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JJD S.A. v. Avon Tyres Ltd [1999] EWHC QB 265 (19th January, 1999)

IN THE HIGH COURT OF JUSTICE 1997 J No. 934

QUEEN’S BENCH DIVISION

BEFORE: THE HON. MR JUSTICE EVANS-LOMBE

Between:

JJD S.A. ( a company)

Plaintiff

-and-

AVON TYRES Ltd

Defendants

JUDGMENT

Judgment handed down on TUESDAY 19th JANUARY 1999 ,at 10.00 a.m. in COURT 40

This is the official judgment of the Court and I direct that no further note or transcript be made.

The Hon. Mr Justice Evans-Lombe

ROYAL COURTS OF JUSTICE 19 th January 1999

MR JUSTICE EVANS-LOMBE:

1. In this case the plaintiff claims against the defendant damages for the loss, alternatively, conversion of certain tyre moulds to which the plaintiff lays claim, while in the possession of the defendant.

2. The plaintiff JJD.SA, to which I will refer as "SA", is a Swiss company owned and controlled by a Mr Jerry Juhan, of Czech origin living in Switzerland who is now 77 years old and is an expert in motor vehicles and their components. At all material times until June 1994 SA was the owner of a patent for a tyre system involving twin narrow tyres mounted on a single hub.

3. The defendant Avon Tyres Ltd, now after a take-over, known as Cooper Avon Tyres Ltd, to which I will refer as "Avon", is an English company engaged in manufacturing all types of tyres for vehicles.

4. JJD (UK) Ltd to which will refer as "UK", was, a United Kingdom registered company and was owned and controlled by a Mr. John Pickworth. Mr Pickworth is an English solicitor. UK was dissolved on a date of which I was not informed.

5. JJD (Tyres) Ltd to which I will refer as "Tyres", is a sister company of UK owned and controlled by Mr. Pickworth.

6. In his witness statement Mr Juhan describes his invention and patenting of the double tyre system and how in 1984 Goodyear, the tyre manufacturers, having developed the tyre for Mr Juhan decided not to manufacture it and how on the recommendation of the motor racing drive Mr Jackie Oliver he approached Avon "to develop the product". His statement then continues at paragraph 6 as follows:-

6. I had known John Pickworth who is an English solicitor and also a friend of Jackie Olivers since about 1972. Even at the time of the arrangements with Goodyear, I had already agreed to enter into a joint venture arrangement with him in relation to the marketing of the tyres. It was therefore agreed that he would be my joint venture partner in the Avon operation.

7. I should mention that both JJD (UK) and later JJD (Tyres) Ltd were entirely owned, so far as I know, by John Pickworth and/or his nominees. I was not aware of the internal arrangements which he had in relation to those companies, except that they were formed for the purpose of the joint venture with me. In particular, I do not know why, although the original arrangements with Avon were to have been with JJD (UK) the agreement was finally signed with JJD Tyres ltd.

8. Although I did all the technical negotiating with Avon, Mr Pickworth, being a solicitor, was entrusted with the drafting of the contract. In addition, Mr Pickworths’ company was to be the UK distributor of the tyres. In any event, after I had negotiated the commercial terms, Mr Pickworth dealt with the legal drafting and the contract was signed between his company, JJD Tyres Ltd and Avon on the 1st March 1986."

7. By a contract dated the 1st December 1983 between SA and UK, in consideration of payments by UK to SA of "Ł4 sterling for each wheel manufactured or sold by [UK] in the territory during the term of this agreement and Ł2 sterling for each tyre sold by [UK]..." SA granted to UK :-

(a) the sole exclusive right and licence to manufacture supply distribute sell advertise and promote as original equipment and as accessories all JJ wheels within the territory and

(b) the sole exclusive right and licence to grant to others sub licences to manufacture supply distribute sell and advertise and promote as original equipment and accessories all JJ wheels throughout the whole or any part of the territory."

8. For the purposes of the agreement "the territory" meant the United Kingdom the Channel Islands the Isle of Man and Eire.

