1. society
2. work
3. contracts

Commercial
Transactions
Module 7-Bailment
Summer 2007-08
©MNoonan2008
This presentation and Copyright therein is the
property of Maureen Noonan and is prepared
for the benefit of students enrolled in the
Commercial Transactions course conducted by
the Law Extension Committee and is available
for their individual study. Any other use or
reproduction, including reproduction by those
students for sale without consent is prohibited.
©MNoonan2008
Expectations?
After study of this module, students should be able to resolve
problems featuring bailment by understanding:






What Bailment is
Extent of duties of Bailor and Bailee in various situations.
Interaction with contract-contractual bailment, especially
limitation/exclusion clauses, comparison of situations/remedies
available.
Sub bailment and issues arising. E.g. are terms of sub-bailment
binding on Bailor?
Its relevance to finding a suitable remedy in a particular
situation
The difference between actions in negligence and in bailment
©MNoonan2008
BAILMENT
A BAILMENT IS FORMED
BY DELIVERY
OF PERSONAL PROPERTY
WITHOUT TRANSFER TITLE
BY BAILOR
TO BAILEE
USUALLY UNDER AGREEMENT
(NOT NECESSARILY CONTRACT)
FOR PARTICULAR PURPOSE
GIVING RISE TO DUTY OF CARE
UPON COMPLETION PURPOSE
BAILEE IS OBLIGED
TO RETURN BAILED PROPERTY
(OR DEAL WITH IT AS DIRECTED)
©MNoonan2008
BAILMENT
CLASSIFICATIONS
Lord Holt in Coggs v. Bernard (1703) 2 Ld Raym909;
92 ER 107
1. The deposit of goods for gratuitous safekeeping by the
bailee.
2. The delivery of goods to a bailee for work to be done on
the goods for the benefit of the bailor without reward.
3. The delivery of goods by way of gratuitous loan for use
by the bailee.
4. The deposit of goods for safekeeping for reward.
5. The delivery of goods to have something done to them
for reward.
6. The delivery of goods for use by the bailee for reward
(hiring).
7. The delivery of chattels to be held as security for a loan.
©MNoonan2008
BAILMENT
DOMESTIC EXAMPLES
DRY CLEANING
CAR REPAIRS
USING A SUPERMARKET TROLLEY
LENDING A FRIEND SOMETHING
YOUR CAR / A BICYCLE / COAT / JEWELLERY /
GARDENING TOOLS
HIRING A CAR/SKIS/BOAT/JETSKI
©MNoonan2008
BAILMENT
COMMERCIAL EXAMPLES
Contracts for HIRE
FLOORPLAN ARRANGEMENTS with Dealers
Sales with title Retention Clauses where delivery
made/possession given to buyer.
TAXI operation
Couriers, CARGO SHIPMENT
STORAGE/WAREHOUSE Arrangements
©MNoonan2008
BAILMENT
DISTINGUISH BAILMENT
FROM
CONTRACT
Consideration
Involuntary possession
LICENCE
Who has possession? Control?
Actual v. constructive?
Ashby v. Tolhurst
Council of the City of Sydney v. West
Walton Stores v. Sydney City Council
GIFT
©MNoonan2008
Contract and Bailment as
separate arrangements
Brambles Security Services Ltd v. Bi-Lo P/L
(1992) Aust Torts Report
Contract between Bi Lo store and security company, which
had arranged, (with knowledge of Bi-Lo) to have some
collections made by Brambles.
Brambles collected money but failed to carry cash safely to
owners bank or in accordance with instructions.
Brambles liable to Bi Lo in bailment, not contract. Contract
was with the other security company.
©MNoonan2008
ASHBY V. TOLHURST
(1937) 2 KB 242
1. Tolhurst owned car park
2. Ashby paid 1/- to attendant
3. Received ticket
4. Exclusion clause
5. Locked car and went away
6. Car given to someone else
NATURE OF RELATIONSHIP?
· Contract?
· Licence?
· Bailment?




Licence only
No obligation on licensor
No change in possession
In any case, exclusion clause covers
©MNoonan2008
COUNCIL OF THE CITY OF SYDNEY V. WEST
(1966) 114 CLR 481
West drove into the Domain parking station. He was handed a ticket, but had no time to read
it.
This card must be presented to attendant to obtain release of vehicle
He was directed to a spot, and left car for the day. An Exclusion clause read:
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.
On his return, he paid and went to get his car. The car was missing.
One Attendant had issued a duplicate ticket. The Attendant on the exit had let thief pass
· Nature of contract? · Licence?
Bailment?
Berwick CJ and Taylor J
· Contract of Bailment. Possession with Parking Station
· Possession retained until presentation and surrender ticket
· In circumstances of the case, loss not within exemption clause
· Because it was unauthorized delivery of possession, outside contract
· Not mere negligence, inadvertence (as in Ashby v. Tolhurst)
· Note comments about whether due notice of exclusion anyway.
· Confirmed in Walton Stores v. Sydney City Council.
(Similar facts. Goulburn Street Parking Station).
©MNoonan2008
Greenwood v. Municipal Council of Waverley
(1928) 28 SR (NSW) 219
Before Greenwood went swimming at Bondi Beach, he
changed in sheds owned and operated by the council and left his
clothes in one of its lockers---having paid the required fee. When he
returned, his clothes were missing.
He sued the council alleging it was in breach of its duties as a bailee. He
failed.
The court held that merely placing clothes in a locker owned by the
council did not make the council a bailee. It had never acquired
possession or control of Greenwood’s clothes either in fact or in intention.
What had happened was that the council had hired him a locker. What he
did with it was his business. In law, there was no bailment--there was
merely a licence by the council allowing Greenwood to use its property
for a specific purpose.
©MNoonan2008
Robertson v. Stang (1997) 38 CCLT (2d) 62
See text extract
Tenant was obsessive-compulsive shopper and had lots of boxes of
things in apartment. Landlords told her she had to remove them and
could store them in storage area within apartment complex. Stolen.
She claimed in bailment. Landlords claimed it was licence only.
Parret J found bailment because transfer of possession and voluntary
acceptance of safekeeping on facts.
