BIS Cleanaway (trading as CHEP) & Ors v Tatale & Anor; Brambles

Supreme Court of NSW|2007-03-19|Before: McDougall J

Background 3 The issues 19 Corporate reorganisation 21 The plaintiffs' terms of trade 35 Relevant legal principles 37 Right to recover goods 38 Ius tertii 45 The witnesses in the case 48 Issues 1, 1A and 1B: right to immediate possession 59 Sections 68 and 69 61 Novation 66 The relevant principles 72 Offer and acceptance 74 Analysis 81 Fungible property 87 Issues 2 and 3: detention and conversion 91 Conclusion on the plaintiffs' case 92 Issues 5 to 12: terms of trade; s 69; estoppel, unconscionability and misleading or deceptive conduct 93 Issue 13: interference with contractual relations 113 Issue 14: negligence 120 Issue 4: relief 124 Conclusions and orders 133

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50109/05 BIS CLEANAWAY LIMITED (FORMERLY KNOWN AS BRAMBLES AUSTRALIA LIMITED t/as CHEP AUSTRALIA) & ORS v TATALE PTY LIMITED & VENASTI PTY LIMITED

50142/05 BRAMBLES AUSTRALIA LIMITED t/as CHEP AUSTRALIA v TATALE PTY LIMITED t/as DOWNTON & DYER and VENASTI PTY LIMITED t/as ARNCLIFFE FREEZERS

JUDGMENT 1 HIS HONOUR: The plaintiffs' distinctive "CHEP" pallets are widely used in the transport industry for the carriage of a wide variety of manufactured goods. The plaintiffs make those pallets available to hirers pursuant to a "pooled pallet" system. The essence of that system is that pallets are retained, or passed from hirer to hirer (and sometimes from hirer to non hirer), until the immediate purpose of their use is fulfilled, and are then returned to the plaintiffs. Each hirer along the chain is responsible for hire charges for the time that it has possession and use of the pallets. Further, where a hirer passes the pallets on to a non hirer, the hirer remains liable for hire charges until the pallets are, in the jargon of the trade, "dehired". 2 The defendants are not, nor have they ever been, customers of the plaintiffs. Nonetheless, for many years they have been in possession of a stock of the plaintiffs' CHEP pallets. The plaintiffs have made several demands for the return of their pallets. The essential question for decision is whether the plaintiffs are entitled to recover possession of those pallets from the defendants. Background 3 Before I turn to the issues, and to enable those issues to be understood, I set out the relevant (and I hope uncontentious) background. 4 Brambles Industries Limited (BIL) is and has been for many years a listed public company. It carried on a number of businesses, including the CHEP pallet hire business, through its former subsidiary, the first plaintiff. The first plaintiff was known as "Brambles Australia Limited" (BAL) whilst it was a subsidiary of BIL, and it is convenient to continue that usage in these reasons. 5 CHEP (as I shall call the operator from time to time of the pallet hire business) is the market leader in Australia, and is a major competitor in the world wide pallet hire market. Its wooden pallets are painted blue and are distinctively branded in white with the "CHEP" logo. 6 No CHEP pallet is uniquely identifiable. Any CHEP pallet is interchangeable for any other. No CHEP customer is obliged to return in specie any pallet that has been hired to it; its obligation is to return pallets equal in number to those hired, or to pay daily hire charges until the pallets are returned or otherwise dehired. 7 The plaintiffs do not sell, nor have they ever sold, their branded CHEP pallets to any user. For many years, CHEP pallets have been hired pursuant to the pallet pooling scheme to which I have already referred. Hirers obtain and return pallets according to their needs. Where the pallets are passed from one hirer to another, there is a scheme for documenting the transfer so that each hirer is liable for hire charges only for the time that pallets are in its possession. When pallets are no longer required, they are returned to a CHEP depot. 8 As pallets are damaged, CHEP repairs them. When pallets are deemed to have reached the end of their useful life, they are broken up and recycled or "defaced" (by removal of the CHEP logo and other means) and disposed of. 9 From time to time, hirers sell or ship goods to non hirers. CHEP's terms of trade permit that to happen, on terms including that the hirer remains liable for hire charges until the pallets are passed on to another hirer, or returned to CHEP, or otherwise dehired. 10 The first defendant (Downton & Dyer) carries on business as a food and grocery wholesaler from premises at Alexandria. The second defendant (Arncliffe Freezers) carries on business as a frozen foodstuffs wholesaler, from the same premises at Alexandria. Before 2000, both companies operated from shared premises at Arncliffe. They are closely related, in that the brothers Messrs Hassan and Abbas Choker, who control Downton & Dyer, also control a 49% interest in, and are directors of, Arncliffe Freezers. The majority interest in Arncliffe Freezers is controlled by Mr Jihad Sayegh. 11 From time to time, the defendants receive consignments of goods packed on pallets. Frequently, those pallets are CHEP pallets. Frequently, the consignors are CHEP customers. 12 Where goods are so consigned to the defendants on CHEP pallets, the defendants store the goods on those pallets until they are onsold. Downtown & Dyer frequently, and Arncliffe Freezers occasionally, use CHEP pallets to deliver goods to their respective customers. 13 The defendants' witnesses (Mr Hassan Choker, Mr Sayegh and a truck driver employed by Downton & Dyer, Mr Thiago Thiesen) all said that when loaded pallets are delivered to or by one or other of the defendants, an equal number of unloaded pallets is taken, either then or very soon thereafter, in exchange. Nonetheless, the defendants have managed to build up a stock of CHEP pallets: on the evidence, about 1,200 at any time between 1996 and 2000, increasing to about 1,700 at the present time. That accumulation occurred notwithstanding the system of exchange to which I have referred, and notwithstanding that the plaintiffs, on three occasions between 2000 and the present, recovered in total 1,018 CHEP pallets from the defendants. 14 Messrs Hassan Choker and Sayegh were frank in their acknowledgment that operating their businesses in this way had significant economic advantages. If they had no stock of CHEP pallets, they would be required to unpack goods as they arrived so that the supplier could take back the empty pallet. This would involve very significant additional labour costs. It would also increase the expense of delivery, because the driver would be required either to wait until the pallet was unloaded or to return to collect it once it had been unloaded. Of course, the defendants could avoid these expenses by becoming CHEP customers. But they have declined all invitations to do so. If they became CHEP customers, they would be liable for hire charges whilst the pallets were in their possession. It appears from the evidence of Messrs Hassan Choker and Sayegh that the defendants retained pallets for a period ranging, on average, from 14 to 30 days. It might be noted that on any view the cost of hiring, effectively on a permanent basis, 1,700 pallets would be very much less than the cost of employing the additional 20 to 30 people that Mr Hassan Choker estimated might be necessary were the defendants required to unload on delivery all goods that arrived on CHEP pallets. 15 It was common ground that one or other of the plaintiffs had at all material times been the owner of all CHEP pallets in the defendants' premises. The defendants accepted that the plaintiffs had made a number of demands for the return of those pallets. The debate centred on the question, whether any of the plaintiffs had ever had the right to immediate possession of those pallets, so as to be entitled to sue in detinue and conversion. CHEP's terms of hire have provided at all material times that the relevant plaintiff has the right to immediate possession of all CHEP pallets whether on hire or not, and may take possession of those pallets immediately and without any notice to any person. 16 The CHEP terms of hire enable a customer to "dehire" a pallet without returning it where:

(1) The customer provides appropriate proof to CHEP that the pallet has been lost; and

(2) The customer pays compensation pursuant to a formula fixed in the terms of hire. 17 The plaintiffs' evidence shows that there is an active black market in CHEP pallets. No doubt, a hirer may lose pallets for a number of reasons that do not involve their destruction, and pallets so lost may fuel the black market. 18 Where black market pallets are used for the transport of goods, they may be received by one of CHEP's customers and returned to CHEP in the ordinary way. CHEP will then carry out appropriate repair or maintenance work on that pallet; and if it has reached the end of its useful life, will dispose of it in one of the ways that I have indicated. Thus, black market pallets represent a twofold loss to CHEP:

(1) The cost of carrying out repairs from time to time until the pallet reaches the end of its useful life; and

