Bunker Bros Trucking Company P/L v Linehaul Holdings P/L & Anor No. Scciv-03-450

BUNKER BROS TRUCKING CO PTY LTD v
LINEHAUL HOLDINGS PTY LTD & ANOR
[2003] SASC 367
Full Court: Doyle CJ, Prior and Vanstone JJ

DOYLE CJ: On the night of 27 March 2001 a truck was stolen from the premises of Linehaul Holdings Pty Ltd (“Linehaul”). The truck has never been recovered.
Bunker Bros Trucking Co Pty Ltd (“BBT”) sued Linehaul in the District Court, claiming that Linehaul was in breach of a written agreement to keep the truck insured for its value. BBT claimed in the alternative that as bailee of the truck Linehaul was obliged to take reasonable care to ensure the truck was not stolen, and had failed to do so. The District Court dismissed the claim. BBT has appealed.
Facts
Some issues argued in the District Court are no longer pursued. There are no significant challenges to the judge’s primary findings of fact. Accordingly, I will summarise the facts quite briefly.
The truck was owned by GE Commercial Corporation (Australia) Pty Ltd (“GEC”) and was leased to WRB Transport Pty Ltd (“WRB”). BBT and WRB and another company had together been involved in the road transport business. The three companies were controlled by members of the Bunker family. Wayne Bunker was a Director of WRB and, I gather, BBT and the other company. The other company owned the premises, BBT owned the vehicles and plant, and WRB was the operating company. However, the particular truck happened to be leased to WRB.
In April 2000 the companies decided to quit their business and to cause WRB to enter into voluntary administration. Wayne Bunker was negotiating with Linehaul for Linehaul to take over the premises and to acquire or hire most of the vehicles and plant used in the business.
On 11 April 2000, WRB entered into voluntary administration.
During April 2000, Wayne Bunker on behalf of BBT negotiated agreements with Linehaul under which Linehaul took on hire from BBT most of the relevant plant and equipment, and BBT also appointed Linehaul its agent to sell the plant and equipment.
The agreement on which BBT sued was not entered into until August 2000. It also was negotiated by Wayne Bunker, and was between BBT and Linehaul. It provided for the sale to Linehaul of vehicles and equipment specified in Schedule I and Schedule II of the Agreement. Clause 4 of the agreement dealt with a further group of vehicles. Clauses 4 and 5 provided:
“4.The vehicles referred to in Schedule III hereof are encumbered vehicles to the extent that they are either subject to leasing arrangements or hire purchase arrangements with various financiers. Linehaul agrees to take an assignment in respect of all vehicles referred to in Schedule III hereof and agrees to maintain all leasing and hire purchase commitments until the said leasing or finance obligations have been paid out in full. In the case where there is a pre-determined benefit in respect of such vehicles then the pre-determined benefit will be immediately paid to the Vendor as soon as the pre-determined benefit is realised and such shall be a debt due and owing by Linehaul to the Vendor.
5.The payments schedule in respect of the vehicles referred to in paragraph 4 hereof and the details of the relevant financier are set out in Schedule IV hereof.”
When WRB went into voluntary administration, the Administrator took possession of the truck. Later GEC agreed to release the truck to Wayne Bunker personally, on terms that protected its position.
There is no doubt that Linehaul took possession of the truck in about July or August 2000, began to use it in its business, and made the agreed payments to BBT or GEC. The judge found that GEC was not aware that Linehaul had possession of the truck.
The judge also found that BBT was never in possession of the truck before Wayne Bunker delivered it to Linehaul. That finding was not challenged.
The circumstances under which the truck came to be included in Schedule III of the Agreement are not clear from the judge’s findings. My impression is that Mr Andrews, the Director of Linehaul who was involved in the negotiations, was aware that the truck was leased to WRB, but beyond that the circumstances are unclear. My understanding is that there was scope for confusion and misunderstanding, because Wayne Bunker and Mr Andrews were negotiating over a considerable quantity of trucks, plant and equipment, and items were being added to and removed from Schedule III from time to time.
Later, Wayne Bunker called for the return of the truck. Linehaul agreed to return it. Arrangements were made with Wayne Bunker that the truck would be returned to Linehaul’s premises on the afternoon of 27 March 2001. Once the truck was unloaded Wayne Bunker would collect the truck from the premises, at about 5.30 pm. The judge so found: [224]. The judge rejected contrary evidence from Wayne Bunker. The finding was not challenged.
