Conversion of Scaffolding Upheld in NSW Court of Appeal

The Court of Appeal upheld the trial judge's decision that the respondent's actions constituted conversion of the claimant's scaffolding, entitling the claimant to damages. The Court found that the mixing of goods by accident and the repugnant nature of the bailment to the contract terms led to the termination of the bailment and the return of immediate possession to the claimant.

OUTCOME: Allowed

Appeal Outcome: Special leave refused with costs by the High Court - 13 June [ADDRESS] of Appeal

CITATION: [NAME_1] & [NAME_2] v [NAME_3] [2007] NSWCA 295

HEARING DATE(S): 29 August 2007

JUDGMENT DATE: 24 October 2007

JUDGMENT OF: Spigelman CJ at 1; Beazley JA at 2; Ipp JA at 157

DECISION: 1. The appeal is dismissed with costs; 2. The Amended Notice of Cross-Appeal is allowed in part, with costs; 3. The parties, within seven days, are to bring in short minutes of order to accord with these reasons.

CATCHWORDS: BAILMENT – bailment created by contract – whether common law principles continue to apply depends upon construction of contract – common law rights excluded only where clearest terms used – bailment contract provided remedies were not exclusive but cumulative to remedies existing at law – not necessary for [NAME_4] to accept repudiation for the right of possession to revert to [NAME_4] – goods of [NAME_4] interchangeable with goods of third party so as to be indistinguishable – where goods mixed by accident owners become owners in common of the mixed property – whether goods were mixed - BAILMENT – purpose of bailment was for on-hire of goods – [NAME_4] entitled to immediate possession where [NAME_5] performs act repugnant to or inconsistent with terms of bailment – whether [NAME_6] of [NAME_5] providing goods to third party for on-hire was repugnant to bailment - PRACTICE AND PROCEDURE – cause of [NAME_6] accrued after proceedings commenced – Civil Procedure Act 2005 (NSW) s 64 allows document to be amended to substitute cause of [NAME_6] that accrues after proceedings commenced - TORTS – conversion – damages of loss for conversion ordinarily full value of thing converted - TORTS – conversion – goods converted where they are dealt with inconsistently with owner's rights with intention of denying owner's rights or asserting right inconsistent with them – no requirement that goods must be destroyed or sold in a market overt – whether licence agreement vesting exclusive control over goods with third party was inconsistent with [NAME_4]'s right to immediate possession

Civil Procedure Act 2005 (NSW) s 64 LEGISLATION CITED: Conveyancing Act 1919 (NSW) s 36A Uniform Civil Procedure Rules 2005 (NSW) r 14.17

Baker v Barclay's Bank Ltd [1955] 2 All ER 571 Baldry v Jackson (1976) 2 NSWLR 415 Barnardiston v Chapman and Smith (1715) 4 East 121; (1715) 102 ER 776 Barton v Williams (1822) 5 [NAME_7] 395 Big Top Hereford Pty Limited v Thomas [2006] NSWSC 1159 Buckley v Gross (1863) 3 [NAME_7] 566 Coleman v Harvey [1989] 1 NZLR 723 Foskett v McKeown & Ors [2001] 1 [NAME_8] 102 Harper v Goodsell (1870) LR 5 QB 422 Indian Oil Corporation Ltd v Greenstone Shipping SA (Panama) [1988] QB 345 [NAME_9] v The Commonwealth of Australia (1974) 129 CLR 151; [1974] HCA 31 Mayhew v Herrick (1849) CB 229 McDonald v Lane (1882) 7 SCR 462 North General Wagon & Finance Co Limited v Graham [1950] 2 KB 7 [NAME_10] v Owners of Steamship Edison [1933] [NAME_8] 449 CASES CITED: Parr v Ash (1876) SCR (NSW) 352 Penfold's Wines Proprietary Limited v Elliott (1946) 74 CLR 204; [1946] HCA 46 Poulton v The Commonwealth & Ors (1952) 89 CLR 540; [1952] HCA 70 Re [NAME_11]: Ex parte [NAME_11] (1996) 70 FCR 254 Sandeman & Sons v Tyzac and Branfoot Steamship Company Limited [1913] [NAME_8] 680 Smith v Torr [1862] 3 F & F 505 Spence v Union Marine Insurance Co Ltd (1868) LR 3 CP 427 The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400; [2006] NSWCA 22 The Nominal Defendant v Andrews (1969) 121 CLR 562; [1969] HCA 51 Union Transport Finance Ltd v British Car Auctions Ltd [1978] 2 All ER 385 Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Limited [2007] NSWCA 276 Clerk & Lindsall on Torts, 15th ed [NAME_12], "Conversion by Wrongful Disposal as between Co-Owners" (1952) 68 Law Quarterly Review 507 Halsbury's Laws of England, 4th ed, 1984, vol 35 Fleming J G, The Law of Torts, 9th ed (1998) Sydney, [COMPANY_13] on Bailment, 2nd ed, (1991) Sydney, [COMPANY_13]

[NAME_1] [NAME_1] [NAME_1] (First Appellant) PARTIES: [COMPANY_14] (Second Appellant) [NAME_3] (Respondent)

FILE NUMBER(S): CA 40865/06

COUNSEL: [redacted] A Bannon SC; [NAME_15]; [NAME_15] (Respondent)

SOLICITORS: [redacted] [NAME_17] (Respondent)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 1478/06

LOWER COURT JUDICIAL OFFICER: Windeyer J

LOWER COURT DATE OF DECISION: 11 December 2006

LOWER COURT MEDIUM NEUTRAL CITATION: [NAME_3] v [NAME_1] & Ors [2006] NSWSC 1360

- 53 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40865/06

SPIGELMAN CJ BEAZLEY JA IPP JA 24 October 2007

[NAME_1] [NAME_1] [NAME_1] & [NAME_2] v [NAME_3]

In December, 2004, the respondent ([NAME_3]) entered into a hire agreement with [COMPANY_18] ([NAME_18]) for the stated purpose of on-hiring [NAME_3]'s scaffolding to other scaffold users. The hire agreement was for a period of ten years. Under the hire agreement [NAME_18] was a mere [NAME_5], with a right only to use the scaffolding in accordance with the terms of the hire agreement. The scaffolding was held in [NAME_3]'s holding yard at [ADDRESS]. Contrary to the terms of the hire agreement [NAME_18] gave the [NAME_3] to [COMPANY_6] ([NAME_6]), which in turn on-hired the scaffolding. [NAME_6] also owned scaffolding which was the subject of a fixed and floating charge in favour of the second appellant, [COMPANY_14] ([NAME_14]). [NAME_6] painted the [NAME_3] a distinctive red colour ([NAME_6] red) and as required by [NAME_14], painted some of its own scaffolding the same colour. In addition, about 30 per cent of the [NAME_3] was micro-dotted as a means of specifically identifying it. However, the evidence disclosed that the micro-dotting was ineffective as a specific identifier. Except to the extent that some [NAME_6] had not been painted, there was no means of distinguishing between the [NAME_3] and [NAME_6]. [NAME_6] first used [NAME_3] to complete any of the on-hire agreements and then used its own. In September 2005, [NAME_18] defaulted in the payment of hiring fees to [NAME_3]. In December 2005, all of the [NAME_3] and [NAME_6] (other than that on sites) was moved to a holding yard at St Peters. At this time, [NAME_6] became substantially arrears in its payments to [NAME_14], and as a result, [NAME_14] appointed the first appellant, [NAME_1], receiver and manager of [NAME_6]'s assets. [NAME_1] took possession of all the scaffolding in the St Peters yards and gave notice of appointment to persons operating sites where there was [NAME_6]. In January 2006, [NAME_1] licensed the business of [NAME_6] to [COMPANY_6] ([NAME_6]). [NAME_3]'s solicitor informed [NAME_1] that part of the scaffolding in his possession belonged to [NAME_3]. Notwithstanding this, the terms of the licence agreement permitted [NAME_6] to use all of the mixed stock. On 15 May, 2006, [NAME_1] retired as receiver and [NAME_14], as mortgagee, entered into possession of the [NAME_6] assets. On that same date, [NAME_14] entered into a new licence agreement with [NAME_6] in which it licensed the use of all of the scaffolding to [NAME_6]. On 16 February, 2006, [NAME_3] commenced proceedings against [NAME_1] and [NAME_14], relevantly alleging that they had converted the [NAME_3]. The trial judge, Windeyer J, found that the entry into the licence agreement was an act of conversion. His Honour entered judgment for [NAME_3] in the amount of $1,331,212 being the value of the [NAME_3] that had been the subject of the hire agreement.

Held per BEAZLEY JA (SPIGELMAN CJ and IPP JA agreeing) [NAME_3] have an immediate right to possession? (1) Any act which is repugnant to the bailment or inconsistent with the terms of bailment terminates the bailment, causing the right to possession to revert to [NAME_4]: [41], [43], [56] Penfold's Wines Proprietary Limited v Elliott (1946) 74 CLR 204; [1946] HCA 46; North General Wagon & Finance Co Limited v Graham [1950] 2 KB 7; The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400; [2006] NSWCA 22 (applied) (2) Where the bailment is created by contract, the extent to which the common law principles continue to apply depends upon a construction of the contract. Common law rights are only excluded or overridden by the terms of the contract if the clearest of terms to that effect are used. A clause that merely gives a right to terminate by notice for breach of the contract of bailment does not have that effect: [46]-[47] North General Wagon & Finance Co Limited v Graham [1950] 2 KB 7; Union Transport Finance Ltd v British Car Auctions Ltd [1978] 2 All ER 385; The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400; [2006] NSWCA 22; Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Limited [2007] NSWCA 276 (applied) (3) Clause 17.2 of the hire agreement provided that the remedies under the hire agreement were not exclusive, but cumulative and in addition to all other remedies existing at law.

Accordingly, the common law principles continued to apply: [59]

(4) Any use of the [NAME_3] by [NAME_6] that was permitted or authorised by [NAME_18] directly or indirectly, was an act repugnant to the terms of the hire agreement. Unlike the position had [NAME_3] been seeking to terminate the hire agreement, there was no necessity for [NAME_3] to accept the act of repudiation for the purposes of the right to possession reverting to it. As a result, [NAME_3] had a right to immediate possession: [84]-[85]

Did the mixing of [NAME_3]'s scaffolding have the effect that [NAME_19] became co-owners?

(5) Where the mixing of goods has taken place by accident or other cause, for which neither of the owners is responsible, the owners become owners in common of the mixed property: [93] Sandeman & Sons v Tyzac and Branfoot Steamship Company Limited [1913] [NAME_8] 680 (applied) (6) There was no error in the trial judge's reasoning or conclusion that the articles had been commingled. In addition, there was no basis to disturb the trial judge's finding that the mixing was wrongful: [101], [103]

(7) Despite the fact that 30 per cent of the [NAME_3] was micro-dotted, it was not possible to identify this scaffolding as belonging to [NAME_3]: [105]-[108]

Was the [NAME_3] converted?

(8) Conversion is the wrongful act of dealing with goods in a manner inconsistent with the owner's rights with the intention of denying these rights or asserting a right inconsistent with them. One of those rights is possession or the immediate claim to it: [122]-[123] [NAME_9] v The Commonwealth of Australia (1974) 129 CLR 151 at 172; [1974] HCA 31; Coleman v Harvey [1989] 1 NZLR 723 (applied); Re [NAME_11]: Ex parte [NAME_11] (1996) 70 FCR 254 (cited) (9) Whilst there may have been a historic basis for the restrictive rule that the goods must be destroyed, or some act akin to destruction, such as sale in a market overt, it is apparent that the law has developed and should be applied in its modern form: [123] Parr v Ash (1876) SCR (NSW) 352 (disapproved)

(10) The licence agreement between [NAME_6] and [NAME_6], by enabling [NAME_6] to continue with the on-hiring of the commingled scaffolding and to enter into new on-hire contracts in respect of which [NAME_3] had no benefits, had the effect that [NAME_6] exercised a right of exclusive control over the scaffolding, which was inconsistent with [NAME_3]'s right to immediate possession. As a result, the trial judge was correct in finding that the entry into the licence agreement constituted a conversion of the [NAME_3]: [126]-[127]

What consequences flowed from the cause of [NAME_6] against [NAME_14] accruing after proceedings were commenced?

