Supreme Court of SA|1999-06-17|Before: Yeldham J

GOODWIN v RON HEATH TYRE SERVICE (SA) PTY LTD No. SCGRG-97-1507 Judgment No. S222 [1999] SASC 222 (17 June 1999)

Respondent was the bailee of a motor vehicle when the motor vehicle was involved in an accident with the appellant - respondent's insurer compensated the owner of the motor vehicle - after an action instituted by the owner of the motor vehicle against the appellant, the respondent brought an action against the appellant - appellant found to be liable for the accident - on appeal the court found that the respondent's payment to the owner subrogated the respondent to any right of recovery held by the owner of the car against the appellant - respondent therefore entitled to recover from the appellant - whether respondent entitled to contribution from the appellant in circumstances where the respondent has been found not liable to the owner of the motor vehicle - discussion of s25 of the Wrongs Act. Bailment - rights of the bailee against a tortfeasor who causes damage to goods subject to a contract of bailment - whether respondent entitled to succeed on the basis of bailment when argument on bailment was not advanced before the Court.

I agree with the reasons given by Justice Lander.

LANDER J: Mattins Holdings Pty Ltd (Mattins) was the owner of a Lexus motor vehicle. On 3 June 1995 it delivered that motor vehicle into the custody and control of the respondent to fit new tyres to the vehicle.

After the work of fitting new tyres had been completed an employee of the respondent, Mr Michael Hunt, took the vehicle for a test run. Whilst travelling west along Elizabeth Street at Eastwood in South Australia the vehicle came into collision with a Sigma motor vehicle being driven by the appellant.

Mattins' motor vehicle was damaged and the cost of the repairs amounted to $10,428.94.

At the time of the collision the respondent was the bailee of the motor vehicle. The respondent was insured with QBE Insurance. The respondent made a claim on its insurer and its insurer indemnified the respondent for the cost of repairs to Mattins' motor vehicle. The motor vehicle was repaired therefore at no cost to Mattins, but at the cost of the respondent's insurer.

On 24 June 1996 Mattins brought proceedings against the appellant for the cost of repairs.

Mattins claimed that the appellant's negligence had been the sole cause of the collision, as a result of which its motor vehicle was damaged, and it had suffered loss. The appellant entered a defence, denying that he was negligent and claiming that the sole cause of the collision was the negligence of Mr Hunt. The appellant filed a counterclaim claiming $2,240 for the cost of repairs to his motor vehicle.

The appellant also issued third party proceedings directed to the respondent and to Mr Hunt. The matter came before a magistrate on 7 November 1996.

It was an agreed fact before the learned Magistrate that the respondent's insurer had met the cost of repairs to Mattins' motor vehicle.

Evidence was led for the purpose of determining the liability for the collision. At the conclusion of that evidence counsel for the appellant submitted "that there was no basis upon which the plaintiff (Mattins) could recover against his client because the plaintiff (Mattins) had already been compensated in full by the insurer of 'The Tyreman' (Ron Heath Tyre Service (SA) Pty Ltd)". He also submitted that Mattins had failed to establish any negligence on the part of the appellant.

The learned Magistrate rejected the appellant's claim that Mattins was not entitled to recover because it had been paid for the cost of repairs. In doing so he relied upon the provisions of s25 of the Wrongs Act 1936. He said that if he had accepted the appellant's submissions he would have had no hesitation in giving leave to the parties to amend the pleadings to join the third party to those proceedings (the respondent in this appeal) as a plaintiff in those other proceedings.

He then went on to consider the question of liability. He found that the defendant in those proceedings (the appellant in this appeal) was guilty of negligence. He also found that Mr Hunt was guilty of negligence. He apportioned the responsibility for liability between the two drivers, the appellant and Mr Hunt 70:30 in favour of Mr Hunt.

He therefore entered judgment for Mattins against the appellant for the amount of its claim. He entered judgment for the appellant on the third party proceedings against Mr Hunt for 30 percent of the judgment against the appellant.

He dismissed the appellant's counterclaim against Mattins upon the basis that Mattins could not have been in any way responsible for the damage to the appellant's motor vehicle. He intimated that it would be appropriate for Mr Hunt or those indemnifying Mr Hunt to pay 30 percent of the appellant's damage. Of course that intimation did not form part of the judgment.

