Cox v Walker

[2009] SADC 74

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

COX & ANOR v WALKER & ANOR

[2009] SADC 74

Judgment of His Honour Judge Nicholson

10 July 2009

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS

BAILMENTS - REMEDIES

TORTS - MISCELLANEOUS TORTS

EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS

EQUITY - EQUITABLE REMEDIES - ACCOUNTS AND INQUIRIES - AS BETWEEN PARTICULAR PARTIES

Plaintiffs engaged the defendants to manage their citrus properties for a number of years whilst the plaintiffs were absent. Plaintiffs acquired and made available to the defendants items of agricultural equipment for this purpose. The defendants also used the plaintiffs' equipment for reward in their management of other citrus properties. The issues to be determined included: whether or not the defendants are liable for unauthorised use of the plaintiffs' equipment on other properties; if so, the legal basis for such liability; if so, the extent to which the plaintiffs' equipment was wrongfully used and, if so, the remedy or remedies available to the plaintiffs. The defendants counterclaimed for monies due for the supply of chemicals, for cost of repairs to two items of defendants' equipment and for damages for wrongful retention of two items of defendants' equipment.

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 226; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 266; Hawkins v Clayton (1988) 164 CLR 539; Byrne v Australian Airlines Ltd (1995) 185 CLR 410; Breen v Williams (1996) 186 CLR 71; Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; The Mediana [1900] AC 113; Egan v State Transport Authority (1982) 31 SASR 481; McKenna & Armistead Ltd v Excavations Ltd (1957) 57 SR(NSW) 515; Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185; United Australia Ltd v Barclays Bank Ltd [1941] AC 1; Strand Electric & Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246; Wade Sawmill Pty Ltd v Colenden Pty Ltd t/a Pilks Pine [2007] QCA 455; Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd (1993) 32 NSWLR 175; Finesky Holdings Pty Ltd v Minister for Transport (WA) (2002) 26 WAR 368; Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552; In re Hallett’s Estate (1880) 13 ChD 696; Jones v Dunkel (1959) 101 CLR 298; Payne v Parker [1976] NSWLR 191; My Kinda Town Ltd v Sell [1982] FSR 147; Warman International Ltd v Dwyer (1995) 182 CLR 544; A-G (UK) v Blake [2000] 4 AII ER 385; Furs Ltd v Tomkies (1936) 54 CLR 583; Vyse v Foster (1872) LR 8 Ch App 309; In re Jarvis (decd) [1958] 1 WLR 815, considered.

COX & ANOR v WALKER & ANOR
[2009] SADC 74

Introduction

1. For many years until 31 December 2004, the defendants (Mr and Mrs Walker) managed citrus producing properties in the Sunlands irrigation area owned by the plaintiffs, Dr and Mrs Cox (“Cox properties”). Included in the management of the Cox properties was the provision of all necessary horticultural services including the administration of fertilisers, insecticides and weedicides, slashing and mulching, pruning and picking of fruit. All of these activities were performed with the assistance of agricultural machinery and equipment (“equipment”). This trial concerns a claim by the plaintiffs to be compensated for wrongful use by the defendants of the plaintiffs’ equipment. There is also a counterclaim to be considered.

2. The defendants, in addition to managing the Cox properties, at the same time managed citrus properties owned by other growers (“Walker managed properties”) and their own citrus properties (“Walker properties”). From time to time in this judgment, I will refer to the Walker managed properties and the Walker properties, together, as the “non-Cox properties”.

3. In order to do this work the defendants’ employed a significant amount, “a pool”, of equipment. Most of this had been acquired by and was owned by the defendants. However, from time to time, they would have access to an item of equipment owned by a grower/client which, according to the defendants, formed part of the pool. The defendants usually stored this equipment on their properties and maintained it themselves unless a maintenance or repair task was of such a nature as to necessitate sending an item of equipment to an outside workshop. It was the defendants’ position that they were entitled to use any item of pool equipment in their management of any property under their control and not just the property of the grower who “contributed” the item of equipment in question.

4. Initially, during the parties’ relationship, the defendants had access to and used only a pool of equipment to which the plaintiffs had not contributed. However, over time, the plaintiffs acquired four items of equipment – a boom spray, a mulcher, a large vicon spreader and a spot spray (the “Cox equipment”) – which the defendants stored on their property.[1] It is the plaintiffs’ case that the defendants were only entitled to use this equipment in their management of the plaintiffs’ properties. The defendants assert that they were entitled to use it in the same way as they used all of the other “pool” equipment; that is, on any property falling within their management portfolio and to charge other growers for its use.

   [1]    The plaintiffs and the defendants also jointly purchased a “bulk fertiliser spreader” which, by agreement, was used by the defendants on Cox properties and non-Cox properties. The plaintiffs incurred no charge for the use of this item on their properties and the defendants were free to charge for its use on other properties. The bulk spreader at all material times has remained in the possession of the defendants. Initially the plaintiffs pressed a claim for damages based on an alleged failure by the defendants to release this item for the plaintiffs’ use (paragraph 18 of the amended statement of claim) but this claim was abandoned during the trial. During the trial the plaintiffs flagged a claim to be paid half of the value of the bulk spreader but ultimately this was not pressed. Hereafter, the references to Cox equipment do not include a reference to the jointly purchased bulk spreader. A claim for the alleged wrongful retention of 500 sprinkler heads (paragraph 19 of the amended statement of claim) was also abandoned during the trial.

5. Throughout the parties’ relationship the plaintiffs were absentee owners; they lived overseas and in Victoria. However, the male plaintiff, Dr Cox, visited his properties regularly and maintained frequent contact with the male defendant, Mr Walker, in person, in writing and by telephone. Towards the end of 2004, by which time the defendants had managed the plaintiffs’ properties for approximately 20 years, Dr Cox decided that his circumstances were then such that he could take over the management of the properties himself and, in so doing, could reduce his overheads. The parties’ management arrangement was terminated by mutual agreement as at 31 December 2004; the relationship at this stage, according to Dr Cox, was “cordial”. At this time, the Cox equipment was returned to the possession of the plaintiffs in good order.

6. To assist in managing their properties the plaintiffs needed access to labour. Because the defendants no longer had the plaintiffs’ properties in their portfolio the defendants’ need for labour was less than before. An amicable arrangement was reached whereby the plaintiffs took on three former employees of the defendants, Mr Adrian Norman, Mr Rick Pierce and his partner, Ms Annelis Rus. The plaintiffs allege that only after they employed these workers did they become aware that the defendants had been using the Cox equipment on non-Cox properties. As a result they instituted these proceedings and have sued the defendants for damages or, in the alternative, an account of profits for wrongful use of the Cox equipment. They base their claim on a number of propounded causes of action.

7. The defendants concede that they used the Cox equipment on non-Cox properties. However, they maintain that this use was not as often as the plaintiffs would have it and that, in any event, they were entitled to use the Cox equipment in this way. The defendants say that none of the causes of action propounded by the plaintiffs can be sustained.

8. The parties were unable to reach agreement as to the extent to which the Cox equipment was used on non-Cox properties. Much of the trial was devoted to a detailed exploration of documentary and oral evidence in an attempt to identify the number of hours that each of the four items of Cox equipment had been used on non-Cox properties.

9. The defendants counterclaimed for money owed for the supply of chemicals, for the cost of repairs to a motorbike and a tractor left for a period in the possession of the plaintiffs and for damages for the wrongful retention of these items.

10. The issues to be decided in this matter are as follows:

    (i)whether or not the defendants are liable to the plaintiffs for unauthorised use of the Cox equipment on non-Cox properties;

    (ii)if so, the legal basis or bases for that liability;

    (iii)if so, the extent to which each item of Cox equipment was wrongfully used;

    (iv)if so, the remedy or remedies available to the plaintiffs; and

    (v)the counter-claim issues.

    The Plaintiffs’ Causes of Action

11. In their amended statement of claim, filed on 22 November 2007, the plaintiffs allege that the parties entered into a contract – described as a “management agreement” – pursuant to which the defendants agreed to manage the plaintiffs’ properties in return for payment of fees.[2] The fees payable to the defendants included a component for use of equipment by the defendants on the plaintiffs’ properties. The plaintiffs further alleged that in or about 1994 an agreement was reached that the plaintiffs would not be required to pay to the defendants the costs associated with certain items of equipment if the plaintiffs purchased their own equipment.

    [2]    In paragraph 3 of the amended statement of claim, the plaintiffs allege that this contract was entered into in or about 1975. However, the evidence of Dr Cox was to the effect that the defendants took over the management of the plaintiffs’ properties in or about 1983. Mr Walker’s evidence lacked precision on this issue, but it may be that the parties’ arrangement commenced a year or so later (T620). Nothing turns on these discrepancies.

12. It is common ground that the plaintiffs, during the period 1994 to 1998, purchased or acquired the Cox equipment, that these items of equipment were stored and largely maintained by the defendants at their expense, that they were used by the defendants in their management of the plaintiffs’ properties and that the plaintiffs were not charged by the defendants for the use of these four items of equipment.

13. Insofar as the defendants also used this equipment on non-Cox properties the plaintiffs, in their amended statement of claim and at trial, propounded various causes of action.

    (i)The plaintiffs assert that it was an implied term of the management agreement that the Cox equipment would be used by the defendants solely in the management of the plaintiffs’ property. The plaintiffs allege that the use by the defendants of the Cox equipment on non-Cox properties constituted a breach of this implied term of the contract which breach sounds in damages.

    (ii)The plaintiffs assert that the defendants’ conduct constituted a trespass to the plaintiffs’ equipment which also sounds in damages.

    (iii)The plaintiffs assert, in effect, that the defendants held or possessed the Cox equipment and monies received by the defendants for use of it on non-Cox properties on trust for the benefit of the plaintiffs.

    (iv)The plaintiffs assert that, in all of the circumstances, the defendants owed a number of fiduciary duties or obligations to the plaintiffs (as itemised in paragraph 14A of the amended statement of claim), including an obligation to use the plaintiffs’ equipment solely on the plaintiffs’ properties; that is, an obligation not to use it in the conduct of the defendants’ business on properties other than those owned by the plaintiffs.

    (v)The plaintiffs assert that the defendants were in possession of the Cox equipment as joint bailees and owed the various duties as itemised in paragraph 14B of the amended statement of claim. The plaintiffs allege that the defendants’ use of the Cox equipment, in the conduct of the defendants’ business on properties other than those owned by the plaintiffs, was a breach of their duty as bailee which sounds in damages.

    (vi)The plaintiffs assert that by their conduct, the defendants breached trust obligations and/or fiduciary obligations owed by them to the plaintiffs. As a result, the defendants are liable to pay equitable compensation or, in the alternative, to account to the plaintiffs for monies received and all profits derived as a result of their breach of trust or breach of fiduciary duty.

    Brief Observations Concerning the Witnesses

14. I accept that all of the witnesses who gave evidence, in the main, honestly attempted to assist the court to the best of their ability. However, it is plain that the evidence of virtually all of the witnesses involved a significant amount of reconstruction, particularly where attempts were made to explain or interpret documentary records of work done over the years and to infer what would or should have occurred based on the respective experience and understanding of work practices of each witness concerned.

15. This was inevitable given the nature of the matters and the level of detail that each witness was attempting to recall concerning events, of no great moment at the time, which occurred at least 4 years and, in some cases, significantly longer ago. On occasion, although not often, I address some criticisms towards particular witnesses. Nonetheless, as I have said, I accept all of them to have been honest, most of the time, in giving their evidence.

