BAILMENT
Contents
(A) Commentary
A: INTRODUCTION AND GENERAL PRINCIPLES
1 Bailment as voluntary possession
2 Delivery and contract or agreement inessential 3 The scope of the necessary consent
4 The identity of the bailor 5 Bailments and licences
6 Bailment under contracts of employment 6.1 Employees
6.2 Independent contractors 6.3 Operators
6.4 Treatment of bailees 7 Attornment
8 The requirement of redelivery
9 Bailee’s right of action against third parties 9.1 The common law position
9.2 The statutory position 10 Bailments and insurance
11 The bailee’s estoppel: pleading jus tertii
B: GRATUITOUS BAILMENTS AND BAILMENTS FOR REWARD
12 The relevance of the distinction 12.1 The historical position 12.2 Modern standard of care 12.3 Modern significance 13 Making the distinction
C: GRATUITOUS BAILMENT
1: GENERAL 14 General 2: DEPOSIT 15 Duty of care 16 Burden of proof 17 Costs of safekeeping 18 Superadded promises 19 Deviation3: MANDATE
20 General 21 Burden of proof 22 Enforcement of the task 4: GRATUITOUS LOAN
(a) General
23 General
(b) Duties of the lender
24 Injury or loss
25 Withdrawal of chattel before expiry of agreed term
(c) Duties of the borrower
26 Duty of care 27 Added promises
28 Duty to abstain from deviation 29 Duty to return chattel
D: BAILMENTS FOR REWARD
1: LOCATIO CUSTODIAE, OR THE SAFEKEEPING OF GOODS FOR REWARD 30 Definition
31 Duties of the bailor 32 Duties of the bailee 32.1 Duty of care 32.2 Acts of employees 32.3 Burden of proof 32.4 Deviation
32.5 Lien
2: LOCATIO OPERIS FACIENDI, OR THE PERFORMANCE OF SKILL AND LABOUR FOR REWARD 33 General
34 Duties of the bailor 35 Duties of the bailee 35.1 Care and custody 35.2 Burden of proof 35.3 Delegation and deviation 35.4 Quality of services
35.5 Quality of goods and materials 36 Lien
3: LOCATIO CONDUCTIO REI, OR HIRE OF GOODS 37 General
38 Duties of the lessor 39 Duties of the lessee
39.1 Custody and safekeeping 39.2 Burden of proof 39.3 Deviation 39.4 Return of goods 39.5 Ownership of produce 39.6 Payment
E: SUB-BAILMENT AND SIMILAR RELATIONSHIPS
40 Definition of sub-bailment 41 Duties of the sub-bailee 42 Relief of the sub-bailee 43 Substitutional bailments
44 Quasi-bailment
F: INVOLUNTARY BAILMENT AND BAILMENT BY CONCEALMENT
1: INVOLUNTARY BAILMENT 45 Definition
46 Duty to guard against loss and damage 47 Duty on delivery to third party 48 Disposal of goods
49 Recovery of costs 50 Other features of bailment 51 Property in unsolicited goods 2: UNCOLLECTED GOODS
(a) Duty of care, and common law disposal of goods
52 General
53 Standard of care diminishing 54 Bailment now involuntary 55 Breach of bailment 56 Abandonment
(b) Statutory disposal
57 The Torts (Interference with Goods) Act 1977 58 Scope
59 Forms of disposal
60 Sale without court authority 60.1 Activating the power 60.2 Imposing a duty to collect 60.3 Giving notice of intention to sell 60.4 Conducting the sale
60.5 Legal effects of sale 61 Sale with court authority
(c) Recovery of expenses
62 Recovery of expenses 3: BAILMENT BY CONCEALMENT
63 General
(B) Forms and Precedents
A: FORMS RELATING TO THE TORTS (INTERFERENCE WITH GOODS) ACT
1 Document seeking written authority of a person claiming to have or having an interest in goods to commence action for wrongful interference with goods
2 Document providing authority of a person claiming to have or having an interest in goods 3 Notice to bailor that goods are ready for re-delivery
4 Notice of intention to sell goods
5 Notice of bailee accounting to the bailor following sale of goods B: UNSOLICITED GOODS AND SERVICES
6 Notice under the Unsolicited Goods and Services Act 1971 C: FORMS RELATING TO SALE OF GOODS
7 Delivery order
9 Warehouse-keeper’s certificate (not document of title) 10 Warehouse-keeper’s certificate: bonded warehouse 11 Dock warrant
12 Warrant issued by manufacturer D: LIEN CLAUSES
13 General and particular lien
14 General and particular lien with power of sale: carriage by sea 15 Power of sale attached to general and particular lien
16 General and particular lien with power to claim storage charges
17 Notice seeking confirmation that goods will be released on tender of amount owed not amount claimed
18 Notice from owner of goods to wharfinger or warehouseman to exercise lien for freight and other charges
19 Notice of sale under the Merchant Shipping Act 1894 Section 497 E: RETENTION OF TITLE CLAUSES
20 Simple retention of title clause 21 Current account clause 22 Extended or continuing clause 23 Tracing clause
24 Aggregation (or enlarged) clause
(A) Commentary
A: INTRODUCTION AND GENERAL PRINCIPLES
1 Bailment as voluntary possession
A bailment1 arises whenever one person is put voluntarily and knowingly in possession of goods which belong to
another2. In general terms, bailment signifies a distribution of ownership and possession between different persons3.
The bailee has possession and the bailor has ownership (or some other reversion in the goods)4. Occasionally the
distinction is expressed as one between special and general property5. Typical bailments involve the delivery of goods
for purposes of hire, loan, storage, cleaning, repair, agistment, publication, salvage, sale on commission, carriage, pledge or title retention under a contract for the sale of goods. Provided the conditions of bailment are satisfied, a bailment can be for any legitimate purpose and for any duration. A bailment may be for the benefit of both parties (sometimes known as a bailment for reward) or for the exclusive benefit of one party (sometimes known as a gratuitous bailment).
[3001]
1 As to bailment generally see Palmer Bailment (2nd Edn, 1991); Paton Bailment in the Common Law (1952) and 2 Halsbury’s
Laws (4th Edn) para 1801 et seq.
2 The Pioneer Container [1994] 2 All ER at 261–262, PC, per Lord Goff of Chieveley; and see Morris v CW Martin & Sons Ltd
[1966] 1 QB 716, [1965] 2 All ER 725, CA.
3 It is not possible at common law for an owner of goods to bail them to himself. Cf Harding v Commr of Inland Revenue [1977] 1
NZLR 337 where it was held that under New Zealand law property could be bailed by the owner to himself and another jointly. See also Paragraph 4 [3007] post (re-bailment by bailee to bailor).
4 See Paragraphs 4 [3007], 8 [3018] post.
5 Re Bond Worth Ltd [1980] Ch 228 at 247, [1979] 3 All ER 919 at 937 per Slade J; and see Donald v Suckling (1866) LR 1 QB
585 (a case of pledge). Where a chattel is bailed to two or more bailees, there may be a joint bailment, in which event each bailee must answer for the conduct of his co-bailees within the scope of their authority: Davey v Chamberlain (1803) 4 Esp 229; Coupe
Co v Maddick [1891] 2 QB 413 at 415, DC, per Cave J. It appears that a joint bailee is not responsible for his co-bailees when
they are negligent not in the performance of the duties imposed by the bailment but through an act or omission wholly outside the bailment. Where a chattel belonging to several co-owners is bailed, these may be joint bailors. See further Palmer Bailment (2nd Edn, 1991) ch 3 pp 260–264.
[3002]
Most bailments arise from a direct physical delivery by one party to another, and from a contract or other agreement. Neither of these elements is, however, essential. A bailment can arise where a seller remains in possession of goods after property has passed to the buyer1, or where goods are taken into the possession of a finder2, or where goods are
possessed by a sub-bailee3 or quasi-bailee4. A gratuitous bailment gives rise to no contract5 and yet creates a bailment.