Mattins therefore obtained judgment against the appellant for the whole of its loss. The appellant was entitled to contribution from the respondent, which was vicariously liable for Mr Hunt, for 30 percent of the damages payable by the appellant to Mattins.

Effectively the Magistrate found that Mattins could have sued both the appellant and the respondent and would have been entitled to recover against both. The respondent would have been vicariously liable for the negligence of Mr Hunt.

The appellant appealed against the learned Magistrate's decision. In an ex tempore judgment, a judge of this court allowed the appeal and set aside the orders of the learned Magistrate. He did so upon the basis that Mattins had suffered no damage and was therefore not entitled to any judgment against the appellant. He found that because Mattins had been compensated by the insurers of one of the tortfeasors to the extent of the whole of its loss, it was therefore disentitled to bring a claim against another tortfeasor.

"This is a case where a party has suffered damage as a result of the independent wrongs of at least two other persons. The action is brought in negligence. Damage is the gist of such an action. It is trite to observe that the purpose of the law of damages is to compensate the injured party. Where a plaintiff has recovered damages from a third party who is liable as a joint tortfeasor, he cannot recover damages a second time from the defendant for the same loss: Castellan v Electric Power Transmission Pty Ltd (1967) 69 SR (NSW) 159, Kohnke v Karger [1951] 2 KB 670 and see the discussion in McGregor on Damages, 15th Edition, para.335-342. That conclusion gives effect to the principle stated above that the purpose of the law of damages is to compensate the injured party. It is also well established, if not trite, to observe that a plaintiff cannot obtain double compensation. The principle is illustrated by posing the example that, if the plaintiff had been paid but half of his cost of repairs by Heath, he could have sued Heath and the defendant for the whole of the cost of repairs but bringing to account that which he had already received. The position is also illustrated in Burn v Morris (1834) ER 149; 2 C & M 579. The terms of s25 of the Wrongs Act 1936 do not alter the principle."

The learned judge refused to refer the matter back to the learned Magistrate. He said that the proceedings were misconceived, having been brought in the name of the wrong plaintiff, and that the proceedings had been infected by that error. He simply allowed the appeal and set aside the judgment in favour of Mattins and the judgment in favour of the appellant against Mr Hunt.

It is the case at common law that the release of one joint tortfeasor releases the other: Duck v Mayeu [1892] 2 QB 511. The reason for the rule is that the cause of action is one and indivisible and the release of one gives rise to the release of all. However, the parties must have agreed upon a release; a covenant not to sue does not operate to release the other joint tortfeasor because the joint action is still maintainable: Hutton v Eyre [1815] EngR 860; (1815) 128 ER 1046.

It was also the case at common law that a judgment against one tortfeasor discharged all others.

Sub sections 25(1) and (2) of the Wrongs Act address a discharge by judgment but not by release. They provide:

"25 (1) Where damage is suffered by any person as a result of a tort (whether a crime or not) - (a) judgment recovered against any tort-feasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tort-feasor in respect of the same damage: (b) if more than one action is brought in respect of that damage by or on behalf of the person by whom it was suffered, or for the benefit of the estate, or of the wife, husband, parent or child of that person against tort-feasors liable in respect of the damage (whether as joint tort-feasors or otherwise) the sums recoverable under the judgments given in those actions by way of damages shall not in the aggregate exceed the amount of the damages awarded by the judgment first given; and in any of those actions, other than that in which judgment is first given, the plaintiff shall not be entitled to costs unless the court is of the opinion that there was reasonable ground for bringing the action: (c) any tort-feasor liable in respect of that damage may recover contribution from ..."

Those subsections allow a person who has suffered damage to proceed against a second tortfeasor responsible for the damage even though a judgment has already been obtained against the first tortfeasor. The second judgment cannot be for a greater sum than the first.

However, the Wrongs Act does not remedy the common law, at least in so far as the person who suffered damage is concerned, if that person has released a tortfeasor. The position is otherwise as between tortfeasors (s25(a)(i)).