9. It appears that as the agreement in fact operated the bulk of the tyres and wheels procured by UK to be manufactured were exported to licensees elsewhere in the world.

10. In October 1984 UK approached Avon with a view to Avon manufacturing tyres from moulds to be made to UK’s design by an outside supplier to be found by Avon.

11. On the 21st January 1985 Avon wrote to Mr Pickworth at UK as follows:-

"I am sorry about the delay in preparing sample costs for you ...

We have concentrated on the size 125/85 VR16, and calculate that we could sell these tyres to you at Ł22.10 each provided you were to order in reasonable quantities (say 1000 tyres) and accept delivery immediately after manufacture. Furthermore, as discussed, we would not wish to put capital into this project, so you would have to buy the mould (approximately Ł20,000) and finance some building machine modifications (approximately Ł2,000). We already have a mould for a 125/90 R16 but could not manufacture in volume without the building machine modifications.

If these figures look interesting to you please contact me to discuss the next step."

12. The tyre moulds in question in this litigation are 6 in number. For the purposes of their opening those appearing for plaintiff prepared a schedule of the moulds, describing them giving their cost of production, how that cost was financed and references to them in the documents in the case. The schedule also sets out in respect of each of the moulds a figure for the loss claimed by the plaintiff in respect of them. On that schedule the moulds are numbered 1 to 6 and I will use those numbers to refer to each of the moulds.

13. On the 19th February and 12th March Mr Pickworth for UK wrote to Avon confirming orders for 3 of the moulds numbers 1 3 and 4. On the 14th March Mr Juhan of SA wrote to Mr Pickworth as follows:-

"Following our last telephone conversation please find enclosed a bankers cheque for Ł45,000 funds you require to cover our commitment with Avon Tyres Ltd. Further to what has been discussed and agreed, I forgot to mention that Avon will be manufacturing our tyres with all the descriptions including the trade mark on one side... ."

14. On 21st May 1985 Mr Pickworth wrote to Mr Juhan enclosing a copy of a draft agreement between UK and Avon of which the recital reads:-

"Whereas: it has been agreed between the parties hereto that Avon will manufacture certain tyres as hereafter described for [UK] for sale as Avon/JJD propriety tyres."

15. An agreement in this form was never in fact entered into but its terms were reflected in an agreement dated 1st March 1986 between Tyres and Avon signed by Mr Pickworth on behalf of Tyres. That agreement contained the same recital as the draft. At clause 1 it contained a provision that the agreement was to remain in force, unless terminated under other provisions for a period of 5 years with provision for agreed extension. Clause 4 under the heading "Moulds" provided as follows:-

"4 (a) JJD [Tyres] shall finance the purchase by Avon of moulds in the sizes required and other necessary equipment (all as previously agreed in writing between the parties hereto) for use by Avon for the sole purpose of the manufacture of tyres for JJD. The moulds and equipment purchased by Avon pursuant to the agreement as at the date hereof are as set out in appendix 2 hereto. Additional moulds and equipment may be purchased as aforesaid.

(b) All such moulds and equipment the purchase of which is financed by JJD as aforesaid shall throughout the continuance of this agreement be on loan to Avon and during the period of such loan Avon shall at its own expense insure the moulds and equipment in the joint names of Avon and JJD to their reinstatement value. Avon will maintain the moulds and said equipment in good and substantive repair throughout the continuance of this agreement. On the expiration or sooner termination of this agreement such moulds and said equipment shall be made available for collection by JJD at the premises of Avon at Melksham, Wiltshire."

16. Appendix 2 of the agreement provides:-

"Moulds and other equipment for the production of the tyre sizes set out in appendix 1 above as may be extended by agreement between the parties."

17. Appendix 1 sets out 7 types of tyre 4 of which are not relevant but 3 of which are numbers 1 3 and 4.

18. On the 3rd March 1986 UK placed an order with Avon for the production of tyre mould number 2 at a total cost of Ł18,500. By contrast with numbers 1 3 and 4 which were manufactured by an English engineering company Aycliffe Engineering Ltd, this mould was manufactured in Italy by a company known as Marangoni. There were difficulties in the manufacture of this mould which ultimately had to be completed in England at a total cost of Ł19,075.17 for which sum Avon submitted an invoice to UK on the 16th November 1987. On the 2nd February 1988 SA transferred to UK the exact equivalent sum in US dollars.

