Personal Property – Goods
Introduction to property
Background on ‘property’
Property comes under many different types of law (tort, contract, criminal etc). “Property law” generally
concerns questions of ownership or allocation.
Property can be seen as “things”, but also as rights – for example, the right to use something, or exclude
someone else, the right to sell or loan it etc. Thus people owe others a duty not to interfere with these
rights. You may not know who the duty is owed to, but the duty is still owed to that person. For example,
you cannot go steal someone else’s car; you don’t know whose car it is, but you owe them a duty to allow
them the right to the car.
Property v Contract – King v David Allen
A right to post bills on the wall of a theatre is a contractual right, not a property right. There are a limited
number of property rights that exist. In order to be called property, a right must fit the little box of property
interests. Property rights can be enforced against anyone (in rem), but contractual rights can only be
enforced against parties to the contract (in persona).
In King, King owned the building that a theatre wall was a part of, and agreed with Allen that he could ost on
it. King leased the building to the company, and they would ratif the agreement later. The company told
Allen that he could no longer post, and Allen sued King for breach of contract. King wanted to bring the
company in as a right to litigation, but was not allowed to because the court held the right to post bills was a
contractual right.
Property classifications
When you hire something, for example a hall from the council, you have a contractual right with the council
to use the hall. Nevertheless, you may not have a proprietary interest with the hall and therefore would not
be able to sue for trespass.
Property rights exist in relation to things, operate in rem as opposed to contractual rights which operate in
persona. You cannot make up your own property right, they are set interests, unlike contractual rights
where you can create a right in the contract.
Property rights come under different types:
1. Fee simple (the person owns the property)
2. Leasehold interest (the person is a tenant)
3. Possessory rights over chattels
However for a right to be a property right, it MUST fall under one of those types. A right to post bills on a
wall is not under one of these and thus is not a property right.
There is a distinct difference between real property (realty) and personal property (personalty). Pure
personalty can be classed as:
1. Choses in possession
a. These are tangible pieces of property other than land
b. E.g. jewellery, televisions
2. Choses in action
a. These are intangible pieces of property which are enforced by legal action
b. E.g. shares, debts, copyrights
RealtyReal Property
Corporeal (land, buildings, fixtures)
Incorporeal (easements and profits)
PersonaltyPersonal Property
Chattels Personal
Choses in possession (tangibles)
Choses in action(intangibles)
Chattels Real Leases
Possession as the root of all title
Whoever controls the property is likely the person who owns the chattel. At common law, possession is
the root of all title, thus if someone has physical control, they are likely the person who owns it. However it
is not just about physical possession, it is also about right to possession. You may lend your phone to
someone; however just because you no longer control it physically, you have a right to get it at any time.
This right might be a right to immediate or future possession. Depending on what it is, the remedy will
differ.
The general principle is that:
“Possession means the same thing and is entitled to the same legal protection whether or not it has been
obtained lawfully or by theft or by other unlawful means. It vests in the possessor a possessory title which is
good against the world save as against anyone setting up or claiming under a better title”
Thus we are particularly focused on the rights given to someone based on possession. You cannot take
things away from people who are currently in possession.
This principle that possession confers a property right has implications for proof of property offences in
criminal proceedings. In R v McKiernan [2003] 2 Qd R 424, Davies JA made the point that possession is not
just evidence of ownership but is ‘effective ownership against the whole world except someone who can
prove better title’.
Categories of possession
Possession Definition Example
Actual
Possession
Where the plaintiff exercises a requisite level
of physical control over the goods and has an
intention to possess
The bailee has actual possession
during the bailment
Constructive
Possession
Where a master/servant or principlal/agent or
a gratuitous bailment at will exists and the
goods are in the hands of the latter, the
former will have constructive possession.
Note: It is as good as actual
possession.
Damages are the full value of the
goods
Right to
immediate
possession
Where the plaintiff (not in actual possession)
can demonstrate earlier possession by
themself or someone whose rights they
acquired and that earlier right was not
surrendered.
At the end of a fixed term
bailment, the bailor has a right to
immediate possession or
throughout the term of a bailment
at will.
Reversionary
Right to
Future
Possession
Where the plaintiff is entitled to possession in
the future at the conclusion of the rights of
someone who is in present possession.
During a fixed term bailment the
bailor has a reversionary right
that is, once the bailment finishes
they are entitled they have an
immediate right of possession
The property torts – actions a plaintiff may bring
TORT DESCRIPTION POSSESSION ELEMENTS
Trespass
(can overlap
with
conversion
but not
detinue)
Wrongful intentional
direct interference
with a chattel in the
possession of another
(Penfolds Wines Pty Ltd
v Elliott). A non-owner
of the chattel can sue
in trespass (Costello)
but even an owner
cannot unless they
have present
possession.
