Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd [1966] HCA 46; (1966) 115 CLR 353 (10 August 1966)

HIGH COURT OF AUSTRALIA

THOMAS NATIONAL TRANSPORT (MELBOURNE) PTY. LTD. v. MAY & BAKER (AUSTRALIA) PTY. LTD. [1966] HCA 46; (1966) 115 CLR 353

Contract

High Court of Australia
Barwick C.J.(1), McTiernan(2), Taylor(2), Windeyer(3) and Owen(2) JJ.

CATCHWORDS

Contract - Carrier - Bailment - Onus of proof of negligence - Exemption clause - "Fundamental breach" - Ambit of exemption clauses - Right of sub-contractor not being a party to rely on exemption clause.

HEARING

Melbourne, 1966, March 11, 15, 16;
Sydney, 1966, August 10. 10:8:1966
APPEAL from the Supreme Court of Victoria.

DECISION

August 10.
The following written judgments were delivered : -
BARWICK C.J. The facts and circumstances of this case which were found by and summarized in the joint reasons which are about to be delivered. I agree with the conclusion that radical to the contract of carriage between the appellant Thomas National Transport (T.N.T.) and the respondent was an engagement implicit in it to take the respondent's goods from its premises to T.N.T.'s depot for marshalling into vehicles for the continuation of their journey inter-State to the agreed destinations. (at p360)

2. The contract of carriage allowed of the pick-up system employed by T.N.T. to the extent that the respondent's goods could be carried on the 'round' before reaching that depot: but the depot was the contemplated terminus of the pick-up round. The respondent's goods were not taken to the depot but to Pay's home where they were damaged. (at p360)

3. What in fact occurred was, in my opinion, such a departure from the promised carriage that T.N.T. was not entitled to rely upon the exemptions of the written contract. Therefore, upon the findings made by the Supreme Court, T.N.T. was liable for the failure safely to deliver the goods: see Halsbury's Laws of England, 3rd ed, vol. 4, par. 412, p. 155 and cases there cited. I concur in the reasoning by which my brothers have arrived at this conclusion. The appeal of T.N.T. thus fails. (at p360)

4. Different considerations arise in the case of the other appellant Pay. With him the respondent had no contract. As, in my opinion, T.N.T. was not entitled to rely upon the exempting clauses of its contract with the respondent, the question of whether Pay, a sub-carrier, carrying the goods within the limits of the agreed carriage would be entitled to the benefit of such exemptions does not arise. Pay's liability is as a bailee of the goods. (at p360)

5. With some hesitation, I have come to the conclusion that, placed in the situation in which he found himself at 5.40 p.m. on the day in question, there was no reasonable step or course open to Pay which he failed to take in the protection of the goods in his custody. (at p360)

6. However, there is much to be said for the view, and indeed I incline towards it, that that situation was self-induced in that Pay continued on his "round" to pick up further goods, at a time when it must have been apparent to him that if he did so he would be unable to deliver to the depot before the time he knew it usually to close any of the goods which he already had on his lorry, including the respondent's goods. A tribunal of fact might well decide that this course was inconsistent with a conclusion that Pay discharged the onus of establishing that he had taken due care for the respondent's goods. But this aspect of the matter was not the subject of any finding by the trial judge, before whom the parties, judging by his reasons for judgment, seem to have concentrated upon the possible precautions which could have been taken by Pay from the time when the goods arrived at his house. I do not feel justified in these circumstances in concluding as a fact that Pay's failure to get the respondent's goods to the T.N.T. depot before its closing time prevented him discharging the onus which he accepted at the trial of negativing any relevant negligence on his part in or in connexion with the custody of the goods. (at p361)

7. Accepting the view, then, that the situation in which Pay found himself at 5.40 p.m. on the day in question was not self-induced, I have come to think, as I have said, that there was no step or course reasonably open to him, and which he did not take, to protect the goods in his custody. This, I think, was certainly true of any step or course which would or might have prevented or minimized the loss which in fact occurred. Accordingly, I am prepared to concur in the conclusion that, in the particular circumstances, Pay should be regarded as having discharged the onus of proof which he had accepted. Consequently, as the trial judge found against Pay, though perhaps on other grounds, his appeal should be allowed. (at p361)

McTIERNAN, TAYLOR AND OWEN JJ. This is an appeal from an order of the Supreme Court of Victoria which directed that judgment be entered for the respondent against both appellants in the sum of 4,634 pounds. By the statement of claim it was alleged that on 21st August 1962 the plaintiff delivered to the first-named appellant (hereinafter referred to as T.N.T.) certain packages of goods for delivery by it to the consignees "marked upon the said packages" and that T.N.T. agreed for reward to safely carry the said packages of goods and deliver the same to the said consignees respectively. Thereupon it was alleged that in breach of the said agreement T.N.T. failed to carry the said packages and deliver the same to the said consignees and the said goods were damaged or destroyed. Alternatively, it was alleged, that on or about the said date the said packages of goods which were the property of the respondent were damaged or destroyed whilst in the custody of T.N.T. to whom the said packages had been entrusted by the respondent to T.N.T. for reward. The claim against the appellant Pay was supported by the allegations that the plaintiff entrusted to that defendant the said packages of goods which were the property of the respondent and that on or about the said date, whilst the said packages of goods were in Pay's custody, the same were damaged and destroyed. (at p362)

2. The evidence in the case and the findings of the learned trial judge thereon are fully set out in his Honour's reasons and it is unnecessary that we should again fully traverse the facts. But it is desirable that, at least, some of the salient matters should be referred to. The packages in question were the subject of some eight consignments to nominated consignees in New South Wales, South Australia, Tasmania, and Western Australia and the various contracts for their carriage from the respondent's premises in Melbourne to the respective consignees were made in Melbourne. It was the practice of T.N.T., which professed to carry on an inter-State transport service, to employ independent contractors to pick up packages in and about Melbourne for transport to a central depot maintained by it where they would be sorted and assembled upon trucks used for inter-State haulage. The appellant Pay was the independent contractor habitually engaged in the pick-up service in that area of Melbourne where the respondent's premises were situated. In operating this service Pay made daily calls at the respondent's premises to pick up outward-bound packages and although the vehicle which he used for this purpose belonged to him it bore the markings of T.N.T. In these circumstances, there was nothing to indicate that Pay was an independent contractor and the plaintiff was unaware that he was. As already appears the packages, the subject of the eight consignments, were picked up from the plaintiff's premises by Pay on 21st August 1962, but these were not the only packages picked up by him that day. In the course of his pick-up service his normal practice was to call at the premises of a number of customers of T.N.T. and he usually reached the respondent's premises about 4 p.m. In fact he called at the respondent's premises at about that hour on the day in question. His ordinary routine was, however, likely to be interrupted by directions from T.N.T. received by him by means of a two-way radio with which his vehicle was equipped. There seems to have been no such interruption to his ordinary routine on the day in question and after leaving the respondent's premises he proceeded, in turn, to other customers of T.N.T. where he picked up further consignments. By the time he had done this it was about 5.40 p.m. Knowing that T.N.T.'s depot usually closed about 5.30 p.m. he attempted to communicate with T.N.T. in order to find out whether he should bring in his load that night but he was unsuccessful in his attempt. Apparently the depot was closed for the night and thereupon, he took the load to his home with the intention of delivering it to the depot on the following morning. It appears from the evidence that he usually proceeded from his pick-up round direct to the depot but there had been about twenty occasions during the preceding twelve months when he had not done so. On these occasions he had been somewhat late in completing his pick-up round and he had been directed by radio by T.N.T. to take his load to his home and bring it to the depot on the following morning. When, on the day in question, he took his load home he parked his vehicle in a garage in the grounds of and alongside his home. The garage was constructed of steel and fibro cement sheeting; it was about twenty feet in length and ten feet wide and the only entrance to it was through the front doors. The tray of Pay's vehicle was about eight feet wide and when his truck was backed in there was a margin of about one foot on either side and the front of the truck protruded through the doorway. The load was covered with a tarpaulin properly secured. He inspected the load at about 9.30 p.m. before going to bed and it was then in the same condition as it had been earlier. But about 4 a.m. a neighbour saw flames issuing from the garage and roused Pay who caused the fire brigade to be called. In the meantime, he attempted to extinguish the fire with water from a garden hose. When the fire had been extinguished it was found that the respondent's packages had, together with other goods on the vehicle, been damaged. There is no suggestion that the fire was in any way due to the nature of any of the goods on the vehicle, the vehicle was apparently in good order and condition and the evidence does not enable it to be said how the fire originated. According to his Honour "from the whole of the evidence it must be assumed that the fire originated from some external source". It remains at this stage to be said that the respondent's goods - worth approximately 7,000 pounds - were damaged to the extent of an amount in excess of 4,000 pounds. (at p363)