[3003]
1 Union Transport Finance Ltd v Ballardie [1937] 1 KB 510, [1937] 1 All ER 420; and see Garlick v W & H Rycroft Ltd [1982]
CA Transcript 277.
2 Morris v CW Martin & Sons [1966] 1 QB 716 at 731–732, 738, [1965] 2 All ER 725 at 734–735, CA, per Denning MR; Cia
Portorafti Commerciale SA v Ultramar Panama Inc, The Captain Gregos (No 2) [1990] 2 Lloyd’s Rep 395 at 405, CA, per
Bingham LJ; Southland Hospital Board v Perkins Estate [1986] 1 NZLR 373 at 375–376 per Cook J; and see Thompson v Nixon [1966] 1 QB 103, [1965] 2 All ER 741; Parker v British Airways Board [1982] QB 1004 at 1017, [1982] 1 All ER 834 at 843, CA, where Donaldson LJ said that the finder must take reasonable steps to acquaint the owner of the goods of his find and must take reasonable care of the goods meanwhile.
3 The Pioneer Container [1994] 2 All ER 250, PC; Morris v CW Martin & Sons [1966] 1 QB 716, [1965] 2 All ER 725, CA; Cia
Portorafti Commerciale SA v Ultramar Panama Inc, The Captain Gregos (No 2) [1990] 2 Lloyd’s Report 395, CA; Hispanica de Petroleos SA v Vencedora Oceanica Navegacion SA, The Kapetan Markos NL (No 2) [1987] 2 Lloyd’s Report 321, CA.
Sub-bailment is discussed below: see Paragraph 40 [3131] et seq post.
4 Metaalhandel JA Magnus BV v Ardfields Transport Ltd [1988] 1 Lloyd’s Report 197; and see The Pioneer Container [1994] 2
All ER 250 at 264–267, PC, per Lord Goff of Chieveley; Palmer Bailment (2nd Edn, 1991) ch 20. Quasi-bailment is discussed below: see Paragraph 44 [3139] post.
5 Walker v Watson [1974] 2 NZLR 175. See also Paragraph 14 [3051] et seq post.
[3004]
3 The scope of the necessary consent
The bailee must consent to the possession of the goods1. In general, this means that he must know that the chattel is his
possession2. His consent may be express or implied3, and must extend both to the nature of the goods and the identity
of their owner4. Where no express consent is given (as where a container is bailed and the bailee is unaware of the
contents) the question is whether the contents are of a class that can reasonably be expected to have been in the container5. If so, the bailee can reasonably be taken to have consented to possession of them6. Where the owner of a
container on delivering it to another warns that it contains valuable chattels, and the possessor fails to inquire further, consent to possession of the contents will generally be implied7.
If a person in possession has not consented to hold possession on behalf of that particular owner, the possessor is not a bailee of that owner and that owner is not a bailor8. But if the necessary consent on the part of the
possessor be proved, a bailment can arise without the consent of the bailor9. Thus, there can be a bailment where a
person finds goods10, or seizes and takes into possession the goods of another11, whether with honest or dishonest
intentions12.
[3005]
1 The Pioneer Container [1994] 2 All ER 250, PC. Cf Lethbridge v Phillips (1819) 2 Stark 544; Neuwith v Over Darwen
Industrial Co-operative Society (1894) 63 LJQB 290, DC; and see the discussion of involuntary bailment Paragraph 45 [3151] et
seq post.
2
See
Kowal v Ellis (1977) 76 DLR (3d) 546 at 547–548 per O’Sullivan JA (landowner not a bailee of objects lying withoutknowledge on his land). But cf Parker v British Airways Board [1982] QB 1004 at 1017, [1982] 1 All ER 834 at 843, CA, per Donaldson LJ (landowner may owe duty to find lost chattels).
3 As to implied consent by a sub-bailee see Paragraphs 40 [3131], 42 [3135] post.
4 The Pioneer Container [1994] 2 All ER 250 at 262, PC, per Lord Goff of Chieveley; cf AVX Ltd v EGM Solders Ltd (1982)
Times, 7 July.
5 Martin v LCC [1947] KB 628, [1947] 1 All ER 783; Moukataff v BOAC [1967] 1 Lloyd’s Rep 396; Brown v Toronto Auto Parks
Ltd [1955] 2 DLR 525; Heffron v Imperial Parking Co Ltd (1974) 46 DLR (3d) 642. See generally Palmer Bailment (2nd Edn,
1991) ch 6.
6 Moukataff v BOAC [1967] 1 Lloyd’s Rep 396 (special mailbags containing banknotes).
7 Martin v LCC [1947] KB 628; Minichiello v Devonshire Hotel (1967) Ltd (1977) 79 DLR (3d) 656; affirmed (1978) 4 WWR
539. See also Mendelssohn v Normand Ltd [1970] 1 QB 177, CA.
8 The Pioneer Container [1994] 2 All ER 250 at 261–262, PC, per Lord Goff of Chieveley; cf Awad v Pillai [1982] RTR 266. 9 The Pioneer Container [1994] 2 All ER 250 at 261–262, PC, per Lord Goff of Chieveley.
10 See Paragraph 2 [3003] ante.
11 R v Leigh (1800) 2 East PC 694; McCowan v McCulloch (1926) 1 DLR 312; Mazullah Khan v McNamara (1911) 13 WALR
151; and see Burns v Roffey (16 March 1982, unreported) English HCt.
12 Cf further R v Rigbey (1863) 2 SCR (NSW) 176 (no bailment where wallet taken from tipsy man).
[3006]
The bailor need not be the owner, although this is commonly so. A bailor may be any person with a superior reversionary interest in the goods1. Thus, an owner of goods may become their bailee by taking possession from an
existing bailee for a period shorter than the original bailment2. The original bailee’s reversion enables him to be cast
both as bailor and a bailee of the owner. Any right of possession against the possessor will probably suffice for a relationship of bailor and bailee3, as where a bailee sub-bails to a third party but retains a right of possession against the
sub-bailee4. The bailor is then simultaneously a bailor of the possessor and a bailee of the owner. But a mere
contractual right of possession against the owner may be insufficient to qualify one as a bailor5. Where cargo was taken
into possession by salvors and stored by their depositaries, and the ship owner was contractually entitled against the cargo owner to resume possession and continue the voyage once the goods were released from storage, the ship owner was not a bailor of the salvors or their depositaries, and the sole bailments were between cargo owners and salvors and salvors and depositaries respectively6. A person who has the necessary ownership or right of possession may be a bailor
although he has acquired no physical possession of the goods before their coming into the possession of the bailee7.
[3007]
1 See the discussion in Palmer Bailment (2nd Edn, 1991) pp 112–122.
2 An owner of goods may also become a bailee without any physical transfer of possession by means of a sale and lease-back
contract.
3 Transcontainer Express Ltd v Custodian Security Ltd [1985] 1 Lloyd’s Rep 128 at 135, CA, per Slade LJ; The Hamburg Star
[1994] 1 Lloyd’s Rep 399 at 404 per Clarke J (proposition that an immediate right to possession is sufficient possessory title to found a claim held arguable). See also the Australian cases of RM Campbell (Vehicle Sales) Pty Ltd v Machnig (22 May 1981, unreported) Supreme Court of New South Wales, Common Law Division; Bolwell Fibreglass Pty Ltd v Foley [1984] VR 97, Supreme Court of Victoria.
4 Morris v CW Martin & Sons Ltd [1966] 1 QB 716, [1965] 2 All ER 725; and see Paragraph 40 [3131] post. 5 China-Pacific SA v Food Corpn of India, The Winson [1982] AC 939, [1981] 3 All ER 688, HL.
6 China-Pacific SA v Food Corpn of India, The Winson [1982] AC 939, [1981] 3 All ER 688, HL.
7 Transcontainer Express Ltd v Custodian Security Ltd [1985] 1 Lloyd’s Rep 128, CA; Belvoir Finance Co Ltd v Stapleton [1971]
1 QB 210, [1970] 3 All ER 664, CA; Johnson Matthey & Co Ltd v Constantine Terminals Ltd [1976] 2 Lloyd’s Rep 215 (disapproved, but not on this point, in The Pioneer Container [1994] 2 All ER 250, PC, at 260–262 per Lord Goff of Chieveley);
Edwards v Newland & Co [1950] 2 KB 534, [1950] 1 All ER 1072, CA.