(11) Section 64 of the Civil Procedure Act 2005 (NSW) provides that an amendment may be made to a document at any stage of proceedings, and that an amendment may be made notwithstanding that it has the effect of adding or substituting a cause of [NAME_6] that accrues after the commencement of the proceedings. As a result, there was a cause of [NAME_6] maintainable against [NAME_14]: [129]

[NAME_3] authorise the mixing of the scaffolding?

(12) [NAME_3] did not authorise the mixing of the scaffolding. The terms of the hire agreement required [NAME_18] to keep the scaffolding separate and that had not been waived. There was also evidence that established [NAME_6] was responsible for mixing the scaffolding: [137]-[139]

The extent of [NAME_3]'s entitlement to the commixed scaffolding

(13) As [NAME_3] did not authorise the mixing of the scaffolding, there was no error in the trial judge's finding that [NAME_3] was entitled to recover from the [NAME_3] an amount of scaffolding equivalent to the scaffolding that was the subject of the hire agreement: [141], [148]

Did his Honour err in reducing [NAME_3]'s entitlement by ten per cent?

(14) Under the terms of the hire agreement, [NAME_18] was [NAME_5] and was responsible for the whole of the [NAME_3]. The evidence established that the whole of the [NAME_3] came into the possession of [NAME_18] and/or [NAME_6]. In circumstances where [NAME_3] established that it had handed over the entirety of the goods to [NAME_18]; and that the entirety of the goods had been mixed with the [NAME_6], it had established its entitlement to damages for conversion of the whole: [144]

(15) In these circumstances, there was no basis for the trial judge's finding to reduce the damages by ten per cent: [147]

Did his Honour err in adding to the award of damages an amount for goods and services tax and a buyer's premium?

(16) The measure of damages of loss for conversion, ordinarily, is the full value of the thing converted: [154]

(17) In circumstances where the Court was concerned with the market value of goods, there was an argument for accepting the figure assessed, as market value, regardless of the underlying methodology. Further comfort may be gained for this approach where there was little argument on the point before the trial judge.

Accordingly, there was no error in the trial judge including an amount for goods and services tax and a "buyer's premium" in determining damages for conversion: [155]

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40865/06

SPIGELMAN CJ BEAZLEY JA IPP JA

24 October 2007 [NAME_1] [NAME_1] [NAME_1] & [NAME_2] v [NAME_3] Judgment 1 SPIGELMAN CJ: I agree with Beazley JA. 2 BEAZLEY JA: This is an appeal from a decision of Windeyer J in which his Honour ordered that the appellants pay damages to the respondent, [NAME_3] ([NAME_3]) for the conversion of a large quantity of scaffolding that had become mixed with the scaffolding of another company, [COMPANY_6] ([NAME_6]). The appeal is against both his Honour's finding that the scaffolding had been converted and against the quantum of damages awarded. 3 The appeal raises the following issues: whether [NAME_3], had an immediate right to possession of the [NAME_3] so as to give it a right to sue for conversion: (grounds 1 and 2); whether the mixing of [NAME_3]'s scaffolding with [NAME_6]'s scaffolding had the effect that [NAME_19] became co-owners of the whole of the scaffolding: (grounds 3, 4 and 14); whether the [NAME_3] had been converted: (grounds 5 and 6); what consequences flow from the fact that the cause of [NAME_6] against the second appellant, [COMPANY_14] ([NAME_14]), accrued after the date that proceedings were commenced: (ground 7); whether [NAME_3] authorised the mixing of the scaffolding: (grounds 8 and 13); the extent of [NAME_3]'s entitlement to the commixed scaffolding: (grounds 9 and 12); whether his Honour erred in reducing [NAME_3]'s entitlement by 10 per cent: (ground 4 of the Amended Notice of Cross-Appeal); and whether his Honour erred in adding to the award of damages an amount for goods and services tax and an amount for buyer's premium: (ground 15). 4 [NAME_3] has filed a Notice of Contention, alleging that there were other bases upon which his Honour could have found that it had an immediate right to possession of its scaffolding so as to give it an entitlement to sue in conversion. [NAME_3] has also filed a cross-appeal, in which it presses a claim in detinue and further appeals against the reduction of the award of damages by 10 per cent, which it contends was based upon an arbitrary assessment by his Honour of likely loss of scaffolding in the ordinary course of use. Counsel for [NAME_3] informed the Court that it relied on detinue only if for any reason its entitlement accrued after the act of conversion.

Facts 5 On 21 December 2004 [NAME_3] purchased a quantity of scaffolding (the [NAME_3]) from the receivers of a partnership known as the [NAME_20]. There were approximately 117,000 individual items of scaffolding, together with a number of pallets of other items of scaffolding. At the time of purchase, the scaffolding was located on two separate sites, one at Prestons in New South Wales and the other at Brooklyn in Victoria. Following the purchase, the [NAME_3] was moved to [NAME_3]'s holding yards at [ADDRESS]. 6 [NAME_3] had been introduced to the purchase transaction by [NAME_21], who previously had been involved with a scaffolding company, [COMPANY_22] (Rildean). Rildean had been placed in receivership and went into liquidation in 2002. Subsequently, [NAME_21] caused [NAME_6] to be incorporated and in 2004, [NAME_6] purchased the scaffolding owned by Rildean from Rildean's receiver. [NAME_6] borrowed the whole of the purchase price for this scaffolding from [NAME_14], which took a fixed and floating charge over the assets of [NAME_6] (other than debtors), to secure the loan. 7 In 2002, [NAME_21] incorporated another company, [COMPANY_18] ([NAME_18]). At various times, one or another of [NAME_21]'s sons was a director of the company, although [NAME_21] was the person who exercised effective control of the company. At the time that [NAME_6] purchased the scaffolding from Rildean, it was either hired out for use on construction sites, or was located in a holding yard at Granville, which was operated by [NAME_6]. [NAME_6] owned other scaffolding which was also located at Granville and it will be convenient to refer to any scaffolding owned by [NAME_6] as the '[NAME_6]'. 8 On 13 December 2004, [NAME_3] and [NAME_18] entered into a hire agreement pursuant to which [NAME_3] agreed to hire the [NAME_3] to [NAME_18] for a period of ten years (the hire agreement). [NAME_18] was required to clear the [NAME_3] from the sites at Prestons and Brooklyn and transfer it to the premises at [ADDRESS]. 9 Under the hire agreement, the stated purpose of the hiring of the [NAME_3] to [NAME_18] was for the on-hire to other scaffold users: cl 2.3. The rights of [NAME_18] to the scaffolding were described in cl 5.1 as the rights of a mere [NAME_5], with a right only to use the scaffolding in accordance with the hire agreement. [NAME_18] was required to keep the [NAME_3] at [ADDRESS] and to make it identifiable. 10 Notwithstanding that the purpose of the hire agreement between [NAME_3] and [NAME_18] was for the on-hire of the scaffolding, [NAME_18] did not hire out the scaffolding. That was done by [NAME_6]. However, [NAME_18] paid the hire fees to [NAME_3] in accordance with the terms of the hire agreement, but was reimbursed by [NAME_6] for these amounts. 11 [NAME_14] had required that the scaffolding subject of its charge (which was that part of [NAME_6]'s scaffolding purchased from Rildean) be painted a distinctive colour. In order to comply with this requirement, two employees of [NAME_6], [NAME_23] and [NAME_23], arranged for the purchase of a distinctive coloured paint called "[NAME_6] red". As there was no room at [NAME_6]'s yard at Granville to set up a painting dock, [NAME_23] and [NAME_23] sent [NAME_6] to the [ADDRESS] site to be painted there. Other [NAME_6] that from time to time came back from construction sites was also taken to [ADDRESS] to be painted. 12 The [NAME_3] was also painted "[NAME_6] red" at the [ADDRESS] site. Indeed, it seems that the [NAME_3] was painted first and that the [NAME_6] was painted as and when it arrived back after having been used on various construction sites. Any of the [NAME_6] that was at the Granville site was brought across to [ADDRESS] to be painted. However, not all [NAME_6], some of which was at all relevant times out on site, was painted. 13 In addition, about 30 per cent of the [NAME_3] was micro-dotted. The identification on the microdot was "[NAME_6]". 14 Once the scaffolding arrived at [ADDRESS], there was no separation of the [NAME_3] from the [NAME_6] and apart from scaffolding that had been micro-dotted and in the case of [NAME_6] that had not been painted, there was no means of distinguishing the [NAME_3] from the [NAME_6]. Further, as is discussed below, the micro-dotting process did not provide an effective means of differentiating that portion of [NAME_3]'s scaffolding that had been micro-dotted from any other scaffolding. 15 After the [NAME_3] had been painted and in some cases micro-dotted, Mr [NAME_23], who was employed by [NAME_6], sent it to construction sites or to the holding yard at Granville, at which [NAME_6] was located. [NAME_23] gave evidence that if the [NAME_3] was insufficient to complete any particular contract, scaffolding that was kept at Granville and not owned by [NAME_3] was used. He explained that this was possible because the scaffolding was interchangeable. 16 In September 2005, [NAME_18] defaulted in the payment of hiring fees. 17 In October 2005, [NAME_3] agreed with [NAME_18] that the scaffolding at the [ADDRESS] yard would be moved by early December 2005, to a new yard at St Peters that [NAME_21] was in the process of leasing. On 8 November 2005, [NAME_3] gave notice to [NAME_18] that it had terminated its lease of the [ADDRESS] yard and it required the scaffolding to be removed within four weeks. By mid-December 2005, all of the scaffolding from [ADDRESS] had been moved to St Peters and the stock at Granville was also moved to St Peters. 18 [NAME_6] at this time was substantially in arrears in its payments to [NAME_14]. On 29 December 2005, [NAME_14] appointed [NAME_1] receiver and manager of [NAME_6]'s assets, pursuant to the terms of its charge. By 18 January 2006, [NAME_1] had taken possession of all of the scaffolding in the St Peters yard, as well as any remaining stock at the Granville yard and had given notice of his appointment to persons operating sites at which there was scaffolding hired from [NAME_6]. His Honour found that some of that scaffolding was [NAME_3]. 19 On 18 January 2006, [NAME_1] licensed the business of [NAME_6] to [COMPANY_6] ([NAME_6]). [NAME_6] had been incorporated on or about 16 January 2006. Its sole director was [NAME_25], who was also the sole director of [NAME_14]. Prior to the licence agreement between [NAME_6] and [NAME_6] being entered into, [NAME_3]'s solicitor had informed [NAME_1] that part of the scaffolding at the St Peters and Granville yards belonged to [NAME_3]. He had also come to understand from [NAME_6]'s staff that the [NAME_3] could not be identified, either by micro-dotting or otherwise, and thus could not be differentiated from the [NAME_6]. Notwithstanding that [NAME_1] understood that [NAME_3] was at the St Peters yard and that it could not be separately identified, the terms of the licence agreement permitted [NAME_6] to use all of the mixed stock: see licence agreement, cls 1(b) and 3. 20 The trial judge found that the entry into the licence agreement was an act of conversion. 21 On 31 January 2006, an administrator was appointed to [NAME_6] and it subsequently went into liquidation on 27 April 2006. On 15 May 2006, [NAME_1] retired as receiver and [NAME_14], as mortgagee, entered into possession of the assets of [NAME_6]. On the same date, [NAME_14] entered into a new licence agreement with [NAME_6] on similar terms to the original licence agreement. The trial judge found that [NAME_25] was well aware that [NAME_3] claimed that its scaffolding was mixed with the [NAME_6] in the St Peters and Granville yards. His Honour also found that [NAME_25] was well aware that he was using some scaffolding of [NAME_3] for his own benefit, or the benefit of his companies. In March 2006, [NAME_25] caused a stocktake to be undertaken of the scaffolding in the St Peters yard and on the construction sites. The stocktake revealed there were approximately 285,000 items of scaffolding in total. 22 The trial judge held that the entry into the new licence agreement was also an act of conversion. 23 On 13 April 2006, [NAME_18] went into liquidation.

