Lecture notes, lectures 2, 3, 6, 7, 9, 11 - with questions PDF

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Commercial Law - Topic 2 Study Notes – BAILMENT Bailment Legal obligations arise out of temporary transfer of possession by owner • Examples – Dry cleaning, car parking, borrowing power tools, hiring power tools, vehicle repairs, appliance repairs, vehicle leasing We enter into these transactions all the time. Generally are times when there is an expectation that the item/good will be returned. There is a duty to take reasonable care of the item. Legal obligaitons arise from this. Exclusion clasues are important here because as part of the contract bc there is a bailment it is implied the person will take reaosnable care of the goods which is why you need the exclusion clauses. Not a transfer of title comes into play in leases, or lending something or a consumer transaction. Each an example of a bailment: • Bailor – A person who delivers goods to another so as to create a bailment. Transfers the goods • Bailee – A person who receives goods from another so as to create a bailment • Sub-bailment - bailment by a bailee to a third party with the permission of the bailor. Just the transfer by the b/ee to a third party does not make it a sub-bailment. The sub-bailee has to know there is an original bailor and need the consent of the b/or. Definition of Bailment: Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220 ‘A bailment comes into existence upon a 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.’ Per Windeyer J at 238 Legal obligaiton that arise out of bailment egs: • the bailee must take reasonable care of the goods • Bailee must not depart from the scope of the bailment-for the agreed purpose • The bailor must have the right to bail the goods • Goods must be suitable for purpose of bailment Types of Bailment Coggs v Bernard: list of bailment types [text p 141] (is an authoritative case) For reward:means there is consideration and a contract you need to consider the terms of the contract read against the obligations of bailment. This is because the obligaitons of bailment can be contracted out of ie dry cleaning cases • Hire • Pledge • Work and labour eg. Car service, carriage of goods (ie item to be worked on is bailed) • Safekeeping for a fee Gratuitous Bailment: (no fee and no contract) os to determine the rights and responsibilities you are relying on the common law of bailment.

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In this situation there is no agreement and the goods are delivered with no expectation of payment. This includes minding another person’s property or the lending of property in a domestic setting. • Without consideration • Loan • Gratuitous safekeeping • If oyu find somethign you are the grat b/ee for the true owner • All the above revocable at the will of the bailor Biggest difference between bailment for reward, and a gratuitous bailment is the ones for reward invole a contract. Essential elements • Voluntary transfer of possession of goods • Obligation to redeliver goods (or deal with as agreed) not absolute Possession • Custody and control • Must be the giving over of possession of the goods • Greenwood v Council of the Municipality of Waverley (1928), person hires a locker, given a token and when finished swimming you collect the token and collect you clothes. If there was a bailment there is an obligation on the council to take reasonalbe care. Aruged there was a bailmetn (all the elements) but in question was there the element of posession and control on the part of the council. Council was not responsible for goods lost (value £150) out of a locker at the sheds at Bondi Beach, as there was not evidence of giving over possession of the clothes to the Council (retrial ordered). The case is not an authority on lockers as posession but the important of leading evidence to determine whether there has been custody and control-actually posession. • Cf Ultzen v Nichols (1893) where a waiter took a customer’s coat. Question was it a bailment or act of goodwill/courtesy. There was custody over the coat bc the waitor took the coat and determined where it would go there was posession and therefore the obligaiton to take reasonable care and control. Held to be a bailment. Not, bailment requires the transfer of a possession, and if there isn’t such a transfer there is no bailment, so therefore no responsibility. A bailment can be distinguished from a licence in that there must be a transfer of possession. In Greenwood v Waverley MC (1928) 28 SR (NSW) 219 the plaintiff hired one of the defendant’s lockers in which to place his clothes. The plaintiff was supplied with a key. Upon the plaintiffs return the clothes were missing. The plaintiff’s action in bailment failed as there was held to be no transfer in the possession of the clothes. The case was one of a mere licence to use the locker. Thus the essential element in bailment is the transfer of possession. NB Distinction between bailments and licenses N.E. Palmer, in Bailment, 2nd ed (Sydney: The Law Book Company Ltd., 1991) p 382 ‘The law has repeatedly drawn a distinction between bailments and licenses; the former requiring a transfer of possession and a voluntary acceptance of the common law duty of safekeeping, the latter amounting to no more than a grant of permission to the user of a chattel to leave it upon the licensor's land on the understanding that neither possession shall be transferred nor responsibility for guarding the chattel accepted’. [text p 156] The distinction between bailment and licence was more clearly drawn in Waltons Stores Ltd v Sydney CC (1968) 88 WN (Pt 2) (NSW) 153 when an employee of the plaintiff parked his company car in the Goulburn Street Parking Station. A parking fee was charged and a ticket issued. It was a term of the agreement that the 2

