Establishing liability for damage
Bailment law disputes - February 2024
Bailment law disputes - February 2024
A service provider will not be liable merely because they failed to take appropriate care of the service provider’s goods. It must be also demonstrated that the service provider’s actions (or inactions) caused the damage to the consumer’s goods.
Once you have established the level of care owed by the service provider in the circumstances and established that the service provider did not discharge their obligations to the consumer according to that level of care, it must be shown that there is a clear connection between what the service provider did (or did not do) and the harm to the goods.
This section includes information and scenarios relating to:
general liability and onus of proof
contributory negligence
failure to mitigate loss
relief
Where goods are damaged or lost while in a service provider’s possession and a consumer is seeking compensation from that service provider, significantly the service provider carries the onus of proving either that:
they took appropriate care of the consumer’s goods; or
their failure to take appropriate care did not contribute to the loss of, or damage to, the goods.
As discussed in the previous section, when assessing liability, the first step is to determine the level of care owed by a service provider in the circumstances. A court may consider the precautions normally taken by service providers in similar situations when deciding whether a service provider’s actions were reasonable or not. Disaster events, whether formally recognised by evacuation orders or not, do not change the service provider’s duty to look after goods or to prove that they have done so to the relevant standard of care. However, as we have outlined, disaster events may affect what level of care is expected of a service provider in the circumstances.
Importantly, a service provider will not be liable merely because they failed to take appropriate care of the service provider’s goods. It must be proven that the service provider’s actions (or inactions) caused the damage to the consumer’s goods. In other words, there needs to be a clear connection between what the service provider did (or did not do) and the harm to the goods. Ultimately, the adequacy or the reasonableness of the precautions taken (or not taken) by the service provider will not matter if the service provider’s failure to take appropriate care did not contribute to the loss or damage. For example, a car left with a mechanic could be destroyed regardless of any reasonable steps the mechanic took to prevent the loss. It follows that the more serious the disaster or natural event, the easier it will be for a service provider to prove that their failure to take appropriate care did not contribute to the consumer’s loss.
Contributory negligence refers to the concept that a person could, by their action, have contributed to a loss that they suffered (or, in other words, have caused or contributed to their own problems). The position on whether contributory negligence is a partial or full defence (if a defence at all) to a claim in bailment remains uncertain. The NSW Supreme Court has recently raised the possibility but expressed no view on whether contributory negligence can be a defence (partial or full) to a breach of a service provider’s duty. On other occasions, courts have observed (without reaching any final view) a potential argument for contributory negligence because the consumer had left car keys in the ignition of a car that was subsequently stolen when under the charge of the service provider.
While recent decisions do not directly address the defence of contributory negligence, there are older cases that do refer to the consumer’s negligence as being a full defence for the service provider. It has been said that the consumer cannot recover from the service provider damages that are the consequence of the consumer’s act. In one case, the Court held that since the service provider used the consumer’s appliances to secure the consumer’s goods (which later failed), it was the consumer who was responsible for their own appliances being insufficient.
The facts:
Sarah provides her car to a mechanic for servicing. The mechanic is fixing 20 cars. One day, the mechanic is put on notice that a flood is coming imminently. The mechanic is aware that he will only have the opportunity to move 10 cars to a safe place, with the other 10 cars being at risk due to the mechanic’s inadequate safety precautions. The mechanic calls all the consumers who own these 10 cars, including Sarah, and says “Please pick up you car because I can’t move it to safety in time.” Sarah, being only a 5 minute walk away from her car, forms the view that her car will be safe and takes no further action to pick up her car. Shortly afterwards, the flood arrives at the mechanic’s shop, destroying her car. All other consumers had picked up their cars from the mechanic after receiving the call.
The likely outcome:
In our view, Sarah helped cause the damage to her own car by not acting on the mechanic’s warning. Any damages awarded for the mechanic’s negligence (in failing to take adequate security precautions) may be reduced because the car owner had a chance to prevent the damages being suffered but did not take it.
It may be that any contributory negligence is instead relevant evidence that can be adduced by the service provider to prove that the service provider’s failure to provide care to the appropriate standard did not cause the relevant loss or damage.
The service provider has the onus of proving that the consumer should have mitigated their loss or damage. A court will consider the steps that the consumer ought reasonably to have taken to minimise the loss or, damage to, their goods. For example, if a consumer’s laptop is damaged while in a service provider’s possession, that consumer may have failed to take steps to repair the laptop before that damage became significantly worse. On the other hand, in the context of a disaster event, it is unlikely a consumer would be able to mitigate their loss.