(2) The opportunity cost of the loss of the ability to hire an equivalent number of pallets. The issues 19 Against that background, the parties propounded the following issues: "1. Have the Plaintiffs the right to immediate possession of the CHEP pallets in the possession of the Defendants? 1A. Whether the Plaintiffs or any of them have established a right of immediate possession of any and if so which of the CHEP pallets claimed from the Defendants. 1B. Whether in light of the corporate reorganisation of the Plaintiffs between January and June 2006 and the documents affecting that reorganisation CEAL, or CAL have and BAL has or has not retained a right of possession of any, and if so which, of the CHEP pallets claimed from the Defendants. 2. Have the Defendants unlawfully detained the Plaintiffs' property? 3. Have the Defendants unlawfully converted the Plaintiffs' property to their own use? 4. If so, to what relief are the Plaintiffs entitled? In particular, are the Plaintiffs entitled to an order for delivery up, injunctive relief and damages? 5. Is there and what are the terms of any notorious and settled custom, practice and usage of trade in relation to the supply and delivery of groceries or frozen foods by inter alia the Defendants' suppliers and the Defendants? 6. What are the terms of contracts for the supply of groceries and frozen goods between the Defendants and their respective Defendant's suppliers? 7. Were the Plaintiffs aware of the terms of the contracts between the Defendants' suppliers and the Defendants? 8. Is the warranty for quiet possession contained in section 69(1)(b) of the Trade Practices Act 1974 (Cth) implied into the contracts between the Plaintiffs and their customers? If so, what effect, if any, does this have on the Plaintiffs' right to immediate possession? Do the Defendants have standing to raise this matter or sue on this issue, not being privy to those contracts? 8A. What are the terms of the contracts between the Defendants and their respective suppliers concerning the supply and exchange or return of CHEP pallets? 9. Is the warranty of quiet possession contained in section 69(1)(b) of the Trade Practices Act implied into the contracts between the Defendants' suppliers and the Defendants? If so, what effect does this have on the Plaintiffs' right to immediate possession? 10. Are the plaintiffs in any way estopped from asserting or enforcing their right to immediate possession? 11. Have the Plaintiffs acted or engaged in any unconscionable conduct which would give the Defendants right to relief pursuant to section 51AA, section 51AB or section 51AC of the Trade Practices Act? What relief, if any, are the Defendants entitled to by reason of that conduct? 12. Have the Plaintiffs engaged in misleading and deceptive conduct for the purposes of section 52 of the Trade Practices Act and section 42 of the Fair Trading Act (NSW) and are they otherwise liable for such conduct pursuant to section 76B of the Trade Practices Act and section 61 of the Fair Trading Act? To what relief, if any, are the Defendants entitled to [sic] by reason of that conduct? 13. Have the Plaintiffs committed the tort of interference with contractual relations? What relief are the Defendants entitled [sic] by reason of that conduct? 14. Did the Plaintiffs owe a duty of care to the Defendants, what was the content of that duty and have the Plaintiffs breached that duty? What relief are the Defendants entitled to in respect of any negligence of the Plaintiffs?" 20 The issues denoted by both numbers and letters (1A, 1B and 8A) were issues specifically propounded by the defendants. There was some dispute as to the width of those issues, but the parties did not direct submissions to that dispute and I do not propose to deal with it. Corporate reorganisation 21 It will be seen that issue 1B refers to "the corporate reorganisation of the plaintiffs between January and June 2006". 22 Evidence of the reorganisation came from Mr Phillip James Austin, the plaintiffs' director of asset management, CHEP Asia Pacific, and from Mr Robert Nies Gerrard, the plaintiffs' senior legal counsel. This aspect of their evidence was essentially unchallenged. It established the following matters:

(1) BAL owned all "CHEP Equipment", including CHEP pallets, from at least the mid 1960s until 3 March 2006.

(2) On 3 March 2006, and as part of a corporate reorganisation, BAL transferred ownership of its relevant moveable assets, including pallets, to the second plaintiff (CHEP Equipment).

(3) CHEP Equipment has remained the owner of all CHEP pallets since 3 March 2006.

(4) Also on 3 March 2006, CHEP Equipment granted BAL the exclusive right to retain possession and use the assets (including pallets) of the CHEP business. BAL continued to do so.

(5) On 3 June 2006, CHEP Equipment terminated BAL's exclusive right to possession and use of assets of the CHEP business.

(6) On the same date, CHEP Equipment transferred possession of those assets to the third plaintiff (CHEP Australia) and granted CHEP Australia the exclusive right to possession and use of those assets.

(7) CHEP Australia has conducted the CHEP business since 3 June 2006.

(8) On 3 March 2006, BAL transferred ownership of its intellectual property (including technology) relating to the CHEP business to CHEP Technology Limited (CHEP Technology). On the same day, CHEP Technology granted BAL the exclusive right to use that property. On 3 June 2006, that exclusive right was terminated and CHEP Technology gave the exclusive right to use that property to CHEP Australia. The transactions relating to that property are not directly in issue in these proceedings. 23 The key transactions effecting the changes to which I have referred in the preceding paragraph were made, no doubt for duty reasons, by written offers orally accepted. The defendants objected to the tender of the various documents on the basis that they had not been stamped. Mr J J Garnsey QC, who appeared with Mr J-P Redmond of counsel for the defendants, submitted that the transactions comprised or effected, the transfer of dutiable property. However, he did not at first identify any property the subject of any of those transactions that was "dutiable property" as that expression is defined in s 11(1) of the Duties Act 1997. Thus, no question arose under s 304 of that Act. 24 Mr Garnsey renewed his objection to the tender of the documents in final submissions. He submitted that the effect of the various transactions was to transfer the goodwill in the CHEP business to CHEP Australia on 3 March 2006, and to give or transfer the right to use of that goodwill firstly to BAL on 3 March 2006 and subsequently to CHEP Equipment on 3 June 2006. Mr Garnsey submitted that the transaction should be so characterised as a matter of substance. Thus, he submitted, the Court should only admit the documents into evidence if the plaintiffs gave an undertaking pursuant to UCPR r 31.13. Mr Garnsey defined the "documents" that were to be the subject of that undertaking as all the various documents to which I have referred, other documents not specifically described above but which were shown by the evidence to have been integral parts of the transactions, and all documents relating to novation of the hire contracts. 25 There are at least two difficulties in this submission. The first is that there is no evidence of the existence of any relevant goodwill. The second is that none of the documents, on its face, sought, attempted or purported to effect an assignment of such goodwill as there may have been. 26 As to the first point: the concept of goodwill was considered by the High Court of Australia in Commissioner of Taxation of the Commonwealth of Australia v Murry (1998) 193 CLR 605. The majority in that case (Gaudron, McHugh, Gummow and Hayne JJ) pointed out at 611 [12] that the difficulties of defining goodwill related, at least in part, to the different purposes for which the definition was required. As their Honours said at 612 [13], the term "goodwill" is used in accounting, business and legal contexts, and the understandings of accountants and business people may differ from that of lawyers. Their Honours considered a number of cases in which a definition of the concept of goodwill had been attempted. They concluded at 614 [22] that there were three aspects to goodwill: goodwill as property; the sources of goodwill; and the value of goodwill. Although, as they noted, what gave unity to those aspects was the concept of goodwill arising from the conduct of a business; they did not either there or elsewhere attempt a comprehensive definition. 27 One point that does arise from their Honours' reasons is that goodwill is to be regarded as distinct from its sources. Their Honours said at 617 [30] that (omitting citations) "[g]oodwill is an item of property and an asset in its own right. For legal and accounting purposes, it must be separated from those assets and revenue expenditures of a business that can be individually identified and quantified in the accounts of a business. Goodwill, as property is "inherently inseverable from the business to which it relates". That which can be assigned and transferred from the business may, while it is connected to the business, be a source of the goodwill of the business but cannot logically constitute any part of the goodwill of the business. To the extent that the law provides remedies for the protection of a severable asset of a business which is also a source of its goodwill, the right to the remedies arises from the legal properties of the asset and not from the existence of goodwill in the business." 28 Their Honours said at 618 [31] that it followed from the passage that I have quoted "that the sale of the asset of a business does not involve any sale of goodwill unless the sale of the asset is accompanied by or carries with it the right to conduct the business. The sale of hotel premises, for example, may involve the sale of goodwill although the contract does not refer to goodwill. Similarly, the mortgage of land used as a business may involve the mortgage of the goodwill of the business although the mortgage does not mention goodwill. But the reason that is so is that, by necessary implication, the sale or mortgage of such a site includes the sale or transfer of the business conducted on the site. Unless a business is transferred to the person to whom an asset of the business is transferred, the transfer of the asset does not transfer any part of the goodwill of the business." (Again, I have omitted citations.) 29 This in turn involved two further consequences, as their Honours recognised at 618-619 [32], [33]:

(1) Where an asset of the business is sold but the business is not, there will be no disposition of goodwill even though the sale may reduce the goodwill of the business; and

(2) Although the ability to use an asset may give it a value approximating to the value of goodwill derived from the employment of the asset in a business, "potential use is merely an attribute of an asset, while goodwill is property which is inseverable from a business. They are not to be equated for legal purposes …". 30 In the present case, there were a number of transactions involving assets:

(1) The transfer of ownership of certain moveable assets;