Therefore assuming that the bailee (Ron Heath Tyre Service (SA) Pty Ltd) and Mr Goodwin were joint tortfeasors, if Mattins had released Ron Heath Tyre Service (SA) Pty Ltd, then Mattins would have also released Mr Goodwin. The question really in that first action was whether the payment by Ron Heath Tyre Service (SA) Pty Ltd of Mattins' repairs amounted to a release or a covenant not to sue. It is not entirely clear that that question was addressed in that action or on that appeal. However, I am not in a position to say whether that decision was right or wrong and in the end, it does not matter.

This is not an appeal from that decision. In fact the parties, or at least Mattins, accepted the correctness of that decision and took no steps to revive those proceedings. Instead the respondent to this appeal commenced proceedings against the appellant. Those proceedings claimed that, as a result of the negligence of the appellant, the respondent had suffered loss or damage to the extent of the cost of the repairs to the Lexus which had been paid by the plaintiff. The sum of $10,428.94 was sought.

The particulars of claim identified the circumstances in which the car came into the possession of the respondent, although they do not in terms claim that the respondent was a bailee. The respondent claimed that whilst the car was being driven by Mr Hunt, the employee of the respondent, it came into collision with the appellant's Sigma motor vehicle as a result of which it suffered damage to the extent of the amount claimed. The particulars of claim alleged negligence on the part of the appellant. The claim then went on in the following terms:

"9 The plaintiff paid to Welland the sum of $10,428.94 being for the said repairs costs.

10 As a result of the collision the plaintiff suffered loss and damage.

Cost of repairs to the Lexus paid to Mattins by the plaintiff $10,428.94.

10a The plaintiff seeks to recover contribution from the defendant pursuant to sections 25(1)(c) and 26 of the Wrongs Act 1936 for the loss and damage such the plaintiff is completely indemnified and repeats the allegations contained in paragraph 7 of the particulars of claim.

11 The plaintiff claims from the defendant the sum of $10,428.94 plus interest and costs pursuant to the Magistrates Court (Civil Division) Rules as amended."

The respondent did not directly claim that it was, as the bailee, of the motor vehicle entitled to bring the action against the appellant.

The appellant filed a defence in which he denied negligence and alleged that the collision was as a result of the negligence of Mr Hunt.

He then claimed to be entitled to set off against the respondent's claim such amounts as may be awarded against the respondent in consequence of a counterclaim.

"9 The defendant denies paragraph 9 of the Particulars of claim and says that the plaintiff is barred as a matter of law or should be barred as a matter of discretion from maintaining its present action, because of claims made determined between the plaintiff and the defendant in action no. 22883 of 1995 (the previous action) or because of claims which should have been made and defences which should have been raised in that action, but were not.

9a The defendant further says that this Honourable Court ought decline(sic) to hear the plaintiff as the cause of action of the plaintiff is based upon an unlawful act, namely that the plaintiff by its agent Mr Hunt drove the said Lexus motor vehicle on a road when the said vehicle was not registered or insured (or both) contrary to the Motor Vehicles Act.

10 The defendant denies paragraphs 10 and 11 of the Particulars of claim and insofar as paragraph 11 is or may be a prayer for relief, further says that the plaintiff is not entitled to the relief sought or any of it and in particular, as far as necessary denies

10.1 that in the circumstances alleged he owed any duty of care to the plaintiff and

10.2 that the pecuniary damage complained of by the plaintiff was reasonably foreseeable."

There were various interlocutory procedures brought by the appellant seeking to have the proceedings summarily dismissed. They are unimportant for the purpose of this appeal.

The matter came on for hearing before a different magistrate. Evidence was again called on the question of the liability for the collision.

On this occasion the learned Magistrate concluded that the sole cause of the collision was the negligence of the appellant. He exonerated Mr Hunt and thereby, of course, exonerated the respondent from any vicarious liability for Mr Hunt's negligence.

He then discussed the defences to which I have referred. The "defence" in par9a failed on its facts. Even if the facts had been made out the plea did not raise a defence. The defences raised in par9 and par10 were dismissed upon the basis that the respondent was entitled to proceed under s25 of the Wrongs Act and therefore entitled to judgment.