3. Upon the defence filed by T.N.T. two substantial issues arose. The first was tendered by an assertion that the damage was accidental and occurred without any want of care on its part and was not due to any negligence or default on its part, whilst the second raised by way of defence several clauses of the contracts of carriage which it was claimed had the effect of exempting T.N.T. from liability for the respondent's damage. These clauses, which purported to exempt T.N.T. from liability for any loss or damage to the goods whilst in transit or in storage, are set out in the learned trial judge's reasons and, for reasons which will appear, it is unnecessary that they should be set out here. Substantially similar issues were raised by Pay's defence which, in addition to asserting that the damage to the goods was accidental and occurred without any want of care on his part, claimed, alternatively, that he was entitled to the benefit of the exempting clauses of the contracts between the respondent and T.N.T. (at p364)

4. Upon these briefly related facts it is convenient to deal first of all with the question of T.N.T.'S liability for the proved damages. For this purpose it is necessary to consider what was involved in T.N.T.'s undertaking to carry the goods from the respondent's premises in Melbourne to the various consignees in the other States. This it proceeded to do, as a first step in the carriage, by providing a "pick-up" service in Melbourne. It is not contended that this was not a permissible way of performing part of its obligations under the contract whether the "pick-up" service was conducted by its own servants or by an independent contractor. But however the service was conducted it would be necessary that the first stage of the journey should be from the respondent's premises to T.N.T.'s depot. Obviously the goods would be transported by the "pickup" service to T.N.T.'s depot in Melbourne in order that they might be sorted and assembled with other goods accepted for carriage upon appropriate trucks for carriage to the other States. It was known to the respondent that T.N.T. maintained a "substantial place" in Footscray Road for this very purpose - a place which is described by the learned trial judge in the following passage: "The depot of T.N.T. is on quite a large area of ground fronting on to the New Footscray Road. It is fairly well secured, being protected either by a wall abutting on the street or by a high fence topped with barbed wire around the curtilage. Generally speaking, sorting and loading at the depot ceased about 5.30 p.m. on Mondays to Thursdays. At the material time, the various consignments were frequently held in the depot overnight but there was a resident caretaker whose duty it was to keep a constant watch on the goods during the hours when the depot was closed. The depot was also furnished with fire extinguishers. There was no sprinkler system. It was constructed of fibro cement sheeting and steel". It was proved that it was Pay's usual practice to take his load at the conclusion of his "pick-up" round to this depot, but, as already appears, there had been about twenty occasions during the preceding twelve months upon which he had been permitted by T.N.T. to depart from this practice. But it is not suggested that the respondent knew of or assented to its goods being taken on any occasion to Pay's home and kept there during the night. Nor is there any suggestion that it was aware that T.N.T.'s depot closed at any particular time and, therefore, that it was not, after that time, available for the receipt of goods which had been picked up. Further there is no evidence that the course adopted on this occasion was justified by some particular custom or usage in the trade. What, therefore, must be presumed to have been the intention of the parties concerning the disposition of the goods at the end of the first stage of their journey? Undoubtedly, notwithstanding the presence in the various contracts of the exempting clauses, T.N.T. impliedly undertook to exercise reasonable care for the safety of the goods at all stages of the various journeys upon which it had undertaken to carry them. This is not of prime importance in the case except in so far as it throws light on the manner in which it was intended that the "pick-up" service should operate. It was, of course, immaterial whether the "pick-up" service - which expression connotes a picking up of the goods by T.N.T. for on-carriage - was conducted by a servant of T.N.T. or by an independent contractor. But it seems clear that if it had been conducted by a servant there can be no warrant for asserting that T.N.T.'s contract with the respondent authorized the former to direct its servant to take any goods which he had picked up to his home and store them there overnight. Such a direction would be clearly inconsistent with the primary obligation which T.N.T. had assumed. The fact that the "pick-up" service was conducted by an independent contractor - although this fact was not known to the respondent - does not in our view affect the matter. It seems to us that it must have been taken to have been implicit in the contract which T.N.T. made with the respondent that its goods would be taken to T.N.T.'s depot and that the depot would be available for their reception at the conclusion of the pick-up round. It is, to our minds, unthinkable that it was within the contemplation of the parties that an extremely valuable consignment of goods was to be kept overnight by T.N.T.'s servant or sub-contractor in the yard of a suburban cottage. On the contrary, the only conclusion consistent with its primary obligation was that they would be taken to and received in the depot at the conclusion of the "pick-up" round. This conclusion is unaffected by consideration of the clause - incorporated in a number of the contracts - that the carrier "is hereby expressly authorized by the Consignor to carry all goods or to have them carried by any method as he in his absolute discretion deems fit and notwithstanding any instruction verbal or otherwise of the Consignor that the goods are to be carried by another method". The italics are ours and it seems to us that the expression "method", which must mean method of carriage, is quite inappropriate to cover the circumstances of this case. What the respondent complains of is not the method which was employed to carry the goods but, rather, that the goods were carried, not to T.N.T.'s depot but to Pay's home and kept there overnight. (at p366)

5. A variety of cases may be cited to illustrate how and in what circumstances a carrier so far departs from his contract of carriage as to preclude him from relying upon exempting provisions designed to relieve him from liability for loss or damage occurring during the performance of his contract. But it is sufficient to refer to Bontex Knitting Works, Ltd. v. St. Johns Garage (1943) 2 A11 ER 690 the decision in which case was approved by the Court of Appeal (1944) 1 A11 ER 381 and referred to with evident approval by the Judicial Committee in Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd. (1959) AC 576, at p 588 The facts of that case are dissimilar but the present case is, if anything, stronger from the point of view of the respondent. (at p366)

6. The effect of this conclusion is, of course, that T.N.T. cannot protect itself by seeking to rely upon the exemption clauses and there is the clearest authority for the proposition that, in such circumstances as the present, it must be held liable for the damage which occurred whether or not it can be said to have resulted from lack of care or to have been directly caused by T.N.T.'s unauthorized departure from the terms of the contract. (at p366)

