Rolfe v Investec Bank (Australia) Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2013 0002
JAMES GEOFFREY ROLFE	Appellant
v
INVESTEC BANK (AUSTRALIA) LTD (ACN 071 292 594)	Respondent

---

JUDGES	NETTLE, BEACH JJA and McMILLAN AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	3 March 2014
DATE OF JUDGMENT	13 March 2014
MEDIUM NEUTRAL CITATION	[2014] VSCA 38
JUDGMENT APPEALED FROM	[2012] VCC 2020 (Judge Kings)

---

BAILMENT – Gratuitous – What constitutes – Shipping containers left on occupier’s land for limited period with occupier’s consent – Whether arrangement amounting to bailment of containers or merely licence – Whether bailment extending to contents of containers –Whether sufficient notification to occupier of general quality and value of contents – Ashby v Tolhurst [1937] 2 KB 242, considered; Coopers & Lybrand v Sterling Circuits Inc and Sun Life Assurance of Canada (1988) 47 DLR (4^th) 614, applied.

---

APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr C W R Harrison SC with Mr C R Northrop	Goldsmiths Lawyers
For the Respondent	Mr P D Crutchfield SC with Dr Oren Bigos	Arnold Bloch Leibler

NETTLE JA

BEACH JA
McMILLAN AJA:

This is an appeal from a judgment given in the County Court. The judge rejected the appellant’s claim for damages for breach of bailment of seven shipping containers alleged to contain three rare and expensive Porsche sports cars, associated parts and other personal property. Her Honour held that the respondent had no knowledge of the existence of the containers and, therefore, did not consent to them being stored on premises of which the respondent was mortgagee in possession. Hence, there was no bailment.

The facts

The appellant (‘Mr Rolfe’) was a director of James Rolfe Transport (Vic) Pty Ltd (‘JRT’). JRT carried on a shipping container business from premises at 363–367 Francis Street, Yarraville (‘the JRT premises’). Mr Rolfe’s wife, Rachel Rolfe (‘Mrs Rolfe’), was the only other director of JRT. JRT leased the JRT premises from Glodale Pty Ltd (‘Glodale’). Mr and Mrs Rolfe were the only directors of Glodale.

During 2001, the respondent (‘Investec’) made loans to Glodale totalling $11.8 million secured by registered mortgage over the JRT premises (‘the Mortgage’), fixed and floating charges over the assets and undertaking of JRT and Glodale and a personal guarantee of Mr Rolfe (‘the Guarantee’). Andrew Hirst was one of the employees of Investec who managed the loan on behalf of Investec.

In mid-2002, Glodale defaulted on the loan and Investec retained Gadens Lawyers, a firm of solicitors, to advise on the realisation of the security. David Reichenberg was the partner of Gadens responsible for the file and he was assisted in the matter by an employee solicitor, Ms Karen McMaster.

In December 2002, JRT entered into an asset management deed but soon defaulted in the performance of the deed. Thus, on 14 January 2003, Mr Rolfe appointed Sims Partners as voluntary administrators of JRT and Sims Partners took possession of the JRT premises.

On 10 February 2003, Sims Partners were appointed as the liquidators of JRT and, on the same day, Investec took possession of the JRT premises as mortgagee in possession.

Investec appointed Dominion Auctioneers and on 20 February 2003 Dominion Auctioneers conducted an auction of all of JRT’s assets at the JRT premises. The goods sold included a number of shipping containers. Once sold, those containers were removed from site and the proceeds of sale were paid to Investec. But there were some other shipping containers which did not belong to JRT and so were not sold at the auction, and they remained on site after the auction.

At or around the same time, Investec retained Sutherland Farrelly, estate agents, to sell the JRT premises on behalf of Investec. Paul Sutherland was the estate agent responsible for the matter and he was assisted by Paul Farrelly and Grant Sutherland.

On 20 March 2003, Investec entered into a contract of sale of land to sell the JRT premises to arms-length purchaser, Jeans’ Team Pty Ltd (‘Jean’s Team’). Jeans’ Team was a property development company owned by Mr Paul DeLutis.

During that day, Mr Rolfe wrote to Investec as follows:

The Francis St, Yarraville property is being auctioned at 3pm today 20 March 2003.
Please deduct the proceeds of this sale from the outstanding loan balance and immediately advise me of the pay-out figure for the balance of the facility, with a full breakdown of interest, default interest, legal fees, agents’ commissions etc; for the purpose of paying out the balance of the loan.
You must appreciate that any financier, including Investec, will require a full breakdown of the amount outstanding, not just a verbal approximate figure that you have provided in the past, despite my repeated requests for a figure with the above detail. I have to say that I continue to be both confused and alarmed by your reluctance to provide this information.
Your immediate response is required to avoid the unnecessary costs being incurred.

On 21 March 2003, Gadens replied on behalf of Investec:

We refer to your letter of 20 March 2003 addressed to Investec, a copy of which has been provided to us by our client.
We confirm that the Yarraville property was successfully sold at auction yesterday for an amount of $4,110,000.00, settlement to occur on 19 May 2003.
Investec has at no time refused to provide you with pay out figures for the facility and has done so on a number of occasions. You must appreciate, however, that further interest and enforcement costs accrued daily, and that it is impossible for Investec to give you a definitive pay-out figure. Furthermore, Investec can only estimate costs as at today’s date, not those likely to be incurred during the period if an offer of re-finance is obtained by you, between acceptance and settlement of the re-finance.
Regardless, an estimate as prepared by Investec, together with current statement of account is enclosed. Should you receive an offer of finance based on this estimate, we will seek instructions on same. Please direct all further queries regarding this matter to us directly.

On 26 March 2003, Mr Rolfe had a without prejudice meeting with Mr Reichenberg and Ms McMaster at Gadens offices. On the same day, Mrs Rolfe sent a fax to Sutherland Farrelly as follows:

I authorise Bryan McLeod to enter 363 Francis St Yarraville and retrieve the Porsche RSR from a container on behalf of Capital Finance A/C No 301173.

On 30 March 2003, Mr Rolfe telephoned Mr Reichenberg. Mr Reichenberg recorded the conversation in a file note of the same date, thus:

Afternoon – Thurs 30 March
Jim Rolfe phoned me, he opened with the comment that the result at Yarraville was a good one. He stated that the value was midway between his highest and lowest estimate. He requested that I provide him with a full detailed breakdown of his current balance. He complained that I had not provided this before, after numerous requests.
I explained to him that in the past I had only provide [sic] him with best estimates due to the fact that all the costs and fees associated with the court action and property sales had not been received and thus I have not been in a position to give him the exact balance.
I confirmed that I would provide him with a balance including an estimate of all costs by 4.00 pm Friday.

On 31 March 2003, at 12.54 pm, Mr Hirst of Investec emailed to Ms McMaster of Gadens, as follows:

Any news from Matt[1] re the $300k from JRTV?

[1]Matt Muldoon of Sims Partners.

Later that day, Ms McMaster spoke to Meredith Lehane[2] concerning Mr Hirst’s inquiry. Ms McMasters’ file note of her attendance on Ms Lehane set out the following:
[2]Also of Sims Partners.

TT: Muldoon
– Meredith
– Report – indicn
– expected $300,000 –
provide that
cleared out vehicles
finalised + vacated premises
debtors etc
collect those
– preliminary dividend
→ will get something out
– get back to me re time frame.

Later again that day, at 4.12 pm, Ms McMaster sent an email to Mr Hirst in answer to his email of 12.54, as follows:

Hi Andrew,
Hadn’t heard anything – someone from their office is going to give me a call back re a preliminary dividend, apparently they are putting a report to the Bank together at the moment.
Esanda finance called Sutherlands the other day, apparently one of the shipping containers remaining on site has a Porche [sic] in it, which they would like to repossess. The car is owned by Rolfe, obviously we can’t say yay or ney, so they are off to get consent or court orders.[3]
I’ll let you know when I hear back from Sims Partners.

[3]Emphasis added.

The ‘Porche’ referred to in Ms McMasters’ email was a Porsche 911 RSR racing car which was subject to finance to Capital Finance and, as recorded in the email, was stored in one of the containers on site. It is likely that Capital Finance repossessed the car even before Ms McMaster sent the email. Mr Rolfe gave evidence that the repossession was effected on 26 March 2003. He said that he was not present but that he sent a former employee, Joe De Petro, to assist the repossession agent, Brian McLeod, in extracting the Porsche from the container and loading it onto a flat top tow truck for removal. Mr De Petro gave evidence in which he confirmed that he attended and assisted as instructed, although he said that he could not remember the exact date on which it took place. The likelihood of the repossession having taken place on or about 26 March 2003 accords with the contents of Mrs Rolfe’s letter of that date to Sutherland Farrelly.