The appellant appealed yet again from that decision. First he complained about the finding of negligence against him and the failing by the learned Magistrate to find negligence or contributory negligence on the part of Mr Hunt. Next he complained about the procedural aspects of the matter. He relied upon the previous decision of the judge of this court dismissing the claim brought by Mattins.

He claimed that the dismissal of Mattins' claim meant that the respondent's claim could not be maintained.

The matter came on before another judge of this court who concluded that the learned Magistrate's decision on liability was correct and agreed that the appellant was solely responsible for the collision.

He then went on to discuss the other matters agitated in the appellant's notice of appeal. First he concluded that the previous decision in the proceedings brought by Mattins did not give rise to res judicata. Secondly he determined that, because the respondent had made good the damage to the Lexus by payment to Mattins of its liability as a bailee, the respondent became subrogated to any right of recovery which Mattins would have had against the appellant for the damage to the motor vehicle caused by the appellant's negligence.

He held that the respondent was entitled to recover by virtue of a right of subrogation which it had acquired when its insurer had indemnified Mattins for the cost of repairs to the damaged Lexus motor vehicle.

It is from that decision that this appeal is concerned.

When this matter first came before this Court only two matters were addressed, the question of subrogation and the question of contribution. I shall address both these matters.

I cannot agree with the learned judge that the respondent was entitled to bring a claim in its own right by reason of some right acquired by subrogation.

In my opinion the respondent did not acquire any rights of subrogation when its insurer paid Mattins the cost of repairs to the motor vehicle. In my opinion the respondent did not obtain any right of subrogation when as a bailee it satisfied the damage caused to the bailor's goods. It was not an insurer of the bailor's goods and it did not therefore obtain any right of subrogation.

The respondent in this action had no right of subrogation to bring these proceedings. That is not to say that the respondent did not have other rights but what rights it had did not arise by right of subrogation. However, before I address any other common law rights available to the respondent, it is necessary to deal with the principal argument advanced in the appeal.

The respondent claimed on this appeal, as it had in par10A of its particulars of claim, that it had a statutory right to contribution from the appellant. That statutory right, it was said, was the statutory cause of action given by s25(1)(c) and s26 of the Wrongs Act.

The difficulty, however, which confronted the respondent on this appeal was whether by reason of the second decision of the learned Magistrate on liability it had any right to contribution against the appellant under the Wrongs Act.

There is no doubt in my opinion that it did have such a right upon the findings and the decision of the first Magistrate. In that decision the learned Magistrate apportioned liability between two tortfeasors.

On the second hearing, in this action, however the learned Magistrate found that the appellant was solely responsible for the happening of the collision. In those circumstances the question is "Can the respondent recover contribution from the appellant in circumstances where the respondent has been found not to be liable to the party who suffered the damage?"

Section 25 of the Wrongs Act in so far as it is relevant provides:

"s25(1) Where damage is suffered by any person as a result of a tort (whether a crime or not) -

(c) Any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would at any time have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person should be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought;

(ca) a tortfeasor who, on or after of the coming into operation of the Wrongs Act Amendment Act, 1959 becomes liable in respect of that damage may recover contribution from the third party as defined in subs(2) of this section or commence proceedings for such recovery notwithstanding -

(i) that judgment in an action founded on the tort has not been given determining the tortfeasors liability in respect of that damage;

(ii) that the plaintiff as defined in that subs has released the third party from his liability to the plaintiff for that or any part of that damage; or

(iii) that the plaintiff has not duly given any notice that would be required if the plaintiff were to recover judgment against that person; or

(iv) that the time within which the plaintiff may commence action against the third party has expired; or

(v) that the third party is the Crown or an instrumentality of the Crown.

(2) In this section, so far as the context admits or requires.