The proceedings 24 On 16 February 2006, [NAME_3] commenced proceedings against [NAME_1] and [NAME_14], seeking interlocutory orders directed to requiring a quantity of scaffolding equipment equal to the quantity of the [NAME_3] retained at the St Peters yard. Orders restraining the sale or disposition of any of the scaffolding was also sought. [NAME_3]'s claim for final relief was brought, relevantly, in detinue and conversion.

Grounds 1 and 2: did [NAME_3] have a right to immediate possession of the [NAME_3]? 25 In order to maintain an [NAME_6] in conversion, [NAME_3] was required to demonstrate that it had a right to immediate possession of its scaffolding. Its claim was that, notwithstanding that it had hired the scaffolding to [NAME_18] for a period of 10 years, [NAME_18] had, by allowing [NAME_6] to have possession and use of the scaffolding, acted in a manner that was fundamentally inconsistent with the terms of the hire agreement so as to be an act repugnant to it, or a repudiation, so that the right to immediate possession of the scaffolding reverted to it. It was fundamental to this submission that [NAME_3] did not have to comply with the terms of the hire agreement relating to termination, nor did it have to accept [NAME_18]'s repudiation. The fact of repudiation was sufficient. The essence of this argument was that [NAME_3]'s position as [NAME_4] was governed by common law principles. 26 The appellants contended, however, that the right to immediate possession was dependent upon [NAME_3] terminating the hire agreement in accordance with its terms, or, alternatively, it had to accept any alleged repudiation of the contract. In short, the argument was that the terms of the hire agreement governed the relationship between the parties, including the circumstances in which [NAME_3]'s right to immediate possession of the goods arose. 27 The appellants also contended that there had been no breach of the hire agreement, nor any conduct that was repugnant to its terms. In particular, they contended that [NAME_18] did not hand over the [NAME_3] to [NAME_6] and even it did, [NAME_3] did not thereby obtain a right to immediate possession under the terms of the hire agreement, because such an act was not repugnant to the bailment and even if it was, [NAME_3] had no right to immediate possession, because it had not terminated the hire agreement. They also submitted that insofar as [NAME_3] was out on construction sites, [NAME_3] had no right to immediate possession, because its rights were subject to the rights of the end hirers. 28 The trial judge accepted that the right of termination provided for in the hire agreement required notice in writing: cl 15.2.3, and that none had been given. His Honour considered, however, that the provisions of cl 2.3, which provided that the purpose of the hire agreement was for the on-hire of scaffolding to scaffold users on building and construction sites, and cl 5, which related to ownership of the scaffolding, were relevant to the determination of the question of the right to immediate possession. His Honour held that under the terms of the hire agreement, [NAME_18] had no right to hand over the [NAME_3] to [NAME_6] and in doing so had acted outside the terms of the hire agreement. His Honour held that [NAME_18] had no entitlement to possession and therefore, the right to possession was in [NAME_3]. It followed, on his Honour's reasoning, that [NAME_3] had standing to sue in conversion. 29 As the competing contentions of the parties require a consideration of the relevant terms of the hire agreement, it is convenient in the first instance to turn to its provisions.

The hire agreement 30 Clause 1.3 provided that the terms of the hire agreement exclusively and completely stated the rights of [NAME_3] and [NAME_18] with respect to the hiring of the scaffolding. 31 Clause 2.3, which is one of the provisions upon which the trial judge relied in reaching his conclusion that [NAME_3] had the right to immediate possession, provided that the parties "acknowledge that the [[NAME_3]] scaffolding has been hired to [NAME_18] for the purposes of on-hire to scaffold users in the building and construction industry". 32 Clause 3.1 provided that the term of the hire agreement was 10 years. 33 Clause 5.1 related to ownership of the scaffolding. It provided: "5 Ownership of the Scaffolding

5.1 [NAME_3]'s title to the Scaffolding, as at the date of this Agreement, is not, and shall not be, affected in any way by the terms of this Agreement, notwithstanding: 5.1.1 [NAME_18] taking possession or control of the Scaffolding; or 5.1.2 the management and use of the Scaffolding by ACS; or 5.1.3 any temporary attachment of the Scaffolding to any land or buildings to facilitate use of the Scaffolding, subject only to the rights of [NAME_18] as a mere [NAME_5] of the Scaffolding with a right only to use them in accordance with, and under, this Agreement." (Blue book 362) 34 Clause 9 contained a series of covenants regarding possession and use of the scaffolding. Under that clause, [NAME_18] acknowledged [NAME_3]'s right, at all reasonable times, to, inter alia, enter upon any premises or location upon which the scaffolding may be stored by [NAME_18]: cl 9.3(a); and inspect the state of repair of the scaffolding: cl 9.3(b). [NAME_18] also acknowledged [NAME_3]'s right and covenanted that it would use its best endeavours to ensure that others acknowledged [NAME_3]'s right at all reasonable times to "do any act, matter or thing which may be required to be done to give proper effect to the terms of [the hire agreement] or to protect [NAME_3]'s rights in the Scaffolding": cl 9.3(f). 35 Clause 15 provided for default and termination. Clause 15.1 specified the events of default, including a failure to pay hiring fees. Should an event of default occur, cl 15.2 gave [NAME_3] an option to: enforce performance; terminate the hire agreement; or retake possession of the scaffolding: cls 15.2.1, 15.2.2 and 15.2.3 respectively. 36 The right to terminate under cl 15.2.2 specified that [NAME_3] may "[t]erminate this Agreement and [NAME_18]'s right to possession of the Scaffolding by notice in writing to ACS" (emphasis added). Upon service of notice, [NAME_18]'s rights to, or in the use of, the scaffolding terminated and [NAME_3] was entitled to take possession. 37 Clause 15.3 specified events that constituted a fundamental breach of the hire agreement. It provided: "15.3 Events Constituting Fundamental Breach 15.3.1 It is expressly agreed and declared by [NAME_18] and [NAME_3] that the obligations of [NAME_18] under the following clauses are essential and fundamental terms of this Agreement such that failure to comply with them will constitute a repudiation of this Agreement entitling [NAME_3] to accept such repudiation: clause 6, clause 9, clause 10 and clause 14. [NAME_18] further agrees that should any event of default occur, its occurrence will be a breach of an essential and fundamental provision of this Agreement by [NAME_18] amounting to a repudiation by [NAME_18] of this Agreement. 15.3.2 The presence of clause 15.3.1 does not mean, and will not be construed as meaning, that there are no other terms and conditions which are fundamental and essential terms and conditions of this Agreement." (Blue book 375) 38 As outlined above, cls 6, 9, 10 and 14 were the nominated provisions in cl 15.3.1. 39 Clause 6 provided for the payment of hiring fees and other costs and expenses. Clause 9, to which I have already referred in part, contained covenants regarding possession and use of the [NAME_3]. Clause 10 provided that [NAME_18] had the obligation to maintain specified insurances in respect of the [NAME_3]. Clause 14 provided that [NAME_18] agreed to use, operate and possess the scaffolding at its own risk and to indemnify [NAME_3] against specified costs and liabilities. 40 Clause 17.2 provided: "17.2 Remedies Cumulative The remedies provided in this Agreement in favour of [NAME_3] arising pursuant to an event of default or after a repudiation of this Agreement by [NAME_18] will not be deemed to be exclusive but will be cumulative and will be in addition to all other remedies in its favour existing at law, in equity or in bankruptcy or insolvency. The election at any time to enforce any such remedies will in no way bar the later enforcement from time to time of any other such remedies."

Legal principles governing the right to immediate possession 41 The hire agreement, both as a matter of general law, and in accordance with cl 5.1 constituted a relationship of bailment between [NAME_3] and [NAME_18]. The general principle is that in a simple bailment, repudiation of the bailment brings the bailment to an end: The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400; [2006] NSWCA 22 per Young CJ in Eq at [63]; Palmer on Bailment, 2nd ed, (1991) Sydney, [COMPANY_13]. Both parties accepted that a reference to an act inconsistent with or repugnant to the bailment was a reference to a repudiation of the bailment. 42 This principle is of ancient origin. In Penfold's Wines Proprietary Limited v Elliott (1946) 74 CLR 204 at 227; [1946] HCA 46, Dixon J adopted as correct the principle as stated in [NAME_26], Possession in the Common Law, at 132: "Any act or disposition which is wholly repugnant to ( Donald v Suckling (1866) L.R. 1 Q.B. 585 at p 615) or as it were an absolute disclaimer of ( Fenn v Bittleston (1851) 7 Ex., at pp. 159, 160; [155 ER at p 899] per Parke B cf Cooper v Willomott (1845) 1 CB 672 [135 ER 706] and Bryant v Wardell (1848) 2 Ex 479 [154 ER 580]) the holding as [NAME_5] revests [NAME_4]'s right to possession, and therefore also his immediate right to maintain [conversion] or detinue even where the bailment is for a term or otherwise not revocable at will, and so a fortiori in a bailment determinable at will." 43 North General Wagon & Finance Co Limited v Graham [1950] 2 KB 7 is also authority for the principle that an act inconsistent with or repugnant to the bailment terminates the bailment and gives to [NAME_4] an immediate right to possession. As Asquith LJ stated at 14: "If [NAME_4] [has] a right to terminate this hiring at will the moment after a breach such as has occurred in this case, then it seems … the case becomes one in which [NAME_4] has an immediate right to possession and can sue a third party in conversion." 44 It seems that when Asquith LJ referred to a right to terminate at will, he did so in the sense meant in Possession in the Common Law at 166, which his Lordship quoted as follows at 14: "The remedies of [NAME_5] are not always exclusive, for [NAME_4] by reason of his right to possession may retain concurrently with him a sufficient right to maintain trespass and theft against strangers. This seems to be the case wherever the bailment is revocable by [NAME_4] at his pleasure either unconditionally or upon a condition which he may satisfy at will. But if the bailment is for a term certain (as in the case of goods let to the tenant of furnished lodgings) or determinable only after notice or after a default by [NAME_5] or upon any other occurrence which does not depend on the will of [NAME_4], then until the term has expired or become determined or become determinable at will , it seems that [NAME_4] is excluded and cannot maintain either trespass or theft or trover even against a stranger." (Emphasis added) 45 Cohen LJ stated at 15: "I must further point out that the hirer, in instructing the defendant to sell, and in selling, the car, has committed a breach of the contract which goes to the root of it. In those circumstances the following passage in Halsbury's Laws of England (2nd ed), vol 1, p 736, seems in point: 'The act of [NAME_5] in doing something inconsistent with the terms of the contract terminates the bailment, causing the possessory title to revert to [NAME_4] and entitling him to maintain an [NAME_6] of trover.'"