Present
Possession
(Actual or
Constructive)
1. Actual or constructive possession
Persons with a deferred reversionary or immediate right to possession
cannot sue in trespass (Henry Berry v Rushton)
2. Interference
Established by any physical contact and includes:
seizing (Crozier v Cundey;
destroying or directly damaging (Fouldes v Willoughby)
removing from one to another (Kirk v Gregory);
simply using the goods (Penfolds Wines Pty Ltd v Elliott)
3. Actionable without proof of damage
Conversion
(can overlap
with
trespass or
detinue)
A positive wrongful act
intentionally denying
the plaintiff dominion
over the goods
inconsistent with his or
her rights (Maynegrain
v Compafnina Bank).
Self-help available.
Present
Immediate right
to possession
1. Actual, constructive, or an immediate right to possession
(Penfolds Wines Pty Ltd v Elliott)
Does not require proof of absolute ownership – only possession
2. Positive, intentional denial of plaintiff’s dominion over chattel
Must be a positive act of dominion which is adverse to the plaintiff’s
title or right to use or possess. Mere removal without intention of
further use is not sufficient; you must show the defendant had a
degree of use as though they were his own (Fouldes v Willoughby).
Mutilation of the chattel (L’Leod v M’Ghie)
Unauthorised sale (Glass v Hollander)
Delivery to a third party (Cook v Saroukas)
Detinue
(can overlap
with
conversion
but not
trespass)
Wrongful detention of
goods and refusal to
hand them over to a
person with a right to
immediate possession
who has formally
demanded their return
(Spackman v Foster)
Self-help available.
Present
Immediate right
to possession
Note: detinue
often arises with
conversion too
1. Actual, constructive, or an immediate right to possession (Jarvis
v Williams) (showing a proprietary interest in the chattel).
2. Detention after plaintiff’s lawful demand for their return
Action accrues when: the right of action accrues at the time of refusal
to hand over (John F Goulding v Victorian Railways Commissioner)
Remedy: A proprietary action for the return of the specific chattel OR
its value, AND damages for its detention use this claim if you want
a particular piece of property back, like a wedding ring.
Negligence
Where the plaintiff was
owed a duty of care
which was breached by
the negligent actions
of the defendant,
damaging the chattel
Present
Immediate right
Reversionary
1. Defendant breached duty of care which caused reasonably
foreseeable damage to the chattel
Does not depend on plaintiff having immediate right to possession but
relies on there being damage (Penfolds Wines)
Action on
the case
Permanent loss or
damage to the chattel
must have occurred
which would enure to
the reversioner.
Present
Immediate Right
Reversionary
only property tort
available for such
possession
1. Intentionally committed acts: causing destruction or lasting
damage to the goods
2. Permanence of the injury: the permanence of the injury must be
clearly demonstrated (Tancred v Allgood)
Remedies
Remedies for Trespass:
Damages: damages are for the full value of the chattel
o Depreciation of value: damages are recoverable for the depreciation of value in the chattel from
the time taken to the time recovered (Pargiter v Alexander)
o Disruption to business: damages are recoverable for disruption to business (Private Parking
Services Ltd v Huggard)
o Annoyance: damages are recoverable for annoyance (Private Parking Services Ltd v Huggard)
Remedies for Conversion:
Damages: the measure of damages is the full value of the chattel (The Winkfield: thus, a plaintiff may be
compensated several times over)
Not in possession: where a plaintiff is not in actual possession, but there exists a legal arrangements
between the plaintiff and the defendant, the plaintiff will only be compensated for his or her limited
interest (The Winkfield)
Subsequent action: defendants have no defence to a subsequent action by the true owner – possibility
of double compensation (Attenborough v London and St Katharine’s Dock Co)
Remedies for Detinue:
Damages: damage for the full value of the Chattel are the ordinary remedy (Howard Perry v British
Railway Board)
Specific performance: the court may make an order of specific performance where the chattel has
special value or interest (some value in addition to its commercial value) (McKeown v Cavalier Yachts)
o Obtain chattel: this is the only tort which allows the possessor to obtain the chattel
Remedies for Negligence:
Damages: damages in tort are compensatory according to the principle restituto in integrum (The
Albarezo)
Remedies for action on the case
COMPENSATORY Damages: (Trading Co Pty Ltd v Baldwin)
The defence of jus tertii
Against a stranger (non-bailment)
1. The plaintiff was in possession
Where the plaintiff is in possession, the jus tertii defence is not available as a defence for the
wrongdoer.
“Possession alone gives the possessor such a property as will enable him to maintain an action
against a wrongdoer, for possession is prima facie evidence of property; against a wrongdoer,
possession is title” (Jeffries v Great Western Railway).
Where the plaintiff is a wrongdoer: Even where the item is stolen, possession will entitle the
possessor to legal protection against interfering strangers even if obtained by unlawful means
(Costello v Chief Constable of Derbyshire Constabulary).
Exception: at the time of the wrongful interference, the defendant was acting as an agent of the
superior title holder
What protection does the law give a thief?
