The new contract law: a Fair Trading Act claim against Kennard’s Self-Storage

In Kimitsis v Kennards Self Storage [2007] VCAT 668, a man put some things into a Kennard’s self-storage facility. He paid the licence fees for a while, but then fell into arrears, and was uncontactable for two months from the time he put the things into the stroage unit. A written warning went unheeded, but there was a bit of a mix-up with the post. Kennard’s forcibly entered the storage unit and sold the stored things, as it was entitled to do under the contract. But it did so unbeknownst to the man, at what he considered to be an obscene undervalue. The contract said Kennard’s did not take possession of the goods and was not a bailee of them. It did not have a key to the storage unit, and did not know what was inside. Neither warehousemen’s legislation — which required sale of the goods at public auction — nor the law of bailment was accordingly found to apply. Kennard’s was found to have breached an implied contractual duty to sell the goods as well as possible. The result was that Kennard’s was ordered to pay damages. It just so happened that those damages were precisely equivalent to the arrears of licence fees owed by the man.

Member Proctor found an implied term that Kennard’s would act “fairly” in exercising its contractual right to enter the storage space forcibly and sell the contents after a certain period of default by the goods’ owner. He said this term was “plain”, and, on the basis that it was “plain”, implied another term, that they be sold for the best price possible. He found a breach of this term by Kennard’s lackadaisical and inadequate approach to the taking of an inventory. Two second dealers had submitted quotes on the basis of the inventory.

The man said there was $26,000 worth of things stored in the facility. Kennard’s sold it all to the second hand dealer with the higher quote ($250). One gets the impression that the man suffered for a want of evidence of the value of the contents of the facility. The second hand dealers gave evidence that had the inventory been accurate their bid would have been a little higher. How much more, they do not appear to have said.

It occurs to me that one indication of value is that the man was originally willing to pay, and did pay for a while, almost $90 a week to store the things. Member Proctor found that the difference between what the second hand dealers would have paid and what they did pay would not have been more than the arrears of licence fees ($1,170), obviously not finding the man’s evidence on the vlue of the things particularly compelling. The Member did have access to a list of the items and presumably formed his own views about their value, but neither the list nor those views are reproduced in the reasons.

Then Member Proctor said this:

32 I found Kennards procedure for creating an inventory of the goods was deficient in the procedure used. Had the inventory been accurate, the bid from the second hand dealer who purchased the goods would have been higher but not higher than the [arrears in licence fees totalling] $1177.00 owed by the [man] to Kennards.

33 I decided that the [man] is entitled to be paid damages by Kennards. The amount of damages should be equal to any amount which would have been paid by the second hand dealer [sic.] in excess of the $1,177.00 owed plus some amount for the cost of replacing personal papers [which had been in a trunk which had not been purchased by the second hand dealer and which had disappeared].

34 Given the difficulty in calculating the amount with certainty and doing my best with the available evidence, I calculated the damages at $1,177.00 and set this off against the debt owed by the Applicant to Kennards. Therefore I declared that the Applicant does not owe any debt to either the First Respondent or the Second Respondent.

The reasons do not disclose how the figures were arrived at, nor whether Member Proctor considered the dispute he was deciding was properly characterised as a consumer and trader dispute (it probably was), a consumer dispute (it was if self-storage services are ‘ordinarily used for personal household or domestic purposes’ — s. 109(4)), and/or a trader trader dispute (probably not; the man’s claim was for about $25,000 less about $1,000, and so was presumably more than $10,000 — s. 109(4)) . The result troubles me because of the extraordinary coincidence that the sum for damages awarded for the breach of the implied duty to sell the contents of the storage unit fairly so as to achieve the best possible price was exactly the sum owed by the man to Kennard’s by way of arrears of licence fees.

The decision is expressed as a simple application of contract law, yet I cannot help wondering whether the fact that a $25,000 case was heard in a fairness vibe jurisdiction gave rise to rough justice, or creative justice of the kind envisaged by sections 108 and 109 of the Fair Trading Act, 1999 on grounds which go unexplained, and unreferred to in the reasons.

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