Possession in fact
81 As I have concluded that Lenny's had an immediate right to take possession of the goods at the date of the alleged acts of conversion and breach of s 440C of the Act, it is unnecessary to determine whether M3G had possession of the kitchen goods in fact at that time. Nevertheless, in my opinion, irrespective of the parties' legal entitlements under the Purchase Agreement, Lenny's in fact, at all material times retained possession of the kitchen goods by maintaining sole possession of the keys. Although the Purchase Agreement contemplated that M3G would have possession as a bailee for reward on delivery, such a bailment assumes a taking of possession. As Palmer stated (in Palmer, N, Palmer on Bailment (3rd ed, Thomson Reuters (Legal) Limited, 2009) at 564):
[A] prospective purchaser who acquires possession of goods under an effective title retention clause (reserving legal property in the goods to the seller until payment of the price or the occurrence of some other condition) will hold those goods until satisfaction of the condition as a bailee for mutual advantage
82 Lenny's, however, never delivered possession of the kitchen goods to M3G.
83 As the applicants submitted, the possession of a key to a container holding goods may not inevitably amount to possession of the goods themselves, as in some circumstances the retention of the key may not be accompanied by the requisite animus possidendi or intention to exercise control and dominion over, and exclude others from, the goods (see, for example, Collector of Customs for the State of New South Wales v Southern Shipping Company Limited (1962) 107 CLR 279).
84 The applicants submitted that in the present case, M3G's lack of access to the keys was immaterial, because the containers were locked only in order to secure the goods until installation rather than to exclude M3G, which neither needed nor wished to open the containers. Further, the applicants submitted that M3G possessed and controlled the work site on which the containers were stored, which necessarily carried with it possession and control of the kitchen goods inside the locked containers. That possession was evidenced by M3G's responsibility to care for the containers, which it exercised without charging Lenny's when it was necessary to secure them with chains due to the impending cyclone.
85 The possession of a key to a container, accompanied by an irrevocable licence to enter premises controlled by another party in which the container is situated, has been held to establish possession of the goods.
86 In Wrightson v McArthur and Hutchinsons (1919) Ltd [1921] 2 KB 807; [1921] All ER Rep 261 ("Wrightson"), Rowlatt J held that the plaintiff had possession of goods placed in a locked separate compartment in the defendant's warehouse in circumstances where the keys were delivered to the plaintiff, who was licensed to enter the defendant's premises to use the key. Rowlett J observed that the locked compartment contained only the goods intended as the plaintiff's security for performance of a third party's obligations under a contract, and the evidence indicated that the parties had left the goods at the defendant's premises to save trouble in the event of the defendant redeeming them in due course.
87 Rowlatt J stated:
The point to which this case is now reduced is whether the circumstance that the rooms, the keys of which were delivered, were within the defendants' premises, prevents the delivery of the keys conferring possession of the contents of the rooms.
88 His Lordship observed that if the plaintiff had received the outside key to the whole warehouse or the keys to the apartment or receptacle in the premises of a third party, it would be clear that possession of the contents passed to the plaintiff. Conversely, if the "keys had been given without a licence to go and remove the goods at any time", it would have indicated that possession did not pass to the plaintiff, because, as the goods were in the defendant's warehouse, the plaintiff would lack any power of affirmative control at his free will.
89 Rowlatt J referred to the principle that delivery of a key has effect not as symbolic delivery, but as giving the actual control.
90 Rowlatt J concluded:
I think that in the case before me the possession was transferred, having regard to the fact that a licence to come and make the necessary entry to use the key was also conferred, a licence which it seems to me could not be revoked... [T]he mere fact that the plaintiff might wrongfully be excluded from the whole building does not, I think, affect the matter.