Costello v Chief Constable
Facts Held
Here the issue was whether Costello, a thief,
could still sue under a property tort claim
even though the property he was suing for,
which was in his possession, did not actually
belong to him (it was not being asked for by
the owner of the good)
1. It was held that YES the law protects anyone with
possession of a good
2. Holding possession of a good means you have
better title to it than anyone else in the world,
except its true owner
Jeffries v The Great Western Railway Co (1856) 119 ER 680
Facts Held
The plaintiff brought an action in trover
(which is the same as its modern form –
conversion) in respect of the seizure by the
defendants of certain railway tracks. At the
trial, the plaintiff proved that the
defendants had seized the trucks from his
possession and claimed ownerships of the
trucks under an assignment from Owen. The
defendants also claimed ownership of the
goods under assignment by Owen after the
3. Lord Campbell CJ – “the law is that a person
possessed of goods as his property has good title
as against every stranger, and that one who takes
them from him, having no title in himself, is a
wrongdoer and cannot defend himself by
showing that there was title in some third
person. Against a wrongdoer, possession is title.
4. The jus tertii cannot be set up as a defence to an
action of trespass or conversion, for the
presumption of law is that the person who has
Generally a defendant in an action for wrongful interference with goods cannot escape liability by
showing that a third party has a better title than the plaintiff (Armory v Delamirie)
date of the first assignment, but before
possession of the goods was taken. The
defendants wanted to prove that before the
plaintiff took possession, Owen went
bankrupt, and the court made an order
requiring the goods to be sold for the
benefit of the creditors. This a would mean
the goods did not belong to the plaintiff, but
to the purchaser of title under the order
from the Court of Bankruptcy – essentially a
plea of jus tertii
the possession has the property. This
presumption cannot be rebutted by evidence
that the property was in a third person when
offered as a defence by one who has no title and
was a wrongdoer.
5. What is important is relativity of the right to
title, NOT who has the best right to title in the
world. Thus here, the plaintiff had a better right
to title than the defendant, even though the best
right lay in the creditor who bought the title.
Therefore the plaintiff could validly sue
6. In the law of property, unless in the context of
bailment, you can be doubly liable. Here the
defendant has committed a tort against the
plaintiff, but may also have committed a tort
against the owner
The above case is generally accepted as deciding that:
1. A defendant who interferes with the plaintiff’s possession is liable to pay the full market value of the
chattel, without any deduction for the likelihood of the true owner taking steps to the recover the
chattel from the plaintiff
AND
The defendant, despite having lost the judgment in favour of the plaintiff, will have no defence to a
subsequent action by the actual owner for recovery of the chattel or payment of its value (essentially this is a
dose of double liability).
2. The plaintiff did not have possession
A defendant liable in conversion may defend themselves by pleading that a third party had a better right to
the goods in the sense of a right to the goods superior to both the plaintiff and the defendant. If this is the
case, then conversion cannot hold because the defendant is not trying to hold dominion over the plaintiff’s
good, they are holding dominion against a third party’s (who isn’t suing) good.
Penfold’s Wines v Elliot (1946) 74 CLR 204
Facts Held
Penfolds put a note with
their bottles saying that
they still retained title on
the bottle, and purchasers
were merely bailees to the
bottle. What happened
was that once a bottle was
drunk, people were re-
1. The court held there was no trespass because Penfold’s was not in
possession of the bottle. There was no detinue as there was no
refusal by the hotel to return the bottle.
There was also no conversion because:
2. It is not an act of dominion to fill up the bottle inconsistent with
Penfold’s rights to one day reclaim the bottle
3. The bailee willingly handed over possession of the bottle, which is
filling the bottle with
cheap wine at a hotel.
Penfold’s then sued the
hotel.
a barrier to bringing an action in conversion
If you deal with goods in possession of someone with authorisation
and you bona fide believe they own the good or have authority from
the owner, you cannot be liable in conversion
Proper use of the jus tertii defence
Assume that A contracted to purchase goods owned by B from C who at all relevant times was in actual
possession of the goods. Assume that the contract did not pass C’s ‘property’ in the goods to A and A never
took possession. IF D wrongfully took the goods from C, A could not sue in detinue or conversion since A has
only a contractual right to possession. Do could correctly use jus tertii in saying that A cannot show an
immediate right to possession, and since A does not have actual possession, A holds no case in detinue or
conversion, since B holds title to the goods.
Thus a jus tertii is not a defence to an action; however, it can be relevant to show that the plaintiff had no
title (e.g. no right to immediate possession). Rather than a defence, it can negative a claim.
Bailment
Has the property been bailed?
A bailment arises when (Hobbs v Petersham Transport):
i. Chattels are delivered by the owner or the person with a right of possession
ii. Into the possession of another person
iii. Upon an express or implied promise that the chattels will be redelivered to the bailor or dealt with in
a stipulated way.