Facts suggested tenant surrendered control.
Landlords moved goods into storage, she did not have key, was told
that her goods would be safe, she was uncertain where exactly they
were stored.
Landlords determined the goods would be moved and did so knowing
emotional state of tenant.
The fact that she could remove them at any time is not unusual where
there is a bailment of indeterminate length and not necessarily make
relationship one of licence.
©MNoonan2008
Petrifond Midwest Ltd v. Esso Resources Canada Ltd
Bailment and Agency (See text)
Operator was facilitator for number of oil companies. Mined tar sands and
produced synthetic crude oil. Entered into contract to excavate a fire
hydrant. During excavation, underground duct bank was damaged and oil
production interrupted. Operator found to be bailee for participants and
could sue in its own name even though it had not suffered the business
interruption…the oil company participants had.
Agency involves service, representation, power to affect the legal position
of the principal. Bailee does not represent bailor and has no power to
make contracts on bailor's behalf.
Management agreement specifically created relationship of principal and
agent not bailor and bailee.
©MNoonan2008
Bailments?
Which type? reward, gratuitous (benefit bailor/bailee)sub?
Adele borrows a book from the library • Brian borrows $20 from Clare
Dell rents a safe deposit box from her bank and locks her jewellery in it
Elle pawns her TV as security for a loan • Frank rents his house to Gwen
Hal leaves his luggage overnight in a railway left luggage room
Ian sells goods to Jan on 10% deposit with balance payable in installments
over 12 months. Jan gets immediate possession.
Kate allows Les to copy her lecture notes •Mike gives Nan his assignment
so she can check the spelling •Olive hires a removalist to help her move
house •Pat returns a defective computer to the shop for repair under
warranty •Quincy subscribes to an Internet service and allows Ray to log on
using his password •Sue licenses Tanya to use her registered trade mark
Ulf rents a video recorder
Viv engages a smash repairer to repair her motor bike
Wes parks his car in a security carpark
Zanthia finds a watch while jogging in the park
Yasmin receives a book from the Readers Club on approval without
ordering it
•Zane gives his mother a pendant as a birthday present
©MNoonan2008
Duties of the Bailor
To deliver the goods
Thereafter not to interfere with bailees lawful possession
To inform the bailee if they are dangerous
Where bailment is hiring for reward, to ensure goods are
merchantable and fit for purpose.
Note that if the bailment is contractual, there may be other
duties, such as to pay the bailees reasonable charges for
work done during the bailment, perhaps to keep them
insured, or if the bailor has agreed to keep them in repair, to
ensure that the required repair work is done in a timely and
competent manner. See Wicks Farming v. Waraluck Mining
P/L (1996) 1 QdR 99
©MNoonan2008
Bailor’s duty
to inform Bailee if goods are dangerous
Schirillo, a market gardener, lent an onion sorting
machine to Chernabaeff. He had earlier removed the safety guard with
which the machine had originally been fitted and he warned
Chernabaeff not to let children near it when it was operating.
Chernabaeff ignored the advice and used it with the help of Pivavaroff, a
13 year old boy. Pivovaroff’’s hand was crushed and badly injured.
Schirillo was held not liable. He had been under a duty to warn
Chernabaeff of the potential dangers, but he had discharged that duty
by informing him of the risks and of the proper procedures to employ
when using the machine.
Pivovaroff v. Chernabaeff (1978) 21 SASR1
©MNoonan2008
DUTIES OF A BAILEE
1.
To take care of the goods. Standard is reasonable in all
the circumstances.
See Mitchell, Houghland, Port Swettenham, Hobbs.
2.
To retain possession (unless it is a term of the bailment
to do so).
3.
Not to use or misuse the goods…usually also breach of
duty of care or conversion (dealing with them in a way
inconsistent with rights of the true owner.)
4.
To return the goods or to deal with them as directed…tort
of detinue (wrongful detention) or conversion
5.
Not to dispute the bailor's title.
See Edwards v. Amos
©MNoonan2008
BAILEE DUTY AND LIABILITY
DUTY OF BAILEE
1. To take due care of the goods
2. To return the goods at the end of the bailment
STANDARD OF CARE
THAT DEGREE
AN ORDINARY REASONABLE PERSON
Would take in ALL THE CIRCUMSTANCES
See Houghland, Mitchell and Port Swettenham
COURTS BEAR IN MIND:
1. Bailment for reward or gratuitous?
2. For benefit of one party or both?
3. Whether bailee has professed skill?
ONUS OF PROOF
Once bailment proved:
ONUS SHIFTS to bailee to disprove negligence
Contrast action in negligence
See Hobbs
©MNoonan2008
HOUGHLAND V. RR LOW (LUXURY COACHES)
(1962) 1 QB 694
Mrs. Houghland caught coach Southampton to
Hoylake. Suitcase locked in boot by driver in Southampton. Delay at Ternhill
for meal and breakdown. Luggage transferred to new coach by passengers in
the dark . No luggage on arrival at Hoylake
Ormerod LJ.
Judge below had found bailment
Gratuitous bailment
 Argument that “gross negligence” required in case of gratuitous bailment
 Judge said it was the standard demanded by the circumstances of the
particular case
 Infinite variety of combinations of circumstances.
 Rigid categories inappropriate
 Prima facie case arose.
 Suitcase put on at Southampton. Not there on arrival in Hoylake.
 Onus on defendants to rebut presumption of negligence
 They did not do so.
©MNoonan2008
MITCHELL V. EALING LONDON BOROUGH COUNCIL
(1979) QB 1
Mrs Mitchell was evicted. The Council offered to store her furniture. She
accepted. The Furniture was put in a lock-up garage. Her Husband arranged to
collect it on 19.12 He went to Council’s office but the Council Officer went to
lock-up garage. Due to the mixup, there was no meeting, no pick-up. The
husband went away. The Mitchells could not be contacted for a while. 4 weeks
later, a new arrangement was agreed for 15.1.79 When the garage was
opened, the furniture was gone.
O’Connor J.
