Bailment PDF

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This lecture explores bailment....

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Bai l ment Essential Reading Sealy and Hooley, except for section on standard of care owed by a bailee to a bailor. This book as always, contains more detail than is required on this course and students should confine themselves to studying only the cases set out in these notes and the extract from Palmer and the journal articles cited below. *Extract from Palmer on Bailment 3rd ed. 2009 (extract on duty of bailee). This book is the leading book on bailment and is useful for research. Further Reading Bankes, N. and Rafferty, N. ‘ Privity of Bailment: Liability of Sub-Bailee to Owner of Goods: The Pioneer Container’ (1997) 50 Can Bus LJ 245 (Friday) *Bell, A. ‘The Place of Bailment in the Modern Law of Obligations’ Chapter 19, Palmer and McKendrick’s ‘Interest in Goods’, 2nd edition McBain, G.S. ‘Modernising and Codifying the Law of Bailment’ (2008) JBL 1 *McMeel, G. ‘The Redundancy of Bailment’ (2003) LMCLQ 169 Bailment: - bailor is the owner of goods and he passes possession - passes ownership to bailee - bailee may store goods - bailment says the bailee has possession of goods (looks after goods) - imposes duty of care on bailee to look after goods of bailor - if bailor calls back for goods bailee should return goods - bailee has no right to enter into contract with TP in respect of those goods - if bailee does, bailor an sue on tort of conversion: wrongfully handing over goods v. lien when you have a right over goods

I nt r oduct i on - A concept adopted from Roman law (see McBain article) - Typically a bailment is created when ownership of goods is with one person while possession is with another.

- The law most importantly imposes on the bailee a duty of care, owed to his bailor, over those goods. - The classic definition of bailment is set out in Pollock and Wright’s ‘An Essay on Possession in the Common Law’ (1888) - find definition! - But it can also be created by someone who has less than full legal and equitable ownership; a superior title to that of the bailee’s is sufficient (a sub-bailment) - It can be created by consent of the parties or without consent. A bailment may be gratuitous or for reward. - Possession of another’s goods is a pre-requisite of bailment however, what may appear as a bailment may be merely an agreement to provide a service in relation to goods eg a licence or permission to leave a chattel at another’s property see Ashby v Tolhurst [1937] 2 KB 242 - someone parked car in car park, received ticket - car park owners gave ticket to thief - presumed that it was bailment - Held: it was a license to park car, not bailment - we need to look at ticket, called itself a ‘car park ticket’ 0 it could not be said that car park owners had possession - exceptional case - So possession of another’s goods is essential - The bailor must have a superior interest in the goods to the bailee. The bailee acquires a limited possessory interest in the goods which is subordinate to the bailor’s ownership - The bailee must redeliver the goods at the end of the bailment or deliver as the bailor instructs Wincanton Ltd v P & O Trans European Ltd [2001] CLC 962 at [19] per Dyson L - Traditionally bailment has been explained on the basis of consensus between the bailor and the bailee however that does not account for involuntary bailments. - Also, in recent years this need for consent has been challenged by writers and now arguably endorsed in a sub-bailment situation, by the Privy Council in The Pioneer Container [1994] 2 AC 324

- i.e. if goods were being shipped to China from seller to buyer and it is being sent on two ships. Carrier 1 has superior title to carrier 2 - This case and the issue of sub-bailments will be examined in greater depth in Bailment Part 2)

Bailment at common law is often widened by use of contractual bailment terms. - For example, where goods are held under a reservation of title clause (under a contract between a seller and a buyer), the buyer holds them as bailee even though he is given expres power to use the goods in his own manufacturing process or power to sell the goods to a sub-buyer see Clough Mill Ltd v Martin [1985] 1 WLR 111 at 116 per Goff LJ - gap of 30 days, if seller transfers ownership + possession to buyer and buyer goes into liquidation seller has to deal with liquidator - but ownership has already passed, S cant claim for goods - not enough money to pay creditors - S might be paid $1 for every good In retention of title clause - s will say he retains ownership (bailor) - if buyer goes into insolvent liquidation - S has ownership - so will be able to claim goods back

Typesofbai l ment - There have been many attempts to categorise bailments but none are entirely successful due to the wide variety of bailments - In Coggs v Bernard (1703) 2 Ld Raym 909, Court of King’s Bench Holt CJ stated that there were six categories of bailment, drawn from Roman law categorization, namely: 1. Goods of one person (the bailor) are delivered to a bailee to keep for the use of the bailor 2. Goods are lent by the owner to someone to be used gratis by the latter