The three Porsche cars the subject of Mr Rolfe’s claim were a 1981 Porsche Carrera 924 GTR, a 1981 Porsche Carrera 924 GTS and a 1969 Porsche 911 S Marathon rally car which, Mr Rolfe alleged, were also kept in containers at the JRT premises.

The sale of the JRT premises to Jean’s Team was completed on Monday 19 May 2003 and on 26 May 2003 Jean’s Team let the premises to a shipping company called Maersk.

Mr Rolfe gave evidence that he was aware that he had to remove his containers from the JRT premises by no later than 16 May 2003 and that he made arrangements with an associate, Nick Stanek, to effect the removal on that day. But, Mr Rolfe said, after some discussion with Mr DeLutis, the proposed removal date was changed to 19 May 2003 and Mr Rolfe arranged for Mr Stanek to attend on 19 May 2003 instead. Then, on the morning of 19 May 2003, Mr Rolfe received a telephone call from Mr De Petro that De Petro had just heard from Rod Davis (who worked at Chalmers next door to the JRT premises) that all the containers appeared to have gone.

Mr Rolfe said that there was no thought of theft at that stage. He ‘assumed that the containers had simply been moved down to the back or whatever’ and that ‘the thought of somebody nicking them didn’t enter my mind’. Nonetheless, he ‘immediately called Nick Stanek and cancelled the trucks and the equipment to get them off the site’. Mr Rolfe did not say why he cancelled the trucks if he thought that the containers were still on site. He offered as justification of his actions that, at the time, he was suffering from the after-effects of a severe illness[4] which caused him to delay before doing anything further about the missing containers.
[4]In the nature of a nervous breakdown.

Eight days later, on 27 May 2013, Mr Rolfe telephoned Ms McMaster and, according to his evidence, told her that the containers were not where they usually were ‘down near Francis Street’ and that he ‘wanted to get onto the site and see where they had gone’. Mr Rolfe said that Ms McMaster reacted with disinterest but undertook to find the purchaser’s details and get back to him. It does not appear why Mr Rolfe would have wanted those details. He had previously arranged with Mr DeLutis to delay the date for picking up the containers from 16 May 2003 to 19 May 2003. So, presumably, he knew how to contact Mr DeLutis.

Be that as it may, Ms McMaster did not get back to Mr Rolfe as quickly as he appears to have hoped; because, on 30 May 2003, he faxed the following memo to Gadens for the attention of Ms McMaster:

I rang you last Monday [sic][5] to enquire about the name and contact number of the purchaser of the Francis St Yarraville property. As explained to you, I still have personal belongings stored at the premises and need to make arrangements to have them removed. As at today’s date I have not received a response from you. Could you please advise ASAP the name and contact number of the purchaser.

[5]The facsimile had the handwritten notation inserted — 27 May.

Ms McMaster then emailed back to him the same day, that:

I am in receipt of your fax of even date and, as requested, note that the purchaser of the above property was Jeans Team Pty Ltd of Level 1, 550 Lonsdale Street Melbourne. The relevant director is Paul Delutis. Their solicitor was David Freeman of Level 10 350 Collins Street Melbourne.
I apologise for not responding to your query earlier, but note that you have had ample opportunity during the period whilst the liquidators were in possession of the site, and during the sale process to collect belongings. Neither we nor our client was aware that you had belongings on the premises.[6]
I also note that you enquired of purchaser details on Tuesday 27 May, not last Monday [26 May] as noted in your fax.

[6]Emphasis added.

On 30 June 2003, Mr Rolfe faxed again to Gadens for the attention of Ms McMaster:

I refer to my facsimile dated 30 May 2003 in relation to personal property stored at the Francis Street Yarraville premises and our response dated same day.
I have spoken to Mr Paul Delutis on a number of occasions and he has told me that, apart from one Audi car stored in a warehouse, he does not know the whereabouts of the other goods. He has advised the following:-
1.He was aware that there were 7 containers plus various car bodies, car trailer and miscellaneous car parts stored on the premises up to 2 days before he took possession of the premises on Tuesday 20 May 2003.
2.He rang Mr Paul Sutherland from Sutherlands prior to taking possession to enquire about the property stored at the premises. He advises that Mr Sutherland told him that everything on the premises was his.
3. When he let the premises on Monday 26 May 2003, he inspected the Francis Street Yarraville premises and all the containers and other property had been removed.

The 7 containers held amongst other things, household furniture, family photographs, a fully constructed commercial bar, 3 classic Porsche cars[7] in various stages of rebuild and a lifetime collection of books and motor sport memorabilia.
I will be filling out a police report on this theft and will give the police Investec’s and Sutherlands names as the entities that had the keys to the premises prior to when Mr Delutis took possession. I note in the Notice of Taking Possession that Investec threatened that anyone entering upon the land would be trespassing. Therefore, if Investec or Sutherlands did not give out keys, it appears that a break in has occurred.
Could you please advise what Investec and or Sutherlands intend to do about this breakin/theft and advise the name and contact number of Investec’s/Sutherlands insurers immediately.

[7]The Porsche 911 S and the Porsche 924 GTR and the Porsche 924 GTS the subject of the proceeding.

On 25 September 2003, Mr Rolfe was declared bankrupt and in November 2006 he was discharged from bankruptcy.

On 13 May 2009, Mr Rolfe instituted the proceeding in the County Court but, for reasons which do not appear, the Writ was not served until May 2010. On 30 July 2010, Mr Rolfe entered into a deed with his former trustee in bankruptcy by which the trustee purported to assign the cause of action alleged to Mr Rolfe.

The appellant’s claim below

Mr Rolfe claimed below that the seven shipping containers (two 40 foot containers and five 20 foot containers) and their contents were owned by him and located on the JRT premises when Investec took possession of the premises on 10 February 2003. He also alleged that the containers were conspicuous.

Mr Rolfe said that, after receiving the Notice of Possession on 11 February 2003, he telephoned Ms McMaster and asked her whether he could leave the containers on the JRT premises for the time being, and that she replied to the effect that it was okay to leave them as long as they were kept out of the way. She added that ‘we’re [scil Investec] going to auction the property and, you know, you’ve got to move them before the new owner takes possession’.

Mr Rolfe tendered in support of his claim a letter dated 1 April 2003 which he said he believed had been faxed to Sutherland Farrelly on that day. It was as follows:

I refer to facsimile dated 26 March 2003 and advise that the Porsche RSR has been removed from the Francis St premises.
A further 7 containers of personal property, an Audi car and various other bits and pieces are still stored on the property until you advise when they have to be removed
Please advise if security patrols are still being used as in the past when under my control.

The ‘Porsche RSR’ referred to in that fax was the Porsche 911 RSR racing car which was repossessed by Capital Finance on or about 26 March 2003. The reference to ‘facsimile dated 26 March 2003’ was a reference to the fax from Mrs Rolfe to Sutherland Farrelly authorising Capital Finance to take possession of the vehicle.

The judge’s findings

The judge found that the Porsche 924 GTR, the Porsche 924 GTS and the Porsche 911 S had all existed and been stored at the JRT premises ‘at some point’. But her Honour was not satisfied either that Mr Rolfe was the owner of the vehicles or that he had sufficiently identified the parts which were the subject of his claim. For those reasons, the judge held, the claim failed.

The judge was also not satisfied that Mr Rolfe had any conversation with Ms McMaster in which she agreed to allow him to store his containers at the JRT premises. Based on Ms McMaster’s testimony, which the judge said she preferred, her Honour concluded that no such conversation occurred.

The judge was not satisfied either that the fax of 1 April 2003 was sent to Sutherland Farrelly or, if it were, that it was received by them. It followed, her Honour said, that Sutherland Farrelly did not know that Mr Rolfe was storing property on the JRT premises and so did not consent to the containers remaining on the premises.

The judge said, too, that she was not persuaded that Mr Hirst, Paul Farrelly or Grant Sutherland had any knowledge of the fact that Mr Rolfe was storing possessions on the JRT premises; and her Honour concluded that, although Mr Sutherland and Mr Farrelly recalled seeing containers on the site, they did not know that those containers belonged to Mr Rolfe. It followed, the judge said, that Investec did not have knowledge of the containers or their contents prior to 30 May 2003 and, therefore, that Investec did not consent to the containers or their contents being stored at the premises. The judge held that, for those reasons, too, the claim in bailment failed.

Ground 1: Possession

Under Ground 1 of the appeal, it was contended that the judge should have found that Investec had possession of the JRT premises between 11 February 2003 and 19 May 2003.