His Lordship then cited the passage in [NAME_26] set out at [42] above, noting that that passage correctly stated the law. 46 Where the bailment is created by contract, the extent to which the common law principles continue to apply depends upon a construction of the contract: see [COMPANY_27] v [COMPANY_28] per Young CJ in Eq at [60]. Common law rights are only excluded or overridden by the terms of the contract if the clearest of terms to that effect are used: see also Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Limited [2007] NSWCA 276. A clause that merely gives a right to terminate by notice for breach of the contract of bailment does not have that effect: Union Transport Finance Ltd v British Car Auctions Ltd [1978] 2 All ER 385 at 391 per Bridge LJ; [COMPANY_27] v [COMPANY_28] per Young CJ in Eq at [70]. In Union Transport Finance Limited v [COMPANY_29], Bridge LJ stated the proposition in these terms: "… it would be perfectly possible to introduce into a contract of bailment a term expressly limiting the manner in which [NAME_5]'s right to possession as against [NAME_4] could be terminated ... It seems to me that it would require the clearest express terms to have that effect. A clause which merely gives a right to terminate by notice for any breach of the contract of bailment could not possibly, in my judgment, be construed as having that effect. Its purpose is to enhance the rights of [NAME_4] and not to curtail them." 47 Palmer on Bailment explains the interaction between these principles at 108-109. The author points out that there is a distinction between the termination of the contract underpinning the bailment and the circumstances in which [NAME_4]'s immediate right to possession revives. He states: "When [NAME_5] performs an act fundamentally at variance with the terms of the bailment (eg, by deviating from the agreed route) no formal conduct is required on the part of [NAME_4] in order to determine the accompanying contract or to crystallise her or his immediate right to possess."

See also [COMPANY_30] v [NAME_31] per Cohen LJ at 15-16. 48 [NAME_3] relies upon this principle. The appellants contend, however, that to the extent that this principle was adopted in [COMPANY_27] v [COMPANY_28], that case was wrongly decided, because the stated principle is inconsistent with statements made by Barwick CJ in The Nominal Defendant v Andrews (1969) 121 CLR 562; [1969] HCA 51. They submit, therefore, that [COMPANY_30] v [NAME_31] should not be followed. 49 I will deal with that submission shortly. However, leaving The Nominal Defendant v [NAME_32] to one side, it would appear from the authorities to which I have referred, as summarised by Young CJ in Eq in [COMPANY_27] v [COMPANY_28], that the principle is, as stated by Roskill LJ in the Union Transport Finance case at 390: "… there is no room for doubt that the position at common law is this: if [NAME_5] acts in a way which, to use the phrase used in argument, destroys the basis of the contract of bailment, [NAME_4] becomes entitled at once to bring that contract to an end, and thus at once acquires the right to immediate possession of the article bailed."

The Nominal Defendant v [NAME_32] 50 In The Nominal Defendant v [NAME_32], the plaintiff had recovered damages against the Nominal Defendant for injuries suffered in a motor vehicle accident. The car in which the plaintiff was a passenger was unregistered and uninsured within the meaning of the Motor Vehicles (Third Party Insurance) Act 1942 (NSW) (Motor Vehicles (Third Party Insurance) Act) at the time of the accident. The car was the subject of a hire purchase agreement between the plaintiff and a finance company and was in the custody and possession of a third party, who was driving it at the time of the accident. 51 The Nominal Defendant brought a third party claim against the plaintiff on the basis that he was the owner of the car and the person entitled to immediate possession of it, so that pursuant to the provisions of s 32 of the Motor Vehicles (Third Party Insurance) Act, any judgment recovered against the Nominal Defendant in satisfaction of the plaintiff's claim might be recovered by the Nominal Defendant as a debt from the plaintiff. Under s 5 of the Motor Vehicles (Third Party Insurance) Act, "owner" was defined to mean: "(ii) where the motor vehicle is unregistered … any person who solely or jointly in common with any other person is entitled to the immediate possession of the motor vehicle." 52 The [NAME_6] was heard by a jury who rejected the Nominal Defendant's third party claim. In the High Court, it was held that it had not been established that the jury verdict should be disturbed. In coming to that conclusion, Barwick CJ discussed the question as to who had the right to possession of the car. He did so against the background of the hire purchase agreement, noting that it was a condition that the hirer, who was the plaintiff, was required under the hire purchase agreement not to take the goods outside New South Wales and to retain them in his possession and custody. 53 Clause 5 of the hire purchase agreement provided that if the plaintiff committed any breach of the agreement, then the hiring company might "without previous notice … determine the hiring and retake possession of the goods". The plaintiff's case was that because the third party who had been driving the vehicle obtained physical possession of the car with the plaintiff's assent, there had been a breach of the hire purchase agreement, so that the right of possession thereupon and without any necessity on the part of the hiring company to take any [NAME_6], reverted to the hire company. The argument then was that at the date of the accident, the hiring company was, as a matter of law, exclusively entitled to possession of the car. It was contended, therefore, that as the hiring company had the right of exclusive possession of the car, the plaintiff could not have been the owner for the purposes of the Motor Vehicles (Third Party Insurance) Act. 54 Barwick CJ stated at 567, that until the hire agreement had been terminated, "the right to possession remains in the hirer". The appellants in this case, rely upon that statement as stating the law governing the right to possession. They contend that cl 15 of the hire agreement specified the circumstances and the manner in which the agreement could be terminated. Even assuming there had been an event of default giving rise to the right to termination, [NAME_3] had not terminated the hire agreement by giving notice in accordance with cl 15.2.2. 55 Senior counsel for [NAME_3] submitted, however, that when making the comment that until termination, the right to possession remains in the hirer, Barwick CJ was concerned only with the definition of "owner" under s 5 of the Motor Vehicles (Third Party Insurance) Act and was not concerned with the question of title to sue in conversion and in particular, was not dealing with the law as to when a party has a right to immediate possession for the purposes of the tort of conversion. It was submitted that this was apparent from his Honour's comments at 567, that the mere fact that there had been a breach of the hire purchase agreement when the respondent parted with possession of the car, did not mean "that there was therefore an automatic change in the right to possession of the car in a proprietary sense" (emphasis added). The reference to possession in a "proprietary sense" is not relevant to the right to immediate possession for the purposes of entitlement to sue in conversion. Thereafter, his Honour's discussion was focussed upon the right of the hiring company to "recover the car", which also depended upon termination of the hire agreement. 56 In my opinion, this understanding of the Chief Justice's judgment is correct. The decision and his Honour's comments were directed to the construction of the meaning of "owner" within the Motor Vehicles (Third Party Insurance) Act and the question whether the trial judge's direction to the jury in that regard was correct. The statement "that there was therefore an automatic change in the right to possession of the car in a proprietary sense" was made in that context and not in the context of a claim in conversion. The principles that this Court should apply, subject to the question whether the terms of the hire agreement ousted the operation of the general law, are those to which I have referred above, that any act which is repugnant to the bailment or inconsistent with the terms of the bailment terminates the bailment, causing the right to possession to revert to [NAME_4].

Did the hire agreement oust the operation of the general law principles? 57 Before dealing with the question whether there was an act repugnant to the bailment, the logically anterior question arises as to whether the terms of the hire agreement exclusively govern the right to immediate possession, or whether the common law principles continue to apply. 58 The appellants relied upon the provisions of cl 1.3 in support of their argument that the terms of the hire agreement exclusively govern the rights of the parties, including any right to immediate possession. They submitted that cl 1.3 was an "entire contract clause". They also relied upon cl 15.2.2, whereby [NAME_3]'s right to retake possession was dependant upon [NAME_3] giving notice in writing and where [NAME_3] had not done so. 59 The complete answer to this submission is to be found in cl 17.2. Clause 1.3 is a clause which has the effect of preventing reliance on, for example, pre-contractual representations. Clause cl 17.2, however, specifically provided that the remedies under the hire agreement arising pursuant to "an event of default", as well as "after a repudiation of the [hire agreement]" were not exclusive, but were cumulative and in addition to all other remedies otherwise existing at law.

Accordingly, the principles to be applied in this case are those discussed above, that is, when [NAME_5] commits an act totally inconsistent with or repugnant to the bailment, the right to immediate possession of the bailed property is to revert to [NAME_4]. It is thus necessary to consider whether there was an act repugnant to the terms of the bailment.

Repudiation of the bailment 60 The trial judge found that [NAME_18]'s conduct in handing over the [NAME_3] to [NAME_6] was inconsistent with the possession it was given under the hire agreement and thus gave to [NAME_3] the immediate right to possession.

Accordingly, [NAME_3] had standing to sue in conversion. The trial judge considered that cls 2.3 and 5 of the hire agreement were relevant in reaching that conclusion. It will be recalled that under cl 2.3, [NAME_3] acknowledged that the [NAME_3] had been hired to [NAME_18] "for the purposes of on-hire to scaffold users in the building and construction industry". Clause 5 then specified that [NAME_18]'s rights in the scaffolding were as a mere [NAME_5], with a right "only to use [the [NAME_3]] in accordance with and under [the hire agreement]". 61 The appellants challenge this finding. Before dealing with the bases of this challenge, it is convenient to deal with another aspect of the appellants' appeal, namely, their contention that [NAME_18] did not hand over the [NAME_3] to [NAME_6]. The appellants argue that it was [NAME_18] that took possession of the [NAME_3] from sites in Preston and Brooklyn and had it delivered to [ADDRESS]; [NAME_18] had a lease over part of the [ADDRESS] site and when [NAME_3] was transferred to construction sites, it did not thereby pass into [NAME_6]'s actual possession. The appellants also rely upon the fact that [NAME_18] and [NAME_6] were both under the control of [NAME_21]. 62 In my opinion, the appellants' submissions misunderstand the trial judge's finding on this question. At [33], his Honour stated that "[t]here was no right to hand the scaffolding over to [NAME_6] for hire". The import of the appellants' submissions seems to suggest that there had to be some physical handing over of the equipment. Whilst I consider that the evidence was sufficient to establish that there was a physical handing over, the essential finding made by his Honour was that [NAME_18] allowed [NAME_6] to hire the equipment to scaffolding users. It was in this sense that his Honour found that [NAME_18] handed over the [NAME_3] to [NAME_6] for hire. 63 The evidence on that point was all one way. [NAME_21] gave evidence that [NAME_6] contracted with various builders to supply scaffolding and secured and administered those contracts. He also gave evidence that [NAME_6] paid [NAME_18]'s bills. [NAME_23] also gave evidence that the [NAME_3] was used to fulfil [NAME_6]'s hire contracts and if the [NAME_3] was insufficient, the [NAME_6] was also used. [NAME_33], the internal accountant for [NAME_6], gave evidence that even after the hire agreement was entered into, [NAME_18] did not carry on the business of hiring scaffolding equipment. Rather, [NAME_6] used whatever scaffolding it received from [NAME_3] to integrate it with its own scaffolding for the purpose of its business. 64 The appellants contended that that there was no difference in substance in handing the scaffolding to [NAME_6], because the intent of the hire agreement was that the scaffolding would not remain in [NAME_18]'s possession. Rather, the possession of the scaffolding was intended, by the terms of the hire agreement, to be given to third parties and there was no difference in substance in the scaffolding being given to [NAME_6] for the purpose of on-hiring from [NAME_18], or [NAME_18] doing the on-hiring itself. It was submitted that, in fact, the handing over of the [NAME_3] to [NAME_6] was done in furtherance of the purpose in cl 2.3. The appellants also contended that there was nothing in the hire agreement to prevent [NAME_18] using other entities as the hiring company, especially those controlled by [NAME_21]. 65 It was also submitted that the effect of [NAME_3]'s contention would be to impose an arbitrary limit on the way in which [NAME_18] could conduct its business and was inconsistent with the context in which the hire agreement was made. In this regard, the appellants contended that the context in which the hire agreement had been entered into included; [NAME_34]'s knowledge as to [NAME_21]'s businesses, [NAME_34]'s confidence in [NAME_21]'s expertise in operating scaffolding business and his acknowledgment that he had no desire to interfere with how [NAME_21] ran his business. 66 The appellants further contended that the conduct of [NAME_34] on behalf of [NAME_3], as revealed by his own evidence, was consistent with the appellants' interpretation of the hire agreement. They relied upon the fact that [NAME_34] had fortnightly meetings with [NAME_21] to see how the overall position was in respect of hiring out the scaffolding; that he gave evidence that he was "simply content that rent be paid"; and that [NAME_3], through [NAME_34], took no steps to ensure that [NAME_18] was complying with the terms of the hire agreement. In addition, the appellants rely upon [NAME_34]'s evidence that he said he would not have given instructions to separate the scaffolding. 67 I do not accept that this is a fair statement of [NAME_34]'s evidence. Indeed, his evidence was somewhat equivocal. It was apparent that [NAME_3] did not know at least until early 2006 that the [NAME_3] and [NAME_6] had been mixed. However, [NAME_34] said in his affidavit sworn 13 June 2006, that "[a]ccordingly, and in any event" (emphasis added), he would not have given instructions to separate the scaffolding. The appellants rely upon the phrase "and in any event" as demonstrating that [NAME_3] did not consider that the fact that [NAME_6] had possession of the scaffolding and had mixed it with its own, was inconsistent with the terms of the hire agreement. 68 However, that evidence has to be viewed in conjunction with [NAME_34]'s cross-examination. When asked whether he had taken any steps to ensure that [NAME_18] was complying with its responsibilities under the hire agreement to keep records of the comings and goings of the scaffolding, he explained that although he did not himself take any steps to ensure the records were kept, he was given assurances on many occasions by [NAME_23], [NAME_21] and other senior persons that stock control records were being kept and stock movements were being recorded. [NAME_34] also said that he was content to leave it to [NAME_21] to maintain such adequate records as he might choose to keep. In any event, he understood that because of the fact the stock was painted red and to some extent, the fact some scaffolding was micro-dotted, the [NAME_3] remained readily identifiable. 69 The effect of the appellants' argument is that no distinction was to be drawn between [NAME_18] and [NAME_6] and no significance should be attached to [NAME_18]'s obligations under the hire agreement because [NAME_21] was, in effect, both [NAME_18] and [NAME_6]. Whilst that might be an agreeable enough proposition in a non-legal context, it has no relevance to legal obligations created under a contract. Its irrelevance is underscored by the fact that, being separate legal entities, either [NAME_18] or [NAME_6], or both, could have come under completely separate ownership at any time during the course of the ten year period of the hire agreement.