Types of bailment
Gratuitous bailment: (Not for reward) Bailee gives no consideration to bailor. May be fixed term or
at will. Here the bailor retains contructive possession
Fixed term bailment: Bailor has a reversionary right that becomes an immediate right to possession
upon the end of the term
Bailment at will: (May be for reward or gratuitous) Bailor has an immediate right to possession and
constructive possession. Not for a specified term and bailee retains the goods only until bailor
demands for their return
Conditional bailment: (Contract) Reversionary right unless condition of the contract is broken (e.g.
using chattel in unauthorised way), then becomes immediate right to possession: (City Motors,
Penfolds Wines v Elliott)
A common scenario of bailor/bailee relationships is in hiring a car. During the term of the contract, the
bailee has actual possession and the right to immediate possession of the car, and the bailor has the right to
future possession upon the end of the hire.
Rights of bailor
o Right to immediate possession if bailment at will, at conclusion of fixed term or where there is
a breach of the terms of the bailment (Hobbs v Petersham)
o The bailee is estopped from disputing the title of the bailor: Biddle v Bond.
o Can claim damages for trespass when the bailment is at will (but not for other types of
bailment) because the bailor has constructive possession: Wilson v Lombank. (but be wary of
this)
Rights of bailee
o Bailee in possession can sue person who wrongfully deals with goods in any action of
trespass, detinue, conversion and negligence: The Winkfield, BRS v Arthur Crutchley.
o Bailee can sue bailor for wrongful acts during currency of the bailment: City Motors.
o Bailee can sue sub-bailee even though bailee has breached the terms of bailment with their
bailor, if the sub-bailee has done something (e.g. negligence) which causes the goods to be
lost: Anderson
Title under possession in a bailment
The following case held that:
a) You get constructive possession from gratuitous bailments at will, but not necessarily for all
bailments at will
b) Even if there is constructive possession, if the person in possession willingly hands it over, that third
person has not committed a trespass
Wilson v Lomback
Facts Held
1. Hinchcliffe J – “I do not think…the plaintiff ever lost possession”. Also “delivery to the
true owner does not defeat the plaintiff’s claim”. It was a bailment at will so that the
plaintiff could have demanded the car back at any time, and thus constructive
possession. Thus gratuitous bailments at will give constructive rights to possession.
However where there is consideration it is unclear. A Tasmanian case says that where
there is reward bailment, there is not constructive possession.
2. There are three types of possession:
a. Actual
b. Constructive
c. Immediate right to possession
3. In this case, the judge found that there was a constructive possession by the plaintiff
through possession of the chattels by the agents of the plaintiff.
4. However, even if there is constructive possession, there is no trespass since there is no
interference with the possession, the car was willingly handed over. It is analogous to
Penfold’s.
a) The plaintiff (bailee) was in possession
i) Action by a bailee against an interfering stranger/third party
Not only can the bailee in possession of a chattel sue in trespass, conversion or detinue, but he or she can
also sue in negligence (The Winkfield)
The Winkfield (1902) All ER Rep 346
Facts Held
There was a
collision between
the steamship
Mexican and the
steamship
Winkfield;
resulting in the
sinking of the
Mexican with
1. Collins MR – the law is that in an action against a stranger for loss of goods
caused by the negligence of the stranger, the bailee in possession can
recover the value of the goods, although he has a good answer to an action
by the bailor for damages for the loss of the thing bailed (essentially there
is not double liability).
2. Possession is good against a wrongdoer and the wrongdoer cannot set up a
jus tertiidefence unless he claims under it
3. The wrongdoer is nnot defending under the title of the bailor is
unconcerned with what the rights between the bailor and bailee are, and
some of the mail
on it. The
Postmaster-
General was a
bailee of
packages aboard
the Mexican. The
court assumed
that the
Postmaster-
General had
custody of the
goods. The
Winkfield was
held to be
negligent. The
question was
whether the
bailee could
recover even if
there was no
obligation to
account to the
bailors (the
people whose
post it was).
thus must treat the possessor as the owner of the goods for all purposes
irrespective of the rights and obligations between the bailee and bailor
a. Thus a defendant who pays damages or restores a chattel to a
person who had been in possession otherwise than as a bailee will
be doubly liable, but if it is to a bailee, then they do have a defence
4. A person possessed of goods as his property has a good title against every
stranger, and one who takes them from him, having no title themselves, is a
wrongdoer and cannot defend themselves by showing that there was title in
some third person, for against a wrongdoer, possession is title. Thus it is
not open to the defendant as a wrongdoer to inquire into the limitations of
the possessor’s property right as bailee as to the bailor.
5. The root principle of the whole discussion is that, as against a wrongdoer,
possession is title. The chattel that has been converted or damaged is
deemed to be the chattel of the possessor and no other, and therefore its
loss or deterioration is his (the possessor’s) loss and thus only he must be
recouped as though he had complete and absolute ownership, entitling him
to equivalent compensation as to the value of the whole loss.
6. This result applies in the case of involuntary bailees and in general in the
case of anyone with a limited interest in the goods with actual possession at
the time of the wrong. Thus compensation is to be paid whether:
a. Through inability to raise jus tertii OR
b. Through the plaintiff having better right to possession
7. Thus the wrongdoer (Winkfield) must treat the person in possession (the P-
G) as the owner of the goods and thus pay him for the full amount, even
though they do not really belong to him.