    The Parties’ Relationship

16. In order to identify the causes of action available to the plaintiffs, if any, arising out of the use by the defendants of the Cox equipment on non-Cox properties, the starting point is to understand the nature of the parties’ relationship up until the management agreement was brought to an end at the end of 2004. The relevant evidence, in this respect, is essentially that of Dr Cox and Mr Walker.

17. The evidence of both Dr Cox and Mr Walker as to the circumstances surrounding the commencement of the management arrangement in the early to mid 1980s, its implementation and the acquisition of the Cox equipment was, not surprisingly, very sketchy. What follows in this section, except where otherwise indicated, is drawn from the evidence of either Dr Cox or Mr Walker where it was unchallenged or is essentially common ground.

18. No written agreement was entered into. Following an approach from Dr Cox, he and Mr Walker engaged in discussions face to face and by telephone. The plaintiffs agreed to and did provide a complete management service, although Dr Cox was regularly involved by way of consultation generally and in the giving of instructions with respect to specific activities on his properties following advice and recommendations provided by Mr Walker.

19. The defendants undertook or arranged all of the necessary physical and accounting work associated with the operation of the plaintiffs’ citrus growing properties. The defendants had access to the plaintiffs’ dedicated bank account from which they arranged for all expenses (including their own invoiced charges) to be met and into which they deposited all receipts for the sale of fruit.

20. Each month the defendants would provide a computer generated document, in the nature of a spreadsheet, being a summary of monies received and expended on the plaintiffs’ behalf including the defendants’ own invoice for labour cost, equipment use cost and the agreed monthly management fee.[3] According to Dr Cox, he and Mr Walker reached “an amicable arrangement” during their initial discussions as to rates to be charged. Each piece of equipment (including tractors and implements towed, such as a vicon fertiliser spreader or a spray plant) was charged at an agreed hourly rate, labour was charged at an agreed hourly rate, bin picking fees were agreed on and a monthly general management fee calculated on the basis of the number of acres under management was agreed on.[4] Some or all of the base amounts of these charges were varied by agreement during the life of the parties’ arrangement.

    [3]    Exhibit P8 is an example of such a document.

    [4]    The management fee covered fixed overheads and a profit element. It is unclear on the evidence whether the other amounts charged on account of variable costs also contributed any profit element to the defendants.

21. From time to time, during the relationship, the plaintiffs acquired additional acreages in the area. The defendants assisted with identifying, acquiring and developing (including, to any extent necessary, replanting) these new acreages. The additional properties, when acquired, came under the management of the defendants pursuant to the general arrangement in place between the parties.

22. I find that during the mid 1980s the parties entered into a contractual arrangement of indefinite duration pursuant to which the defendants agreed to manage the plaintiffs’ citrus properties and the plaintiffs agreed to pay the defendants’ charges. It would be a very difficult, but ultimately unnecessary, exercise to identify and accurately state all of the terms of this contract. What is clear is that the parties implemented the contract in a co-operative and, it would appear, mutually beneficial manner for very many years.

23. As far as the use of equipment on the plaintiffs’ properties is concerned, for the first ten or so years of the relationship the defendants employed such of its pool equipment as was necessary and the plaintiffs met the defendants’ monthly invoices including the amounts charged for equipment use. From 1994 to 1998 the plaintiffs acquired the Cox equipment. Thereafter, they were not charged for the use of this equipment on their properties. There is some conflict between Dr Cox and Mr Walker as to the circumstances in which and the reasons why some items of Cox equipment were acquired. It is unnecessary to resolve these conflicts; they are explainable by the passage of time and the tendency in each of Dr Cox and Mr Walker to reconstruct what they said and were thinking at the time of the acquisitions as a result of the entrenched positions they now respectively hold.

24. The plaintiffs purchased a “boom spray”[5] in late 1998 from a local engineering firm for $27,000. This was constructed to the plaintiffs’ specifications arrived at with the assistance of Mr Walker. The boom spray is towed by a tractor along the citrus rows and, as its name suggests, is used to spray the trees, usually with insecticide, fungicide, and liquid fertiliser.

    [5]    Also referred to in the evidence as the “total” spray and the “jet” spray.

25. The defendants’ pool of equipment, throughout the life of the relationship, included an “air spray”. It performed the same tasks as the boom spray but utilised a quite different delivery mechanism. It atomised the product to be delivered and was more targeted in its operation. The respective advantages and disadvantages of the plaintiffs’ boom spray and the defendants’ air spray were fiercely debated in the evidence.

1. A mulcher was purchased by the plaintiffs in or about June of 1996 for $7,200. The mulcher, as its name suggests, mulches unwanted vegetation once it has been pruned from trees or slashed. It can also slash undergrowth and the like. The defendants’ pool of equipment from time to time included one or more slashers. A slasher can also mulch. The respective advantages and disadvantages of the plaintiffs’ mulcher and the defendants’ slasher also were debated in the evidence.

2. In or about September 1996, the plaintiffs  purchased a large vicon fertiliser spreader for about $7,000. This implement was towed behind a tractor along the rows to distribute fertiliser. The Cox vicon had a capacity of approximately 1 tonne (1000 kgs). In the defendants’ pool of equipment was a smaller vicon spreader with a capacity of approximately 500 kgs or less.[6]

   [6]    Various respective capacities were suggested by different witnesses. I have taken these figures from the evidence of Reg Willis, the defendants’ leading hand and mechanic. What is of significance and undisputed is that the Walker vicon had a capacity much smaller than that of the Cox vicon.

3. In or about November 1994 the plaintiffs purchased a property referred to in the evidence as “Cox 7”.[7] As part of this purchase, the plaintiffs acquired some items of equipment all of which are irrelevant to these proceedings, except for a small weedicide “spot” sprayer.[8] This implement had a 200 litre capacity and was used to apply weedicide to small areas. The defendants’ pool of equipment included a 1300 litre weedicide unit which was capable of covering larger areas more efficiently and numerous spot spray units, smaller than the Cox one, which were attached to and operated from a “quad” (motor) bike. The Cox spot sprayer was “found” by the defendants in the plaintiffs’ shed “very, very late in the programme”, that is, in about 2000. It was in poor condition and the defendants re-conditioned it at no cost to the plaintiffs and put it to use.[9]

   [7]    The plaintiffs, the defendants themselves and various of the defendants’ other clients all owned a number of citrus properties or blocks. They were on separate titles scattered throughout the Sunlands and Golden Heights areas. The properties within a particular owner’s portfolio were not always contiguous. Each property was identified and referred to by the name of the owner and a block number.

   [8]    Some items were sold off within months of acquiring Cox 7 and others were left in a small shed on Cox 7.

   [9]    Evidence of Mr Walker at T641, 708-710.

4. By and large when performing work on the Cox properties the defendants’ used the Cox equipment as much as possible once it had been acquired and no charge was levied for its use. The Cox properties comprised a large proportion of the defendants’ management portfolio.[10] The main rationale for acquiring the Cox equipment[11] was the plaintiffs’ desire to reduce their overheads. It also assisted to ease the pressure on the use of the defendants’ equipment.

   [10]   Up to 40% at its highest. According to Dr Cox the termination of the parties’ agreement resulted in approximately 200 acres being removed from the 500 acres under Walker management, T178.

   [11]   With the exception of the spot sprayer.

5. The primary dispute between the parties centres on the issue of whether the defendants were also entitled, in law, to use the Cox equipment on non-Cox properties and to charge for such use. Leaving aside for the moment how any such entitlement might legally be characterised, it could only arise if the defendants had the express, implied or imputed permission of the plaintiffs to use the Cox equipment in this way.

   The Question of Permission – Evidence and Findings

6. Dr Cox could recall only one conversation with Mr Walker concerning the use to which the boom spray might be put on non-Cox properties. He said that they had no discussions about the defendants using any of the other items of Cox equipment. He remembered little of the detail of the conversation about the boom spray. He said that he asked Mr Walker whether he would like to use the boom spray on other properties; Mr Walker said “no”. This conversation occurred at about the time of the purchase of the boom spray. Dr Cox said in court that “there (sic) was quite a big expense and I wanted to get back a bit of money from that purchase”.[12] In cross-examination,[13] Dr Cox agreed that during this conversation, Mr Walker said “I have got my own spray plant, I don’t need to [use the boom].” Dr Cox was firm in his evidence that he had indicated to Mr Walker that he was hoping to get a “reimbursement” or “some return” for the use of the boom spray.[14]

   [12]   T174.

   [13]   T451, 455.

   [14]   T451.24, 452.1, 453-454.

7. Mr Walker, at first, was adamant that there were no discussions at all about the potential use of the Cox equipment including the boom spray.[15] However, during cross-examination, his attention was drawn to the admission in paragraph 8 of the defence. Ultimately, Mr Walker conceded that a discussion about use of the boom spray did occur[16] but remained resistant to the notion that payment for its use was discussed. Indeed, once he was forced to concede that Dr Cox had offered to allow the defendants to use the boom spray on non‑Cox properties, he attempted quite opportunistically and disingenuously, in my view, to use this to bolster the defendants’ case that from the beginning they were permitted to use the boom spray and the other Cox equipment.[17] In my opinion, the cross-examination of Mr Walker on this topic[18] brought him no credit at all. I specifically reject his answer “I believe he said we could use the equipment”.[19]

   [15]   T636, 710, 773, 781.

   [16]   T783-784.

   [17]   T784.25-785.22.

   [18]   In particular at T770.29-771.7, 771.31-771.37, 772.32-773.21, 781-782.21 and 783.29-785.25.

   [19]   T784.27.

8. I accept the account of Dr Cox concerning the discussion about the boom spray and make the following findings relating to the issue of express permission to use the Cox equipment.

   (i)At no time did Dr Cox and Mr Walker discuss whether or not the defendants might use the Cox mulcher, large vicon or spot sprayer on non-Cox properties or the terms of any such use.

   (ii)At no time during their relationship did the plaintiffs give any express permission to the defendants to use the mulcher, the large vicon or the spot sprayer on properties other than Cox properties.

   (iii)At or about the time of the acquisition of the boom spray, Dr Cox asked Mr Walker if the defendants might like to use the boom spray on non-Cox properties on the basis that the plaintiffs would receive some form of payment for any such use. Mr Walker was not interested and declined to explore this invitation.

   (iv)At no time during their relationship did the plaintiffs give any express permission to the defendants to use the boom spray on properties other than Cox properties.

9. I turn now to the question of, whether or not, in all the circumstances, the defendants had the implied permission of the plaintiffs to use the Cox equipment on non-Cox properties or whether or not such permission ought to be imputed in all of the circumstances.

10. The defendants maintain that they were entitled, at all times during the relationship, to use the Cox equipment on non-Cox properties even in the absence of any express permission. Mr Walker described, on a number of occasions during his evidence, the defendants’ management system including having access to and using a pool of equipment. His evidence about the pool was, to a limited extent, corroborated by that of two of the defendants’ other grower clients, Mr Anderson and Mr McInness, whose evidence I accept.[20] I make the following findings based essentially on the evidence of Mr Walker which was not, in these respects, the subject of any significant challenge by the plaintiffs, and the evidence of Messrs Anderson and McInness.

    [20]   According to Mr Walker there was one other client, the late Mr Giannakopolous, who knowingly participated in the pool of equipment arrangement as described by Mr Walker.

    (i)The defendants had available to them a pool of agricultural machinery and equipment which they used as necessary and as convenient on any property in their management portfolio.

    (ii)Some of the equipment was owned by the defendants and some had been contributed by other grower clients. As to the latter (leaving aside the Cox equipment), it is unnecessary to determine who, in law, was the owner of, that is, who held title to this equipment.