If bailee unable to deliver, liable for value unless he can show loss without
negligence. Timing of the loss was important in this case
No negligence for using lock-up garage. Usual to put seized goods there
No recorded incident of previous theft
No blame for not mounting a guard
BUT, it was negligent to send Officer to wrong place
After that, Council were insurers of goods
Note: If after new arrangement, might have been different duty. No
evidence on timing.
©MNoonan2008
PORT SWETTENHAM AUTHORITY V. T.W WU AND CO
(1979) AC 580
Wu arranged for 93 cases of pharmaceuticals to be sent
to them in Malaysia. Cases arrived by ship at Port Swettenham.
Stored by the Port Swettenham Authority Shed 8 10 days later, 64
cases had disappeared. Wu sued and won. Appeal to PC
Lord Salmon
Law on Bailment in this case codified-set out in sections 104 and
105 Contracts (Malay States) Ordinance 1950
In all cases of bailment, the bailee is bound 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 as the goods bailed.
Onus on defendants to prove they met this standard. Conspicuously
failed to do so. Called only 2 witnesses. who knew nothing about the
lost goods. Did not call men working in shed 8, not even man in
charge. Therefore, no evidence they had taken due care and not
been negligent. System of control and security left much to be desired
©MNoonan2008
HOBBS V. PETERSHAM TRANSPORT CO
(1971) 124 CLR 220
Petersham Transport agreed to carry equipment belonging to ASEA
Electric
Petersham Transport engaged Hobbs
Hobbs loaded equipment onto near new semi
On the way, semi suddenly overturned
Unexpected failure of axle.
· ASEA sued Petersham in contract and joined Hobbs
· ASEA won.
· Hobbs appealed
Barwick CJ
 Breach of promise to carry goods safely
 Onus on plaintiff to prove fault/negligence
 Not done
 Non-delivery prima facie evidence
 Axle failure not due to act of Petersham or Hobbs
 Destroyed prima facie inference
 Not bailment
 Onus would have been otherwise in bailment
©MNoonan2008
COTTEE V. FRANKLINS SELF SERVE PTY LTD
(1997) 1 Qd R469
R purchased goods in store and was pushing it with goods and her 6
month old child towards her car in the carpark attached to the store; when she
suffered injury.One of the front wheels collapsed without warning. It capsized and R
was hurt trying to restrain it from toppling over. Experts did not explain why it had
occurred. Claim brought in both Negligence and Contractual bailment. Note issues
of proof and outcome.
Negligence not proven.
System of inspection existed. Successful at first instance but overturned on appeal.
No evidence that any system of inspection would have prevented it.
Bailment?
Gratuitous bailment? If so, a gratuitous lender is liable only to warn the borrower of
defects known to the lender not apparent to the borrower making them unfit for the
borrower's purpose.
Contractual bailment? Open to the court to find it in this case-consideration
of purchase of groceries. In such a case, clear from HC that the implied term
in the case of hire of chattels is that they shall be reasonably fit for the
purpose hired…obligation same as that with sale of goods…
TPA mentioned but not pleaded.
©MNoonan2008
Tottenham Investments P/ L v. Carburettor
Services P/L (1994) Aust Torts Reports 81-292
The D was held liable when thieves entered its premises
through a skylight and stole P’s vehicle, the keys of which
had been left in the ignition. The Court held that, even
though the premises were located in a well lit street,
adjacent to a busy bus depot and had not been the
subject of break ins or theft for 15 years, the D had failed
to exercise the standard of care that would have been
expected of a careful and vigilant person in like
circumstances.
The fact that security bars, an alarm system and warning
signs were all installed at minimal expense after the theft
was held to be evidence that all these precautions were
practicable,and should have been taken before it.
©MNoonan2008
Pitt Son & Badgery Ltd v. Proulefco SA
(1984) 153 CLR 644
A Wool broker was held liable when an
intruder gained access to a wool store,
lit a fire and destroyed the wool. The
broker had failed to take appropriate
steps to ensure the fence was adequate
to keep intruders out.
©MNoonan2008
WD AND HO Wills (Australia) Limited v. State
Rail Authority of NSW; SRA v. TNT
Nos. CA 40577/95;CA 40663/95(1998)NSWCSC 81 (21.4.98)
Wills consigned container load of cigarettes to TNT. Carrier was SRA.
Following delivery by SRA to TNT, container was put in TNT’s shed
Shed stood in SRA’s rail terminal yard. Left overnight; locked but
unstaffed. Stolen overnight
Mason P, Priestley JA, BeazleyJA
A person could not become bailee or sub-bailee of goods in
absence of possession, consent or knowledge on their part
No assumption of responsibility on SRA’s part
No known reliance or dependence on the part of the freightforwarders or
customers including Wills and TNT
No duty on SRA as lessor of shed to provide security
No general duty on occupiers to take reasonable care to prevent others
using it as springboard for stealing
©MNoonan2008
Sub-Bailments-General Rules …cases
If bailee sub bails with knowledge and authority of bailor, unless bailee
negligent in choosing sub-bailee, the only person liable if the goods are lost or
damaged would be sub-bailee.
If the bailee sub bails without authority,usually liable to bailor---not because
the loss or damage has occurred, but because they are in breach of the duty to
retain possession. See Edwards v. Newland & Co (1950) 2 KB 534, 539, 542.
In either case, sub-bailee will be liable to bailee for loss, attributable to their
breach of duty, or if bailment contractual, breach of contract. See Edwards. The
sub-bailee will also be directly liable to head bailor; at least if they know they
are their property or the property of a person other than the one they received
them from. Gilchrist Watt
The head bailor cannot succeed against both head bailee and sub bailee in
the same action because this would result in double damages. Usually the head
bailor sues one or the other. If they sue the bailee, they would normally seek
indemnity from sub-bailee by joining them to the action.
©MNoonan2008
THE ISSUE OF SUB-BAILMENT
RIGHT OF ACTION BY BAILOR
AGAINST SUB-BAILEE
GILCHRIST WATT AND SANDERSON V. YORK PRODUCTS
(1970) 1 WLR 1262 –NSW case
York bought 2 cases clocks from Germany. Gilchrist stevedores and
ships agents at wharf. Unloaded 2 cases and placed them in a shed
they used in day. Keys to shed kept by customs during night. When
agents of York came, 1 case missing. York successfully sued.
