Pleading a jus tertii
19 Esanda puts its case on the basis of the principle which precludes reliance on a jus tertii, and also on the broader ground of estoppel. As Professor Atiyah has remarked ('A Re-examination of the Jus Tertii in Conversion' (1955) 18 Mod LR 97,105), standard formulations of the law in this area hide a 'mass of ambiguity', especially as to the concepts of jus tertii and right to possession. The orthodox application of the jus tertii principle to an action in trover or conversion was explained in the judgment of Henchman J in Henry Berry & Co Pty Limited v Rushton [1937] SR (Qld) 109, who said (at 119):
'although where the plaintiff was in actual possession of the goods when the defendant by a wrongful act got possession of them the defendant can plead the jus tertii only in certain cases ..., it is otherwise when the plaintiff was not in actual possession when the wrongful act was done. When the plaintiff was not in actual possession, but relies upon his right to possession, he must recover on the strength of his title, and the 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.'
20 In the present case Esanda was not in possession of the buses on 18 December 1998 and the proceedings which it commenced on that day rely upon its right to immediate possession, arising under the terms of the master lease agreement. The principles stated by Henchman J, if one were to pause at that point, would imply that Mr Gibbons would be entitled to raise a jus tertii by denying Esanda's right to immediate possession on the basis that TPI did not have good title to the buses when it sold them to Esanda in 1998.
21 However, the principles with respect to jus tertii are subject to further qualifications. Henchman J remarked (at 121) that 'in cases of bailment for a term, the bailor has no right of possession and cannot sue in trespass or conversion until the contract is determined.' In such a case, the bailee is precluded from setting up a jus tertii against the bailor. See also Butler v Hobson [1838] 4 Bing (NC) 290; 132 ER 800; Leake v Loveday (1842) 4 Man & G 972; 133 ER 399; Woods v Mason Bros Ltd (1892) 8 WN (NSW) 114.
22 The principle behind the rules concerning bailor and bailee has been explained by Messrs R P Balkin and J L R Davies in Law of Torts 2 ed (1996) p 73 as follows:
'The idea that the jus tertii can be pleaded by a converter of goods as against a plaintiff with only an immediate right to possession, is subject to the exception that a bailee, if sued by the bailor, is estopped from denying the bailor's title, although some other defence may be available. Moreover, the rule that the bailee is not entitled to dispute the bailor's title and therefore cannot plead the jus tertii against the bailor is itself subject to certain exceptions. Herron J in Edwards v Amos stated the rule thus: ((1945) 62 WN NSW) 204 at 206):
'the defendant, although a bailee, can plead the jus tertii in three cases, (a) where he defends the action on behalf of and by the authority of the true owner, (b) where he committed the act of conversion complained of on the authority of the true owner, and (c) where he has already made satisfaction to the true owner by returning the property to him.''
23 In my view, though they are expressed by reference to the particular case of bailor and bailee, the principles with respect to pleading the jus tertii are best understood not as a series of mechanistic rules but as a series of propositions which relate to the same fundamental concern for fairness which gives rise to the modern law of equitable estoppel. An understanding of the basis of principle should help to avoid confusion about the relevant legal concepts. Essentially, the defendant in an action in conversion in modern times will be precluded from pleading and relying upon the title of a third party in order to defeat the plaintiff's assertion of a right to immediate possession, when:
(a) the defendant's conduct has contributed to the plaintiff's belief that its right to immediate possession exists; and
(b) the defendant does not act with the authority of the true owner.
24 It may be that the principle underlying the cases on jus tertii is an application of the doctrine of equitable estoppel. It is unnecessary for me to decide whether the jus tertii cases are merely cases of equitable estoppel or have some special characteristics. It is enough for present purposes to say that (assuming the true owner has not intervened) the cases require, inter alia, an inquiry with respect to the defendant's conduct, in order to determine whether there is in that conduct something which justifies the Court from preventing the defendant from defeating the plaintiff's right to immediate possession by pleading or relying upon the better title of the third party.
25 That this is the correct approach is confirmed, in my view, by the judgment of Walsh J in Standard Electronic Apparatus Laboratories Pty Limited v Stenner (1960) 77 WN (NSW) 833, 836. That was a case where the plaintiff in an action for conversion was the bailee of goods which had been taken by the bailor. Walsh J held that the bailee had special property in the goods in question by virtue of work done on them which had created a lien; that special property was sufficient to support the action. The question was whether the bailor, having entered into the bailment, could defend the action by asserting a jus tertii . His Honour held that the bailor, having purported to bail the goods to A, could not dispute his own right to do so by setting up a jus tertii even if the third party was in fact the true owner. His Honour contemplated that the position may have been different had it been shown that the true owner demanded the goods or that the bailor was acting under the authority or direction of the true owner. In the case before him, a claim of that kind had not been made, the bailor merely asserting that he had not made any agreement with the bailee in relation to the goods. Since this defence had failed and as between the parties to the proceedings the bailee was properly in possession, Walsh J held that the bailor should be precluded by his own conduct from pleading the jus tertii.