There does not seem to be any dispute about that. As has been noticed, the judge found that Investec took possession of the JRT premises on or about 10 February 2003 and that Investec’s sale of the JRT premises was completed on 19 May 2003. There is no reason to doubt that finding.

Grounds 2, 3 and 4: Investec’s knowledge of the containers

Under Grounds 2, 3 and 4 of appeal, it was contended that the judge erred in refusing to conclude that, at relevant times, Mr Rolfe had two 40 foot containers and five 20 foot containers stored at the JRT premises; and thus erred in finding that Investec had no knowledge of the containers prior to 30 May 2003. Counsel for Mr Rolfe submitted that the fact the containers were at the site was clearly established by:

(i) uncontradicted photographic evidence which showed containers on site at the relevant time;

(ii) testimony of Mr De Petro concerning a conversation he had with Mr P Sutherland on site at the time of the repossession by Capital Finance of the Porsche 911 RSR;

(iii) evidence given by Mr Sutherland concerning that event;

(iv) evidence given by Mr DeLutis that he saw containers on the site shortly before settlement;

(v) the email from Ms McMaster to Mr Hirst on 31 March 2003, inasmuch as it expressly referred to ‘one of the shipping containers remaining on site’; and

(vi) the fax which Mr Rolfe said he sent to Sutherland Farrelly on 1 April 2003.

It is convenient to deal with those aspects of the evidence in turn. Starting with the photographic evidence, we accept that it shows a number of containers were on site at the relevant time. That was confirmed by Mr P Sutherland in testimony to which we shall come to below.

Next, there is the evidence of Mr De Petro. He said that he had been employed as foreman at the JRT premises up to the point of cessation of the JRT business. His employment was terminated some two or three weeks after the liquidators were appointed and, at that point, as far as he knew, the three Porsches were in containers ‘at the back of the block’. Then, two or three weeks after Mr De Petro was let go, Mr Rolfe asked him to go to the site to give a hand in taking some parts out of the office and putting them into containers. Accordingly, he went to site, met Mr Rolfe there and, using a fork lift truck, moved two 40 foot containers from down near ‘a triangular building’ to near the office, with the doors of the containers facing the office about four metres from it. After that, he spent about two to two and a half hours taking parts from the office and putting them in the containers. At Mr Rolfe’s request he also relocated a number of 20 foot containers in which Mr Rolfe kept personal property, including a hotel bar belonging to one of Mr Rolfe’s associates, and stacked them with the two 40 foot containers with the doors facing in rather than towards the street — the 20 foot containers butted up against the 40 foot containers for safety reasons and staggered to make it difficult for anyone to lift them off.

Mr De Petro further deposed that, after about another two or three weeks —‘maybe a touch longer’ — Mr Rolfe asked him to go to the site again ‘to help some guy take a car out of a container, because they were going to repossess it’, and that somebody from Sutherlands would be there to let Mr De Petro into the premises. When Mr De Petro got there he found the gates open and Mr Rolfe talking to another man to whom Mr De Petro was not introduced. Then, after a while, the repossession agent arrived and then later came a tow truck to effect the repossession. Mr De Petro said that he assisted in opening the doors of a container which was parked next to the office on the inward side gate area and in pushing the Porsche out of the container and onto the tow truck.

Mr De Petro recalled that, after loading the car, the man who had previously been speaking to Mr Rolfe asked Mr De Petro: ‘when do you think you’re going to get rid of these other containers?’ Mr De Petro replied that it had nothing to do with him and that the man should speak to Mr Rolfe, ‘they’re his containers’.

Finally, some weeks later again, Mr De Petro received a telephone call from another ex-employee, Rod Davis, who told him that all the containers had gone.

Mr P Sutherland gave evidence which, to a considerable extent, corroborated Mr De Petro’s version of the repossession, although Mr Sutherland said that he had no recollection of being told that the containers belonged to Mr Rolfe. So far as relevant, Mr Sutherland’s testimony was as follows:

COUNSEL: He [Mr De Petro] says that the doors of a container were opened to get your car out? --- Yes.
COUNSEL: Do you recall where that container was? --- I believe it was that group of containers in that north-western section near the boundary.
…
COUNSEL: Do you recall the car? --- It was a white Porsche.
…
COUNSEL: It was then loaded onto a tow truck and off it went. Probably a flat-bed tow truck? --- Yes, a tilt-tray. I believe that’s correct.
COUNSEL: Mr De Petero says that he recalls that you said to him words to the effect, ‘When do you think you’re going to get rid of these other containers?’ He asked, ‘Look, it’s got nothing to do with me. You’ve got to speak to Mr Rolfe. They’re his containers’? --- I don’t recall.
COUNSEL: It’s nine years ago. If the containers were still there, you might well inquire, mightn’t you, as to when they were going to go? --- I may, I may not. I don’t recall.
COUNSEL: To the extent that you were aware of containers at the auction do, you recall whether there were still the other containers there? --- There was other containers, but again I don’t know the number
COUNSEL: Do you have any recollection of being told they belong to Mr Rolfe? --- No.
COUNSEL: You never made any inquiry about to whom they belonged? --- no.

Mr DeLutis gave evidence that he attended the auction of the JRT premises on site on 20 March 2003 and successfully bid for the property. He said that he recalled seeing containers on site on that occasion. To the best of his recollection, they were on the ‘right hand side’ of the property some 20 to 30 metres to the right of the office, and there were about three of them. But he said that when he took possession of the property at settlement, they were no longer there, although there was an Audi motorcar which he subsequently returned to Mr Rolfe.

Lastly, there is the email of 31 March 2003 from Ms McMaster to Mr Hirst which referred to one of the shipping containers remaining on site having a Porsche in it.

Counsel for Mr Rolfe submitted that the judge’s finding that Investec had no knowledge of containers at the site was clearly wrong. It was plain from the email that Ms McMaster and Mr Hirst were aware that there were then a number of shipping containers on site and that one of them at least contained a Porsche motor car which belonged to Mr Rolfe. In counsel’s submission, it was also clear from Mr De Petro’s evidence, which was uncontradicted but unremarked in the judge’s reasons, that Mr P Sutherland was aware that the containers on site belonged to Mr Rolfe and that Mr Sutherland asked when they would be removed from the site.

In our view, there is some force in those submissions. Based on the evidence to which we have referred, we think it more likely than not that Mr P Sutherland knew that there were containers on site containing personal property which belonged to Mr Rolfe or at least which Mr Rolfe claimed belonged to him, and more likely than not that Ms McMaster and Mr Hirst and, therefore, Investec knew or believed that there were a number of containers on site in one of which there had been a Porsche belonging to Mr Rolfe which was subject to finance and had been repossessed by Capital Finance.

Ground 5: Contents of the containers

Under Ground 5 it was contended that the judge should have concluded, but failed to find, that the three Porsches were in containers on the site at the relevant time.

In our view, there is some force in that complaint, too. The judge said this about the matter:

I accept that Mr Rolfe owned containers and stored them at the premises. This was supported by the evidence of Mrs Rolfe and his [Mr Rolfe’s] former employees. What was not clear was the contents of the containers and the ownership of the vehicles at the time the containers disappeared.
The main aspect of the claim relates to Porsches and car parts alleged to be owned by Mr Rolfe and stored in the containers. I accept Mr Rolfe had an interest in Porsche motor vehicles and owned and raced vehicles over the years. This was supported by the evidence of his wife and former employees.
Mrs Rolfe said that at the time they move from Bacchus Marsh to Middle Park, Mr Rolfe had two 924s and one 911 Porsche, which were taken to the yard and stored securely in containers. To the best of her knowledge, they were never sold or disposed of. She was unable to recall when she last saw the containers.
Mr Davis said some time between 2001 and 2003, he helped push the 911 Porsche out of a container. That was the only evidence he gave about seeing any of the vehicles. Mr Stanic said he saw the GTR in one of the sheds at the premises. He did not say when that was, and his evidence was he ceased working at the premises in 2000. Mr De Petro said he saw all three vehicles on the day he assisted Mr Rolfe put car parts in the containers. It is not clear from his evidence that he meant in February 2003, because he had helped Mr Rolfe previously; however, I am prepared to accept he was referring to assisting Mr Rolfe in February 2003.
Mr Rolfe’s wife and former employees gave evidence that Mr Rolfe had car parts in the office at the premises. I accept their evidence.
I accept that the vehicles existed and were stored at the premises at some point.[8]

[8]Reasons, [109]–[114] (emphasis added).