Note: the bailee can recover from a stranger the full value of the destroyed or lost chattel, but remains liable
to account to the bailor for the surplus recovered beyond his/her limited interest.
ii) Action by a bailee against bailor
The bailee can sue the bailor for wrongful acts during the currency of the term of the bailment (City Motors).
Whether the chattel has been destroyed or merely damaged (McCauley v Karooz)
Regardless of whether the damage done to the chattel exceeds the value of the bailee’s own interest
Regardless of whether the bailee is answerable to the bailor for the damage (The Winkfield)
Whether the bailment is gratuitous or not does not affect the bailee’s standing to sue ((Houghland v
R R Low (Luxury Coaches) Ltd)
City Motors Pty Ltd v Southern Aerial Super Service Pty Ltd (1961)
Facts Held
The bailor interfered with goods
during the bailment whilst the bailee
was in actual possession. The plaintiff
The bailee can sue the bailor for wrongful acts during the
currency of the term of the bailment.
Con
vers
ion and detinue in a bailee situation
Recall that a plaintiff must show that he or she had actual possession of the good(s), or an immediate right
to possession at the date of interference with the goods or the date of demand for return. In the case of car
hire, there is not claim in detinue if the car hire company demands the car back before the end of the
contract, since they have no immediate right to possession.
In the case of goods bailed at will (such as a gratuitous bailment), the bailor has the right to regain
possession at any time and thus retains immediate right to possession during the bailment.
In both cases (contractual bailment and bailment at will), both the bailee and bailor have a cause of action
against a wrongdoer who interferes with the goods in the bailee’s possession (BIS Cleanaway t/a CHEP v
Tatale [2007] NSWSC 378. However, in the absence of prior actual possession or other proprietary interest, a
contractual right to possession is not sufficient title to mount a case in detinue or conversion (Jarvis v
Williams [1955] 1 All ER 108 & International Factors v Rodriguez [1979] QB 351). This is because of jus tertii.
Issue: where the bailee is in breach of the terms of the bailment. Can the bailee rely on jus tertii?
Bailee can sue sub-bailee even though bailee has breached the terms of bailment with their bailor, if the
sub-bailee causes the goods to be lost:
Anderson Group Pty Ltd v Tynan Motors Pty Ltd
Facts Held
The appellant was hiring a car under a hire purchase agreement
with Esanda Ltd. The appellant left the car with the respondent
sub-bailee to sell, violating the hire purchase agreement. The
car was stolen due to the respondent’s negligence. The
respondent claimed the appellant did not have title to sue as
the breach of the agreement meant only the company had a
right to immediate possession.
The bailee could not deny the
bailor’s title to sue – even if a
person breaks a bailment, if that
person continued in possession of
property then that person has a
title to defend his or her
possession.
A bailee is estopped from pleading jus tertii - the bailee cannot defend an action by the bailor on the
ground that a third party is the true owner of the goods or has a superior right to that of the bailor (Biddle v
Bond), unless:
agreed to purchase a new truck from
the defendant and trade in an old
truck as part of the purchase price.
The new truck and old truck were
exchanged before the defendant told
the plaintiff that the offer was
rejected and the old truck broke
down. The plaintiff offered to pay for
the new truck but the defendant
declined and took possession of it.
The plaintiff bailee had an exclusive possessory right to the
truck –the bailor repossessed it in circumstances not
authorised by the hire purchase agreement and therefore
could sue in detinue.
A plaintiff can sue their own bailor in detinue if the term
of the bailment has not finished. When a bailor sues a
bailor and vice-versa, damages are restricted to the value of
that party’s interests – they cannot sue for the full value of
the property. For example the bailee could sue for damages
in not being able to use the truck for one year.
1. The bailee is evicted from the goods by a person whose title is superior to that of the bailor. The
bailee can resist any attempt by the bailor to recover the goods or damages (Biddle v Bond)
2. The bailee's denial of the bailor's title is authorised by the true owner (Biddle v Bond)
It is not enough that the defendant merely be aware of an adverse claim, the defendant
must defend the right and title by the authority of the true owner (Biddle v Bond)
Biddle v Bond
Facts Held
5. A bailee is estopped from disputing title of a bailor, which means that the bailee
cannot rely on jus tertii to avoid returning the goods to the bailor
6. The exception is:
a. Eviction by title is paramount; the true owner takes the goods from the
bailee
b. The bailee defends action by the bailor with the authority of the true owner
i. This was the case in Biddle v Bond
b) The plaintiff (bailor) was out of possession
i) Bailor’s right against a stranger who interferes
Bailment at will or where a conditional bailment was broken gives an immediate right to possession and
therefore makes the actions available.
Can
a
1 Take this case with a grain of salt. Seems to be at odds with other authorities as it suggests that a person with a right to immediate possession is to be regarded as having possession.