(i) a tort-feasor from whom any other tort-feasor is entitled to recover contribution under paragraph (c) of subsection (1) of this section; and

(ii) the husband or wife of a person suffering the damage and from whom some other person is entitled to recover contribution under paragraph (d) of subsection (1) of this section:

'plaintiff' means the person suffering the damage referred to in subsection (1) of this section whether or not that person has commenced an action for recovery of judgment in respect of the damage:

(3) Any proceedings by a tort-feasor for the recovery of contribution form a third-party under this section must be instituted before the expiration of two years from the day on which the amount of damages or other compensation payable by the tort-feasor to the plaintiff is determined by the judgment of a court of competent jurisdiction, or by agreement between the plaintiff and the tort-feasor."

Section 25(1)(ca) provides that a right of contribution by one tortfeasor from another does not depend upon the first tortfeasor establishing that a judgment has been given against that tortfeasor. Clearly a tortfeasor can claim contribution even though that tortfeasor has not been held to be a tortfeasor by a Court.

Moreover, a tortfeasor may seek contribution from another tortfeasor even though the person who has suffered the damage has released that second tortfeasor from the liability to the plaintiff. That means that if a person who has suffered damage releases a tortfeasor that party releases all tortfeasors from any liability to that party. However, the release does not operate to prevent another tortfeasor seeking contribution from the tortfeasor who has been released.

Section 25(1)(c) is confined to actions in tort.

It provides a "cause of action apart from and independent of the cause of action which the injured party has or would have had against a tortfeasor from whom contribution is sought"; Brambles Constructions Pty Ltd v Helmers [1966] HCA 3; (1966) 114 CLR 213 at 218.

The action is concerned with the tortfeasor's obligations between each other to contribute to a loss caused to the party who has suffered damage. It is therefore concerned with the breach of the duty owed by the tortfeasors to the person who suffered the damage. The court is called upon to measure the respective departures from the breaches of duty owed by the tortfeasors to the person who has suffered the damage for the purpose of apportioning the loss between the tortfeasors in the contribution proceedings.

One way a tortfeasor may establish that he or she has a liability to the party who has suffered the damage is by proof of judgment against him or her in favour of the party who has suffered the damage: Brambles Constructions Pty Ltd v Helmers (supra); Bitumen & Oil Refineries (Australia) Limited v Commission for Government Transport [1955] HCA 1; (1955) 92 CLR 200.

However, the cause of action for contribution arises notwithstanding that the tortfeasor seeking contribution under this section has not been found liable to the person who suffered the damage. That is clear on authority (Bitumen & Oil Australia Ltd v Commission for Government Transport (supra)), although no authority is necessary in this State because of the provisions of s25(1)(ca)(i).

It follows that a party is entitled to seek contribution from a tortfeasor in circumstances where neither have been found to be liable to the person who suffered the damage. A party however cannot seek contribution from another person under s25(1)(c) if that second party has been found not to be liable to the party who suffered the damage: Bitumen & Oil Refineries (Australia) Limited v Commissioner for Government Transport [1955] HCA 1; (1955) 92 CLR 200. Nor can a tortfeasor seek contribution from a party where that party has obtained a consent judgment against the person who suffered the damage and in circumstances where the court has made no determination of liability for the damage: James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) HCA 78.

A party however can seek contribution, under this section, from a tortfeasor who has been released from that tortfeasor's liability to the party who suffered the damage: s25(1)(ca)(ii). Moreover, a party is entitled to seek contribution from a tortfeasor in circumstances where the plaintiff's cause of action against that tortfeasor has been lost by reason of a failure of the person who suffered the damage to give notice to that tortfeasor or because the action is or has become barred under the Limitation of Actions Act. It follows therefore that a party is entitled to obtain contribution from a tortfeasor in circumstances where that tortfeasor no longer has any liability to the party who suffered the damage.

The cause of action is statutory and each of the elements of the statutory cause of action must be made out. At common law there was no right to contribution between tortfeasors: Genders v Government Insurance Office of New South Wales [1959] HCA 30; (1959) 102 CLR 363 at 376-377; Merryweather v Nixan [1799] EngR 669; (1799) 101 ER 1337. In those circumstances it seems to me that a party cannot seek contribution from another party unless the first party establishes that he or she and the party from whom contribution is sought are both tortfeasors.

It is only a tortfeasor who is given the statutory cause of action. It is necessary therefore in a claim for contribution under 25(1)(c), that the claimant must establish, if that party's liability to the person who suffered the damage has not been ascertained by a judgment of the court, that that he or she is a tortfeasor.

