She continued:
35. The difficulty with the plaintiff relying upon this argument in these proceedings (which I think is an insurmountable difficulty) is that, prior to and following receipt of the letter of 17 June 2002, the plaintiff's attitude was not one of unambiguously asserting a desire that the goods be returned and unambiguously indicating a lack of consent to the defendants' continued use of the pallets. Rather, the situation was analogous to that referred to in the above quote in relation to the grand piano. The plaintiff was hoping that the defendants would enter into hiring agreements and continue to use the pallets, but in an "authorised way".
21 The primary judge then referred to a second argument of the plaintiff that, if it was plain that the opponents would have refused to comply with the proper demand, had one been made, it was not necessary that there be a proper demand, referring to Baud Corp NV v Brook (1973) 40 DLR (3d) 418 at 423.
22 The primary judge then continued:
38. Reference was made to the defendants' conduct observed on 10 April 2000 of storing goods on pallets which had been cut and adapted in some way to fit into the defendants' warehouse premises, but that observation was made well before consideration was given to making any demand for return of goods and, in any event, the nature of the goods and the terms of hire contemplate that goods may be damaged when they are out in the community.
23 In relation to conversion, the primary judge referred to arguments on behalf of the claimant that the persistent use of the pallets and the cutting of the pallets amounted to conversion and then continued:
45. The difficulty with all these arguments is that the uncontested situation in this matter is that the plaintiff was, throughout the relevant period, wanting the defendants to enter into a hiring agreement with it. It was not concerned about the defendants continuing to utilise the pallets, provided they entered into a hiring agreement and, in that sense, was ambivalent about whether it wanted return of the goods. Again, the situation is analogous to the grand piano illustration given in the case of Capital Finance Co Ltd .
24 The claimant seeks to appeal on the following grounds:
1. Her Honour Judge H G Murrell SC erred in ordering that the District Court Proceedings No. 7010 of 2002 between the Appellant as plaintiff and the First and Second Respondents as defendants be dismissed.
2. Her Honour erred by failing to apply the correct legal principles required in an application for summary dismissal pursuant to District Court Rules Part 11A, Rule 3.
3. Her Honour erred in finding or purporting to find that there was not triable issue in the proceedings.
25 Mr Coles QC for the claimant submitted that the letters and in particular the letter of 17 June 2002, were sufficient to convey to the opponents that they did not have the owner's consent to continued possession and use of the pallets. The fact that the opponents did not have to comply with the demand to deliver the pallets at the claimant's premises, and that failure to deliver would not of itself be detinue, did not detract from that effect of the letters.
26 In those circumstances, he submitted, the continued possession and use of the pallets by the opponents could be such as to demonstrate an intention to hold them in defiance of the claimant's right (see Bray at 607 and 609). Mr Coles submitted that whether this was so in this particular case was a matter to be decided on the whole of the evidence, not on a summary disposal application.
27 Mr Coles also submitted that it could be inferred from the circumstances and the original defence that a proper demand would have been futile, and that too was sufficient for detinue (see Baud).
28 In relation to conversion, Mr Coles submitted that the cutting of the pallets could be conversion, even though it took place before there was any withdrawal of consent to possession.
29 He submitted that the continued use of the pallets after the letters were sent could amount to conversion, depending upon the circumstances as they were fully established at a final hearing (see Penfolds Wines Pty Limited v Elliott (1946) 74 CLR 204, Model Dairy Pty Limited v White [1935] Arg LR 432).
30 Mr McKeand SC, for the opponents, submitted that there were two key pieces of evidence in the case that were definitive and could not change at a final hearing, namely the terms of the contracts of hire and the letter of 17 June 2002.
31 In relation to the former, he submitted that the standard terms, and in particular 2(c)(3), permitted pallets to be passed on to non-hirers, in which case there would be no obligation on these non-hirers to keep records or to use or refrain from using the pallets in any particular way, and no obligation not to pass the pallets on to further parties.