Appeal to PC: Lord Pearson
Duties arise at common law only if legally recognised relationship.
One such recognised relationship is voluntary custody of goods of
another.
Obligation created by delivery and assumption possession.
Defendants took possession and kept possession pending delivery
As sub-bailees took on duty to exercise due care notwithstanding
no contractual relationship. Confirmed judgement
©MNoonan2008
Sub bailment on terms
This is where a sub-bailee accepts goods from the
bailee on the basis of its terms and conditions.
Common in contracts of carriage. Usually, these
terms and conditions contain a limitation or
exclusion of liability clause for damage or loss
of the goods. Should a bailor be bound by terms
of a contract to which it is not a party? If so, in
what circumstances?
©MNoonan2008
The Pioneer Container (1994) 2 AC 324 (PC)
KH Enterprise (Cargo Owners) v. Pioneer Container (Owners);
See text Chapter 4 for discussion of Sub Bailment on terms.
Owners engaged carriers to ship goods by sea under bills
of lading which gave carriers authority to sub-contract the
whole or part of carriage “on any terms”.
Sub bailment contained exclusive jurisdiction clause (that
law of Taiwan applied). Could sub bailee use this against
Owners/Bailors?
Owners bound by conditions if they have expressly or
impliedly consented to bailee making sub bailment on
these conditions and those conditions not so unusual or
so unreasonable that they could reasonably be
understood to fall outside the scope of the original
bailor’s consent.
©MNoonan2008
Implications of The Pioneer
Container decision
PC, so not binding in Australia, but persuasive. Cited with
approval/applied in a number of cases. e.g.See Westpac v. Royal Tongan
Airlines Contrast WA case of WMC Engineering v. Brambles, where Wheeler J
debated merit and whether it should be adopted in Australia.
Note context of international shipping and jurisdiction clause. Is it a
sensible approach to have one jurisdiction for containers? …”in
commercial terms it would be most inconvenient…there may be chaos…” Sub
bailments extremely common, course of dealing.
“terms of the trade” or course of dealing may be relevant. Note also presence of
terms such as Himalaya clause…giving person right to protection of terms in
another contract.
Consider the decision in the context of consumer transactions.
©MNoonan2008
Implications of The Pioneer Container case
---focus consumer transactions
See article by Kate Lewins Murdoch University Electronic Journal of Law on
Austlii. Sub-Bailment on terms and the Australian Consumer.
What quality of consent will be required? Will it differ with commercial context?
E.g. commercial trader using air waybills and sea carriage documents regularly
v. consumer sending car for specialist repair.
See WMC case where WMC found to be well versed in commercial transactions
but not transport contracts…judge found WMC did not have required level of
knowledge for judge to find consent. In contrast in Westpac, judge was of the
view that bailor must have known that the postal service would not undertake
all aspects of delivery personally.
What if terms markedly disadvantageous when compared with head bailment?
Consider alternative actions…contract, including s. 74TPA, bailment and
negligence. In which one will plaintiff be better off? Can sub bailee exclude
liability in bailment that it would be prohibited from doing in contract by s. 74?
©MNoonan2008
WESTPAC BANKING CORPORATION V. ROYAL
TONGAN AIRLINES & ORS 50127/95 5.9.96 SCNSWCD
Westpac bought NZ & US currency from Bank of Tonga.
Sent by post from Nuku’alofa to Sydney. Carried by Royal Tongan
Airlines, Air NZ and Qantas. Did not reach Westpac. Westpac sued in
bailment Either Westpac or Bank of Tonga had title to sue. When had title
passed? Timing material to liability as bailee?
Giles CJ Chain of bailments -Tongan Postal Department to Royal Airlines
to NZ.Post to Air New Zealand to Qantas. Lost from possession of either
Air NZ or Q. Confirmed Morris v. Martin (mink stole to sub bailee) Consent
of bailor (Bank of T or W) to sub-bailment? Air NZ claimed protection by
terms agreement with NZ Post governing sub-bailment. No, said judge
Anyway, concluded they were lost by Qantas. If lost by Q, protected by
terms of ground handling agreement with Air NZ or Australian Postal
Corporation Act? Former not so normal or usual assent could be
presumed.
Bailor only needs to prove goods went into possession of bailee and
not redelivered. Bailee must prove he exercised reasonable
diligence in taking care of them Qantas liable unless protected by s. 34
APCA and acts by or on behalf of Australia Post It must prove that. Had
not done so. Westpac should have judgement because it was entitled to
possession at time loss s. 23 SGA
©MNoonan2008
MAYNEGRAIN V. CAMPAFINA BANK
(1982) 2 NSWLR 141
Campafina Swiss Bank. ANZ was Australian agent. Campafina lent BTE
money to buy barley for export to Kuwait. Barley stored in silos by
Maynegrain. Maynegrain acknowledged it held on ANZ’s account. BTE
directed Maynegrain to ship barley to Kuwait. Maynegrain did so without
authority Campafina. Campafina found out, obtained assignment bill of
lading. Barley sold Price less than loan. Campafina sued Maynegrain in
SC and succeeded. Note lack of direct relationship
Appeal to C of A. Hutley JA
1. Trial judge assessed damages at whole value of barley
2. Damages are meant to be compensation
3. Entitled to be put back in position as if no conversion.
4. Measure of damages is:
debt + expenses-sale proceeds
©MNoonan2008
PENFOLDS WINES V. ELLIOTT
(1946) 74 CLR 204
Elliott was hotelkeeper. Brother
brought him empty Penfold bottles.Elliott filled them with wine for
him.Before he could collect, agents of Penfolds acting as inspectors took
them Penfolds sued Elliott in trespass and conversion.
Dixon J.
Not trespass because no infringement of possession
Not conversion, because no act nor intent inconsistent with
appellants right to possession and nothing to impair or destroy it
Penfolds bailors of bottles; brother was bailee. In distribution of Penfolds
wines, each successive merchant or trader had implied authority to
create a bailment. Acts repugnant to bailment could found action for
conversion but not trespass. Filling the bottles and returning them to
person in possession not repugnant to bailment. Filling bottles did not
involve exercise of dominion. No intention to take property or deprive
Penfolds of title. Handing them to officials bowing to authority, not a sale.