(2) The transfer of ownership of certain intangible assets; and

(3) The grants of rights of use of those moveable and intangible assets. 31 If these transactions are considered in the light of the principles derived from the decision of the majority in Murry, there is no basis for concluding, as a matter of necessity and absent demonstration, that the dealings in the moveable and intangible assets effected by the various agreements to which I have referred included, amounted to or effected an assignment of goodwill. 32 Thus, and notwithstanding the further submissions put by Mr Garnsey, I remain of the view that the documents were admissible without the plaintiffs being required to give any undertaking pursuant to r 31.13. 33 It was the plaintiffs' case that by what was in substance a process of novation, contracts for the hire of CHEP pallets made by BAL with customers became, on or at some time after 3 June 2006, contracts on the same terms between CHEP Australia and those customers. The defendants disputed this contention. 34 So far as I could discern from the defendants' submissions, there was no other challenge to the proposition that the rights of the plaintiffs from time to time, in respect of CHEP pallets, were as defined by the agreements constituting the transactions that I have described. The plaintiffs' terms of trade 35 Mr Austin's evidence establishes that at all times material to these proceedings the standard terms of hire for CHEP equipment have included provisions to the following effect: " 1 DEFINITIONS In these terms: … CHEP means CHEP Australia Limited ABN 11 117 266 323 (and its successors and assigns); … Equipment means items of property lent or hired out by CHEP from time to time; … Hirer means any person, firm or corporation to whom Equipment is lent or hired by CHEP, and its legal personal representatives, successors and permitted assigns; … Quantity on Hire means, in respect of any day, the quantity of Equipment lent or hired by CHEP to the Hirer; … 2. HIRE OF EQUIPMENT (a) Equipment will be added to and deducted from the Equipment held by the Hirer and the Hirer's Quantity on Hire when: (1) equipment is hired to the Hirer ( issue ); (2) hired Equipment is returned to CHEP at a Service Centre authorised to accept that Equipment ( return ); (3) there is an approved transfer of hired Equipment by the Hirer ( Sending Party ) to another Hirer ( Receiving Party ) or by a Receiving Party to the Sending Party; or (4) there is an adjustment under these terms. An item of Equipment will not be recorded as returned until the whole of the item is returned or compensation is paid under clause 4. … (c) The Hirer must not part with possession of any Equipment unless: (1) it is returned to CHEP; (2) it is transferred onto another Hirer's account with CHEP; or (3) the Hirer keeps and makes available to CHEP on demand approved CHEP documentation, CHEP electronic records or other control records approved by CHEP identifying the name and address of the person in possession of the Equipment, the date of the change of possession, the quantity and type of Equipment, and the terms (if any) on which the Hirer parts with possession. The Hirer must ensure that those terms are at all times subordinate to and will be overridden by these terms. If CHEP requests, the Hirer must provide to CHEP (at CHEP's reasonable expense) a copy of all or any part of such records. … 4. OWNERSHIP, LOSS, CONDITION AND REPOSSESSION OF EQUIPMENT The Hirer acknowledges that each item of Equipment has a special value to CHEP in that, as part of CHEP Australia, CHEP repairs, maintains, handles and otherwise administers the circulation of all Equipment. The Hirer expressly agrees to all the following matters as a condition of CHEP agreeing to lend or hire Equipment to the Hirer. (a) Despite any other clause in these terms, CHEP remains the owner of the Equipment at all times. No person is entitled to use, dispose of or otherwise deal with Equipment in any way that is inconsistent with CHEP's ownership or these terms. Payment of compensation, or any other circumstance or event, does not constitute or result in any transfer of property or interest in the Equipment from CHEP. (b) (1) If the Hirer establishes to CHEP's satisfaction that Equipment on hire is destroyed ( Destroyed Equipment ), the Hirer must pay CHEP compensation in an amount equal to the then current value, as determined by CHEP, of that quantity of new Equipment. The Hirer remains liable to CHEP for hiring charges in respect of Destroyed Equipment until payment of the compensation required by this clause. (2) If the Hirer establishes to CHEP's satisfaction that Equipment on Hire is lost ( Lost Equipment ), the Hirer must pay CHEP compensation in an amount agreed between the Hirer and CHEP or, if they do not agree, at CHEP's Posted List Equipment Compensation Rate from time to time. … (3) If the Hirer subsequently recovers possession of Lost Equipment in respect of which compensation has been paid, or if CHEP retakes possession of Equipment for which CHEP considers that the Hirer has paid compensation, CHEP will refund to the Hirer the amount of compensation paid for the Lost Equipment, after deducting any costs of recovery or retaking possession and an amount equal to the amount of hiring charges not paid by the Hirer and which would otherwise be due and owing if CHEP has not agreed to treat the Equipment as Lost Equipment. … (d) CHEP has the right to immediate possession of all CHEP Equipment, whether on hire or not, and may take possession of any Equipment immediately and without notice to any person. The Hirer gives CHEP an irrevocable licence to enter property occupied by the Hirer at any time and take any steps CHEP considers reasonably necessary or appropriate to obtain possession of Equipment. The Hirer must pay CHEP's actual costs of obtaining possession of Equipment. CHEP may credit the Hirer's account with Equipment so recovered. If CHEP takes possession of any Equipment which the Hirer demonstrates to CHEP's satisfaction was then on hire to the Hirer, CHEP will, at the Hirer's request, make available the same quantity of Equipment to the Hirer, if the Hirer demonstrates to CHEP's satisfaction that the Hirer would then have no more Equipment than its Quantity on Hire. … 14. TERMINATION CHEP may at any time give the Hirer written notice terminating the hire of Equipment and further or alternatively any licence granted under these terms. On receipt of a notice terminating the hire of Equipment, the Hirer must deliver to CHEP (at no cost to CHEP) within 7 days of the date notice is given, or by any later date specified in the notice, all Equipment held by the Hirer. CHEP may treat any Equipment not so delivered as Lost Equipment for the purposes of clause 4(b) (2), or may seek to recover the Equipment from the Hirer. If CHEP chooses to recover the Equipment, the Hirer must indemnify CHEP for its costs of recovery, including legal costs on a solicitor and own client basis. The Hirer's obligations under this clause survive termination of the hire of the Equipment. … " 36 Those terms are taken from a version current, on its face, as at May 2006 and intended to form part of an application for credit. However, Mr Austin's unchallenged evidence was that substantially similar terms had been in place at all material times between BAL or CHEP Australia (as the case may be) and hirers. Relevant legal principles 37 The parties favoured me with detailed written submissions, and extensive citation of authority, on the relevant principles. Without wishing to be disrespectful either to the parties or to the authorities cited, I do not think that it is necessary to deal at length with those submissions. The relevant principles are clear. Right to recover goods 38 The plaintiffs sue in detinue and conversion. Those are possessory remedies. To succeed, the plaintiffs must show that they had at the relevant time - the date of demand - the right to immediate possession of the pallets. That right is an incident of ownership, or title; but ownership and possession may be separated. 39 Where (as in the present case) an owner of personal property is out of possession, the owner's entitlement to recover the property, and damages for its conversion, depends as I have said on the owner's showing a right to immediate possession. That right may exist apart from both physical and legal possession: see Pollock and Wright, An Essay on Possession in the Common Law (Oxford, Clarendon Press 1888; reprinted by Law Press, 1990) at 27. 40 An owner who is wrongfully dispossessed of goods does not thereby lose the right to immediate possession of those goods. However, where an owner lawfully gives possession of goods to another, the owner's right to immediate possession will depend on the terms of the "arrangement" between it and that other. 41 If goods are hired or bailed for a term, the owner (or bailor) will not normally have a right of immediate possession during that term. Whether a right of immediate possession vests immediately upon breach, or by virtue of notice after breach, depends on the terms of the bailment: see North General Wagon & Finance Co Limited v Graham [1950] 2 KB 7, Reliance Car Facilities Limited v Roding Motors Limited [1952] QB 844 and The Anderson Group Pty Limited v Tynan Motors Pty Limited (2006) 65 NSWLR 400. 42 Where goods are bailed at will, so that the bailor has the right to retake possession of those goods at will, the bailor has (or, more accurately, retains during the bailment at will) the right to immediate possession: see Possession in the Common Law at 28, 92-93 and 166; and see Jelks v Haywood [1905] 2 KB 461 and North General Wagon. 43 Thus, in Reliance Car Facilities, Denning LJ said at 849 that "[i]n order to sustain a claim in conversion, it is essential that the bailor should have the right to immediate possession; or that the hiring should be determinable at will. It is not necessary that it should in fact be terminated." 44 To the same effect, Lord Radcliffe said in Kahler v Midland Bank Limited [1950] AC 24 at 56 that "in the case of a bailment which is terminable at the bailor's will the law will give the right of action to the bailor as well as to the bailee; but then such a bailor has nothing less than a right to immediate possession." In other words, where a stranger to a bailment terminable at the bailor's will is in possession of goods, both the bailor and the bailee could maintain conversion, because each has, as against the stranger, the right to immediate possession. In the bailee's case, the right flows from the bailment. In the bailor's case, it flows from the right to terminate the bailment at will: equivalent to the right to immediate possession. Ius tertii 45 The defendants relied on the doctrine of ius tertii. In substance, their case was that they had obtained the pallets from sources that had a right to possession of those pallets. 46 It is clear, and was not controversial, that the defence of ius tertii may be set up against an owner (or bailee) who is not in possession of the goods. See Henry Berry & Co. Pty. Ltd v Rushton [1937] St. R. Qd. 109. It is equally clear that for the defence of ius tertii to succeed, the third party must have a better right to possession than the plaintiff. See for example Vaughan J in Butler v Hobson [1838] 4 Bing. N.C. 290 at 300; 132 E.R. 800, 804. 47 In Henry Berry, Henchman J (with whom Webb J and, on this point, E A Douglas J agreed) said at 119 that a defendant "may, under a plea of not guilty or not possessed, show that the plaintiff has no right to immediate possession, because that right is in some other person." I think it follows from what his Honour said, and in any event from the more general proposition that one who asserts must prove, that the defendant bears the onus of identifying the third party and proving that the third party has a right to possession superior to that of the plaintiff. The witnesses in the case 48 Before I turn to the particular issues, I will indicate briefly my views on the credibility of the various witnesses. 49 The plaintiffs called a number of witnesses. They included Messrs Austin and Gerrard (to whom I have referred above) and Messrs Paul Stephen Downes, Anthony Graham Pearman and Glenn Hammond. Messrs Downes, Pearman and Hammond were all involved, one way or another, in the plaintiffs' efforts to ensure that CHEP pallets should not remain in the hands of anyone who was not entitled to them, either as hirer or as someone to whom a hirer had parted with possession of pallets in terms apparently permitted by cl 2(c)(3) of the terms of hire. 50 No attack was made on the credibility of any of those witnesses. Each of them gave his evidence in a clear and forthright manner. I formed the view that I could accept each of them as a witness of truth. 51 As I have indicated, the defendants called Messrs Hassan Choker, Sayegh and Thiesen. No attack was made on the credibility of Messrs Sayegh and Thiesen and I formed the view that I could accept each of them as witnesses of truth. 52 Mr Hassan Choker falls into a different category. Because the views to which I have come do not depend on acceptance or rejection of his evidence, I will not comment upon it in detail. It is sufficient to say that in my view it was marked by constant evasive and non responsive answers, which gave the very strong impression that Mr Choker regarded his role as that of an advocate rather than a witness. I formed the very strong impression that the governing consideration for Mr Choker was expediency, rather than veracity or indeed consistency. When those matters are combined with his evidence relating to Mr "Gary Massel", or Gary Marsden (see paras 2 to 4 of Mr Choker's affidavit sworn 7 March 2007, and see his cross-examination at T154.35-T156.50), I formed the view that I should not rely on Mr Choker's evidence on any matter in dispute unless the evidence were against interest, or were corroborated by other acceptable evidence, or were consistent with the probabilities objectively ascertained. Specifically, as to his evidence concerning Mr "Massel" or Mr Marsden, I thought that Mr Choker was trifling with the truth and the Court. 53 The defendants also called their solicitor, Mr Ian Kalaf. For reasons that are entirely unclear to me, Mr B A Coles QC, who appeared with Mr P T Russell of counsel for the plaintiffs, sought to attack the credit of Mr Kalaf in relation to so much of his affidavit sworn 14 March 2007 as I admitted. I formed the view that that cross-examination was entirely misdirected as to its subject matter, and that in any event it did not demonstrate any want of credibility in Mr Kalaf. To the extent that Mr Kalaf's evidence goes to any relevant issue (which I doubt) I would accept it as truthful. 54 The defendants also sought to adduce evidence from an expert, Mrs Elizabeth Barber. 55 Mrs Barber is an expert in the field of Logistics and Supply Chain Management, in which subject she lectures at the Australian Defence Force Academy (University of New South Wales) in Canberra, and at the Institute of Transportation and Logistics Study at the University of Sydney. She has taught and conducted research on various aspects of transportation studies and logistic studies, essentially studying the movement of products along a supply chain through different forms of transport and through different warehouse systems. 56 The difficulty with Mrs Barber's evidence lay not in her qualifications, which I would accept, but in the nature of the opinions that she expressed. There were in substance four problems:

