"Bailment - does a breach of a hire purchase agreement terminate the bailment": The Anderson Group Pty Limited -v- Tynan Motors Pty Limited [2006] NSWCA 22
Author: Nicholas Gordon   
Judgment Date: 24 February 2006
Jurisdiction: NSW Court of Appeal
In Brief
  • This case involved a bailee’s duty to take reasonable precautions against theft of a motor vehicle. The Court also considered whether a breach of a hire purchase agreement terminated the bailment.
Background Circumstances
  • The bailor, Anderson Group Pty Limited (“the appellant”) obtained a Mercedes car (“the vehicle”) under a hire purchase agreement from Esanda Limited. The agreement contained a provision that the hirer was not to part with possession without prior written consent. The appellant claimed that it telephoned Esanda, obtained a payout figure, informed Esanda that they intended to sell the vehicle and then took it to the yard of the bailee, Tynan Motors Pty Limited (“the respondent”) for sale on consignment. The appellant also failed to insure the vehicle which was a breach of the agreement.
  • On 3 May 2000 thieves broke into the respondent’s office where there were displayed on the wall a board on which the keys to the vehicle were hung. The thieves took the keys and drove the vehicle out of the yard and it has not been seen since.
  • On 3 March 2000 the appellant was wound up. On 24 May 2000 Esanda gave a notice of repossession demanding that the appellant hand over possession of the vehicle. On 29 May 2000 the liquidator of the appellant gave a notice under the Corporations Law disclaiming the subject vehicle. The dispute between the appellant and Esanda was later settled by the liquidator for $130,629.39.
  • The market value of the subject vehicle at the time was $166,000. The appellant, sued the respondent for breach of duty as bailee under negligence, and in contract.
Trial Judge Decision
  • District Court Judge Hughes found that the moment the appellant attempted to have the vehicle sold there was a breach of bailment so that possession was immediately available to Esanda. He stated that:

“It was then that not only was the plaintiff not the owner of the chattel but also was not entitled to possession of the chattel, and had no possessory title and, therefore, had no standing to sue. That is, at the time of the theft, the plaintiff, because of his attempted conversion, was neither the owner of the goods or entitled to the possession of the goods, nor had any possessory title. At the time of the theft the defendant had possession of the chattel. At the time of the theft only Esanda was entitled to immediate possession. The plaintiff is therefore non-suited by reason of legal reasoning.”

  • Judge Hughes also found that, apart from the standing to sue issue, the respondent was not liable for the appellant’s loss in any event. His Honour stated that:

“The relevant standard of car was the reasonable standard of the industry. I am further satisfied that a more secure regime of say higher fences of higher gauge steel in the boom gates, chains or padlocks was not reasonable in the circumstances. _ With those findings of fact if the defendant owed a duty of care to the plaintiff, he did not breach that duty of care. l am satisfied the defendant took all reasonable care to look after the vehicle, bearing in mind second hand car sales or any car sales have to be such that the vehicle has to be well displayed so that it will sell. In those circumstances I don’t find that the Defendant breached its duty of care.”

