot Arenas Ltd v Waterfield [2010] EWHC 115 (QB), 32 See Palmer on Bailment (3rd edn, 2009 ) para 1-024.. 33 Belvoir Finance Co Ltd v Stapleton [1971] 1 QB 210, CA; Johnson Matthey & Co Ltd v Constantine Terminals Ltd [1976] 2 Lloyd’s Rep 215 (not followed in The Pioneer Container [1994] 2 AC 324, PC, but not on this point). 34 For cases where liability akin to that of a bailee can arise even before the reception of possession, see 16.85 et seq. 35 Palmer on Bailment (3rd edn, 2009) ch 2; N Palmer, ‘Possessory Title’ in N Palmer and E McKendrick , Interests in Goods (2nd edn, 1998). 36 Leigh and Sillivan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] 1 AC 785, 809, HL, per Lord Brandon; Green v Stevens (1857) 2 H & N 146; The Hamburg Star [1994] 1 Lloyd’s Rep 399; Mayfl ower Foods Ltd v Barnard Bros Ltd (HC, 9 August 1996); MCC Proceeds Inc v Lehmann Bros International (Europe) [1998] 4 All ER 675, CA; East West Corp v DKBS 1912 [2003] EWCA Civ 83; [2003] QB 1509; The Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] UKHL 12, [2004] 1 AC 705; cf China Pacific SA v Food Corp of India (The Winson) [1982] AC 939, HL. A contractual right of possession will suffice: Government of the Islamic Republic of Iran v Barakat Galleries Ltd [2007] EWCA Civ 1374, [2009] QB 22.

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Chapter 16: Bailment requirement, a bailment can arise between a head bailee and a sub-bailee,37 or between an original bailor and bailee where the bailee bails the goods back to the bailor for a period shorter than the original bailment.38 A bailor is a person who has a reversionary interest in goods.39 But bailment is a common law relation40 and the bailor must have a legal interest in the goods;41 a mere equitable interest (such as that of a beneficiary under a trust)42 will not suffice, 43 unless that interest draws with it a right to the immediate possession of the subject goods.44

(2) The Essential Role of Possession (a) Bailment obligations and possession 16.06 Possession is central to bailment.45 Unless one person is in possession of goods to which

another has a superior right of possession there can be no bailment.46 Obligations akin to those on a bailment can arise, however, without possession of another’s goods. A person who agrees to take possession of goods at a particular time and fails to do so may owe duties similar to those of a normal bailee,47 as may a person who, having the option of taking possession

37 Morris v CW Martin & Sons Ltd [1966] 1 QB 716, 729, CA, per Lord Denning MR; The Hamburg Star [1994] 1 Lloyd’s Rep 399; The Pioneer Container [1994] 2 AC 324, PC. 38 Roberts v Wyatt (1810) 2 Taunt 268, 127 ER 1080; Brierly v Kendall (1852) 17 QB 937, 117 ER 1540. 39 For cases using the word ‘reversion’ in this context, see Kwei Tek Chao (t/a Zung Fu Co) v British Traders & Shippers Ltd [1954] 2 QB 459, 487, per Devlin J; Empressa Exportadora De Azucar v Industria Azucarera Nacional SA (Th e Playa Larga and Marble Islands) [1983] 2 Lloyd’s Rep 171, 179, CA per Ackner LJ; Candlewood Navigation Corp Ltd v Mitsui OSK Lines Ltd (The Mineral Transporter) [1986] AC 1, 18, PC per Lord Fraser; and see HSBC Rail (UK) Ltd v Network Rail Infrastructure Ltd [2005] EWCA Civ 1437, [2006] 1 WLR 643. Counsel have occasionally come to grief by failing to distinguish between the residual ownership of an alleged bailor and the alleged bailor’s immediate right of possession, which may not necessarily accompany ownership: see eg Indian Herbs (UK) Ltd v Hadley & Ottoway Ltd and others (21 January 1999, CA). In claims for conversion by a party out of possession at the time of the alleged wrong it is the immediate right of possession that must be shown: Government of the Islamic Republic of Iran v Barakat Galleries Ltd [2009] EWCA Civ 1374, [2009] QB 22. In a title retention case this may depend on whether payment for the goods has fallen due: Whitecap Leisure Ltd v John H Rundle Ltd [2008] EWCA Civ 429, [2008] 2 Lloyd’s Rep 216. 40 MCC Proceeds Inc v Lehmann Bros International (Europe) [1998] 4 All ER 675, 702, CA, per Hobhouse LJ. 41 MCC Proceeds Inc v Lehmann Bros International (Europe) [1998] 4 All ER 675, CA; and see Leigh and Sillivan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] 1 AC 785, HL. 42 See generally Halsbury’s Laws of England (4th edn Re-issue) Trusts. 43 MCC Proceeds Inc v Lehmann Bros International (Europe) [1998] 4 All ER 675, CA, explaining Healey v Healey [1915] 1 KB 938 and International Factors Ltd v Rodriguez [1979] 1 QB 351, CA. 44 As in International Factors Ltd v Rodriguez [1979] 1 QB 351, CA, as explained by MCC Proceeds Inc v Lehmann Bros International (Europe) [1998] 4 All ER 675. As to the suffi ciency of a right of possession to cast the party thus entitled in the position of a bailor of the possessor, and so to ground a bailment between those parties, see East West Corp v DKBS 1912 [2003] EWCA Civ 83, [2003] 1 Lloyd’s Rep 239; and see further Government of the Islamic Republic of Iran v Barakat Galleries Ltd [2007] EWCA 1374, [2009] QB 22 (holder of immediate right to possession may sue in conversion).. 45 See generally Palmer on Bailment (3rd edn, 2009) paras 1-131–1-139, chs 5, 6 and 7. Th e question of possession recurs frequently; the court will ordinarily take account of all the circumstances. For a modern case where a claim in bailment failed on the facts because the particular defendant was not in possession of the goods at the material time see Hardy v Washington Green Fine Art Publishing Co Ltd [2010] EWCA Civ 198 noted (2011) 16 Art Antiquity and Law 85. For a modern bailment claim where the defence that the alleged bailee was not in possession failed on the facts see Mainline Private Hire Ltd v Nolan [2011] EWCA Civ 189 noted (2011) 16 Art Antiquity and Law 161. 46 Hence at common law a person cannot bail goods to himself: Harding v Comr of Inland Revenue [1977] 1 NZLR 337 (decided under New Zealand property legislation). 47 Quiggin v Duff (1836) 1 M & W 174, 150 ER 394; Edwards v Newland & Co [1950] 2 KB 534, CA.