    (iii)Mr Anderson’s equipment[21] was handed over to the defendants more than 20 years ago when they took on the total management of Mr Anderson’s property. Mr Anderson did not want to be bothered with storage and maintenance of his equipment. It suited him to allow the Walkers unfettered use of the equipment. This arrangement “evolved … over a period of time”. Mr Anderson did not recall having any discussions with Mr Walker about it. Mr Anderson knew that the defendants used his equipment on other properties and was content for this to occur. He was also content to be charged for equipment use on his own property even if the equipment used happened to be his.

    [21]   His equipment included tractors, trailers, forklifts, a slasher, a grader, a cultivator and a ripper.

    (iv)Equipment belonging to Mr McInness[22] was handed over to the defendants more than 15 years ago when they took over the management of his property. The equipment is stored in the defendants’ shed and maintained by them. It is freely available for use on all properties managed by the defendants. Again, Mr McInness was content to be charged for use of equipment on his property even if the equipment used was his; “the advantages … far outweighed those costs”. Mr McInness may have had discussions with Mr Walker about this arrangement but essentially it was a practice that developed over time.

    (v)All of the pool equipment, including the Cox equipment, was securely stored or housed in sheds on the defendants’ property. No separate charge was levied for this storage. Some of the equipment was of significant size, for example the Cox boom spray, and required considerable shed space for convenient storage.

    (vi)The defendants serviced and maintained all of the pool equipment, including the Cox equipment, except when a repair or maintenance task was such as to necessitate sending it out to a specialist engineering or repair business. The defendants have employed Mr Reg Willis for more than 20 years. He is effectively second in charge of the working side of the defendants’ management operations[23] and is answerable to Mr Walker. Mr Willis is a highly competent agricultural machinery mechanic. Dr Cox agreed that he performed excellent work in maintaining the Cox equipment.[24]

    (vii)The plaintiffs were charged for parts but not labour insofar as in-house maintenance of the Cox equipment was concerned and invoices for external repair jobs were met by the plaintiffs.[25] I am unable to make a finding on the evidence available as to whether or not other “contributors” of pool equipment, in particular Messrs Anderson and McInness, were charged at all for repairs and maintenance to “their” equipment.

    (viii)The general availability to the defendants of all of the pool equipment, including the Cox equipment, resulted in practical advantages from time to time, to all grower clients including the plaintiffs.

    (a)In the event that a particular item of equipment was out of service whilst undergoing repair or maintenance, alternative equipment was available to ensure that tasks were performed in an efficient and timely manner.

    (b)Because of the locations of and distances between various properties in the Walker management portfolio it was, at times, more convenient and efficient to use the one item of equipment across a number of properties rather than return to the Walker depot to remove and replace equipment between jobs on different properties. For example, after the Cox boom spray had been used on a Cox property it might be more convenient and efficient to then use it on a nearby non-Cox property rather than having the tractor returning to the depot to pick up the Walker air spray. In these cases there was a reduction in the charge for the travelling time that otherwise would have been levied against each grower client.

    (c)There were occasions where, because of time pressures, the two spray units (boom and air) would be used at the same time on the one property.

    (d)It was not a one-way street. For the reasons given in (a), (b) and (c) above, the air spray and other non-Cox equipment was available, from time to time, to be used on Cox properties. However, it is common ground that other clients were charged for any use of Cox equipment on their properties and that the plaintiffs generally were charged for use of non-Cox equipment on their properties. It would appear that they were charged if non-Cox equipment was used because of some temporary unavailability of the Cox “equivalent”.[26]

    [22]   His equipment included a tractor, a small spray plant, a small slasher and various bin trailers.

    [23]   That is, as opposed to the office/accounting side which is supervised by the second defendant, Mrs Walker.

    [24]   T432.

    [25]   This was the effect of Mr Walker’s evidence on this topic. Dr Cox, in his evidence, did not in clear terms put any contrary position, T180-181, 432-433, 444.5.

    [26]   See for example P8 and D47 which record an hourly charge out rate of $44 for use of the Walker air spray on Cox properties. The total equipment cost charged according to P8 suggests that the plaintiffs were charged for 14.5 hours of use of Walker spray plant in February 2003.

11. Considerations of efficiency and mutual client advantage were not the only reasons that the Cox boom spray was used on non-Cox properties. Mr Walker said during cross-examination that he started to direct his main tractor operator, Peg Willis, to use the boom spray on non-Cox properties “about 2001”. He gave as his reason “just the pressure of the market conditions that we were required to be in.”[27] Elsewhere in his evidence Mr Walker explained that, at about that time, changes in export and regulatory requirements led to a necessary increase in the spraying regimes for citrus properties. Mr Walker also said that they started to use the Cox mulcher on non-Cox properties in early 2000 (together with the Walkers’ slasher) because of pressure of work, in that there was more work than they could cope with using just the slasher, as well as because of the convenience factor.[28]

    [27]   T770.

    [28]   T894-896.

12. In summary, I accept that there were advantages available to the plaintiffs as a result of the defendants operating the business of, as Mr Walker described it, “a cluster farm” utilising the pool of generally available equipment. These included, but may not have been limited to, secure storage of the Cox equipment at no cost, high quality, readily available maintenance at a significantly reduced cost, availability of back up equipment for times when the Cox equipment was temporarily unavailable, an increase in the capacity of the defendants to provide efficient and timely services and, from time to time, a reduction in charges for travelling time.

13. The actual extent of or value in monetary terms of these advantages, insofar as they applied to the plaintiffs during the life of the relationship, was a matter of some debate during the trial. However, the claimed advantages have to be considered in the light of the parties’ overall arrangement. The defendants agreed to provide a total professional management service in exchange for a management fee together with the right to charge for and recover specified variable costs. It is artificial to look at these “advantages” as, in a sense, uncharged for services. They are features of the defendants’ operation which, it would seem, assisted them to provide an efficient and acceptably priced management of the plaintiffs’ and other clients’ properties.

14. Another factor potentially relevant to the question of whether or not the defendants had implied permission to use the Cox equipment on non-Cox properties concerns the state of the plaintiffs’ knowledge about its use. The second plaintiff, Mrs Cox, did not give evidence and took no active part in the trial. It is common ground that Dr Cox had the carriage of all matters on behalf of the plaintiffs concerning the working relationship between the parties. It has not been suggested that Mrs Cox possessed knowledge of any material matter, including about the use of the Cox equipment, additional to that which Dr Cox might have had.

15. Dr Cox said that he only had the one conversation about possible use of the boom spray, as discussed above. He said that at no time was he told that the plaintiffs’ equipment was, in fact, being used on non-Cox properties. He never heard anything or saw any document that drew to his attention the fact that the plaintiffs’ equipment was being used in this way. On his periodic visits to the area he visited the plaintiffs’ properties. When travelling to and from these properties and around the area generally he would have travelled past various non-Cox properties but did not visit them. At no time did he see the plaintiffs’ equipment being used on non-Cox properties.[29] The first time Dr Cox became aware of this use was in January 2005 through information provided by Mr Norman and Mr Pierce.[30] Dr Cox was not seriously challenged on this evidence during cross-examination. In any event, I accept it. The allegation in paragraph 7 of the defence to the effect that the plaintiffs were aware of the defendants’ use of the Cox equipment as a result of regular attendances at properties in the region was not pursued during the cross-examination of Dr Cox.

    [29]   T174-177.

    [30]   T181-182.

16. Mr Walker, in his evidence, could point to no conversations,[31] documents or property visits through which Dr Cox might have been put on notice that the Cox equipment was being used on non-Cox properties. In essence, Mr Walker asserted that the defendants’ entitlement to use the Cox equipment arose because of the absence of anything said to the contrary by Dr Cox in the context of the “cluster farm” and pooled equipment practice regularly employed in the industry and understood by his clients to be the defendants’ modus operandus.[32]

    [31]   Other than the one concerning the boom spray discussed above.

    [32]   T770.37-771.7, 771.31-773.4, 773.25-773.35, 775.14-775.35, 806.17-818.

17. In light of the immediately preceding discussion, I make the following findings. At no time prior to January 2005 did the plaintiffs, through Dr Cox or otherwise, have any knowledge, actual or constructive, that Cox equipment was being used on non-Cox properties. I find Messrs Anderson and McInness to have been aware of the use to which their respective equipment was put and to have been untroubled by this. There is no evidence about whether or not other clients of the defendants were aware of this “pool” arrangement other than Mr Walker’s assertions to this effect. In any event, it would have been of no concern to them[33] because they were not contributors to the pool. Furthermore, their state of knowledge and that of Messrs Anderson and McInness hardly could bind the plaintiffs and I am not satisfied that the plaintiffs, themselves, were aware of the defendants’ “pool” arrangement. Mr Walker’s evidence as to the industry practice was weak and barely rose above speculation.[34] In any event, there is no evidence to support a finding that the plaintiffs were aware of any such industry practice. If other multiple farm managers do, in fact, employ a pool of equipment in their operations on the same conditions as those adopted by the defendants, such would seem to be irrelevant to the relationship between the plaintiffs and the defendants, at least where the plaintiffs had no knowledge of either the asserted industry practice or the defendants’ practice in this respect.

    Defence Counsel Submissions and Ultimate Findings as to whether or not Defendants’ had Implied or Imputed Permission

    [33]   Other than perhaps the late Mr Giannakopolous.

    [34]   T806-807.

1. Defence counsel submitted that the defendants “understood” that Dr Cox would have realised the use to which pool equipment, including the Cox equipment, would be put. I have found that Dr Cox did not realise this. Counsel outlined the various advantages to the plaintiffs of the pool system. The next step in the argument was that the pool system was integral to the defendants’ operation, in that, they were in the business of managing orchards, not hiring equipment, and that to restrict the use of the Cox equipment to Cox properties would cause a “complete disruption” to the defendants’ business in a number of ways. This was not the sort of business the defendants were operating and if the plaintiffs had wanted the defendants to operate their business in a different manner they should have gone elsewhere. Counsel then argued that the defendants had an obligation to run their management operations for all clients in a rational and efficient way. Counsel proceeded to explain, with examples, the inefficiencies and increased costs that would be likely to arise if use of Cox equipment had been restricted to Cox properties.

2. There are problems with this argument. First, in my view, it overstates the effect of the evidence. I am not persuaded that any inefficiencies and increases in the costs of operation caused by restricting the use of Cox equipment would be as significant as the defendants asserted.

3. Second and more importantly, Dr Cox was not told any of this at the time he initially entered into the management agreement, at the times the plaintiffs acquired the Cox equipment and put it into the defendants’ possession or at any other time throughout the life of the parties’ relationship. The parties at no time adverted to the possibility, let alone expressly agreed, that the management agreement would contain a term to the effect that the defendants could use and charge for the use of Cox equipment on non-Cox properties.

4. The defendants’ argument to this point goes no further than saying that, in the defendants’ opinion, the most efficient and cost effective way of performing their contracted management operations for all clients was to employ the pool of equipment approach. This may or may not be so.[35] However, this of itself, is not a justification for a finding that the defendants had the plaintiffs’ permission, implied or imputed, to use the Cox equipment in this way.

   [35]   It is an open question as to just how cost effective and efficient the defendants’ approach was, in fact. It is also an open question as to who, in fact, benefited. An obvious benefit to the defendants of employing the pool approach is that they needed to own less of their own equipment in order to provide their management services. They also could reduce their own labour costs. The extent to which these potential overhead savings were in fact passed on to the clients, including the plaintiffs, if at all, cannot be determined from the evidence. Of course, if as a result of restricting the use of the Cox equipment the defendants had been forced to purchase additional equipment, this increase in overheads may well have been passed on, in some form or another, to the clients, including the plaintiffs.