19. On 20th June 1988 SA sent a facsimile to Avon signed by Mr Juhan as follows:-

"... as discussed with Les Parfitt last week please order from your mould maker two spacers which will allow us the manufacturing of a width of 135mm and 145mm from the currently modified 125/90 VR16 Avon Turbo mould (Rolls Royce tread) while conserving the same circumference."

20. This became mould became number 5. In due course this mould was produced. In evidence is an invoice of the 23rd September 1988 from Aycliffe Engineering Ltd to Avon for work modifying the tread pattern of this mould. The question of ownership of this mould was raise by Avon SA and was dealt with in a facsimile signed by Mr Juhan of the 3rd February which he said:-

"We naturally request a modification of this mould. We however would not like to share ownership of this mould with Avon. Having discussed the matter with JJD UK, we prefer to be the boss in our own house. We would therefore appreciate a price suggestion for the mould as it exists today."

21. In due course Avon indicated a price of Ł13,000 for transfer of ownership and it is not in issue that that sum was paid by SA who thereby became the owner of mould number 5.

22. I was not directed to any documentary record showing which entity ordered mould number 6 and how it was paid for. At paragraph 15 of his witness statement Mr Juhan states that he "gave Mr Pickworth a bankers cheque for at least $25,000 (I cannot remember the exact amount) outside Lloyds bank in Place Bel-Air in Geneva." He was not able to produce any banking records of this transaction that confirmed that the money came from SA to finance the acquisition of this mould. It seems to me to follow from this evidence that the order for the mould must have been placed by UK.

23. In evidence was a file of correspondence and other documents covering the period from December 1983 to December 1993. From that correspondence it emerges that SA, primarily through Mr Juhan, dealt directly with Avon, particularly as to technical matters including modification to the tyre moulds to be used for the production of tyres by Avon for UK. Among that correspondence are records of payment by SA to Avon of sums of money in payment of Avon invoices which have been lost. For the sake of brevity I will not set out each of these payments but they were not of substantial sums being each in the Ł4,000 to Ł6,000 range.

24. It seems that in September 1990 negotiations started for the purchase of the JJD tyre system together with the relevant patents by Mitsubishi. This proposed sale was dealt with in a letter from Mr Pickworth to Mr Juhan dated the 6th September 1990. That letter described how Mr Pickworth understood the "present position" in these terms:-

"JJD(UK) Ltd has a licence for the territory (which is the United Kingdom The Channel Islands The Isle of Man and Eire) for two functions :-

1. The sole distributor throughout the world of the Avon tyres which are manufactured for the JJD system (this is a function which JJD(UK)Ltd has carried out since Avon produced its first commercial tyre) and

2. To sell tyres and wheels and to manufacture wheels for the JJD system as original equipment for cars manufactured in the territory... .

JJD(SA) has advanced monies to JJD(UK)Ltd to buy tyre moulds for use by Avon tyres Ltd."

25. The letter then continues to describe the proposal as follows:-

"The proposed sale to Mitsubishi should be for everything i.e. both functions set out at 1 and 2 above and repayment of the mould payments to JJD(SA). No opportunity should be given to Mitsubishi to buy part of the business. The only negotiable point is the price."

1. Then under the heading "finance" the letter continues "I suggest that what Mitsubishi must pay for is as follows:-...

1. Repayment to JJD(SA) of all the mould money - Ł70,000

2. A sum to compensate SA for the loss of

(a) future royalty payments for tyres sold out of UK and

(b) future royalty payments on tyres and wheels sold in the territory - Ł450,000

3. A sum to compensate JJD(UK) for (a) and (b) above - Ł450,000"

26. The letter then goes on to consider the tax aspects of these payments and concludes:-

"Perhaps you could give the matter some thought and let me know what you feel about the proposal."