Temporary and harmless use at the request of and for the benefit of a
person in possession
©MNoonan2008
Westrac Equipment P/L v. “Assets Venture” (2002) FCA 440
Action in Admiralty,by P - writ in rem against the ship Assets
Venture (Vessel) - damages for loss Caterpillar D6M bulldozer (the machine) in
course of a voyage between Christmas & Cocos Keeling Islands.
P (importer and distributor heavy earthmoving equipment) made contract with
Government to supply machine. Title not to pass until machine delivered. Arranged
carriage with Z.(D2)D2 supplied 20 foot bolster and chains to attach to machine to
make it ready for transportation. Arranged transport to Fremantle, went on board
Libra Australia to Malaysia and transshipped to Assets Venture for voyage to
Cocos. Stowed in No 1 hold. Decision made in course of voyage to discharge and
load at Christmas Island on the way to Cocos instead of the way back. Machine
taken from hold and stowed on No 1 hatch cover for remainder voyage. Vessel left
Christmas Is. late Dec 1. Early Dec 3, the crew noticed that bolster and machine not
on board.Claim by P in bailment and negligence against Vessel owners (D1);
damages for breach of contract, bailment and negligence against D2.
Lee J:
D1 were sub-bailee of machine for reward even though it took possession under
arrangements between D1 and D2 and not directly with P. Had notice that D2
arranging carriage for a third party, not itself-regular course of business between
them for carriage for others.
©MNoonan2008
Westrac Equipment P/L v. “Assets Venture” (2002) FCA 440(2)
D1,sub-bailee, liable if loss occurred whilst machine in their
possession unless they could show they had taken reasonable care of the machine or
its failure to do so was not the cause of loss….same duty as direct bailee. D1 did not
adduce evidence, did not establish on documents, or cross examination it had
exercised reasonable care. Judge accepted evidence of marine surveyors that D1 had
not taken necessary care in securing the bolster to hatch cover…adequate lashing
points should have been welded plus blocks to stop lateral movement. No observable
residue of any welding sites and log made no record. Only 20 minutes between closing
of hatch cover and sailing and 3 hours required for adequate welding.D1 pleaded loss
caused by act of God and not breach…judge found it was an ordinary event to expect
heavy roll and pitch in ocean swells.D2 was quasi bailee…did not take actual
possession….same duty as D1….there was no substitution of D1 for D2 as D2
retained overall responsibility for carriage.
Measure of damages is amount required to restore P to position it would have been in
but for the breach. Loss of profit not appropriate because it was a singular sale
modified to order and not situation where loss of machine meant loss of opportunity to
effect a further sale. Correct measure is cost of replacement machine including cost of
modification and further costs incurred in meeting specifications of contract made with
department plus freight and insurance plus interest for delay period for loss of use of
money.
©MNoonan2008
EDWARDS V. AMOS
(1945) 62 WN (NSW) 204
Mr. Jones had refrigerator from SCC on HP. Purported to assign to Miss
Edwards 2.8.43. Delivered it to Miss E. She handed it to Amos, for
safekeeping 10.8.43, SCC agreed to substitute Mrs J as hirer. Mrs J paid
out what was owing and became owner. Mrs J claimed refrigerator from
Amos. Amos gave it to her. Miss E sued Amos.
Herron J
No legal title passed on assignment. Normally bailee cannot dispute
bailor’s title. Very foolish to take the risk
Has onus to prove better title of person he gave goods
Bailee can plead jus tertii (the right of a third person) in 3 cases:
1. Where he defends on behalf of and by authority true owner
2. He committed the conversion by authority true owner
3. Where he has already made satisfaction to true owner by
returning
property
In this case onus discharged. Mrs. J entitled to refrigerator ©MNoonan2008
BAILMENT
EXCLUSION CLAUSES
BAILOR AND BAILEE CAN AGREE TO MODIFY
WAS TERM AGREED TO BY BAILOR? IF SO, MEANING? EACH
CASE DETERMINED ON OWN FACTS. A FEW PRINCIPLES:
DISPLAY OF NOTICES
Mere display not enough. Bailor must have agreed to terms Or, be taken
to have done so. Large letters, prominent location, Chance to read and
proceed or Small print on tickets
CONSTRUCTION AGAINST BAILEE …in case of ambiguity, against the
party asserting it
TICKETS Did Bailor know document contained contractual conditions?
Did Bailor think it was a receipt only?
FUNDAMENTAL BREACH Only relevant now to construction
Deviation outside contract not covered by exemption.
SUB BAILMENTS
Sub-bailee sometimes can rely; sometimes not, mostly not.
©MNoonan2008
1.



2.
3.
4.
5.
EXCLUSION OF LIABILITY
The person seeking to rely on an exemption clause must establish it
has become part of the contract by showing either:
That it was included in a contract signed by the other; or
That he or she had taken steps which were reasonably sufficient in
the circumstances to give notice; or
That the parties had intended to contract on the same basis as
before.
If the nature of an exemption clause is misrepresented, the person
seeking to rely on it will not be permitted to do so.
An exemption clause will be construed strictly-any ambiguity against
the person seeking to rely on it.
An appropriately worded exemption clause can exclude a party from
liability for negligence, although it will not normally be construed as
doing so in the absence of clear words to that effect.
Exemption clauses will not normally be construed as limiting or
excluding liability for acts done outside the terms or scope of the
contract. Thomas
©MNoonan2008
Exemption Clauses
Whether a particular exemption clause governing a bailment effectively
excludes liability for breach of either a party’s common law duties or
contractual obligations all depends on whether, on proper construction,
clause is wide enough to cover breach in question. See Nissho Iwai
Australia Ltd v. Malaysian International Shipping Corp Berhardt (1989)
167 CLR 219, 227.
©MNoonan2008
THOMAS NATIONAL TRANSPORT (Melb.) PTY LTD v. MAY
& BAKER (Aust) Pty Ltd (1966) 115 CLR 353
TNT regularly employed subcontractors to pick up goods
around Melbourne and transport them to their central depot;
which closed at 5.30pm. On the day in question the
subcontractor collected the goods and finished around 5.40.