Accordingly, any 'comfort' that might have arisen from [NAME_21]'s background control of each company was not to the point. 70 The very purpose of the detailed provisions of the hire agreement was to enable [NAME_3] to be assured of a number of matters, including the financial viability of [NAME_18] and its ultimate control over the scaffolding. As I explain below, the handing over of the [NAME_3] to [NAME_6] undermined, or at least had the potential to undermine, each and every obligation that [NAME_18] had under the hire agreement and had the potential to render the representations made under the hire agreement worthless. 71 It was submitted, alternatively, that [NAME_6] itself was a scaffold user, within the meaning of cl 2.3 of the hire agreement so that there had been an on-hire of the scaffolding by [NAME_18] to it. There was no evidence to support this contention. 72 The appellants further contended that his Honour's reliance on cl 5 was misguided. They argued that that clause did not have the effect of reserving the right to immediate possession to [NAME_3]. Rather, it was concerned with ownership, not the right of possession. It followed on this argument that his Honour erroneously construed cl 5 when, at [33], he stated that the handing over of the [NAME_3] to [NAME_6] for hire was an [NAME_6] "outside the terms of possession acquired by the contract". The appellants also submitted that this construction of cl 5 gave cl 15.2 no work to do and in particular, overlooked the operation of cl 15.2.2, which made provision for the termination of [NAME_18]'s right to possession in the case of an event of default. 73 There are a number of underlying difficulties with this submission. First, it fails to recognise the principles to which I have already referred, namely, that a bailment may be terminated by a repugnant act notwithstanding that the contract underlying the bailment may not be terminated, unless some requirement of the underlying contract, such as the giving of notice, has been complied with. Further, his Honour did not, as I understand his reasoning at [33], construe cl 5 as having the effect of "reserving the right to immediate possession to [NAME_3]" as contended by the appellants. Rather, his Honour considered that his conclusion that [NAME_18]'s actions in handing over possession of the [NAME_3] to [NAME_6] had the effect that the right to immediate possession reverting to [NAME_3], was supported by the provisions of cls 2.3 and 5. That is quite a different proposition from saying that his Honour construed cl 5 as having that effect. 74 In my opinion, his Honour's conclusion is correct and was supported by cls 2.3 and 5. Clause 2.3 required that the scaffolding be used for the purposes of on-hire to scaffold users. Under cl 5, [NAME_18] had a right to use the scaffolding only "in accordance with, and under, this Agreement". As I explain below, giving [NAME_6] possession of the [NAME_3] did not amount to compliance with cl 2.3. A failure to perform any of the covenants or provisions of the hire agreement was an event of default: cl 15.1, giving [NAME_3] the right to specifically enforce performance, or terminate the hire agreement, or to take possession of the scaffolding: cls 15.2.1, 15.2.2 and 15.2.3. 75 Under cl 15.2.3, if [NAME_3] chose to retake possession of the scaffolding, [NAME_18] was required to do all things necessary to give [NAME_3] the benefit of any contracts or arrangements entered into by [NAME_18] relating to the scaffolding. [NAME_18] may have been able to comply with this clause to the extent that any [NAME_3] was in the actual possession of [NAME_6]. However, [NAME_18] would have had no legal right to pass on to [NAME_3] the benefit of contracts of hire entered into by [NAME_6] with scaffold users, unless [NAME_6] cooperated with [NAME_18]. There was no legal obligation on [NAME_6] to do so and if [NAME_6] was in receivership or liquidation, it would have no actual ability to do so. 76 In any event, the handing over of the entire quantity of the [NAME_3] to [NAME_6] was a distinctly different commercial operation with different contractual and financial implications from [NAME_18] on-hiring the scaffolding to scaffold users from time to time in accordance with the terms of the hire agreement. There are a number of reasons why this is so. First, there was no express contractual control relating to the use of the scaffolding in [NAME_6]'s hands. This is of particular importance, because under the terms of the hire agreement, [NAME_18] had specific obligations in relation to the scaffolding. These obligations included where the scaffolding was to be stored: cl 4.1. It was required to pay various costs relating to the scaffolding, including all repair and operating expenses: cl 6.2.4. It was required, at its own cost, to keep and maintain the scaffolding in a properly serviced and working order, and in good and substantial repair: cl 9.1.1. 77 In addition, [NAME_18] made certain representations and warranties under the hire agreement, including a representation that it was not in default or difficulty under any deed or the like by which it was bound or in respect of any financial commitment or obligation that it had: cl 7.1.1. It also had an obligation to comply with all applicable laws relating to the safe and lawful operation of the scaffolding: cl 9.2.1. [NAME_6] had none of these obligations, nor did it make any representations to [NAME_3]. 78 Further, it is apparent that the fees to be derived from the on-hire of the scaffolding were to be a source of the hire fees payable to [NAME_3] under the hire agreement. By handing over the scaffolding to [NAME_6], [NAME_18] deprived itself of that source of income and potentially of its ability to pay the hiring fees under the hire agreement. [NAME_6] paid [NAME_18] the amount of the hiring fees payable to [NAME_3], this arrangement was only as viable as [NAME_6]'s own financial position, a matter in respect of which [NAME_3] had no knowledge and no control. 79 This is to be contrasted with the position as between [NAME_3] and [NAME_18]. [NAME_18] was required to submit to [NAME_3] a proposed annual program and budget: cl 11. Quarterly statements were required to provide true and accurate records and accounts of its performance of its duties under the hire agreement: cl 12. It was required to maintain proper systems of internal control to enable its assets to be adequately controlled and accounted for and to provide reasonable control of transactions: cl 13.1.2. Those records were to be available for inspection by [NAME_3] on 30 days notice: cl 13.2, and [NAME_18] was to provide a statement of account reflecting those matters at the end of each financial year: cl 13.3. 80 There were other provisions of the hire agreement that demonstrate the fundamental difference in the 'control' [NAME_3] had under the hire agreement and the potentiality for the loss of 'control' by the handing over of the scaffolding. Thus, pursuant to cl 6.2.4, not only was [NAME_18] responsible for the payment of all repairs and operating expenses relating to the scaffolding, it did not have authority to create any lien or charge upon the scaffolding and was required to give any workman notice of that prohibition before such workman undertook any work upon the scaffolding. There was no such prohibition or obligation on [NAME_6]. 81 Under cl 7.1.1, [NAME_18] warranted that it was not subject to any financial obligation that was reasonably likely to adversely affect its ability to comply with its obligations, including the payment of hiring fees, under the hire agreement. [NAME_6] gave no such warranty. This could have significant practical effects. For example, if a receiver or liquidator was appointed to [NAME_6], the receiver or liquidator would be entitled to receive the fees for the on-hire of the scaffolding by [NAME_6] for the payment of [NAME_6]'s creditors. [NAME_3], of course, was not a creditor of [NAME_6] and thus would not have any entitlement to claim any hire fees owing by [NAME_18] under the hire agreement either from the receiver or liquidator. 82 The loss of control by [NAME_18] over the scaffolding by giving possession to [NAME_6] underscores the fundamental difference in that arrangement to what was specified in the hire agreement and demonstrates that the arrangement with [NAME_6] was repugnant to the express provisions of the hire agreement.

Accordingly, there is no error in the trial judge's conclusion at [33] that handing the scaffolding over to [NAME_6] for [NAME_6] to on-hire was outside the terms of the hire agreement and was so inconsistent with the terms of the contract as to constitute a repudiation. As there was a repudiation, then, on the principles that I have already discussed, the right to immediate possession in the [NAME_3] reverted to [NAME_3]. 83 The appellants further contend that even if [NAME_3] had an immediate right to possession in respect of the [NAME_3], that did not extend to the scaffolding on sites, because the contracts for hire of scaffolding to builders vested the right of possession in the hirers. The appellants accepted that the hirers on site were sub-bailees and as such owed duties to [NAME_3] as the owner, those duties being subject to the contracts of sub-bailment. [NAME_3]'s answer to this is simple: the sub-bailments themselves were acts which were inconsistent with the terms of the bailment because the contracts of hire were between [NAME_6] and the relevant building companies. [NAME_3]'s agreement was for the on-hire by [NAME_18]. It was submitted that any sub-bailment agreement by [NAME_6] was contrary to the provisions of cl 9.3 and in particular, cl 9.3(f), which provided: "[[NAME_18]] acknowledges [NAME_3]'s right, and will use its best endeavours to ensure that others acknowledge [NAME_3]'s right at all reasonable times to:

…

(f) do any act, matter or thing which may be required to be done to give proper effect to the terms of this Agreement or to protect [NAME_3]'s rights in the scaffolding." 84 In my opinion, [NAME_3]'s submission is correct. But in any event, the [NAME_3] first came into [NAME_6]'s possession because [NAME_18] allowed [NAME_6] to on-hire the [NAME_3]. I have explained this above. The evidence disclosed that [NAME_6] took the [NAME_3] from the [ADDRESS] yard for that purpose. It follows, in my opinion, that any use of the [NAME_3] by [NAME_6] that was permitted or authorised by [NAME_18] directly or indirectly, was an act repugnant to the terms of the hire agreement. 85 Unlike the position had [NAME_3] been seeking to terminate the hire agreement, there was no necessity for [NAME_3] to accept this act of repudiation for the purposes of the right to possession reverting to it.