7. There was no contractual relationship between the respondent and Pay and the question of his liability falls to be determined by different considerations. Apart from the operation of the exempting clauses of the contracts between the respondent and T.N.T., the benefits of which he also claims, the primary question is whether he has proved that the damage did not result from any want of care on his part. The onus of disproving negligence, it may be observed, was accepted by him on the pleadings and, again, expressly, both in the Supreme Court and in this Court. No doubt this was done on the strength of the decision in Morris v. C. W. Martin & Sons Ltd. (1965) 3 WLR 276 The learned trial judge found against Pay on this issue because in his view no satisfactory evidence was given of any precise precaution taken by him "to protect the goods against the risk of fire". The difficulty inherent in the proof of a negative is not made any the less by the fact that in this case the evidence is such that the cause of the fire remains unknown and, therefore, it is impossible to say what precaution, or precautions, if any, would have been sufficient to prevent its occurrence (cf. Gosse Millard v. Canadian Government Merchant Marine (1927) 2 KB 432, at p 434 and Pendle & Rivet Ltd. v. Ellerman Lines Ltd (1927) 33 Com Cas 70, at p 78) But it is not essential, in order to discharge the onus of proof, for a person in the position of a bailee of goods which have been damaged or destroyed whilst in his custody, to establish, first of all, the precise cause of the loss and, thereafter, to establish that the cause arose or operated without negligence on his part (Bullen v. The Swan Electric Engraving Co. (1906) 22 TLR 275; (1907) 23 TLR 258; The City of Baroda (1926) 25 Ll LR 437, 441, 442; and Makower, McBeath and Co. Pty. Ltd. v. Dalgety and Co. Ltd. (1921) VLR 365, at pp 377, 378); it is sufficient if the bailee is able to establish that he took such care of the goods as was reasonable in the circumstances. (at p367)

8. Any inquiry into Pay's conduct must commence with an examination of the position in which he found himself at about 5.40 p.m. on 21st August 1962. There is, of course, no suggestion that he was guilty of any want of reasonable care in not having completed his pick-up at an earlier hour so that he might have proceeded to T.N.T.'s depot whilst it was still open. But at 5.40 p.m. on that day he was unable to communicate with T.N.T. and the depot was closed. What, in these circumstances, was he to do with his load? To us it is apparent that he had no alternative and that the course which he took was a course that any reasonably prudent man would have taken in the circumstances. It is true that the garage at his home may be thought to have provided insufficient protection for his load during the night but it was, as far as it can be seen from the evidence, the best protection available. Indeed it was, for all practical purposes, the only protection offering. The suggestion made in argument that it was negligent on his part to place his truck in the garage with the consequent restriction of access to the load is without substance when the matter is seen in perspective as also is the suggestion that there was a lack of care in failing to have a fire extinguisher available in the garage. The only other suggestion that was made is that Pay should have inspected the load at regular intervals during the night after 9.30 p.m. when he last inspected it but, it seems to us, that the risk of fire in the circumstances did not reasonably require that such a specific precaution should have been taken. There was nothing in the character of the goods, and there was nothing in the character or condition of the vehicle itself, which might have led him to foresee any unusual risk of fire and from the nature of the damage it seems that his Honour was satisfied that the cause was "external". The risk of fire from such a cause was entirely remote. On the whole, we are of the opinion that, upon the evidence which his Honour accepted, there was no lack of reasonable care on Pay's part and that, in the circumstances, he did all that could have been expected of a reasonably prudent man. Consequently, we are of opinion that the evidence which was accepted did operate to discharge the onus which lay upon him. (at p368)

9. The further question whether Pay was, in any event, entitled to the protection of the exempting clauses of the contracts between the respondent and T.N.T. does not, therefore, arise. However counsel for the appellants examined the effects of their Lordships' speeches in Midland Silicones Ltd. v. Scruttons Ltd. [1961] UKHL 4; (1962) AC 446 and sought to distinguish the present case from Wilson v. Darling Island Stevedoring and Lighterage Co. Ltd [1956] HCA 8; (1956) 95 CLR 43 But, apart from the difficulties involved in such a task, it is apparent that the conclusion that T.N.T. cannot, in the circumstances of the case, successfully claim the benefit of these clauses would of necessity also be fatal to Pay's contention on this aspect of the case. (at p368)

10. One other matter remains to be mentioned. The respondent makes an alternative claim against Pay by its reply that its goods were destroyed in the course of an unauthorized deviation or departure from the contract of carriage. This, we think, represents a departure from its statement of claim which sets up a cause of action to which proof of the absence of negligence on Pay's part would have been a complete answer (cf. Hunt & Winterbotham (West of England) Ltd. v. B. R. S. (Parcels) Ltd. (1962) 1 QB 617) but, however this may be, we think the claim must be rejected for, as we have already said, there was no contractual relationship between the respondent and Pay and his liability could not have been any greater than that of a bailee of the goods at the time when the damage occurred. (at p368)

WINDEYER J. The first-named appellant, Thomas National Transport (Melbourne) Proprietary Limited, is a company which it will be convenient to call "T.N.T.". It has been spoken of as a carrier. This, without more, is misleading. Its business is not so much the carrying of goods by its own servants as procuring for its customers the carriage of their goods from one State to another. But it is not a mere forwarding agent, because it has, by servants or sub-contractors, actual possession of goods as a bailee. This Victorian company is part of a large organization, there being in the other States associated companies having similar names. The company employs carriers - at the relevant time there were some twenty or more - to pick up goods in and around Melbourne for despatch to other States. Goods are brought by these local carriers to a depot in Footscray, Melbourne. There they are sorted for onward movement. The onward carriage is sometimes by road, sometimes by railway; in the case of goods for Tasmania it is by sea. The goods that go by road are taken from the depot by carriers regularly employed by T.N.T. and by them carried to the State of destination. It is said that most of these inter-State carriers and all the local carriers are sub-contractors not servants of T.N.T. They and the local carriers are however regularly and exclusively engaged in carrying for T.N.T.: their vehicles bear markings identifying them with T.N.T.: and in carrying out their tasks the local carriers are given directions by T.N.T., they being connected with the depot by two-way radio. Whether, for the purposes of T.N.T. being liable in tort for their actions, these carriers would in law be classified as independent contractors or as servants is a question that, in the way I see the case, does not have to be decided. I shall assume them to be correctly called sub-contractors. The second-named appellant, Pay, is one of the local carriers regularly employed by T.N.T. to collect goods from its customers and bring them to its depot. (at p369)

2. The depot is an area of land of some size enclosed by fences. Within it there is a large loading dock. The local vehicles come in on one side and are unloaded by workmen employed there, who then sort the goods according to the States to which they are to go and load them on the other side of the dock into vehicles for the different States. When an inter-State vehicle is fully loaded it goes on its way. Some goods go out on trucks to be despatched by railway. At all relevant times the practice at the depot was as follows. Work began at 8 a.m. each day and, except on Fridays, finished at about 5 or 5.30 p.m. On Fridays the depot stayed open until later. Except on Fridays, goods were not received at the depot after 5.30 p.m. unless they were wanted to complete the load of an outward bound vehicle and enable it to get away that night. The local carriers could not always finish their rounds and be at the depot by closing time. Any carrier who could not do so would, generally speaking, get in touch with the depot and inquire whether the goods he had were wanted that night and the depot kept open to receive them. Unless he was told they were wanted, he would simply keep them on his vehicle somewhere and bring them in next morning. The witness Brazenor, who was in charge of the road delivery section of T.N.T.'s business, explained this. He said: "A sub-contractor can find himself out in an area well away from the depot knowing he hasn't a possible chance to get in before 5 or 5.30, in which case he generally contacts by radio or telephone and advises what he has on. In other words, he could say, 'I have two tons for Sydney, do you require it? Will you be open if I come back?', and he will be told, 'No, we don't require it till tomorrow: see you in the morning". This, the witness said, was a daily occurrence. In his cross-examination by counsel for the respondent, this occurred:

"Q. Those owner-drivers were all expected in the normal course of events to bring their loads back to the depot before the

end of the day's work weren't they?
A. No, not always. It depended entirely where the vehicle
was at the latter part of the day, if . . .
Q. Just a moment. In the absence of any special instructions
they were expected to bring their vehicle back to the depot
before the end of the day and unload the goods there,
weren't they?
A. Do you refer to without special instructions?
Q. Well, unless they received any specific instruction to keep
the vehicle away or not to bring the load in that night, they
were expected to bring the vehicle into the depot and
unload it before the end of the day's work?
A. Yes, if they could get back to the depot in reasonable time,
we would expect to have them back there and unloaded.
His Honour: Why?
A. Well, the idea then we would possibly need the freight to
go inter-State.
His Honour: It was simply a working practice, in other
words, to be able to get on with your job immediately?
A. Yes Sir." (at p370)

