Clauses 6, 9, 10 and 14 of the hire agreement related to payment of hiring fees, possession and use of scaffolding, insurance and indemnities respectively.
10 The transfer of the scaffolding from Prestons to Wetherill Park was supervised by Mr Gregory Baker. The transfer from Brooklyn to Wetherill Park was supervised by Mr Paul Stuart. Both of these persons were employees of Action. I find that the equipment purchased was all transported to Wetherill Park. While there were no loading documents to support this I am satisfied that the equipment from each site was all put onto trucks and sent to Wetherill Park and received there. The evidence is sufficient to establish that.
11 It was apparently a requirement of Citadel that the charged property of Action be painted a distinctive colour and it was probably a union requirement as well. Mr Paul Stuart and Mr Baker set up a painting area at Wetherill Park. Mr Stuart organized a particular paint from Luxury Paints in Queensland to be purchased and called it "action red". At this time Action had a yard at Granville, but there was no room there to set up a painting dock. Mr Stuart therefore sent Action scaffolding to Wetherill Park to be painted there and Action scaffolding coming back from sites after hire was also taken to Wetherill Park to be painted. At the same time the Reglon scaffolding was being painted and some, perhaps about 30 percent or less of the Reglon stock, was subject to a micro-dotting process. There was no separation by Action of the scaffolding of Reglon from the Action scaffolding at Wetherill Park. The items are such that they can be interchanged and apart from painting one cannot be told from the other.
12 Although ACS Hire was the company which hired the scaffolding from Reglon it did not hire it out to operators on building sites. That was done by Action. All ACS Hire did was to employ the administrative staff so as not to be liable to higher workers compensation premiums for those staff which would otherwise be payable by a scaffolding company. During the time the hire fees were being paid ACS Hire paid them, but was reimbursed by Action.
13 The Smit interests required possession of the whole of the Wetherill Park site in November 2005. By this stage ACS Hire was in default with its payment of hire fees. Mr Greg Baker arranged for all scaffolding at Wetherill Park to be moved to another yard at St Peters, probably leased by Action. Any stock at Granville was also moved to St Peters.
14 On 29 December 2005 Citadel appointed Mr Graham Hill, the second defendant, receiver and manager of the assets of Action pursuant to the charge. On 20 January 2006 Mr Peter Krejci was appointed voluntary administrator of ACS Hire. He was appointed liquidator on 13 April 2006. On 31 January 2006 Mr Krejci was also appointed voluntary administrator of Action.
15 Mr Maiolo is the sole director of Citadel. He is also the sole director of another company, Action Constructions Services (NSW) Pty Limited (NSW) which was formed around 16 January 2006. It was he who arranged to appoint Mr Hill as receiver. Mr Hill, on 18 January 2006 licensed NSW to carry on the business of Action. By then he had taken possession of all the equipment in the St Peters yard and the Granville yard and he had given notice of his appointment to those persons operating those sites on which there was scaffolding hired from Action. Some of that scaffolding can be assumed to have come from Reglon.
16 Mr Hill knew of the claim of Reglon that part of the scaffolding at St Peters and Granville belonged to it. Although he was told by Mr Kemp, the plaintiff's solicitor, that the Reglon items could be identified by the micro-dotting and in other ways, he had been told by Action staff that this was not the case. Nevertheless he proceeded either on the basis that it could be identified or that it could not be, yet he licensed NSW to use all the mixed stock and undertook or allowed Action to undertake in the licence agreement to make available to NSW "Action scaffolding and any other scaffolding (if any) that is being used by it to perform the contracts to enable the licensee to enter into and perform such contracts".
17 Mr Hill retired as receiver on 15 May 2006, on which date Citadel entered into possession of the assets of Action as mortgagee in possession. On the same date Citadel entered into a new licence deed with NSW on similar terms to the previous one. In other words Citadel proceeded to licence NSW to carry out the Action contracts using the mixed stock.
18 Mr Maiolo was well aware of the claims of Reglon that stock was mixed with the Action stock in the St Peters and Granville yards. He said that Mr Smit had said to him that the Reglon stock could be identified and that he had told Smit that if that was so then there would be no problem in taking the Reglon stock. Mr Smit agreed he may have made the last statement but said Mr Maiolo's remark was not said with conviction and I think it is clear that that is the position. Mr Maiolo was well aware of his actions in connection with the mixed stock and that he was using some stock of Reglon for his own benefit or the benefit of his own companies, and against the interests of the true owner.