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A. Definition and General Character of goods or delegating the task to another, chooses to delegate; that person may then be liable for the defaults of the delegate,48 as he would if he were bailing the goods under a conventional sub-bailment, having first got possession in person.49 It is said that a bailment by way of hire50 can arise though the hirer gets no possession because the chattel is supplied with an operator who continues to be employed by the lessor and to retain possession on his behalf,51 but that is doubtful.52

(b) Bailment and employment Th e requirement of possession may mean that no bailment arises between employer and 16.07 employee.53 Traditionally, employees who have charge of their employer’s property in the course of employment have mere custody and no independent possession. 54 Th ey cannot therefore sue third parties in trespass or conversion55 and they cannot be liable as bailees.56 Th e rule is antiquated and may in any event not apply where there is a substantial distance and lack of control between the employer and the employee,57 or where the employee receives from a third party goods intended for the employer; in that case, the employee may get an independent possession (and may therefore be a bailee) until he appropriates the goods to the employer.58 An employee who loses or damages the employer’s goods during the course of employment can be sued in tort for negligence59 and for breach of an implied term of the contract of employment.60 An employee to whom a chattel is loaned by the employer for a purpose unconnected with employment can of course be a bailee.61 Employers can be bailees of their employees’ chattels, as where employees’ work tools are 16.08 left on the employer’s premises overnight,62 or coats are deposited during working hours.63

48 Metaalhandel JA Magnus BV v Ardfi elds Transport Ltd [1988] 1 Lloyd’s Rep 197; and see The Pioneer Container [1994] 2 AC 324, 345, PC, per Lord Goff; Palmer on Bailment (3rd edn, 2009) paras 23-055–23-064. 49 See Morris v CW Martin & Sons Ltd [1966] 1 QB 716, CA; and Palmer on Bailment (3rd edn, 2009) paras 1298–1301. 50 See generally as to hire 16.61 et seq. 51 Fowler v Lock (1872) LR 7 CP 272, 282, per Byles J. 52 Palmer on Bailment (3rd edn, 2009) para 1-131 . 53 Palmer on Bailment (3rd edn, 2009) ch 7 . For an imaginative but tentative application of the ‘no possession’ principle in the context of an art bailment and the potential liability of a ‘guest curator’ see Kamidian v Holt and others [2008] EWHC 1483 (Comm). 54 Lotus Cars Ltd v Southampton Cargo Handling plc (The Rigoletto); Southampton Cargo Handling plc v Associated British Ports [2000] 2 Lloyd’s Rep 532, 539; Alexander v Southey (1821) 5 B & Ald 247, 106 ER 1183; Associated Portland Cement Manufacturers (1910) Ltd v Ashton [1915] 2 KB 1, CA; R v Harding (1929) 46 TLR 105. Th e non-possession rule does not apply to agents and independent contractors, who may get possession and be answerable as bailees: Lotus Cars Ltd v Southampton Cargo Handling plc (The Rigoletto); Southampton Cargo Handling plc v Associated British Ports. And see 16.20. 55 Hopkinson v Gibson (1805) 2 Smith 2021 (trover). 56 Wiebe v Lepp (1974) 46 DLR (3d) 441. But a general duty of care may be owed, unaccompanied by the peculiar bailee’s burden of proof: see 16.33. 57 The Jupiter III [1927] P 122, 131, per Hill J, aff’d [1927] P 250; Boson v Sandford (1690) 1 Shower 101, 89 ER 477; Moore v Robinson (1831) 2 B & Ad 817, 109 ER 1346. 58 Marshall v Dibble [1920] NZLR 497; F Pollock and RS Wright, An Essay on Possession in the Common Law (1888) 60. 59 Superlux v Plaisted [1958] Current Law Year Book 195. 60 Rowell v Alexander Mackie CAE (1988) Aust Torts Rep 67, 727, NSWCA. 61 Haira v Attorney-General [1962] NZLR 549. 62 MacDonald v Whittaker Textiles (Mary...