2. There is no written evidence of any response to this letter.

27. It seems that by the autumn of 1991 Avon were taking the view that the manufacture by them of JJD tyres was not turning out to be profitable and they wished to conclude the arrangement which they had entered into by their contract with Tyres of the 1st March 1986. On the 2nd September 1991 they sent a recorded delivery letter to Mr Pickworth at UK the concluding paragraph of which reads:-

"In view of the essentially non existent level of business between us it would seem inappropriate for the agreement to continue to run on during the full formal notice period. If you agree I would suggest that we arrange to terminate the agreement much sooner say with effect from the 30th September 1991. During that period we can arrange for JJD’s moulds, which are held here to be delivered to you or such other address as you may nominate."

28. Mr Pickworths’ response is in a letter of the 4th September 1991 in which he says:-

"I acknowledge receipt of your notice to terminate the agreement on the 3rd September 1992 in accordance of the terms of the agreement. I do not agree the earlier termination."

29. In evidence is an internal memorandum of the 26th February 1992 of Avon drawing attention to the fact that the agreement was shortly to terminate saying "in view of this, we need to get together all the equipment which is the property of JJD Tyres." Also in evidence was an internal document of Avon listing the JJD equipment in their possession showing all the moulds except number 6.

30. On the 4th September 1992, the day after the agreement terminated, Avon wrote to Mr Pickworth:-

"With reference to the above agreement which terminated on the 3rd September 1992 you will recollect that we hold certain moulds which are the property of JJD. I should be pleased to receive your instructions for the delivery of these moulds and look forward to hearing from you shortly."

31. Mr Pickworth responded by a letter of the 14th September asking "in order that I can make the necessary arrangements would you be kind enough to assist me by indicating the approximate size and weight of the moulds and ancillary equipment."

32. In evidence was a further internal Avon document dated the 29th July 1993 recording the placement of moulds which were "no longer part of our product range" into store at Avon’s Bowerhill store. The moulds so placed include numbers 1 2 and 3 and either 4 or 5.

33. By November 1993 Avon had still not provided Mr Pickworth with the relevant weights but on the 30th November an internal memorandum was passed to Mr Bate the marketing services manager of Avon showing all the moulds had been found except for number 5 and setting out their weights. In a letter of the 2nd December 1993 from Avon to UK signed by Mr Bate Avon say:-

"As previously mentioned to yourself we are still holding on your behalf the following tyre moulds"

34. There are then set out the particulars of moulds 1 to 4 and 6 giving their weights. The letter concludes:-

"We would be grateful if you could advise what action we should take with these moulds. If they are no longer required by yourselves, then could you please provide us with a written instruction to scrap these moulds."

35. From the point of view of the documentary record nothing then appears to happen save that on 13th June 1994 the representative of an American company who had purchased the SA patents seems to have visited Avons’ Melksham headquarters with a view to discussing the JJD twin tyre project. This visit is recorded in an internal telefax of Avon.

36. Nothing then appears in the written record until on 27th March 1997 when there is a facsimile message from Avon to Mr Juhan which refers to two of the moulds and then continues:-

"I am currently investigating the situation and will contact you when more information is available. Please contact me if you have any queries in the meantime."

37. The message was signed by Mr Baldwin the marketing development manager of Avon.

38. It was Mr Baldwins evidence that this facsimile was in response to a telephone call from Mr Juhan which was the first contact which Avon had had with any of the JJD companies since September 1992. It was Mr Juhans evidence that he in fact contacted Avon to enquire about the moulds in September 1996.

39. The next document on the record is a letter of the 9th April 1997 in which Mr Juhan writes to Mr Baldwin with reference to his facsimile of the 27th March "and our telephone conversation in the meantime" giving particulars of all 6 of the moulds and concluding:-

"I would like to remind you that I was approached by a sidecar outfit manufacturer about the possibility of supplying tyres and sidecar outfits in quantities of around 3000 units per month."