Seemingly, her Honour was persuaded that, although the three Porsche motor cars were in the containers on the site at some point, it was not established that the cars were in the containers at the relevant time.

With respect, we think that it was established on the balance of probabilities that all four Porsche cars were in the containers when the 911 RSR was repossessed on or about 26 March 2003 and that, thereafter, the 924 GTR and the 924 GTS and the 911 S remained in the containers until or shortly before the containers disappeared at the time of settlement of the sale of the JRT premises.

The fact that the 911 RSR was in a container until repossessed on or about 26 March 2003 was established by the evidence of repossession given by Mr De Petro and Mr P Sutherland and the communication from Ms McMaster to Mr Hirst on 31 March 2003. The fact that the 924 GTR, the 924 GTS and the 911 S were in containers some two to three weeks before that time was established by the uncontradicted evidence of Mr De Petro that he saw them there when he went to assist to load parts two to three weeks after he was let go by the liquidators. Given that he was put off some two to three weeks after the liquidators were appointed, and they were appointed on 10 February 2003, the effect of his evidence was that the cars were in the containers at least until early March 2003.

It is possible that the 924 GTR, the 924 GTS and the 911 S were removed from the containers sometime between the date in March 2003 when Mr De Petro saw them and the weekend of 16 to 19 May 2003 when the containers disappeared. But that was not suggested at trial, and it strikes us as unlikely. Sutherland Farrelly had the keys to the property. That is why Mr P Sutherland had to be present when Capital Finance repossessed the 911 RSR, and there was also evidence that, before the JRT premises were auctioned, there were occasions when Mr Rolfe sought to show prospective purchasers the site and that he had to obtain access through Sutherland Farrelly. In any event, it makes no difference to Mr Rolfe’s claim whether the cars were taken from the containers between early March 2003 and the weekend of 16 to 19 May 2003 or were taken with the containers over the weekend of 16 to 19 May 2003, because Investec was in possession of the JRT premises at each of those times.

Ground 6: Ownership of the Porsches

The complaint made under Ground 6 was that the judge should have been satisfied on the balance of probabilities that Mr Rolfe was the owner of the 924 GTR, the 924 GTS and the 911 S because, although he may not have been able to prove that he was the true owner of each car, he established on the balance of probabilities that he had a right to immediate possession of both.

We accept that submission. Like the judge, we do not think it was established that Mr Rolfe, as opposed to one or other of his private companies, was the true owner of the vehicles. But the evidence did show that Mr Rolfe was in effect the alter ego of each his private companies with more or less untrammelled right to do with each vehicle as he chose. In reality, he treated each car as his own and, because he owned and controlled each company, he was largely entitled to do so.[9] A right to immediate possession is sufficient to found an action in bailment as against all except the true owner.[10] The point is made in Palmer:[11]

The rule that precludes a bailee from pleading jus tertii, and thus from evading liability for damage or non-delivery on the grounds that the goods belong to someone other than the bailor, is a long established one… The rule, which is a powerful weapon in the bailor’s armoury, is based on obvious considerations. These are readily tested by a glance at the alternative: (citation omitted)
… to allow a depositary of goods or money, who has acknowledged the title of one person, to set up the title of another who makes no claim or has abandoned all claim would enable the depositary to keep for himself that to which he does not pretend to have any title in himself whatsoever.[12]

[9]Subject, of course, to acting bona fide in the best interests of the company as a whole: Corporations Act 2001(C’th), s 181(1); Walker v Wimborne (1976) 137 CLR 1, 7 (Mason J).

[10] East West Corpn v DKBS AF [2003] QB 1509, 1530 [27] (Mance LJ); The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400, 403 [7] (Basten JA); Palmer on Bailment, 3d Ed, [2-007].

[11]Palmer on Bailment, 3 Ed [4-026].

[12]Betterley v Reed (1843) 4 QB 511, 517.

Counsel for Investec submitted that Mr Rolfe’s case in bailment had been put below solely on the basis of legal ownership of the cars and it was too late now for the first time on appeal for Mr Rolfe to advance a new and different case of bailment based on an immediate right to possession.

We do not accept that submission. Although it is true that Mr Rolfe’s case was pleaded and opened on the basis that he was the owner of the cars, the fact that the vehicles may have been legally owned by one or other of Mr Rolfe’s private companies in no way detracted from the substance of that allegation or anywise misled Investec as to the nature of the claim made against it.

Ground 7: Possession as bailee

Counsel for Mr Rolfe submitted in support of Ground 7 that, whether or not Investec knew of the existence of the containers on the site, Investec had assumed control of the site, with consequent ability to exclude trespassers, and thereby taken possession of the containers. It followed in counsel’s submission that Investec was a bailee of the containers and also of the contents of the containers. And as support for that proposition, counsel invoked the following observations of Lord Russell of Killowen CJ in South Staffordshire Water Company v Sharman[13] as to what the possession of land may carry with it:

The possession of land carries with it in general, by our law, possession of everything which is attached to or under that land, and, in the absence of a better title elsewhere, the right to possess it also. And it makes no difference that the possessor is not aware of the thing’s existence…the legal possession rests on a real de facto possession constituted by the occupier’s general power and intent to exclude unauthorized interference.[14]

With result that:
Where a person has possession of house or land, with a manifest intention to exercise control over it and the things which may be upon or in it, then, if something is found on that land, whether by an employee of the owner or by a stranger, then the presumption is that the possession of that thing is in the owner of the locus in quo.[15]

[13][1896] 2 QB 44, 47.

[14]Ibid 46–7.

[15]Ibid 47.

We reject the submission, for three reasons. First, what may be sufficient to establish possession for one purpose is not necessarily sufficient to qualify as possession for all purposes. So, for example, in SouthStaffordshire Water Company v Sharman,[16] where the plaintiff brought an action in detinue to recover two gold rings which the defendant found in a pond on the plaintiff’s land, it was held that the plaintiff had possession of the rings because, as occupier, he had a right to possession of everything that was on and under the land.[17] On the other hand, in Merry v Green,[18] where the question was whether the purchaser of a desk was guilty of larceny of valuables concealed within it at the time of purchase, it was held that there was no possession, and therefore no asportation, because the purchaser was unaware of the existence of the valuables.[19] Similarly, as Palmer says, for the purposes of bailment, there must be at least some degree of actual or imputable knowledge of the existence of the chattels before a bailment can arise.[20]
[16][1896] 2 QB 44.
[17]Cujus est solum ejus est usque ad coelum, et ad inferos: Corbett v Hill (1870) LR 9 Eq 671, 673; Perth v Halle (1911) 13 CLR 393, 399 (Griffith CJ)..
[18](1841) 7 M&W 623; 151 ER 916.
[19]See also R v Hudson [1943] 1 KB 458; R v Wright (1975) 62 Cr App R 169; Palmer on Bailment 3^rd Ed, [6-001].
[20]Ibid.

Secondly, even where a defendant has actual knowledge of a plaintiff leaving some of the plaintiff’s chattels on the defendant’s land, and assents to the chattels remaining there pro tem, the relationship thus constituted between plaintiff and defendant may not necessarily amount to more than one of licence without obligation on the part of the defendant to take care of the chattels. So, in Ashby v Tolhurst,[21] it was held that, where a motorist parked his car in a car park operated by the defendant, the relationship was one of licensor and licensee and, in the circumstances which obtained, it could not be inferred that the defendant had assumed responsibility for the safe keeping of the vehicle. So, too, in Coopers & Lybrand v Sterling Circuits Inc and Sun Life Assurance Company of Canada,[22] in which the facts were in some respects like those here, Trainor J of the Supreme Court of British Columbia held that a lessor who had permitted a lessee’s trustee in bankruptcy to leave the lessee’s chattels on vacated leased premises for a reasonable time was not a bailee of the chattels and so was not liable when the chattels were later stolen. His Lordship reasoned that:

…Here, although Sun Life granted permission to the plaintiff to leave goods on the premises, there was no discussion of a locked room [in which the plaintiff put the goods]. In fact, I am satisfied that Sun Life did not know the goods were even in a room locked or otherwise until after the break-in.
The justification for shifting the onus of proof of negligence to the bailee is that exclusive possession by him puts him in the position of being the only person who knows what happened to the chattel. Here, there was no delivery to Sun Life of the goods in circumstances where it became aware of the location of the goods within the premises or what steps had been taken to segregate them. I am not satisfied that the possession acquired by Sun Life by virtue of the goods being left or stored in its premises amounted to custody and control giving rise to bailment. The relationship established was in reality the granting of a right or licence to allow the plaintiff’s goods to remain on the premises for a time.[23]

[21][1937] 2 KB 242, 255–6 (Romer LJ); Heffron v Imperial Parking Co (1974) 46 DLR (3d) 642, [12].