As he was too late, he took his loaded truck home as he had
been directed to do by TNT when he was too late. He backed
it into his garage but in the early hours of the morning a fire
broke out damaging the goods.
In an action for damages, the HC held that it was implicit in the
contract between TNT and the customer that their goods
would be taken to and received by the depot. Accordingly,
taking the goods home was an unauthorised departure or
deviation from the terms of the contract and precluded TNT
from relying on the exclusion clause in the contract.
©MNoonan2008
BAILMENT and EXCLUSION CLAUSES
Kamil Export (Aust) Pty Ltd v. NPL (Aust) Pty Ltd (1996) I VR538
Shipper shipped goods from Melbourne to Guam and other
goods from Melbourne to Nauru, with same carrier. In Guam goods
were unloaded into warehouse and released to consignee without bill of
lading. In Nauru goods were also unloaded into warehouse and 11/20
pallets released with shippers consent to consignee without production of
bill of lading. Remaining 9 released without production of BL. Shipper sued
carrier for damages for loss of Guam goods and loss of 9 pallets of Nauru
goods.
Carrier relied on exemption clauses in bill of lading which also contained
clauses which made it clear that the carrier would not only transport the
goods from port to port but would also "deliver" them.Implied term that a
carrier will deliver only in exchange for the bill of lading….long practiced
understanding in merchant shipping.Specific clauses agreed can defeat the
object of the contract of carriage, …e,g, negligence perhaps…..but not here.
Held not to cover deliberate conversion. "The question is ordinarily whether, on
the proper construction of the contract, it can be said that the language of the
exemption clearly applies to the event or kind of event which has actually happened,
notwithstanding that its effect may defeat the object of the carriage contract".
©MNoonan2008
Exclusion Clause in Kamil Export v. NPL
"The carriers obligations in respect of the goods shall begin when the
goods are accepted at the ocean vessel's rail at the port of lading and
shall continue until the goods are discharged at the ocean vessel's rail at
the port of discharge. The Carrier shall not in any circumstances
whatsoever be liable for any loss or for delay or damage to the goods
(whether in his actual or constructive possession or not) howsoever
caused occurring before they are accepted at the ocean vessel's rail at
the port of loading or after they are discharged at the ocean vessel's rail at
the point of discharge.
The Carrier may at any time and for any purpose whatsoever discharge
the goods or any part thereof from the vessel whether before or after
sailing from the port of lading and/or land or store the same either on
shore or afloat and/or trans-ship or forward the same by sea, air and/or
land. In any such case, the Carrier shall not be liable for any loss, damage
or delay howsoever caused to the goods arising after discharge from his
vessel."
©MNoonan2008
BAILMENT AND LEGISLATION
INTERACTION examples
TPA S. 74…warranty that services will be rendered with due care and
skill and where purpose known, reasonably fit for same. Note that by
74(3) it does not apply to transportation of goods for business, trade,
profession.
PAWNBROKERS AND SECOND-HAND DEALERS ACT 1996 (NSW)
COMMON CARRIERS ACT 1902 (NSW)…common carrier not liable for loss of
valuable items if value exceeds $20.
TRANSPORT ADMINISTRATION ACT 1988 (NSW) …..limits liability.
CIVIL AVIATION (CARRIERS LIABILITY) ACT 1959 (CTH) implements treaty
obligations for international carriage-limits liability to particular amounts for both
international & domestic. See also CARRIAGE OF GOODS BY SEA ACT 1991
INNKEEPERS ACT 1968 limits liability. INDUSTRIAL RELATIONS ACT-taxis
INCOME TAX ASSESSMENT ACT-employee? Commissioner of Taxation of the
Commonwealth of Australia v. De Luxe Red & Yellow Cabs Co-operative (Trading)
Society Ltd & Ors (1998) 361FCA.
SALE OF GOODS ACT….Can be very relevant to understanding who has title
Matthew Short & Associates Pty Ltd v. Riviera Marine (International) Pty Ltd and
Anor (2001) NSWCA 281.








©MNoonan2008
Commissioner of Taxation of the Commonwealth of Australia
v. De Luxe Red & Yellow Cabs Co-Operative (Trading) Society
Ltd & Ors (1998) 361FCA
Were payments to taxi drivers by taxi operators constitute “salary or wages”
under the Income Tax Assessment Act? If so, taxi operators required to
deduct income tax and pay superannuation guarantee charge.
Is the relationship between operators and drivers one of employment or
bailment?
Per Beaumont, Foster and Sackville JJ. It is one of bailment.
Commissioner’s argument was that a taxi driver does not conduct their own business
operation but provides labour as an integral part of the operator’s business. Most
services provided by operator-base, registration,maintenance, panel beating, code of
conduct, registers, advertising, charge cards. Driver responsible for petrol and
washing.Industrial Relations Act defines relationship as one of bailment. Awards
based on that relationship.Other cases and aspects of general law have proceeded
on that basis.
When circumstances viewed in setting drivers are bailees notwithstanding level of
control of operator. Such reservation of control is not necessarily inconsistent with a
bailment relationship.
©MNoonan2008
RE: Commissioner of Taxation of the Commonwealth of
Australia v. De Luxe Red & Yellow Cabs Co-operative
(Trading) Society Ltd & Ors (1998) 361FCA.
INDUSTRIAL RELATIONS ACT 1996 SECT 307 Contract of bailment meaning
1. For the purposes of this Chapter, a contract of bailment is a contract under which:
a) a public vehicle that is a taxi-cab is bailed to a person to enable the person to
ply for hire in a transport district established under the Transport Administration
Act 1988, or
b) a public vehicle that is a private hire vehicle is bailed to a person to transport
passengers in such a transport district.
2. If a person:
a) is in possession of a private hire vehicle otherwise than as a bailee or
employee, and
b) is, in such a transport district, engaged in transporting passengers in the
private hire vehicle pursuant to a licence under the Passenger Transport Act
1990 of which the person is not the holder, this Chapter applies to and in respect
of that person in the same way as it would apply if the person were in
possession of the private hire car under a contract of bailment made with the
holder of the licence.