The truck was brought to the yard, unloaded and left in the yard. Wayne Bunker did not come to collect the truck. Overnight the truck remained in a fenced and locked yard. The ignition keys were placed on the dipstick of the truck. I gather from the judge’s findings that as a matter of practice drivers left keys to vehicles either on the dipstick or concealed in the “bull bar”. This was the practice when the premises were used by WRB and when used by Linehaul. The truck was stolen overnight from this yard. Presumably, whoever stole the truck found the keys and used them to start the truck and to drive it away.
Entitlement to Sue
The judge upheld a submission that BBT had no claim unless it demonstrated that it had an interest in the truck capable of being assigned to Linehaul under clause 4 of the Agreement: [197]. BBT argued that it had undertaken to GEC to pay all rental owing to GEC, that as between the guarantors of the lease it had assumed the role of principal guarantor, and it had an interest in the truck on the basis that once all rental payments had been made, it was likely that GEC would sell its interest in the truck to BBT.
The judge rejected the first two submissions, and held that the commercial practice of lessors disposing of leased goods did not create an interest that could be regarded as “an equitable expectancy” and that any such interest in any event would vest in WRB.
It may be that the judge is correct on these points. I incline to that view.
However, I see considerable force in the argument by Mr Trim QC, counsel for BBT, that the claim made was a claim in contract under clause 4, and that BBT was entitled to enforce the covenant contained in clause 4 without regard to its proprietary interests in the truck. As far as I am aware there is no difficulty, as a matter of the law of contract, in A entering into an agreement with B that B will make certain payments in respect of the property of C, being property in which A has no legal or equitable interest.
The fact that BBT had no interest in the truck that it could assign to Linehaul would be relevant if Linehaul were to plead, by way of defence, that BBT was in breach of its agreement and that by reason of that Linehaul had a counterclaim for damages. No such claim was made. It might also be relevant if it were argued as a matter of construction that the obligation “to maintain all leasing and hire purchase commitments” was conditional upon an interest being assigned to Linehaul. But the argument before the judge does not appear to have gone along those lines, nor was that the argument before us. Nor was there any plea that BBT was in breach of the agreement.
On this approach a question might arise as to whether, in respect of the truck, BBT had provided consideration for the covenant by Linehaul to make the payments. On that point the fact that the agreement is described as a Deed, and is executed under seal, would be relevant. That being so, it may be that there is no need for BBT to provide consideration for Linehaul’s covenant in clause 4.
There is also an issue as to whether Linehaul is estopped from denying that it took possession of the truck from BBT, or estopped from denying that BBT provided consideration for the covenant, if consideration be necessary. Wayne Bunker appears to have been acting generally in negotiations with Linehaul on behalf of BBT, and for the purposes of the agreement BBT might be treated as having arranged for the truck to be delivered into the possession of Linehaul.
There is also a question of whether a bailment arose as between BBT and Linehaul, or whether Linehaul is estopped from denying an interest on the part of BBT. During the course of submissions I was inclined to the view that Linehaul, like any bailee, was estopped from denying BBT’s title as bailor. However, on reflection it seems that any such estoppel would depend upon BBT proving that it had made delivery of the truck to Linehaul, and that is the very fact in issue. Linehaul’s contention is that BBT never had possession of the truck, that Wayne Bunker was not acting as BBT’s agent and that there is simply no basis upon which BBT can rely upon delivery of the truck as giving rise to a bailment between it and Linehaul, providing a basis for estopping Linehaul from denying the interest or title of BBT.
Some of these issues were touched on an argument, but not all of them. The submissions on them were relatively brief. On reflection, were it necessary to decide these issues I would wish to hear further submissions from the parties. But, for reasons that will appear, I consider that the appeal can and should be dismissed without the necessity to reach a decision on BBT’s entitlement to sue under the agreement.
The Obligation to Insure
The judge decided that clause 4 of the agreement (set out above) did not impose an obligation on Linehaul to insure the truck and the interests of GEC, BBT or WRB. Whether BBT had an insurable interest may be doubted but that can be put to one side.
I am not persuaded that the judge was wrong.
I read the second sentence of clause 4 as imposing an obligation limited to the payments due to be made to GEC under the relevant leasing arrangement. The sentence is not as clear as it might be. But the concluding clause of the sentence, when it refers to “said leasing or financial obligations”, indicates that the preceding reference to “leasing and hire purchase commitments” is a reference to payments to be made to GEC. That, I consider, is the natural meaning of the sentence taken as a whole. It is difficult to read the sentence as embracing an obligation to insure the truck, even though such an obligation would include an obligation to pay insurance premiums. I do not accept the submission that the concluding clause of the second sentence does no more than indicate when the obligation “to maintain all leasing and hire purchase commitments” comes to an end. I consider that it assists in determining the scope of that obligation. If this sentence was intended to impose an obligation to insure the relevant vehicles and to pay insurance premiums, and to meet any other obligations imposed by the relevant lease on the hire purchase agreement, I would have expected it to be worded quite differently.