40. On the 6th May Mr Baldwin sent a facsimile to Mr Juhan as follows:-

"The purpose of this facsimile is to provide you with an update on the sidecar tyre supply opportunity mentioned in your facsimile of 9th April 1997. Our mould engineers are currently examining our mould inventory in order to locate the moulds mentioned in your facsimile. However we have considered the possibility of supplying these tyres but due to existing commitments would not be able to undertake manufacture. Can you please let me know if you wish me to take any further action."

41. In due course SA made demand for the return of all six tyre moulds and on Avon’s failure to comply these proceedings followed.

42. Those proceedings were commenced by Writ, issued on the 4th August l997. The Statement of Claim served has been amended three times. The relief now claimed as a result of the second amendment seeks an order for the return of SA’s goods wrongfully detained by Avon or their value, alternatively, damages for loss of SA’s goods while in the care and custody of Avon, alternatively, damages for wrongful conversion of SA’s goods.

43. In issue in the proceedings has been the question of SA’s locus standi to seek such relief against Avon. As initially pleaded in paragraph 6 of the Statement of Claim, it was alleged that SA purchased all six moulds and supplied them to Avon for the purposes of the contract of the 1st March l986. As a result of the first amendment, that case was changed so as to allege that all six moulds were purchased by Avon with finance provided by Tyres who became the owner of the moulds as a result. Thereafter, SA purchased the moulds from Tyres. Thus Avon became bailee for SA of the moulds. As a result of the second amendment in August of this year, the case was again altered so as to allege that when Tyres financed the purchase of the moulds by Avon, it was acting as agent or trustee for SA, which thus became the beneficial owner of the moulds at all material times. Thus Avon became bailee for SA. The third amendment in October of this year again changed the case so as to allege that Avon purchased all six of the moulds on the instructions of U.K. and SA with funds provided by SA. In so far as U.K. placed the orders and financed the purchase of the moulds by Avon, it did so as agent for SA. Thus the final position was again that Avon was bailee for SA of the moulds.

44. In the absence of Mr Pickworth, I have received no explanation for why it was that, whereas U.K. was the licensee in respect of SA’s patents under the agreement of the 1st December l973 to manufacture and distribute J.J. Tyres and Wheels, it was Tyres which was party to the agreement with Avon of the 1st March l986 whereby Avon agreed to manufacture motor car tyres for Tyres and Tyres agreed to finance the purchase by Avon of moulds for the purposes of such manufacture. In fact, as the documents show, it was U.K. which placed orders with Avon for the production of the first four moulds. It was SA which asked Avon to acquire Mould No.5 ownership of which was ultimately transferred by Avon to SA. Such evidence as there is points to U.K. having placed the order with Avon for the purchase of Mould No. 6. It seems to me that since U.K. was SA’s licensee, having the sole right to manufacture from the moulds within the territory, that I should treat Tyres as having entered into the agreement of the 1st March l986 on behalf of U.K. Neither party dissented from this approach. It is accepted that at all times material to these proceedings, SA has been the owner of Mould No.5.

45. Against SA’s claim, Avon deployes four lines of defence. The first is a challenge to SA’s locus standi to bring these proceedings in respect of all the moulds save Mould 5. It is Avon’s case that U.K. is the owner of the other five moulds, having purchased them through Avon with the assistance of loans from SA. It follows that in respect of these five moulds Avon has at all material times been bailee for U.K. and not SA.

46. The second line of defence is that, if Avon, contrary to its first submission, has been bailee for SA, its duties as such bailee had long since expired by the time that SA came to ask for a return of the moulds. This contention was put forward under two alternative heads. The first that there was to be implied into the contract of bailment, a term that SA would collect the moulds within a reasonable time of them being made available for collection by Avon. Their failure to do so released Avon from any further obligations as bailee. The alternative contention is that the contract of bailment expired by lapse of time.

47. The third line of defence is that if, contrary to Avon’s second line, its duty as bailee subsisted in March l997, then Avon’s duty must be determined in the light of the fact that Avon had long since made the moulds available for collection and as a result became, a reasonable time thereafter, merely an involuntary bailee of them. As an involuntary bailee, Avon would only be liable for wilful or reckless damage to the moulds.