In James Hardie & Co Pty Ltd v Seltsam Pty Ltd (supra) Kirby J said that it was a necessary precondition that the claimant should be a tortfeasor liable in respect of that damage. Although in dissent there is no suggestion that any member of the court disagreed with that proposition. In Ballina Shire Council v Volk & Another (1989) 18 NSWLR 1 at p10 Kirby P (as he then was) said; "a precondition to the entitlement to make such a claim is the establishment that there are two or more tortfeasors liable in respect of the damage".

The subsection gives a statutory cause of action to a tortfeasor. The cause of action is limited to claims against a tortfeasor "liable in respect of the same damage". That person can be liable as a joint tortfeasor or otherwise. The respondent is not a tortfeasor. It is not liable in respect of the same damage. It is not a joint or concurrent tortfeasor. It had no liability to the person who suffered the damage. It was not a tortfeasor qua that party. There is nothing for which it is entitled to contribution. In those circumstances it seems to me the respondent is not entitled to rely upon the provisions of s25(1)(c).

This leads to a curious result. It means that the respondent, which believed itself to be a tortfeasor, a belief which was entirely reasonable having regard to the judgment of the first magistrate, and which has paid the whole of Mattins' damages, is not entitled to recover contribution because it cannot prove that it was in any way responsible for the damage. It has proved that it is not responsible and therefore not entitled to contribution. It means that a tortfeasor from whom contribution is sought could successfully defend himself or herself by proving that he or she was solely responsible for the damage and therefore escape liability to make contribution.

However, I think it is the result that the subsection demands.

This result will only come about in circumstances where the party who is seeking contribution has not had his or her liability established by a judgment of the court. It will only arise where a party mistakenly believes that he or she is a tortfeasor in circumstances where in fact the party has no responsibility for the damage. Even so, the result may discourage parties from settling with the party who has suffered damage. That would be an unfortunate result both from the litigants and the courts point of view. However the result is brought about by the terms of the section itself.

It seems to me that it must be the case that s25(1)(c) cannot operate unless there are at least two tortfeasors. It cannot operate in circumstances where the claimant is not a tortfeasor. A party who has no responsibility for the damage cannot claim contribution from some other tortfeasor.

I thought at one stage that perhaps s26 might suggest otherwise. Section 26 of the Wrongs Act provides:

"In any proceedings for contribution under the last preceding section the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable, having regard to the extent of that person's responsibility for the damage; and the court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity."

I do not however think that the words of that section are enough to deny the plain words in s25(1)(c) itself so as to allow a party who is not a tortfeasor to obtain a complete indemnity from a party who was solely responsible for the damage. There is no doubt that the whole scheme of s25 assumes that there is more than one tortfeasor. Where there is not more than one tortfeasor then s25(1)(c) has no work to do.

In my opinion therefore the respondent was not entitled to succeed under any doctrine of subrogation or for contribution under s25(1)(c) of the Wrongs Act.

When I came to consider the arguments advanced it occurred to me that neither party had addressed the question of bailment in this Court or before the Judge from whom this appeal has been brought.

The parties were invited to address the Court in writing on two matters. First whether the respondent should be entitled to now argue a question of bailment. Secondly, whether as a bailee the respondent was entitled to recover from the appellant. The parties written arguments were submitted to the Court. I shall address these two questions in reverse order.

The question of bailment is alluded to in the pleadings and I think alluded to in the decision in the court below.

"3 On or about 3 June 1995 Mattins, by its servants or agents, delivered the Lexus into control of the plaintiff to enable to plaintiff[sic], by its servant or agents, to take all necessary steps to fit replacement tyres to the Lexus."

Although not directly saying so, the respondent was there no doubt referring to a contract of bailment which undoubtedly arose between Mattins and the respondent.

The learned judge also referred incidentally to a contract of bailment in his reasons.

The respondent was undoubtedly a bailee. On the findings of the learned Magistrate, the appellant was a tortfeasor who had caused damage to the goods subject to the contract of bailment.