5. There was no relevant express term in the parties’ contract. As such, any contractual entitlement in the defendants can only be by way of an implied term. Whilst not pleaded in the defence, counsel for the defendants, in his final address, invited me to find an implied term to the effect that the defendants were authorised to manage the business of the plaintiffs including by making appropriate decisions in respect of the use of the plaintiffs’ plant and equipment.[36] Such a term, it was submitted, would constitute a complete answer to the plaintiffs’ claim no matter what cause of action it was based on.

   [36]   T1206 line 31 and T1204 to 1210 generally.

6. Arguably, the existence of such a term, construed so as to apply in the context of the management of the plaintiffs’ properties alone, would be unobjectionable. It does no more than re-state the management arrangements agreed upon by the parties. However, to construe such a term as permitting the defendants to use the plaintiffs’ plant and equipment in their management of their own and other client properties for reward begs the question of whether or not they had the plaintiffs’ permission, express or implied, to do so. In my view, the formulation of a putative implied term in this very general way as proposed by the defendants sidesteps this issue of permission or authorisation which is central to the parties’ relationship. If a term were to be implied in favour of the defendants, it could only be one the terms of which directly addressed this issue; in other words, a term to the effect that the defendants, whilst using the plaintiffs’ equipment in the course of managing the plaintiffs’ properties, were entitled also to use the equipment for their own purposes and for their own financial benefit.

7. In my view, when formulated in this way, the necessary requirements for a term to be implied in fact, as traditionally formulated[37] are not met. Whilst such a term is capable of clear expression and may be seen as consistent with (or, at least, not inconsistent with) the other terms of the contract it is not, in my view, a term “so obvious that it goes without saying”. To the contrary, given the information available to Dr Cox, particularly following the still born discussion with Mr Walker concerning the boom spray, the more obvious understanding is that this was equipment purchased by the plaintiffs (at some expense) for the defendants to use on Cox properties in an effort to reduce equipment charges otherwise levied by the defendants. If the defendants wanted to use the Cox equipment for any other purpose (other than perhaps a de minimis or emergency use) they should seek permission of the owner. In addition, such a term is not necessary to give business efficacy to the contract and I doubt (for reasons already touched upon) whether such a term could be said necessarily to be reasonable and equitable for both parties. As to the former requirement, the fact that efficiencies and cost reductions would, in fact, result from the pool of equipment approach (although I have made no finding to this effect) would not of itself mean that a term to this effect is necessary to give business efficacy to the contract; that is, to make the contract commercially effective. The contract for management of the plaintiffs’ properties would work quite sensibly and adequately if use of the Cox equipment were restricted to Cox properties only, even if the plaintiffs or the defendants or both might be put to additional expense. The fact that this might cause the defendants difficulty in servicing their other clients (in the absence of incurring greater overheads or increasing their charges) is irrelevant to, but in any event does not detract from, the business efficacy of the defendants’ contract with the plaintiffs.

   [37]   BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 226 at 282-3 per the Privy Council, approved in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 605-5 per Mason J with whom the other members of the High Court agreed and in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347 per Mason J with whom Wilson and Stephen JJ agreed.

8. Of late, a distinction has been drawn between formal written contracts complete on their face and other informal contracts. The above analysis drawing, as it does, on the criteria established in BP Refinery (Westernport) Ptd Ltd v Shire of Hastings[38] has been said to apply to the former category[39] whereas an alternative approach, as described by Deane J in Hawkins v Clayton[40] has been applied to the latter category.[41]

   [W]here it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. That general statement of principle is subject to the qualification that a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties.

   [38] (1977) 180 CLR 266 at 282-3.

   [39]   Byrne v Australia Airlines Ltd (1995) 185 CLR 410, Breen v Williams (1996) 186 CLR 71.

   [40] (1988) 164 CLR 539 at 573.

   [41]   Whether or not there is a real practical difference between these two approaches is a matter of debate, see Carter on Contract (looseleaf) Lexis Nexis Butterworths 2002 Vol 1 at [11-110].

9. Even on this more flexible test, no term can be implied if the contract is capable of operating reasonably and effectively without the term.[42] I have already found that the contract between the plaintiffs and the defendants was capable of so operating. None of the additional possibilities set out in the last sentence of Deane J’s approach is established by the evidence in this case.

   [42]   Byrne v Australian Airlines Ltd (1995) 185 CLR 410, Breen v Williams (1996) 186 CLR 71 at 123-4 per Gummow J.

10. My findings to this point are, in short, that the defendants did not have the permission of the plaintiffs in fact, whether express, implied or imputed, to use the Cox equipment on non-Cox properties and that the contract pursuant to which the defendants undertook the management of the Cox properties did not contain any such term, whether express or implied.

    The Plaintiffs’ Cause of Action in Contract

11. The plaintiffs also assert the existence of an implied term in the management contract. In paragraph 7 of the Amended Statement of Contract claim they plead that, following its purchase, it was an implied term of the management agreement that the Cox equipment would be used by the defendants solely for the purpose of managing the plaintiffs’ property.

12. In my view, the reliance on such an implied term is misconceived. The arrangement reached, as a matter of fact, was that the plaintiffs would make equipment available to the defendants which the defendants were to use in their management of the plaintiffs’ property. To the extent that the defendants would thereby be relieved from using their “own” equipment, the plaintiffs would enjoy a reduction in fees charged for equipment use. As part of the arrangement the defendants assumed possession of the Cox equipment. To this point the onus rests with the defendants to justify their using of the Cox equipment outside the terms of any express or implied permission granted by the plaintiffs. An implied term in the form propounded by the plaintiffs is not necessary to give business efficacy to the contract of management.[43] As events have shown, the contract, implemented by the defendants in a manner contrary to the plaintiffs’ position, was commercially effective. In any event, a finding that such an implied term existed and had been breached throughout the contract would achieve little, if anything, for the plaintiffs. The breach of such a term would sound in nominal damages only.

    [43]   Whichever legal formulation of the requirements for an implied term were to be adopted.

13. The plaintiffs have been caused no loss by the defendants’ use of the Cox equipment. The equipment was fully maintained throughout and returned to the plaintiffs at the end of the contract in good working order. It is conceivable that the remaining life expectancy of the equipment available to the plaintiffs had been reduced as a result of any additional “wrongful” use and notwithstanding that it had been regularly and well maintained and serviced. However, there was no evidence to this effect and the proposition is by no means self evident.[44] Furthermore, the plaintiffs made no claim for this type of loss. The plaintiffs’ claim at all times was confined to the benefit obtained by defendants as a result of their wrongful use of the equipment. The plaintiffs’ claim for the breach of an implied term in the contract fails.

    [44]   The general tenor of Mr Walker’s evidence about the type of pool equipment he used was that provided it was repaired as necessary and regularly maintained it remained in use for decades. I suspect that obsolescence is likely to be the main reason why the lifespan of properly maintained equipment would come to a premature end.

    The Question of Bailment

14. I turn now to consider various non-contractual causes of action. However, before doing so, brief consideration needs to be given to the issue of bailment. In addition to the contractual (management) arrangement between the parties and, perhaps, independently of the contractual terms of the management agreement[45] the defendants became (joint) bailees of the Cox equipment. At all material times, they knowingly and voluntarily assumed possession of the Cox equipment with the plaintiffs’ knowledge and consent. The bailment was consensually brought to an end on or shortly after 31 December 2004 when the plaintiffs resumed actual possession following the termination of the management agreement. Whether or not the bailment was contractual, it was subject to conditions. I have already found that the purpose of putting the Cox equipment into the possession of the defendants was for them to use it in their management of the Cox properties and that they had no express or implied permission to use it on any other properties.

    [45]   See N.E. Palmer, Bailment 2nd ed, Law Book Coy Ltd at 19-20.

15. Duties arise under a bailment in two principal ways: by implication of law, as a result of the possessory relationship or by virtue of an agreement between the parties.[46] In addition to any cause of action for breach of contract or in tort, the plaintiffs may have an action for breach of bailment.[47] However, the common law obligations as bailee owed by the defendants are, of course, subject to qualification by the terms of the contractual agreement with the plaintiffs. Furthermore, as a general although not exclusive rule, the damages available for breach of bailment will be the same as those available for the analogous cause(s) of action for breach of contract or in tort available on the facts.[48] I will return to the issue of breach of bailment simpliciter later in these reasons.

    [46]   Palmer at 64.

    [47]   Pleaded by the plaintiffs at paragraphs 14B, 14C, 15, 16 of the Amended Statement of Claim as a breach of the “contract of bailment”.

    [48]   Palmer at 78-81.

    The Plaintiffs’ Cause(s) of Action in Tort and More on Bailment

16. The cause of action in tort expressly relied on by the plaintiffs in the Amended Statement of Claim is trespass to goods. Trespass is a wrong to possession.[49] The plaintiff must be in possession of the goods at the time of the unlawful interference. A legal right to the immediate possession of the goods in question may, in appropriate circumstances, suffice. The plaintiffs were the bailors and the defendants were the bailees of the Cox equipment. In my view, the bailment was at will rather than for a fixed term and, accordingly, the plaintiffs at all times had an immediate right to possession. However, the better view is that even in these circumstances no cause of action against a bailee in trespass will arise at least where, as in the present case, the wrongful interference has not brought the bailment to an end.[50]

    [49]   Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 at 224 per Dixon J.

    [50]   Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 at 224-8 per Dixon J with whom Starke J agreed at 221 and cf; Williams J at 241-42, McTiernan J at 233-34 and Latham CJ at 216-17.

17. In any event, the plaintiffs have suffered no loss recoverable in an action for trespass to goods. They were not deprived of the use of the Cox equipment throughout the period of management and it was returned to them properly maintained and in good order at the end of the period of bailment. The ordinary measure of damages for a trespass to goods is the value of the goods or of the bailor’s interest in the goods where it is a limited one, reflective of the fact that the cause of action arises from a wrong to possession. General damages for loss of use of the goods during any period in which a bailor was deprived of the use of the goods may be recoverable but the plaintiffs have suffered no proved loss of use. This is not a case where general damages, as distinct from special damages for loss of use, might be awarded.[51] The plaintiffs’ claim as pleaded in trespass to goods also fails.

    [51]   Cf; The Mediana [1900] AC 113 at 117-118.

18. Whilst not specifically pleaded by the plaintiffs, I next give consideration to the allied causes of action, detinue and conversion. The plaintiffs can have no claim in detinue because for this action to apply there needs to have been a wrongful detention of a chattel for which a demand for return has been made by the person with the immediate right to possession.[52]

    [52]   Egan v State Transport Authority (1982) 31 SASR 481 at 529 per White J.

19. The tort of conversion raises different considerations. In Penfolds Wines Pty Ltd v Elliott[53] Dixon J said:

    The essence of conversion is a dealing with a chattel in a manner repugnant to the immediate right of possession of the person who has the property or special property in the chattel. It may take the form of a disposal of the goods by way of sale, or pledge or other intended transfer of an interest followed by delivery, of the destruction or change of the nature or character of the thing, as for example, pouring water into wine or cutting the seals from a deed, or of an appropriation evidenced by refusal to deliver or other denial of title. But damage to the chattel is not conversion, nor is use, nor is a transfer of possession otherwise than for the purpose of affecting the immediate right to possession, nor is it always conversion to lose the goods beyond hope of recovery. An intent to do that which would deprive “the true owner” of his immediate right to possession or impair it may be said to form the essential ground of the tort.

    [53] (1946) 74 CLR 204 at 229.