vehicle was not to be released except on presentation of the ticket. A thief obtained a duplicate ticket by saying he had lost his and then took the car. The Court of Appeal held that a bailment existed and that the council was liable for the wrongful and negligent delivery of the car to the thief. Asprey JA held that the critical factors that determined the relationship as one of bailor and bailee was: • A ticket was needed to recover the vehicle • The vehicle was parked in a multi-storey carpark that was purpose built • Parking was by payment of a fee Robertson v Stang (1997) 38 CCLT (2d) 62 [text p 154] -needed to prove a transfer of posession. She had to ask for the key and not able to determine wehre the key went so there was a transfer of posession not a lisence to store goods on the premises. ‘...control over the subject chattels is the key to distinguishing between bailments and licenses. In the present case, the facts suggest that the plaintiff surrendered control of her goods to the defendants and a bailment relationship was created’ Cf car park cases Tennant was a big shopper, her goods were a hazard so she was obliged to move some of her items into storage. They were then stolen. Question whether it was bailment? Well, custody and control was in the hands of the building owner, therefore it was bailment. These cases establish the principle that control over the subject chattels is the key to distinguishing between bailments and licenses. In the present case, the facts suggest that the plaintiff surrendered control of her goods to the defendants and a bailment relationship was created: it was the defendants who moved the plaintiff's goods into storage; the plaintiff did not have a key to the storage rooms; the plaintiff was told by Mr. Stang that her goods would be safe; and the plaintiff was uncertain as to where exactly the goods were stored. Car park case examples of the distinction • A publican was not responsible for the loss of a customer’s motorcycle in the carpark – Tinsley v Dudley [1951] 2 KB 18. the innkeeper had no power over wehre it was parked it was merely a liscence so no obligation to take reasonable care • Distinction between licence to park and bailment – Ashby v Tolhurst [1937] 2 All ER 837 (‘owners are requested to show ticket when required’). In when person parked car, they paid money for ticket. They were not always required to show their ticket when they left the car park. Car was stolen. Question was, was it a case of bailment or just a license agreement? Well, the carpark owner did not have any control over the vehicle. No custody and control so no obligation • Ticketed parking – Council of the City of Sydney v West. Person parked car as Sydney parking station. Was a requirement to show ticket before getting a carpark back. A rouge tricked attendant by not having a ticket, talked his way out of the carpark. The threshold of bailment to lisence all about power. • See also BG Transport Service Ltd. v Marston Motor Company Ltd [1970] 1 Lloyd's Rep 371. Is a bailment car parking case. Car park attendant held on to keys, car was stolen, held not to be bailment. • Bailment has its own contractual obligations Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220 (definition again) ‘A bailment comes into existence upon a 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.’ In Ultzen v Nichols [1894] 1 QB 92 the handing of a coat to a waiter by a patron of a restaurant was sufficient to amount to a bailment as the court held that there was a transfer of possession. However in order 3