(1) When asked to identify the facts (in issue) about the existence in which the opinion was expressed (see s 76(1) of the Evidence Act 1995), Mr Garnsey replied at a level of extreme generality: "first as to a matter of theory and theoretical structure of the industry; secondly, as to practical operation of the industry in the light of the facts which [are] referred to … chiefly from Mr Austin's affidavit … and in the final opinions, … reference is made … back to the facts or, secondly, as to the facts in Mr Austin's affidavit." (T119.31-.38). The only "facts" that I could discern to which the opinions might go were matters of extreme and unhelpful generality (for example, paras 94, 95 and 96, dealing with very general matters relating to the use of pallets), or irrelevant matters (eg, para 97, dealing with attempts by pallet providers to gain and retain customers), or expressed in jargon that rendered them opaque to the point of inutility (eg, para 98 "In Australia there is a dominant participant complexity that has not settled … ", or para 99 "In the Australian pallet industry there is a continual flux of leverage contests occurring and … the distribution and transport companies in particular are struck with multiple pallet use.").

I might add that the facts expressed as opinions in para 96, to which I have referred briefly, were apparent from Mr Austin's evidence, and Mr Coles conceded this.

(2) The report as originally expressed made it impossible to understand how the opinions expressed were based upon the specialised knowledge of Mrs Barber (see s 79 of the Evidence Act) . Although the report was supplemented in an attempt to cure this problem, the attempt was in my view unsuccessful. I did not think that it was appropriate to impose on the plaintiffs the burden of cross-examining Mrs Barber and perhaps, through that process, exposing a chain of reasoning that hitherto had lain dormant.

(3) Many of the "opinions" expressed were in fact simple questions of fact, and plainly based on nothing other than observation of warehouse operations. To that extent, it could not be said that the "opinions" were based in any way on Mrs Barber's specialised knowledge.