20. The question before me here is whether the unauthorised (as I have found) use by the Walkers of the Cox equipment on non-Cox properties, in the circumstances, amounted to acts of conversion or were acts which, notwithstanding that they were unauthorised, fell short of what is required to constitute that tort.[54]

    [54]   This was the same question adverted to by the NSW Full Court in McKenna & Armistead Ltd v Excavations Ltd (1957) 57 SR(NSW) 515 at 517 Street CJ, Owen and Walsh JJ, to which case I return below.

21. In my view, the actions of the Walkers cannot be seen as disclosing an intent to do anything which would deprive Dr and Mrs Cox, as the true owners, of their immediate right to possession of the Cox equipment or which would impair their immediate right to possession. The evidence does not admit of a finding that the Walkers, at any material time, were not ready, willing and able to restore possession of the Cox equipment in good and proper order to the plaintiffs if and when demanded. It is true that the plaintiffs could have terminated the bailment at any time and demanded the return of the Cox equipment on account of the breach of bailment or for no reason at all, it being a bailment at will. However, the fact is that they did not do so and the tort of conversion is an intended wrong to ownership[55] including the owner’s immediate right to possession which has not occurred here. In my view, any action for conversion must fail for this reason.

    [55]   Strictly, conversion is a wrong to ownership. A plaintiff can succeed if he or she has a possessory title only because possession or a right to possession of a chattel is good as against anyone but the true owner; see generally Palmer at 209.

1. In McKenna & Armistead Ltd v Excavations Ltd,[56] the plaintiff had sold excavating machinery to the defendant. The contract provided that the transportation of the machines by the plaintiff in Sydney to the defendant in Melbourne should commence within 21 days of the contract and continue until delivery was effected. The plaintiff did not commence transportation within 21 days and continued to use the machinery for its own purposes. The defendant cross claimed in the proceedings alleging breach of a contractual term that the plaintiff would not use the machinery pending delivery and, in the alternative, a breach of a condition of the bailment said to be in the same terms.

   [56] (1957) 57 SR(NSW) 515.

2. Without deciding, the Full Court expressed doubt that there was evidence on which a finding of conversion could be made[57] and did not proceed to answer the question that I have just answered on the evidence before me. However, the Full Court did affirm the trial Judge’s findings that there was a bailment and that no agreement had been made that the plaintiff/cross respondent should have the right to use the machinery.[58] These are the same conclusions that I have reached in the present matter. The Full Court in McKenna went on to hold as follows: [59]

   In our opinion, it is clear that a bailor is entitled to sue a bailee for damage resulting from any use by the bailee of the goods or any dealing with the goods going outside or beyond the terms upon which he has become bailee. An unauthorized departure from the terms of the bailment renders the bailee liable for damage which results from it. Whether the action may be more appropriately framed as an action for breach of an implied term in the contract of bailment, or as an action for breach of a duty arising out of the relationship between the parties and imposed by law upon the bailee, is a question which need not be determined in this case. The first and second pleas of cross-action were adequate to raise the claim of the defendant for damages for the unauthorized use of its goods ; and as it was not disputed that the goods were used by the plaintiff and it was found that the defendant had not agreed to that use, the defendant established its right to recover such damages. (citations omitted)

   [57]   At 517.

   [58]   At 518.

   [59]   At 518.

3. Notwithstanding my conclusion that the defendants did not commit any act or acts of conversion by their unauthorised use, they did commit a breach of bailment in the sense described in McKenna. The important issue is the nature of any damages to which the plaintiffs are entitled as a consequence of this breach of bailment.

4. The general rule is that an injured party should be placed, as far as possible, in the same position financially as they would have been in had the defendant not infringed their legal rights.[60] In most cases of conversion or breach of bailment the actual loss is represented by the full value of the property of which the plaintiff has been deprived. The plaintiffs in the present case have not actually been caused any such loss, for the reasons discussed above during my consideration of the pleaded breach of contract cause of action. Had the plaintiffs succeeded with a claim for conversion they may have been entitled to elect to “waive the tort” and sue instead for the proceeds of the conversion as money had and received their use.[61] However, as I have found, no claim in conversion arises.

   [60]   McKenna at 518, Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185.

   [61]   United Australia Ltd v Barclays Bank Ltd [1941] AC 1 at 34 per Lord Romer.

5. Nevertheless, if the plaintiffs can demonstrate that they have been caused to suffer some form of pecuniary loss apart from the value of the property as a result of the defendants’ breach of bailment they should be entitled to recover for that. There is a well established line of authority to the effect that a plaintiff can recover for breach of bailment, in appropriate circumstances,[62] a reasonable hiring rate for the wrongful use of their property.[63]

   [62]   The principle rarely will apply in cases of conversion because it turns on a wrongful refusal to hand over possession which, ordinarily, signals an action in detinue.

   [63]   See, for example, Strand Electric & Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246, McKenna at 518-520, Wade Sawmill Pty Ltd v Colenden Pty Ltd t/a Pilks Pine [2007] QCA 455 (a case of detinue, but no distinction, of principle, appears to arise), Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd (1993) 32 NSWLR 175 (a case of detinue, but no distinction, of principle, appears to arise). See also the discussion in Finesky Holdings Pty Ltd v Minister for Transport (WA) (2002) 26 WAR 368 at 380-383 per Steytler J (with whom Wallwork and Parker JJ agreed) and the observation of Mason P in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 at [129].

6. In my view, these authorities stand for or are consistent with the proposition that a bailor is entitled to damages, measured by a reasonable hiring charge, where the bailed goods are wrongfully used by a bailee for their own purposes and where:

   (i)the plaintiff bailor has been wrongfully denied possession;

   (ii)notwithstanding that it has been demanded; and

   (iii)the goods in question would or might otherwise have been hired out by the plaintiff for reward.

7. It is arguable that some of the cases[64] go further and allow such a recovery even if there is no evidence that the plaintiff could or would have hired out the goods in question during the period they were wrongfully deprived of possession, provided that the plaintiff was in the business of hiring out the goods in question.[65]

   [64]   For example, Strand Electric and, perhaps, Gaba.

   [65]   Mason and Carter in Restitution Law in Australia, 1995, Butterworths, at [1629] criticise the requirement that the plaintiff must be shown to have been in the hiring business. Palmer at 235 criticises the basis for the Full Court’s refusal to award this type of damages in McKenna being that the defendants were not, at the material time, under a duty to deliver the goods to the plaintiff and accordingly neither deprived them of possession nor caused them any loss. Whilst I sympathise with these criticisms, in my view the authorities have not yet developed the law in either of these ways.

8. In the present case, neither (i) nor (ii) is satisfied on the facts before me. I also am not satisfied that (iii) applies. In this latter respect, I accept that the plaintiffs were open to allowing the Cox equipment to be used on other properties if they could receive some recompense. However, on the evidence available in this case I am not satisfied that the defendants would have used or facilitated the use of the Cox equipment, on this basis, on the other properties under their management. Had the issue of use without permission arisen during the parties’ relationship, it is not possible, on the evidence, to know what the defendants would have done. They may have been able to continue to manage the non-Cox properties only using the non-Cox equipment in the pool, they may have acquired other equipment or, of course and quite possibly, the parties’ relationship may then have been brought to an end and the Cox equipment returned. Other possible outcomes may have emerged. However, I cannot find on a balance of probabilities that the plaintiffs would have been able to hire out the Cox equipment for use on non-Cox properties. Furthermore, there is simply no evidence of any opportunity for the plaintiffs to have hired out their equipment for use on non-Walker managed properties nor is there any evidence that the plaintiffs attempted, at any time, to pursue any such opportunities. The plaintiffs were never in the business of hiring out their equipment.

9. For these reasons, the authorities that I have referred to in this context are distinguishable and the proposition for which they stand does not apply. It is unnecessary for me to attempt to calculate a reasonable hiring fee of which the plaintiffs have been deprived.

10. Any claim in detinue or conversion (albeit not expressly pleaded) and the claim for damages for breach of bailment fail.

    The Plaintiffs’ Cause of Action Alleging Breach of Trust

11. I turn now to the plaintiffs’ claim for breach of trust.[66] Rarely, will a claim for breach of trust in relation to personal property co-exist with a bailment relationship and notwithstanding that a number of cases, particularly older ones, speak of bailment as a delivery of goods on trust.[67] Where property is held on trust there is a separation of the legal and equitable title to the trust property. The plaintiffs do not plead nor does the evidence suggest, in any way, a transfer of the legal title in the Cox equipment from the plaintiffs to the defendants. My rejection of any argument that the Cox equipment was held by the defendants on an express or implied trust for the plaintiffs does not necessarily mean that a constructive trust could not arise as a result of the defendants’ conduct, as bailee, in appropriate circumstances.[68]

    [66]   Amended Statement of Claim paragraphs 14, 15 and 16.

    [67]   See Palmer at 189 and the authorities there cited.

    [68]   See generally in Palmer, the text to fn 60 at 190.

    The Plaintiffs’ Claim for Breach of Fiduciary Obligation

12. I turn then to the plaintiffs’ claim that the defendants owed them various fiduciary obligations as a result of their bailment relationship.[69] In Hospital Products Ltd v United States Surgical Corporation,[70] Mason J said:

    The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other 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 or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions “for”, “on behalf of”, and “in the interests of” signify that the fiduciary acts in a “representative” character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal. (Citations omitted.)

    [69]   Amended Statement of Claim at paragraphs 14A, 14C, 15 and 16.

    [70] (1984) 156 CLR 41 at 96-97.

13. Whilst Mason J was in the minority in this case on the issue of whether or not a fiduciary relationship existed on the facts, this passage is a well accepted statement of general principle.[71] It sets out some of the features that may indicate the existence of a fiduciary relationship outside the conventional categories, including where the relationship is one of trust and confidence and involves the exercise of a power or discretion which will affect the interests of a party such that this party’s position may be seen as vulnerable to abuse by the other. The existence of these features does not necessarily, that is, always indicate a fiduciary relationship. However, one element that has been said to be essential is that of where a person undertakes to act for or on behalf of or in the interests of another, so that the first person is not free to pursue his separate interests.[72]

    [71]   See also the discussions by Gibbs CJ at 68-72 and Dawson J at 141-142.

    [72]   See the discussion in Meagher Gummow & Lehane, Equity Doctrines and Remedies 3^rd Ed, Butterworths at [501]-[502].

14. A relationship may be fiduciary as to all or as to some only of its aspects. Further, a relationship, whilst fiduciary in part, also may be governed by other legal principles derived, for example, from the common law such as contract, tort or bailment principles.[73]

    [73]   Meagher Gummow and Lehane at [502].

15. In the present case, the parties’ relationship was governed primarily by their management agreement. However, the plaintiffs, as absentee owners, did hand over almost total control of their properties and the Cox equipment for long periods of time to the defendants who were to act as their agents in a number of respects. In this respect, the plaintiffs were, throughout the relationship, in a position of heightened vulnerability in that the defendants undertook to act for or in the interests of the plaintiffs at least insofar as the management of the Cox properties was concerned. Whether or not the overall management arrangement between the parties incorporated or required the defendants to observe some fiduciary type obligations is not a matter I have to decide. However, I do add that, leaving aside the impugned use of the Cox equipment, there is nothing in the evidence to suggest that the defendants were anything other than scrupulous in their management dealings with the plaintiffs.