to transfer possession there must be something more than mere control over something for a brief period, presence and supervision are not enough; Matthew Short & Associates Pty Ltd v Riviera Marine (International) Pty Ltd [2001] NSWCA 281. Obligation to redeliver (MUST HAVE THIS OBLIGATION for it to be a bailment). • If the bailee is not obliged to return the goods, then no bailment has been created – (Chapman v Verco Bros (1933) 49 CLR 306). Chapman took Verco Bros’ wheat to be sold (wheat is fungible ie replaceable). Wheat was transferred, and Verco Bros went broke. The Court said no bailment because no expectation to get back the exact good back. • Bailee is only liable if the failure to return the goods could have been avoided by the exercise of reasonable care • Because there was no obligaiton to redeliver the same goods it wasnt a bailment • Goods may be returned in changed form: see Pangallo Estate Pty Ltd v Killara 10 Pty Ltd [2007] NSWSC 1528 (contract to transform grapes into wine). Grapes turned into wine, was bailment because same thing (grapes) could be returned, even though it was in different form (wine). There was an expectation of redelivery albeit in a changed form. Obligation to redeliver? Motor Mart Limited v Webb [1958] NZLR 773 Hire purchase agreement to buy truck. Title passes on receipt of final payment. ‘A bailment does not necessarily entail upon the bailee the obligation of redelivering to the bailor the thing bailed.’ There can be an altimate transfer of title but this doesnt defeat the bailment rights up until then. Per Turner J Bailee’s Obligations • Same for all bailment relationships – though may be a question of degree – Houghland v RR Low (Luxury Coaches) Ltd (distinction between bailment for reward and gratuitous bailment) • To take reasonable care of the goods (do not need to go to inordinate lengths to take care of the goods). • Not to depart from the scope of the bailment (if they do, they become the insurer – they have to pay to have them repaired/replace). • To return the goods or deal with them as directed • To not dispute the bailor’s title to the goods In Coggs v Bernard, Lord Holt CJ stated: 1. If the bailment was for reward then the bailee must take reasonable care 2. If the bailment was gratuitous and for the bailor’s benefit then the bailee is only liable for gross negligence 3. If the bailment was gratuitous and for the bailee’s benefit then the bailee is liable for the slightest negligence More modern authorities raise doubts as to whether a distinction should be drawn between gratuitous bailments and bailments for reward in this regard. Where the bailment is for reward then the duty on the bailee is to take reasonable care. Reasonable care means reasonable care having regard to the risks. A bailee is not required to guard against remote risks; TNT v May & Baker Pty Ltd. However what is significant about the law of bailment is that if the goods are lost, damaged or destroyed then the onus is on the bailee to show that the goods were so lost etc. notwithstanding the exercise of reasonable care by the bailee; Pitt Son & Badgery Ltd v Proulefco.

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Obligation to take reasonable care of the goods What is reasonable care? Depends on: • The goods themselves – value of the goods, nature of the goods eg jewellery given to a hospital for safekeeping – Martin v LCC (bailment for reward). Patient goes to hospital with valuable jewellery, she gives it to staff for safe-keeping, it was put on a desk on a level with street access and stolen. She gave them the goods with the expectation that they would be returned. Was a bailment for a service, therefore there was an expectation for the hospital to take reasonable care. • Relationship of the parties – gratuitous or commercial bailment • ‘The burden was in that sense put on them, but they are in a position to recover all the expenses to which they have been put, and that, no doubt, includes the expense of keeping safely the property which they had taken into their possession.’ per Martin v LCC Henn Collins J • Circumstances of the deposit – scope of the bailment eg jeweller gave def ring to show his wife – was stolen from his coat – def was not negligent and not liable –found he had taken reasonable care WGH Nominees Pty Ltd v Tomblin. Gave ring to man to take home and show wife, he went to bar on way home and it was stolen. Was going to bar, with ring in pocket, reasonable care? Have to know all the circumstances the jeweller bagered him and interrupted a meeting to push him to take it home. In Williams v The Curzon Syndicate Ltd (1919) 35 TLR 475 a club was held liable for breach of duty as a bailee to one of it members who deposited jewellery with the night porter who subsequently steals the jewellery. It was held that the club should not have employed this particular person as night porter in view of his criminal record. Tottenham Investments Ltd v Carburettor Services Pty Ltd (1994) Aust Torts Reports ¶81-292 • Plaintiff left a valuable car with the garage for repair keys left in ignition • Thieves entered through a skylight and started the car with keys left in the ignition • Was there a voluntary transfer of posession from one person to another -yes • Posession-yes bc left under lock and key • So therefore an obligation to take reasonable care. The case spells out the obligations of the b/ee • The b/ee is not an insurer and not obliged to make up a loss no matter how it occurs. Only in the event that there wasnt reasonable care. • After the theft, the defendant put in an alarm and bars that didnt indicate that there wasnt reasonable care but that it was easy and cheap to increase security • Kirby P “In modern circumstances, with the prevalence of theft it will often be reasonable to impose on a bailee the duty to take positive steps to deter would-be thieves and to prevent them from gaining access to building in which bailed goods are kept.” • Test: the Obligation is not that of an insurer – just to take reasonable steps that a careful and vigilant person would exercise for their own property. Note, keys in the ignition didn’t mean much – the building was locked up. Today it would be different In exam: - look at all facts – i.e. did area have high crime rate, was there an alarm etc, - the b/or only has to show loss or damage - then the b/ee has to prove that there wasnt any negligence

