Laws3111 Lecture5 2011

Week 5 – Bailment

  • Source of obligation, much like contracts, tort, unjust enrichment, etc.
  • Modern view: an independent sui generis obligation – but traditionally bound to contracts and torts
  • Initially consensual – gave rise to explicit/implied contract, looking at ‘consideration’ for the goods. However the consent based model fails for ‘finders’, ‘rescuers’, etc.

The Pioneer Container

  • Chain of bailments with multiple sub-bailees for transport purposes
  • Contracts and feeder bills of lading in place stipulating any dispute be dealt with in Taiwan
  • Plaintiffs (original bailors) bought case in Hong Kong instead
  • Defendant attempted to argue exclusive jurisdiction
  • Privy Council held that ship owners became bailees for reward on behalf of the plaintiffs, as they had notice of the plaintiffs interests
  • Bailment on terms requires express/implied consent of the bailors – which was found in this instance by the very broad terms of the original bill of lading. Thus those terms could be enforced against the bailor.

Consent Rules

1. Bailee must possess goods (Wills v State Rail Authority) – which requires intent and control, not merely having goods on SRA land.
2. Bailor does NOT need to consent (eg. Bailee can find a lost watch without needing the owners consent to pick it up and establish a bailment)

Morris v CW Martin & Sons Ltd

  • Mrs Morris gave fur for cleaning to Mr Beder
  • He then bailed it to Martin & Sons for cleaning on their terms
  • Diplock held this created bailment between Morris & Martin completely independent of contract with Mr Beder as a sub-bailee
  • Imposed duty to NOT convert goods/exercise reasonable care to keep goods safe. A non-delegable duty.
  • Held exemption clause applied to contract liability, but did not exclude bailment liability
  • Suggests there is no such thing as an involuntary bailee.

The unwitting Bailee

  • AVX v EGM Solders – returned additional boxes, not just rejected items by accident – all of which were scrapped. Held defendant was liable for failing to reasonable steps to verify they owned the goods
  • Further explored in Robot Arenas

Robot Arenas v Waterfield

  • Set purchased by Robot Arenas, stored on old RAF base under agreement
  • Waterfield purchased RAF base with ‘Vacant Possession’, which Robot Arenas had left some (they argued all, but was rejected) of the set behind
  • Contacted prior owner, gave them 5 weeks to remove the parts – then destroyed them due to lack of response. Robot Arenas sued for damage.
  • Held that standard rules of conversion hold that if A possesses B’s goods and destroys them without consent, A is liable to B for conversion.
  • If goods are abandoned, however, they may be destroyed
  • No conversion can occur if it is REASONABLE to treat the goods as having been abandoned. Therefore no liability if the circumstances are such (as in this instance) that the previous owners denied knowledge of the goods, nobody had come to collect them, they looked functionally useless (just random leftover parts) etc.
  • Cited Palmer on bailment, which proposed the unwitting bailee only be liable if it would be reasonable to assume goods were not abandoned. Effectively merging abandonment with negligence.

Finders and Occupiers

  • Finding generally amounts to a bailment (Palmer)
  • Occupiers’ possession can be independent of bailment responsibilities (Wills v SRA)

Types of Bailments

  • Gratuitous v For Reward
  • Fixed Term v At Will
  • Gratuitous – one sided benefit (eg. Loan, deposit, mandate – only one sided consideration)
  • Reward
    • Mutual exchange (hire of work on chattels, pawn, pledge, etc.) – not the same as contractual consideration (easier to meet the bailment standards of for reward)
    • Can include free services if that service provides a practical benefit (Murphy v Hart)
    • Even loaning artwork for no charge to a museum could potentially be for reward if it improves the value/recognition of the artwork and/or donor

Enforcement – duties include:

  • Duty to take reasonable care of the goods (Hobbs v Petersham, WGH Nominees Pty Ltd v Tomblin)
  • Duty to retain possession (dependent on relationship)
  • Duty to not misuse the goods (Morris v CW Martin)
  • Duty to redeliver the goods (or justify why you cannot) (Jackson v Cochrane, Hobbs v Petersham)
  • Duty to not dispute title
  • Duty to not convert (Penfolds)

Duty to take reasonable care

  • Only to take ‘reasonable’ care – standard based on degree of benefit to bailee and/or general standards of negligence (WGH Nominees v Tomlin) – circumstances determine reasonableness
  • Applies equally to sub-bailees – even if no relationship/knowledge with original bailor (Morris v CW Martin)
  • Can be excluded and/or supplemented by contract (Pioneer Container)
  • Standard is ‘reasonable in the circumstances’ (Tottenham investments) but onus of proof is reversed (Graham v Voight)

Hobbs v Petersham Transport

  • ASEA engaged Petersham to deliver the goods
  • Petersham engaged Hobbs to deliver the goods, who made promises regarding the quality of the vehicle
  • Petersham attempted to get Hobbs to contribute/indemnify them
  • Held nothing in contract prevented sub-contracting
  • Held Hobbs was a bailee for reward, bound to use due care and diligence for the delivery – standard of a ‘careful and vigilant person’
  • Where bailee fails to deliver goods, THEY have the onus of proof to demonstrate that they exercised that care

Duty to Redeliver

  • May not be expected to be exercised (eg. Hire Purchase, delivery)
  • Where ongoing possession is NOT countenanced, it must be returned on request (Jackson v Cochrane) or as directed
  • Misdelivery is actionable regardless of negligence/want of care, as it is conversion with strict liability
  • Right to sue in detinue requires ‘higher possessory right’, so sub-bailees CAN still bring a case (Premier Group)
  • Duty to redeliver keys to a drunk patron more important than policy/safety concerns (CLA v Motor Accident Insurance)


  • Substantial departure from prescribed method of performance for a contract/bailment – changes from reasonable care to strict liability
  • Right of possession reverts (Penfolds) but the repugnancy of the deviation must be substantial

Bailors Obligations

  • Must have the right to bail the item
  • Must be safe/fit for purpose, and not hazardous
  • Must pay certain fees/expenses (eg. Storage after bailment expires)
  • Must not repossess goods before the termination of the bailment (if for fixed term)

Case Study: Yearworth v North Bristol NHS Trust (2009)

  • 6 men treated for cancer in Hostpial
  • Donated sperm due to high risk of infertility
  • NHS agreed to store the sperm with ‘all possible care’
  • Storage device failed, semen lost, sued for mental distress and psychiatric injury
  • Denied liability under negligence – on grounds that sperm was not property (merely regenerating tissue)
  • Held they had ‘ownership’ of the sperm for the purposes of the claim (so property, albeit with limited rights)
  • Property is contextual – action in tort for negligence modified context. Right to sue for negligence one right in the bundle which was primarily a right to USE the sperm (or control the use of the sperm)
  • Regulation was for medical practitioners, not to limit the rights of men, only to limit the doctors
  • Held it was a gratuitous bailment – by accepting it they accepted the duty to care for it. By holding themselves out as having special skills to care for it, they because liable to that particular standard
  • Damages for bailment depends on whether it is more like contract (agreement to use) or tort (lack of due care/skill)