48. The fourth line of defence relates to damages. It was at the commencement of the hearing being contended by SA that SA was entitled to damages in respect of one of the moulds representing loss of profit which SA might have obtained by having the mould available for the manufacture of tyres for which it had a contract to supply in prospect. As a result of evidence produced during the hearing that contention was abandoned. The issue between the parties on the question of damages is whether SA. are entitled to damages representing the cost of replacement of the moulds, that is, what it would cost to produce new moulds or whether, as Avon contends, the measure of damage is their present scrap value only.

49. Since if Avon are right in the contention supporting their second line of defence, that disposes of the entirety of the case, I will deal with that issue first.

50. In the decision of the Court of Appeal in Peddrick v Morning Star Motors Ltd, unreported, 14th February l979, the Court of Appeal was considering a case where the plaintiff had purchased a motor car from the defendants but, discovering some faults in the car, took it back to the defendants for those faults to be corrected. The plaintiff was dissatisfied with the repairs and a dispute started. Meanwhile, the motor car was left on the defendants premises where it obstructed the defendants business. Approximately a month after the emergence of the dispute, the defendants removed the car to a public car park where they left it and their solicitors wrote to the plaintiffs solicitors informing them of this and of where the car was parked. Approximately seven months later and after proceedings had been commenced in the County Court by the plaintiff claiming rescission of the contract to purchase the car, it was stolen. The claim to rescind failed and the plaintiff then claimed to recover the value of the car on the basis that the defendants were in breach of their duties as bailees of it. The Court of Appeal concluded that that claim also failed. Giving the lead judgment in the case, Lord Justice Megaw said:-

"It was obviously an implied term of that agreement - which one would not have expected to be put in as an express term because it was so obvious - that when the repairs had been done by the defendants, subject to any right of lien for payment of money that was due for the work done, should allow the plaintiff to take that car away. It was equally obviously an implied term of that agreement that when the repairs had been duly done, the plaintiff should make proper payment for them, in accordance with the contract, and should take the car away. If the plaintiff, of his own volition, and contrary to the wish of the defendants, chose to leave that car with the defendants when the defendants asked him to take it away on the due performance of the contract, that would be a breach of contract on the part of the plaintiff. I do not see that there can be any doubt about those implied terms. It is not a part of a contract, when somebody hands over a chattel to somebody else in order to work upon it, that the person to whom it has been handed over should be obliged, by virtue of his contract, to keep that chattel - whether it be a white elephant, a motor car or anything else - indefinitely, for the convenience of the owner and his own inconvenience and disadvantage."

51. In Davis v Henry Birks & Sons Ltd [l982] 142DLR, p 356, the Court of Appeal of British Columbia was considering a case where a husband took his wife’s diamond brooch to the defendant, a jeweller, to appraise it. The defendant having sent a letter of appraisal to the husband and to his insurance company, there was then a lapse of seven years before the plaintiff sought to recover her brooch from the defendant. By then the brooch had become mislaid. On the plaintiffs action, the Court by a majority determined that in the circumstances a term should be implied into the contract between the plaintiff and the defendant to appraise the brooch that the defendant would have a reasonable time to complete the appraisal, and the plaintiff would have a reasonable time after receipt of the appraisal to pick up the brooch. The plaintiff having failed within such reasonable time to recover the brooch the defendants were thereafter relieved of any continuing duty as bailees. The judgment of the majority was given by Taggart J.A. who at page 359 of the Report says this:-

"Nothing appears to have been agreed between the parties as to how much time the defendant would have to make the appraisal. Nor did they agree on how long after completion of the appraisal the plaintiff would have to pick up the brooch. In the circumstances of this case the Court should imply terms that the defendant would have a reasonable time to complete the appraisal; and the plaintiff would have a reasonable time after receipt of the appraisal to pick up the brooch....In my opinion in the circumstances of this case, a reasonable term to imply is that the plaintiff have one month from the time when she received the letter of request to attend at the defendants premises and take possession of the brooch. She did not do so because she and her husband decided to leave it there. That was a decision in which the defendant did not participate. In these circumstances, I think the defendant has discharged its contractual obligations to the plaintiff....The plaintiff and her husband said that they received no written or oral notice from the defendant to the effect that they should come and pick up the brooch. The contract does not impose on the defendant an obligation to give such notice to the plaintiff. In any event, the plaintiff did receive the written appraisal and since it was for that purpose only that the defendant had the brooch, I think the clear implication to be drawn from the receipt of the letter was that the plaintiff should pick up the brooch within a reasonable time...."