[3008]
5 Bailments and licences
The requirement of possession means that bailments must be distinguished from licences1. The problem commonly
arises with regard to car parks2, restaurant cloakroom facilities3 and other situations4 where objects are left on land or
premises with the occupier’s consent.
Where an occupier of land permits another to leave goods on the land in circumstances which do not transfer to the occupier the possession of the goods, the relationship is merely one of licensor and licensee. The occupier owes no general duty to guard the goods against theft5 and cannot sue third parties for wrongs committed upon the goods6. In
judging whether possession has passed, regard is paid to all the circumstances: the layout of the site7, the type of
goods8, the distance which the owner moves from his goods and the ease with which he can retrieve them9, the parties’
expectations10, any previous dealings between the parties11, whether keys or other means of control are delivered to the
occupier12, whether there are employees of the occupier on hand to oversee the goods or assist in their redelivery13,
whether the owner is charged for the service14, and the way in which the charge is enforced15.
[3009]
1 The subject is discussed in detail in Palmer Bailment (2nd Edn, 1991) ch 5.
2 Leading cases areAshby v Tolhurst [1937] 2 KB 242, [1937] 2 All ER 837, CA; Tinsley v Dudley [1951] 2 KB 18, [1951] 1 All
ER 252, CA; and see BG Transport Service Ltd v Marston Motor Co Ltd [1970] 1 Lloyd’s Rep 371; BRS (Contracts) Ltd v
Colney Motor Engineering Co Ltd (1958) Times, 27 November, CA; Fred Chappel Ltd v National Car Parks Ltd (1987) Times,
22 May.
3 See eg Ultzen v Nicols [1894] 1 QB 92, DC; Samuel v Westminster Wine Co (1959) Times, 16 May; Davies v Educated Fish
Parlours Ltd [1966] CLY 539.
4 Eg caravan parks and boat moorings: see Halbauer v Brighton Corp [1954] 2 All ER 707, [1954] 1 WLR 1161, CA; Hinks v
Fleet (1986) Times, 7 October, CA.
5 Ashby v Tolhurst [1937] 2 KB 242, [1937] 2 All ER 837, CA; Tinsley v Dudley [1951] 2 KB 18, [1951] 1 All ER 252, CA;
Deyong v Shenburn [1946] 1 KB 227, CA; Edwards v West Herts Group Hospital Management Committee [1957] 1 All ER 541,
[1957] 1 WLR 415, CA; and see generally Smith v Littlewoods Organisation Ltd [1987] AC 241, [1987] 1 All ER 710, HL.
6 Cf the position of the bailee, who can thus sue: see Paragraph 9 [3021] post.
7 See eg James Buchanan Ltd v Hay’s Transport Services Ltd [1972] 2 Lloyd’s Rep 535; BG Transport Service Ltd v Marston
Motor Co Ltd [1970] 1 Lloyd’s Rep 371; BRS (Contracts) Ltd v Colney Motor Engineering Co Ltd (1958) Times, 27 November; Ashby v Tolhurst [1937] 2 KB 242, [1937] 2 All ER 837, CA; Tinsley v Dudley [1951] 2 KB 18, [1951] 1 All ER 252, CA.
8 Maritime Coastal Containers Ltd v Shelburne Marine Ltd (1982) 52 NSR (2d) 51. 9 Ultzen v Nicols [1894] 1 QB 92, DC; Davies v Educated Fish Parlours Ltd [1966] CLY 539. 10 James Buchanan Ltd v Hay’s Transport Services Ltd [1972] 2 Lloyd’s Rep 535.
11 James Buchanan Ltd v Hay’s Transport Services Ltd [1972] 2 Lloyd’s Rep 535.
12 BG Transport Service Ltd v Marston Motor Co Ltd [1970] 1 Lloyd’s Rep 371 and see Olley v Marlborough Court Ltd [1949] 1
KB 532, [1949] 1 All ER 127, CA; Nahhas v Pier House (Cheyne Walk) Management (1984) 270 EG 328.
13 Sydney City Council v West (1965) 114 CLR 481, HC of A; Shorters Parking Station Ltd v Johnson (1963) NZLR 135. 14 But cf Ashby v Tolhurst [1937] 2 KB 242, [1937] 2 All ER 837, CA.
15 See PalmerBailment (2nd Edn, 1991) pp 406–409.
[3010]
6 Bailment under contracts of employment 6.1 Employees
Under old authority, which has not been directly disapproved, an employee who gets charge and control of the employer’s goods in the course of employment has no possession and is not a bailee, but has mere custody1. The
employee owes a duty of care2 but does not, it seems, carry the bailee’s burden of proof3. The rule (which has little to
commend it)4 gives way where the distance of the employee from the employer, and the corresponding lack of control
over the employee, is so great as to warrant a contrary conclusion5. With modern communications, such cases are likely
to be rare6. An employee may also get possession where he receives goods from a third party for delivery to the
employer; in that case the employee may get an independent possession between the moment of delivery to him and the moment of his performing some unequivocal act of appropriation to the employer7. An employee to whom an
employer’s chattel is loaned for a purpose unconnected with the employment may also get possession8.
[3011]
1 Mires v Solebay (1677) 2 Mod 242 Rep; Alexander v Southey (1821) 5 B & Ald 247; Associated Portland Cement
Manufacturers (1910) Ltd v Ashton [1915] 2 KB 1, CA; R v Harding (1929) 142 LT 583, CCA; see generally Palmer Bailment
(2nd Edn, 1991) ch 7.
2 Superlux v Plaisted [1958] CLY 195, CA.
3 Wiebe v Lepp (1974) 46 DLR (3d) 441; and see Rowell v Alexander Mackie College of Advanced Education (1988) Aust Torts
Report 67, 727.
4 Palmer Bailment (2nd Edn, 1991) p 456 et seq.
5 The Jupiter (No 3) [1927] P 122 at 131 per Hill J, affirmed [1927] P 250; Boson v Sandford (1690) 1 Show 101; Moore v
Robinson (1831) 2 B & Ad 817.
6 The Jupiter (No 3) [1927] P 122 at 131 per Hill J, affirmed [1927] P 250.
7 Pollock and Wright, Possession in the Common Law (1888) 60, and cases cited therein; Marshall v Dibble [1920] NZLR 497,
SC.
8 Haira v Attorney-General [1962] NZLR 549.
[3012]
6.2 Independent contractors
Independent contractors to whom tasks involving the care of goods are delegated (such as sub-carriers) get possession once the goods are delivered to them; they are not mere custodians of the first possessor1. Where a carrier delegates the
carriage to a subsidiary carrier, the first carrier gives up possession2, though he may retain a possessory reversion. 1 Palmer Bailment (2nd Edn, 1991) ch 20. Cf Transcontainer Express Ltd v Custodian Security Ltd [1985] 1 Lloyd’s Rep 128, CA. 2 As to sub-bailment and kindred concepts see Paragraph 40 [3131] et seq post.
[3013]
6.3 Operators
Where chattels are temporarily supplied with operators or other guardians, the question whether there is a bailment depends on all the circumstances1. The fact that the operator remains an employee of the supplier2 is a significant, but
not decisive, factor against a bailment of the chattel3. Nor is it decisive that the operator becomes a temporary
employee of the hirer. Other material factors are the discretion given to the employee in working the chattel, the physical circumstances of the place of use, the identity of the parties responsible for collection, delivery and overnight storage, the allocation of risk and the general nature and terms of the contract4.
1 These are discussed at length in Palmer Bailment (2nd Edn, 1991) ch 7, pp 470–493.
2 See generally as to the test for establishing this Mersey Docks and Harbour Board v Coggins and Griffith (Liverpool) Ltd [1947]
1 AC 1, [1946] 2 All ER 345, HL.
3 See eg British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd [1975] 1 QB 303, [1974] 1 All ER 1059, CA. Cf Dean v Hogg
(1834) 10 Bing 345.
