New South Wales Supreme Court CITATION : Kehoe v Williams [2006] NSWSC 326 HEARING DATE(S) : 3 - 6 April 2006 JUDGMENT DATE : 26 April 2006 JURISDICTION : Civil JUDGMENT OF : McClellan CJatCL DECISION : 1. Verdict and judgment for the defendant; 2. Plaintiff is ordered to pay the defendant's costs. CATCHWORDS : CIVIL DAMAGES - gratuitous bailment - breach of contract - obligations of a bailee - whether took care of goods to relevant standard of care - whether there was a failure to return the goods - art collection - partial sale of art collection at auction - sale at below reserve prices Bainbridge v Firmstone (1838) 112 ER 1019 CASES CITED : Coggs v Bernard (1703) 92 ER 107 Fankhauser v Mark Dykes Ltd [1960] VR 376 Thomas National Transport (Melbourne) Pty Ltd v May and Baker (Aust) Pty Ltd (1966) 115 CLR 353 PARTIES : Stephen Bernard Kehoe (Pltf) John Segar Williams (Def) FILE NUMBER(S) : SC 20321/02 COUNSEL : M Rollinson (Pltf) G M Colman (Def) SOLICITORS : Carters Law Firm (Pltf) Dibbs Abbott Stillman (Def) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION McCLELLAN CJ at CL WEDNESDAY 26 APRIL 2006 20321/02 KEHOE v WILLIAMS JUDGMENT 1 HIS HONOUR: The plaintiff has over many years been a collector of paintings, sculpture and other artefacts. In late December 1995 or early January 1996 he made arrangements with the defendant for the storage of a significant part of his collection at the defendant's premises. At that time the defendant was a dealer in fine art although his business has subsequently changed and he now operates exclusively as an auctioneer of fine artwork, furniture and artefacts. 2 On 28 July 1996 the defendant held an auction at which a number of the plaintiff's art works were offered for sale. Many sold but some did not. Subsequently the plaintiff retrieved a number of items from the defendant. However, he did not retrieve them all and, in circumstances which I will later relate, those items have now apparently been lost. 3 By an amended statement of claim the plaintiff alleged that there was an agreement between the parties which required the return of unsold items. The plaintiff alleged that that agreement was breached and claimed in these proceedings damages, being the value of 26 items, which have not been returned to the plaintiff. The plaintiff says that other items may also have been lost but makes no claim in relation to them. The facts 4 The plaintiff gave evidence by affidavit and was cross-examined. His life for the last 30 years has not followed a conventional path. He was admitted as a solicitor in Queensland but was struck off following his conviction for defaulting transgression in relation to the firm's trust account. He served a period in prison. 5 Following his release from prison he came to work in Sydney and occupied executive positions. However, he was beset by financial difficulties in 1987 and was made bankrupt. After he was discharged from bankruptcy he apparently increased his collecting activities. The plaintiff also gave an account of the premises in which he has lived during recent years. It seems he has occupied a number of residences each for a relatively short period of time. 6 During the late 1980's and 1990's the plaintiff earned income as a music critic. However, his income from those activities has been modest and he has apparently been receiving the present day equivalent of unemployment benefits. 7 The plaintiff first met the defendant sometime before 1994 when he acquired an item at an auction which the defendant had conducted. They struck up a friendship and the evidence indicates that they had frequent contact both at cultural events and also enjoying meals together. From the end of 1994 the plaintiff began to place antique pieces with the defendant for sale on a more regular basis. 8 In January 1996 the plaintiff had run into difficulties in his then residence. It was necessary for him to vacate the premises and he faced the problem of what to do with his art collection and furniture. He rang the defendant and told him of his difficulties. Ultimately they reached agreement that the plaintiff could store his items in the garage at the back of the defendant's home, St Kevins, in Woollahra. 9 The plaintiff says that he said to the defendant "John I am going to have to let this house go. I am thinking of culling my art collection and furniture. What do you think?' 10 The defendant replied with words to the effect: "I am happy to sell what you want. What are your plans?" 11 The plaintiff replied with words to effect: "My daughter lives in Paris. I think I will go and stay with her for a while and just have some time out." 12 The defendant replied with words to the effect: "You can store everything over here. I have the shed out the back and then we can go through everything. I can sell what you want when you want and place the money in your bank account." 