Claims of the plaintiff
19 The final relief claimed by the plaintiff is an order that the defendants deliver up to the plaintiff the equipment or in the alternative an order for damages for conversion of the equipment. In addition the plaintiff seeks an order for an inquiry as to damages for loss of potential hiring charges, although it is fair to say this was not pressed.
20 It is necessary to explain what is meant by "the equipment". The summons identifies this as being "sufficient scaffolding equipment that equates to the scaffolding equipment claimed by the plaintiff in the proceedings and described in the schedule to the summons". The schedule to the summons sets out the same items as were included in the purchase agreement by Reglon from the court appointed receivers of the scaffolding.
21 I should say at the outset that while I take it to be the position where alternative claims are made that the defendant may elect to return the equipment in respect of which the detinue claim is made, that is not an order which I would make in the present proceedings. Apart from anything else it is necessary in detinue for a demand to be made prior to the commencement of the proceedings. The proceedings commenced on 15 February 2006 prior to any proper demand having been made. The summons cannot operate as the demand because the demand is central to the cause of action in detinue. In addition it would not be appropriate to order return of the scaffolding when some of it is hired to contractors on building sites. In those circumstances I turn to the claim in conversion.
Confusion and intermixture
22 It is not necessary to embark on a discussion of this subject from Roman law to the present day. Despite the strongly pressed arguments of Mr Coles QC, I think it clear that it is not essential that goods or products such as oil, sugar or cotton be mixed together in one vessel or container so as to merge in one substance for the general principles of co-mixture law to be brought into play. It is true Bramwell B is reported to have said in Smith v Torr [1862] 3 F&F 505 that the doctrine of confusion of property did not apply to distinct chattels like chairs and tables but to commodities "such as corn, wine, oil and the like of which there can be commingling of substance". Generally speaking in 1862 people could identify their furniture, but the doctrine has been applied in Canada to logs of wood: McDonald v Lane (1882) 7 SCR 462. I can see no reason to require a commingling of substances as distinct from a mixing of many types of identical items, when the ownership of a particular one of such items is impossible to tell from other items of the same type. The evidence is that apart from painting colours on items of scaffolding, such as those in issue in these proceedings, they cannot be distinguished one from another. I hold that commingling occurred.
23 The law in such a case can I think be stated as follows: Where there is wrongful intermingling of a substance or substances by one party, the whole belongs to the other party; where the intermingling is not wrongful, the whole is shared in common ownership in the proportions each has contributed; and perhaps in a case where there has been no intermingling of a substance, yet the mingling is wrongful, the innocent party should share in the whole, to the extent of his property introduced to the whole in a case where the contributions of the wrongdoer cannot be established or the case where both contributions cannot be satisfied. Sandeman & Sons v Tyzack & Branfoot Steamship Co Ltd [1913] AC 680 at 694. The subject is discussed in various texts including Vaines: Personal Property 4th Edition 1967 at 387 and Helmore Commercial Law and Personal Property in New South Wales 10th Edition 1992 page 40. In the present case the mixing was not shown to be authorised yet there is no mixing of substance. In those circumstances as between the owners entitled to claim and Action, I would hold that Reglon was entitled to recover from the articles painted red, equipment to the amount claimed in the summons. However, the matter is not as simple as that.
Interest of the parties
24 Neither Citadel nor Mr Hill could claim a greater interest in the mixed stock than could Action. They take title through Action. That was not disputed. Reglon claims in its own right.
Conversion
25 A co-owner does not commit conversion merely by using the joint property himself. But if one co-owner assumes exclusive possession and then uses the property solely for his benefit, then that will amount to a conversion. Here, each defendant by entering into a licence agreement with NSW would, I consider, be liable in conversion as it acted in complete disregard of Reglon's interest. See: Baker v Barclay's Bank Ltd [1955] 2 All ER 571; [1955] 1 WLR 822.
26 A receiver of the assets of the company appointed by a chargee under a deed or charge takes control of the assets of the chargor subject to the charge pursuant to the terms of the charge agreement. To license another company to use those assets mixed with the assets of some other company, without the consent of the other company, in my view amounts to a conversion. The conduct of Citadel and Mr Maiolo in licensing NSW, a company of which he was the sole director, to use the jointly owned equipment is a more blatant conversion.