4 See Allison Concrete Ltd v Canadian Pacific Ltd (1974) 40 DLR (3d) 237; Coast Crane Co v Dominion Bridge Co (1961) 28
DLR (2d) 295; and see generally Palmer Bailment (2nd Edn, 1991) p 470 et seq. [3014]
Bailees are not treated as employees for the purposes of equating their conduct with that of the bailor. A bailor is not vicariously liable for the misconduct of his bailee towards third parties, and conversely a bailor’s damages against a third party are not to be reduced on account of the contributory negligence of the bailee1. The position may be
otherwise where the case is one of agency by casual delegation, as where a car is being driven to a destination at the owner’s request2.
1 Wellwood v King Ltd [1921] 2 IR 274, CA; France v Parkinson [1954] 1 All ER 739, [1954] 1 WLR 581, CA; Gibson v
O’Keeney [1927] NI 66, CA.
2 Ormrod v Crossville Motor Services Ltd [1953] 2 All ER 753, [1953] 1 WLR 1120, CA.
[3015]
7 Attornment
A bailment may arise by attornment1, as where a bailor of goods in store sells them and the bailee acknowledges to the
buyer that he now holds the goods on the buyer’s behalf2, or where a pledgor of goods in store pledges them and the
pledgor’s bailee makes a similar acknowledgement3. In that event the bailee becomes the bailee of the buyer or
pledgee, and it appears that the terms of the original bailment govern the bailment by attornment4. A seller of goods
who remains in possession after the sale may also attorn, by acknowledging that he now holds them on the buyer’s behalf5.
An attornment can be easily made6, but requires some overt act of recognition of the incoming party’s interest7. There
can be no attornment where the bailee simply alters his own records without communicating that fact8, or receives
delivery orders without objection9.
Where the goods comprised in the attornment are identified, the attornment can pass property to the attornee and may, for example, constitute an act of unconditional appropriation by the seller for the purposes of Section 18 rule 5(1) of the Sale of Goods Act 197910. Where the goods are not identified (as where the bailee attorns in respect of a
undivided portion of a larger bulk) an attornment cannot pass property but may estop the attornee from denying that this has occurred11. Such estoppel does not, however, confer a proprietary interest on the attornee exigible against third
parties12, even (it seems) where such third parties are aware of the circumstances giving rise to the estoppel13.
An attornment to the agent of an undisclosed principal can pass property to the principal, or create an estoppel in the principal’s favour, according to whether the goods are identified or undivided, and subject to the making of an election14.
[3016]
1 Palmer Bailment (2nd Edn, 1991) ch 21.
2 Dublin City Distillery Ltd v Doherty [1914] AC 823, HL.
3 Madras Official Assignee v Mercantile Bank of India Ltd [1935] AC 53 at 58–59, PC; Maynegrain Pty Ltd v Compafina Bank
[1982] 2 NSWLR 141, on appeal, without reference to this point (1984) 58 ALJR 389, [1984] 1 NSWLR 258; Askrigg Pty Ltd v
Student Guild of the Curtin University of Technology (1989) 18 NSWLR 738.
4 HMF Humphrey Ltd v Baxter, Hoare & Co Ltd (1933) 149 LT 603; Britain and Overseas Tradings (Bristles) Ltd v Brooks Wharf
and Bull Wharf Ltd [1967] 2 Lloyd’s Rep 51; Cremer v General Carriers SA [1974] 1 All ER 1, [1974] 1 WLR 341; Leigh and Sillivan Ltd v Aliakmon Shipping Co Ltd, The Aliakmon [1986] AC 785, [1986] 2 All ER 145, HL; Cia Portorafti Commerciale SA v Ultramar Panama Inc, The Captain Gregos (No 2) [1990] 2 Lloyd’s Rep 395, CA.
5 Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236. 6 Laurie and Morewood v John Dudin & Sons [1926] 1 KB 223 at 237, CA, per Scrutton LJ.
7 See eg Gosling v Birnie (1831) 7 Bing 339; Seton, Laing & Co v Lafone (1887) 19 QBD 68, CA; Re London Wine Co (Shippers)
Ltd [1986] PCC 121; Woodley v Coventry (1863) 2 H & C 164; 159 ER 68; Knights v Wiffen (1870) LR 5 QB 660.
8 Laurie and Morewood v John Dudin & Sons [1926] 1 KB 223, CA. 9 Laurie and Morewood v John Dudin & Sons [1926] 1 KB 223, CA. 10 Maynegrain Pty Ltd v Compafina Bank Ltd [1982] 2 NSWLR 141. 11 Maynegrain Pty Ltd v Compafina Bank Ltd [1982] 2 NSWLR 141.
12 Re London Wine Co (Shippers) Ltd [1986] PCC 121; Simm v Anglo-American Telegraph Co (1879) 5 QBD 188, CA; Re
Goldcorp Exchange Ltd [1994] 2 All ER 806 at 816–819, PC per Lord Mustill.
13 Re Goldcorp Exchange Ltd [1994] 2 All ER 806 at 816–819, PC per Lord Mustill; Re Stapylton Fletcher Ltd [1994] 1 WLR
1181 at 1203 per Judge Baker QC.
14 Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141; on appeal, without reference to this point, (1984) 58 ALJR 389,
[1984] 1 NSWLR 258, PC. [3017]
8 The requirement of redelivery
A bailment requires that the goods remain identifiable as the property of the bailor throughout the period that they are in the other party’s possession1. No delivery which confers general property on the deliveree can give rise to a
bailment, because it is of the essence of bailment that general property remains with the bailor2. An outright gift is not a
bailment, and neither is an outright sale or exchange, or a transaction of mutuum3. It follows that a delivery of generic
bailment4. Such deliveries are normally analysed as passing property to the deliveree and as giving the deliveror a mere
contractual right to the substitute goods, ineffective in the event of the deliveree’s insolvency5. But in cases of clear
intention, there may be a joint ownership of the overall bulk on the part of all the deliverors in proportion to their contributions6. There may then be a joint bailment, the interests of the joint bailors being entrusted to a single bailee. In
that event, the deliverors are protected on an insolvency.
[3018]
Although an outright sale and delivery is incompatible with a bailment, the two transactions can arise consecutively on a single chattel. Goods supplied on hire purchase are bailed until the hirer exercises the option to buy or until the lessor repossesses them7. A seller can remain in possession as a bailee after property has passed to the
buyer8, and may undertake additional bailment responsibilities such as the despatch of the goods by carrier9. Goods
delivered to a buyer on title retention terms, whereby the seller retains property until payment, are bailed until the seller reposseses them, or until the buyer resells them or causes their identity to be lost in the manufacturing process10. The
mere fact that such resale or consumption is contemplated at the time of delivery does not by itself prevent the delivery from being one of bailment11. But if no realistic right of repossession is reserved to the supplier (as where a seller
knows that goods supplied to the particular buyer are always resold or consumed before the payment date) a court may conclude that there is no bailment, even before consumption or sale12.
It follows from the foregoing that redelivery of the precise goods to the deliveror is not essential to bailment. If redelivery to the deliveror is contemplated, it must be the exact goods which are to be redelivered or their clear physical successors (as where money is bailed to buy gold13, or grapes are delivered to be pressed into wine)14. But a
bailment can contemplate some purpose other than delivery, such as the ultimate transmission of property to the deliveree, or the deliveree’s ultimate delivery of the goods to a third party, provided there is an intervening period during which the deliveree has possession and the deliveror retains property. Where a carrier of money is instructed to pay it into a bank account (so rendering further identification of the exact currency impossible) the carrier is
nevertheless a bailee of the money between receipt and payment in15.
