New South Wales District Court CITATION: Allan Chrara v Evaton Cosmetics Pty Limited [2006] NSWDC 120 HEARING DATE(S): 31/10/06, 1/11/06, 2/11/06, 23/11/06 JUDGMENT DATE: 15 December 2006 JUDGMENT OF: Murrell SC DCJ DECISION: Verdict for the defendant CATCHWORDS: Bailment - Conversion - Ostensible Authority PARTIES: Allan Chrara (Plaintiff) EvatonCosmetics Pty Limited (Defendant) FILE NUMBER(S): 3111/05 COUNSEL: Mr T O Bland (Plaintiff) Mr P W J Gray SC (Defendant) JUDGMENT Overview 1 Allan Chrara was a friend and business acquaintance of Tony Wyndham, the former husband of Eva Cheung. Ms Cheung was the sole director and shareholder of Evaton Cosmetics Pty Limited, which sold cosmetics through wholesale and retail outlets. On 1 March, 2002, Mr Chrara purchased 32 pallets of nail polish (480,000 individual items) for $20,000. Tony Wyndham agreed to store the nail polish at a Kingswood warehouse which was leased by Evaton. Subsequently, some of the pallets were moved to a warehouse which Evaton leased at North Parramatta. In June/July 2002, Mr Wyndham and Ms Cheung separated. Mr Chrara claims that Evaton, as bailee, has failed to take reasonable care of his goods and has converted them. Issues 2 1. Did Tony Wyndham have actual or ostensible authority to bind Evaton in relation to the storage arrangement? 2. Was there a bailment for reward or a gratuitous bailment? 3. Was any bailment terminated in July/August 2002? 4. Did Evaton fail to take reasonable care of the polish or convert it? 5. What damages has Mr Chrara sustained? Tony Wyndham's Authority To Bind Evaton 3 Ms Cheung was a generally reliable witness, while Mr Wyndham was hostile, evasive and almost completely lacking in credibility. Inter alia, Mr Wyndham's evidence in relation to the agreement which was Annexure A to Mr Chrara's affidavit was a blatant attempt to distance himself from the loan said to be the subject of that document, despite the terms of the document, which include reference to a "person (sic) loan" to Mr Wyndham. 4 I accept Ms Cheung's evidence that Tony Wyndham was not actually authorised to offer storage to Mr Chrara. She was not present when the arrangement was made. I accept that she had no knowledge of the storage arrangement until after it had been implemented and she saw the polish in Evaton's warehouse. 5 However, I find that Tony Wyndham did have ostensible authority to offer storage to Mr Chrara. He was Ms Cheung's husband. Although Evaton was owned and managed by Ms Cheung, Mr Wyndham played a role in Evaton's business affairs. He negotiated Evaton's lease of the Kingswood warehouse and, while Ms Cheung was not happy about that lease arrangement, she accepted it. Mr Wyndham attended the Kingswood warehouse far more frequently than did Ms Cheung. He had keys to the warehouse. Those matters, combined with Mr Wyndham's confident, self-important manner, no doubt conveyed to Mr Chrara the impression that his friend was authorised to deal with the warehouse as he saw fit. Was There a Bailment for Reward or a Gratuitous Bailment? 6 For there to be a bailment, the bailor must deliver exclusive right of possession to the bailee. 7 After Mr Chrara delivered the polish to the Kingswood warehouse, he retained access to it. He arranged and paid for his son to repack some of the polish and to move some polish to Evaton's North Parramatta warehouse. By mid 2002, the pallets at both warehouses were sealed in plastic. Under cross-examination, Mr Chrara agreed that, at all times, he was able to access his goods and do as he pleased with them. Although he did not have keys to the warehouses, his friends and regular drinking partners, Mr Wyndham and Mr Morrow (the warehouse supervisor), each had keys. According to Mr Morrow (who was called by Mr Chrara and whom Ms Cheung's counsel conceded to have been an honest witness), Mr Chrara attended the Kingswood warehouse two or three times a week. At least during the period to mid 2002, when Ms Cheung and Mr Wyndham separated, Mr Chrara's access to his polish was, in effect, unimpeded. 8 As Evaton did not have exclusive right to possession of the goods, there was no bailment. 9 It there was a bailment, it was a gratuitous bailment, not a bailment for reward. There was no consideration which would render it a bailment for reward. 10 I was not impressed by Mr Chrara's evidence. He was a nervous and agitated witness. I have little confidence in the reliability of his evidence, except where it was corroborated by reliable evidence. 11 Even if I did accept Mr Chrara's evidence as to his dealings with Evaton, apart from the loan agreement that is Annexure A to Mr Chrara's affidavit, there is scant evidence that any of loans referred to in paragraph 18 of Mr Chrara's affidavit was made. Ms Cheung (whose evidence I do generally accept) denied that the loans were made to Evaton. Ms Maroon, the intermediary through whom some of those loans were allegedly made or repaid, was not called by Mr Chrara. 12 As to the agreement which is Annexure A to Mr Chrara's affidavit, it refers to the fact that Mr Wyndham "owns and operates a cosmetics wholesale and retail business" and the agreement is on the letterhead of "Evaton Cosmetics" of Grandville (not Granville), but Mr Wyndham had business interests independant of Everton and the agreement is stated to be between Mr Alan Chrara and Mr Tony Wyndham. In my view, the document evidences an agreement between Mr Chrara and Mr Wyndham, rather than between Mr Chrara and Everton. 13 In any event, on Mr Chrara's evidence, all the loans referred to in paragraph 18 (including the loan the subject of Annexure A) were more than repaid by February 2002, prior to the purchase of the polish. Consequently, they could not constitute consideration for a March 2002 bailment. Was Any Bailment Terminated In July/August 2002? 