[22](1988) 47 DLR (4^th) 614 [12]–[13].

[23]Cf Gobeil v Elliot (1996) 150 Sask R 285, [15].

Thirdly, even in cases where permission to leave chattels on land for the time being amounts to bailment, the better view is that a gratuitous bailee of goods sealed in a container is not liable for the goods as opposed to the container unless the bailee is apprised of the nature and value of the goods[24] or unless the goods are of a character, value and quantity likely to be found in a normal situation of the kind in question. Thus, as Palmer observes, a budget tour operator who carries his passengers’ luggage in the boot of the coach can hardly be conceived of as liable as bailee for priceless works of art which, unbeknownst to him, one of the passengers has put inside his bags:

The predominant philosophy of bailment as a voluntary, if not a consensual, undertaking demands not only that actual possession of the goods, such as would be sufficient to sustain an action in conversion or detinue, but also some reasonable notification of their general quality and value, be brought home to the bailee.[25]

[24]Moukataff v British Overseas Airways Corporation [1967] 1 Lloyds Rep 396, 415–416.

[25]Palmer on Bailment, 3^rd Ed, [6-003]; and see WD & HO Wills (Aust) Ltd v State Rail Authority of New South Wales (1998) 43 NSWLR 338, 353 (Mason P).

Admittedly, there is not a great deal of Australian or English authority on the point. But it accords with principle and there are a large number of North American decisions which endorse it.[26] For example, in Waters v Beau Site Co[27] (with which the other decisions align) it was held that, although the defendant was bailee of the plaintiff’s trunks and their contents, the defendant did not know, and was not required to assume, that the trunks contained articles other than those ordinarily contained in trunks of the kind in question. Consequently, the defendant was not liable as a bailee for the loss of an expensive diamond pendant which the plaintiff had left in one of the trunks. As the court observed:

None of the cases upon the subject relied upon by the plaintiff hold the defendant in such an action liable as bailee, unless he knew the lost article was in his possession or unless the article which he did receive was of such a character that the presence of the lost article or articles of a similar nature might be presumed.[28]
[26]See, for example, Waters v Beau Site Co 186 N.Y.S. 731; Riggs v Bank of Camas Prairie 200 P. 118; Crosby v 20 Fifth Ave Hotel Co 17 N.Y.S. 2d. 498; Swarth v Barney’s Clothes Inc 242 N.Y.S. 2d. 922; Warren v Downes 851 N.Y.S. 2d. 75.
[27]Waters v Beau Site Co 186 N.Y.S. 731.
[28]Ibid 733.

Grounds 8 to 11: Removal of containers and the vehicles

Under the headings of Grounds 8 to 11, counsel for Mr Rolfe submitted that, since it was established on the evidence that Investec was aware of the containers and suffered them to remain on site, it necessarily followed that Investec was bailee of the containers and their contents and it fell to Investec to show that the loss of the containers and of the contents was not due to Investec’s failure to take proper care of either.[29]
[29]Counsel for Mr Rolfe announced in the course of oral argument that he was not pursuing the claim for the parts and other property said to have been stored in the containers

We do not accept that contention. Even on the view of the evidence most favourable to Mr Rolfe, Investec never agreed with Mr Rolfe to more than that he could leave his containers on site for the time being provided he kept them out of the way and provided he arranged for them to be removed from site before completion of the sale to Jean’s Team. It follows, as we see it, that the arrangement thus constituted between Mr Rolfe and Investec was essentially permissive — in effect a licence of the kind identified in Coopers & Lybrand v Sterling Circuits Inc and Sun Life, Assurance Company of Canada[30] — without any assumption of liability for safekeeping.
[30](1988) 47 DLR (4^th) 614.

Alternatively, if, contrary to our view of the matter, the arrangement or relationship between Investec and Mr Rolfe rose to the level of bailment of the containers, there is nothing to show that Investec knew anything of the nature or value of the contents of the containers. Indeed, even if one accepted that Sutherland Farrelly received the fax of 1 April 2003 (and it will be recalled that the judge was not satisfied it was sent or received) it disclosed no more about the contents of the containers than that there were ‘7 containers of personal property’.

Admittedly, Investec became aware late in March 2003 that Mr Rolfe had been storing a Porsche in one of the containers and that it was repossessed by Capital Finance on or about 26 March 2003. But Investec knew nothing of the value of that car (except that it was a Porsche) and Investec did not know that there were any other cars in the containers, still less a Porsche 924 GTR, a Porsche 924 GTS and a Porsche 911 S (which, according to the evidence, were very rare and extremely valuable). There was moreover nothing in the evidence or otherwise to rebut the impression which arises as a matter of common sense and ordinary experience that rare and expensive motor cars are of a character and value altogether different to what one might reasonably expect would be left in unattended containers in a disused shipping yard without express disclosure of the nature and quality of what is within. Indeed, we find it very difficult to conceive how anyone sufficiently privileged to own three vehicles of that kind would even contemplate taking that risk.

Bearing in mind what we have said about the level of assent and actual or imputed knowledge necessary to constitute a bailment of the contents of a sealed container — in particular, that it requires some reasonable notification of the general quality and value of the contents — we conclude that any obligations which might properly be attributed to Investec as bailee did not extend beyond the containers to the Porsche cars within and, consequently, that Investec is not liable for their loss.

Additional considerations

It follows from what we have said thus far that the appeal must be dismissed. In case the matter goes further, however, it remains for us to deal now with a number of additional considerations which were agitated before the judge (and on appeal) but with which her Honour failed to deal.

Onus of proof

Counsel for Investec submitted that, if it were found that Investec was a bailee of the containers, it was nonetheless established on the evidence that the JRT premises were at all relevant times securely fenced with a chain wire fence with the gates locked, and he contended that those measures were sufficient to discharge Investec’s obligations as bailee of the containers. Counsel also argued that, inasmuch as the containers were heavy and so could not be removed from site without the use of expensive, sophisticated vehicles and other equipment, it should be inferred that the containers were taken by thieves who were both knowledgeable and organised and otherwise of a kind unlikely to be deterred by additional security measures such as CCTV and security guards.

We do not accept the argument. Despite some divergence among Australian authorities as to which party bears the onus of proving negligence in relation to a gratuitous bailment, we think the better view to be, as it is in England, that the onus is on the bailee to show that the goods have been lost without negligence on the bailee’s part.[31] Here, Investec did not essay the task of showing that the containers were lost without any negligence on its part. There was a lack of evidence as to how the gates were opened or the containers otherwise extracted from within the chain-wire fence. As counsel for Mr Rolfe submitted, for all one knows, it may be that Investec or one of its servants or agents lent the keys to the thieves or left them where the thieves could obtain access to them. Examples can be multiplied.
[31]Graham v Voigt (1989) ACTR 11, 19 (Blackburn J); Curtin v Meadlow Holdings Pty Ltd [2001] QCA 145, [28] (Thomas JA, with whom Byrne and Dutney JJ agreed).

It follows in our view that Investec did not establish that it had discharged any duty of care which it may have owed as bailee of the containers.

Contributory negligence

Counsel for Investec next submitted that, if Investec breached any duty of care which it owed as bailee of the containers, Mr Rolfe was guilty of contributory negligence in leaving three very valuable Porsche motor cars in unattended containers in what were known to be substantially unoccupied premises without alerting Investec to the value of the contents of the containers or doing anything else to secure the contents against the possibility of theft.

We accept that submission in part. As to the containers themselves, we consider that they were of such relatively small value (as we shall explain below) that it was not negligent for Mr Rolfe to leave them with Investec on the JRT site without taking any further measures to guard against their loss. Hence, we do not accept that Mr Rolfe was guilty of contributory negligence in connection with their loss.

As to the contents of the containers, however, it appears to us that the three Porsche motor cars were of such rarity and value that Mr Rolfe was negligent in leaving them in the containers without conveying to Investec their general nature, value and quantity or doing anything else to secure them. For the reasons already explained, we consider that Mr Rolfe’s failure to alert Investec to the nature, value and quantity of the contents means that Investec is not liable as bailee for the contents. But, if Investec did have a liability as bailee for the contents, we would hold that Mr Rolfe was guilty of contributory negligence in respect of the loss of them, and we would assess the degree of his contributory negligence at the level of 80 per cent.

The value of the containers

The only direct evidence of the value of the containers, as opposed to their contents, was given by Cameron John Dunsford, a chartered valuer called by Mr Rolfe. He opined that their value would depend on their condition but that, assuming they were in ‘quite good condition’, each 40 foot container would be worth approximately $3,000 and each 20 foot container would be worth approximately $2,000, making a total for the seven containers of $16,000.