Obligation to not depart from the scope of the bailment Deviation from the bailment entitles the bailor to: – they are an insurere and liable for damage no matter how it occurs strict liability – Retake possession – Sue for conversion for full value if goods are lost (bailee becomes an insurer)

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– See Mitchell v Ealing London Borough [1979] QB 1; analogous to contract deviation cases seeTNT (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd (1966) 115 CLR 353 Squatters keep getting evicted, council decided to store goods (out of goodwill). There was an agreement to meet at an agreed time to pick up the goods, but the council failed to turn up. When they did reorganise it was too late bc the goods were then stolen, but because council failed to show reasonable care they become an insurer for the goods. There was a departure from the scope of the bailment when they failed to turn up. Therefore: - The b/ee isnt an insurer but only responsible for loss or damage when there is a departure from reasonable care. - If there is a departure from the scope of the bailment they are strictly liable for loss or damage no matter how it occurs Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220 ‘A bailment comes into existence upon a 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.’ Must be returned when requested • Squatter was evicted • Asked to collect furniture – but official went to wrong meeting place • When met up to collect the furniture from the garage – it was gone • As the bailee had failed to deliver up when an unequivocal demand was made, it became strictly liable for the loss thereafter – Mitchell v Ealing London Borough [1979] QB 1 Uncollected Goods Act 1995 (NSW) Applies to: • Bailed goods being chattels personal • Object of the act is to provide bailees with a means of disposing of goods without being liable to the bailor by: – Obtaining a court order, or – Private disposal after giving notice Uncollected Goods Act 1995 (NSW) • If goods are ready for delivery and are uncollected, bailee gives notice, unless bailor cannot be traced • Need to give notice of: – 28 days if goods worth less than $100 in any manner – 3 months if goods worth $100 - $500 by public auction of private sale – 6 months if goods worth $500-$5000 by public auction – Perishable goods – can be verbal notice with reasonable time to collect and can be disposed of in any manner Onus of proof In the circumstances of a bailment if goods are lost or damaged the plaintiff simply has to prove loss or damage and the defendant must prove they took reasonable care. See Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220 Bailor’s obligations—for reward • Entitlement to bail the goods • That the goods are safe and suitable for bailment • To pay the agreed rate for storage • Not to interfere with the bailee’s possession for the term of the bailment because it is a contracted term 6

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Goods have to be fit for purpose

Implied conditions into bailments for reward • At common law • That the goods will be reasonably fit for their particular purpose made known to the bailor – Derbyshire Building Co Pty Ltd v Becker • Eg Franklins was liable to injuries caused by a trolley toppling over when its wheel broke – Cottee v Franklins Self-Serve Pty Ltd • Trade Practices Act (Cth) • Implied conditions of merchantable quality, correspondence with description, and fitness for purpose are implied. – If supplied to a consumer is bought for less than $40,000 or goods ordinarily acquired for personal, domestic or household use but not for the purpose of resupply Bailor’s obligations—gratuitous bailment • Gratuitous Bailment • The right to bail the goods • To warn of the dangers that might arise from the goods that the know about – Coughlin v Gillison (exploding ship’s boiler) there was no liabiltity bc the b/or didnt know about it • Make good any damage caused by the goods • Instruct on the proper use of the goods – Pivovaroff v Chernabaeff lent an onion sorting machine without a guard. Bailor told not to be used near children. 13 year old had hand mutilated – bailor was not liable as had warned on proper use of t...