In my opinion, that was enough to invest the respondent with a cause of action against the appellant. A bailee is entitled to bring an action against a party who has negligently caused damage to the bailed goods whilst they were in possession of the bailee.

The cause of action does not depend upon any liability of the bailee to the bailor. Nor is the cause of action dependent upon the bailors authority and consent.

In the "The Winkfield" [1902] P 42 at p55 Collins M.R. said:

"For the reasons which I am about to state I am of opinion that Clarridge's case [1892] 1 QB 422 was wrongly decided, and that the law is that in an action against a stranger for loss of goods caused by his negligence, the bailee in possession can recover the value of the goods, although he would have had a good answer to an action by the bailor for damages for the loss of the thing bailed."

It is not necessary for the tortfeasor, against whom the proceedings are brought to be aware of the contract of bailment or the bailor or bailee's interest in the property which has been damaged.

The cause of action given to a bailee in circumstances where the bailee has no liability to the bailor for the damage to the bailed goods, is somewhat unusual in that it is not consistent with the general principle that damages are compensatory.

The rationale for allowing a bailee a right of recovery arises because the bailee was in possession and that possession was good against any wrongdoer. A possessor it was said was entitled to bring actions in trover and trespass. An action on the case against a wrongdoer was no different. A wrongdoer had no concern with the relationship between the bailor and the bailee and must treat the bailee as the owner of the goods.

"Therefore, as I said at the outset, and as I think I have now shewn by authority, the root principle of the whole discussion is that, as against a wrongdoer, possession is title. The chattel that has been converted or damaged is deemed to be the chattel of the possessor and of no other, and therefore its loss or deterioration is his loss and to him, if he demands it, it must be recouped. His obligation to account to the bailor is really not ad rem in the discussion. It only comes in after he has carried his legal position to its logical consequence against a wrongdoer, and serves to soothe a mind disconcerted by the notion that a person who is not himself the complete owner should be entitled to receive back the full value of the chattel converted or destroyed. There is no inconsistency between the two positions; the one is the complement of the other. As between bailee and stranger possession gives title - that is, not a limited interest, but absolute and complete ownership, and he is entitled to receive back a complete equivalent for the whole loss or deterioration of the thing itself. As between bailor and bailee the real interests of each must be inquired into, and, as the bailee has to account for the thing bailed, so he must account for that which has become its equivalent and now represents it. What he has received above his own interest he has received to the use of his bailor. The wrongdoer, having once paid full damages to the bailee, has an answer to any action by the bailor."

As the learned author of the 2nd Edition of Palmer on Bailment says the rule in "The Winkfield" seems to be too well entrenched to be departed from [300].

"The Winkfield" has been cited with approval recently in "The Albazero" [1977] AC 774. In that case Lord Diplock said that the decision was an exception to the general rule that damages are compensatory. "The Winkfield" was also approved by the Privy Council in Chabbra Corporation Pty Ltd v Jag Shakti (1986) 1 AC 337.

In Millar v Candy [1981] FCA 208; (1981) 38 ALR 299 at 301 Blackburn J said:

"The law is clear that a bailee, even under the simplest form of bailment (for example, a loan of goods on terms that they are to be returned on demand) is entitled to the market value of the goods if they are destroyed by the wrongful act of the defendant. Arbitrary that rule may be, but it is not disputed that this respondent (a bailee on hire purchase) was entitled to the benefit of it."

The rule was applied by Yeldham J in R M Campbell Vehicle Sales Pty Ltd v Machnig (unreported, Supreme Court New South Wales, Yeldham J, 22/5/1981, 1615 of 1978).

