UNSW

LAWS2385 – Equity and Trusts

2013 S1

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?”