26 It appears to me that the present case is quite similar to the Standard Electronic case. Here Esanda asserts its right to immediate possession against Busrent. In the amended defence it is admitted that six of the buses were in the possession of TPI on 18 December 1998. As far as those buses are concerned, it is not asserted that TPI had any better right to possession than Busrent. However TPI, it is said, had no title to confer upon Esanda in 1998 when it purported to sell the buses to Esanda subject to a leasing arrangement in favour of Busrent. Putting to one side for the moment the complexity which arises because there is more than one related company concerned and a separate party to the proceedings is the receiver and manager, the case appears as one in which a defendant to an action in which the plaintiff asserts a right to immediate possession of goods pleads that the plaintiff's title, and consequently its right to possession, are defective, because the defendant had no title to give when at an earlier time it purported to sell the goods to the plaintiff. Viewed in that manner the facts fall within the principles enunciated by Walsh J in the Standard Electronic case.
27 In the present case, however, additional complexity arises out of the corporate group relationship and the receivership. As far as the corporate group relationship is concerned, TPI can have no better right to retain possession of the buses than Busrent. Consequently, any assertion on behalf of TPI or Busrent challenging Esanda's right to immediate possession is an assertion of a jus tertii falling within the principles of the cases, whichever of those two companies makes the assertion.
28 Mr Gibbons has not asserted that APG authorised TPI to resist Esanda's demand for possession on its behalf. The fact that there were four common directors is not of itself a basis for inferring that such authority was given.
29 Both TPI and Busrent were parties to the overall transaction of October 1998 by which TPI purported to sell the buses to Esanda for substantial valuable consideration and Esanda leased the buses to Busrent. In those circumstances, it can hardly lie in the mouth of either TPI or Busrent to assert now that a part of the transaction in which they both took part was ineffective because TPI was not able to confer good title. The facts that Mr Loiterton and Mr Ellis were signatories to the lease documentation on behalf of Busrent, and were also at the relevant time directors of TPI, merely confirm this conclusion.
30 As far as the position of Mr Gibbons is concerned, it is clear from the statement of claim that he has been joined as a defendant in his capacity of receiver and manager of the assets of TPI and part of the assets of Busrent (although the latter capacity is not significant because the receivership is confined to Busrent's book debts). By the amended defence Mr Gibbons admits that he is receiver and manager of the assets of TPI. In that context it is clear that the rights which he purports to assert are not rights which he claims as an individual, but are rights asserted in his capacity as the receiver and manager of the assets of TPI. In other words, Mr Gibbons has no capacity in these proceedings other than as receiver and manager. And that being so, his assertion of a jus tertii must effectively be regarded as an assertion made by TPI through him rather than by him as an individual.
31 It appears to me, therefore, that the standard set by the General Steel Industries case has been met by Esanda with respect to six of the buses concerned. Mr Gibbons submitted that in the present case the dispute between the parties relates to difficult questions of law and some unresolved questions of fact, and consequently, it is not an appropriate case for the Court to accede to an application to strike out the defence. However, the mere fact that there are difficult questions of law involved does not prevent an application to strike out a pleading from succeeding, for the reasons explained by Barwick CJ in the General Steel Industries case. Once one analyses the difficult legal issues, one may, as I have here, reach the view that the claim which is challenged is so clearly untenable that it cannot possibly succeed.
32 As far as unresolved questions of fact are concerned, my view is that it is unnecessary to determine them in order to reach a conclusion on Esanda's application. Mr Gibbons' difficulty flows directly from the incontrovertible fact that TPI, as part of the finance lease transaction which it entered into with Busrent and Esanda, purported to confer good title to the buses upon Esanda for the purposes of the lease. Once one identifies that this is the case, it flows inexorably that the principles with respect to jus tertii should prevent Mr Gibbons as receiver and manager of TPI from making an assertion inconsistent with TPI's conduct in that respect.
33 As regards the remaining three buses, the amended defence denies that they were in the possession of any defendant because they were in the possession of APG on 18 December 1998. Esanda says in those circumstances the correct procedure is for it to discontinue the present proceedings with respect to these buses, on the basis that APG may seek to recover damages from it in appropriate proceedings if it wishes to do so. In the circumstances, Esanda says the correct orders are orders that the amended defence of the first defendant be struck out, that (on a final basis) the first and second defendants deliver up to it the six buses which the amended defence admits to being in the possession of TPI on 18 December 1998, and that Esanda be granted leave to discontinue the proceedings against Mr Gibbons and TPI with respect to the other three buses.