What’s a bailment?

 
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And how does it affect a solicitor holding documents for a client?

For at least three hundred years[1] the law has given rights to a person in possession of goods[2], even if the person in possession has no other basis for claiming an interest in them. So rights can exist in a finder or even (amazingly, perhaps) a thief[3]. A seemingly dark and mysterious[4] body of law, bailment, has developed specifically designed to define and confine interests arising from possession[5]. It is this general concept which elides possession with ownership which has given rise to the popular, if slightly overstated, expression that “Possession is nine-tenths of the law”.

General principles of bailment

So, when one person holds another’s goods, a bailment arises. This is so whether the holder is a drycleaner, motor mechanic or solicitor. But what does this mean? In relation to a solicitor who holds another’s possessions it means this:

  1. Retention

The bailee/solicitor must exercise reasonable care in the retention of the bailed documents and goods.

  1. Deliver

The bailee/solicitor must deliver the documents and goods to the bailor (or any person to whom the bailor directs delivery, or any person having a better title to the goods than the bailor, such as the owner) in proper condition within a reasonable time of demand. This obligation is applied even where there is no direct connection between the owner of the goods or documents and the possessor/bailee, such as:

2.1       Where there is a sub-bailment. An example is where documents are delivered by the principal/owner to his or her attorney, and by the attorney to the solicitor. Irrespective of the attorney’s rights to recover the documents as sub-bailor, the principal (and any duly authorised agent of the principal) could recover the documents as owner.

2.2       Where there is a bailment by attornment. In the context of a solicitor’s practice, this most commonly occurs where the solicitor holding the client’s goods and documents transfers the legal practice to another solicitor. The second solicitor (strictly the attornee) become the bailee (and therefore bound by any obligations which attach to the retention of the goods and documents) without any involvement of the owner/bailor, and the first solicitor (the attornor) is thereon released.

  1. Exceptions to delivery

There are exceptions to the obligation of delivery. These include:

  • a lien[6], which creates the bailee a lienor in relation to the goods or documents,
  • contrary obligations created by contract, estoppel and, possibly, unilateral mandate, which restrict, elaborate, modify or abolish obligations of bailment, and
  • legislative provisions[7].
  1. Remedies

There are a very large number of remedies available for a breach of a bailee’s obligation, including detinue, conversion, damages (for breach of contract as well as trespass, negligence and other torts) and the little-used slander of title, as well as other remedies where a bailee is a fiduciary (as is a solicitor) – such as injunction, specific restitution, equitable compensation, account of profits, a constructive trust and tracing. When the bailee is a legal practitioner, a statutory remedy is also available by virtue of the Legal Profession Uniform Law, s472(1)(b).

Bailment of wills

It is sometime said that bailment does not apply to a client’s will. That is clearly wrong. The leading Australian authority on the legal relationship which arises from a solicitor’s custody of a person’s will is Hawkins –v- Clayton (1998) 164 CLR 539, [1998] HCA 15. The facts are well known, and can be simply stated. Clayton Utz held the will of Mrs Brasier. Mr Hawkins was named as executor in the will. (He was also the residuary beneficiary.) Upon Brasier’s death, Clayton Utz failed to promptly notify Hawkins that he was the executor. By reason of the delay, the deceased’s house, which was the main asset of the estate, deteriorated. The executor sought to recover that loss from the solicitor.

Mason CJ and Wilson J delivered a joint judgment. They dissented on the outcome but not on the issue of bailment. They stated that, during the life of the willmaker, either the willmaker or the solicitors could bring “the bailment of the will to an end”[8]. Deane J made the identical point in these words:

“….. as a matter of joint contractual intention, the testatrix and the firm could, during the life of the testatrix, each bring the bailment to an end by reasonable notice to the other party: the testatrix could require that her will be handed to her; the firm could require that she remove her will from its custody”[9].

Brennan J considered that an understanding of the basis on which the solicitor held the will was essential to determining the duty owed by the solicitor to the executor of the deceased will maker. He commented:

“To determine whether a duty of disclosure arises out of these circumstances, it is helpful to recall the character of a solicitor’s custody of a client’s will.

A solicitor to whom a testator entrusts the custody is bound to deliver it to the testator at any time during his life – for the testator may wish to alter it – and the solicitor can claim no lien upon it[10]. Upon the death of the testator, the bailment is at an end”[11].

The general principles of bailment therefore apply to wills as they do to other goods and documents

                                                                                                                                             Darryl Browne[12]

[1] Armory v Delamirie (1722) 1 Stra 505; [1722] EWHC KB J94; 93 ER 664.

[2] In this setting, goods includes land: Allen v Roughley [1955] HCA 62; 94 CLR 98,130.

[3] Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81, [37], [89].

[4] In his Foreword to Palmer on Bailment, 3d Ed, Lord Tom Bingham wrote that bailment “is a body of law of which even the informed public are largely unaware and of which many professional lawyers are ignorant”.

[5] Lord Bingham of Cornhill wrote that “almost any generalisation made about the law of bailment….. is likely to be wrong. It may only be said, quite simply, that a bailment comes into being whenever one person is knowingly and willingly in possession of goods that belong to another”: Foreword, Palmer on Bailment, 3d Ed. Professor Norman Palmer states “The essence of bailment is possession”: Preface, Palmer on Bailment, 3d Ed.

[6] This is a “right to retain possession of goods of another until his claims are satisfied”. Hewitt –v- Court [1983] HCA 7, (1982) 149 CLR 639, 635.

[7] For instance, these exist for common carriers and inn keepers.

[8] (1998) 164 CLR 539, [1998] HCA 15, [4].

[9] Ibid at [17].

[10] Ibid at [6] citing Balch v Symes (1823) Turn & R 87, at p 92 [1823] EngR 362; (37 ER 1028, 1030).

[11] Ibid at [5] – [6]. The fifth member of the Court, Gaudron J, did not consider the nature of the solicitor’s custodianship of the will.

[12] Darryl Browne is the principal of BROWNE. Linkenbagh Legal Services. He is an Accredited Specialist in Wills and Estates. He is the Chair of the Law Society’s Ethics Committee. He has been a member (2010- 2014, 2016), Chair (2014) and Deputy Chair (2016) of the Elder Law and Succession Committee. He is a Councillor of the Law Society, a member of the Specialist Accreditation Board and the Society’s Future Committee and the Nominations Committee, the Working Group on Future Prospects for Young Graduates and the Working Group on Elder Abuse. He is a member of the Law Council of Australia’s Elder Law and Succession Committee and its Working Group on Elder Abuse. He is a member of the Legal Aid Commission Board and the University of Sydney’s Law Extension Committee. He writes bi-monthly Case Notes on wills and estates for LSJ and occasional other articles for that and other journals. He facilitates the Law Society’s online Wills and Probate Procedures for Solicitors. He designed and presents the Masterclass on Powers of Attorney. He is a member of STEP and SMSF Association. The opinions expressed in this paper are his own.

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