3. When goods are left with the bailee to be used by him for hire 4. Goods are pledged 5. Possession of the goods is given for the purpose of paid carriage or reward 6. Possession of the goods is given for unpaid carriage or some gratis action Problems with this case: - However these categories are very limited, it is far more flexible - But categories are based on fundamentally consensual form of bailment and the main social and commercial types at that time - Does not include less obvious types of bailment and fails to forsee new types of bailment which have been developed; for example there are also bailments by finding, bailments which arise on wrongful or mistaken seizure of property, on a landlord levying distress on his tenant’s goods, the bailment between an owner and a sub-bailee and under a retention of title clause - Palmer, N. E. Bailment (2nd edition) pp124-5 as reproduced in Sealy and Hooley p 93 Should we… • An alternative form of classification is based on whether the bailee is paid (bailments for reward) or is not paid (a gratuitous bailment) and sometimes it is important to determine whether the bailment is for a fixed term or at the will of the bailor • But its better to view bailment as having no categories • The relationship between the common law and a contract for bailment and negligence • • There will usually be a contract of bailment which will supplement the proprietary relationship of bailor and bailee at common law • • However there does not need to be a contract between the parties to create a bailment. For example, with the consent of the bailor the bailee may bail the goods to another person who thereby becomes a sub-bailee of the bailor even though there is no privity of contract between them (see obiter statement in The Pioneer Container). There is also no consent in the case of involuntary bailments •

• Bailment was developed to fill a gap in the law before the development of the tort of negligence and now contracts often contain bailment terms which are wider than bailment at common law. (see McMeel, G. ‘The Redundancy of Bailment’) • • Bailment gives rise to obligations which are independent of contract and tort (see Lord Goff in The Pioneer Container) and referenced journal articles (to be discussed in the next lecture-Bailment-Part 2).

TheBai l ee’ sl i abi l i t y •

He owes a duty to the bailor to take reasonable care of the bailor’s goods; this duty is central to the relationship (for reading on this topic see extract from Palmer on Bailment)

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Historically, the standard of care owed by the bailee used to vary according to whether the bailment was gratuitous (bailee liable only for gross negligence) or for reward (bailee liable for ordinary negligence)

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However, there was conflicting case law as to both what constituted ‘gross negligence’ and whether there should be two standards of care. The Court of Appeal decision in Houghland v RR Low (Luxury Coaches Ltd )[1962] 1 QB 694 CA is often referred to as the authority for there being only one standard of care being that of a reasonable standard required ‘by the circumstances of the case’.

Facts: Luggage on a coach was lost when transferred to another coach due to breakdown of the first. The drivers of the first coach left it untended in the dark for a few hours and allowed the unsupervised passengers to collect their luggage from the first coach and place it in the second coach which was being supervised by a driver. Held: driver of the original coach, as an employee of the defendant, was a bailee of the luggage. It was acknowledged that in the lower court it had been found to be a gratuitous bailment (the latter finding was criticised in the CA). Therefore gross negligence had to be proved traditionally. Test not applied; was a question of whether reasonable care had been exercised by the driver in all the circumstances.

But this is not a strong authority since the CA were not sure the bailment was gratuitous and criticised the County Court on finding so and the defendants were unable to provide evidence as to why the luggage had disappeared so that on either standard of responsibility they would have failed in their defence to a claim. As ‘Palmer on Bailment’ states that ‘it follows’ that the statement by Ormerod LJ was ‘in any event, only obiter’. Dicta in Morris v CW Martin & Sons Ltd [1966] 1 QB at 725 and 737 imply that regardless of other relevant circumstances, such as the character of the bailee and the nature and value of the goods, the absence of remuneration can produce differences in the standard of care required of a bailee. See also the subsequent Privy Council case of Port Swettenham Authority v TG Wu & Co Sdn Bhd [1979] which supported Houghland and the requirement of a gratuitous bailee to be subject to an obligation of reasonable care Lord Salmon stated obiter that the standard set in a relevant Malaysian Ordinance requiring every class of bailee …’to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value of the goods bailed,’ corresponded to the standard required at common law of a gratuitous bailee. BUT he further stated that the standard of care expected from a gratuitous bailee ‘was less exacting’ than that required from a bailee for reward. He also remarked that the ‘line between the two standards is a very fine line, difficult to discern and impossible to define’ because a man of ordinary prudence would presumably take reasonable care of his own goods’. See also Lord Diplock in The Winson [1982] Ac 939 at 960 where he stated that salvors of cargo who, after completion of the salvage operation held the cargo as gratutitous bailees, ‘…owed a duty of care …..[requiring the same measures that] a man of ordinary prudence would take for the preservation of his own property’. In the more recent case of Sutcliffe v Chief Constable of West Yorkshire [1996] RTR 86 the Court of Appeal followed the Houghland decision with Otton LJ at (90) stating ‘no distinction is to be drawn between a gratuitous bailment and one for reward’. In summary what is the test for the standard of care? •

Is the care that a reasonable man, sometimes expressed as ‘a man of ordinary prudence’, would take in all the circumstances of the case