3. The depot was used for sorting of goods both for despatch and delivery. Goods consigned to destinations beyond Victoria and goods that arrived from other States for delivery to destinations in Victoria were alike brought there. The latter came in by vehicles which might sometimes arrive late at night, or in the early hours of the morning, when the depot was shut. No effort was made to ensure that they arrived while it was open. If it was shut when they arrived they could be parked on a vacant allotment outside until morning. The gates of the depot were locked at night. A caretaker lived on the premises and acted as a watchman, but he did not open the depot after it had been closed and work for the day had ceased. (at p371)

4. Pay had a regular round of premises at which he called. But sometimes he was directed to pick up goods at other places also. Like the other local carriers, he was sometimes unable to reach the depot before closing time. He said that on about twenty occasions within twelve months he had been unable to do so and had been told to bring his load in next day. On these occasions he had taken his loaded vehicle home and parked it in his garage there for the night. (at p371)

5. The respondent May & Baker (Australia) Proprietary Limited, which it will be convenient to call "May & Baker", is a distributor on behalf of a parent manufacturing company of that company's well-known drugs and chemicals. It has a large business in the distribution of these products, which it sends from Melbourne to other State capitals. It had been a regular customer of T.N.T. for about twelve years before the happening of the events out of which this case arose. It had a standing arrangement with T.N.T. that a carrier would call at its premises daily, except Saturdays and Sundays, to collect goods to go to other States. At all relevant times Pay was the carrier assigned by T.N.T. to this task. (at p371)

6. In the afternoon of 21st August 1962 Pay took delivery at May & Baker's premises of several parcels of goods to be sent to New South Wales, Tasmania, South Australia and Western Australia. He afterwards went to two other places to pick up goods, one the premises of a regular customer, the other an address at which he had been directed to call. By the time he had picked up the last load it was already after 5.30 p.m. He tried to get in touch with the depot by radio but could not do so, presumably because work there had already ceased. He then drove to his home at Albion in the neighbourhood of his last place of call. From there he tried to get in touch with the depot by telephone, but again got no answer. The depot being then obviously closed for the night he did what he had done on other occasions. He put his lorry with the load aboard in his garage. This was a wooden shed just wide enough to take the lorry but not long enough to cover its whole length. During the night a fire started in the garage. A neighbour saw it at about 4 a.m. He aroused Pay who was then in his house asleep. The fire brigade was summoned. The fire was extinguished; but the goods on the lorry had been damaged. It is conceded that the damage to the goods of May & Baker amounted to $8,622. From these events the present action arose. May & Baker sued both T.N.T. and Pay. The action was tried by Gillard J. who gave judgment against both defendants for the amount claimed. (at p372)

7. It was the standing practice that a separate contract was made between T.N.T. and May & Baker for each consignment for a particular destination. This was done by an officer of May & Baker inserting relevant details upon a printed form, described as a freight note, signing it, handing a copy completed to Pay when he called, and retaining a copy which Pay signed as a receipt for the goods. This had been going on for years, and May & Baker held a stock of T.N.T.'s blank forms to fill up as required. The forms in use were of two kinds, as a result apparently of the wording having been somewhat altered before the printing of a new edition. Some of May & Baker's goods comprising the load in question in this case were covered by one type of form, some by the other. But the relevant clauses were substantially the same in each. (at p372)

8. On the front of the form there were blank spaces to be filled up to show, among other things, the place from which the goods were to be taken, the place they were to go to and a description of them. Then followed in print the words "Please forward at owner's risk in accordance with conditions of cartage endorsed on back hereof". Then there was a place for the "sender's signature" - and at the bottom was a printed notation "WE ARE NOT COMMON CARRIERS. PLEASE READ CONDITIONS OF CARTAGE ON REVERSE". On the back of the form under the heading "CONDITIONS OF CARTAGE" there were a number of conditions in small print of which those presently material are as follows:

"1. THOMAS NATIONAL TRANSPORT (MELBOURNE) PTY. LTD. (hereinafter referred to as "the Carrier", which expression

will include servants agents and sub-contractors) is not
a common carrier and will accept no liability as such.
All goods carried or other services performed shall be
subject only to these conditions of carriage and the Carrier
reserves the right to refuse the carriage of any class of
goods at its discretion.
3. The Consignor must accept responsibility for any damage
or loss of any goods whilst in the Carrier's custody during
storage or in transit by road, rail, steamship, air freighting
or other means due to civil commotions, act of God, Government
intervention, war, strikes, seizure under legal process,
accident misadventure, fire or water.
4. Insurance of goods will not be effected for the benefit of
the Consignor except upon his written instruction and
then only at his expense.
6. Unless otherwise expressly agreed in writing, no responsibility
will be accepted by the Carrier for any loss of, or
damage to, or mis-delivery or non-delivery of goods,
parcels, packages, crates or cases, etc., or the contents
thereof either in transit or in storage for any reason
whatsoever."

In addition there was in one version of the form but not in the other a clause as follows:

"9. The Carrier may and is hereby expressly authorised by the Consignor to carry all goods or to have them carried by any

method as he in his absolute discretion deems fit and
notwithstanding any instruction verbal or otherwise of
the Consignor that the goods are to be carried by another
method." (at p373)

9. There was also on the form, under the heading "INSURANCE ON GOODS", certain matter introduced by the words "For the benefit of all clients wishing to use our facilities for Insurance on Goods whilst in transit, we set out hereunder the Premiums chargeable and the conditions of cover effected". (at p373)

10. There is no doubt that the terms of the freight note were brought fully to the notice of May & Baker, that it had ample opportunity to read them, and that it was bound by them. This was no hasty engagement; and there was no inequality between the parties to trouble a court as to the justice of enforcing the contract according to its terms. T.N.T. had drawn specific attention to them in correspondence more than once. On 25th March 1960, when submitting a quotation in writing for the carriage of May & Baker's goods, it had written, "The above rates include pick-up and delivery charges, but do not include insurance, which is however available through this company, and we would be happy to quote on your behalf, if you so desire. We wish to draw your attention to our conditions of cartage, as set out on the reverse side of the attached freight note". And on 19th September, a revised quotation was sent by a letter which said "Our conditions of cartage and facilities for insurance, with which you are familiar, remain unaltered". In June of the next year, when a special quotation was submitted, the letter contained the following: "Please note, we are not common carriers and goods are carried at owner's risk. However, we can offer adequate cover at attractive rates should you so desire, and for this purpose, we attach hereto a copy of our freight note, on the reverse side of which are details of insurance and conditions of cartage". (at p374)

11. It seems that there was an expectation that goods when taken by road would be got from Melbourne to Sydney or Adelaide in two or three days. It may even be that there was after June 1961 a contractual undertaking by T.N.T. that this would be so, because in the letter of 9th June submitting the "special quotation for transporting your goods interstate" rates are quoted for Melbourne to Sydney and Adelaide "by our Loadfast Service" and these are followed by the statement "Transit times 2 days". This apparently meant two days from the time goods were picked up in Melbourne to the time of their arrival in Sydney or Adelaide. (at p374)