13 The plaintiff replied with words to the effect: "That sounds good. I will let you know what I decide to do within the next week or so." 14 In his account of these events the defendant says that he does not recall a specific date but at some point around 1995 he was contacted by the plaintiff who was moving out of his Paddington house. He recalls a conversation to the following effect: "Plaintiff: I am moving out of my place in Paddington. I don't know where I am going to go. Can you please store some of my things while I decide. I may even decide to auction them off. Defendant: That will be fine, although I haven't got much space and it can't be for long. Plaintiff: It won't be for long. Either I will move into another place or I will ask you to auction them at one of your auctions. Williams: OK, I will store them but it can only be for a couple of weeks." 15 The defendant placed emphasis on the fact that the storage was proposed to be only a short term arrangement. In any event the plaintiff arranged for some of his property to be taken to Woollahra. Other items including furniture were placed in storage with "China Bear" in Mascot. 16 The plaintiff gave evidence of a conversation on the day the property was delivered to Woollahra in which he said: "I am going to stay over in Manly. I have to sort out a lot of stuff with the Butlers and there is a chance I can also get back some of the paintings I left in a previous relationship. All the paintings are similar but put together it would make a good collection." The plaintiff said that he was waiting for the outcome of these matters before deciding which items he would ask Mr Williams to auction. Until he later found out about a proposed auction which the defendant had arranged the plaintiff said he had not given instructions for any of his property to be sold. 17 The plaintiff notes that neither he nor Mr Williams catalogued what was to be stored at Mr Williams' residence. He recalled that the property included furniture, paintings, books, CDs and other domestic effects. He has a specific memory of some items. 18 In his affidavit the defendant acknowledged the delivery of various items and says that he told the plaintiff that storage was not a problem "but I really cannot store it for too long because I need the space for my business." The defendant says that the plaintiff accepted that it would only be for a short time. 19 Relations between the plaintiff and the defendant deteriorated shortly after the items had been delivered. The plaintiff became embroiled in criminal proceedings in which he was charged and convicted, then acquitted on appeal, of stealing paintings from another person. The defendant assisted the prosecution in that matter. As a consequence of advice given to him by the police the defendant did not seek out the plaintiff to speak with him. However, they continued to bump into each other on isolated social occasions and the defendant said he continued to ask the plaintiff what he was going to do about the items stored with him. 20 It would seem that the defendant continued to put pressure on the plaintiff to remove the items from his premises. The defendant had by this time, contracted to sell his house and was required to give up vacant possession on 17 July 1996 making the disposition of the plaintiff's items a matter of pressing importance. 21 The defendant gave evidence that sometime in the period after February and before 17 July 1996 he advised the plaintiff that he would moving and would not be able to store his items any further. He says that at about that time they had a conversation in which it was agreed that the defendant would sell the items for the plaintiff. The defendant says that he agreed to do this on condition that the plaintiff gave him prices. The defendant was conducting an auction at the end of July in 1996 and says that he told the plaintiff he would move the items, including furniture, to the warehouse storage he had hired for the auction. 22 The plaintiff does not accept that this conversation occurred and says that the first he knew of the proposed auction was when he was made aware of a flyer, which was a Notice of Auction, which he says he received on or about 21 July 1996. From conversations with a friend he says he came to realise that his items were being included in the auction. 23 Nothing turns upon the different recollections. However, if I was required to choose between the plaintiff's account of any exchange and that of the defendant I would prefer the defendant's evidence. The plaintiff is a man who has been guilty of many indiscretions in his life and has proved untrustworthy. He admits to having been less than "frank" at times when complete disclosure was required. I am also satisfied that his personal and professional dealings have for many years been little short of chaotic making his recollection of particular events and when they occurred unreliable. Although I am satisfied that in relation to the present matter he is endeavouring to tell the truth, but where his recollection differs to that of the defendant I accept the defendant's evidence. 24 However the plaintiff came to learn of the auction, he promptly set about writing to the defendant listing the property which he believed the defendant had stored for him and setting reserve prices. The plaintiff says he wrote 3 letters but only one, being that of 22 July 1996, has survived. 