[3019]
1 South Australian Insurance Co Ltd v Randell (1869) LR 3 PC 101, PC.
2 Re Bond Worth Ltd [1980] Ch 228 at 247, [1979] 3 All ER 919 at 937 per Slade J.
3 Ie, the lending of fungible things for repayment in the form of equivalent things: see Parastatidis v Kotaridis [1978] VR 448;
Coleman v Harvey [1989] 1 NZLR 723.
4 South Australian Insurance Co Ltd v Randell (1869) LR 3 PC 101, PC. 5 See further Chapman Bros v Verco Bros & Co Ltd (1933) 49 CLR 306.
6 Re Stapylton Fletcher Ltd [1994] 1 WLR 1181; Mercer v Craven Grain (March 31 1994, unreported), HL. Cf Re Goldcorp
Exchange Ltd [1994] 2 All ER 806, PC.
7 Motor Mart Ltd v Webb [1958] NZLR 773. Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd
(1987) 61 ALJR 415, HC Aust.
8 See Paragraphs 2 [3003] ante (delivery unnecessary) and 7 [3016] ante (attornment). 9 CCC Films (London) Ltd v Impact Quadrant Films Ltd [1984] 3 All ER 298.
10 Aluminium Industrie Vaassen (BV) v Romalpa Aluminium Ltd [1976] 2 All ER 552, [1976] 1 WLR 676, CA; Re Andrabell Ltd
[1984] 3 All ER 407; Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25, [1979] 3 All ER 961, CA; Re Peachdart
Ltd [1984] Ch 131; Compaq Computers Ltd v Abercorn Group Ltd [1991] BCC 484; Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick Ltd [1984] 2 All ER 152; Clough Mill v Martin [1984] 3 All ER 982 at 987, CA, per Goff LJ.
11 Clough Mill v Martin [1984] 3 All ER 982, [1985] 1 WLR 111, CA.
12 Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25, at 38, CA, per Bridge LJ. 13 Oriental Bank Corpn v Hewitt (1862) 1 SCR (NSW) 220.
14 Wine Grapes Marketing Board for the City of Griffiths v Griffiths Vintners Pty Ltd (1989) 1 ACSR 88, NSW Supreme Court
Equity Division, per Cohen J (semble).
15 Brambles Security Services Ltd v Bi-lo Pty Ltd [1992] ACL Rep 40 NSW 1.
[3020]
9 Bailee’s right of action against third parties 9.1 The common law position
At common law, the bailee’s possession counts as title1. In the absence of the bailor, the bailee can recover from any
third party who commits a wrong against the goods the full value of the goods or (in the event of damage) the full cost of repair2. This right of recovery does not depend on the consent of the bailor or on the bailee’s being liable to the
bailor for the misadventure3, and appears to extend to persons who have no actual possession but an immediate right to
the possession of the goods4. It arises irrespective of whether the bailee has suffered personal loss, although the bailee
must hold the sum recovered for the bailor once the value of his personal interest is deducted5. Where the bailee
recovers full damages from the third party, the third party is released from further liability to the bailor6. Conversely,
where the bailor is the first to recover full damages, the bailee cannot then sue the third party in respect of the same wrong7. But where the commercial interests of bailor and bailee are divided (as where goods are leased and the lease
has some years to run) and one of them recovers only the value of his limited interest, the third party is not released; the other party to the bailment can recover the outstanding value of his own interest.
The common law rule does not apply where:
9.1.1 the wrongdoer has a cross claim or right of set-off against the bailee8, or
9.1.2 an award of full damages to the bailee would produce circuity of actions9, or
9.1.3 the wrongdoer has an interest in the goods10, or
9.1.4 the wrongful act is performed by authority of the true owner11, or
9.1.5 the wrongdoer defends with the true owner’s authority12, or
9.1.6 the wrongdoer has, since the time of the wrongful act, become the owner of the goods13.
In such cases, it appears that the bailee can recover only the value of his possessory interest and/or any other personal loss.
[3021]
1 The Winkfield [1902] P 42, CA; for a full discussion, see Palmer Bailment (2nd Edn, 1991) ch 4. 2 As to the categories of loss recoverable, see Palmer Bailment (2nd Edn, 1991) pp 318–340.
3 The Winkfield [1902] P 42, CA; The Albazero [1977] AC 774, [1976] 3 All ER 129, HL; Glenwood Lumber Co Ltd v Phillips
[1904] AC 405; Eastern Construction Co Ltd v National Trust Co Ltd [1914] AC 197; China-Pacific SA v Food Corpn of India,
The Winson [1982] AC 939, [1981] 3 All ER 688, [1981] 3 All ER 688, HL.
4 Chabbra Corpn Pte Ltd v Jag Shakti (owners) [1986] AC 337, [1986] 1 All ER 480, PC; sed quaere; cf Palmer Bailment (2nd
Edn, 1991) pp 340-351; Butler v Hobson (1838) 4 Bing NC 290; Leake v Loveday (1842) 4 Man & G 972; Gadsden v Barrow (1854) 9 Exch 514.
5 The Winkfield [1902] P 42, CA. 6 The Winkfield [1902] P 42, CA.
7 O’Sullivan v Williams [1992] 3 All ER 385, CA.
8 Chabbra Corpn Pte Ltd v Jag Shakti (owners) [1986] AC 337 at 345–346, 348, PC, per Lord Brandon of Oakbrook, who
described this as ‘the only exception’ to the rule in The Winkfield [1902] P 42, CA.
9 Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 156–157 per Hutley JA, reversed without reference to this point
(1984) 58 ALJR 389, PC.
10 Brierley v Kendall (1852) 17 QB 937; and see further Standard Electronic Apparatus Laboratories Pty Ltd v Stenner [1960]
NSWR 447; Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 156–157 per Hutley JA (semble) reversed without reference to this point (1984) 58 ALJR 389, [1984] 1 NSWLR 258, PC. Palmer Bailment (2nd Edn, 1991) p 316 note 95.
11 The Winkfield [1902] P 42 at 54, CA. 12 The Winkfield [1902] P 42 at 54, CA.
13 Eastern Construction Co Ltd v National Trust Co Ltd and Schmidt [1914] AC 197, PC, at 210.
[3022]
9.2 The statutory position
The common law position is overlaid by statute, which seeks to bring all interested parties before the court, and to distribute liability for misconduct towards bailed goods in a single proceeding. Under the statutory provisions, a defendant in an action for wrongful interference with goods1 is entitled to show, in accordance with rules of court2, that
a third person has a better right than the plaintiff as respects all or any part of the interest claimed by the plaintiff, or in right of which the plaintiff sues3. Rules of court under this provision require the plaintiff to give particulars of his title
and to identify any person who, to his knowledge, has or claims any interest in the goods4. The defendant may apply
for directions5 as to whether any person should be joined with a view to establishing whether he has a better right than
the plaintiff, or has a claim as a result of which the defendant might be doubly liable6. Where a party fails to appear on
the hearing of the summons or to comply with any direction given by the court on such an application, the court may deprive him of any right of action against the defendant for the wrong, either unconditionally or subject to such terms and conditions as may be specified7.
It appears that these provisions (being limited to cases of wrongful interference with goods) are inapplicable where a bailee sues a third party for breach of contract rather than in tort8.
[3023]
1 This provision applies to all proceedings for wrongful interference as defined in the Torts (Interference with Goods ) Act 1977 s
1 (45 Halsbury’s Statutes (4th Edn) TORT), ie trespass to goods, negligence so far as it results in damage to goods or to an interest in goods, and any other tort so far as it results in damage to goods or to an interest in goods: see also ibid s 8(1). As to the general scope of the Act see 45 Halsbury’s Laws (4th Edn) para 1419.
2 Power to make rules of the court is conferred by the Torts (Interference with Goods) Act 1977 s 8(2), without prejudice to any
other power of making rules of court: ibid s 8(3).
3 Ibid s 8(1), which also states that any rule of law to the contrary (sometimes called jus tertii) is abolished. A defendant is entitled
to invoke the statutory right to plead a superior right in a third party even though, at the date of the joinder application or hearing, the third party’s right has been disposed of: De Franco v Commr of Police of the Metropolis (1987) Times 8 May, CA.