(4) More generally, many of the opinions expressed, and much of the discussion or reasoning on which they were based, dealt with theoretical models of the logistics industry, and not with an identifiable fact situation relevant to these proceedings. The report did not demonstrate, except through expressions of the greatest generality, how it was that those theoretical constructs were relevant to the present case, or how opinions based on them could be relevant in the facts of this case. 57 Thus, as I have said, I rejected the tender of Mrs Barber's evidence. However, because Mr Austin had been cross-examined by reference to some paragraphs of her report, I admitted those paragraphs for the purpose of rendering those aspects of his cross-examination comprehensible and meaningful. 58 Before I leave this topic, I wish to make it plain that Mr Garnsey did not identify, as a fact about the existence of which any of Mrs Barber's opinions were expressed, "the notorious and settled custom, practice and usage of the trade" alleged in para 9 of the defendants' further amended cross-summons filed on 6 November 2006. The "trade" referred to appears to be "the supply and delivery of groceries or frozen goods by manufacturers or suppliers of those goods". The custom, practice or usage is alleged in paras 9.1 to 9.4 as follows: "9.1 for those goods to be supplied and delivered on pallets including CHEP pallets, and 9.2 for manufacturers or suppliers including the Cross-Claimants' Suppliers to part with possession of the pallets, including CHEP pallets, and to deliver and supply goods packed on pallets, including CHEP pallets, delivered to the persons or corporations, including wholesalers and distributors such as Tatale and Venasti; and 9.3 for those goods to be stored on and to remain on the pallets, including CHEP pallets, until the pallets reached a wholesaler, distributor or a consumer and for those pallets not to be available for return or be returned in the ordinary course of trade to the person or company who delivered the pallets to the wholesaler or distributor or for return to the Cross-Defendants or any of them until the goods had been unloaded or unpacked from the pallets in the ordinary course of trade by a wholesaler or distributor; and 9.4 for those pallets once the goods thereon had been unloaded or unpacked to be returned to the person or company who or which delivered the pallets to the wholesaler or distributor." (emphasis in original) Issues 1, 1A and 1B: right to immediate possession 59 In my view, it is plain that if the plaintiffs' terms of hire apply to a contract for the hire of CHEP pallets then the relevant plaintiff (hirer) at any given time has had the right to immediate possession of pallets thus hired. This follows necessarily from cl 4(d), the effect of which is to make any hiring terminable at the will of the relevant plaintiff. 60 Mr Garnsey submitted that cl 4(d) did not have that effect. He submitted that it was necessary for the relevant plaintiff to terminate any hiring before the right to immediate possession of the hired pallets could arise. I do not accept that submission. It is inconsistent with principle, as explained in the authorities to which I have referred in paras [41] to [44] above. Sections 68 and 69 61 Mr Garnsey also relied on ss 68 and 69 of the Trade Practices Act 1974. He submitted that s 69 had the effect that there was implied into every agreement made by the plaintiffs for the hire of CHEP pallets a warranty of quiet possession (s 69(1)(b)); that the effect of cl 4(d) was to exclude, restrict or modify that statutory implied warranty; and that accordingly s 68 avoided cl 4(d). 62 I pass over for the moment the question, whether any of the hirers of CHEP pallets were consumers for the purposes of s 69. 63 The warranty implied by s 69(1)(b) is, relevantly, for quiet possession "except so far as it may lawfully be disturbed by the supplier" (the position of third party chargees or encumbrancees can be put to one side). Apart from s 69, the effect of cl 4(d) is to make any hiring of CHEP pallets on the Terms of Hire a hiring terminable at the will of CHEP. The clause gives an express permission to CHEP "to enter property occupied by the Hirer at any time and take any steps [considered] reasonably necessary or appropriate to obtain possession of Equipment." 64 Thus, any disturbance of the hirer's quiet possession effected in accordance with cl 4(d) is a disturbance expressly authorised by the terms of the contract for hire. It is very difficult to see why such a disturbance should not be "lawful" for the purposes of s 69(1)(b); and, in my view, it would be "lawful" in that sense. 65 Mr Garnsey relied also on the concluding words of cl 4(d), which in effect oblige CHEP to reinstate repossessed pallets if the hirer demonstrates in substance that the repossession left it with less than the quantity of pallets that it then had on hire. That does not impinge on the right to immediate possession given by the first sentence of cl 4(d); at the most, it requires CHEP to make good any adverse consequences flowing from an over zealous exercise of that right. Novation 66 That leaves for consideration the effect of the various agreements of 28 February and 2 June 2006, and the attempted novation of the hire agreements. 67 Mr Garnsey accepted (I think) that the agreements of 28 February and 2 June 2006 had achieved their intended purposes. Of present relevance, those purposes included transferring title in the pallets to CHEP Equipment and revesting the right of exclusive use and possession of those pallets in BAL up until 3 June 2006, and in CHEP Australia thereafter. However, Mr Garnsey submitted, the plaintiffs had not demonstrated that contracts for the hire of CHEP pallets made by BAL with hirers had been novated to CHEP Australia. 68 It is therefore necessary to consider Mr Austin's evidence. 69 In para 74 of his affidavit sworn 22 November 2006, Mr Austin referred to the changeover from BAL to CHEP Australia, effective on 3 June 2006. He said that in the week before that date, a letter was sent to every CHEP customer notifying it of the proposed change. The letter stated, relevantly, that: " … The pending sale of Cleanaway and Brambles Industrial Services has made it necessary to move the CHEP business into another company in the Brambles group: CHEP Australia Ltd. CHEP Australia Ltd is an Australian company and a wholly owned subsidiary of Brambles Industries Limited (which is listed on the Australian Stock Exchange). … To make this as easy as possible for you, Brambles Australia Limited will transfer its contractual and commercial arrangements with you to CHEP Australia Ltd. This transfer will take effect from midnight, 3rd June, 2006 and apply to any of the following agreements you have with CHEP at the date of this letter: · Terms of Hire: … I would like to stress that there will be no change at all to your current hiring arrangements with CHEP. …" (emphasis in original) 70 There was enclosed with that letter a further letter. It stated, relevantly: "The covering letter explains why existing agreements with CHEP Australia, a division of Brambles Australia Limited (BAL), will soon be transferred to CHEP Australia Ltd (ABN 11 117 266 323). … To make the transfer to CHEP Australia Ltd as easy for you as possible, BAL (operating as CHEP Australia) will novate its hire and sale arrangements with you as at midnight, 3rd June 2006 to CHEP Australia Ltd (Transfer). … At any time from midnight, 3rd June 2006, you hire additional CHEP equipment, purchase supplies from CHEP, take a transfer of CHEP equipment onto your account, make a payment to CHEP; or if there are no such transactions, after one billing cycle (35 days from 3 June, 2006), BAL and CHEP Australia Ltd will deem this to be your agreement to the novation of the Terms and to deal with CHEP Australia Ltd on the provisions set out in the Terms, and CHEP Australia Ltd obtaining all the rights (past or future), and assuming all the obligations (past or future), of BAL (trading as CHEP Australia) under the Terms on and from midnight, 3rd June 2006. For the sake of completeness, BAL (trading as CHEP Australia) and CHEP Australia Ltd will also deem this to be your agreement that any references in the Terms to BAL are to be read as references to CHEP Australia Ltd. … " 71 Mr Garnsey's point was simply that there was no evidence that any hirer had hired additional CHEP equipment, purchased supplies from CHEP, taken a transfer of CHEP equipment onto its account, or made a payment to CHEP. As to the remaining alternative (lapse of one billing cycle or 35 days from 3 June 2006), Mr Garnsey submitted that there was no evidence as to what a "billing cycle" was, and in any event that silence could not amount to consent for the purpose of demonstrating the existence of a bilateral contract. The relevant principles 72 Novation is the substitution of some new contract for a contract already in existence. The new contract may be between the same, or different, parties; and the consideration is the discharge of the old contract and the agreement to perform the new. See Lord Selborne in Scarf v Jardine [1882] 7 App Cas 345, 351. In Olsson & Another v Dyson (1969) 120 CLR 365, Windeyer J said at 388 that "[n]ovation is the making of a new contract between a creditor and his debtor in consideration of the extinguishment of the obligations of the old contract: if the new contract is to be fully effective to give enforceable rights or obligations to a third person he, the third person, must be a party to the novated contract". 73 Thus, for a novation to be effective, the parties to the existing contract must agree that it is to be discharged in consideration of the making of the new; and the parties to the new contract must in fact make it. Offer and acceptance 74 It is therefore necessary to show assent to these stages of the novation; or, to put it in the language of traditional legal discourse, offer and acceptance. 75 In Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, Heydon JA observed at 176 [71] that offer and acceptance analysis "is neither sufficient to explain all cases nor necessary to explain all cases. Offer and acceptance analysis does not work well in various circumstances." 76 At 178 [77], Heydon JA referred to the words of McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11, 110 at 11,117 where his Honour observed that "a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words", and stated that the question was "whether the conduct of the parties, viewed in the light of the surrounding circumstances shows a tacit understanding or agreement." 77 There is a general principle that silence on the part of an offeree is insufficient to create a contract; an offeror cannot create a contract simply by asserting to the offeree that silence amounts to acceptance of the offer. This was made clear in the old case of Felthouse v Bindley (1862) 11 CB (NS) 869; 142 ER 1037. 78 Thus, in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523, McHugh JA (with whom Samuels JA agreed) said at 534 (omitting citations): "Under the common law theory of contract, the silent acceptance of an offer is generally insufficient to create any contract … . The objective theory of contract requires an external manifestation of assent to an offer. Convenience, and especially commercial convenience, has given rise to the rule that the acceptance of the offer should be communicated to the offeror. After a reasonable period has elapsed, silence is seen as a rejection and not an acceptance of the offer. … [A]n offeror cannot erect a contract between himself and the offeree by the device of stating that unless he hears from the offeree he will consider the offeree bound. He cannot assert that he will regard silence as acceptance … ." 79 Nonetheless, as McHugh JA recognised in Empirnall Holdings at 534-535, the silence of an offeree in conjunction with other circumstances may indicate, as a matter of fact, that the offeree has accepted the offer. McHugh JA said at 535: " … [W]here an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms." 80 It is plain that Heydon JA accepted that analysis. His Honour said in Brambles at 179 [81]: "In the light of the above cases, it is relevant to ask: in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the Council and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?" Analysis 81 The universe of those who supply the defendants with CHEP pallets (or with goods loaded onto CHEP pallets) may be divided into two classes. The members of the first class are, or were at the time of the supply, customers of CHEP. The members of the second class are, or were, not. 82 If one accepts the evidence of Messrs Hassan Choker and Sayegh, to the effect that pallets (or goods loaded on them) have a 14 to 30 day turnaround time in the warehouse of Downton & Dyer or the coolroom of Arncliffe Freezers, then one would expect that any pallets now on the defendants' premises were delivered no earlier than the beginning of April 2007: some nine months after the events of 3 June 2006, and the antecedent notification to CHEP's customers. Thus, those of the defendants' suppliers who were CHEP customers had had some ten months' notice of the change, and some ten months to reflect upon the letter that was sent to them before the change. If those customers kept on hire over that period exactly the same number of pallets as they had on hire at the beginning of it - no more, no less and no returns - they would have been liable to pay at least seven months' hire charges to CHEP. Those charges were payable within seven days of invoice (cl 3(a)). It is apparent from the letter sent to customers in relation to the changeover that CHEP rendered invoices at approximately monthly intervals. I think it unlikely in the extreme that CHEP would stand by and permit hire charges to accrue, unpaid, over six or seven billing cycles. I think it likely that customers who had pallets on hire over the whole of the period to which I have referred would have made at least one payment of hire charges. Thus, I think it likely that in relation to any customer of the kind presently under consideration, there would have been an act signifying, in terms of the letter sent to that customer, acceptance of the novation. 83 For other customers (one might think, although the evidence is unclear, the majority), who over the period in question either took more pallets on hire or surrendered or otherwise dehired pallets, then once again there was, in terms of the letter, acceptance of the novation. 84 Thus, as to those suppliers of the defendants who were customers of CHEP, I think there is a basis in the evidence for inferring that, one way or another, they have accepted the novation in one or other of the ways proposed in the letter sent to them. 85 As to the second class of those who supplied CHEP pallets to the defendants - suppliers who were not CHEP customers - there can be no question of novation, because there was no contract to novate. But presumably those suppliers took, directly or indirectly, from CHEP customers, and can have had no higher right than those customers. In this context, it is important to note that the terms of hire have always defined "CHEP" to mean the relevant company that hires out the pallets - at first, BAL, and, since 3 June 2006, CHEP Australia - "together with its successors and assigns". Thus, the right of immediate possession given by cl 4(d) enures not only for BAL or CHEP Australia (as the case may be), but for their successors and assigns. On any view, I think, one of the effects of the transactions of 3 June 2006 was to make CHEP Australia the successor in business to BAL. Thus, the right to immediate possession enjoyed by BAL against non customers in possession of its pallets enures for the benefit of CHEP Australia. 86 It follows that CHEP Australia has a right to immediate possession sufficient to support its claims against the defendants. Fungible property 87 Mr Garnsey submitted that the plaintiffs could not succeed in an action for the detention or conversion of their pallets because the pallets were fungible property. Alternatively, he submitted, the fungible quality of the plaintiffs' pallets was a bar to the grant of a mandatory injunction requiring the return of the pallets. He relied on Palmer, Bailment (2nd edition, 1991) at 13 and 178-182. 88 At p 13, Professor Palmer states that "[t]he doctrines of bailment may apply to money or to any other commodity in which property would normally pass on delivery, provided it is made clear from the terms of the bailment itself that the goods are to be returned in specie and not merely in an equivalent form." This concept is discussed further at 178-182, although by reference to cases all of which involve the delivery of money. 89 As will be seen from the quotation that I have set out, it is the negotiability of money, with the consequent passing of title on delivery, that makes the principles of bailment inapplicable unless, contrary to the normal situation, the money is handed over with a requirement that it be returned in specie. But I do not think that CHEP pallets are negotiable in this sense; far less do I think that property in CHEP pallets passes on delivery. On the contrary, as the evidence and the terms of hire make clear, the relevant plaintiff has at all material times retained property in CHEP pallets, at least until they are disposed of once they have been defaced and are no longer capable of identification as CHEP pallets. 90 It is correct to say that, as between CHEP and hirers, the terms of hire makes pallets fungible, or substitutable. The hirer's obligations relate to the number of pallets on hire at any given time, and may be discharged by the payment of hire for, or the return or other dehiring of, that number of pallets. There is no requirement to return the precise pallets that were originally hired. But it does not follow from any of this that CHEP loses its right to immediate possession of, let alone its title to, any of its pallets simply because they are not hired on terms that require the return of the specific pallets hired. Nor do I think, at least as a question of threshold principle, that the fungible or substitutable nature of the pallets means of necessity that they cannot be made the subject of an order for delivery up, or an equivalent mandatory injunction. However, it will be necessary to return to this topic when considering the relief to be granted. Issues 2 and 3: detention and conversion 91 If, as I have concluded is the case, the plaintiffs or some of them at all relevant times have had the right to immediate possession of any CHEP pallets in the possession of the defendants or either of them, it is plain (subject to the "cross-claim issues") that the defendants have unlawfully detained, and have converted, those pallets. This follows necessarily from the premise, and from the numerous demands made by the plaintiffs on the defendants for delivery up of the pallets. Conclusion on the plaintiffs' case 92 I conclude in principle, and subject to the cross-claim points (except s 69 of the Trade Practices Act, with which I have dealt already), that the plaintiffs have made good their claims in detinue and conversion. I shall return to the question of relief (Issue 4) after dealing with the issues arising out of the cross-claims. Issues 5 to 12: terms of trade; s 69; estoppel, unconscionability and misleading or deceptive conduct 93 For the reasons that I have given in paras [61] to [65] above, s 69 has no relevant application as between the plaintiffs and hirers from them. Thus, it can have no relevant application as between those hirers and the defendants. 94 It is convenient to consider the remainder of these aspects of the cross-claim together, since they depend upon the same matrix of asserted facts. 95 The foundation for these claims is the "notorious and settled custom, practice and usage of the trade" alleged in para 9 of the further amended cross-summons (see para [58] above). The defendants rely on that, and on what are asserted to be terms of their agreements with their suppliers that the suppliers would permit the defendants to retain CHEP pallets on which goods were loaded and delivered to the defendants until the defendants, in the ordinary course of their businesses, unpacked those goods from the pallets. The defendants say that CHEP was aware of those matters. 96 I note that there is no allegation that the alleged notorious and settled custom, practice and usage should be reflected or embodied in any implied term of any relevant contract of hire made between one or other of the plaintiffs and any of their hirers for the hire of CHEP pallets. It is alleged in para 13 of the further amended cross-summons that the plaintiffs knew of that notorious and settled custom, practice or usage; but nothing of contractual significance is alleged to follow from this. In this, the position may be contrasted with allegations made in para 14 of the further amended cross-summons as to the terms of contracts made between the defendants and their suppliers. 97 There are immediate difficulties with the claim as framed:

(1) There is no evidence of the "notorious and settled custom, practice and usage of the trade".

(2) There is no evidence of the terms of the defendants' contracts with their suppliers.

(3) There is no evidence that CHEP was aware of those alleged terms.

(4) CHEP's terms of hire at all times made it plain that it would permit hirers to part with possession of pallets to non hirers only on the conditions set out in cl 2(c)(3). 98 As to the first matter: the defendants' evidence went no higher than asserting that this was their understanding. They did not call any supplier; and the existence of the asserted custom was not admitted by CHEP's witnesses in cross-examination. Further, to the extent that proof of the existence of the asserted custom depends upon the acceptance of Mr Hassan Choker's evidence, I refer to what I have said in para [52] above. 99 As to the second matter: the defendants did produce a considerable volume of invoices and the like from their suppliers. I was not taken to any contractual term endorsed on or enclosed with or related to those invoices to the effect of the terms alleged in para 14 of the further amended cross-summons. I note that in any event a number of those terms were said to be implied, either in law or in fact. In this context, I should point out that I made it plain to the parties that if they wished me to consider any particular document among the large quantity of documents that was tendered, they would need to take me to the specific document. 100 The defendants also tendered a number of letters or other communications from their suppliers, purporting to state terms of trade to the effect of at least some of the terms alleged in para 14 of the further amended cross-summons. However, those communications were admitted (subject to relevance) only as proof of communication of the matters asserted, and not as proof of the truth of the matters asserted. The documents were brought into existence after the plaintiffs had first made demand on the defendants for the return of the plaintiffs' CHEP pallets and were plainly brought into existence in contemplation of the litigation that in fact ensued. 101 The third and fourth matters are related. Mr Austin said that he did not know the terms of trade of the defendants' suppliers, and was not aware of their specific requirements (T76.14-.36). He was aware from his university studies of the existence of "retention of title" or "Romalpa" clauses, but had little practical knowledge of them. There is no basis for thinking that he was aware that any of the defendants' suppliers included such clauses in their terms of supply (T77.49-78.23). I accept his evidence. 102 In any event, the limited permission given by cl 2(c)(3) of CHEP's terms of hire is inconsistent with the wider permission that the defendants allege. Mr Austin must have been aware, and I have no doubt was aware, that CHEP's hirers were required to ensure that, if they parted with possession of CHEP pallets to non hirers, CHEP's terms of hire overrode any terms as between the hirer and its customer. 103 Indeed, cl 2(c)(3) is inconsistent with the "notorious and settled custom, practice and usage of the trade" alleged in para 9 of the further amended cross-summons - at least, unless that custom, practice or usage of the trade is limited or qualified by restrictions of the kind apparent in cl 2(c)(3). In circumstances where (as was not in dispute) CHEP has about 70% of the pallet hire market in Australia, it may be wondered how there could be a "notorious and settled custom, practice and usage of the trade" inconsistent with CHEP's terms of hire. The defendants did not submit, or put to any of the plaintiffs' witnesses, that the terms of hire in general, or cl 2(c)(3) (or cl 4(d)) in particular, were a sham. 104 For these reasons alone, the defendants' cross-claim based on estoppel, unconscionability and misleading or deceptive conduct must fail. But there are other, equally fatal, defects. 105 What I have said means that the representations pleaded in the further amended cross-summons (para 33) that form the basis of each of these aspects of the cross-claim were not made. But even if they were made, there is no acceptable evidence that:

(1) The defendants in any relevant way acted on the basis of any representation of the kind pleaded; or

(2) CHEP knew, ought to have known, or intended that the defendants would so act. 106 In addition, it is plain that:

(1) The defendants have been aware, at least since CHEP first made demand on them in November 2000, of CHEP's terms of hire - in particular cls 2(c)(3) and 4(d) - and that CHEP did not consent to their continuing use of CHEP pallets;

(2) The defendants' continued use of CHEP pallets thereafter was undertaken with that knowledge; and