©MNoonan2008
Matthew Short &Assoc. P/L v. Riviera Marine (Int.) P/L &
Anor (2001) NSWCA 281. The Facts
Riviera,manufacturer motor cruisers, sold some o/s, exporting
through Pt Botany. In1997 Mr&Mrs S, of US caused broker,B to procure Riviera
to build motor cruiser (34/18). At time of contract, boat “future goods” within
meaning of SOGA. Dealing followed standard pattern. When boat ready, Riviera
booked arrangements with Short, the carrier, for 34/18 to be shipped to
California on “Direct Currawong” leaving Aug 97. Once again, standard
dealings between R and S. Because of IR situation at Botany, Short could not
have his own employees take 34/18 alongside ship and employed contractors.
Campbell had a low loader to transport it alongside and then a crane would
load.Fax by Riviera to Boland advising on shipment.Further to your fax of this
afternoon please find hereunder indicative costs to cover the 2 shipments as
requested. (Riviera will be including transport to wharf Sydney/crane etc on
their invoice as F.O.B)
Campbell drove under archway. Superstructure of 34/18 struck large metallic
sign attached to the archway causing considerable damage. Smiths refused to
take a repaired boat and a different cruiser was sent.
Riviera sued Short under a contract of Bailment….In or about early August
1997, the Plaintiff and First D entered into a contract of bailment….4 implied
©MNoonan2008
terms in that contract….breached and therefore claimed damages.
Matthew Short &Assoc. P/L v. Riviera Marine (Int.) P/L
& Anor (2001) NSWCA 281. The Facts cont.
Riviera also sued Campbell in negligence…failure to keep a proper lookout,
failure to notice and observe position of sign, failure to avoid driving under the
sign, failure to detour around the sign, failure to drive at a sufficiently low
speed so as to permit stopping at the moment of impact, failure to stop at
impact.
There was a contract between Short and Campbell.Clause 3: Subject to 18 and
20 hereof the carrier shall not be under any liability whether in tort or in
contract for any loss of or damage to or misdelivery, delay in delivery,
concealed damage, deterioration, contamination, evaporation, non-delivery of
goods held in its care, custody or control,or any consequential loss arising
therefrom howsoever caused including but not limited to any negligence or
breach of contract by the carrier. Clause 21: Indemnity
Who owned 34/18 when the accident happened?Intention of the parties?
If Boland/The Smiths, then Riviera would lack any title to sue.Reference to
FOB, COD, payment made before delivery. Belonged to Riviera until it was
swung “over the rail”? Parties assumed SOGA applied.Consideration of ss. 6,
21, 22, 23 particularly Rule 5, 25, 35. See the consideration of whether there
were contracts of bailment, and if so between which parties. Note insufficient
“possession” with Short for there to be Bailment in that case.
©MNoonan2008
Matthew Short &Assoc. P/L v. Riviera Marine (Int.) P/L
& Anor (2001) NSWCA 281.
Riviera claimed damages from Short and Campbell and
won. Short was ordered to indemnify Campbell under a clause in the
Conditions of Carriage. Short appealed and Campbell cross-appealed.
Held by Heydon JA (MeagherJA and IPP AJA concurring) allowing appeal
and dismissing cross appeal;
Short was not liable to Riviera for the damage to 34/18 by Campbell’s
negligence. If Riviera was owner of 34/18 at the time of accident, Riviera
and Short were not in legal relationship of bailment since Short did not
have possession of 34/18 as distinct from some other form of relationship
with it. Short was not in breach of any duty to Riviera because Campbell
was an apparently capable carrier. Riviera owned 34/18 at the time of the
accident. Sale of Goods Act. Contract for future goods, time fixed by s. 23 r
5 replaced by time of earlier payments if parties so intended.
©MNoonan2008
Matthew Short &Assoc. P/L v. Riviera Marine (Int.) P/L &
Anor (2001) NSWCA 281. Cont.
Contemporary practices of parties and documents (fax
referring to FOB) used indicated intention for property to pass when 34/18
loaded onto freighter. Property did not pass when 34/18 came into the
possession of Short or Campbell by reason of s.23 r5. The freighter owner
was the relevant “carrier” for purposes of s.23 r 5(2), not the drivers on the
way to loading on the freighter. Only delivery to the freighter owner was for
“the purpose of transmission to the buyer”.
No sub bailment by Short to Campbell on terms which would defeat
Riviera’s claim against Campbell. Short was not a bailee and therefore
Campbell was not a sub-bailee. Insufficient evidence that Riviera consented
to the terms contained in the “Conditions of Carriage” between Short and
Campbell.
The exclusion of liability term in Conditions of Carriage between Short and
Campbell did not defeat Riviera’s claim against Campbell because although
Short contracted with Campbell in fulfilment of its duties to Riviera, Short
nonetheless contracted with Campbell as principal not agent for Riviera.
Indemnity applied as between Short and Campbell.
©MNoonan2008
What if bailed goods contain other goods?
e.g. I hand you a locked briefcase containing important papers. Are you
the bailee of the briefcase alone or of both the case and the papers?
If it is reasonable to assume the item handed over contained goods of the
same type that it did in fact contain, the bailment extends to contents.
This was the case in Moukataff v. BOAC (1967) 1 Lloyd’’s Rep 396 where
20,000 pounds in banknotes sent by registered mail from London to
Kuwait was stolen by a baggage handler. BOAC denied liability arguing
that while it might have been a bailee of the mailbags, it was not a bailee
of their contents. They failed. The court held that because BOAC knew
that the mailbags contained mail and in particular that red labelled
registered mailbags contained valuables, it had become a bailee of both.
©MNoonan2008
What if bailed goods contain other goods?
e.g. I hand you a locked briefcase containing important papers. Are you
the bailee of the briefcase alone or of both the case and the papers?
If it is reasonable to assume the item handed over contained goods of
the same type that it did in fact contain, the bailment extends to
contents.