12. On the pleadings the case stood as follows:

In its action against T.N.T., May & Baker alleged first, a breach by T.N.T. of a contract to carry the goods safely and deliver them to the consignees; secondly, that the goods were entrusted to T.N.T. for custody for reward and a breach of the obligations of this bailment. T.N.T. by its defence, so far as it is material to set it out, said first, that if the goods were damaged while in its possession (which was not admitted) then this was accidental and not due to its neglect or default; secondly, the conditions of the freight note were set up as exempting T.N.T. from liability. May & Baker replied as follows: first, that it was an implied term of "the contract of carriage" that neither T.N.T. nor its servants or agents would do or suffer to be done any act which was not in direct performance of this contract or was fundamentally in breach of it: and that in breach of this Pay "collected the said packages from the Plaintiff's premises for transport to the depot of the first-named Defendant and took them instead to Albion where they were damaged and destroyed". Secondly, and it was said alternatively, it was alleged that the goods were damaged and destroyed in the course of an unauthorized deviation or departure from performance of the said contract of carriage. Thirdly, T.N.T. was said to be estopped by the alleged unauthorized deviation or departure from relying upon the conditions on the freight note. And finally, it was said that at the time of the damage the goods were not in transit or in storage within the meaning of the freight note. (at p374)

13. In the action against Pay, May & Baker alleged that it "entrusted to the defendant Pay (on behalf of the defendant company) the said packages of goods which were the property of the plaintiff", and that "whilst the said packages of goods were in the custody of the defendant Pay the same were damaged and destroyed". The ground on which relief was sought against Pay on the basis of this allegation is not altogether clear. He is said to have been entrusted with the goods on behalf of T.N.T. The bailment to him is not said to have been for reward to him. No contract with him is asserted. The legal obligations that the transaction alleged would impose upon Pay seem to be those which flow from a bailment of deposit or mandate. But I do not doubt at all that he had a duty of care to May & Baker in respect of the goods in his custody and, unless himself protected by an exemption clause, would be liable in tort for negligence, it being immaterial that it was pursuant to a contract with T.N.T. that May & Baker had delivered the goods to him: cf. Foulkes v. Metropolitan District Railway Co. (1880) 5 CPD 157, at pp 158, 159, per Bramwell L.J. Pay by his defence said, inter alia, that the damage to the goods was accidental and denied negligence. He also referred to the exemption clauses on the freight note and claimed to be entitled to the protection of them. May & Baker replied to this defence, as it had to T.N.T.'s defence, by alleging fundamental breach and deviation. (at p375)

14. To the law as to deviations by a carrier from his contractual route, first developed in relation to sea voyages, I shall come later. It has been described by the authors of the recent Australian edition of Cheshire & Fifoot's Law of Contract (p. 211), as a primary source of the doctrine of fundamental breach. In so far as "fundamental breach" is a convenient rubric under which to collect old illustrations of the termination of contracts by breach it may seem a convenient phrase although a new one. But it has sometimes been taken as more than this, as a description of a principle by which restrictions were seemingly imposed by law upon the power of parties to a contract to define the limits of their obligations under it, and as enabling the courts to abrogate the effect of exemption clauses. In that far-reaching form the doctrine was never I think espoused by this Court. Indeed its validity has been expressly questioned because of its seemingly imprecise character. (at p375)

15. It may be that the law is defective in allowing persons to contract out of liabilities which from the nature of their callings or undertakings they would otherwise incur. Lengthy conditions in small type are printed on the back of tickets and similar documents. Customers often have little time to read them, yet in a practical sense they must accept them, having no opportunity of rejection or counter-offer. This has been often remarked upon, recently and forcefully by Lord Reid, as a regrettable result of the freedom of contract that the law, as it stands, allows. It may be that the law should provide that persons who engage in specified common callings or enter into specified kinds of contracts should not be able to contract out of all obligations that common law or statute would annex to their callings and contracts. But the task for a court is to ascertain what was the bargain that the parties made, not to modify it. In The Council of the City of Sydney v. West [1965] HCA 68; (1965) 114 CLR 481, I said that "the question, as I see it, is one of interpretation. It is not for a court to say that persons may not contract out of the obligations that the law of bailment imposes, or to put new limits on their power to do so. The question for a court is only whether they have done so". In the same case my brother Kitto said of the exemption clause there in question that it was "part and parcel of the bargain by which the bailment was created and the reciprocal rights and obligations of the parties as bailor and bailee were regulated". (at p376)

16. I can discard much that I had written at this point, because the report of the important decision of the House of Lords in Suisse Atlantique Societe D'Armement Maritime S.A. v. N. V. Rotterdamsche Kolen Centrale (1966) 2 A11 ER 61 has come to hand. Their Lordships' judgments were given after the conclusion of the argument in this case. What they have said has now made it plain that there is no doctrine that every exemption clause, however widely expressed, is nullified by a "fundamental breach". It would be superfluous and a presumption for me now to discuss at any length the question that their Lordships have now dealt with at length. Their judgments, notwithstanding some variety of expression, all confirm me in the view that a question such as we have in this case is to be resolved by construing the language that the parties used, read in its context and with any necessary implications based upon their presumed intention. It is not to be resolved by putting exemption clauses into a position of peculiar vulnerability. There are, however, certain established rules of law that must govern their interpretation. (at p376)

17. The first is that an "exemption clause" - or "exception clause" or "protective clause", all terms are used - is ordinarily construed strictly against the proferens, the party for whose benefit it is inserted. (at p376)

18. Secondly, it is not construed as relieving him against liability for the negligence of himself or his servants, unless it expressly or by implication covers such liability. It will by implication do so if there be no ground of liability other than negligence to which it could refer: Alderslade v. Hendon Laundry Ltd. (1945) 1 KB 189; Rutter v Palmer (1922) 2 KB 87; Producer Meats (North Island) Ltd. v. Thomas Borthwick & Sons (Australia) Ltd. (1964) N.Z.L.R. 700; Canada Steamship Lines Ltd. v. The King (1952) AC 192, at pp 207, 208; and see The Council of the City of Sydney v. West (1965) 114 CLR, at pp 493, 494, per Kitto J. The effect of this rule in the case of a common carrier was summed up by Dixon J. in a passage in his judgment in Commissioner for Railways (N.S.W.) v. Quinn [1946] HCA 12; (1946) 72 CLR 345, at p 371 But, as the only obligation of a carrier who is not a common carrier is to take due care of the goods, a general exclusion of liability necessarily extends to a liability arising from breach of that obligation. That is to say it exempts him from the consequences of negligence. Specific illustrations of this in the case of damage of goods by fire resulting from negligence are Turner v. Civil Service Supply Association (1926) 1 KB 50 and Fagan v. Green and Edwards Ltd. (1926) 1 KB 102 (at p377)

19. Thirdly, there is a rule or guide to construction which has in recent writings sometimes been treated as absorbed within the generalized modern term "fundamental breach", but which is itself far from new. It is that a condition absolving a party from liability, in particular exonerating a bailee from liability for the loss of goods in his care, is construed as referring only to a loss which occurs when the party is dealing with the goods in a way that can be regarded as in intended performance of his contractual obligation. He is not relieved of liability if, having obtained possession of the goods, he deals with them in a way that is quite alien to his contract. This doctrine has been conveniently called the "four corners" rule, an expression used by academic writers and in judgments, e.g. in Hunt & Winterbotham (West of England) Ltd. v. B.R.S. (Parcels) Ltd (1962) 1 QB 617, at p 626 Its first clear statement is probably in Lilley v. Doubleday (1881) 7 QBD 510 It was referred to by Scrutton LJ in the well-known passage in Gibaud v. Great Eastern Railway Co. (1921) 2 KB 426, at p 435, which will bear quotation again:

"The principle is well known, and perhaps Lilley v.
Doubleday (1881) 7 QBD 510
is the best illustration, that if you undertake
to do a thing in a certain way, or to keep a thing in a certain
place, with certain conditions protecting it, and have broken
the contract by not doing the thing contracted for in the way
contracted for, or not keeping the article in the place in which
you have contracted to keep it, you cannot rely on the
conditions which were only intended to protect you if you
carried out the contract in the way in which you had
contracted to do it."

