Bunnings Group Ltd v CHEP Australia Ltd

Bunnings Group Ltd appealed to the Court of Appeal of New South Wales against a decision concerning the tort of conversion. The dispute arose from Bunnings' use of CHEP Australia Ltd's pallets, which CHEP supplied to Bunnings under terms that contemplated Bunnings would use them and then return them to CHEP or make them available for collection. Bunnings, however, failed to return or make available a significant number of these pallets, leading CHEP to claim damages for conversion.

The Court of Appeal was required to determine whether Bunnings' conduct constituted conversion of CHEP's pallets. Specifically, the court considered whether mere possession of fungible goods, released into the market on terms contemplating sub-bailment and transfer of possession, could amount to conversion. It also had to assess whether Bunnings' use of the pallets was repugnant to CHEP's rights as the true owner, considering the commercial context and the terms of the bailment. Furthermore, the court examined the principles for attributing knowledge of an agent to a corporation and the proper measure of damages for conversion in such circumstances, including the potential for a fee for hire.

The Court of Appeal reasoned that in the commercial context of fungible goods like pallets, which are intended to be used and transferred, mere possession does not automatically constitute conversion. However, conversion can be established by a refusal to make available or deliver up the goods in response to an unconditional demand from the owner. The court applied the principles from *Penfolds Wines Pty Ltd v Elliott* regarding the user principle, emphasizing the need to assess the nature of the use in light of all the circumstances. The court also considered the principles for attributing knowledge to a corporation and the measure of damages for conversion, referencing authorities such as *Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd* and *Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd* concerning the recovery of hire fees.

The Court of Appeal granted leave to the parties to file draft orders and submissions within 14 days, not exceeding 10 pages each, outlining the orders they believed should flow from the court's reasons. The proceedings were then stood over to a date to be fixed for the making of orders and any further argument.