There was some evidence, in the form of a valuation prepared for the administrators prior to the auction on 20 February 2003, that some of the 20 foot containers which belonged to JRT and were to be sold at the auction had an estimated market value of $1,000 each and an estimated auction realization value of $700 each. But there was no indication of how the condition of those containers compared with the condition of Mr Rolfe’s seven containers. Nor was it suggested to Mr Rolfe that the condition of his containers was anything less than ‘quite good’.

Doing the best we can on the available evidence, and bearing in mind that really nothing was said by or on behalf of Investec to detract from the efficacy of Mr Dunsford’s valuation, we assess the present value of the seven lost containers in the total amount of $16,000.

Counsel for Investec complained that Mr Rolfe did not make any claim below for the value of the containers as opposed to their contents. We reject that complaint. The claim for the containers was pleaded, supported by Mr Dunsford’s evidence and the subject of submission in the course of Mr Rolfe’s counsel’s final address.

Value of the Porsche motor cars

The evidence as to the value of the Porsche motor cars was more complex. Mr Dunsford assessed the present fair market value of each of the three vehicles as follows:
– Porsche 924 GTR:      $95,734
– Porsche 924 GTS:       $90,948
– Porsche 911 S:            $119,000.
Mr Dunsford, also assessed what he described as the ‘indemnity value’ of each vehicle — a much higher figure than the present market value — but, in our opinion, that was irrelevant for present purposes. Counsel for Mr Rolfe did not suggest and we do not see why Mr Rolfe would be entitled to recover anything more than the present market value of the chattels which he lost.

In contrast to Mr Dunsford’s valuations, in a valuation prepared at the request of Investec, Mr James Nicholls, Head of Collectors’ Motor Cars for Sotheby’s Australia, assessed the present market value of each of the vehicles as follows:
– Porsche 924 GTR:      $70,000 to $90,000
– Porsche 924 GTS:       $60,000 to $90,000
– Porsche 911 S:            $120,000 to $140,000.
In our view, Mr Nicholls’ method of valuation presents as far more exacting, and therefore more compelling, than Mr Dunsford’s assessment. We also note that Mr Nicholls observed in his report that the values he assessed could be significantly lower if any of the vehicles were disassembled or otherwise in less than concourse condition. Significantly, there was some evidence that at least one of the vehicles was in a state of partial disassembly, although Mr Rolfe said in evidence that it would have been possible to reassemble that vehicle in relatively short time. We must say, too, that the impression we derive from the photographic evidence of the vehicles and from the general tenor of Mr Rolfe’s description of them is that none of them was in concourse condition at the time of its disappearance.

In light of the two reports, our preference for Mr Nicholls’ methodology, the evidence of disassembly and the inference which we draw that the vehicles were not in concourse condition, we assess the present market value of each vehicle as follows:
– Porsche 924 GTR:      $70,000
– Porsche 924 GTS:       $60,000
– Porsche 911 S:            $119,000.
Respondent’s notice of contention

Investec relied on a notice of contention to the effect that, if the judgment below were otherwise unsound, it should be upheld on the basis that Mr Rolfe lacked standing to bring the proceeding. Essentially, the argument was that, at the time of filing the Writ, the right of action was vested in Mr Rolfe’s trustee in bankruptcy; consequently, the trustee alone had title to sue; and, although the trustee later purported to assign the right of action to Mr Rolfe, by then the claim was statute barred with the result that the proceeding was a nullity.

We do not accept the argument. The proceeding was not a nullity albeit that it was defective.[32] Although it is true that Mr Rolfe had no title to sue when the Writ was filed, it was open to him to take an assignment of the right of action from the trustee,[33] as he did, and to seek, as he also did, to amend the Writ to reflect that he claimed as assignee. The judge was not in error in granting him leave so to amend his claim. Although the limitation period had expired by then, the Court may allow an amendment notwithstanding the expiration of a limitation period — if satisfied that the other party to the proceeding would not thereby be prejudiced in a way that cannot fairly be met by an adjournment or award of costs — and there was no prejudice of that kind here because the claim (albeit in imperfect form) had been advanced before the limitation period expired.
[32]Stone v ACE-I.R.M. Insurance Broking Pty Ltd [2004] 1 Qd R 173, 177 [7] (McPherson JA) and 183 [25] and [26] (McMurdo J).
[33]Or, more accurately, as will be explained, the right to the net balance assessed in accordance with s 86 of the Bankruptcy Act 1966.

To adopt and adapt the language of McMurdo J in Stone v Ace-I.R.M. Insurance Broking Ltd,[34] Mr Rolfe had commenced the proceeding on what was in substance the same cause of action before the expiration of the limitation period and, in those circumstances, the proper purpose of the limitation period would not be defeated by permitting him to go forward on that basis once the defect in the proceeding had been surmounted.
[34][2004] 1 Qd R 173, 185 [30].

Counsel for Investec submitted that Mr Rolfe’s claim was nonetheless incompetent because Mr Rolfe had not added the trustee as a plaintiff. In counsel’s submission, the decision in Stone showed that it was necessary for that to be done.

We do not accept that submission. In Stone, the assignment of the cause of action was an equitable assignment and so, in accordance with ordinary principles, the proceeding could not be prosecuted without the joinder of the trustee, either as a plaintiff by agreement or as a defendant in the absence of agreement.[35] In contrast, here the assignment was a legal assignment, in conformity with s 134 of the Property Law Act 1958, and so could be prosecuted by and in the name of Mr Rolfe alone.
[35]Heydon & Leeming, Jacobs Law of Trusts in Australia, 7^th Ed, [221]; United States Trust Co of New York v Master of Ionian Mariner (1997) 77 FCR 563, 587.

Counsel for Investec invoked the decision of the Western Australian Court of Appeal in Willoughby v Clayton Utz[36] for what he said was further authority for the proposition that it was necessary to join the trustee and that it was not open to join the trustee after the limitation period expired.
[36][2007] WASCA 5.

We do not consider that Willoughby is authority for either proposition. There, it was conceded that the legal assignment on which the plaintiff relied was prospective, and hence that the proceeding could not succeed unless it were shown that the cause of action had earlier been assigned in equity; thus, the need to join the trustee. Wheeler JA, with whom the other members of the court agreed, held that it was too late to join the trustee because, under the rules which operated in Western Australia, it was not open to assert a cause of action that accrued after the date of commencement of the proceeding, or to add a cause of action in respect of which the limitation period had expired since commencement of the proceeding; and, since the joinder of the trustee would take effect only from the date of joinder, which was after the expiration of the limitation period, the proceeding would be incompetent. Wheeler JA noted that the position in Western Australia was different to Queensland, and therefore that the result in Willoughby was different to the result in Stone, because there was no provision in Western Australia like Rules 375 and 376 of the Uniform Civil Procedure Rules 1999 (Qld) which allow the addition of a cause of action which has expired before the amendment or has arisen after the proceeding is instituted.

In Victoria, as in Queensland, there is provision to allow an amendment to add a cause of action arising after the commencement of a proceeding and notwithstanding the expiration of the relevant limitation period, provided that any prejudice to another party to the proceeding can be overcome by adjournment or appropriate order as to costs.[37] Accordingly, the position here is the same as it was in Stone.
[37]Limitation of Actions Act 1958, s 34; Supreme Court (General Civil Procedure) Rules 2005, Rules 36.01(1), (3), (6) and (8) and 14.03(2).

Mutual Set-Off

Investec further contended that, if the judgment were otherwise unsound, it should be upheld on the basis that, under s 86 of the Bankruptcy Act 1966 (Cth), Investec was entitled to set off in extinguishment of Mr Rolfe’s claim against Investec Mr Rolfe’s liability to Investec as surety for the debt obligation of Glodale Pty Ltd (an amount which, it was said, exceeded a million dollars).

Counsel for Mr Rolfe submitted to the contrary that the set-off for which Investec contended was not available for three reasons:

(1) first, the amount claimed by Mr Rolfe from Investec and any amount due by Mr Rolfe to Investec as surety for the obligations of Glodale Pty Ltd were not mutual credits, mutual debits or other mutual dealings within the meaning of s 86;

(2) secondly, upon Mr Rolfe’s discharge from bankruptcy, he was perforce of s 153 of the Bankruptcy Act discharged from all debts and other liabilities provable in his bankruptcy, including his liability to Investec as surety for Glodale Pty Ltd’s obligations; and

(3) thirdly, some time ago, Investec settled proceedings with Glodale Pty Ltd and, as part of the settlement, agreed that Glodale’s liability to Investec in respect of Glodale Pty Ltd’s loan account was nil, with the result that Mr Rolfe’s liability as surety must also be nil.