25 Many of the items owned by the plaintiff were sold at the auction. Some of them were sold for a value less than the reserve price which the plaintiff had put upon them. Many others did not sell. The defendant accounted to the plaintiff for the goods which were sold at the auction to an amount in the order of $10,000. 26 The defendant forwarded a document referred to as "the accounts sales". Upon receiving it the plaintiff said he was shocked to see that a number of items had been sold below the reserves and that others which he had asked not be sold had in fact been sold. The plaintiff began corresponding with the defendant about these matters and retained solicitors to assist him. 27 In early December 1997, the plaintiff made arrangements to take his friend Philip Klaunzer with him to the defendant's premises. They travelled in a sedan motor vehicle and when they arrived had a discussion with the defendant. The plaintiff says that he had intended to go to the defendant's premises for the purpose of cataloguing the items but upon arrival the defendant required him to remove them all. I am satisfied that there was a terse exchange between them and the plaintiff set about retrieving and taking with him as many items as he could. The evidence satisfies me that he took all of the small pieces which he could find but some large pieces, including some paintings, were left behind. When leaving the premises the plaintiff said he would return to retrieve the remaining items as soon as he could. 28 There was further correspondence between the plaintiff and the defendant in which the plaintiff called for a "proper accounting." However, the matter remained unresolved. At the time the plaintiff was living in a warehouse owned by his friend, Michael Boyd, but because of his difficulties with criminal charges he did not get around to collecting his items. Proceedings were also commenced in the Fair Trading Tribunal but they did not bring a resolution of the matter. 29 The plaintiff apparently made arrangements for Mr Boyd to collect his remaining goods from the defendant. By fax forwarded on 9 September 1998 the plaintiff indicated to the defendant that Mr Boyd would be making arrangements to collect the items and that Mr Boyd would telephone to arrange a convenient time. The defendant says that a short time later a person who introduced himself as Michael Boyd telephoned and said: "Hi, it's Michael Boyd here. I am trying to arrange to collect some furniture from you for Stephen Kehoe." The defendant replied: "Yes, when can you attend?" 30 The defendant says that he made arrangements with Mr Boyd. His diary identifies an appointment being made on Saturday 19 September at 10.30 – 11.00 am and notes "Mallet Street for Kehoe." The defendant says that although he was present at the time arranged, Mr Boyd did not appear and he called him and made arrangements for another date. On that date, which the defendant cannot now remember and which he did not note in his diary, he again arranged to be at the Mallet Street premises. He said a van pulled up outside the property and a man got out and identified himself as Michael Boyd. The defendant says they had the following conversation which was admitted without objection: "Defendant: Michael Boyd? He said: Yes, I came to collect some furniture for Stephen Kehoe. Defendant: Good, I will show you where it is." 31 The defendant says he showed Mr Boyd where the furniture was and remembers that it was spread in various rooms in the building and on both floors. He recalled that Mr Boyd was not happy about the location of the furniture. Nevertheless, the defendant helped Mr Boyd to load the van placing the fragile items in the cabin. Paintings, rugs, animal skin and other items were placed in the back of the truck. The defendant says that as far as he was able he gave Mr Boyd all of the items which were at the premises belonging to the plaintiff. 32 The plaintiff continued to correspond with the defendant seeking a report of the auction. Although records had been originally kept in a computer the defendant's computer malfunctioned and could not be effectively repaired. The hard drive has been lost. 33 The plaintiff called Mr Klaunzer to give evidence. He confirmed the visit which he paid with the plaintiff to the defendant's premises in 1997. Mr Boyd did not give evidence. The plaintiff gave evidence that he had attempted to contact him by calling his mobile phone number, being unaware of his residential address. However, the mobile phone is no longer active and he has been unable to contact Mr Boyd. There is no evidence which would suggest that the defendant is aware of Mr Boyd's address. 