Australia: "Palliative Care": Conversion and Damages in the Pallet Hire Business

Last Updated: 13 February 2012
Article by Philip Stern


The New South Wales Court of Appeal held in Bunnings Group Limited v CHEP Australia Limited [2011] NSWCA 342 that the use by Bunnings of CHEP's wooden pallets for the delivery of goods from its distribution centres to its stores constituted an intentional dealing with CHEP's lawful property that was repugnant to its ownership rights, thus being a tort of conversion.

Refusal by Bunnings to comply with CHEP's lawful demands for return of its property amounted to unlawful detinue.

Damage was the loss of potential hire revenue.


In its usual business, Bunnings acquired wooden pallets owned by CHEP when Bunnings received stock from suppliers. It used these pallets to display goods on its shop-floors; and to store goods not immediately required for stock replenishment. On many occasions Bunning's distribution centres also used some of the pallets owned by CHEP to transport its own goods to and from its distribution centres and stores.

CHEP's primary business is the operation and administration of a pallet pooling service to its customers on a temporary hire basis. By CHEP's standard terms and conditions, it retains complete ownership of all the pallets hired to its customers. Any pallets hired to customers that are unaccounted for attract compensation charges.

In the late 1990's, CHEP identified the holding and usage by Bunnings of a substantial number of its wooden pallets despite it not being one of its contracted clients. On 16th May 2002, CHEP informed Bunnings that it formally withdrew consent for the continued non-commercial use of its wooden pallets by Bunnings.

In November 2005, executives of CHEP met senior Bunnings managers suggesting that Bunnings immediately enter into a hire agreement with CHEP or face legal demands and potential court action for return of all of its pallets held by Bunnings. Bunnings asserted that wooden pallets owned by CHEP in its possession were lawfully in Bunnings use, as between it and its suppliers, who Bunnings presumed were CHEP customers.

On 30th May 2007, an unequivocal demand was issued for return of all wooden pallets owned by CHEP in Bunnings' possession. Bunnings responded on 18 June 2007, pointing out the practical difficulties of compliance, specifically with identifying the pallets owned by CHEP that were or were not part of existing commercial agreements in its possession.

Judgment in First Instance

McDougall J, held Bunnings liable to CHEP in conversion and detinue in respect of pallets owned by CHEP. Damages were awarded by reference to lost hire revenues, amounting to $9,375,798, plus interest of $4,100,002.

Commercial Implications

  • This appeal case follows the High Court of Australia's stipulations on the essential elements of conversion in Penfolds Wines Pty Ltd v Elliot [1946] 74 CLR 204: "An intent to do that which would deprive 'the true owner' of his immediate right to possession or impair it may be said to form the essential ground of the tort."Allsop P's majority judgment makes it clear however, that not every use of CHEP pallets outside the confines of a hire agreement is necessarily a conversion, as it's use may not be a deprivation of the owners rights. Examples include the use by Bunnings of CHEP pallets in ways contemplated by the pallet pooling system and commercial custom.
  • Detinue requires an unequivocal and unconditional notice and/or demand as to the lawful rights of the lawful owner.
  • The correct measure of damages in conversion of hire goods is compensatory, not restitutionary. The quantum of damages is to be assessed by reference to lost hire revenues by the wronged party. Bunnings submitted that CHEP had not asserted any financial loss or damage and therefore could not make out a claim for compensatory damages. Bunnings further argued that CHEP had already collected compensatory payments for the pallets from its own clients when they became unaccounted for, and that any award by the court would be doubling-dipping in terms of compensation. The Court of Appeal disagreed. There was no link between the compensation CHEP received from its clients as per their contractual agreement in respect of unaccounted for pallets and compensation due from Bunnings conversion and detinue of them. Assessing damages in such an instance does not require proof of the extent of financial damage or loss by the wronged party. The damage suffered was the loss of commercial opportunity.

Impacts of the Personal Property Securities Act 2009 ("PPSA")

The PPSA and its Regulations1create a register and accompanying regime that allows transactions and obligations secured by or against personal property (excepting land and some other statutory forms of property) to be catalogued, providing a streamlined regime of enforceability of interests and a system of priority between competing interests.2

This decision would not have been decided differently if the PPSA had already commenced subject to registration by CHEP of its client hire-agreements in ways that meet the requirements of attachment3, perfection4, and being in writing5. The hire-agreements between CHEP and its suppliers would be 'PPS Lease' security agreements6, attracting the super-priority status of a 'Purchase Money Security Interest', making its interest in the property the subject of the hire-agreements fully enforceable against any and all lower priority parties7.

However, if CHEP had failed to register its hire-agreements with its clients and Bunnings subsequently registered an interest in the same property meeting the requirements of attachment and perfection or control8, then failing dishonest or intentionally tortious dealings or actual and constructive notice9, Bunnings claims would trump CHEP. The basis of the PPSA is that buyers or lessees for value "take-free" of unperfected security interests.10

Following the commencement of the PPSA from 30th January 2012, parties to transactions that secure any undertakings or obligations with proprietary interests should register the interests to gain the fullest protection of them.

Registration can be done according to serial number of individuals items of property11 or according to classes or sub-classes or property12. Registration can be made of commingled goods13. Registration also can be made once in respect of a whole sequence of like transactions between parties14.

The assistance of Michael Hislop, Clerk, of Addisons in the preparation of this article is noted and greatly appreciated


1 Reference here is to the Personal Property Securities Regulations 2010 (Cth)
2 For an overview of the PPSA, see PPSA, s3
3 "Attachment" refers to the linking of specific collateral to a financial transaction or the performance of some obligation. PPSA, s19
4 "Perfection" refers to completion of all the required steps necessary to make registration of the security interest effective and enforceable. PPSA, s21
5 PPSA, s20
6 For a statutory definition of a 'PPS Lease', see PPSA, s13.
7 A 'Purchase Money Security Interest', is a security interest arising from the conditional assistance given another to acquire a specific property and/or inventory, see PPSA, s14.
8 PPSA, s341
9 For a definition of 'actual and constructive notice' and its applicability, see PPSA, ss197, 298, 299.
10 PPSA, s43
11 PPSA, s153 and Personal Property Securities Regulations 2010 (Cth), Schedule 1 Part 2
12 PPSA, s153 and Personal Property Securities Regulations 2010 (Cth), Schedule 1 Part 2
13 PPSA, s99
14 PPSA, ss21(4), 153

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.