It is convenient to take each point in turn. First, we see no reason to doubt that Mr Rolfe’s claim against Investec and its claim against him as surety for the obligations of Glodale Pty Ltd were mutual dealings within the meaning of s 86. As the High Court has remarked on more than one occasion, the essential purpose of the section is to protect persons who engage in mutual dealings with a bankrupt and, to that end, the section is to be given the widest possible scope consistent with reasonable notions of mutuality.[38] In this case, the obligations of each party are claimed and owed in the same capacity and are genuinely mutual as a matter of substance.
[38]Day & Dent Constructions Pty Ltd v North Australian Properties Pty Ltd (1982) 150 CLR 85, 95; Gye v McIntyre (1991) 171 CLR 609, 619.

Secondly, the fact that Mr Rolfe was discharged of provable debts upon his discharge from bankruptcy does not mean that the right of set-off under s 86 ceased to apply. As was explained in Gye v McIntyre, s 86 is a statutory directive which operates automatically at the time of bankruptcy whether or not the creditor proves in the bankruptcy and such that, if the balance obtained upon settling the amount due by the debtor to the creditor against the creditor’s claim is nil or in favour of the creditor, the amount that can be recovered by the trustee from the creditor is nil.[39] Moreover, s 86 does not require that the two obligations have been due at the time of the commencement of the bankruptcy. They may be set off under the section even if only contingent at the commencement of the bankruptcy and perhaps even if they remain unascertained when the calculation is later carried out. To that end, they are treated as continuing to exist as such up to the point of calculation; albeit only for the purposes of calculation.
[39]Gye v McIntyre, ibid.

It remains, however, as the House of Lords stressed in Stein v Blake[40] that, as from the date of bankruptcy, the only chose in action which continues to exist as an assignable item of property is a claim to the net balance It follows, we think that, when the trustee in this case purported to assign to Mr Rolfe the cause of action for damages against Investec for breach of bailment, the effect of the assignment was to convey to Mr Rolfe only such claim to any net balance as the trustee may have had against Investec after bringing to account the amount due by Mr Rolfe to Investec under the Guarantee.[41]
[40]Stein v Blake [1996] 1 AC 243, 255 (Lord Hoffman, Lords Keith, Ackner, Lloyd and Nicholls concurring, (with respect to the comparable provisions of s 323 of the Insolvency Act 1986 (UK)).
[41]Stein, ibid 259.

Thirdly, it appears to us that the amount due by Mr Rolfe to Investec under the Guarantee in respect of Glodale’s indebtedness was nil: because, by the terms of settlement, Investec agreed with Glodale that the amount owing by Glodale to Investec was nil.

We are conscious that the amount owing by Glodale to Investec and, consequently, the amount contingently due by Mr Rolfe as surety for Glodale was perhaps much greater than nil at the point of commencement of Mr Rolfe’s bankruptcy. Plainly, too, it is the amount of Mr Rolfe’s obligation to Investec as at the commencement of the bankruptcy which must be brought to account for the purposes of s 86. But, although it is possible that a greater valuation would have been put on Mr Rolfe’s contingent obligation before the terms of settlement were executed, it is only now that the valuation is in fact being carried out. Hence, with the benefit of knowledge of what has occurred, one can and must now say that the proper valuation to be ascribed to Mr Rolfe’s obligation as surety for Glodale’s indebtedness, as at the commencement of the bankruptcy, was and is nil.

Counsel for Investec contended that the terms of the Glodale release were to be construed in the light that, when Investec entered into them, it did not know and could not have suspected that Mr Rolfe would later bring the proceeding for damages for breach of bailment. It followed, counsel submitted, that the terms should be construed as not reducing Glodale’s debt for the purposes of calculating Mr Rolfe’s liability to Investec as surety. Any other construction, counsel said, would ascribe a meaning to the terms of settlement which the parties would surely not have contemplated.

We do not accept that submission. Whether or not Mr Rolfe was guilty of sharp practice in allowing Investec to enter into the terms of settlement without bringing to its attention the possibility that he might bring a claim for breach of bailment[42] — and we note that it was never put to him in the course of the trial that he had acted improperly — the terms of settlement are clear. They leave no room for doubt that Investec agreed that the amount of Glodale’s liability to Investec is nil.
[42]Karam v ANZ Banking Group [2001] NSWSC 709, [406].

Possibly, if the terms of settlement were the result of a mistake on Investec’s part, it would have been open to Investec to apply have them set aside, on the basis of a unilateral mistake of which Mr Rolfe was seeking to take unconscientious advantage.[43] But Investec has known about Mr Rolfe’s claim for breach of bailment at least since it was served in 2010 and has done nothing about the suggested mistake. In our view, it is too late for the first time on appeal to contemplate the possibility of rescission of the terms in deciding the outcome of this proceeding.
[43]Taylor v Johnson (1983) 151 CLR 422, 432–3.

Guarantee and Memorandum of Common Provisions

Finally, under cover of the notice of contention, counsel for Investec argued that, perforce either of cl 6.1 of the Guarantee or cl 12.1 of the Memorandum of Common Provisions applicable to the Mortgage (‘the Common Provisions’), Mr Rolfe was liable to indemnify Investec against any liability which it may have to him for breach of bailment of the containers; and that, pursuant to s 86 of the Bankruptcy Act, Mr Rolfe’s liability so to indemnify Investec was in effect to be set off in extinguishment of his claim, thereby once again resulting in a nil balance.

Counsel for Mr Rolfe argued to the contrary on two bases. First, he submitted that, if Mr Rolfe were otherwise liable to indemnify Investec against the claim for damages for breach of bailment, the liability was discharged pursuant to s 153 of the Bankruptcy Act upon Mr Rolfe’s discharge from bankruptcy. Secondly, he contended that, upon its proper construction, neither cl 6.1 of the Guarantee nor cl 12.1 of the Common Provisions required Mr Rolfe to indemnify Investec in respect of the claim for damages for breach of bailment.

We reject the first of those contentions for the same reasons we have given for rejecting the argument that Mr Rolfe’s liability as surety of Glodale’s obligations should not be brought to account for the purposes of s 86.

Turning to the second contention, cl 6.1 of the Guarantee provided that:

6.1 General Indemnity
(a)The Guarantor [Rolfe] indemnifies the Financier [Investec] against any claim, action, damage, loss, liability, cost, charge, expense, outgoing or payment which the Financier pays, suffers or incurs, or is liable for, in respect of any of the following:
(1)any failure by the Debtor to pay any of the Guaranteed Moneys when due or in the manner or currency in which they were required to be paid;
(2)any failure of the Debtor or the Guarantor or any other person to observe, perform or comply with any provision of any Transaction Document or any other document or agreement;
(3)any fact or circumstance not being as represented or warranted to the Financier by the Debtor or the Guarantor or any Transaction Party;
(4)the occurrence of any Event of Default; and
(5)the Financier exercising its Powers consequent upon or arising out of the occurrence of any Event of Default.

(b)Without limitation to the indemnity contained in clause 6.1(a), that indemnity includes the amount determined by the Financier as being incurred by reason of the liquidation or re-employment of deposits or other funds acquired or contracted for by the Financier to fund or maintain the Guaranteed Moneys and includes, but is not limited to, loss of margin.

For the purposes of cl 6.1(a)(5) of the Guarantee, the expressions ‘Power’ and ‘Event of Default’ were defined to mean:

any right, power, authority, discretion or remedy conferred on the Financier by any Transaction Document or any applicable law.[44]

[44]The expression ‘Transaction Document’ was defined in the guarantee to mean the guarantee, the Principal Agreement, each Collateral Security or any other Transaction Document as defined in the Principal Agreement … or any document or agreement entered into or given under any of the above.

Counsel for Investec argued that any claim which Mr Rolfe may have had against Investec for damages for breach of bailment of the containers was encompassed by the language of cl 6.1(a)(5): ‘claim, action, damage, loss, liability, cost, charge, expense, outgoing or payment which the Financier pays, suffers or
incurs, or is liable for, in respect of … [Investec] exercising its Powers consequent upon or arising out of the occurrence of any Event of Default’.