The last words, "in the way in which you had contracted to do it", are critical. I take a few examples, italicizing some significant words. (at p378)

20. In the early case of Sleat v. Fagg (1822) 5 B & Ald 342 (106 ER 1216), the defendant had contracted to send a parcel by a particular mail coach, the Pool Mail. He in fact sent it by another coach. It was lost or stolen. He had expressly limited his liability to 5 pounds unless an insurance was paid. But it was held that he could not rely upon this exception or upon the contributory negligent conduct of the consignor in not informing him that the parcel in fact contained bank notes to the value of 1,300 pounds, for, said Abbott C.J., "This, however, is not the case of the negligent performance of the contract, but of a refusal altogether to perform it, for the defendant did not send the parcel by the Pool Mail as he had contracted to do" (1822) 5 B & Ald, at p 347 (106 ER, at p 1218) (at p378)

21. In Gunyon v. South Eastern and Chatham Railway Companies' Managing Committee (1915) 2 KB 370, Sankey J. said: "In my view the present contract was a contract for carriage of perishable merchandise by passenger train. The whole basis of the contract was the condition that the goods should be so carried. When the cherries were put into a goods train an entirely different mode of conveyance was substituted for that stipulated for, to which different rates and different conditions were applicable. The defendants from that moment departed from the agreement into which they had entered and substituted for it another one to which the exceptions for which they had contracted did not apply" (1915) 2 KB, at p 378 (at p378)

22. In Mallet v. Great Eastern Railway (1899) 1 QB 309 the plaintiff filled in a consignment note directing that goods go via Weymouth to Jersey. That was the stipulated route. The defendants accepted the goods, but by mistake sent by Southampton instead of by Weymouth. This caused a delay in delivery. The defendants were held to be not entitled to rely upon a provision of the consignment note exonerating them from liability for delay. Day J. said: "The delay referred to in the consignment note is a delay in the performance of the contract. But that is not this case. Here the delay arose in consequence of the defendants doing something which was wholly at variance with the contract" (1899) 1 QB, at pp 311, 312 Foster v. Great Western Railway Company (1904) 2 KB 306, which was not reconcilable with this, is now overruled. That case, as Scrutton L.J. was later to remark (in Neilson v. L.&N.W. Railway Company (1922) 1 KB 192, at p 203), was "a clear case of a departure from the contract journey, and consequently . . . the exceptions did not apply at all". (at p379)

23. Throughout Neilson's Case (1921) 3 KB 213, Divisional Court; (1922) 1 KB 192, Court of Appeal, and (1922) 2 AC 263, House of Lords the same thing appears The goods were "despatched upon some other journey than that contracted for", per Bankes L.J. The goods were not carried on "the contract route"; and the exceptions did not apply "unless the goods are being carried on the journey stipulated for", per Atkin L.J. In the House of Lords similar expressions were used: "agreed route" by Lord Dunedin and Lord Sumner, "stipulated route" by Lord Atkinson. (at p379)

24. The first question in all such cases is therefore what did the party who relies upon the exception clause contract to do. That being ascertained, the next question is was there such a radical breach by him of his obligations under the contract that, upon the true construction of the contract as a whole including the exception clause, he cannot rely upon the exception clause. (at p379)

25. Cases concerning the effect of deviations in a voyage upon contracts of affreightment by sea are merely an example of these general principles of the law of contract. Their peculiar character is only in the strictness of the established rule that any deviation from the contract voyage - that is the one expressly stipulated for in the contract, or stipulated by implication as the usual and customary route of the vessel - is a breach that goes to the root of the contract of affreightment, a breach that entitles the cargo owner to treat the whole contract as at an end, unless with knowledge of the breach he has affirmed the contract. As Fletcher Moulton L.J. put it:

"The cases show that, for a long series of years, the courts have held that a deviation is such a serious matter, and changes the character of the contemplated voyage so essentially, that a ship-owner who has been guilty of a deviation cannot be considered as having performed his part of the bill of lading contract, but something fundamentally different, and therefore he cannot claim the benefit of stipulations in his favour contained in the bill of lading": Joseph Thorley Ltd. v. Orchis Steamship Company Ltd. (1907) 1 KB 660, at p 669 (at p379)

26. In an earlier edition of Scrutton on Charterparties (12th ed. (1925) at p. 249) it was said that "deviation affects the operation of exceptions by driving them out of the contract". The phrase was picturesque. But it is, we now know, a misleading analysis. It is not that the breach of the contract by deviation expels the exception clauses, rather that it enables the cargo owner to treat the contract of which they are a part as at an end. In Hain Steamship Company Ltd. v. Tate & Lyle Ltd. (1936) 2 A11 ER 597, at p 601, Lord Atkin, with whom Lord Thankerton and Lord Macmillan agreed, said: "I venture to think that the true view is that the departure from the voyage contracted to be made is a breach by the shipowner of his contract, a breach of such a serious character that however slight the deviation the other party to the contract is entitled to treat it as going to the root of the contract, and to declare himself as no longer bound by any of its terms. I wish to confine myself to contracts of carriage by sea . . . ". And later he added: "if this view be correct, then the breach by deviation does not automatically cancel the express contract, otherwise the shipowner by his own wrong can get rid of his own contract. Nor does it affect merely the exception clauses. This would make those clauses alone subject to a condition of no deviation, a construction for which I can find no justification". (at p380)

27. The strictness of the rule as to deviation in sea voyages appears to be based upon the assumption that deviation alters the risks of the voyage, and to be related to, perhaps a by-product of, the law of marine insurance. A deviation alters the risks of the contemplated voyage by adding or substituting the hazards of further time and a different place. In some cases, especially in war-time, a deviation may actually reduce the perils of a voyage. Nevertheless the general principle is that a deviation, except for a purpose recognized and permitted by the contract, discharges the underwriter simply because it substitutes a risk that is different, whether it be in fact greater or less than before: Company of African Merchants v. British and Foreign Marine Insurance Co. (1873) LR 8 Ex 154, at pp 157, 158 That rule, now in the Marine Insurance Act, goes back for hundreds of years: Elliot v. Wilson [1776] EngR 60; (1776) 4 Bro PC 470; 2 ER 320; Goram v Sweeting [1845] EngR 278; (1670) 2 Wms Saund 200 (at p380)

28. In Hain Steamship Company Ltd. v. Tate & Lyle Ltd. (1936) 2 A11 ER 597 Lord Wright said (1936) 2 A11 ER, at pp 607, 608, "An unjustified deviation is a fundamental breach of a contract of affreightment. Owing to the peculiar nature of a maritime adventure in which shipowner and goods owner are jointly concerned, it is a fundamental condition that in the absence of express liberties, the ship shall proceed by the ordinary and customary route: any deviation changes the adventure. It has also the serious consequences that it vitiates the goods owner's insurances". In the same case Lord Atkin said (1936) 2 A11 ER, at p 601, "No doubt the extreme gravity attached to a deviation in contracts of carriage is justified by the fact that the insured cargo owner when the ship has deviated has become uninsured". (at p381)