16. Whether or not the parties’ overall relationship had a fiduciary aspect to it, in my view the defendants did assume fiduciary obligations when they became bailees of the Cox equipment at least insofar as their responsibilities relating to the use of that equipment were concerned. The defendants were entrusted with possession of the Cox equipment for the purpose of using it only in their management of Cox properties. The plaintiffs were absent from the area for most of the time and were in a particularly vulnerable position should any misuse of the equipment occur. In my view, the defendants were not free to use the Cox equipment in the service of their own interest.

17. It is well recognised that a bailee can stand in a fiduciary relationship with the bailor when goods are entrusted to the bailee to be held or dealt with for the benefit of the bailor or for stipulated limited purposes.[74] There is nothing about the contractual relationship of the parties here that would serve, in my view, to exclude or qualify such a fiduciary relationship. As such, the defendants, when using the Cox equipment, had an obligation not to pursue their own or any other client’s interest and not to profit from its use. By using the Cox equipment on other properties and receiving payment for that use the defendants’ own interests were in conflict with their duty of fidelity owed to the plaintiffs and they breached their fiduciary obligation not to prefer their own interest.

    [74]   Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 101 per Mason J and see also Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552 at 563-564 per Roskell LJ, In re Hallett’s Estate (1880) 13 ChD 696 at 708-709 per Jessel MR.

    Remedies Where there is a Breach of Fiduciary Obligation

18. In these circumstances, a court of equity can award equitable compensation or, at the election of the plaintiffs, an account of profits. Equitable compensation, like damages at common law, is intended to be compensatory. It does not focus on any benefit a wrongdoer may have gained; only loss actually suffered by the beneficiary. For reasons already given, any loss suffered by the plaintiffs as a result of the unauthorised use of the Cox equipment can only be seen as nominal. This is not like, for example, a patent case where the wronged party might point to a measurable loss of sales or market share as an alternative to an account of the wrongdoer’s profits.

19. An account of profits is, like all equitable remedies, discretionary. I will return to this issue. Further, it is clearly established that a plaintiff, whilst bound once an election is made, is only obliged to make an election between equitable compensation and an account prior to judgment being entered.

20. The evidence in this case permits findings to be made as to the number of hours that the defendants used each item of Cox equipment on non-Cox properties and as to the approximate hourly rates of remuneration received for this unauthorised use. I turn now to consider these two issues before considering whether I am in a position to undertake the accounting exercise or whether I should simply order that an account be taken provided the plaintiffs were to so elect.

    Hours of Unauthorised Use

21. The defendants provided to each of the employees in the field pre-printed sheets on which each employee was required to record, inter alia, information as to tasks undertaken, equipment used and chemicals and the like consumed by reference to individual client properties worked on. These pre-printed sheets were called “daily work sheets”. The expression is a misnomer. Each such sheet recorded the work done by an employee/author during the week ending on the date noted on the sheet.

22. By reference to the various original and copy daily work sheets in evidence, I have managed a partial reconciliation of the defendants’ schedule and the plaintiffs’ schedule handed up during final submissions. As a result, the following hours of use of Cox equipment on non-Cox properties are conceded by the defendants:

    (i)The Cox boom spray – 454 hours;

    (ii)The Cox mulcher – 157 hours;

    (iii)The Cox (large) vicon – 31.5 hours; and

    (iv)The Cox spot sprayer – 72 hours.

    Cox Boom Spray

23. I provide the following explanations with respect to some of the hours of use of the Cox boom spray conceded by the defendants. It is common ground that a reference to “Plant B” on a daily work sheet is a reference to particular Walker equipment whereas a reference to “Plant A” can, according to the circumstances, be a reference to the Walker air spray or the Cox boom spray.

    (i)With reference to daily work sheet (“dws”) 0639 dated 6/2/2002, the plaintiffs, in their schedule, claim 9 hours whereas the defendants, in their schedule, concede 16.25 hours. The defendants appear to have inadvertently included 7.25 hours referable to “plant B” equipment. “Plant B” is Walker equipment not Cox equipment. I have included in my calculation only the 9 hours claimed by the plaintiffs.

    (ii)With reference to dws 0680 dated 11/12/2002 the plaintiffs claim 25.25 hours whereas the defendants record the plaintiffs as claiming 24.75 hours. I have treated this as either an arithmetical or typographical error by the defendants and have included in my calculation 25.25 hours.

    (iii)With reference to dws 0685 dated 22/01/2003, the plaintiffs claim 24 hours whereas the defendants concede 2.4 hours. I have treated this as a typographical error and have included 24 hours in my calculation.

    (iv)The defendants, in their schedule (page 8) concede 3.25 hours with reference to dws 0182. This is a typographical error for dws 0192. I have included the 3.25 hours conceded by the defendants.

    (v)I have reviewed the daily work sheets that relate to this total of 454 hours and the approximate break-up of this use on Walker managed properties and Walker properties is 332 and 122 hours respectively.

    Cox Mulcher

24. I provide the following explanations with respect to some of the hours of use of the Cox mulcher conceded by the defendants.

    (i)The defendants concede 3 hours use with reference to the Rick Pierce dws 0729 dated 23/12/2003. There is no reference on this dws to the use of a mulcher. However, the preceding dws in exhibit P3, one for Adrian Norman (0191 dated 22/12/2003) does contain an entry of 3 hours for “tractor/mulcher”. This is claimed by the plaintiffs in their schedule and it appears that the defendants have made a transcription error. I have included the 3 hours conceded by the defendants.

    (ii)The defendants concede 3.25 hours with reference to dws 0009 dated 28/04/2004. The plaintiffs claim 3.5 hours. A review of dws 0009 shows this to be a typographical error in the defendants’ schedule. I have included 3.5 hours in my calculation.

    (iii)The defendants concede 2.2 hours with reference to dws 0033 dated 13/10/2004. Again this is a typographical error. The plaintiffs claim and I have allowed, in my calculation, 2.25 hours.

    (iv)I have reviewed the daily work sheets that relate to this total of 157 hours and the approximate break-up of this use on Walker managed properties and Walker properties is 112 and 45 hours respectively.

    Cox Large Vicon

1. The plaintiffs, on the other hand, have attempted an analysis of the statements in P15 and P15A. This analysis is found in Annex 4 attached to their document handed up during final submissions. According to the plaintiffs’ analysis, a total of 417 acres was sprayed (using either the boom or air spray) for which a total of $16,221 was charged during the periods covered by these statements. This suggests an average charge per acre of $38.90.

2. Given that the analysis of each party suggests a figure between $38 and $39 per acre, if I were able to calculate the number of acres that would have been sprayed over the 843 hours in question (the second approach referred to above), I would adopt an average spray plant charge of $38 per acre.

3. I turn now to consider whether a calculation of the average number of acres sprayed for every 1 hour of use of the spray plant is possible.

4. According to Mr Walker[123] whose evidence, in this respect, I accept, the properties under his management are likely to be sprayed with various insecticides[124] up to five times a year, with nutrient (foliar fertiliser) two to three times a year, with copper once, with Gibberellic Acid once and with something called “stop drop” once. The last two are sometimes combined. The spraying regime will vary for each property according to its circumstances. Furthermore, once it becomes apparent that a particular Valencia crop will only be good for juice, some of the spraying, particularly that related to appearance, will stop. For much of the relevant period, 50% of the oranges under Walker management were valencias and 50% were navel. However, there is insufficient evidence to enable any reduction in the spraying regime for valencias, as and when it took place on particular properties, to be identified and taken into account in any precise way. Given that the onus on all matters rests with the plaintiffs, this is a reason why a conservative position, favourable to the defendants, would need to be adopted.[125]

   [123] T668-670.

   [124] The main infestations are Thrip, Apple Brown Moth, Scale and Mealy Bug Moth.

   [125] I discuss this issue in more detail further below.

5. Mr Walker estimated that insecticide sprays were applied at the rate of 3 hours for 3 acres and that 60 acres could be sprayed with nutrient spray in 20 hours. He gave no estimates for copper, Gibberelli Acid or stop drop. I have reviewed the monthly statements in exhibits P15, P15A, D15B and D15C. It is not always apparent from these statements precisely how many acres were sprayed by reference to the recorded hours of spraying a particular chemical. However, often it is. The spray rates as recorded vary considerably. However, on my review, the monthly statements suggest the following:

   (i)spraying insecticide for 1 hour would cover in the order of 1½ acres;

   (ii)spraying nutrient (foliar fertiliser) for one hour would cover in the order of 2 acres;

   (iii)spraying copper for 1 hour would cover in the order of 2.8 acres;

   (iv)spraying Gibberelli Acid for one hour would cover in the order of 1.5 acres; and

   (v)spraying stop drop for 1 hour would cover in the order of 2 acres.

6. I have spent quite some time in attempting, with the assistance of Mr Walker’s evidence, modified by reference to the monthly statements in evidence, to calculate an average number of acres sprayed for every hour of use of the spray plant irrespective of the chemical sprayed. I am not confident that I can arrive at a figure sufficiently accurate to be of use in any accounting exercise that might be undertaken.

7. Furthermore, the defendants, in D12, by reference to various daily work sheets in evidence have calculated what they submitted were the total number of acres of Walker managed properties (Schedule I) and of Walker properties (Schedule II) actually sprayed using the Cox boom spray. However, exhibit D12, in its present form, is of no assistance. It does not take into account all of the daily work sheets that, as I have found, record a use of the boom spray on non-Cox properties nor does it take into account the uplifts in use determined by me in reliance on the oral evidence notwithstanding the absence of some daily work sheets. Furthermore, the evidentiary basis for the calculations in D12 remains unclear to me. In particular, the evidentiary basis for the defendants’ calculations of the acres sprayed, according to each particular dws referred to in D12, is not clear.

8. In this respect, I note that there is no express reference to “acres” on any dws. However, I understand the defendants to have calculated the number of acres sprayed by reference to the information provided on the back of each original dws, where available.[126] However, even if the evidence would permit a reworking of D12 to identify the number of acres sprayed according to the original daily work sheets in evidence, accepted by me as recording use of the boom spray on non‑Cox properties, this still would only be a starting point. Significant extrapolation would need to be engaged in to take account of those daily work sheets that are not in original form and therefore do not contain the necessary information on the rear and to take account of the additional Pierce hours and of the uplift hours.

   [126] See, for example, the evidence of Mrs Walker at T1180.

9. In these circumstances, I return to the first approach referred to above; ascertaining an average rate per hour for which the spray plant was charged out. The monthly statements in evidence usually include the rate per acre that a customer was charged for use of the spray plant during the month in question, the number of acres sprayed and the number of labour hours expended on the spraying activities. From this information, it is possible to calculate the effective hourly rate charged to a particular customer for the use of the spray plant during a particular monthly period. In doing so, it is important to eliminate from consideration any labour hours expended on weedicide spraying which constituted a different operation separately charged for. Usually there is sufficient information in the monthly statement to enable the weedicide labour hours to be identified and excluded from consideration.

10. The plaintiffs in Annex 4 to their final submissions have calculated the total of all amounts charged to customers as recorded on the statements in P15 and P15A for use of spray plant and the total number of hours that the spray plant was in use. In so doing, they arrived at an average hourly rate of $73.73. However, on checking P15 and P15A, it appears that they omitted to include data from the Curran, February 2003 statement (8.5 acres at $44.50 per acre involving 5 labour hours), the Wyllie, May 2003 statement (6.5 acres at $42.50 per acre involving 8.5 labour hours) and the Hales, October 2004 statement (16.5 acres at $44.50 per acre involving 5 labour hours). In addition, whilst there is a measure of ambiguity about the monthly statements that I next refer to, in my view, an additional 5 hours from the McGuiness (sic: McInness) January 2002 statement, an additional 7 hours from the Dorman, January 2002 statement, an additional 4 hours from the McGuiness (sic: McInness) May 2002 statement and an additional 2½ hours from the Dorman, October 2004 statement also should be included.