Grounds 3, 4 and 14: did the mixing of scaffolding result in co-ownership? 86 The trial judge held at [22] that the [NAME_3] was commingled with the [NAME_6] and that the various pieces of scaffolding were both interchangeable and indistinguishable from one another. There is no dispute about that factual matter. Nor can there be any doubt, for the reasons explained above, that [NAME_6], not [NAME_18], commingled the goods. Likewise there is no doubt that there was a lack of discrimination in [NAME_6]'s painting of the scaffolding – both [NAME_3] and a quantity of [NAME_6] ended up painted "[NAME_6] red". The commingled scaffolding ended up at the St Peters yard and/or on building sites. 87 The trial judge further held that, as a result of the commingling, [NAME_19] owned the scaffolding in common in the proportions that each had contributed: see Sandeman & Sons v Tyzac and Branfoot Steamship Company Limited [1913] [NAME_8] 680 at 694. 88 His Honour held that [NAME_3] was entitled to recover from the red-painted scaffolding, scaffolding to the amount claimed in the Summons: this entitlement was based upon the principles in Indian Oil Corporation Ltd v Greenstone Shipping SA (Panama) [1988] QB 345 at 370-371, where Staughton J stated: "… where B wrongfully mixes the goods of A with goods of his own, which are substantially of the same nature and quality, and they cannot in practice be separated, the mixture is held in common and A is entitled to receive out of it a quantity equal to that of his goods which went into the mixture, any doubt as to that quantity being resolved in favour of A." 89 The appellants contend that his Honour erred in finding that the scaffolding was co-owned by [NAME_6] and [NAME_3]. If it was not co-owned, they submitted that there was no conversion, because [NAME_3] was unable to identify the items that it alleged had been converted. This is the issue raised in ground 14. Alternatively, if his Honour was correct in finding that the mixing had resulted in the property becoming co-owned, the appellants contend that the licensing of the [NAME_3] did not amount to conversion. This is the issue raised in grounds 5 and 6. 90 [NAME_3] accepts that more than one person may have an interest in goods at the same time. Nonetheless, a person with a co-interest may commit an act of conversion. For example, in the case of joint owners of property, each joint owner is entitled to possession of the property, but does not have the right to exclusive possession. If a joint owner does an act that is justified only by the right of exclusive possession, then it commits an act of conversion as against the other joint owner: see Baker v Barclay's Bank Ltd [1955] 2 All ER 571. See also [COMPANY_27] v [COMPANY_28]. 91 The appellants' submission in respect of the question of co-ownership amounted to the following proposition: commingling for the purposes of the law of conversion only applies where substances are mixed in a way that the mixture becomes irreversibly one compound. The classic examples are the mixing of oil from two different owners. Once such substances are mixed, it is not possible to separate out the individual substances which went into the mix. It was submitted that the mixing of matters that retain their individual identity, such as was alleged in the case here, did not have the consequence of affecting title to the component parts. 92 This argument was based upon the Roman law principles of confusio (substances becoming irreversibly mixed) and commixtio (items which, though mixed together, retain their individual identity). The appellants contend that his Honour's adoption of the principles stated in [NAME_35] was erroneous, because that decision itself was erroneous. In short, the point was that his Honour applied the principle that was only available in the case of confusio and the intermingling of the [NAME_3] and [NAME_6] was a case of commixtio. It was further submitted that his Honour erred in distinguishing Smith v Torr [1862] 3 F & F 505. In that case, [NAME_36] stated that the doctrine of confusion of property did not apply to distinct chattels such as chairs and tables and by analogy for the appellants, to individual pieces of scaffolding. Rather, it was a principle that was confined to the mixing of substances such as corn, wine and oil. The point sought to be made was that individual pieces of scaffolding were 'distinct chattels'. 93 In my opinion, his Honour's approach and answer to the question whether the intermingling of the scaffolding resulted in [NAME_19] co-owing the scaffolding was correct and his terse dismissal of the need to enter into the interstices of Roman law was appropriate. In [NAME_35], [NAME_35], at 694-695, referred to the legal consequences that followed where the goods of one party become "indistinguishably and inseparably mixed with the goods" of another. Having explained that the consequence of the goods becoming mixed due to the wrongful act of one of the owners was that the innocent owner could claim the goods, his Lordship then stated the principle that Windeyer J applied in this case, namely: "… if the mixing has taken place by accident or other cause, for which neither of the owners is responsible , a different state of things arises. Neither owner has done anything to forfeit his right to the possession of his own property, and if neither party is willing to abandon that right the only equitable solution of the difficulty and the one accepted by the law is that [the owners] become owners in common of the mixed property." (Emphasis added) 94 His Lordship then commented that it was not safe to go further than stating that settled principle. He observed that it was apparent that the law was not settled, as was shown by the divergence of opinions as to the relevant shares that participating parties have in the case of an accidental commixtio. His Lordship referred to Buckley v Gross (1863) 3 [NAME_7] 566 at 575, where it was considered that where goods had been mixed, the parties would be tenants in common in equal shares; and to Spence v Union Marine Insurance Co Ltd (1868) LR 3 CP 427, where it was held that the parties possessed the mixed mass in proportion to the probable amounts of their contributions. [NAME_35] observed at 695: "The fact is that the conclusion of the Courts in such cases, though influenced by certain fundamental principles, have been little more than instances of cutting the Gordian knot – reasonable adjustments of the rights of parties in cases where complete justice was impracticable of attainment." 95 In this case, Windeyer J, after applying the principle to which I have referred, observed that the principles stated by [NAME_36] in [NAME_37] v [NAME_37] had not been strictly applied in other cases. His Honour referred to McDonald v Lane (1882) 7 SCR 462, where the principle relating to the rights of co-owners in an indistinguishable mass was applied in Canada to logs of wood. His Honour saw no reason, therefore, to require a commingling of substances, as distinct from a mixing of many types of indistinguishable items, where the ownership of any particular item is impossible to tell from other items of the same type. This, in my opinion, must be correct. It is apparent that the circumstances with which [NAME_36] was dealing in [NAME_37] v [NAME_37] were different from the circumstances here. In that case, the tables and chairs were said to be distinct goods and not commodities such as corn, wine or oil, etcetera, of which there could be commingling of substance. Here, the scaffolding were not distinct goods as such. Further, there is no reason in principle to confine the concept of confusio in the way suggested by the appellants. Principles of law may be applied to different circumstances either directly because there is no difference in substance in the different circumstances, or by analogy. Further, as [NAME_35] LJ observed in [NAME_35], the full parameters of the principle have not been determined. However, his Lordship stated the principle to the extent that it was settled. It was that principle that the trial judge applied in this case. 96 Not unsurprisingly, the concepts of confusio and commixtio have received little judicial attention. There was a passing reference in Foskett v McKeown & Ors [2001] 1 [NAME_8] 102. That case involved a dispute between two groups of parties as to the rights to a death benefit of approximately $1m paid by insurers pursuant to a whole of life policy. In the course of his judgment, Lord Hoffman referred briefly to the Roman concept of confusio. His Lordship stated at 115: "… this is a straightforward case of mixed substitution (what the Roman lawyers, if they had an economy which required tracing through bank accounts, would have called confusio )." 97 The point was picked up by [NAME_38], who, although dissenting in the result, did not agree that the principles of confusio and commixtio related exclusively to the ownership of corporeal property. His Lordship observed at 121 that there was no clear distinction in the use of the terminology applied to what had become recognised as the doctrines of confusio and commixtio. His Lordship also referred to [NAME_35]'s description of the principles in [NAME_35]. 98 In Poulton v The Commonwealth & Ors (1952) 89 CLR 540; [1952] HCA 70, Williams, Webb and Kitto JJ referred to the law applicable to the class of cases referred to by [NAME_35] in [NAME_35]. Although their Honours observed that it had not been established in that case that there had been any intermixture of the wool (being the commodity in question), to make it necessary to give the matter consideration, their Honours did not cast any doubt upon the correctness of the principle stated in [NAME_35]. 99 Brereton J, in Big Top Hereford Pty Limited v Thomas [2006] NSWSC 1159, at [62], applied the principle to circumstances where cattle had become mixed in a way that one group could not be distinguished from another. 100 In my opinion, the principle stated by [NAME_35] is not dependant on the type of goods in question, such as the mixture of oils, but to cases where items or goods become so inextricably mixed that they cannot be distinguished one from the other. Indeed, it might be said that one of the traditional examples of confusio, namely, the intermingling of pieces of corn, is no different, except to the extent of the size of the items, to the intermingling of indistinguishable items of scaffolding. 101 It follows, therefore, that there was no error in his Honour's reasoning or conclusion that the articles had been commingled so as to become commixtio. 102 If the appellants are correct in their submission, then subject to the question whether [NAME_3] authorised the mixing, the consequences may be that [NAME_3] was entitled to the whole of the scaffolding. If it is accepted, for the purposes of this argument, that [NAME_3], through [NAME_34], did not authorise the mixing of [NAME_3] with [NAME_6] and that mixing was done by [NAME_18], as asserted by the appellants, then, in accordance with the principles in [NAME_35] discussed above, in circumstances where the wrongful intermingling was done by one party, the whole belongs to the other. However, [NAME_3] did not contend for that position and I leave it to one side. 103 The appellants further contend that if [NAME_3] authorised mixing of the scaffolding, then the principle to be applied was that the shares of [NAME_6] and [NAME_3] as co-owners of the scaffolding were equal to the proportion of their contributions. In my opinion, there is no basis to disturb his Honour's finding that the mixing was wrongful, that is, that [NAME_3] did not authorise it. 104 Having reached that conclusion, it is not necessary to separately deal with ground 14 of the appeal, that [NAME_3] could not identify the items said to have been converted, as that ground depended upon there being error found in his Honour's finding as to commingling and co-ownership. However, the conclusion that I have reached does require a consideration of two issues: the first is that raised by ground 4, namely, that his Honour erred in finding that commingling occurred in respect of all the [NAME_3] and grounds 5 and 6, that there had been no conversion by the red scaffolding having been licensed.

Ground 4: did micro-dotting enable identification of the [NAME_3]? 105 This issue is essentially a factual one and can be disposed of briefly. The submission advanced by the appellants was that 30 per cent or less of the [NAME_3] had micro-dots on it. It was submitted that the evidence supported a conclusion that so much of the scaffolding that had been micro-dotted could have been identified as being [NAME_3]'s. It was submitted that the onus was upon [NAME_3] to establish that its scaffolding had become mixed with [NAME_6]'s scaffolding in such a way that both had become co-owners of the whole upon the basis of the principles just discussed: see also [NAME_40] v [COMPANY_40] (Panama). 106 There is no doubt that the intention of micro-dotting the [NAME_3] was so as to put a specific identifying mark upon it. The difficulty, however, with this identification system, was that, as described by [NAME_23] in his evidence, each micro-dot looks like "grinding dust". The micro-dots are sprayed with a spray gun, leaving approximately 20 to 30 micro-dots with each spray. [NAME_23] explained that once applied, the dots are very hard to find. He said that to be able to find the micro-dots, one would need to know where to find them, or, alternatively, every item of scaffolding would need to be inspected from every angle under an ultraviolet light. 107 [NAME_21] gave evidence that he did not believe that the micro-dotted equipment could have been easily located. He described the work of locating the micro-dots as being "extremely intensive work". As he explained, it would have been necessary to unstack in excess of 4,000 pallets, some of which were stacked four pallets high; unpack each pallet; inspect each of over 400,000 pieces of equipment, repack the pallets and restack the pallets. 108 In addition, not all the scaffolding was at the St Peters yard. Some had been hired out. It would therefore be necessary to visit all of the relevant building sites and carry out inspections on each piece of scaffolding with an ultraviolet light. To state the facts throws up the absurdity of the proposition upon which the appellants rely and ground 4 should be rejected.

