Leases and bailment 653

3If there is no contract between bailor and bailee (either because the bailment did not arise consensually, or because it was consensual but there was no consideration), are its terms enforceable? If so, by what mechanism? In particular, are the agreed terms of a gratuitous bailment (such as in Mitchell) enforceable, and, if so, how?

4Explain the significance of the fact that in Mitchell the council could not prove whether the furniture was stolen from the garage before or after it failed to meet Mr Mitchell as arranged. Why was the onus of proof on the council?

5Consider what the position would have been if, when Mrs Mitchell was evicted, she had left her furniture behind in the flat, the local authority had taken no steps to put it into storage, and it had then been stolen from the flat. Would the local authority have been a gratuitous bailee of the furniture? Would it have been liable to Mrs Mitchell for its loss?

6What duties are owed by a bailee to a bailor? What standard of care is expected from a bailee? Does it make any difference whether the bailment is for reward or (as in Mitchell and Sullivan) gratuitous? Should it?

7It appears from AVX Ltd v. EGM Solders Ltd that a person in possession of the goods in the mistaken belief that he is the owner has no duty whatsoever – but he must take reasonable steps to ascertain that they are indeed his goods. If he fails to do so and the goods are lost or damaged, is he liable as insurer, or is it a lesser standard of care, appropriate to someone who has goods thrust upon them?

17.4.5. Is bailment proprietary?

In Chapter 5, we identified three possible indicia of a proprietary interest, as opposed to a personal right. These are exclusivity (the interest carries with it a right to exclude others from enjoyment), exigibility/enforceability against nonparties (the interest is attached to the thing, in the sense that those subsequently dealing with that thing will be bound by the interest holder’s rights in the thing), and alienability (the interest can be passed from one person to another, so in that sense is not personal to the original holder). As we noted in Chapter 5, the third of these is by no means necessary for an interest to be proprietary, but we probably can say that an interest that does have this characteristic is proprietary. Measured by these criteria, does bailment confer a proprietary interest on the bailee?

17.4.5.1.Possession and exclusivity

The first point to make is that, since a bailee has possession, not only does he necessarily have the right to exclude the whole world, but also his interest is necessarily proprietary because possession is proprietary. It was argued above in relation to leases that a person in possession of land who does not hold any other proprietary interest in the land which carries with it the right to possession must necessarily have a lease of the land. For the same reason, it must follow that the

Leases and bailment 655

form, so that the assignee holds the interest on the same terms as the assignor. It is not necessary that the assignor should cease to be liable after assignment: as noted above, until the Landlord and Tenant (Covenants) Act 1995 lessees of land continued to be liable under the lease after assignment. Since a person assumes the character of a bailee simply by voluntarily assuming possession of a thing, as established by The Pioneer Container, it must follow that, when a bailee purports to transfer his interest and delivers possession to his transferee, the transferee will become a bailee of the owner – but this does not necessarily mean that the first bailee’s interest has been assigned. The decision in The Pioneer Container unfortunately is of no direct help here, as it concerned a sub-bailment rather than an assignment of a bailment. However, it is difficult to see why an assignment of the bailment should not result in the transferee taking on the same terms as the transferor, since by the act of accepting the transfer he can be said to be assuming possession on the same terms as those that bound his transferor.

17.4.5.3.Enforceability against third parties

The issue here is whether a person who purchases or takes a mortgage or charge over goods that have been bailed is bound by the interests of a bailee of the goods. There are shipping cases (discussed in Chapter 9 above) concerning purchasers and mortgagees who have been held not entitled to interfere with the performance of charterparties which would seem to support the proposition that bailments are enforceable against third parties, since charterparties which confer possession on the charterer are bailments: see further Clarke, ‘Ship Mortgages’, pp. 693–5. However, these cases have not escaped criticism by the courts, and it has been argued by William Swadling in ‘The Proprietary Effect of a Hire of Goods’, p. 491, that these cases are supportable only ‘as examples of a peculiar rule of maritime law derived from the Law Merchant [which] provide no authority outside that area’. It has to be said that there is nothing in these cases themselves to suggest that the courts thought they were dealing with a principle special to maritime property, and indeed, except in so far as a matter is covered by the Merchant Shipping Acts, ships are treated in property law in the same way as any other goods. However, in the absence of more recent direct authority, the question of enforceability probably remains open.

17.4.5.4.Other proprietary indicia

Nevertheless, there are other ways in which bailees are treated as having more than a personal right in respect of the bailed goods. Because the bailee has possession, bailees have the locus standi to bring actions for trespass and wrongful interference with goods. Also, a bailee has, in his own right, an insurable interest in the thing bailed, and is entitled to insure for the full value of the thing, not just for his own personal loss or to cover any personal liability he may owe to the bailor in the event of loss of the thing (Hepburn v. A. Tomlinson (Hauliers) Ltd [1966] AC 451, and see Palmer, Bailments, pp. 56 and 364–74). The same is not true of licensees of goods