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Palmer on Bailment (see 10-020) is of the opinion that since the standard of care ie reasonable care, is set ‘in the circumstances of the case’ this phrase can be manipulated and indeed is by the courts, to produce a just result

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As to what circumstances may be taken into account a statement in McLaughlin v Sears Roebuck & Co 188 SC 358 per Justice Baker, is helpful:

‘What is reasonable care must materially depend on the nature, value and quality of the thing bailed, its liability to loss and injury, the circumstances under which it is deposited, and sometimes on the character and confidence and particular dealings of the parties. Generally, then, it will not be sufficient for a defendant to show that he took the same amount of care of the plaintiff’s goods as he did his own, if that amount is less than a normal person of prudent habits would exercise in regard to the property’.

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It is a test therefore which is primarily objective rather than subjective but nevertheless both tests have to be applied to some degree

In certain circumstances the bailee’s liability may be strict; i)

Where the bailee ‘deviates’ from the bailment eg by storing the goods in a place other than agreed see Lilley v Doubleday (1881) 7 QBD 510) or by trusting the goods without authority to a third person Edwards v Newland & Co [1950] 2 KB 534

ii)

Where the bailee wrongfully refuses to return the goods or negligently fails to return them when called on by the bailor to do so at the end of the bailment Mitchell v Ealing London Borough Council [1979] QB 1.

Note deviation in the conduct of the bailment acts as a repudiatory breach and gives the bailor an immediate right to possession of the goods. Where the deviation is so serious as to amount to a blatant disregard of the bailor’s interests then it might constitute conversion by the bailee see Garnham, Harris and Elton Ltd v Alfred W Ellis (Transport) Ltd [1967] Lloyd’s Rep 22 and the bailee will generally lose the protection of any contractual exclusion clauses see Gibaud v Great Eastern Rly Co [1921] 2 KB 426

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The Tort (Interference with Goods) Act 1977 unifed the law relating to bailment and torts relating to goods (conversion, trespass and negligence) and introduced some new procedural provisions (see below). If the bailed goods are lost or destroyed as a result of the bailee’s breach of duty so he cannot rede-

liver the goods back then he will be liable for breach of duty, breach of bailment (duty to re-deliver) and conversion (s 2 (2)).

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By contrast where the bailee delivers the goods to the wrong person he is liable even if the misdelivery was innocent see Devereux v Barclay (1819) 2 B & Ald 702.

Bai l mentandt hi r dpar t i es See Collins MR judgment in The Winkfield [1902] P 42 Court of Appeal Facts: •

mail was carried on the steam ship ‘Mexican’ which collided with the ship the ‘Winkfield’. The ‘Mexican’ sank with a loss of the mail from Cape Colony and Natal and the mail was lost

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the Postmaster -General bought a claim on behalf of himself and the Postmaster -General of Cape Colony and Natal as bailee of the lost mail for the value of the mail from the owners of the Winkfield .

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the owners of the Winkfield paid a sum of money into court and the PG claimed payment out of that sum on the basis that they were the bailees of the mail which were lost on the Mexican.

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could they claim the sum? Yes, the mail was in the custody of the PG as bailee at the time of the accident

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once the bailee has claimed for loss of those goods it precludes the bailor (the owners of the mail) claiming against the wrongdoer but must take action against the PG for the monies he had received for the loss of the chattels (otherwise unjust enrichment)

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unsatisfactory that though the bailee had a limited interest he could sue for wrongful interference with the goods without the bailor being joined into the action

Collins MR quoted Lord Campbell in Jefffries v Great Western Railway Co (1956) 5 E & B 802,806 “ a person possessed of goods as his property has a good title as against every stranger, and one that takes them from him, having no title in himself, is a wrongdoer, and cannot defend himself by shewing [sic] that there was title in some third person, for as against a wrongdoer possession is title”.

“…as against a wrongdoer, possession is title. The chattel that has been converted or damaged is deemed to be the chattel of the possessor and no other, and therefore its loss or deterioration is his loss and to him, if he demands it, it must be recouped”. “ …the bailee has to account for the thing bailed, so must he account for that which has become its equivalent and now represents it. …. “ “ The wrongdoer, having once paid full damages to the bailee, has an answer to any action by the bailor” Claim by the bailee •

Possession by the bailee at the time of the wrongdoing is required and the bailee is at common law, despite having a limited interest, able to recover the full market value of the goods and damages for subsequent loss but subject to rules of remoteness.

NOTE: Decision must be read in light of the Torts (Interference with Goods) Act 1977 ss 7 and 8 which permits a wrongdoer to join all the claimants to an action for wrongful interference with goods so that they may recover according to their actual interest. If all parties are not so joined to the action then the party with a possessory title has a duty to account to any other potential claimant (to avoid double liability of the wrongdoer)....