11. When all of these matters are allowed for the average rate per hour of $73.73, as calculated by the plaintiffs, reduces to $68.51. Exhibits P15 and P15A contain 33 separate monthly statements referable to 10 Walker customers.

12. I have undertaken a similar exercise with respect to the monthly statements included in exhibit D15B (9 statements referable to 9 customers for the month of October 2001) and exhibit D15C (11 statements referable to 11 customers for the month of November 2001) and have arrived at average rates per hour of $86.69 and $66.28 respectively.

13. There are a number of reasons why it cannot be said that any of these average figures necessarily represents the true effective average hourly rate charged by the defendants for spray plant over the 1999 to 2004 period. I do not need to set out these reasons; the proposition is self-evident. I am also conscious of the fact that the defendants, in contrast to the position with their other customers, charged the plaintiffs for use of the Walker spray plant from time to time on an hourly basis. The applicable rate in November 2001, October 2001 and February 2003 was $44 per hour.[127] The plaintiffs, from the mid 90s onwards, had 200 acres under Walker management and they were by far the defendants’ largest single customer.[128] By reference to Mr Walker’s evidence to the effect that his charge out rate per acre would vary according, inter alia, to the number of acres a customer had under management, I infer that the rate of $44 per hour charged to the plaintiffs would have been a significantly discounted rate. For these reasons and by reference to the analyses of the information contained on P15, P15A, D15B and D15C referred to above, I find the effective average hourly rate charged to non-Cox customers for use of the spray plant to have been not less than $60.

    [127] See exhibits P8 and D47.

    [128] Evidence of Mr Walker at T624-625.

    Should the Defendants be Ordered to Account to the Plaintiffs

14. I have taken, in my view, a conservative approach – that is an approach which, if anything, favours the defendants – insofar as the additional hours I have allowed with respect to Rick Pierce, the 2001 to 2004 period uplift and the uplift for the years prior to 2001 are concerned. I have taken a similar approach in my determination of hourly charge out rates, particularly that relevant to the spray plant. I have done this for the following reasons.

15. The plaintiffs bear the ultimate onus of proving and quantifying the financial gain enjoyed by the defendants which is to be the subject of any accounting exercise. In most cases the remedy of an account of profits will lead to a precise calculation of relevant profits enjoyed by a defendant in contrast to the approach often permitted with respect to calculation of common law damages which can, in appropriate circumstances, admit of a so called “broad axe” approach inevitably lacking precision. The authorities in that area are clear to the effect that whilst the onus rests with a plaintiff to prove a loss and the amount of any loss, a court must do the best it can when assessing damages even though the available evidence does not permit anything like a precise calculation of loss to be arrived at.

16. It is sometimes said, by way of contrast, that the remedy of account demands, by its nature, a precise accounting of proved gains and losses. However, there is support in the authorities for a less than precise approach to an account of profits being adopted in appropriate circumstances. In My Kinda Town Ltd v Sell,[129] Slade J said:

    [T]he general intention of the Court making the order … has been to achieve a fair apportionment, so that neither party will have what justly belongs to the other. What will be required on the inquiry, if it has to be pursued, is not mathematical exactness but only a reasonable approximation.

    [129] [1982] FSR 147 at 159.

17. The High Court in Warman International Ltd v Dwyer[130] referred to this observation of Slade J with approval and added:

    What is necessary however is to determine as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty.[131]

    Lord Nicholls made similar observations in A-G (UK) v Blake:[132]

    [D]espite the niceties and formalities once associated with taking an account, the amount payable under an account of profits need not be more elaborately or precisely calculated than damages.

    [130] (1995) 182 CLR 544 at 558; Mason CJ, Brennan, Deane, Dawson and Gaudron JJ.

    [131] See also Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 110 per Mason J.

    [132] [2000] 4 AII ER 385 at 400 and see generally Restitutionary Damages – The Unnecessary Remedy? by Sam Doyle and David Wright [2001] 25 MULR 1 at 16.

18. In the circumstances before me and on the findings I have made, the only remedy available to the plaintiffs which would result in a monetary award, other than nominal, is the remedy of an account. A precise accounting simply is not possible given the state of the evidence and this is not the fault of the plaintiffs in the way they presented their case. On my findings, critical evidence relevant to any accounting exercise including a comprehensive set of daily work sheets and customer monthly statements, is not available and cannot be made available. Nevertheless, I am satisfied that the defendants did enjoy a significant financial benefit as a result of their wrongful use of the Cox equipment. To fail to engage in an accounting of the financial benefit obtained by the defendants because such inevitably would lack precision would be to fail to do justice between the parties.

19. For these reasons, and in accordance with the approach permitted by the authorities I have just now referred to, any account to which the plaintiffs may be entitled should be one that determines as accurately as possible the true measure of the financial benefit obtained by the defendants in breach of their fiduciary duty. However, to the extent that precision is not possible and given that ultimately the onus of proof rests with the plaintiffs, care must be taken not to call on the defendants to account for more than the financial benefits actually enjoyed as a result of their breaches.

20. It is essentially for this reason that where I have reached findings as to hours of use for which there is no documentary record available and as to average hourly charge out rates I have adopted a conservative approach in the sense of adopting the minimum figures that I am satisfied are supported by the evidence.  Where a fiduciary obtains a benefit as a result of conduct which gives rise to a conflict of duty and interest, the fiduciary will be called on to account for any benefit obtained. It is no answer that the benefit obtained is one that the beneficiary could not itself have obtained or that no loss has been caused to the beneficiary by the fiduciary’s conduct.[133] However, equity does not assume a jurisdiction to punish by requiring a fiduciary to account for more than that actually received as a result of the breach.[134]

    [133] See generally Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 108-109 per Mason J and, in particular, Furs Ltd v Tomkies (1936) 54 CLR 583 at 592.

    [134] Vyse v Foster (1872) LR 8 Ch App 309 at 333 per James LJ and Hospital Products Ltd at 109.

21. I now return to the question of whether or not I am in a position to undertake an account of profits made or, in the alternative, moneys received by the defendants as a consequence of their use of the plaintiffs’ equipment in breach of their fiduciary obligation, should the plaintiffs elect for the remedy of an account.

22. The authorities support two approaches to the determination of a fiduciary’s liability to account:

    One approach more favourable to the fiduciary, is that he should be held liable to account as constructive trustee not of the entire business but of the particular benefits which flowed to him in breach of his duty. Another approach, less favourable to the fiduciary, is that he should be held accountable for the entire business and its profits, due allowance being made for the time, energy, skill and financial contribution that he has expended or made … In each case the form of inquiry to be directed is that which will reflect as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty.[135]

    [135] In re Jarvis(decd) [1958] 1 WLR 815 at 820 per Upjohn J and see generally Hospital Products Ltd at 110, Warman International Ltd v Dwyer (1995) 182 CLR 544 at 558-9.

23. As to the question of which approach should be adopted and as the final sentence quoted above suggests, each case will turn on its own facts.

24. In my view, any attempt to identify and account for those “profits” made by the defendants when conducting their management business as a result of their breach of fiduciary obligation would be quite inappropriate. Rather, there has been a clear and isolated monetary benefit obtained by the defendants directly resulting from their unauthorised use of the Cox equipment on Walker managed properties, namely, the fees charged for and paid by their customers for use of the Cox equipment.

25. However, the use of the Cox equipment on Walker properties raises other considerations. No money changed hands where Walker properties were concerned. Nevertheless, a real benefit was enjoyed by the defendants in cases where both Walker equipment and comparable Cox equipment were in use at the same time. Here, the fees received from other customers for use of the Walker equipment were earned because the comparable Cox equipment had been diverted to the Walker properties. In other words, the defendants still engaged in an unauthorised use of the Cox equipment so as to enable two properties to be worked on at the same time and fees to be earned. In these cases it is only serendipitous that the Cox equipment was used on a Walker property rather than a Walker managed property. In my view, it is no answer to the plaintiff’s claim here to say that the work on the Walker properties could have been deferred until the Walker equipment became available. The fact is that, either for reasons of necessity or convenience, it was not deferred and the defendants, by employing the Cox equipment, were able to work on their own property and at the same time receive a direct financial benefit by earning fees for working on customer properties.

26. It is likely that there were occasions where, for reasons of convenience or because the comparable Walker equipment was out of action undergoing repair, Cox equipment was used on a Walker property but no comparable Walker equipment was used at the same time on a Walker managed property. In such cases the defendants would have received no direct financial benefit for which they could be required to account. They may have been saved an expense in some of these cases if the work had to be done without delay and the Walkers would have had to hire a piece of equipment, had the comparable Cox equipment not been available and used. However, it is not possible to form a concluded view as to the precise nature and extent of any such indirect financial benefit given the state of the evidence.

27. Doing the best I can on all of the evidence before me and having regard to the parties’ submissions made to this point, I estimate that less than 40% of the Walker property hours of use would not have returned to the defendants a direct financial benefit in the way I have described. In forming this preliminary view, insofar as the spray plant is concerned, I have been strongly influenced by the fact that Mr Walker and Reg Willis had a strong preference for using the air spray rather than the boom spray where that choice was available.  For this reason I infer that for a significant majority of the hours that the Cox boom spray was used on Walker properties, this occurred because the Walker air spray was simultaneously in use on other properties.

28. In other words, my view is that no less than 60% of the hours of use of Cox equipment on the Walker properties would have occurred at the same time as comparable Walker equipment was being used on Walker managed properties. In adopting this figure, I have ignored the fact that there also may have been some, albeit immeasurable, indirect financial benefit to the defendants. I also recognise that it simply is not possible, on the evidence before me, to identify all of the occasions and all of the hours when Cox equipment and comparable Walker equipment were being used at the same time on Walker properties and Walker managed properties respectively.

1. The defendants submit that this is not an appropriate case to order an account. In essence they argue that it is not possible to identify with sufficient precision the factual basis for any such account and that it is not possible to identify and to make just allowances for overhead expenses including a just allowance for the defendants’ own skill and effort incurred and expended in deriving the unauthorised benefits. I reject these submissions.

2. I accept that a precise basis for an account cannot be ascertained, given the state of the evidence. I am also satisfied that most, if not all, of the difficulties I have identified could not be rectified if the parties were permitted to call further evidence. However, I have set out the approach I would adopt were I to proceed to undertake an account. As I have indicated, this approach is predicated on the proposition that care must be taken to ensure that the defendants are not required to account for more than the financial benefits they actually did enjoy as a result of their unauthorised use of the Cox equipment.

3. The latter of the submissions by the defendants, identified above, would carry more weight if I was proposing to order an account of the profits made by the business as a result of the defendants’ unauthorised use. However, it carries little, if any, weight where only an account of financial benefits directly obtained is in contemplation. The defendants charged and received payment each time a piece of Cox equipment was used on Walker managed properties. The tractor, labour, chemicals and fertiliser were separately charged or accounted for. In addition, each customer paid a management fee based on the number of acres under management which was intended to cover a management (or profit) element and business overheads. The mere fact of a tractor with driver (for which a fee was charged) towing a piece of equipment (for which a fee was charged) would not add to management costs or variable overheads other than, perhaps, some increase in the use of fuel which in the overall scheme of things would be de minimis. In any event, the onus rests with the defendants to prove any caused increase in variable overheads which might be allowed for and there has been no attempt to do this.