14 I have no doubt that the letter dated 6 September 2002 from Evaton to Mr Chrara (Annexure L to Mr Chrara's affidavit) accurately sets out Evaton's position as at that date regarding Mr Chrara removing the polish. The letter was drafted by Ms Cheung and Mr Morrow. The letter is consistent with Mr Morrow's evidence that, on 20 August 2002, Ms Cheung told Mr Chrara that she wanted the polish removed by a nominated date, and that Mr Chrara agreed to remove the polish. The letter states: "During the past three weeks we have had numerous conversations regarding the removal of your nail polish from our Parramatta and Penrith warehouses. We understand the storage was an arrangement between yourself and Tony Wyndham however there was no arrangement between yourself and Evaton Pty Ltd. You were informed to remove the stock on Tuesday 20-8-02 and under your request postponed to Friday 6-9-02 ... Please make arrangements for removal of stock by 12 noon Friday 6-9-02 or we will have no choice but to make arrangements for disposal at your expense." 15 Mr Morrow confirmed that the last sentence was inserted because Mr Chrara had reneged on an undertaking that he would remove the goods. 16 The communications culminating in the letter of 6 September 2002 were an express and unequivocal withdrawal by Evaton from any responsibility as bailee. Consequently, at least from late August/early September 2002, no bailment existed. Did Everton Fail to Take Reasonable Care of the Polish or Convert It? 17 If, contrary to the above findings, Evaton was a gratuitous bailee, then there was no breach of the standard of care owed by a gratuitous bailee. 18 There is no fundamental difference between the degree of care required of a bailee for reward and that required of a gratuitous bailee. In each case, the bailee is required to take reasonable care of the bailor's goods and not to convert them. What constitutes reasonable care depends on the circumstances of the case: Halsbury's Laws of Australia at [40-20]. 19 At all times, the polish was stored in warehouses. Very soon after delivery, it was sealed in plastic wraps. 20 During late March/early April 2002 Mr Chrara Junior sorted some of the polish at Kingswood and sealed it in plastic wraps. Subsequently, he observed that the polish was still at Kingswood wrapped in plastic. 21 Mr Chrara Junior said that eight pallets were transferred from Kingswood to North Parramatta. They were wrapped in plastic before they were transferred. Ms Fan's evidence established that those eight pallets were still intact. They were available to Mr Chrara. 22 There was evidence suggesting that some of the polish may have been sold during warehouse sales in April 2002. However, that evidence was somewhat inconsistent with the evidence of Mr Chrara Junior that all the polish was sealed in plastic wrapping at an early stage. If the polish was secured in plastic wrapping, it is most unlikely that some of the contents of the plastic wrapping would have been removed and sold at a warehouse sale. As to the polish at North Parramatta, there was strong evidence that all the pallets remained intact and are still intact. I conclude that there is no reliable evidence that any of the polish was sold by Evaton. 23 In August/September 2002, Mr Chrara was told to remove the polish from both warehouses. He was told that, if he failed to do so, Evaton would dispose of the polish. He took no steps to remove the polish, and thereby impliedly consented to any subsequent disposal of the polish by Evaton. 24 On 29 July 2005, Mr Chrara executed a deed of release, settling his claim for conversion of the polish at the North Parramatta warehouse by the occupier of that warehouse (Exhibit 3). On 8 May 2006, he settled his claim for conversion by the occupier of the Kingswood warehouse, and received compensation (Exhibit 4). 25 The consequence of the two settlements is that title in the goods the subject of the settlements has passed from Mr Chrara to the claimed converters and Mr Chrara cannot now maintain an action against Evaton for conversion of the same goods : Balkin and Davis, Law of Torts, 3rd Edition, 2004, para [4.40(iv)], p 96. Mr Chrara's Loss 26 At most, the polish was worth $20,000. Mr Chrara paid $20,000 for 480,000 bottles of polish, ie about 4 cents a bottle. The polish was sold cheaply because it was sold "as is dam", ie "as is - damaged". 27 Photographs of the North Parramatta stock (Exhibit 8) and Mr Morrow's observations of some stock - which he described as dirty, mixed up and, in some cases, leaking - are consistent with Ms Cheung's evidence that, based on her observations and 15 years' experience in the cosmetics industry, the North Parramatta stock was commercially of very little resale value. 28 As to the stock at the Kingswood warehouse, Mr Chrara has settled proceedings against the occupier of that warehouse. As to the North Parramatta stock, Mr Chrara has settled proceedings against the occupier of that warehouse and, in any event, the stock is still available to Mr Chrara. 29 The obvious explanation for Mr Chrara's reluctance to remove his stock from the North Parramatta and Kingswood warehouses when requested to do so is that possession of the stock would have been burden as it had no significant resale value. 30 I am not satisfied that Mr Chrara has suffered any loss. If he has suffered a loss, Evaton is not liable. If Evaton is liable, the maximum sum for which it could conceivably be liable is $20,000. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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