(3) In any event, the defendants' use of CHEP pallets - before and after November 2000 - was dictated by considerations of commercial convenience and not by any representation said to be spelled out of the factual matrix. 107 As to para [105(1)]: neither Mr Hassan Choker nor Mr Sayegh gave any evidence of awareness of, let alone of having acted on, any representation of the kind alleged in the further amended cross-summons. At most, their evidence could be taken as some (although unsatisfactory) evidence of understanding of the "notorious and settled custom, practice and usage of the trade" alleged in para 9. But that is not something that is pleaded as having arisen from any representation made by, or indeed any dealings involving, CHEP. It is pleaded as a custom, practice or usage, relevant (so far as the diffuse form of the pleading allows analysis) to the trade between the manufacturers or suppliers of groceries or frozen goods such as those who supply the defendants, on the one hand, and distributors, such as the defendants, on the other. 108 As to para [105(2)]: there is simply no evidence of those matters. 109 As to para [106(1)]: Mr Downes' evidence is that in 2000, he sought to audit or reconcile the number of CHEP pallets held by the defendants with the records of suppliers to the defendants (nominated to him by the defendants) who were CHEP customers. His audit revealed that the bulk of the CHEP pallets held by the defendants could not be traced back to such suppliers. He wrote to Downton & Dyer on 16 November 2000, referring to the 1,509 (out of a total of 1,573) CHEP pallets that could not be so reconciled, forwarded a copy of CHEP's current terms of hire and drew attention to cl 4(d), and requested that Downton & Dyer become a CHEP customer failing which "we will have no alternative but to proceed with further action." Although that request was made in terms to Downton & Dyer for the attention of Mr Hassan Choker, I am satisfied that it came to the attention of Arncliffe Freezers. Firstly, Mr Sayegh was accustomed to leaving such matters to Mr Choker. Secondly, Messrs Abbas and Hassan Choker were both directors of Arncliffe Freezers. 110 If the defendants had not understood hitherto that their use of CHEP pallets was being undertaken without CHEP's consent, they can hardly have continued to think so having regard to the discussions that Mr Downes had with Mr Hassan Choker and to the terms of the letter of 16 November 2000. It follows, as I have said in para [106(2)], that their continued usage of CHEP pallets thereafter was undertaken with knowledge both of CHEP's terms of trade and of CHEP's reliance on its rights under those terms of trade. 111 As to para [106(3)]: I refer to what I have said in paras [10] to [16] above. It is and has always been open to the defendants either to unpack goods on delivery or to become CHEP customers. Alternatively, it is and has always been open to them to keep adequate records of CHEP pallets delivered to them by CHEP customers to enable CHEP to ensure that any pallets in the defendants' possession have come from customers in accordance with cl 2(c)(3) of the terms of hire. The defendants have chosen not to do any of those things. I am satisfied that this is because they see no reason to incur the cost and burden of doing so, and not because they have (or have ever had) any belief or understanding traceable back to anything done, said or omitted to be done, by CHEP that engendered a belief that the defendants have any right (let alone a right superior to CHEP's rights) to use CHEP pallets as they do. 112 For these reasons - which do not deal with all the points raised by CHEP - the cross-claim based on estoppel, unconscionability and misleading or deceptive conduct fails. Issue 13: interference with contractual relations 113 The defendants' pleaded case (para 48 of the further amended cross-summons) is that BAL and CHEP Australia have prevented and threatened to prevent suppliers to the defendants from fulfilling their obligations under their contracts with the defendants "to return and exchange CHEP pallets in accordance with the terms of the Supply Contracts pleaded … above". It is then said that this was done, and may continue to be done, "with knowledge of the obligations of the … respective suppliers … under the contracts … as pleaded … above." 114 This claim must fail. 115 Firstly, as to any supplier to the defendants that is a CHEP customer, there is no evidence that CHEP has ever done anything in relation to any such customer to prevent it from supplying the defendants with pallets in accordance and on compliance with cl 2(c)(3). No such supplier was authorised to deal with pallets, in relation to a non customer of CHEP, otherwise than in accordance with cl 2(c)(3). It follows that, to the extent that CHEP has insisted on the observance of cl 2(c)(3), it has not prevented that supplier from doing anything that it was entitled to do; if the supplier was seeking to do more, that is a matter between it and the defendants. 116 Secondly, and as I have said already (see para [101] above), there is no evidence that CHEP, or specifically BAL or CHEP Australia, has acted in any way with knowledge of whatever obligations the defendants' suppliers may have assumed under their contracts with the defendants. Indeed, CHEP was entitled to assume that those suppliers who were its customers would contract with non customers such as the defendants on terms consistent with cl 2(c)(3) of the terms of hire. 117 For those of the defendants' suppliers that are or were not customers of CHEP, again the finding that CHEP was unaware of the terms of trade between those suppliers and the defendants is sufficient to dispose of this aspect of the cross-claim. But in any event, as against those suppliers and in respect of any CHEP pallets that they hold, CHEP - BAL or CHEP Australia as the case may be - has a right of immediate possession. It cannot be an inducement of breach of contract for the relevant plaintiff to exercise that right. See Edwin Hill & Partners v First National Finance Corp plc (1989) 1 WLR 225. In that case, Stuart-Smith LJ (with whom Nourse LJ and Sir Nicolas Browne-Wilkinson V-C concurred) said at 127 that if the owner of property, exercising rights that the law gives it for the defence or protection of its property, interferes with a contract between others, it will be justified even though it knows of that contract. That statement of principle was approved by the majority (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ) in Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530 at 582 [145]. 118 It may be added that this reasoning is applicable not only to the case of suppliers to the defendants who are not CHEP customers, but also to suppliers who are; and it is applicable to suppliers in the latter category whether or not they comply with their obligations under cl 2(c)(3). 119 Thirdly, there is simply no evidence that any supplier to the defendants has breached its contract with the defendants, or that the defendants have breached any contract with any such supplier. Such evidence as there is is to the contrary. Mr Downes gave evidence of the three occasions between 2000 and the present when CHEP repossessed its pallets from the defendants. He said that on no occasion did any customer of CHEP complain that its pallets had been taken, or request the return of the pallets or an adjustment to its account. This no doubt is because it was the practice of those defendants (as Messrs Hassan Choker and Sayegh conceded) to take back an empty pallet whenever a loaded pallet was delivered: either on delivery or later that day or, at the latest, when the next delivery was made. Issue 14: negligence 120 The duty of care said to be owed by CHEP to the defendants is alleged in para 52 of the further amended cross-summons. It is said to involve the following elements:

(1) An obligation to warn the defendants that they were not entitled to receive from their suppliers or retain, for the purpose of unpacking, CHEP pallets or to return unpacked CHEP pallets to those suppliers.

(2) To warn the defendants that, if they received and retained CHEP pallets, the relevant plaintiff might demand and procure delivery up of those pallets.

(3) An obligation to ensure that suppliers to the defendants gave them appropriate warnings as to the foregoing matters.

(4) An obligation to take reasonable steps from preventing suppliers from supplying goods on CHEP pallets on terms that those pallets might be retained until unpacked in the ordinary way and returned.

(5) An obligation to prevent suppliers from delivering goods to the defendants on CHEP pallets except on terms that the goods be immediately unpacked and the pallets immediately returned to the relevant plaintiff. 121 This claim too must fail. 122 As the parties accepted, vulnerability is the key to the existence of a duty of care to prevent economic loss. (I say "as the parties accepted", but it should be noted that the defendants sought to call in aid also the doctrine of proximity.) The defendants were not relevantly vulnerable. They could have protected themselves in either of two ways:

(1) They could have dealt with their suppliers who were CHEP customers on terms (pursuant to cl 2(c)(3) of the terms of hire) that protected their right to hold the pallets until they were unpacked.