29. A common carrier by land is deemed to contract to carry by his customary route if no route be expressly stipulated. And the strictness of the rule about deviations in contracts of carriage by sea has been imported by analogy into the contracts of carriage by land. And now the term "deviation" has come to be used sometimes to describe not only departures from a carrier's geographical route, but also other radical breaches of his contract. But, except in the case of deviations from the contract route, it inverts the question to ask of a departure in method, Is it a deviation? - and say that if it is, it is a breach of a term that lies at the root of the contract. The correct question is, Is this departure a radical breach of the contract? If it is, it may sometimes be conveniently called a deviation simply because it has the consequences which by law geographical deviations have long had in contracts of carriage. An illustration is Bontex Knitting Works Ltd. v. St. Johns Garage (1943) 2 A11 ER 690; aff'd (1944) 1 A11 ER 381 There goods were stolen from a van when the driver left it unattended for an hour and went to lunch. An exemption clause did not avail the defendants because the contract had expressly provided for the delivery of the goods "forthwith and immediately". Lord Wilberforce has said of this: "The decision may be justified on the basis that there was a breach of contract equivalent to a deviation, but if it goes beyond this I would regard it as of doubtful validity": Suisse Atlantique Societe (1966) 2 A11 ER, at p 94 On whatever basis it is to be justified, the decision in the Bontex Knitting Works Case (1943) 2 A11 ER 690; (1944) 1 A11 ER 381 has I think no direct bearing on the present case although it was relied upon by the respondent. There the learned trial judge, Lewis J., put his decision on the basis that there had been a breach of a term of the contract that the goods would be delivered forthwith or immediately, and the carrier was being paid on a time basis. In the Court of Appeal his decision was affirmed, Scott L.J. saying that there had been "a radical departure from the terms of the contract". That there was a "breach of an express agreement for immediate delivery" was the ground on which Lord Denning used the case as an illustration in Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd. (1959) AC 576 (at p381)

30. Some remarks in the judgment delivered by his Lordship in the last-mentioned case have now met doubts and disapproval in the House of Lords: see the Suisse Atlantique Societe, (1966) 2 A11 ER, at p 73 per Lord Reid; (1966) 2 A11 ER, at p 79 per Lord Hodson; (1966) 2 A11 ER, at p 94 per Lord Wilberforce We can however, in the present case ignore the statements which have not met with approval. What the Privy Council there said, we should treat as in no way gainsaying, rather as asserting, that the scope and ambit of an exception clause is always a question of construction of the contract as a whole. The wide words of the exception clause in that case were curtailed, as in other similar cases, by an implied limitation. So considered the two cases, that in the House of Lords and that in the Privy Council, stand harmoniously together. The unreported judgment of the Privy Council which Lord Hodson mentioned, Boshali v. Allied Commercial Exporters Ltd. This case said by Lord Hodson ((1966) 2 A11 E.R. 79) and by Windeyer J. supra to be unreported, is briefly reported in (1961) 105 Sol J 987: See 40 A.L.J. 344, footnote 95 - Ed. could perhaps cause some embarrassment for us if it was categorically at variance with what the House of Lords has now said. But without knowing more of it we should assume it has any bearing on this case that would deter us from accepting as the law what has now been said in the House of Lords. (at p382)

31. A further aspect of deviations is of some importance. It is that a deviation does not mean only that an exception clause will not avail a carrier against liability for loss occurring during the deviation. It also prevents him relying upon the exception clause in the event of a loss occurring afterwards, unless it be shown that the same loss would have occurred if there had not been a deviation: James Morrison & Co. Ltd. v. Shaw, Savill and Albion Co. Ltd. (1916) 2 KB 783, at pp 795, 800: Hain Steamship Company Ltd. v. Tate & Lyle Ltd. (1936) 2 A11 ER 597; A/S Rendal v Arcos Ltd (1937) 53 TLR 953, at p 957 This tends to be lost sight of when, as in the present case, the loss occurs during the alleged deviation. But if, as the respondent May & Baker contends, T.N.T. cannot rely upon the conditions endorsed on the freight note because the goods were in Pay's garage for the night - that being, it is claimed, a deviation - then it could not rely upon them if they had been delivered safely to the depot next morning but had thereafter been lost or damaged by the negligence of some servant of T.N.T. at the depot or had been later lost or damaged at some stage on their inter-State journey to their destination. This merely brings into sharp relief that a deviation means a departure from a fundamental obligation of the contract. (at p382)

32. I turn back now to see what exactly were the obligations of T.N.T. under the contract. T.N.T., by its agents who were sub-contractors, obtained possession of the goods of consignors for the purpose of getting them to the destinations they stipulated. To this end it entrusted them to sub-bailees, that is bailees from it, T.N.T. - road carriers, railways, or shipowners - who contracted with T.N.T. to carry them onward. The consignor, May & Baker, made no contract with the road carriers, railways or shipowners. (at p383)

33. I have not found anything that made it expressly part of T.N.T.'s contract with May & Baker that it would take its goods into a depot at any stage of their movement from the place of pick-up to the place of delivery. Of course goods that were to go to different States had necessarily to be sorted somewhere for onward movement. But there was no express contractual obligation on T.N.T. to do this at any particular place, at any particular time, or in any particular manner. There would have been no breach of any express term of the contract if it had been done elsewhere than at the depot. (at p383)

34. But, although there was no express undertaking in the contract that goods would be taken to the depot, it is sought to bring in such an undertaking by implication from the course of business. Gamble, the general manager of May & Baker, said that his belief had been that T.N.T. would take the goods to a depot for sorting, and that his "impression" was that they would be taken there on the day they were picked up and "probably would be sorted during the next few hours - possibly right through the night". But he had no idea whether they then went from Victoria to other States by road or rail. He had got his impression from something that had been said many years before by a representative of T.N.T. in Sydney, speaking apparently of arrangements in Sydney. The learned trial judge expressly accepted the evidence of Gamble as to his belief in the way the goods were dealt with by T.N.T. But, however he came to have the impression that he had as to the manner in which T.N.T. carried on its business, I can find no contractual undertaking, express or implied, by T.N.T. to give effect to it. The highest at which the case for May & Baker can be put contractually is, I think, that its standing arrangement with T.N.T. was that its goods should be dealt with according to T.N.T.'s customary method. To say that, however, does not help May & Baker in this case. It may import into the contract an obligation by T.N.T. to take the goods in to the depot at some time. But it was not T.N.T.'s customary method to keep the depot open after 5 o'clock. It was not its custom that goods collected by the local carriers would all be brought to the depot on the day they were collected. Frequently, indeed daily, some were not brought there until the next day. (at p383)

35. The case is unlike those, referred to above, in which a carrier contracted to carry by an expressly stipulated route or method. And it is unlike cases where, no route being expressly stipulated, a carrier is bound to carry by his known usual and customary route, which is then by implication the contractual route, it being, as Willes J. put it, the route by which "he professes to go": Myers v. London and South Western Railway Co. (1869) LR 5 CP 1, at p 4 Although TNT called itself a carrier and that broadly described its business, it did not undertake itself to carry goods. Its undertaking was to procure their carriage from the premises of the consignor to the place of delivery to the consignee and it reserved to itself a wide discretion as to the means it should adopt to this end. (at p384)

36. It is true that when the local carriers could not get to the depot with their loads before closing time they generally got in touch with the depot to inquire whether goods that they had were required that night. On other occasions Pay had done this: before taking goods to his home for the night he had communicated with the depot and been told the goods he had were not wanted until the morning. It may be that in not informing the depot earlier in the day of his position on this occasion Pay failed in his duty to T.N.T. But, even if this were so, and I do not think it was established, I do not see how it had become part of the contract between T.N.T. and May & Baker that Pay would in every detail do what T.N.T. expected of him. T.N.T.'s routine arrangements with its local carriers, its expectation that if running late they would communicate with the depot, were quite unknown to May & Baker, and were not as I see it the basis of its contract with T.N.T. Nevertheless the fact of Pay's not having express instructions that his load was not needed that night was in argument urged as a critical consideration. It was said that Pay had taken the goods to his garage without authority, which is a somewhat misleading way of saying that he had not been expressly told that the depot would not be open to receive them but had learnt that it was already closed because his call was not answered. The garage would not have been any more safe a place, the risk of fire there would not have been any less, had he spoken to the depot and been told that it would not be open beyond the usual closing time. I do not think that Pay's failure on this occasion to obtain express instructions before taking the goods home constituted a breach by T.N.T. of its contract with May & Baker, certainly not a radical breach equivalent in effect to a deviation by a carrier. I can see no ground for denying to T.N.T. the benefit of the exemption clauses endorsed on the freight note. Let it be assumed that Pay as T.N.T.'s agent did not take reasonable care for the safety of May & Baker's goods. If that were so, then doubtless T.N.T. would be liable for the damage unless exonerated by the terms of its contract with May & Baker: see e.g. John v. Bacon (1870) LR 5 CP 437 Let it be assumed that T.N.T. itself in closing its depot before all goods collected by its sub-contractors were brought there failed to take reasonable measures for the safety of the goods. Again T.N.T. would be liable unless protected by its contract. It may be that if T.N.T. had exercised due care for the safety of the goods entrusted to it, it would have kept its depot open every night until all goods that it had directed its local carriers to collect were received there - or, putting it another way, that it would not have sent carriers to pick up goods which could not be brought to the depot before closing time. To allow goods that it had contracted to have delivered to consignees to be in the course of their journey unprotected in a shed in a suburban backyard may well be described as negligence. (at p385)

