Allied Mills Ltd v Gwydir Valley Oilseeds Pty Ltd [1978] 2 NSWLR 26
Property law; bailment; gratuitous bailment; seller of goods as bailee; duty to take reasonable care.
Facts: Allied Mills sold 130 tonnes of linseed meal, which it had in store at its premises, to Gwydir Valley Oilseeds. As the contract was for the sale of specific goods in a deliverable state, ownership passed at the time the contract was made, in February 1975. In breach of the contract, Allied Mills delayed in making delivery of the meal. In March, while the meal was still in the possession of the seller, there was a fire at Allied Mills' shed which destroyed the meal that Gwydir Valley Oilseeds had purchased.
Issue: Was Allied Mills responsible for the loss of the meal, even though ownership had passed to the buyer, and even though the fire was not caused by Allied Mills' carelessness?
Decision: Allied Mills was responsible for the loss of the meal and had to compensate Gwydir Valley Oilseeds.
Reason: Ownership of the linseed meal passed to the buyer at the time the contract was made. This would normally mean that the buyer would bear any risk of accidental loss by fire as long as the seller, in possession as bailee before delivery, had taken reasonable care of the goods. But Huntley JA said (at 29):
"…where a seller who is a bailee … does not deliver the goods in accordance with the contract, as here, he cannot take advantage of his own wrong and contend that he has a lower degree of responsibility than he had pursuant to the contract itself". Because it was Allied Mills' fault that the linseed meal had not been delivered on time, they were responsible for the loss.