Grounds 5 and 6: did the entry into the licence agreement amount to an act of conversion by the appellants? 109 The trial judge held that the licence granted by [NAME_6] to use the commingled scaffolding constituted an act of conversion because the entering into the licence agreement was an act in complete disregard of [NAME_3]'s interests: see [NAME_21] v [COMPANY_41]. 110 The appellants contend this finding was wrong. They contend, in short, that for a co-owner to be able to maintain an [NAME_6] in conversion, the co-owned goods must have been destroyed, or some [NAME_6] equivalent to destruction must have occurred at the instance of the co-owner. They rely on the statement of Mason J in [NAME_9] v The Commonwealth of Australia (1974) 129 CLR 151 at 172; [1974] HCA 31. 111 In [NAME_9], Mason J said at 172: "It is convenient, in the first instance, to consider the claim in conversion. Conversion may be brought at the instance of a co-owner of a chattel; in particular it will lie at the suit of a co-owner of a ship. In Barnardiston v Chapman and Smith (1715) 4 East 121 [102 ER 776n] a ship was possessed by one tenant in common and sent to sea without the consent of his co-tenant. It was held that trover would lie, the ship having been lost (see also [NAME_42] v [NAME_42] , per Lord Hatherley LC (1872) LR 5 HL 464 at p 474). In Barnardiston v Chapman and Smith (1715) 4 East 121 [102 ER 776n] the defendant dealt with the ship in a manner inconsistent with the rights of the plaintiff as co-owner by excluding him from possession and preventing him from exercising his rights." 112 Counsel for the appellants submitted that the authorities to which Mason J referred in this passage stand for the proposition that for an [NAME_6] in conversion to lie at the suit of a co-owner, the co-owner has to be deprived of the goods absolutely, or of all possible use and enjoyment of the goods: see Halsbury's Laws of England, 4th ed, vol 35 at [1217]; Clerk & Lindsall on Torts, 15th ed at 21-66. Counsel for the appellants further submitted that the reason behind the rule is that where a co-owner has used goods to the exclusion of another co-owner, the excluded co-owner can follow the property. In a case such as this, it was submitted that [NAME_3]'s remedy was to have sued [NAME_6] for a division of property under s 36A of the Conveyancing Act 1919 (NSW) (the Conveyancing Act). The appellants also accepted that [NAME_3] would probably have been entitled to sue for an account of profit. However, those claims were different from claims in conversion. 113 In Barnardiston v Chapman and Smith (1715) 4 East 121; (1715) 102 ER 776, the question before the Court was whether one tenant in common was only answerable to the other tenant in common for an actual destruction of the co-owned goods. That question was left to the jury in circumstances where the defendant had taken the goods in question, a ship, out of the co-owner's possession, secreted it from him and changed the name of the ship. The ship afterwards came into the possession of another party and was subsequently sunk and entirely lost. The question, therefore, was whether, in those circumstances, it could be found that the destruction had occurred "by the defendant's means". The jury found in the plaintiff's favour and the Court held there was no error in that finding, as the defendant had permitted the ship to go out of its possession and thereby lost control of it. 114 It appears that the same rule was followed in Parr v Ash (1876) SCR (NSW) 352. In that case, Sir James Martin CJ, after considering [NAME_43] v [NAME_45] and certain other authorities, stated at 355: "The principle to be gathered from the cases is that where one joint or part owner of chattel property seized the joint property, and deprived the other owner or owners of the use and possession of it, no [NAME_6] will lie except where the property was sold in market overt or where it was destroyed so that the part owner could not recover his share."

See also Harper v Goodsell (1870) LR 5 QB 422 at 428. 115 The appellants also submitted that to the extent that more modern authorities stated that goods will have been converted where some act is done inconsistent with the rights of co-ownership and only consistent with the right of sole ownership or exclusive possession, those authorities are wrong. In this regard reference was made to Coleman v Harvey [1989] 1 NZLR 723 and Re [NAME_11]: Ex parte [NAME_11] (1996) 70 FCR 254. 116 Before considering those decisions, it is convenient to refer again to [NAME_9] v The Commonwealth of Australia. In that case, a yacht that was co-owned by four people, and was on an around the world cruise, came under control of the Australian Customs Department when it entered port in Darwin. A dispute then arose between the co-owners. One of the co-owners obtained a certificate of clearance from the Customs Department and he and another two of the co-owners sailed away. The remaining co-owner brought proceedings against the Commonwealth, claiming that by issuing a certificate of clearance of the yacht, which enabled it to be sailed away, the Commonwealth had converted the yacht. 117 Mason J held that the certificate of clearance was a declaration that the law of the port had been complied with and that the yacht was entitled to leave. The issue of the certificate was not a dealing with the yacht in a manner inconsistent with the rights of the plaintiff as co-owner, nor was it a denial of the plaintiff's rights as a co-owner. Nor was its effect to deliver possession of the yacht to the party who sailed it away. It was in that context that his Honour made the observation that conversion will lie at the instance of a co-owner and in particular will lie at the suit of the co-owner of a ship. It was also in that regard that his Honour made reference to the decision in [NAME_43] v [NAME_45] in the terms quoted above. It is significant, in my opinion, to note that what his Honour derived from the facts was the inconsistent dealing which had the effect of depriving the co-owner of possession of goods and which prevented the co-owner from exercising the rights of co-ownership. 118 Thus, in examining whether the Commonwealth had converted goods by issuing the certificate of clearance his Honour focussed upon the effect of giving a certificate. The issue of the certificate of clearance enabled the ship to be sailed from the port without breaching any provision of the Customs Act 1906-1968 (Cth). It did not have the effect of delivering possession of the yacht from Customs to the persons who sailed it away. Those persons already had possession of the yacht. His Honour observed that the other co-owner was subsequently deprived of possession, but that was due to the acts of the other three co-owners and not by the actions of Customs in giving the certificate of clearance. 119 If a cause of [NAME_6] in conversion required either the destruction of goods or the sale in a market overt, as contended by the appellants, it is inconceivable that Mason J would not have said so and there would not have been any necessity for him to give any more extensive consideration to whether there had been a conversion by for example, considering the effect of the issue of a certificate of clearance. 120 In [NAME_46] v [NAME_46], the [ADDRESS] of Appeal held that the sale of the plaintiff's silver, which had been mixed with other silver, amounted to conversion. Somers J, (Richardson J agreeing) noted, at 731, that there was a respectable line of authority to support the proposition that a sale by one co-owner did not amount to conversion save where the right of property was lost. His Honour considered however that that proposition, the origins of which lay in the history of the actions of trespass, detinue and trover should not be sustained: see [NAME_12], "Conversion by Wrongful Disposal as between Co-Owners" (1952) 68 Law Quarterly Review 507 at 511-512. 121 In his article, [NAME_12] explained that trover originally applied only to cases of a wrongful disposal of a chattel, which in turn had developed as a remedy for cases that would ordinarily have been treated as trespass. He considered that the analogies that the courts had to draw on between co-owners were analogies arising out of relations between co-tenants of land and their rights inter se with respect to trespass of that land. He pointed out that it was understandable that an ouster was required before one co-tenant of land could sue his companion for trespass. In order for the same concept to be applied to conversion, [NAME_12] considered that it was necessary to have something amounting to destruction of the chattel because of the rule that possession of one co-tenant is the possession of both. He states at 513 that that may well be the historical explanation of the rule having been laid down so dogmatically in the old cases. [NAME_12] considered that the rule as tentatively expressed in Mayhew v Herrick (1849) CB 229 and in Barton v Williams (1822) 5 [NAME_7] 395 was to be preferred. In those cases it was held that it was not necessary to establish actual destruction in order to bring a claim in conversion. 122 Returning then to [NAME_46] v [NAME_46], although Somers J acknowledged that there was authority to the contrary, his Honour considered that the correct statement of principle was that: "Conversion is the wrongful act of dealing with goods in a manner inconsistent with the owner's rights with the intention of denying the owner's rights or asserting a right inconsistent with them. One of those rights is possession or the immediate claim to it."

His Honour referred, inter alia, to [NAME_9] v The Commonwealth of Australia in support of this proposition. 123 In my opinion, this statement, which accords with the principle as stated by Mason J in [NAME_9] is correct and should be applied according to its terms. See also Re Gillie and Ors; Ex parte [NAME_11] per Finn J. For the reasons I have explained, I do not consider that there is any basis for reading [NAME_9] in the restrictive way suggested by counsel for the appellants. Further, the old rule has been criticised both judicially and extra-judicially. Whilst there may have been an historic basis for the restrictive rule that the goods must be destroyed, or some act akin to destruction, such as a sale in a market overt, it is apparent that the law has developed and should be applied in its modern form. 124 The question to be determined therefore is whether the entry into the license agreement constituted an act of conversion. Under the licence agreement, [NAME_6] took over the business of [NAME_6], including taking over the performance of all existing contracts that [NAME_6] had, as well as entering into new contracts in the future of the same kind as [NAME_6] had entered into. [NAME_6] agreed to make available all of its scaffolding, and any other scaffolding that was being used by it to perform its existing contracts to enable [NAME_6] to continue to perform those contracts and to enter into new contracts. 125 [NAME_3] contend that in circumstances where its scaffolding could not be distinguished from the [NAME_6], the entry into the licence agreement constituted an act that was inconsistent with its rights as joint co-owner. In short, the effect of the licence agreement was to enable [NAME_6] to use all of the commingled scaffolding for its own purposes, to the exclusion of [NAME_3], in circumstances where there was no possibility that [NAME_3] could ever use or recover the [NAME_3] because it could not ascertain what was its scaffolding and what was the scaffolding of [NAME_6]. 126 It is possible that one answer to that contention is that [NAME_3], as a co-owner would have had the right to use the whole of the scaffolding. Whilst that is right as a matter of principle, it also explains why, in my opinion, the licence agreement was an act of conversion. Under the licence agreement, a third party, over whom [NAME_3] had no control and with whom it had no contractual relationships, had the use of the scaffolding. [NAME_3] itself could not use the scaffolding and did not necessarily know where it was. The licence agreement, by enabling [NAME_6] to continue with the on-hiring of the commingled scaffolding and to enter into new on-hire contracts in respect of which [NAME_3] had no benefits, had the effect that [NAME_6] exercised a right of exclusive control over the scaffolding, which was inconsistent with [NAME_3]'s right to immediate possession. 127 It follows, in my opinion that the trial judge was correct in finding that the entry into the licence agreement constituted a conversion of the [NAME_3].

Ground 7: cause of [NAME_6] against [NAME_14] 128 The appellants contend that the claim against [NAME_14] should have been dismissed, as the alleged act of conversion upon which [NAME_3] relies did not occur until after the proceedings had been commenced. [NAME_3]'s Summons in the matter was initially filed on 16 February 2006, in which [NAME_3] sought both interlocutory and final relief. The final relief included a claim for damages for conversion of the [NAME_3]. The appellants contend that there was no cause of [NAME_6] for conversion against [NAME_14] when the proceedings were commenced, with the consequence that there was no cause of [NAME_6] maintainable based on the cause of [NAME_6] on which [NAME_3] ultimately succeeded. 129 This ground should be rejected. Section 64(1) of the Civil Procedure Act 2005 (NSW) (the Civil Procedure Act) provides that a court may, at any stage of proceedings, order that a document in the proceedings be amended. The power of amendment is to ensure that the court determines the real questions raised by or otherwise depending on the proceedings and includes the purpose of avoiding multiplicity of proceedings: subs (2). Pursuant to subs (3), an amendment may be made notwithstanding that it has the effect of adding or substituting a cause of [NAME_6] that has arisen after the commencement of the proceedings. 130 Should the amendment be made for the purposes of adding a cause of [NAME_6], then the date of commencement of the proceedings in relation to that cause of [NAME_6] is to be taken to be the date on which the amendment is made: see also subs (3). The purpose of that provision relates, inter alia, to the calculation of interest. Section 64 is further aided by r 14.17 of the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR), which provides that a party may plead any matter, even if the matter has arisen after the commencement of the proceedings. 131 Counsel for the appellants refined his argument on this point and made two submissions. The first was that r 14.17, which permitted the pleading of a matter which had arisen after the commencement of proceedings, did not extend to a cause of [NAME_6]. This submission was undoubtedly based upon this Court's decision in Baldry v Jackson (1976) 2 NSWLR 415, in particular at 419, to which reference is made in the annotations to r 14.17: see "Ritchie's Uniform Civil Procedure New South Wales" para 14.17.5. It is not necessary to pause to consider the effect, purpose or extent of the operation of r 14.17. Section 64(3) of the Civil Procedure Act which specifically permits an amendment to add or substitute an [NAME_6] that has arisen after the commencement of the proceedings. 132 As I understand it, this led to a further submission, which was directed to the operation of r 14.17 but may also have extended to s 64, that is, the power of amendment only related to pleadings and this matter was commenced by Summons. However, [NAME_3] claimed in its Summons an order that the appellants pay damages for conversion of the [NAME_3]. That is the relief that was ordered.

