A ‘palletable’ decision with larger ramifications for industry

Friday, 09 February 2007

By Andrew Hudson  - partner, Hunt &  Hunt Lawyers.

A RECENT decision of the New South Wales Supreme Court has handed Brambles the right to recover CHEP pallets even though those holding them were not customers of Brambles. 

The case involved pallets used for the carriage of a wide variety of goods.  They are made available by the hirer on a “pooled” system.  Pallets are retained, passed from hirer to hirer (or non-hirer) until they are returned (or replaced).  Each hirer is responsible for hire while it has possession.  When a hirer passes the pallets to a “non-hirer”, the hirer remains liable for charges until the pallet is “de-hired”.  In this case, the defendants were not customers of the plaintiff.  However, there was clear evidence that for many years the defendants had received goods packed on pallets and stored the goods on those pallets until the goods were sold.  There were also advantages to the defendants to run their businesses that way.  Without a stock of pallets, the defendants would have been obliged to unpack goods as they arrived on pallets and to return the empty pallets immediately which would have involved additional delay and expenditure.  The evidence before the Court was also that there was a significant “black market” in pallets being used by those not party to the scheme.

The issue before the Court was whether the plaintiff had a right to immediate possession.  If so, then based on “conversion” and “detinue” the plaintiff could successfully recover the pallets and recover damages.  The general proposition is that any owner who is wrongfully dispossessed of goods does not lose the right to immediate possession.  However, where an owner lawfully gives possession to another, the right to immediate possession depends on the relevant contractual arrangements.  If goods are hired for a term, then there is no right to immediate possession unless there has been breach by the person to whom they are hired.  Where goods are hired “at will” (ie not for a term), the hirer then has a right to re-take the goods at will giving a right to immediate possession of the goods. 

The defendants raised a number of in defences.  However, those defences were rejected.  Based on the terms and conditions of hire, the Court held that the plaintiff’s terms of trade gave it a right to immediate possession as it made the hiring terminable at will.  That supported the actions of conversion and detinue.

As it currently stands, the decision represents a significant benefit to the plaintiff.  Many of those holding these pallets will now be giving thought as to whether they should be retaining those pallets.

Further, the decision has a number of other potential impacts.

Firstly, it provides a useful summary of the principles behind actions for conversion and detinue.  I am often consulted by parties who claim that others are unlawfully exercising liens over goods on account of moneys allegedly underpaid.  In those circumstances, one remedy is to bring an action for conversion and detinue to recover those goods.

Secondly, there is the clear potential that the principles may be adopted by those seeking to recover containers against those with whom they do not have a contract.  The traditional weapon of choice has been for the issue of container detention fees against the consignee even though the consignee no longer has the container.  Presumably, this case may give the owners of containers cause to consider taking actions against the holders of the containers.
Thirdly, freight forwarders and customs brokers often face action for container detention fees.  This case may afford those parties to raise a defence to the effect that in mitigating their loss, it is open to the owner of the containers to bring an action against those parties unlawfully holding the containers rather than merely seeking large amounts of detention fees (which often exceed the value of a new container).

The case represents an interesting modern application of some very ancient legal principles and we will watch with interest to see if there are any other actions brought using these remedies.