4 RSC Ord 15 r 10A(1), which applies when the plaintiff is one of two or more persons having or claiming an interest in the
unless the plaintiff has the written authority of every such other person to sue on the latter’s behalf: Ord 15 r 10A(1), which does not apply to an action arising out of an accident on land due to a collision or apprehended collision involving a vehicle.
5 He can apply any time after giving notice of intention to defend, and before a judgment or order on the plaintiff’s claim: RSC
Ord 15 r 10A(2).
6 RSC Ord 15 r 10A(2). This does not apply to a person who has authorised the plaintiff in writing to sue on his behalf. The
application for directions must be by summons, and the summons must be served personally on every person named in it as well as being served on the plaintiff: Ord 15 r 10A(3).
7 RSC Ord 15 r 10A(4).
8 For cases where a bailee was allowed to recover full damages in contract under the rule in The Winkfield [1902] P 42 at 54, CA,
see Tanenbaum v WJ Bell Paper Co (1956) 4 DLR (2d) 177; Terminal Warehouses Ltd v JH Lock and Sons Ltd (1958) 12 DLR (2d) 12.
[3024]
10 Bailments and insurance
The bailee has an insurable interest in the bailed goods1. The insurable interest extends beyond the value of the bailee’s
own liability to the bailor and the loss which the bailee may personally suffer on the occurrence of a specified peril2. If
the insurance contract is appropriately phrased3, the bailee can recover the full value of the goods (or the full cost of
repair) from the insurer. The bailee holds the residue of the insurance money, after deducting his personal loss, for the bailor4.
1 Hepburn v A Tomlinson (Hauliers) Ltd [1966] AC 451, [1966] 1 All ER 418, HL; Waters and Steel v Monarch Fire and Life
Assurance Co (1856) 5 E & B 870; Castellain v Preston (1883) 11 QBD 380, CA; The Albazero [1977] AC 774, [1976] 3 All ER
129, HL.
2 Hepburn v A Tomlinson (Hauliers) Ltd [1966] AC 451, [1966] 1 All ER 418, HL; Waters and Steel v Monarch Fire and Life
Assurance Co (1856) 5 E & B 870; Castellain v Preston (1883) 11 QBD 380.
3 The usual reference is to goods held in trust or on commission.
4 Quaere as to whether the bailor has a proprietary interest in the insurance money. Re EH Dibbens & Sons Ltd (in liq) [1990]
BCLC 577 suggests that generally he does not, but cf Mathew v TW Sutton (1994) Times, June 22 (pledge); Lord Napier v
Ettrick and Hunter [1993] AC 713, [1993] 1 All ER 385, HL (equitable lien or subrogation). In cases like Hepburn v A Tomlinson (Hauliers) Ltd [1966] AC 451, [1966] 1 All ER 418, HL, it is assumed that the money are held on trust, but the
precise nature of the bailor’s relationship with the money did not require decision. [3025]
11 The bailee’s estoppel: pleading jus tertii
At common law, the bailee is estopped from denying the bailor’s title1, unless he defends the bailor’s action with the
authority of the true owner2 or is evicted of the goods by a person having title paramount3. The latter does not require
forcible eviction4, but merely a lawful demand against which the bailee has no defence. It is uncertain whether the
bailee can avoid the estoppel by simply returning the goods to a third party owner who has not demanded them5.
The bailee takes the risk that the third party is not the owner and, in cases of rival claims, is well advised to interplead6. In general, the bailee’s estoppel extends only to a plea of jus tertii (viz, that title lies with some third
party)7. It does not normally preclude him from pleading that he has personally acquired property from a third party
since the creation of the bailment8. But a bailee’s claim to have derived title from a third party is in essence a claim that
a third party had title, which the common law estoppel ostensibly precludes.
The bailee’s estoppel is affected by statute, which seeks in cases of wrongful interference with goods to bring all interested parties before the court and to distribute liability in a single proceeding. These provisions, as we have seen9, abolish the rule that, as against a plaintiff in possession of goods at the time of the wrong, the defendant cannot
defend on the ground that title resides in some third person under whom he does not claim10. These rules appear also to
abolish the rule that a bailee is estopped from denying his bailor’s title11, although the estoppel may be preserved where
the bailor sues otherwise than in tort12. Academic opinion is divided as to whether these provisions can be avoided by
suing in contract or bailment rather than in tort13.
[3026]
1 Cheesman v Exall (1851) 6 Exch 341; Biddle v Bond (1865) 6 B & S 225; Rogers Sons & Co v Lambert & Co [1891] 1 QB 318,
CA; Ross v Edwards & Co (1895) 73 LT 100, PC; The Albazero [1977] AC 774, [1976] 3 All ER 129, HL; China-Pacific SA v
Food Corpn of India, The Winson [1982] AC 939, [1981] 3 All ER 688, HL.
2 Thorne v Tilbury (1858) 3 H & N 534; Biddle v Bond (1865) 8 B & S 225; Re Sadler, ex p Davies (1881) 19 Ch D 86, CA;
Rogers Sons & Co v Lambert & Co [1891] 1 QB 318, CA.
3 Biddle v Bond (1865) 6 B & S 225. 4 Biddle v Bond (1865) 6 B & S 225.
5 Palmer Bailment (2nd Edn, 1991) pp 275–276.
6 RSC Ord 17; as to interpleader see 25 Halsbury’s Laws (4th Edn) paras 1001–1090.
7 Cf Webb v Ireland and A-G [1988] IR 353; The Albazero [1977] AC 774 at 841, [1976] 3 All ER 129 at 132, HL. 8 Webb v Ireland and A-G [1988] IR 353.
10 Torts (Interference with Goods) Act 1977 s 8 (45 Halsbury’s Statutes (4th Edn TORTS) and see Paragraph 9.2 [3023] ante. 11 As to the principle that a bailee is estopped from denying his bailor’s title see China Pacific SA v Food Corpn of India, The
Winson [1982] AC 939 at 959, [1981] 3 All ER 688 at 694, HL, per Lord Diplock; Redler Grain Silos Ltd v BICC Ltd [1982] 1
Lloyd’s Rep 435 at 438, CA, per Kerr LJ, and at 440 per Stephenson LJ.
12 Palmer Bailment (2nd Edn, 1991) pp 285–286. 13 Cf Clerk and Lindsell, Torts (17th Edn) ch 22.
[3027–3030]
B: GRATUITOUS BAILMENTS AND BAILMENTS FOR REWARD
12 The relevance of the distinction 12.1 The historical position
In former times, the distinction between gratuitous and rewarded bailments was important, largely because the location of benefit under a bailment was considered a material element in defining the bailee’s duty of care1. A bailee for reward
(such as a paid custodian) was held to owe a duty of reasonable care, while an unpaid bailee (such as a depositary or a mandatary) was held liable only for gross negligence2. At the other end of the scale a borrower, who derived the sole
benefit from the bailment, was responsible even for slight neglect; mere proof of reasonable care was not enough3. 1 Eg Coggs v Bernard (1703) 2 Ld Raym 909.
2 Eg Giblin v McMullen (1868) LR 2 PC 317. 3 Coggs v Bernard (1703) 2 Ld Raym 909.
[3031]
12.2 Modern standard of care
The gradations of care have now vanished, to be replaced by a single standard of reasonable care according to all the circumstances1. The fact that a bailee gains a benefit from the bailment may still be relevant in judging whether a given
act or omission meets the standard of reasonable care2, but it no longer affects the abstract definition of the duty itself3.
Even in its limited area of relevance, the question whether a bailee is a professional or a private custodian, acting in the course of a business or performing a ‘one-off’ favour for a friend, appears more important than the simple question of reward as such4. In the event of loss or damage to the goods an unrewarded bailee, like a bailee for reward, carries the
burden of disproving fault5.
[3032]
1 Houghland v RR Low (Luxury Coaches) [1962] 1 QB 694, [1962] 2 All ER 159, CA; Griffiths v Arch Engineering Co (Newport)
Ltd [1968] 3 All ER 217; and see AVX Ltd v EGM Solders Ltd (1982) The Times, 7 July.