  • Accordingly, there was a verdict for the respondent and the appellant appealed. Court of Appeal Decision
  • The principle reasons of the Court were given by Young CJ.
  • Young CJ first dealt with the standing issue. His Honour criticised the trial Judge’s non consideration of the law of bailment going back hundreds of years. His Honour re-stated what he said in the. matter of Specialised Transport Pty Ltd V Dominiak (1989) 16NSWLR657, that “at common law the possessor of a chattel has a better title as against all the world save the true owner”.
  • Young CJ then turned to the respondent’s proposition that because there was a fundamental breach of the hire purchase agreement, the appellant was not entitled to possession and therefore not entitled to sue. His Honour noted that in a simple bailment, if the bailee repudiates the bailment then the bailment comes to an end (Penfolds Lines v Elliot 1946) 74CLR204. However, his Honour also stated that “it must be remembered that the act that is necessary to terminate the bailment “must be a very serious act and one which is virtually a disclaimer of the contract of bailment” (see Fenn v Bittleston (1851) 7EX152).
  • After noting that no written authority was provided by Esanda and that the appellant did not maintain insurance of the vehicle, but also that that there was no attempt to default by the hirer, Young CJ held that he cannot see that it could be found as a question of fact that the hirer had repudiated the bailment. His Honour noted some contrary authority in overseas case law, but held that “in Australian law the proposition does not go beyond what I have stated and it is not the case that a deviation short of repugnancy or disclaimer of the bailment amounts to the bailee losing all title or right to possession”.
  • Young CJ also referred to the respondents’ allegation that a deviation from the bailment had been committed. In dismissing this claim, his Honour referred to the High Court case of Russell v Wilson (1923) 33CLR538 which held that “if the person taking the goods has a superior right, then to the extent of that superior right, and to that extent only, must the possessory title yield.”
  • Young CJ then dealt with the respondents’ claim that, as the liquidator of the appellant had disclaimed the vehicle on 29 May 2000, the respondent could not therefore sue for the property they had disavowed. His Honour stated that the Trial Judge erred in agreeing with the proposition, and stated that “because the right of action accrued before the disclaimer, namely, on the date of the theft on 3 .May 2000, the disclaimer can have no affect” (Sandtara Pty Ltd v Abigroup Limited 1996) 19ACSR578.
  • For the above reasons his Honour was “comfortably satisfied that the appellant did have standing to sue”.
  • Young CJ then dealt with the allegations of negligence and breach of contract. His Honour noted that cases such as Hobbs v Petersham Transport Co Pty Limited (1971) 124CLR220 were authority for the proposition that “a bailee for award must take reasonable care of the goods bailed”, and that the onus of proving that the loss was not due to the bailee’s default is on the bailee.
  • His Honour held that the Court of Appeal was in a suitable position to evaluate the facts of the matter and found that it was clear that the respondent did not discharge the onus of demonstrating that it had not been negligent. His Honour’s reasons were that the keys of the motor vehicles in an open yard were kept on a key board in an office and although the office was protected by a burglar alarm at a certain time during the early evening the cleaners turned the burglar alarm off and it appeared the thieves became aware of this practice and struck at a time when the alarm was turned off.
  • Whilst not determinative of the matter, Young CJ also dealt with the appellant’s appeal point that due to an undisclosed contact between Counsel for the respondent at trial and the Trial Judge in the period between trial and verdict, the verdict and judgment should be set aside on the ground of apprehended bias.
  • His Honour noted that the case of R v Lilydale Magistrates Court [1973] ER122 is a authority for the proposition that:

“the sound instinct of the legal profession – Judges and practitioners alike – has always been that, saving the most exceptional cases, there should be no communication or association between the Judge and one of the parties (or the legal advisers or witnesses of such a party)”

  • • In this case the Trial Judge appears to have requested certain material from the respondent’s counsel, without also advising the appellant’s counsel. Young CJ ultimately made no orders in this regard, but confirmed that any contact by a Judge must be made with both counsel and that a stronger than usual Jones v Dunkel inference applied in this case as no evidence was put on by counsel appearing for the respondent at trial despite invitations to do so.
  • In relation to quantum Young CJ agreed with the appellant that the appropriate award was the value of the vehicle and not the amount paid by the liquidator of the appellant to settle the claim with Esanda. The Trial Judge’s decision was therefore overturned and a judgment for $1666,000.00 plus costs was awarded to the appellant.
Implications
  • The decision confirms that possessory title to goods is a superior right to all other rights other than the rights of the actual owner, and that accordingly it is difficult to argue that those holding possessory title to goods have no standing to sue, unless it can be shown that they have repudiated a particular contract by virtue of their actions.
  • The decision is further authority for the well known proposition that the onus is on a bailee to demonstrate that their actions under a contract of bailment were reasonable in any defence to a claim of negligence arising out of the bailment.
  • The decision also confirms that judges, if they must communicate with representatives of litigants, must do so with representatives of all sides, and that these communications must be open and transparent otherwise the public may perceive bias.

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