4. In my view, any account to be undertaken is to be an account of the financial benefit directly obtained by the defendants as a result of their unauthorised use of the Cox equipment. There are no just allowances to be made. The account will identify and calculate the best estimate possible, in accordance with the evidence, of the fees that were obtained by the defendants for use of the Cox equipment on Walker managed properties and of the fees that were obtained for use of Walker equipment used at the same time that comparable Cox equipment was used on Walker properties.

5. None of the discretionary factors or equitable defences such as estoppel, laches, or acquiescence apply here. There has been no conduct of the plaintiffs that would render it inequitable to order an account.

6. In due course, I will enter judgment for the plaintiffs. In light of my findings and reasons, the remedy available to the plaintiffs is either equitable damages or an account of the financial benefits enjoyed by the defendants as a result of their breach of fiduciary obligation. The plaintiffs must make an election and, in the circumstances, should be permitted to make that election between the publication of these reasons and final entry of judgment.[136]

   [136] United Australia Ltd v Barclays Bank Ltd [1941] AC 1 at 19, 30.

7. In the event that the plaintiffs were to elect for an account, I do not see why I should not proceed to complete that task. The evidence, relevant to damages and financial benefits received, was presented at trial by both parties with a view to me determining what relief would be appropriate and making all necessary calculations to give effect to that relief. As I have indicated, there are gaps in the evidence. By and large, I am not persuaded that the evidence could be improved upon in these respects if an account were to be undertaken from scratch either before me or a master, at least insofar as the gaps in the documentary record are concerned. In my view, I am the judicial officer best placed, in all the circumstances, to conduct an account of financial benefits. Putting the parties to the not inconsiderable expense of pursuing an account before another judicial officer, particularly given that the costs already incurred by each party, in my view, are likely to exceed by a significant amount the value of the plaintiff’s claim, cannot be justified. I propose to complete the exercise in the event that the plaintiffs were to elect for the remedy of an account.

8. I envisage the following method of calculating the financial benefit for which the defendants should account to the plaintiffs, in the event of and following any such election. The amount payable would be the total of the following:

   (i)Use of the spot spray for 48 hours on Walker managed properties at $15.50 per hour which equals $744;

   (ii)Use of the spot spray for 30 hours (60% of 50 hours) on Walker properties at $15.50 per hour which equals $465;

   (iii)Use of the Cox vicon for 66 hours on Walker managed properties at $15.50 per hour which equals $1,023;

   (iv)Use of the Cox vicon for 16.8 hours (60% of 28 hours) on Walker properties at $15.50 per hour which equals $260;

   (v)Use of the Cox mulcher for 168 hours on Walker managed properties at $13.50 per hour which equals $2,268;

   (vi)Use of the Cox mulcher for 44.4 hours (60% of 74 hours) on Walker properties at $13.50 per hour which equals $599;

   (vii)Use of the Cox boom spray for 640 hours on Walker managed properties at  $60 per hour which equals $38,400;

   (viii)Use of the Cox boom spray for 145.8 hours (60% of 243 hours) on Walker properties at $60 per hour which equals $8,748;

9. The presumptive total amount for which the defendants would be ordered to account is $52,507.[137]

   [137] Being the total of the figures $744, $465, $1,023, $260, $2,268, $599, $38,400 and $8,748 above.

   The Counter Claim

10. The defendants counterclaimed for the price of weedicide and chemicals allegedly supplied to the plaintiffs in accordance with two invoices dated 3 February 2005 and 11 February 2005 for the amounts of $2,247.49[138] and $879.50[139] respectively. Dr Cox, in his evidence, conceded that he was indebted to the defendants in the amount of $879.50. He denied that he was indebted with respect to the larger amount. However, Dr Cox conceded that if the chemicals referred to in P19 had, in fact, been used on his property he would be liable either to pay the supplier direct or to reimburse the defendants. According to Dr Cox, it was unusual or out of the ordinary to receive an invoice from the defendants for chemicals. Usually the cost of chemicals was met directly by the defendants from the plaintiffs bank account to which the defendants had access.[140] Exhibit P19 is an invoice dated 3 February 2005, that is, after the management arrangements had come to an end and at a time when the defendants no longer had access to the plaintiffs’ bank account. In short, Dr Cox’s evidence rose no higher than to the effect that these payment arrangements were out of the ordinary. He was unable to say whether or not the chemicals in question had been supplied and, if so, whether or not they had already been paid for.

    [138] After allowance for a credit, see tax invoice 247244, P19.

    [139] After allowance for a credit, see tax invoice 247248, P18.

    [140] T383-386.

11. Mr Walker gave an explanation as to how it came about that, following the termination of the arrangement, it was discovered that chemicals from the Walker stock had been used on Cox properties and that there was a need to raise the invoices P18 and P19.[141] Parts of Mr Walker’s evidence here were hearsay but it was not objected to and critical aspects of it were corroborated by Mrs Hoffman, an employee who participated in the stock take and by Reg Willis who also participated in the stock take. I accept Mr Walker’s evidence on this topic and the counter claim for $2,247.49 is allowed.

    [141] T714-717.

12. The defendants also counterclaimed for $600 and $2,000 being the costs of repairs to a motorcycle and a forklift tractor respectively and for $8,800 (inclusive of GST) on account of 64 days loss of use of the motorcycle and tractor.[142] These claims arose in the following circumstances.

    [142] See invoice 247282 dated 6/5/05, P20, and see also D38 and D39.

13. According to Dr Cox, in January 2005, in the context of the termination of the management agreement, Dr Cox and Mr Walker discussed the purchase by the plaintiffs from the defendants of a forklift tractor for $14,000 and a quad motorbike for $4,000.

14. According to Dr Cox, the two pieces of equipment concerned were made available to and put in the possession of the plaintiffs for the period 3 January to 7 February 2005. Dr Cox’s original intention was to purchase this equipment. However, he did not pay for them and when the defendants asked for their return he returned them.[143] Dr Cox agreed in cross-examination that Mr Walker contacted him and said words to the effect “You haven’t paid for them. You better send them back.”

    [143] T386, 597-598.

15. According to Mr Walker, an agreement to sell the tractor and bike to the plaintiffs was reached in December 2004 with payment to be made at the end of January 2005. However, as at the end of January 2005, there was no money in the plaintiffs’ account still under the control of the defendants and they were unable to obtain payment from that source. Dr Cox told Mr Walker he would pay “later”. At some stage, Dr Cox sent an e-mail[144] saying he would take the bike and tractor as “compensation”, at which time the defendants demanded its return. According to Mr Walker, both items were left on the side of the road at one of his properties, the bike “was not going” and the tractor had a damaged clutch. Invoices dated 5 June and 8 June 2005 record the cost of clutch repairs for a tractor totalling $1,237.20 (inclusive of GST).[145] An invoice dated 18 March 2005 records the cost of repairs to a Honda motorbike in the amount of $157.80 (inclusive of GST).[146] Exhibit D41 indicates that the actual repair work on the tractor was performed in late May of 2005. According to Mr Walker, the tractor was “surplus at the time” and there was no urgency to have it repaired. The bike was repaired mid-March about a month after the equipment had been returned which, according to Mr Walker, was about mid‑February. Again, there was no pressure to have it fixed because of the availability of other bikes. The defendants had no need to hire other equipment whilst either the tractor or the bike were out of action.

    [144] This e-mail is not in evidence.

    [145] T746-747, 1063, D40 and D41.

    [146] T747, 1063, D42.

16. The recollection of Reg Willis was slightly different. He could not say when the tractor and bike were returned but said they were returned to the main shed at which time he was asked by Mr Pierce to sign a release specifying that they were in good condition which he refused to do.

17. I turn to consider the claims for repairs. I assume for present purposes but without deciding, that whilst in possession of the bike and the tractor, the plaintiffs assumed the role and obligations of a bailor and that, on this or some other legal basis, were potentially liable for any damage caused to the equipment whilst in their possession. I accept that following the return of both items of equipment, they were found to be in need of repair; specifically the tractor had a damaged clutch and the bike had a damaged drive train. However, there is insufficient evidence before me to enable a finding to be made as to their state of repair at the time the plaintiffs took possession.

18. Both items of equipment were second hand and surplus to the requirements of the defendants. The mechanical damage identified on their return was at least, in part, of a latent nature. There is insufficient evidence to enable an inference to be drawn on a balance of probabilities that each of the tractor and the bike was in good repair in the relevant respect at the time that the plaintiffs took possession.

19. Putting the defendants’ claim here at its highest, a bailor, in appropriate circumstances, can be strictly liable for damage caused to property in his or her possession and, in other circumstances, will assume the onus of proving that any damage caused was not due to his or her negligence. Nevertheless, an onus still rests with the defendants to prove, as a starting point, that the damage complained of occurred whilst the plaintiffs were in possession. This they have not done. This aspect of the counter claim is rejected.

20. I turn now to the claim for hire. I find, based on the evidence of Dr Cox and Mr Walker, that the parties entered into an oral contract to purchase the tractor and the bike. In accordance with the terms of the contract, the plaintiffs were entitled to take possession prior to paying the price which was to be paid no earlier than late January. Time for payment of the price was not expressly made essential. The contract was either abandoned by mutual agreement and brought to an end at or shortly after the time Mr Walker asked for the equipment to be returned or the contract was terminated by the defendants for breach at the time Mr Walker asked for the equipment to be returned. I do not need to form a concluded view as to which of these is the case.

21. Whilst the contract remained on foot, the plaintiffs were in possession with the permission of the defendants and there was no expectation or entitlement in law to be paid a daily hiring fee.

22. Once a contract has been brought to an end and whilst a purchaser remains in possession, an obligation to pay a reasonable hiring fee or damages for wrongful retention may, in appropriate circumstances, arise.  However, for reasons which will become apparent, I do not need to explore these potential bases for liability further.

23. According to Mr Walker, the equipment was returned mid-February, Reg Willis could not recall when it was retuned and Dr Cox said it was returned on 7 February. Rick Pierce said that the bike was repaired at the end of January 2005 before it was taken back to Mr Walker. He later agreed that the tractor may have been returned after 21 February 2005.[147] He agreed to this proposition after refreshing his memory from a diary entry suggesting that he had used the tractor on that day. I do not accept that the equipment was returned on 7 February.  Dr Cox’s evidence here was given by way of an acceptance to the proposition as put by the defendants’ counsel during cross-examination of Dr Cox, that the equipment was available to him between 3 January and 7 February. However, this question, as put by cross-examining counsel, was either inconsistent with his instructions or the transcript[148] misrecords counsel’s question as referring to 7 February rather than 7 March. The defendants in their counter claim plead, at paragraph 27, that the equipment was returned on 7 March 2005. In addition, exhibit P20, the Walker invoice claiming 64 days hire, is dated 6 May 2005. It is a relatively contemporaneous business record and identifies the period for which a hiring fee is allegedly due as being 3 January to 7 March. In all of the circumstances, I accept that P20 correctly records this as being the period during which the tractor and bike were in the plaintiffs’ possession.

    [147] T525-527.

    [148] At T386, line 21.

24. Nevertheless, in order to ascertain the number of days for which the plaintiffs might be liable for a hiring fee, the day that the equipment should have been returned, that is, the day the contract of purchase came to an end, needs to be determined. However, the evidence on this topic only permits a finding (by inference) to the effect that it was some time after the end of January 2005.  A finding as to the period of time, if any, that the plaintiffs remained wrongfully in possession could only be based on speculation. For this reason, this aspect of the defendants counter claim also must fail.

    Conclusion

25. At the time that I enter judgment for the plaintiffs on their claim, I will enter judgment for the defendants on their counter claim in the amount of $3,126.99. I will hear from the plaintiffs as to the question of their election and from the parties on the issues of interest and costs.