The judge relied also on a difference between the terms of the agreement in question, and the terms of the earlier agreement of April between the same parties, made as part of the overall arrangement under which BBT gave Linehaul the use of vehicles previously used by WRB. The earlier agreement included a clause that dealt specifically with Linehaul’s obligation to keep the vehicles insured, and no such clause is included in the relevant agreement. The contrast is significant. I agree with the judge that, in the circumstances, the earlier agreement is part of the objective background facts to which regard could be had were that necessary, in arriving at the meaning of clause 4.
Breach of Obligation
I agree with the judge’s finding that, if Linehaul was obliged to insure the truck, no breach of the obligation was proved.
The judge made a close examination of the relevant facts. He found that on 27 March 2001 an employee of Linehaul notified the insurer of the truck that it was to be returned to Wayne Bunker that day, and that later the insurer had advised Linehaul of the removal of the truck from the relevant schedule as from 4.00 pm that day. However, the judge found that consistently with the employee’s intention the termination of the insurance was not effective prior to 11.59 pm on 27 March 2001: at [92-93], [192] and [217].
On the judge’s findings, the truck ceased to be held by Linehaul for the purposes of the agreement from late afternoon on 27 March 2001, when Wayne Bunker was to collect the truck. Thereafter Linehaul held the truck solely for the purpose of delivery to Wayne Bunker. The truck was insured until the time at which it ceased to be held by Linehaul for the purposes of the agreement.
Accordingly, no breach of the agreement was established.
Although in its defence Linehaul admitted removing the truck from its insurance policy with effect from 4.00 pm on the day in question, my impression from the judge’s reasons is that Linehaul conducted its case at trial on the basis that insurance was in force until 11.59 pm that day. In any event, in my opinion it suffices for Linehaul to show that the truck was insured until it ceased to be held by Linehaul for the purposes of the agreement, and was held by it for the purposes of return to Wayne Bunker.
Duty of Care
BBT argued that in any event a bailment of the truck rose under the agreement, that that carried with it an obligation on Linehaul to keep the truck reasonably secure from loss or theft, and that in leaving the truck in its yard with the key on the dipstick Linehaul failed to take sufficient care to keep the truck secure from loss or theft.
Putting to one side the question of whether BBT was a party to the bailment, I am not satisfied that the judge was wrong to reject the submission.
The truck was in a fenced yard with locked gates. Linehaul expected Wayne Bunker to collect the truck on 27 March. Its employee, who lived close to the premises, was expecting Wayne Bunker to arrange for him to open the gates so that he could take the truck away. There is nothing in the evidence to indicate that reasonable precautions required more than that the truck be kept in a locked and fenced yard. Leaving the keys on the dipstick must have made it easier for the thief to remove the truck. However, it needs to be borne in mind the expectation was that Wayne Bunker would arrive to collect the truck and, I gather, might have done so before the gates were closed and locked. The evidence was that it was standard practice for truck keys to be kept either within the “bulbar” or on the dipstick. This was also the practice when WRB operated a trucking business from the premises. I gather that there was no evidence before the judge about industry practices in this respect. There was no evidence to suggest that trucks had been stolen in the past from the premises.
I am not persuaded that the judge’s finding that conduct of Linehaul was reasonable, in all the circumstances, should be set aside.
Conclusion
For those reasons I would dismiss the appeal.
PRIOR J: The appellant unsuccessfully sued the respondents for damages. The appellant complained of a failure of the respondent company and its respondent director to have insured a prime mover, stolen from the respondent’s premises in March 2001. The respondent company was said to be liable as a bailee. There was also a claim alleging a failure to keep the prime mover reasonably secure from loss or theft.
The appellant relied upon a Deed of Sale, dated 18 August 2000, between it and the respondents. By that Deed of Sale, the appellant purported to dispose of a number of transport vehicles to the respondent company. The respondent director was a guarantor for the respondent company under that agreement. The agreement acknowledged that vehicles referred to in a schedule, including the prime mover known as K949, were “encumbered vehicles to the extent that they (were) either subject to leasing arrangements or hire purchase arrangements with various financiers”.[1] By the same clause of the Deed, the respondent agreed to take an assignment of the vehicles, including K949, and “to maintain all leasing and hire purchase commitments until the said leasing or finance obligations have been paid out in full”.
[1] cl 4 of Deed dated 18 August 2000
The appellant says that in breach of the Deed, the first respondent terminated insurance upon the prime mover just before it was stolen from the respondent’s premises.