Wilson v Lombank Ltd1
Facts Held
Wilson purchased the car from an
individual who did not have title to sell it.
He took it to a garage for repairs. Upon
completion the car was wrongfully taken
by the defendant.
Plaintiff brings an action in trespass
contending that he was in possession of
the car when the defendant removed it.
Defendant argues that the plaintiff had an
immediate right to possession only, thus
not allowing an action in trespass.
Court chooses to see the plaintiff as in possession –
repairs had been completed, monthly account
between the plaintiff and garage – Wilson at all times
could have demanded the return of the car.
Moreover there does not appear to be any obvious
bailment at will here as moneys are being paid to the
bailee garage.
Therefore Wilson never lost possession of the car.
Constructive possession entitles the bailor to sue in
trespass
third party wrongdoer be doubly liable?
In general, yes, double liability may occur for any property tort. However a bailee/bailor situation is an
exception. If the bailee brings a case against the wrongdoer, the bailor may not, and vice-versa.
O’Sullivan v Williams
Facts Held
A bailee was in
possession of a car,
and was trying to
claim losses for
damage of the car by
the wrongdoer. The
bailor had already
sued the wrongdoer.
1. Since the bailor had already sued the wrongdoer, the bailee could not
sue as well.
2. They did sue because they wanted damages, but also claimed nervous
shock. The court said that if they wanted to sue for loss of the property,
they must sue the bailor; however they could still sue the wrongdoer in
a normal tort – so they could sue for the nervous shock.
ii) Bailor against own bailee
Breach of bailment will bring the bailees rights to an end at which time the bailor acquires a right to
immediate possession (Penfolds).
Penfolds Wines v Elliot
Facts Held
The appellants were wine producers and sold
their wines in bottles which were supplied on
condition that they were returned as soon as
the contents had been consumed. The
bailee’s right to possession ended from the
moment the wine was drunk.
The respondent was the owner of a hotel
which sold bulk wine to customers who
brought in their own bottles – some of these
belonged to the appellant. The respondent
did not take any step to inform himself
whether the bottles so filled were or were not
owned by the appellant.
Breach of the contractual condition brought the
bailees rights to an end at which time the bailor
acquired a right to immediate possession.
The appellants could not sue in trespass as they did
not have actual possession – the only possession
interfered with was that of the bailee who
authorised the interference.
The acts of the respondent amounted to conversion
because they filled the bottles for the purposes of
trade in a manner quite inconsistent with
recognition of the appellants title.
Lost-and-Found Situations:
Generally, a finder in actual possession of a chattel has sufficient title to sue a stranger, even if
they are not the true owner
Actual possession sufficient: a finder in actual possession of a chattel, though not an owner, has
sufficient title to sue a stranger (Armory v Delamirie)
Employees: the rights of the finder will be determined by the employment relationship.
Found in course of employment: where the chattel is found in the course of
employment, the employer takes a superior right (Wiley v Synan)
Employment wholly incidental: where the employment or agency is wholly
incidental to the finding, the employee takes a superior right (Byrne v Hoare)
Must take into control: the employee or agent who finds the chattel must take
it into control to assert the rights against anyone (Wiley v Synan: boatswain
finding on a ship could not recover when gave directly to custom’s officials)
Problem Questions
1. LYB loans jewellery to women for special occasions. LYB lends a diamond necklace to Susan for 48
hours from noon Saturday until noon Monday. Susan pays a $500 deposit plus $80 rental. On
Saturday night, Lara sees Susan wearing the necklace and believes that it is the same necklace that
was stolen from her the precious year. Lara explains the situation to Susan, who hands over the
necklace over to Lara. When Susan explains the situation to LYB, LYB writes to Lara stating that the
necklace is a common one that that LYB bought the necklace directly from the manufacturer. LYB
also provides copies of the receipts to Lara. LYB demands that the necklace be returned; however
Lara does not reply to LYB’s correspondence. You can assume that LYB is correct in its assertion that
the necklace is not Lara’s stolen one. Can LYB bring an action against Lara in any property tort?
- LYB and Susan have a bailment for reward for a term does not give right to constructive
possession
o They have a right to future possession, they can bring action on the case if there is
permanent loss or damage
- At the time of Lara’s conduct at the party it is not trespass
o It is willingly handed over
o There is no possession by LYB
- In conversion and detinue
o At the time of Lara taking the jewellery there is no immediate right to possession by LYB, so
there is no right to sue
o However after Monday, the refusal to hand the necklace over to LYB by Lara is an act of
detinue and conversion since LYB did have immediate right to possession as the bailment
term was over
2. Sally finds a nice bracelet on the floor as she walks out of her property class. She decides to take it to
jeweller to find out how much it is worth. She passes the bracelet over the counter. The jeweller,
realising that the bracelet is valuable, asks Anne where she got it from. On hearing the story, he says
to her “well, the bracelet isn’t really yours then, is it?” and refuses to return it to Anne despite her
protestations. Later, when the true owner sees the bracelet in the window, the bracelet in the
window, the jeweller returns it to her. The jeweller and the true owner are no longer in touch. Does
Sally have a remedy against the jeweller?