2 Cf Garlick v W & H Rycroft Ltd [1982] CA Transcript 277.
3 See eg the definition of the gratuitous depositary’s standard of care in China-Pacific SA v Food Corpn of India, The Winson
[1982] AC 939 at 960–961, HL, per Lord Diplock.
4 Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd [1979] AC 580, [1978] 3 All ER 337, PC; but see China-Pacific SA v
Food Corpn of India, The Winson [1982] AC 939, HL.
5 Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd [1979] AC 580, [1978] 3 All ER 337, PC.
[3033]
12.3 Modern significance
For the reasons stated above, whether a bailment is gratuitous or for reward is of reduced significance. Practically the only areas where it is likely to remain an issue are:
12.3.1 the ability of the bailee to bind himself by additional promises imposing a stricter liability than his normal common law responsibility1,
12.3.2 the liability of the bailee for the theft, dishonesty or other deliberate wrongdoing of his employees2, and
12.3.3 the ability of the bailor to demand the redelivery of the goods before expiry of the agreed period of the bailee’s possession3.
In the second of these cases, there is substantial indirect authority suggesting that the bailee’s responsibility is comparable to that of a bailee for reward4. In the first and third cases there is no direct modern authority, although
Australian dicta suggest that promises added to gratuitous bailments are unenforceable, whether they relate to the bailee’s level of responsibility or to the period of loan5.
The answer probably depends on whether courts are willing to admit the existence a separate head of liability in bailment, capable of generating obligations which are not reflected in the law of contract and tort, or whether they insist that all promises added to bailments satisfy contractual standards6. If the latter position is taken, the promise will
normally fail for want of consideration7. It is submitted that the former position is preferable.
In spite of these dwindling points of difference, the question whether a bailment is gratuitous or for reward can still affect liability. Both the Privy Council8 and the Court of Appeal of the Supreme Court of New South Wales9
have hinted that practical differences may survive between the duties of each class of bailee. In the Privy Council case, Lord Salmon said that the line between the standard of care required of a bailee for reward and that required of a gratuitous bailee is ‘a very fine line, difficult to discern and impossible to define’10. For that reason, there follows some
account of the criteria by which the two classes of bailment are distinguished.
[3034]
1 See Paragraphs 18 [3057], 22 [3062] post. 2 See Paragraph 15 [3053] post.
3 See Paragraph 25 [3065] post.
4 Most recently, Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd [1979] AC 580, [1978] 3 All ER 337, PC; and the
general logic of the Court of Appeal’s decision in Morris v CW Martin & Sons Ltd [1966] 1 QB 716, [1965] 2 All ER 725, CA.
5 Parastatidis v Kotaridis [1978] VR 449 at 454–455 per Harris J. 6 Palmer Bailment (2nd Edn, 1991) chs 1, 9.
7 Walker v Watson [1974] 2 NZLR 175; Parastatidis v Kotaridis [1978] VR 449.
8 Port Swettenham Authority v T W Wu & Co (M) Sdn Bhd [1979] AC 580, [1978] 3 All ER 337, PC. 9 Brambles Security Services Ltd v Bi-lo Pty Ltd [1992] ACL Rep 40 NSW 1.
10 Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd [1979] AC 580 at 589, PC.
[3035]
13 Making the distinction
A bailment for reward (or mutual advantage) is one which either confers or can reasonably be expected to confer a benefit on both parties1. Normally one party gets a monetary payment while the other gets the benefit of some service
to the goods. The service is usually provided by the bailee to the bailor, as where a bailor bails goods for storage2 or to
be worked on for payment3, but it may be provided by the bailor to the bailee, as where goods are bailed on hire4.
There can be a bailment for reward without a money payment to or by either party5, provided each can
reasonably be taken to have intended to derive an advantage from the bailment. A garage which, on accepting a customer’s car for repair, bails to the customer a substitute vehicle for use without separate payment till the repair is done, is party to a bailment for mutual benefit; the substitute car is part of the service from which the garage makes its profit6. Where a restaurateur takes care of a diner’s coat7, or allows a guest to leave his car in the car park8, the
bailment (if any)9 is for mutual advantage because the facility is one from which the proprietor can be expected to
derive goodwill. Where goods are delivered to an agent to be sold on commission, the agent is a bailee for reward whether the goods are sold or not, because he has a prospect of remuneration10. A professional carrier left in possession
of goods which he has carried for reward, who has warned customers by notice that uncollected goods may be sold after three months to defray storage and other costs, is likely to be a bailee for reward11.
[3036]
A bailee who takes custody without specific reward, but expecting remuneration if the owner later engages his services, takes from the beginning as a bailee for reward12. But a decision of the House of Lords appears to hold
that an original bailee for reward (in this case, a salvor) who retains possession when the contract ceases to exist becomes a gratuitous bailee13.
The bailment which arises where a seller agrees to retain possession of goods after property passes to the buyer is probably one for mutual benefit, at least where the seller is a commercial party and the agreed collection date has not yet arrived14. Again, the bailment may be viewed as part of the seller’s service. After expiry of the collection date, if the
buyer has failed to take possession the bailment may become gratuitous or even involuntary in extreme cases15. The
position is, however, uncertain16.
A bailment for mutual advantage may arise though reward does not pass directly between bailor and bailee. A landlord who, for reasons beneficial to himself, allows a tenant to store his wife’s trunk in a room occupied by the landlord owes the wife the duties of a bailee for reward, though the storage agreement is with her husband17. A
sub-bailee who receives his reward directly from the middle sub-bailee rather than from the head bailor owes the head bailor the duties of a bailee for reward18.
[3037]
1 See generally Palmer Bailment (2nd Edn, 1991) ch 8. 2 See Paragraph 30 [3081] et seq post.
3 See Paragraph 33 [3092] et seq post. 4 See Paragraph 37 [3104] et seq post.
5 As, for example, where two owners temporarily exchange possession of their chattels. An illustration is Bryce v Hornby (1938)
82 Sol Jo 216.
6 Sanderson v Collins [1904] 1 KB 628 at 630, 633, CA, per Collins MR and Romer LJ. 7 Murphy v Hart (1919) 52 NSR 79.
8 Martin v Town N’ Country Delicatessen Ltd (1963) 42 DLR (2d) 449 at 458 per Schultz JA. 9 Cf Paragraph 5 [3009] ante (bailments and licences).
10 Jackson v Cochrane [1989] 2 Qd R 23. 11 Cairns v Robins (1841) 8 M & W 258.
12 Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd [1979] AC 580, [1978] 3 All ER 337, HL. In this case there was a
further possibility of benefit to the bailee because goods not collected within three days from the Authority’s wharfside sheds were taken to its warehouse, whereupon extra duties were payable. The goods here were stolen before such removal had occurred.
13 China-Pacific SA v Food Corpn of India, The Winson [1982] AC 939, esp at 960 per Lord Diplock.
14 Palmer Bailment (2nd Edn, 1991) pp 518–519. Cf CCC Films (London) Ltd v Impact Quadrant Films Ltd [1984] 3 All ER 298 at
302 per Hutchison J (seller was bailee for reward where making separate contract for mailing of goods to buyer).
15 See Paragraph 52 [3162] et seq post.
16 See Wiehe v Dennis Bros (1913) 29 TLR 250; Demby Hamilton & Co Ltd v Barden [1949] 1 All ER 435; and cf Allied Mills Ltd
v Gwydir Valley Oilseeds Pty Ltd [1978] 2 NSWLR 26 (delivery delayed by seller). The Sale of Goods Act 1979 s 20 (39
Halsbury’s Laws (4th Edn) SALE OF GOODS AND CONSUMER PROTECTION) gives no specific guidance on this point.
17 Andrews v Home Flats Ltd [1945] 2 All ER 698, CA. As to employers who become bailees of their employees’ work tools, see
MacDonald v Whittaker Textiles (Marysville) Ltd (1976) 64 DLR (3d) 317.