The facts found proved by the trial judge were that the appellant company was one of three corporations, known as the Bunker Group, associated in the road transport business. One of the directors involved in those companies was Wayne Bunker. He was the manager of both the appellant company and WRB Transport Pty Ltd (WRB). WRB was placed under administration in April 2000. K949, the prime mover the subject of these proceedings, was put up for sale at about that time. The administrator was approached by Wayne Bunker to have K949 released to him. This occurred. It was put to work in the respondent’s business. However, K949 was never owned or leased by the appellant. It was leased by WRB from its owner, GE Commercial Corporation (Australia) Pty Ltd (GEC).
In about March 2001, Wayne Bunker sought the return of the prime mover from the respondent company. He believed he could sell it favourably and clear all its leasing obligations. The request was agreed to. The vehicle was recalled from Sydney. The trial judge found that the vehicle was made available for collection by Wayne at, or soon after 5.00 or 5.30 pm on 27 March. His Honour also found that Wayne had agreed with an employee of the respondent that he would collect the prime mover from the respondent’s premises late in the afternoon of 27 March 2001.
His Honour also held that the person who made that arrangement with Wayne Bunker requested the cancellation of insurance of that vehicle. However, on the material before him, the trial judge was unable to determine whether the insurance was cancelled with effect from midnight on the evening of 27 March 2001 or 4.00 pm on 28 March 2001. Assuming that there was an obligation to insure in the appellant’s favour, the breach was thus not made out.
The trial judge found that GEC authorised the release of K949, not to the appellant but to Wayne Bunker personally. His Honour found that there was nothing in the evidence to satisfy him that “K949 at some point came into the possession of WB as agent for the plaintiff and was then (as the plaintiff contends) passed on by it to Linehaul as bailee”. Thus the trial judge rejected the claim of the appellant that there was any bailment by the appellant to the first respondent.
His Honour also found that there was nothing in the Deed of 18 August 2000 to establish a bailment given that, on His Honour’s findings, the appellant had not, at any relevant time, had possession of, or any interest in K949 such as to enable it to bail the vehicle to the first respondent. The only bailment identified by the trial judge was by GEC to WRB, with GEC consenting to a sub-bailment by WRB to Wayne Bunker personally.
His Honour further found that if there was a bailment, the respondent company was not shown to have failed to take reasonable care of the prime mover. The appellant’s claim was therefore dismissed.
In this appeal, the appellant says that the trial judge should have found that the August 2000 Deed did impose an obligation on the respondent company to comprehensively insure K949. It was said that it was not necessary for the appellant to show that it had an interest in that vehicle which was capable of being assigned in order to establish that the respondent company was obliged to comprehensively insure the vehicle. It was argued that the vehicle was released to Wayne Bunker by GEC as agent for the plaintiff, whether alone or with other guarantors. It was submitted that the guarantors paying rent during the period of the lease and paying the residual value at the end of the lease, those guarantors would have an expectation of acquiring ownership in the vehicle at the termination of the lease. That expectation was a sufficient interest to entitle the appellant to succeed. The appellant invoked the terms of the Deed of Sale to argue that the prime mover “passed from the plaintiff as bailor to the first defendant as ….” a bailee for hire.

It was also submitted that there was also an implied term between the appellant and respondent company to keep the prime mover reasonably secure from loss or theft and that the company had failed to do so. The first respondent was said to be negligent in leaving K949 in its yard with the keys to the ignition placed on the dipstick.
I think the evidence established that when GEC released K949 to Wayne Bunker he was clearly the agent of the appellant company. All the trucking business activities were through companies with individuals, including Wayne, acting as guarantors. That apart, as between the companies in this appeal the appellant’s interest and position of bailor could not be denied. I therefore agree with the submission put on behalf of the appellant that a bailment was made out in the appellant’s favour. The trial judge found that Wayne Bunker contacted an agent of the respondent and agreed to collect the vehicle from the respondent late in the afternoon of 27 March 2001. That finding is not challenged. The bailment came to an end then. Thus there was no basis upon which any obligation to insure beyond that time arose. The language of the Deed of August 2000 is ambiguous. It cannot fairly be construed in the appellant’s favour to impose an ongoing obligation to insure. The clause invoked is confined, as the trial judge found, to the payment of rent.
The appellant cannot succeed on the allegation that the first respondent was in breach of a duty of care it owed to the company. Assuming a duty, there was no breach made out. The premises within which the vehicle was kept were locked. The keys were hidden. The premises were regularly inspected throughout the night.
The appeal should be dismissed.
VANSTONE J: I agree that the appeal should be dismissed for the reasons given by the Chief Justice.

[2003] SASC 367

23 October 2003