- Yes, but not in trespass as there was no interference, she handed it over
- She can sue in detinue and conversion as she has greater right to the bracelet than the jeweller,
even though the true owner has supreme right
3. For an agreed fee of $100, Mary lends Nina her car for the weekend. Mary, who is desperately in
need of the money, does not put any conditions on the loan. Due to bad weather, Nina cancels her
planeed weekend away and instead offers the car to her boyfriend Oliver for the weekend. Mary,
surprised to see Oliver driving her car, waits until he pulls over and then demands that he return the
car to her immediately. Oliver, (being far from home) refuses. Nina returns the car as agreed on
Sunday night. Does Mary have any cause of action against Oliver
- It is a reward bailment for a term no constructive possession, but a future right to possession
o Could be action on the case, but no damage
- No trespass, willingly handed
- Within the term, so she has no right to immediate possession, so therefore no tort at all.
4. Sam lends his spare watch (given to him by his father) to his brother Wilson, saying he won’t need it
for a while but will ask for it back when he does. Kevin steals the watch from Wilson and gives it to
his friend Matthew for his birthday. Sam sees Matthew wearin g his watch and writes him a letter
demanding he return the watch (giving evidence that it is his watch). Matthew refuses. Does Sam
have an action in trepass against either Kevin or Matthew? What remedies does Sam have against
Matthew
- This is a gratuitous bailment at will, so Sam still maintains constructive possession of the watch
therefore he still has possession. Thus there is an action in trespass against Kevin who stole the
watch and thus interfered with the item in his possession. However he cannot sue Matthew for
trespass
- He can sue Matthew in detinue and conversion for the refusal to return
- The remedies Sam has against Matthew are specific restitution and damages (he can get the watch
back and damages in common law).
Fiduciary Relationships and Obligations
Fiduciary relationships
A relationship of trust and confidence will be recognised as fiduciary where it arises from a fiduciary
undertaking to act in the interests of the beneficiary in a matter which confers discretion on F, and in
respect of which the exercise of discretion affects B in a practical or legal way (such as economically).
The essence of a fiduciary relationship is that the fiduciary must act exclusively in the interests of the
beneficiary in matters within the scope of the relationship. In determining whether a relationship is likely to
be fiduciary, a guiding principle is:
“The more closely the legal relationship approximates to that of a vendor and purchaser, the less likely it is to
be fiduciary”.
Examples of fiduciary relationships
Some recognised fiduciary relationships include those between:
a) Trustee and beneficiary
a. The trust is the paradigm fiduciary relationship, though trustees may also come under a duty
to act for the unborn (unidentified person) (Breen v Williams (1996))
b) Solicitor and client
c) Director and company
You must ask:
1. Is there a fiduciary relationship?
2. What are the fiduciary duties/obligations and what is the scope of these duties?
3. Have they been breached?
4. Has there been informed consent?
5. Are there any other defences?
If you determine that there is a breach, the available remedies are:
1. Compensation for loss
a. Equitable compensation (personal remedy)
2. Disgorgement of gain
a. Account of profits (personal remedy)
b. Constructive trust (proprietary remedy)
3. Restitution of property obtained by the fiduciary in breach of obligation
a. Rescission of gift or contract with a constructive trust over property transferred
or the traceable proceeds (proprietary remedy)
4. Injunction to prevent further breach
a. For example an injunction to prevent a fiduciary in pursuing a self-interest
activity.
d) Employee and employer
e) Agent and principal
f) Partner and co-partner
g) Executor/executrix of an estate and beneficiary
h) Investment advisor and client (as per ASIC v Citigroup (2007))
Other relationships may be held to be fiduciary, in whole or in part, where there is a reasonable expectation
that one party should subordinate their own interests on a particular matter for that of another.
The thing that all of these relationships have in common is that:
1. The fiduciary is expected to act exclusively in the interest of the beneficiary on matters covered by
the relationship; AND
2. The fiduciary is not permitted to pursue self-interest
‘Vertical’ relationships
A vertical relationship is one where one party has much greater access to resources, skill or information than
the other. Examples include trust and agency.
The leading authority for application of fiduciary obligations to vertical business relationships is Hospital
Products v United States Surgical Corporation (1984) 156 CLR 41, where the Mason J held that:
“The critical feature of [fiduciary] relationships is that the fiduciary undertakes to act for or on behalf of, or
in the interests of another person in the exercise of power which will affect the interests of that person in a
legal or practical sense”.
All aspects of this test must be satisfied, it is not enough to say that A is a fiduciary to B because A has
undertaken to act for B.