52. In Maritime Coastal Containers Ltd v Shelburn Marine Ltd in the Supreme Court of Nova Scotia l982, 52 NSR p51, Mr Justice Hallett was considering a case where a plaintiff shipowner had contracted with the defendant stevedores, inter alia, to unload 40 tonnes of structural steel from one of their ships. The defendant did so and piled the steel on adjacent land. Neither the plaintiff nor the defendant paid any attention to the steel for 3˝ years, at which time the plaintiff discovered that it was missing. The plaintiff claimed that the defendant was liable for the value of the steel as its bailee. Mr Justice Hallett held that the plaintiff’s action failed. At page 69 of the Report, he said this:-

"Even if one were to hold that there was a change of possession and a bailment under the circumstances, the bailment would terminate within a reasonable time which, in my opinion, considering the nature of the property in question would be six months. The defendant could not have been expected to safely keep 40 tonnes of steel indefinitely when it is not in the storage business. Secondly, it would be reasonable for the defendant to assume that had the plaintiff considered the steel to have any significant value, the plaintiff would have returned to remove the steel from the site. Not having returned to remove the steel which had the general appearance of scrap and not having made any enquiry about the steel, it was reasonable for the defendant to conclude, without contacting the plaintiff, that it had no obligation to care for the steel after the expiration of six months. Forty tonnes of rusted steel dumped at a shipyard by a vessel in a hurry cannot be viewed in the same manner as the custody of luggage, a case of clocks or a fur coat as in the cases upon which the plaintiff relies. In concluding that a bailment of an indefinite duration terminates after the expiration of a reasonable time, I have relied on statements in Chapman v Great Western Railway Co. 5 QBD p278, Furbank v Anderson l956 57 WWR (MS) 646 and Davis v Henry Birks & Sons [l981] 5 WWR 559."

53. It is the defendants contention that even assuming Mr Juhan’s evidence is correct and that after Avon’s letter of the 2nd December l993, he first made contact with Avon to enquire about the whereabouts of the moulds in September l996, by then the reasonable period that the court should imply into the agreement of the 1st March l986 for the collection of the moulds after the expiry of that agreement had long gone by and they were discharged from any continuing duties to SA as their bailees.

54. It was first contended by SA that the decision of the Court of Appeal in Pedrick’s case has been superseded by the coming into force of section 12 of the Torts (Interference with Goods) Act l977. That section applies, inter alia where a bailor is in breach of an obligation to take delivery of goods. The section empowers the bailee on giving notice in the form prescribed by the Act to sell the goods in question and account to the bailor for the proceeds of sale, less costs of sale. It is SA’s contention that the existence of this statutory route whereby the bailees can disembarrass themselves from their obligations precludes the court from implying a term into a contract of bailment that the obligations of the bailee under it will be discharged after the failure of the bailor to collect the goods bailed within a reasonable time of the conclusion of the contract.

55. I cannot accept this contention. It does not seem to me that Section 12 can be read as a provision excluding previously existing common law rules relating to contracts of bailment. All it does is to provide a bailee with a specific power of sale of the goods bailed in circumstances where the bailor is obliged to take delivery but fails to do so. By subsection (8), the section, and schedule 1 to the Act, which prescribes the form of notice, takes effect "subject to the terms of the bailment". The facts of the present case illustrates circumstances where a bailee might not wish to exercise the powers conferred by Section 12. It is Avon’s case that the moulds are only worth the negligible sums represented by their present scrap value, certainly to a third party not licensed to manufacture tyres covered by SA’s patent. It must be very doubtful that the proceeds of sale of the moulds would cover the costs of attempting to sell them.