32 In those circumstances, there could be no detinue or conversion, at least until the owners plainly withdrew consent to use or properly demanded the return of the pallets. Particularly this was so in circumstances where the original hirer of the pallets was under an obligation to keep records in relation to them, and to keep paying rent for them.
33 Turning to the letter of 17 June 2002, Mr McKeand submitted that it did not express or imply a withdrawal of consent to retain and use the pallets. It indicated a wish that the opponents enter into an agreement to pay rent for them.
34 Dealing with the particular requirements made at the end of the letter, Mr McKeand submitted that any requirement indicating a cesser of consent to use took effect only after an audit had taken place, or at least an audit had been sought and denied. Mr McKeand submitted that if a refusal to return goods is relied on, the refusal must be categorical.
35 In my opinion, it could not be concluded on the material before the primary judge on the summary dismissal application that the letter of 17 June 2002 could not amount to a withdrawal of the claimant's consent to the opponent's continued possession, use and disposal of the pallets.
36 The primary judge's conclusion that the plaintiff's preference was to have the opponents enter into a hiring agreement was a reasonable one, and the letter did not explicitly state in these terms that consent to possession, use and disposal was withdrawn. The matter is further, to some extent, clouded by the reference to audit relied on by Mr McKeand.
37 However, in my opinion, the letter is, in its context, plainly capable of amounting to a communication of a withdrawal of consent, and in my opinion, whether it does so or not must be determined having regard to all the circumstances, which would only be established at a final hearing. It would not be appropriate on an application for summary disposal to conclude that the letter did not, or was not capable of, conveying such a withdrawal of consent.
38 If the letter was effective to communicate a withdrawal of consent, then use or disposal of the pallets thereafter could amount to detinue if such use or disposal demonstrated an intention to hold and use and/or dispose of the pallets in defiance of the owner's rights, and could also amount to conversion.
39 In those circumstances, in my opinion, the case is not one where it was appropriate to make an order for summary dismissal.
40 Although it is not necessary to my decision to deal with the contention that the evidence could show that the making of a proper demand would have been futile, it does seem to me that that inference may be open, particularly having regard to the terms of the defence initially put on by the opponents.
41 It seems to me further that events occurring prior to 17 June 2000 could have amounted to conversion, in particular the cutting of pallets to make them suitable for use, apparently for the purpose of storage in the opponent's premises. The fact that the standard terms of hire have provision for compensation to the claimant for damage occasioned to the pallets could not prevent the deliberate cutting of the pallets for the purpose of some medium or long-term use in the opponents' premises from amounting to conversion, or at least from being capable of being conversion.
42 It is also possible that the continued retention, use and disposal of pallets following the earlier communications could have amounted to conversion. The area is a difficult one, as shown by the decision in Penfolds Wines, and it does seem to me that a conclusion as to whether what happened at that time amounted to conversion would require a finding as to the whole of the circumstances of the case.
43 For those reasons, in my opinion, the opponents had not proved before the primary judge that there was no triable issue or that the claimant had no reasonable cause of action, and the proceedings should not have been summarily dismissed. Although the order for summary dismissal is in form an interlocutory order, it had the effect of putting an end to the proceedings, and in my opinion it is appropriate to grant leave to appeal.
44 I would note finally that, as correctly noted by the primary judge, there may be serious difficulties in the way of the claimant in proving damage, when it may not be able to prove that rent was not being paid by other parties for the relevant pallets, and where the normal conversion remedy of forced sale may be inappropriate.
45 However, in my opinion the primary judge was correct in her conclusion that these difficulties did not justify summary dismissal of the proceedings.
46 For those reasons, I propose the following orders:
1. Leave to appeal granted.
2. Notice of Appeal to be filed within 14 days.
3. Appeal upheld.
4. Orders below set aside.
5. Opponent's Notice of Motion dated 18 July 2003 dismissed with costs.
6. Opponents to pay claimant's costs of the application and appeal and to have a Suitors Fund Act certificate if otherwise entitled.
47 MCCOLL JA: I agree.
48 WINDEYER J: I agree.
49 HODGSON JA: Those are the orders of the Court.
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