(2) Alternatively, they could have become CHEP customers and taken the pallets on hire for as long as they needed them. 123 In any event, as I have said in paras [106(1)] and [109] above, the defendants have known for more than six years: of CHEP's terms of hire; that CHEP regarded itself as having the right of immediate possession of its pallets; and that CHEP wished to enforce that right against the defendants. In those circumstances, the proposition that CHEP has failed to warn them of its attitude is risible. Those warnings long preceded the first repossession; and if (which I doubt) the defendants have suffered any damage, it can only have been suffered on repossession. Issue 4: relief 124 The plaintiffs claimed an order for specific delivery to CHEP Australia of such CHEP pallets as are in the possession of the defendants. They submitted that damages would not be an adequate remedy. In support of this submission, they pointed to evidence of the black market in CHEP pallets, to the loss of hire that they would sustain if the pallets were not delivered up (which loss, at least in the future, would be difficult to compute) and to the expense that they would sustain in continuing to refurbish those pallets as from time to time, in the ordinary course of trade, they came back into a CHEP depot (both as to the past and as to the future, a loss that would be difficult to compute). 125 In my view, those circumstances favour the making of an order for specific delivery notwithstanding that the pallets could not be said to possess some special or unique quality or value. 126 An order for delivery up is expressly authorised by s 93 of the Civil Procedure Act 2005. Although many of the cases dealing with orders for specific delivery relate to chattels of a peculiar or sentimental value, the jurisdiction is not limited to such cases. The question is one of the adequacy (or otherwise) of damages. The character of the chattel is but one of the matters to take into consideration. See Jacobs J in Aristoc Industries Pty Ltd v R E Wenham (Builders) Pty Ltd (1965) NSWR 581 at 588; see also Hope J in Doulton Potteries Ltd & Another v Bronotte (1971) 1 NSWLR 591 at 597 and Young J in McKeown v Cavalier Yachts Pty Ltd and Another (1988) 13 NSWLR 303 at 307-308. 127 The defendants submitted that no order could be made for specific delivery because of the fungible nature of the pallets. I do not accept that submission. The specification of the pallets, in any order for delivery up, will depend not on their individual unique identifying characteristics (there are none), but on the circumstance of their being in the possession of one or other of the defendants. In my view, that is sufficient specificity to give content to an order for specific delivery. 128 The plaintiffs also sought an order restraining the defendants from retaining possession of any other CHEP pallets without the written consent of CHEP Australia. The defendants did not specifically address this proposition. The evidence satisfies me that the defendants, unless they are restrained, will act in the future as they have acted in the past: that is to say, they will acquire and accumulate CHEP pallets. I see no reason why the plaintiffs should be put to the trouble and expense of bringing further litigation to recover their property. Thus, in principle, I think that there should be some injunction of the kind sought. However, I think that the injunction sought goes further than is necessary or indeed appropriate. As I have said more than once, the effect of cl 2(c)(3) is to permit non CHEP customers to receive and hold CHEP pallets where those CHEP pallets come from CHEP customers and where the requirements of that clause are met. If that is done, the plaintiffs' rights are protected. They will continue to receive hire for all such pallets and they will be able to check the provenance of any CHEP pallets that may hereafter be held by the defendants. 129 Thus, I think, the injunction as to future possession should be limited by reference to (and so as to permit) possession pursuant to, on the terms of and in compliance with, cl 2(c)(3) of the terms of hire, and only in the alternative by reference to the written consent of the third plaintiff. 130 At the risk of stating the obvious, I will add that any inconvenience to the defendants flowing from such an injunction could be averted if they take the simple course of becoming CHEP customers. If for reasons that I cannot presently foresee CHEP declines (other than on proper commercial grounds) to accept the defendants as customers, the defendants' position could be protected (to the extent - probably minimal - that cl 2(c)(3) does not do so) by the reservation of liberty to apply. 131 The plaintiffs sought an order pursuant to UCPR r 23.8 giving CHEP Australia the right by its servants or agents to enter the defendants' premises on appropriate notice and at appropriate times for the purpose of inspecting the premises and ascertaining the number of CHEP pallets there. I was not pressed with submissions on that relief, although I was informed in the course of hearing (when I raised the possibility of making such an order) that it was not then seen as necessary. In the circumstances, I will not make that order without hearing further submissions. I think that the reservation of liberty to apply should extend to those prayers for relief. 132 The plaintiffs sought damages for detinue and conversion. They have demonstrated in principle that they have sustained real and not merely nominal damage, at least by being deprived of the opportunity to rehire pallets held by the defendants from time to time. The parties agreed that if (as I have done) I were to conclude that the plaintiffs were entitled to the substantive relief that they seek and that the cross-claim failed, then the appropriate course would be to direct the entry of judgment for damages to be assessed and to leave it to the plaintiffs to decide whether they wish to pursue their claim for damages and, if they did, to propose means whereby it could be resolved. I propose to take that course. Conclusions and orders 133 I return to the issues, and answer them as follows:

Issue 1: Have the Plaintiffs the right to immediate possession of the CHEP pallets in the possession of the Defendants?

Issue 1A: Whether the Plaintiffs or any of them have established a right of immediate possession of any and if so which of the CHEP pallets claimed from the Defendants.

Answer: They (BAL up to 3 June 2006 and CHEP Australia thereafter) have: as to all CHEP pallets in the defendants' possession.

Issue 1B: Whether in light of the corporate reorganisation of the Plaintiffs between January and June 2006 and the documents affecting that reorganisation CEAL, or CAL have and BAL has or has not retained a right of possession of any, and if so which, of the CHEP pallets claimed from the Defendants.

Answer: CHEP Australia is entitled to possession of all CHEP pallets in the position of the defendants or either of them.

Issue 2: Have the Defendants unlawfully detained the Plaintiffs' property?

Issue 3: Have the Defendants unlawfully converted the Plaintiffs' property to their own use?

Issue 4: If so, to what relief are the Plaintiffs entitled? In particular, are the Plaintiffs entitled to an order for delivery up, injunctive relief and damages?

Answer: The relevant plaintiffs (see answer to issue 1A) are entitled to orders for delivery up, injunctive relief and (should they wish to pursue them) damages.

Issue 5: Is there and what are the terms of any notorious and settled custom, practice and usage of trade in relation to the supply and delivery of groceries or frozen foods by inter alia the Defendants' suppliers and the Defendants?

Issue 6: What are the terms of contracts for the supply of groceries and frozen goods between the Defendants and their respective Defendant's suppliers?

Issue 7: Were the Plaintiffs aware of the terms of the contracts between the Defendants' suppliers and the Defendants?

Issue 8: Is the warranty for quiet possession contained in section 69(1)(b) of the Trade Practices Act 1974 (Cth) implied into the contracts between the Plaintiffs and their customers? If so, what effect, if any, does this have on the Plaintiffs' right to immediate possession? Do the Defendants have standing to raise this matter or sue on this issue, not being privy to those contracts?

Answer: Not necessary to answer, because if it is, it would be subject to the relevant terms of trade, including in particular clause 4(a).

Issue 8A: What are the terms of the contracts between the Defendants and their respective suppliers concerning the supply and exchange or return of CHEP pallets?

Issue 9: Is the warranty of quiet possession contained in section 69(1)(b) of the Trade Practices Act implied into the contracts between the Defendants' suppliers and the Defendants? If so, what effect does this have on the Plaintiffs' right to immediate possession?

Answer: Unnecessary to answer, given the answers to issues 1, 1A, 1B and 8.

Issue 10: Are the plaintiffs in any way estopped from asserting or enforcing their right to immediate possession?

Issue 11: Have the Plaintiffs acted or engaged in any unconscionable conduct which would give the Defendants right to relief pursuant to section 51AA, section 51AB or section 51AC of the Trade Practices Act? What relief, if any, are the Defendants entitled to [sic] by reason of that conduct?

Issue 12: Have the Plaintiffs engaged in misleading and deceptive conduct for the purposes of section 52 of the Trade Practices Act and section 42 of the Fair Trading Act (NSW) and are they otherwise liable for such conduct pursuant to section 76B of the Trade Practices Act and section 61 of the Fair Trading Act? To what relief, if any, are the Defendants entitled to [sic] by reason of that conduct?

Issue 13: Have the Plaintiffs committed the tort of interference with contractual relations? What relief are the Defendants entitled [sic] by reason of that conduct?

Issue 14: Did the Plaintiffs owe a duty of care to the Defendants, what was the content of that duty and have the Plaintiffs breached that duty? What relief are the Defendants entitled to in respect of any negligence of the Plaintiffs?

Answer: No; does not arise; none. 134 The relevant plaintiffs succeed on their claim for possession of all CHEP pallets in the possession of the defendants. It is appropriate that those rights be vindicated not just by damages (which would in effect amount to a forced sale, and legitimise the defendants' wrongful use of the plaintiffs' property) but by an injunction requiring the return of the pallets. 135 The appropriate order, in respect of damages, is to direct the entry of judgment for damages to be assessed and to stand the proceedings over to enable the plaintiffs to consider whether they wish to proceed to assessment and, if so, by what means. 136 The relevant plaintiffs are entitled to an injunction restraining the defendants from using or otherwise dealing with CHEP pallets otherwise than in accordance with either cl 2(c)(3) of the Terms of Hire or the written permission of CHEP Australia. 137 I direct the plaintiffs within 14 days of today's date to bring in short minutes of order to give effect to these reasons. If the parties cannot agree on the precise form of any order, or as to costs, I will hear further argument.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Trade Practices Act 1974(Cth)

CITATION : BIS Cleanaway (trading as CHEP) & Ors v Tatale & Anor; Brambles (trading as CHEP) v Tatale & Anor [2007] NSWSC 378

Aristoc Industries Pty Ltd v R E Wenham (Builders) Pty Ltd (1965) NSWR 581 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Butler v Hobson [1838] 4 Bing. N.C. 290 Commissioner of Taxation of the Commonwealth of Australia v Murry (1998) 193 CLR 605 Doulton Potteries Ltd and Another v Bronotte (1971) 1 NSWLR 591 Edwin Hill & Partners v First National Finance Corp plc (1989) 1 WLR 225 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Felthouse v Bindley (1862) 11 CB (NS) 869 CASES CITED : Henry Berry & Co. Pty. Ltd v Rushton [1937] St. R. Qd. 109 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11 Jelks v Haywood [1905] 2 KB 461 Kahler v Midland Bank Limited [1950] AC 24 McKeown v Cavalier Yachts Pty Ltd and Another (1988) 13 NSWLR 303 North General Wagon & Finance Co Limited v Graham [1950] 2 KB 7 Olsson and Another v Dyson (1969) 120 CLR 365 Reliance Car Facilities Limited v Roding Motors Limited [1952] QB 844 Scarf v Jardine [1882] 7 App Cas 345 The Anderson Group Pty Limited v Tynan Motors Pty Limited (2006) 65 NSWLR 400 Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530

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