Australia: Is there a duty to warn about lack of insurance in a bailment relationship?

Curwoods Case Note
Last Updated: 15 March 2012
Article by Paul Garnon and Heidi Nolan

Judgment date: 23 February 2012

All Covers and Accessories Pty Limited v Sidawi [2012] VSC 48

Supreme Court of Victoria – Judicial Review and Appeals List 1

In Brief

  • There is no general duty of a bailee, when taking possession of a bailor's goods, to warn the bailor that the goods will not be covered by insurance.
  • The court considered whether there should be an exception to this general rule in circumstances where the goods are of an "unusually high value".


The principles of a cause of action in bailment are well summarised in cases such as Tottenham Investments Pty Limited v Carburettor Services Pty Limited 2 . These are:

  1. A bailee for reward owes a duty to take such care of the bailed goods as is reasonable in the circumstances.
  2. The duty of the bailee is not that of an insurer. The bailee is not obliged to take every conceivable or possible precaution to prevent loss of the goods. Its duty is simply to act reasonably and to take reasonable care such as a person would take in respect of that person's own goods.
  3. Foreseeability of damage or loss is an undemanding test.
  4. If the bailee, bearing the onus of proof, discharges that onus by establishing that the theft (or damage) of the bailed goods occurred without negligence on its part, a bailor must establish precautions which reasonably could and should have been taken by the bailee to prevent the loss of the goods.

Mr Sidawi (the respondent) left his boat and trailer at the premises of All Covers and Accessories Pty Limited (the appellant) to have a canopy and storm cover made and installed on the boat. The boat had been in the possession of the appellant for approximately 2 weeks when a fire destroyed the appellant's premises and everything in it, including the respondent's boat and trailer. The appellant did not hold any insurance which would extend to cover the respondent's losses.

The respondent accepted that the fire was not caused or related in any way to the appellant's negligence. However, his claim was brought on the basis that he had not been told that the appellant held no insurance to cover any losses to his property.

The respondent brought a case before the Magistrates Court on the basis that he had not been told that he would be leaving his boat at the appellant's premises at his own risk, and that if he had been aware that there was no insurance in place to cover any damage to his boat, then he would have taken his boat to another workshop where insurance was in place.

The appellant gave evidence that it had in place a sign on the roller door through which all boats would come into the factory, which said words to the effect that goods were left at the customer's risk. It was accepted that a person may not see that sign when entering the factory. Evidence demonstrated that the appellant did not hand over any receipt or other document which said that the customer left goods in the factory at their own risk, nor was there a conversation in which the respondent was warned that the boat would be left at his own risk. There was no evidence given about any discussions about insurance, although it seems to have been accepted that there was no such conversation held.

While it was accepted that a bailee's duty of care does not ordinarily include an obligation to insure the goods or to warn the bailor that they are not insured, the Magistrate held that where bailed goods are of an unusually high value, that justifies the departure from the ordinary principle that the bailee's duty of care does not include an obligation to warn the bailor that they are not insured. The Magistrate determined that the boat and trailer in this case were of an unusually high value (purchased for $9,200).

The Magistrate placed emphasis on the fact that the appellant had placed a sign on the premises warning customers that goods left by them would be at their own risk, saying that this showed that the appellant recognised a need to warn his customers.

The Magistrate found that the appellant was under legal duty to warn the customer that the business did not have insurance.


On appeal the issue for determination by Nukhtar AsJ was whether, or in what circumstances, a bailee for reward is under a duty to warn the customer of an absence of insurance.

His Honour referred to the Canadian decision of Mason v Morrow's Moving and Storage Limited which involved a failure to warn that there was no fire insurance. It was found that there was no overwhelming risk in that case and therefore no duty to warn of the risk so that insurance could be taken out.

Nukhtar AsJ applied these principles to the present case, and said that, if a bailee is aware of some unusual risk or danger that might affect bailed goods such that a reasonable person would inform a bailor that they might wish to obtain insurance over the goods, or advise them that their goods will not be insured, then a duty to warn might arise. However, his Honour made it clear that any such finding will depend on the facts of the individual case.

His Honour noted that although duties falling under the law of bailment and tort are distinguished from one another, the laws of negligence concerning a duty to warn may apply to bailment cases. In this particular instance, where the respondent accepted that the appellant was not negligent, and that the fire could not have been foreseen by the appellant, this duty to warn would not apply.

His Honour rejected the respondent's submission regarding the unusually high value principle, stating that it clashed with settled law that a bailee is not an insurer and is under no duty to insure. His Honour further said that even accepting that circumstances may present a duty to warn in a bailment case pursuant to general laws of negligence, it would be a duty to warn about hazards to the goods, rather than matters such as insurance which relate to the bailor's commercial interest in the goods. This would be consistent with the established principles regarding duties of bailees.

The Appeal was therefore allowed and the respondent's claim was dismissed.


The responsibility of a bailee does not generally extend beyond looking after the goods which are stored. It does not invoke a duty to warn about the need to take out insurance.

However, in some circumstances, where there is a foreseeable risk of harm to the goods, a duty to warn the bailor of that risk of harm, which may include discussions about a desire for the bailor to obtain its own insurance over the goods, may be found depending on the factual circumstances of each case.


1 Nukhtar AsJ
2(1994) Aust Torts Reports 81-292 per Kirby P

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