Accordingly, it was not necessary for it to amend its claim in order to be entitled to the relief sought. I perhaps should add that, in any event, the Summons was amended, it appears, on two occasions, with a Further Amended Summons being amended on 7 November 2006 with leave, but not so as to amend the relief sought in respect of the conversion of the [NAME_3]. 133 Counsel for the appellants argued, although only faintly, that the cause of [NAME_6] had to accrue before proceedings were commenced. He acknowledged the existence of s 64(3) of the Civil Procedure Act which permitted an amendment to introduce a cause of [NAME_6] that had not accrued at the time that the proceedings were originally commenced. His point, however, seemed to be no more than that there was no amendment to do that. I would reject this argument for the reasons already given. 134 It follows that this ground should be rejected.

Grounds 8 and 13: the mixing of the [NAME_6] and [NAME_3] was authorised by [NAME_3] and it was not established that [NAME_6] did the mixing 135 The trial judge found at [23] that the mixing of the [NAME_6] and [NAME_3] was not shown to have been authorised by [NAME_3]. The appellants challenge the correctness of this finding. They also contend that it is implicit in this finding that [NAME_6] was responsible for the mixing and contend that this was not established on the evidence. 136 The appellants rely upon [NAME_34]'s evidence that he knew that [NAME_21] had other scaffolding interests and the only reason that he purchased the [NAME_3] in the first place was because he could on-hire it immediately to a company under the control of [NAME_21]. The appellants also rely upon the fact that [NAME_34] knew that the scaffolding at [ADDRESS] was to be moved to St Peters, together with scaffolding from the yard conducted by [NAME_6] at Granville. This was for the express purpose of [NAME_21] consolidating his scaffolding operations in the one place. 137 However, the fact that [NAME_34] knew that [NAME_21] had other scaffolding operations and that he knew, at least at some stage, that all the scaffolding was to be held in the same yard, does not mean that he authorised it to be mixed together so as to become indistinguishable. In any event, the evidence is to the contrary. There was evidence that the terms of the hire agreement required [NAME_18] to keep the scaffolding separate. The circumstances relied upon by the appellants do not establish that that obligation had been waived. 138 Furthermore, the evidence contradicts the appellants' assertion. [NAME_34], in his affidavit of 16 February 2006, stated that when the [NAME_3] was first brought to the yard at [ADDRESS], there was no other scaffolding on the site. In February 2005, [NAME_23] informed him that a painting bay was to be constructed for the purposes of painting the [NAME_3]. [NAME_23] advised [NAME_34] that his sole role in being at the [ADDRESS] yard was to prepare and paint the [NAME_3]. During this process, [NAME_23] also invited [NAME_34] to attend at the yard to see the micro-dots that had been placed on the [NAME_3]. 139 [NAME_34] also gave evidence that he was never told that scaffolding other than the [NAME_3] was being brought into the [ADDRESS] site. The evidence of [NAME_21] and [NAME_23] was that [NAME_6] was responsible for mixing the two lots of scaffolding. There was no evidence to the contrary and this evidence was not challenged. 140 Accordingly, these grounds should also be rejected.

Ground 9: [NAME_3] was not entitled as against [NAME_6] to recover from the red scaffolding an amount of scaffolding equivalent to the [NAME_3] 141 The appellants advanced the same arguments in support of this ground as were advanced in respect of Ground 8. However, as I have found that [NAME_3] did not authorise the mixing of the scaffolding, it has not made out its challenge to the trial judge's finding that [NAME_3] was entitled to recover from the red scaffolding an amount of scaffolding equivalent to the [NAME_3]. The appellants also advanced the submission that his Honour's finding in this regard was dependent upon a finding that [NAME_6] mixed the scaffolding. I deal with this question below and determine it adversely to the appellants' contention. It follows, therefore, that Ground 9 should also be rejected.

Ground 4 of the Amended Notice of Cross-Appeal: reduction of [NAME_3]'s entitlement by 10 per cent 142 The trial judge, at [36], dealt briefly with [NAME_3]'s ultimate entitlement to damages. That determination depended upon whether [NAME_3] had established that all goods identified in the Summons had been converted. His Honour found, correctly on the conclusions to which I have come, that the entirety of [NAME_3]'s scaffolding came into [NAME_6]'s possession. His Honour considered that it was reasonable to make some allowance for loss prior to conversion and for damaged stock. His Honour considered that it was reasonable to allow a reduction of 10 per cent to take account of what I understand to be, in effect, a contingency to allow for that. It is not apparent from his Honour's reasoning what factual findings underlay this reduction. As I have said, it appears more to be an allowance of a type of contingency for what might have happened. The appellants appear to accept this analysis, as they accept in their written submissions that the estimate of 10 per cent was not based upon evidence. They considered, however, that it was for [NAME_3] to prove that all of its scaffolding had been mixed with [NAME_6]. 143 In my opinion, his Honour's reduction of the damages by 10 per cent was not supported by the evidence and was in fact contrary to the evidence. First, the evidence was unequivocal that the entirety of the [NAME_3] arrived at the [ADDRESS] yard and that at that time there was no other scaffolding at the yard. Thereafter, the scaffolding was, pursuant to the hire agreement, under the care and control [NAME_18]. Further, as the evidence disclosed, [NAME_6] had the physical control of the scaffolding. 144 Under the terms of the hire agreement, [NAME_18] was [NAME_5]. It was responsible for the whole of the [NAME_3]. The evidence established that the whole of the [NAME_3] came into the possession of [NAME_18] and/or [NAME_6]. In my opinion, in circumstances where [NAME_3] established that it had handed over the entirety of the goods to [NAME_18]; and that the entirety of the goods had been mixed with the [NAME_6], it had established the first step necessary to be entitled to damages for conversion of the whole. Thereafter, the evidence was that when scaffolding was required to fulfil an order for a particular site, about 99 per cent went via the Granville yard. 145 The Granville yard, of course, was operated by [NAME_6]. When the scaffolding was at the Granville yard, it was entered into [NAME_6]'s computer records. The evidence was also that when the move was made to the yard at St Peters, any remaining stock at [ADDRESS] was transferred to St Peters, so that by the end of December 2005, all the stock at the [ADDRESS] yard and a large percentage, if not all, of the stock from the Granville yard had been moved to St Peters. On 29 December 2005, [NAME_1] was appointed receiver and manager of [NAME_6] and on that date, he took possession of all the scaffolding at the St Peters yards as well as the scaffolding at the building sites that were serviced by [NAME_6]. 146 It is perhaps relevant in this regard to observe that [NAME_1] did not become aware that [NAME_3] owned any of the scaffolding until about 11 or 12 January 2006. 147 In my opinion, there was no basis in the evidence for his Honour's finding to reduce the damages by ten per cent.

Accordingly, there will have to be an adjustment in the judgment sum.

Ground 12: it was not established that all of the [NAME_3] was mixed 148 The conclusion at which I have arrived in respect of Ground 9 and Ground 4 of the Cross-Appeal effectively deals with Ground 12 of the Appeal in which the appellants contend that it was not established that all of the [NAME_3] was mixed. Ground 12 should accordingly also be rejected.

Ground 15: "buyer's premium" and GST 149 The appellants contend that the damages should be reduced in any event by deducting GST and a "buyer's premium", which they contend was included in the valuation of [NAME_47] and accepted by the trial judge. 150 The appellants contend that these amounts should be deducted because the ordinary measure of damages in conversion is the value of the thing converted as if there was a forced sale to [NAME_3]. It was submitted that, as there was no actual sale, then additional amounts such as GST and buyer's premiums ought not to be included. 151 [NAME_3] contended that this submission misunderstands the evidence. [NAME_47] assessed the sale price of the [NAME_3] at $1,478,125, including GST and buyer's premium, following a joint consultation with [NAME_3]'s expert, [NAME_48]. In the combined report put before the trial judge, the experts agreed that auction value in the present case was the same amount as the market value. They also agreed that market value was: "… the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion."

In assessing market value, [NAME_47] found the market value and the equivalent auction value of the scaffolding to be $1,478,125. 152 Whilst it is correct to say that that amount included both the buyer's premium and GST, the calculation that needed to be done was one that assumed an auction. Under an auction, the buyer, who on the underlying principles was the appellants, would be required at auction to pay both a buyer's premium and GST. Whilst the sale is hypothetical and because the appellants in this notional sale would not receive either the buyer's premium or the GST, there is a basis for an argument for the reduction of damages so as to exclude those amounts. 153 [NAME_3] submits that the amounts should not be deducted for two reasons: the first was that the sale price of $1,478,125, was [NAME_47]'s assessment of fair market value. However, where, as in this instance, the fair market value was also the auction price, then it is arguable that those amounts ought to be deducted. 154 [NAME_3] advanced an alternative argument, namely, that a proper measure of loss for conversion is the fair market cost to [NAME_3] of replacing the goods as at the date of conversion: see [NAME_10] v Owners of Steamship Edison [1933] [NAME_8] 449. That case, however, did not involve conversion, but rather the negligent destruction of goods. The correct principle, it would seem, is as stated in J G Fleming, The Law of Torts, 9th ed (1998) Sydney, [COMPANY_13], at 76, that the measure of damages, ordinarily, is the full value of the thing converted. In Palmer on Bailment at 214, the author explains the basis of damages as being, that the act of conversion is a sufficiently serious infringement of the plaintiff's right of control over the converted goods to justify "the drastic sanction of compelling the wrongdoer to buy the plaintiff out". In this case, both valuers agreed that the market value was the auction value. 155 However, if what the Court is concerned with is market value, then there is an argument for accepting the figure assessed, as market value, regardless of the underlying methodology. Further comfort may be gained in adopting this approach in this case because, as his Honour observed at [34], there was apparently little argument as to whether the trial judge should accept the evidence of the valuers and if so, which valuer should be accepted. His Honour recorded that the appellants did not challenge either valuation except in general terms. His Honour accepted the lower valuation of [NAME_47], having regard to one aspect that differentiated their approaches.

Accordingly, I would reject this ground of appeal. 156 Having regard to the conclusion at which I have arrived, namely, that the [NAME_3] had been converted, it is not necessary to deal with the remaining claims made on the Amended Notice of Cross-Appeal or in the Notice of Contention. However, I would comment that I would not have found that a claim in detinue had been made out. So far as s 36A of the Conveyancing Act is concerned, I would comment that that matter was not argued in the court below.

Accordingly, I propose the following Orders:

1. The appeal is dismissed with costs;

2. The Amended Notice of Cross-Appeal is allowed in part, with costs;

3. The parties, within seven days, are to bring in short minutes of order to accord with these reasons. 157 IPP JA: I agree with Beazley JA. **********

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