"The rule propounded by Collins M.R. has stood, practically without judicial question, since The Winkfield was decided, and has been acknowledged on repeated occasions both by members of the House of Lords and by members of the Privy Council as well as by many other courts in England and Australia. A bailee in possession of a chattel may sue for any injury inflicted upon that chattel and may recover in full the cost of replacement or repair irrespective of whether the chattel has been destroyed or merely damaged; irrespective of whether he has suffered any personal loss as a result of the wrongdoer's misconduct; irrespective of whether the injury sustained by the chattel exceeds the value of the bailee's own limited interest; irrespective of whether he is answerable to the bailor for the damage or loss in question; and irrespective of whether he is a gratuitous bailee with "bare" possession, or a bailee for reward with a finite tenure of the chattel, still subsisting when the wrong occurred. The remedy brought by the bailee in possession can extend not only to trespass, case or conversion, but to negligence, detinue and even, it appears, breach of contract." (footnotes omitted)

The "judicial question" to which the learned author of Palmer is there referring, is a decision of Hutley JA in the Court of Appeal in New South Wales: Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 156-157. In that case, a claim in conversion, the trial judge assessed damages on the whole value of the goods converted. It was argued the damages should have been assessed in respect of the respondent's interests alone. The appellant argued that "The Winkfield"(supra) could be distinguished. Hutley JA held that in so far as "The Winkfield" purported to lay down a universal rule for assessment of damages in conversion such a rule was inconsistent with a decision of the High Court in Butler v Egg and Egg Pulp Marketing Board [1966] HCA 38; (1966) 114 CLR 185.

It is clear that His Honour was confining his remarks to the assessment of damages. He did not suggest the decision could not be followed in so far as it provides that the bailee has a cause of action even though the bailee has suffered no loss. This is an action in negligence and therefore the question before Hutley JA does not arise.

There are exceptions to the rule, none of which are relevant in the circumstance of this case.

A bailee who brings an action for damage to goods subject to a contract of bailment must in due course account to the bailor for the proceeds of the claim. That is not a matter of difficulty in this case because the bailee has accounted to the bailor in advance of the claim brought against the wrongdoer.

The claim by the bailee is not in substitution for a claim by the bailor. The bailor would have been entitled, subject to the exception to which I have already referred, to bring its action against the appellant but recovery by the bailee, in this case the respondent, relieves the appellant from any liability to Mattins.

In my opinion the respondent was entitled to succeed but, because of a contract of bailment by which it was the bailee, not for any of the reasons advanced before the judge below and initially on this appeal.

Whilst I think the pleadings are wide enough to allow recovery: Dare v Pulham (1982) 148 CLR 658 at 664, the problem is that the respondent did not argue that it was entitled to claim as bailee.

Ordinarily a party would not be entitled to raise for the first time on a second appeal a point which had not been raised before the trial judge or the judge on the first appeal. More particularly a party would not be entitled to raise a matter after the conclusion of the hearing of the second appeal in circumstances where the matter had not been previously argued: Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at 7-8.

Usually the appeal would be considered and dealt with upon the grounds it was argued.

However, this case is different in my opinion. The point which the respondent has overlooked does not require further evidence, because there is no further relevant evidence. The pleadings cover the issue. All that has happened is that the courts were not directed to the correct principle and the authorities. The facts are beyond controversy. In Green v Sommerville [1979] HCA 60; (1979) 141 CLR 594 Mason J said at 608:

"When a question of law is raised for the first time, even in a court of last resort, "upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is...expedient, in the interests of justice," to decide it (Connecticut Fire Insurance Co v Kavanagh per Lord Watson; Suttor v Gundowda Pty Ltd.)"

See also O'Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310 at 319.

If this appeal was allowed an injustice would result. The injustice would be that the party who was wholly responsible for the damage would succeed. This court ought not to permit an injustice to occur if, subject to whatever terms are necessary in relation to costs, it can arrive at a just result: National Australia Bank Ltd v K D S Construction Services Pty Ltd [1987] HCA 65; (1987) 163 CLR 668; Centronics Systems Pty Ltd v Nintendo Co Ltd [1992] FCA 584; (1992) 111 ALR 13.

In those circumstances in my opinion the appeal should be dismissed.

WICKS J. I agree that this appeal be dismissed for the reasons given by Lander J.

Limitations of Actions Act 1936

GOODWIN v RON HEATH TYRE SERVICE

At a glance

Court

Decision date

Before

Source

Judgment (134 paragraphs)

GOODWIN v RON HEATH TYRE SERVICE (SA) PTY LTD No. SCGRG-97-1507 Judgment No. S222 [1999] SASC 222 (17 June 1999)

Parties

Legislation Cited (1)

Cases Cited (12)