56. It is next contended by SA that such a term is not to be implied in the present case because the evidence of Mr Baldwin of Avon shows that Avon was routinely engaged in the long term storage of tyre moulds belonging to their customers. Whether or not that may be correct as a question of fact, such a contention seems to be to be inconsistent with the provisions of clause 4(b) of the Contract of 1st March l986 which clearly contemplates that the parties expected the moulds to be collected by their owner, on the termination of the agreement. Particularly is this so in circumstances where Avon had notified Mr Pickworth and U.K., the alleged agents of SA that they were expecting the moulds to be collected or alternatively to be given instructions as to their disposal. It does not seem to me that the facts of this case are materially different from those in the Pedrick case for this purpose.

57. It is then contended by SA, on the basis of an extract from the 8th Edition of Treitle’s Law of Contract at page 701 that the implied term is not, without more, to be treated as a condition of the contract of bailment so as to bring it to an end when breached by the bailor. That was certainly not the approach of the Court of Appeal in Pedrick, not of the Canadian courts in The Davis and Maritime Coastal cases. It does not seem to me that a rule that a second notice to the bailor requiring him to remove the goods, containing a threat that failure to do so may lead the bailee to dispose of them, so as to convert an ordinary term of the agreement of bailment into a condition is created by the judgment of Lord Goddard in Sachs v Mickloss [l948] 2 KB page 23.

58. It is finally contended by SA, on the authority of Mitchell v Ealing L.B.C. [l979] 1 QB page 1 that the burden is on Avon to show that it retained the moulds available to be handed over to SA. up to the time of the expiry of the reasonable period within which they were to be collected by SA. that was to be implied.

59. I cannot accept this contention either. In Pedrick’s case, it was known when the Defendants removed the car from their garage and placed it on the public car park and the date when it was stolen. The point, however, was available in The Davis and Maritime Coastal cases where it was not known when the brooch and the load of steel went missing. In any event, it does not seem to me that Mitchells case is authority for the proposition for which SA. contend. It seems to me to be dealing with the point at which the local authority’s obligations as gratuitous bailees of the plaintiffs furniture, with the limited duties to protect it resulting from that status was converted, by their own actions, into a liability as insurer of the furniture.

60. I accept Avon’s submission that a term is to be implied into the contract of 1st march l986 that the owner of the moulds would collect them from Avon within six months of them being available for collection, which period runs from receipt of Avon’s letter to U.K. on 2nd December l993. The failure by U.K., Tyres or SA to take any steps to recover the moulds within that period so breaching the implied term, operates to relieve Avon of its obligations as bailee of the moulds. Unless constrained by authority, it does not seem to me to be appropriate to place on Avon a burden to show that they were in a position to deliver up the moulds at all items up to the expiry of that period of six months when the first indication that anyone had of a continuing interest in the moulds of which there is any evidence, was Mr Juhans’ contact with Avon, he said, in September l996. In my judgment I am not so constrained.

61. That disposes of the case, and makes it unnecessary for me to decide the points of law which determine whether the defendants, had their second line of defence failed, were entitled to succeed on their third line of defence or their contention as to the basis on which they would have to pay damage, were all their defences to have failed. In case the matter goes further, however, it seems to me I should briefly express my view on the question of SA’s locus standi to advance the claim at all in respect of moulds 1 to 4 and 6. In my judgment, the documentary evidence in the case is consistent only with the purchaser of the moulds from Avon being U.K. whose purchase was financed by SA by means of the transfer of funds by SA to U.K in the manner which I have described in the earlier part of this judgment. I would not have been persuaded to depart from that view by the evidence of Mr Juhan that no such loan was intended or took place and that U.K. was throughout acting as agent for SA. which was the real purchaser. I found Mr Juhan’s evidence unsatisfactory and his assertions inconsistent with that part of his evidence where he accepted that U.K. was intended as a vehicle for exploiting SA’s patent in the United Kingdom where it was to be responsible for procuring the manufacture and distribution of J.J. tyres and Wheels.

62. For these reasons, in my judgment, the plaintiffs action fails.