34 The critical question in this case is whether the defendant should be accepted when he says he delivered the plaintiff's possessions to Mr Boyd. I am completely satisfied that this occurred. The evidence makes plain that the plaintiff engaged Mr Boyd for that purpose and the defendant says that, although there were some problems, Mr Boyd was ultimately given the items. If this had not happened the most likely response of the defendant would have been to again contact the plaintiff telling him that Mr Boyd had not arrived and could he please carry out the anticipated removal. Having regard to the patience with which the defendant had acted in providing free storage for the plaintiff over a long period of time it is not likely that the defendant would merely have disposed of the plaintiff's goods. The defendant's account of the relevant events was convincing. I accept that neither the plaintiff nor the defendant knows where the goods are now located leaving only the conclusion that they were taken by Mr Boyd. The legal problem 35 The plaintiff submitted that the original arrangement between himself and the defendant was a contract pursuant to which the defendant would hold his items for later sale. I am not satisfied that this was the case. I am satisfied that the original arrangement was a gratuitous bailment. However, the character of that arrangement later changed when the plaintiff agreed that the defendant should sell many of his possessions at auction with the others to remain in his care. It does not matter whether this occurred at the original request of the plaintiff. The letter written a week or so prior to the auction makes plain that the plaintiff authorised the defendant to sell various items and identified a reserve with the expectation that the defendant would take his usual commission. At that point the arrangement in relation to those items changed. The defendant was authorised to include the nominated items in the auction. Those which did not sell he continued to hold. 36 The plaintiff complains that the price at which some of the items were sold was for an amount well below the reserve which he had identified. As to some items this is conceded by the defendant. However, there is no evidence before me which provides a reliable indication of the true value of any of those items at the time of the auction. There is evidence from the plaintiff of the price at which he believed he may have purchased the items but in many cases this was years before the auction. The plaintiff has no written record of the acquisition of any of the items and I am not satisfied that his recollection is reliable. It provides no evidence of the value at the date of the auction. Evidence was also tendered from Ms Stella Downer who is a fine art dealer, consultant and valuer. In her affidavit she suggested various values for the art works. While she notes that she was familiar with some of the works from having seen them in the Macquarie Galleries in the 1980s she was relying principally on the plaintiff's descriptions. I am not satisfied that her valuations can be relied upon in these proceedings having been made nine and a half years after the relevant events. 37 Accordingly, the only evidence I have of the true market value of these works in 1996, and it would generally be the best evidence, is the price at which they were sold on 28 July 1996. The value of the works was the price that was accepted by the purchaser. There is no better evidence of value than the price obtained at a free auction where there is no suggestion of corruption of the auction process. 38 Accordingly, even if a breach of contract has occurred by selling at a price below the reserve I am not satisfied that the plaintiff has suffered any damage by reason of those sales. 39 In relation to the other items, the obligation of the defendant was that of a bailee. Accordingly, he was required to take care of the goods and return them on demand to the plaintiff see Bainbridge v Firmstone (1838) 112 ER 1019. In the event of an allegation by the bailor that the bailee has breached his duty, the bailee carries the onus of proving that he has carried out his duties see Fankhauser v Mark Dykes Ltd [1960] VR 376 at 378. Under the law of gratuitous bailment the bailee is liable only for gross negligence see Coggs v Bernard (1703) 92 ER 107. Otherwise a bailee is required to take reasonable care and deal with the goods in good faith; Thomas National Transport (Melbourne) Pty Ltd v May and Baker (Aust) Pty Ltd (1966) 115 CLR 353 at 367. 40 I have already stated that I am completely satisfied that the defendant provided storage for the plaintiff's items over a lengthy period and well beyond the time at which the defendant had requested the plaintiff to collect them. I am also satisfied that the plaintiff made arrangements for Mr Boyd to collect the remaining items and that a person identifying himself as Mr Boyd carried out that request with the assistance of the defendant. The defendant could have done no more. In my opinion he met his obligations as the bailee of the plaintiff's possessions. He took reasonable care of them and in giving them over to Mr Boyd acted without negligence. 41 In these circumstances the plaintiff's case fails. I make the following orders: 1. Verdict and judgment for the defendant. 2. The plaintiff is ordered to pay the defendant's costs. ********** 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.