We do not accept that contention. The principles governing the construction of contractual indemnities are clear. By and large, such instruments fall to be construed like other commercial contracts, and thus according to what a reasonable person in the position of the parties would have understood the terms of the instrument to mean. The Court should have regard to all of the words used in the agreement so as to render them all harmonious with one another, and to ensure the congruent operation of the various components as a whole.[45] Nevertheless, a contract of indemnity like a contract of guarantee is a contract strictissimi juris and so, to the extent of any ambiguity, is to be construed in favour of the surety. As the plurality explained in Andar Transport Pty Ltd v Brambles Ltd:[46]:
[45]See Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 461–2 [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd 2004) 219 CLR 165, 179 [40]; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; Western Exports Services Inc v Jireh International Pty Ltd (2011) 86 ALJR 1, 3 [5]; and Retirement Services Australia v 3143 Victoria Street Doncaster Pty Ltd [2012] VSCA 134, [50].
[46](2004) 217 CLR 424.

The proper construction of cll 8.2.2 and 8.2.3 cannot be undertaken without reference to the principles of construction applicable to contractual indemnities. The starting-point is the decision of this Court in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd. In that case, the Court considered whether two clauses of a guarantee operated as conditions the breach of which would discharge the surety from liability. In answering that question in the affirmative, Mason ACJ, Wilson, Brennan and Dawson JJ said:
At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety. The doctrine of strictissimi juris provides a counterpoise to the law’s preference for a construction that reads a provision otherwise than as a condition. A doubt as to the status of a provision in a guarantee should therefore be resolved in favour of the surety.

In Chan v Cresdon Pty Ltd, Mason CJ, Brennan, Deane and McHugh JJ described the statement in Ankar set out above as evidencing a ‘settled principle governing the interpretation of contracts of guarantee’.
…
[N]otwithstanding the differences in the operation of guarantees and indemnities, both are designed to satisfy a liability owed by someone other than the guarantor or indemnifier to a third person. The principles adopted in Ankar, and applied in Chan, are therefore relevant to the construction of indemnity clauses.[47]

[47]Ibid 433–437 [17] and [23] (Gleeson CJ, McHugh, Gummow, Hayne and Haydon JJ) (citations omitted); Electricity Generation Corporation v Woodside Energy Ltd & Ors [2014] HCA 7, [35] (French CJ, Hayne, Crennan and Kiefel JJ).

In our view, the construction contended for by Investec should be rejected for three reasons. First, it gives the words of cl 6.1(a)(5) a wider operation than a reasonable construction of them will bear. According to the natural and ordinary meaning of its terms, it is limited to an indemnity in respect of the exercise by Investec of defined powers. Ex facie is does not provide an indemnity in respect of acts or omissions that give the guarantor (Mr Rolfe) a cause of action against Investec.

Secondly, when cl 6.1(a)(5) is construed in the context of the remainder of cl 6.1, and indeed the Guarantee as a whole, there is even less basis for giving it a construction which would require Mr Rolfe to indemnify Investec in respect of breaches of duty or trespasses committed by Investec.[48] The specificity with which other matters are dealt in cl 6.1 and elsewhere in the Guarantee implies an intention that, unless a liability is specifically provided for, it is not included in the indemnity.
[48]See further, Australian Paper Plantations Pty Ltd v Venturoni [2000] VSCA 71 [18]; Roads and Traffic Authority of NSW & Anor v Palmer [2003] NSWCA 58 [200]–[214]; and Burch v Shire of Yarra Ranges & Anor [2004] VSC 437, [197]–[218].

Thirdly, if and to the extent that there is any doubt about it, the doubt should be resolved in favour of Mr Rolfe in accordance with the principles of construction explained in Andar Transport.

Clause 12.1 of the Common Provisions provides that:

12.1 General Indemnity
The Mortgagor [Glodale] indemnifies the Mortgagee [Investec] against any claim, action, damage, loss, liability, cost, charge, expense, outgoing or payment which the Mortgagee, Receiver (whether acting as agent of the Mortgagor or of the Mortgagee) or Attorney pays, suffers, incurs or is liable for, in respect of any of the following:

(a) the occurrence of any Potential Event of Default or Event of Default;
(b)the Mortgagee exercising its Powers consequent upon or arising out of the occurrence of any Potential Event of Default or Event of Default;
(c)the non-exercise, attempted exercise, exercise or delay in the exercise of any Power;
(d)any act or omission of the Mortgagor or any of its Officers, employees or agents;
(e)the occupation, use or ownership of any of the Mortgaged Property by the Mortgagor or any of its Officers, employees or agents;
(f)any workers’ compensation claim by any employee of the Mortgagor;
(g)any insurance policy in respect of the Mortgaged Property;
(h)the sale or storage of any personal property which is not subject to this deed;
(i)any compulsory acquisition or statutory or judicial divestiture of any of the Mortgaged Property; and
(j)any other thing which is in respect of this deed or the Mortgaged Property whether or not of the same kind as the above.

Counsel for Investec submitted that cl 12.1 of the Common Provisions required the Mortgagor (Glodale) to indemnify Investec against any liability which Investec may have to Mr Rolfe for damages for breach of bailment; and, in turn, that Glodale’s obligation so to indemnify Investec were ‘Guaranteed Moneys’ within the meaning of the Guarantee.

‘Guaranteed Moneys’ were defined in the Guarantee to mean:

… all debts and monetary liabilities of the Debtor [Glodale] to the Financier [Investec] on any account and in any capacity irrespective of whether the debts or liabilities:
(a)       are present or future;
(b)       are actual, prospective, contingent or otherwise;
(c)       are at any time ascertained or unascertained;
(d)are owed or incurred by or on account of the Debtor alone, or severally or jointly with any other person;
(e)are owed to or incurred for the account of the Financier alone, or severally or jointly with any other person;
(f)are owed or incurred as principal, interest, fees, charges, Taxes, damages (whether for breach of contract or tort or incurred on any other ground), losses, costs or expenses, or on any other account;
(g)are owed or incurred to or for the account of any successor or assignee of the Financier; or

(h) comprise any combination of the above.

Counsel relied in particular on paragraphs (b), (c), (e) or (h) of cl 12.1.

We accept that, other things being equal, ‘Guaranteed Moneys’ would include Glodale’s liability to Investec under cl 12.1 of the Common Provisions. We do not accept, however, that any liability which Investec may have to Mr Rolfe for damages for breach of bailment of the containers falls within any of paragraphs (b), (c), (e) or (h) of cl 12.1 of the Common Provisions.

Our reasons for so concluding in relation to paragraphs (b), (c) and (e) of cl 12.1 are largely the same as our reasons for concluding that cl 6.1(a)(5) of the Guarantee does not require Mr Rolfe to indemnify Investec in respect of breaches of duty or trespasses committed by Investec.

Perhaps, Investec is on slightly stronger ground with respect to cl 12.1(h) of the Common Provisions than in relation to the other identified paragraphs. On one view of the matter, Mr Rolfe’s claim is one ‘in respect of … the sale or storage of any personal property which is not the subject to [the mortgage]’. But we think the better view is that Mr Rolfe’s claim is one in respect of Investec’s breach of duty and/or the loss (rather than sale or storage) of property to which Mr Rolfe was entitled to possession. As with cl 6.1 of the Guarantee, we are disinclined to accept that cl 12.1 of the Common Provisions was intended to afford Investec an indemnity in respect of its own breaches of duty and/or causes of action accruing solely against it. And we are fortified in that conclusion by the fact that, whereas there is express provision in paragraph (d) of cl 12.1 for an indemnity in respect of any act or omission of the Mortgagor (Glodale), there is an absence of any such provision relating to the acts or omissions of the Mortgagee (Investec).

Finally, it remains to observe that if, contrary to our construction of cl 6.1 of the Guarantee or cl 12.1 of the Common Provisions, Mr Rolfe were liable to indemnify Investec in respect of his claim against it for breach of bailment of the containers then, for the reasons already given in relation to the setting-off of Mr Rolfe’s principal liability under the Guarantee, we accept that his liability to indemnify Investec against his claim for breach of bailment would, perforce of s 86 of the Bankruptcy Act, need to be set off against Investec’s liability to Mr Rolfe, resulting once again in a nil net balance.

Conclusion and orders

For the reasons we have given, the appeal will be dismissed.

- - -

Citations

Rolfe v Investec Bank (Australia) Ltd [2014] VSCA 38

Most Recent Citation

Cases Citing This Decision

12

Aerolink Air Services Pty Ltd v Bankstown Airport Limited [2019] NSWSC 1283

Nader v Prodom Pty Ltd as trustee for the Lovett Family Trust [2020] NSWDC 886

Fabbri v Atyeo [2024] WADC 2

Cases Cited

21

Statutory Material Cited

0

Perth v Halle [1911] HCA 57

R v WRIGHT [2019] SASCFC 128

Actions

Download as PDF Download as Word Document

[2014] VSCA 38

13 March 2014