91 In the present case, Mr Lenny, an impressive, responsive and highly credible witness, whose evidence I accept, expressly testified that Lenny's retained the keys to the containers both to keep the goods secure and in order to maintain control of them. The consistent theme of Mr Lenny's evidence was that Lenny's intended to exclude others from the goods until it obtained payment in full. The applicants, in final written submissions, selectively quoted Mr Lenny's relevant evidence, omitting his crucial addition of intention to control.
92 In cross-examination, the following exchange occurred between senior counsel for the applicants and Mr Lenny:
And if you do open them, there's that possibility of dust getting into them, which you don't want happening. Is that right?
Well, yes, I guess. It's actually not necessarily the main reason. I mean, the main reason is to avoid the risk of losing anything out of those containers by somebody pilfering something, or damaging something. And then there's always an argument about who did it, and why is, you know, item number 139 is missing. We put it in there, where has it gone? … So that's really the main reason that we like to keep the things like that absolutely secure and under our control.
And is it the case that if someone else were to open the containers, that the warranty that you provided under the contract would commence?
No.
(emphasis added)
93 In re-examination, Mr Lenny stated:
You had a retention of title clause in your sale agreement, didn't you?
Yes.
And did you understand that the delivery of the goods to site would, in any way, mean that you lost control of the goods that you had consigned?
No.
And did you understand that delivery of those goods to site as part of the sale agreement that you had with M3G would allow M3G to open the containers and take possession of the goods?
No.
94 Mr Lenny also testified that as at 17 April "As far as I was concerned, we were the owners. Lenny's Commercial Kitchens still had possession or title to the goods, because we hadn't been paid at that stage".
95 In contrast, Mr Halliday, on whose evidence the applicants relied, asserted that M3G had possession of both the construction site on which the containers were stored and the kitchen goods themselves.
96 Sino initially objected to the admission of the relevant paragraphs of Mr Halliday's affidavit as conclusionary and unsupported by material facts, but ultimately, merely submitted that no weight should be accorded them.
97 Mr Halliday was an unimpressive witness who was frequently evasive, highly argumentative and unusually discursive. He failed to respond directly to many questions, despite being directed to do so on a number of occasions.
98 Mr Halliday testified that M3G's lack of keys did not affect its possession of the kitchen goods, as it had no need to open the containers and, had the need arisen, he would have broken the locks. He also testified that prior to the cyclone, M3G took action to secure the containers to the ground with chains at its own cost and did not seek reimbursement for its work from Lenny's.
99 Mr Halliday's final evidence was that when the prospect of opening the containers in order to check the goods arose, Luke Jordan of Lenny's offered to open the containers for him. Again, the applicants' written submissions misstated the effect of Mr Halliday's evidence on that significant issue, extracting only his earlier testimony (which he subsequently corrected) that Mr Jordan offered him the keys. Ultimately, Mr Halliday conceded that M3G did not at any time acquire possession of the keys and was at no stage offered possession of the keys for any purpose. The evidence does not indicate that Lenny's was willing to provide the keys to M3G if a need to open the containers arose, but, rather, that Lenny's intended to control and oversee any such process.
100 The evidence establishes, in my view, that Lenny's retention of the keys to the containers was principally, if not exclusively, due to its consistent intention to maintain possession of the kitchen goods until it obtained payment in full. Its maintenance of the keys reflected its animus possidendi in relation to the kitchen goods and in fact effectively excluded all others from access to them. As in Wrightson, Lenny's possession of the keys was coupled with an irrevocable licence to use M3G's right of access to the premises in which the containers were stored if payment were overdue. Therefore, irrespective of whether M3G had possession of the construction site as at the date of the acts of the alleged conversion and breach of s 440C of the Act, in my opinion, Lenny's had possession of the kitchen goods. M3G's securing of the containers during the cyclone did not, in the circumstances, establish its possession of the contents, but was consistent with its obligations under the construction contract. Lenny's animus possidendi extended to the panels, which although too large to be placed in the containers, were stored in immediate proximity to them and could be used only in conjunction with their contents.