If a service provider fails to exercise reasonable care with respect to a consumer’s goods, and the breach of that duty caused the relevant loss of, or damage to, the goods, the consumer would usually be entitled to some form of payment. The extent of the service provider’s liability would typically be determined by factors such as:
the terms of the parties’ bailment agreement;
the type of bailment; and
the level of care expected.
Generally, the service provider will be required to ‘make good’ the consumer’s loss or damage, which consists of restoring the consumer to the position they would have been in “but for” the breach of duty by the service provider (which may include interest).
The various forms of relief that a consumer might be entitled to include:
Compensation for loss or damage: a service provider may be required to compensate the consumer for the cost of repairs or the diminished value of the goods. If the goods are lost, the service provider may be liable to reimburse the consumer for the value of the lost goods;
Reimbursement for consequential loss: a consumer might be able to recover consequential losses that were foreseeable to the service provider. For example, if a mechanic was fixing a van that had signage indicating the van belonged to a plumber, the plumber’s loss of business would likely be reasonably foreseeable to the mechanic if the van suffered damage; and
Legal costs: this remedy would be granted in addition to one or more of the other forms of relief listed above. This form of relief is intended to compensation a consumer for any legal costs incurred in pursuing a claim for damages against a service provider.
In limited circumstances, the most appropriate remedy might involve something other than the payment of money, such as an order that the service provider must properly perform the subject contract (by fixing and returning the goods to the consumer). A court would consider it more appropriate to grant specific performance when:
the goods are unique or rare such that the compensation for the goods cannot be valued;
the goods are custom or tailor made and cannot be replaced/compensated;
the goods are sentimental and the value of the goods cannot be calculated;
the goods are used for a specific purpose and cannot be easily replaced; or
the service provider possesses a specific skillset/expertise for the proper use/repair of the goods, and seeking a replacement for those goods is difficult.
The consumer may also wish to seek to have the contract with the service provider cancelled. A court would consider cancelling the contract when:
the service provider used the goods illegally; or
the service provider attempts to claim ownership of the goods for their own use.
The facts:
Bridget, preparing for her wedding, commissions a grand cake from a baker located three hours away from the wedding venue. This wedding cake necessitates precise temperature control to manage its mixture of creams. To ensure its safe delivery, Bridget engages CBM Food, a specialty food delivery company with a commitment encapsulated in both a contractual term and advertising slogan to deliver temperature-controlled goods “rain, hail, or shine”. Convinced by this assurance, Bridget entrusts CBM Food to transport her wedding cake.
Two days before the wedding day, CBM Foods collects the cake, but there is an unexpected hailstorm. Medium sized hailstones pelted down, and the wedding cake melts. Bridget, upon hearing of what happened to her cake, is distraught and takes no steps to get a new cake. Without the cake, she cancels her wedding.
The likely outcome:
In our view, the parties are in a bailment relationship. The bakery, acting on Bridget’s behalf, delivered the cake to CBM Food, who accepted possession of it, with consideration exchanged through Bridget’s payment for its services.
CBM Food, as the service provider, bore the duty to safeguard the goods against foreseeable risks. While the refrigeration unit initially functioned properly, the hailstorm disrupted its operation. Although the hailstorm itself might not have been predictable, the potential for intervening events affecting a refrigeration unit should have been considered. A well-devised contingency plan, including standby vehicles, portable coolers, and emergency ice supplies, could have mitigated the impact on perishables goods. There was, in addition, nothing exceptional about the size of the hailstones which hit the van.
The “rain, hail, or shine” clause in CBM Food’s commitment implied preparedness for any weather event, suggesting that adverse conditions were in fact foreseeable. Bridget, relying on this clause, chose CBM Food, and its failure to meet these standards means it will be liable in bailment or for breach of contract.
Bridget could potentially seek compensation for the cost of the ruined wedding cake and the expenses related to obtaining an alternate cake. However, the subsequent decisions to call off the wedding may not be seen as reasonably connected to CBM’s failure to discharge their duties. CBM Food would therefore not be liable to compensate Bridget for these additional damages related to the cancellation of the wedding.
Once you have considered obligations and liabilities that arise in the context of a common law bailment relationship, you will then need to consider whether the common law bailment relationship has been modified by contract.
We discuss this further in the next resource, here:
This resource was last updated on 14 February 2024. This is legal information only and does not constitute legal advice. You should always contact a lawyer for advice specific to your situation. You can read our full disclaimer here: Disclaimer and copyright for our Disaster Legal Support Resource Hub – Justice Connect.