37. But condemning its conduct as careless does not make T.N.T. legally liable for its consequences. It requires no citation of authority to show that negligence in the performance of a contract is not a fundamental departure from the contract which deprives the negligent party of the benefit of an exemption clause which upon its true construction covers liability for negligence. The position would be different if the goods had been intentionally set on fire or given away by T.N.T. A contract must be read as a whole. If it provides that a party shall not be liable for loss or damage and if upon its true construction this provision extends to the party's own negligence in performing his contract, then it is impossible to rely upon the obligation to use due care that would otherwise have been implied by law. Kitto J., in The Council of the City of Sydney v. West [1965] HCA 68; (1965) 114 CLR 481, referred to the discerning discussion by Doctor Coote in his work Exception Clauses of the problem in juristic theory that thus arises. The question is whether the effect of an exception clause in a contract is to absolve a party from liability for the consequences of a breach of duty, or whether its effect is to define substantively the limits of his duty by negativing obligations that the law would otherwise impose and undertakings that it would otherwise imply. The answer in any given case may, I think, depend upon the actual words of the contract. In theory the effect of a contract that goods are to be at owner's risk and that the contractor will accept no responsibility for their loss or damage "for any reason whatsoever", which I take to mean "however occurring", is, I consider, to define the terms on which the goods are accepted for carriage, and to negate an implied obligation of due care. It seems to me therefore that those provisions of the freight note that have been called exception clauses do not operate to qualify the effect of a breach of a contractual obligation independently existing. Rather they determine the total content of the contractual obligation. But, however regarded in final analysis, they are part and parcel of the contract and must be given their full effect. (at p386)

38. The question then is as to the construction of the provisions which state that T.N.T. assumes no liability for loss or damage to goods "in transit" or "in storage". In my view, goods received for carriage pursuant to the contract contained in the freight note were "in transit" from the time they were picked up at the place described under "From" on the freight note until they were delivered at the place described under "To" - provided that at any time in the interim when the question arose they were where they were in the course of being moved from the one place to the other. I do not think that they ceased to be in transit when they were taken to Pay's garage for the night, even if that was a negligent performance of the transit. The learned trial judge, as I understand his reasoning, did not hold that the exemption clause had been terminated by a radical breach of the contract. In this I consider he was right. What he said was that upon its true construction May & Baker's goods were not in transit or in storage when in Pay's garage. In this I consider he was wrong. He said that the words "in transit" must be read in the light of the "usual procedure" adopted by T.N.T. He did not say that to be in transit they had to be taken to the depot before nightfall. What, as I understand it, he held, was that they were not in transit at the time of the fire because they had not been delivered by Pay to the depot that night and Pay had had no express authority or instruction not to do so. But, as I have already said, I am, with respect to his Honour, unable to put the weight that he did on the fact that Pay had not been told the goods were not required at the depot that night. Had he been told to bring them in next morning and had taken them to his garage, as on former occasions he had done, would they have been in transit? If not, why not? And if they would have been in transit in his garage had he been told the depot would be closed and that they were not required until morning, why were they not in transit there when he had been unable to get in touch with the depot because it was already closed? The argument for the respondent did not explain this. Had the goods been in the depot they would, it is said, have been in transit or in storage; had they been in Pay's garage for the night because he had been told to bring them in next morning they would still have been in transit or in storage; but, as it was, they were neither in transit nor in storage. I am unable to agree with this. (at p387)

39. In my opinion T.N.T. was entitled to the benefit of all the provisions on the freight note. And in my opinion, having regard to those provisions, it incurred no liability for the damage to the goods. (at p387)

40. I turn to the case against Pay. He had no contract with May & Baker. And May & Baker could have no action against him based upon his failure to perform his contract with T.N.T. - even if there were any evidence, and there is none, that he had not done so and that his failure to do so had caused the loss. The case against Pay thus turns on whether, having goods in his custody as bailee, he failed to take proper care of them. If he were in that sense negligent, a question would arise whether he, a stranger to the contract between T.N.T. and May & Baker, could - notwithstanding the decision in the Midland Silicones Case [1961] UKHL 4; (1962) AC 446 - have the benefit of the clauses on the freight note, they being expressed to extend to sub-contractors. This question was argued; but, in the view I take, it does not have to be decided. (at p387)

41. It was conceded that the onus was on Pay to prove that he took proper care of the goods. Even assuming this concession was correct, there was I think no evidence that he was careless. It is said that he did not take any precautions against fire. It was urged that there is always a possibility that houses and sheds may get on fire. That is true, but such general statements do not help. There was no reason for Pay to have foreseen that, "from some external cause" as the learned judge expressed it, his garage or his lorry would catch on fire that night. The origin and cause of the fire remain a mystery. Nevertheless it was said the goods might have been stolen and that Pay took no precautions against theft in the night: there was no door on the shed, and had there been it could not have been closed because the lorry was too big; and there were no burglar alarms and no watchman. All this seems to me irrelevant. I cannot see that a failure to take precautions, whether reasonable or not, against loss by theft made Pay liable for damage by fire. And, even if it might have been a prudent precaution to have had a fire extinguisher on the premises, there is nothing to suggest that one being there would have made any difference. (at p387)

42. The case was fully and carefully argued by counsel on both sides and some other matters were put forward; but I do not find it necessary to consider further the arguments that were submitted. (at p388)

43. To sum up I repeat my conclusions as follows:

First: T.N.T. had no contractual obligation to May & Baker that the goods would be taken by any particular route to the depot for sorting there, or that they would arrive there before nightfall or at any particular time, or that the depot would be kept open at night - if indeed it was any part of the contract that the goods must go to the depot at all. There was no departure from any fundamental term of the contract such as would make the exemption clauses unavailing on the principle of Lilley v. Doubleday (1881) 7 QBD 510 - the four corners doctrine
Secondly: Unless protected by the exemption clauses, T.N.T. would be liable if on the facts it appeared that its agent Pay was negligent in not taking proper care of the goods, or if it were negligent in not having made proper arrangements for their care. It was however protected in either case by the exemption clauses, the goods being in transit from the consignor to the consignee when they were damaged.
Thirdly: Pay, although not himself contractually bound to May & Baker, had a duty to it to take care of its goods while they were in his custody. But in the situation in which he was placed and having no reason to foresee a fire, he could not on the evidence be found to have failed in this duty. (at p388)

44. The action should I consider have been dismissed against both defendants. I would allow the appeals. (at p388)

ORDER

Order of Supreme Court varied by setting aside the judgment entered for the respondent against the appellant Pay and substituting therefor judgment for that appellant with costs. Respondent to pay the costs of the appellant Pay of this appeal. Otherwise appeal dismissed with costs.