18 The Pioneer Container [1994] All ER 250 at 258–260 per Lord Goff of Chieveley, citing Morris v CW Martin & Sons Ltd [1966]
1 QB 716, [1965] 2 All ER 725, CA. [3039–3050]
C: GRATUITOUS BAILMENT
1: GENERAL
14 General
There are three types of gratuitous bailment: depositum, or gratuitous custody; mandatum, or gratuitous work and labour; and commodatum, or gratuitous loan. In each case, only one party derives a benefit from the transaction. In the first two cases the sole benefiting party is the bailor, while in the third case the sole benefiting party is the bailee.
Earlier decisions treat gratuitous bailments as contracts1. This analysis is now outmoded, and modern courts
seem likely to accept the view that gratuitous bailment has nothing to do with contract2. It follows, for example, that a
bailee by way of loan can plead contributory negligence in defence to an action for negligent damage by the bailor3.
The factor which prevents gratuitous bailments from being contracts is, of course, the absence of consideration: in the first two cases no consideration is supplied by the bailor, while in the third case no consideration is supplied by the bailee.
Two reservations may, however, be noted. First, it is occasionally hinted that gratuitous bailments are a sort of honorary member of the contractual family, admitted to membership by a pragmatic relaxation of one of the technical rules of contract4. Secondly, it does not necessarily follow from a rejection of the contractual analysis that the
rights and duties of the parties to a gratuitous bailment subsist solely in tort. In particular cases, there may be room for the application of special rules of bailment5.
[3051]
1 Coggs v Bernard (1703) 2 Ld Raym 909; Blakemore v Bristol and Exeter Rly Co (1858) 8 E & B 1035.
2 Walker v Watson [1974] 2 NZLR 175; cf New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd, The Eurymedon [1975]
AC 154 at 175, PC, per Lord Wilberforce.
3 Walker v Watson [1974] 2 NZLR 175; cf, as to the availability of the defence in actions for breach of contract,
Forsikringsaktieselskaspet Vesta v Butcher [1988] 2 All ER 43, CA, upheld [1989] 1 All ER 402, HL.
4 Eg New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd, The Eurymedon (above). 5 Palmer Bailment (2nd Edn, 1991) ch 9
[3052]
2: DEPOSIT
15 Duty of care1
The gratuitous depositary must take reasonable care of the goods, such care being defined by reference to all the circumstances2. The fact that the service is gratuitous may be a factor in defining the standard of care3, but is probably
less persuasive than other factors, such as the value of the goods and the apparent professional standing and capabilities of the bailee4. Although older authorities suggest otherwise, the bailee cannot escape liability merely by showing that
he has abstained from gross negligence5, or that he has taken the same degree of care of the goods as he took of his
own goods6, if the care he took of his own was not objectively reasonable7.
The duty of care may require the bailee to perform positive acts, such as checking the goods or advising the bailor of any loss or deterioration.
The normal duty of care may be relaxed if the bailor is aware of special circumstances (such as defective premises or personal incompetence) rendering it more difficult for the particular bailee to exercise an objective degree of care and skill. Such relaxation may be more easily established under gratuitous bailments than under bailments for reward8, but remains hard to prove. Clear proof of an express or implied consent by the bailor to the reduced standard
still appears necessary9.
The bailee is answerable for any want of care shown by his employees in the course of their employment10,
or by any third party to whom he has sub-bailed the goods with the bailor’s authority11. The bailee must also, it is
submitted, answer for any theft or other deliberate depredation committed by any employee or other person to whom he has entrusted the goods and delegated the performance of any part of his duty of care12. Modern authority on this point
is scarce, however, and Lord Denning MR has denied that the gratuitous bailee is answerable for the dishonesty of his employees, even those to whom the goods have been entrusted13. But the view we have stated appears consistent with
principle.
[3053]
1 Palmer Bailment (2nd Edn, 1991) ch 9
2 Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd [1979] AC 580, [1978] 3 All ER 337, HL, per Lord Salmon;
China-Pacific SA v Food Corpn of India, The Winson [1982] AC 939 at 943–944, HL, per Lord Diplock; Mitchell v Ealing London Borough Council [1979] QB 1, [1978] 2 All ER 779; James Buchanan & Co Ltd v Hay’s Transport Services Ltd [1972] 2
Lloyd’s Rep 535; Garlick v W & H Rycroft Ltd [1982] CA Transcript 277; Houghland v RR Low (Luxury Coaches) Ltd [1962] 1 QB 694, [1962] 2 All ER 159; Blount v War Office [1953] 1 All ER 1071, [1953] 1 WLR 736.
3 Garlick v W & H Rycroft Ltd [1982] CA Transcript 277.
4 Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd [1979] AC 580, [1978] 3 All ER 337, HL. 5 Eg Giblin v McMullen (1868) LR 2 PC 317.
6 Doorman v Jenkins (1834) 2 Ad & El 256; but cf Morris v CW Martin & Sons Ltd [1966] 1 QB 716, [1965] 2 All ER 725 at 731
per Lord Denning MR.
7 Doorman v Jenkins (1834) 2 Ad & El 256. 8 See Paragraphs 13 [3036] ante, 32.1 [3083] post.
9 Skyway Service Station Ltd v McDonald [1986] 1 NZLR 366.
10 Morris v CW Martin & Sons Ltd [1966] 1 QB 716 at 723–725, [1965] 2 All ER 725 at 731–732, CA, per Lord Denning MR. 11 See generally Palmer Bailment (2nd Edn, 1991) ch 20 and Paragraph 41 [3133] post (sub-bailment); British Road Services Ltd v
Arthur V Crutchley & Co Ltd [1968] 1 All ER 811, CA. Cf James Buchanan & Co Ltd v Hay’s Transport Services Ltd [1972] 2
Lloyd’s Rep 535 (head bailment for reward, gratuitous sub-bailment; sub-bailee owed head bailor duties of gratuitous bailee).
12 Palmer Bailment (2nd Edn, 1991) pp 554–560.
13 Morris v CW Martin & Sons Ltd [1966] 1 QB at 716, [1965] 2 All ER 725 at 731–732, CA.
[3054]
16 Burden of proof
In the event of an established loss or injury affecting the goods while they are in the bailee’s possession, the bailee carries the burden of proving that the misadventure did not result from any failure by him or his delegates to attain the necessary standard of care of the goods1. A similar burden of proof appears to apply in regard to the deliberate acts of
employees or independent contractors2, assuming that liability for such acts can attach to the bailee in principle3. 1 Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd [1979] AC 580, [1978] 3 All ER 337, PC; Mitchell v Ealing London
Borough Council [1979] QB 1, [1978] 2 All ER 779; Houghland v RR Low (Luxury Coaches) Ltd [1962] 1 QB 694, [1962] 2 All
ER 159, CA.
2 Cf Paragraph 32.2 [3086] ante/post. It is submitted that bailments by way of depositum follow bailments by way of locatio
custodiae on this point, as on burden of proof generally.
3 See Paragraph 15 [3053] ante.
[3055]
17 Costs of safekeeping
In many cases, the bailee cannot claim the normal costs of storing the goods, because responsibility for these costs will have been impliedly undertaken by his acceptance of the goods as depositary1. An agreement to pay the reasonable
costs of storage might, however, be inferred in particular cases. In addition, the bailee may be entitled to recover the costs of safeguarding the goods against extraordinary hazards, provided that in so acting he is discharging his duty of care2. It is uncertain how far this result depends on the commercial nature of the bailment or the bailor’s foreknowledge
of the bailee’s conduct, or how far the law of agency of necessity affords the bailee an alternative ground of restitution3. 1 Palmer Bailment (2nd Edn, 1991) p 585.
2 China-Pacific SA v Food Corpn of India, The Winson [1982] AC 939, [1981] 3 All ER 688, HL; Palmer Bailment (2nd Edn,
1991) p 584 et seq.
3 Cf on these points the speeches of Lord Diplock (for the majority) and Lord Simon of Glaisdale in The Winson (above).