Hospital Products v USSC (1984) 156 CLR 41
Facts Held
USSC manufactured
surgical tools, and the
first defendant,
Blackman, realised they
were not patented in
Australia. He offered to
become a distributor and
gained exclusive
distribution rights under
an oral contract. In the
meantime, he
established his company,
Hospital Products, which
was a direct competitor
of USSC by repackaging
USSC products and
The essential features of fiduciary relationship the “undertaking test”
‘The critical feature of these relationships is that the fiduciary
undertakes or agrees to act for or on behalf of or in the interest
of another person in the exercise of a power or discretion
which will affect the interest of that person in a legal or
practical sense’
The relationship between the parties is therefore one which
gives the fiduciary a special opportunity to exercise the power
of discretion to the detriment of that other person who is
accordingly vulnerable to abuse by the fiduciary of his position.
The expression ‘for’, ‘on behalf of’ and ‘in the interest of’ signify
that the fiduciary acts in ‘representative’ character in the
exercise of his responsibility’
selling them as their own,
as well as using designs
to make their own
products. This became
successful so that
Hospital Products began
to compete with USSC in
America. USSC then
terminated the contract
and sued for breach of
contract and fiduciary
obligation.
All elements of the test have to be applied
1. Blackman’s conduct in developing a competing business was a
breach of contract, but there were no fiduciary obligations owed to
USSC
2. The latitude Blackman enjoyed under the agreement was
inconsistent with the existence of a fiduciary relationship – he was
not obliged to sell any specific quantity, could determine sale price
and was permitted to make a profit. Essentially Blackman could act
as a commercial party for his own benefit. Furthermore, there was
no undertaking by Blackman to do anything for the benefit of USSC.
Also, the contract was terminable by either party at will.
3. The court will not, by application of fiduciary principles, make
agreements for parties which they have no made for themselves.
4. However Mason J held that there was a limited fiduciary duty to
maintain the goodwill of the company in Australia. This would mean
that they owe a duty not to put themselves in a conflict of interest
with the USSC brand and not profit based on their brand.
5. If they sued for breach of contract, USSC could only sue for
expectation loss. They didn’t want what they lost from not keeping
the contract alive, they wanted the profit made by HP, the equitable
remedy of “account of profits”.
6. Another remedy they sought was the proprietary version of the
account of profits. They wanted an order to access the bank account
with the profits as THEIR property. The court essentially says that
the fiduciary held that property as a trust for the beneficiary, called
a constructive trust. The benefit of this is that owning the account
rather than just being paid gives priority over other creditors in
bankruptcy
Commonwealth Bank of Australia v Smith (1991)
Facts Held
The plaintiffs were longstanding clients of the bank
who often relied on their advice in their business
dealings. The bank advised them to purchase a hotel
which happened to belong to another of the banks
clients (since it meant the hotel owner would repay
the loans the bank had issued them) even though a
mortgage valuation showed the hotels value being
less than the price the plaintiffs were paying. The
bank also said the lease would be renewed, despite
having no grounds to make that representation. The
plaintiffs lost considerable money in operating the
hotel and the lease wasn’t renewed.
The Full Federal Court held that the bank
had so identified its interests with those of
the plaintiffs that it owned the plaintiffs a
fiduciary obligation – it had undertaken to
act exclusively in their interest in advising
them on the purchase of the hotel.
The bank placed themselves in a position of
conflict between the advisory duties it
owed to the plaintiff and the interest in
ensuring the sale of the lease, thereby
breaching its fiduciary obligations.
The underlying question coming from this is:
When can a fiduciary relationship arise from a contractual relationship?
If there is going to be a fiduciary duty, there will likely be a clause in the contract that creates it. If there are
fiduciary relationships created by a contract, it does not mean ALL breaches of contract will be breaches of
fiduciary duty.
You cannot then say that due to this ordinary contractual reliance that there would be superimposed
fiduciary obligations. It is not enough; you need something more than this ordinary vulnerability John
Alexander’s Clubs v White City Tennis Club [2010] HCA 19
John Alexander’s Clubs v White City Tennis Club [2010] HCA 19
Facts Held
The parties
entered into a lot
of contracts to
enable for the
development of
the tennis club
1. The court held that a while generally a fiduciary relationship can be
superimposed on a contract, it is not automatic and should not be put on
all contracts. In all contracts there is an element of vulnerability and an
element of reliance. You cannot then say that due to this ordinary
contractual reliance that there would be superimposed fiduciary
obligations. It is not enough; you need something more than this ordinary
vulnerability.
2. HCA said there were no fiduciary obligations; the terms of the contract
outlined that there was less/no extra reliance.
‘Horizontal’ relationships
In these cases the fiduciaries and principals are the same people – consider business partners.
A horizontal relationship is one where the resources, skills and information are shared between
the parties for the purpose of achieving a common goal. Examples include professional or
business partnerships. Note that even though there is not one person vulnerable to another,
they are mutually vulnerable to each other’s actions.
Vulnerability need not be about someone having more expertise, for example in this case, it may
just be about the undertaking in question.
The rule for determining whether there exists a fiduciary relationship in a horizontal sense, as
used in United Dominions Corp v Brian (1985) 157 CLR 1, is:
“Have the parties placed a high degree of mutual trust and confidence in each other in the
pursuit of their common goal?”