If it is NOT reasonable to make that assumption, the only way the
bailment can extend is if the bailor made specific mention at the time of
delivery. In Mendelssohn v. Normand Ltd (1970) 1 QB 177,
Mendelssohn was prevented from locking his car by a car park
attendant. He told the attendant that it contained valuables and asked
him to ensure it was locked after being parked. When he returned, he
found it unlocked and the valuables gone. The company was held liable.
It had been a bailee of both the car and its contents because it had been
©MNoonan2008
put on notice that the car contained valuables.
COMMON CARRIERS
LIABLE WHETHER NEGLIGENT OR NOT
DOES CARRIER HOLD HIMSELF OUT AS WILLING TO
PROVIDE SERVICES TO ALL WHO CHOOSE TO ENGAGE HIM? OR
DOES HE MAKE KNOWN HE RESERVES RIGHT TO REFUSE?
DOES HE CARRY GOODS? (people only?)
Private carrier free to negotiate conditions of carriage. Only liable if
cannot disprove negligence
Duties:
Carry goods for anyone that are properly packed.Carry the goods by the usual
route. Deliver to consignee without unreasonable delay.Deliver to consignee in
accordance with instructions of consignor
Rights:
To be informed if goods dangerous.Can require payment in advance. Has a lien
for carrying charges.Can refuse carriage if dangerous or insufficiently packed
Exceptions to absolute liability:
Acts of God.Acts of enemies of state or seizure public authorities Faulty or
defective packing.Inherent fault or deterioration goods
Statute:
Common Carriers Act 1902 (NSW) Transport Administration Act 1988(NSW) (railways)
Australian National Railways Commission Act (Cth) 1983 Civil Aviation (Carriers’Liability)
Act 1959 (Cth) Civil Aviation (Carriers’Liability) Act 1967 (NSW) Carriage of Goods by Sea
Act 1991 (Cth)
©MNoonan2008
COMMON INNKEEPERS
LIABLE EVEN WITHOUT NEGLIGENCE
Provides lodging and sustenance for travellers
 Must be Guest and not lodger or boarder
 Has a lien
Statute: Amends common law duties
Innkeepers Act 1968 (NSW):
1. Keeping of an inn shall not attract common law duties, liabilities and
rights
2. Nothing in act affects liability for default, neglect or wilful act
3. Abolishes distinction for liability purposes between damage and loss
4. Excludes vehicles and live animals from liability and liens, subject to
(2)
5. Limitation of liability provided prescribed Notice conspicuously
displayed in reception and in room
©MNoonan2008
BAILMENT QUESTIONS
1.
2.
3.
4.
5.
How does bailment differ from sale?
How does bailment differ from a licence?
How is a bailment created?
How can a bailment be brought to an end?
Can a bailee limit liability for negligence by an
exclusion clause?
6. What is a common carrier?
7. What is the difference between a common carrier
and a private carrier?
8. What is the difference between a guest and a
lodger?
©MNoonan2008
BAILMENT?
1. A borrows $100 from B
2. B, a phone card collector, deposits her collection with the
bank for safekeeping.
3. C leaves his cat with a neighbour while away on
business.
4. D hires a car at Sydney Airport.
5. E smashes his car and books it into a garage for repairs.
6. F pawns her gold watch.
7. G posts a parcel to her son at Christmas.
8. H lends his bicycle to his friend.
9. J uses a trolley at the supermarket.
©MNoonan2008
BAILMENT PROBLEM
George left his Porsche overnight with Airport Parking while he flew to
Sydney for a meeting. He paid $20.
Airport Parking parked the car for him in a padlocked garage, which had a
burglar alarm, that was switched on at night plus a security company
conducted regular patrols.
Unfortunately, there was a power failure that night which blacked out the
suburb where Airport Parking was located and shut down the alarm.
When a thief broke into the garage by cutting through the padlock, the
alarm did not work and he was able to steal George's car. The security
company was attending another call at the time.
Advise George.
©MNoonan2008
BAILMENT PROBLEM
Anna left her ball gown with Rapid Dry Cleaners for drycleaning. She requested that special care be taken with
beads and sequins. An employee said that all goods left for dry cleaning
would be treated with due care and skill but that the dry cleaners did not
accept responsibility for clothes left with them. On the back of the ticket
Anna was given there was a clause to the effect that all care would be
taken but no responsibility for loss or damage accepted by the dry cleaners.
Without getting permission from Anna, Rapid sent the gown to another
cleaner that specialised in ball gowns.
When Anna got the dress back she discovered that some of the beads and
sequins were missing and that the dress had been stained.
Advise Anna.
©MNoonan2008
The chainsaw problem
Bob lent his chainsaw to Charlie, who wanted it to lop a large tree in his
front yard. The saw had a tendency to jam if it was not kept properly
lubricated but Bob showed Charlie what to do and also lent him his
specially adapted oil can. After Charlie had lopped the tree he decided to
cut up some old timber joists for firewood. Unfortunately a nail had
broken off inside one of the joists and, as Charlie cut through it, a number
of the saw’s teeth were badly damaged.
Notwithstanding this, Charlie lent the saw to Dick who wanted to use it to
clear some scrub. Dick’s work was interrupted by a sudden storm and he
ran for cover leaving the saw out in the rain. When he attempted to restart
it some time later it would not work. He pulled it to pieces in an attempt to
fix it but then found that he could not put it together again. Bob has asked
Charlie to return the saw. Charlie, in turn, has asked Dick to return it. Dick
has told him that he has not finished with it and that he will hand it back
“in a couple of days”.
©MNoonan2008
The chainsaw problem (2)
The chainsaw situation:
What are the respective positions:
(bailor, bailee, head bailor, sub bailee etc) of Bob, Charlie, Dick?
What are the respective duties and liabilities of Bob, Charlie, Dick?
What breaches of duty have occurred and by whom?
What actions could be instituted and by whom to remedy those
breaches?
©MNoonan2008
BAILMENT PROBLEM
Robin lent her neighbour Pat her lawnmower.
The mower did not have a guard on it and she told Pat that
when mowing she must wear safety glasses to protect her
eyes from stones being thrown out by the blades.
Pat forgot Robin's warning and during the course of mowing,
was struck in the eye by a stone. She has been told that the
eye cannot be saved.
Advise Pat.
©MNoonan2008