Sub-bailment

• Author: Robert H Tanha
• Pages: 386-420

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Chapter 7

Sub-bailment

A. INTRODUCTION

A sub-bailment is a second bailment of a bailor’s goods. A sub-bailment

would occur where a bailor takes a vehicle to a bailee such as a body shop

for a paint job in circumstances where the vehicle needs to be subsequently

transferred to another bailee (the sub-bailee) for a further secondary or

ancillary purpose, such as to a repair shop for a small light repair, by the

implied or express consent of the bailor. A sub-bailment can also arise

where the bailee, while contracted to look aer the work, is unable to per-

form some or all of the work or services under the contract of bailment

itself but is authorized by the bailor to sub-contract or delegate the work

to a third party for completion.1 As a second bailment of the bailor’s goods,

a sub-bailment is no more defeasible than a rst bailment of the goods

and can be for reward2 or gratuitous. Where for reward, the standard of

care owed will be a higher one; the sub-bailee will have to disprove that its

negligence caused the loss at issue. Alternatively, the sub-bailee may show

1 See, for example, Purolator Courier Ltd v Nav Air Charter Inc, 2002 BCSC 965.

2 For a sub-bailment to be for reward, there must be an exchange of value between

bailor, bailee, and sub-bailee. In FR Smith Towing Co v JM Swaine (The), [1980] FCJ

No 105 (TD), the defendant bailee paid to charter a barge om the plainti (bailor).

The defendant sub-bailee also received recompense om the defendant bailee for

transporting the ship by tug to a certain location. Thus, the sub-bailment was for the

advantage of all three parties and was thus for reward: see paras 26–28 of the deci-

sion, Collier J, for relevant discussion.

Sub-bailment • 

that reasonable care was taken at all material times.3 Many of the same

general considerations will apply when considering whether a sub-bailee

has met its applicable standard of care as were considered in the cases

of gratuitous bailments and bailments for reward,4 such as whether the

sub-bailee took the appropriate care as measured against what a prudent

owner would have done in the same or similar circumstances.5 Similarly,

a failure by a sub-bailee to oer up any explanation for the loss of bailed

goods, or merely stating that the goods may have been stolen by one of

its own sta under its own charge, will make it liable.6 A sub-bailee who

fails to maintain proper records showing that injury to the goods did not

occur as a result of the sub-bailee’s negligence, or lack of reasonable care,

during times when the goods were in the exclusive possession or control

of the sub-bailee, will also be liable.7 However, a sub-bailment is necessar-

ily a more complex relationship than a mere bailment relationship, as it

involves no fewer than three parties who owe legal duties to one another:

1) the owner of the goods (the bailor who delivers possession of the

goods to the bailee);

2) the bailee of the goods (the party who receives possession of the bail-

or’s goods directly om the bailor, or its assigns, for a particular pur-

pose, and who transfers possession of those goods to a further bailee,

called a sub-bailee, to carry out a further purpose); and

3) the sub-bailee of the goods (the party who receives the bailor’s goods

directly om the bailee, or its assigns, to carry out a further particu-

lar purpose involving those goods).

As a result of the more multilayered nature of sub-bailments, in

order for the sub-bailee to discharge its standard of care and show that

3 See Webb v Tyldesley’s Ltd, [1998] BCJ No 2978 at paras 33–34 (Prov Ct (Civ Div)) [Webb].

4 Many of the same considerations om the general law of bailment will also apply

when determining whether the legal relationship of sub-bailment has been created

at all, or whether a lesser legal relationship such as a licence should be found. For

example, have the keys to the property been relinquished? Does the sub-bailee possess

the ability to control the bailed goods, or at least to control access to the property on

which they are situated? Does the sub-bailee have reasonable security precautions in

place to protect the bailed property om the or other ordinary hazards? See Quigley

v Rands, [1982] BCJ No 367 (Co Ct), especially para 18.

5 See, for example, Punch v Savoy’s Jewellers Ltd (1986), 54 OR (2d) 383 at para 20 (CA)

[Punch].

6 Ibid.

7 See, for example, Webb, above note 3 at paras 38–39.

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it has not deviated om the terms of the bailment contract, dierent

considerations will apply than in your ordinary bailment involving two

parties (i.e., the bailor and bailee). The communications between the sub-

bailee and bailee will always need to be considered, including whether the

sub-bailee has acted within its authority. In this connection, the bailee’s

actions in delivering the goods to a further bailee in a sub-bailment will

always need to be considered where the goods happen to be damaged

thereaer or in the process of the transfer being made.

Sub-bailments have presented problems for bailors and bailees alike

where loss of the bailed goods occurs. This is because there is not generally

a direct line of communication between bailors and sub-bailees. While the

sub-bailee, in order to owe a duty of care to the bailor, must be aware

that a bailor (who owns the goods) exists, the sub-bailee may try to rely

on the terms of agreement entered into between it and the head bailee

in defending against a bailment action and does not have to communi-

cate with the bailor in carrying out the bailment. This does not necessarily

make the actions or decisions taken by sub-bailees unauthorized or unlaw-

ful, so long as they are acting in accord with implied or express authority

received om the bailor, via the bailee, and otherwise in accordance with

their applicable standard of care. Direct consent om bailors, or bailees, to

every action taken in relation to the bailed goods by the sub-bailee would

not be practical, possible, or even desirable. Still, when a loss occurs, the

question of consent and proper authorities is one that the law must grap-

ple with in determining questions of liability arising between the relevant

parties. To complicate matters further, acts of negligence, or breaches of

the bailment contracts, by some or all of the bailees and sub-bailees that

lead to loss of or damage to bailed goods, require the law to come up with

rules to apportion liability between the various bailees. The applicability,

reach, and enforceability of exemption clauses in sub-bailment contracts

can present a challenge here.8 In sorting out these questions, the law must

determine the contractual relations between each set of parties and the

extent to which those relations should aect standard-of-care and liability

questions as between the various parties in the chain of bailments and

sub-bailments, including between bailors and sub-bailees who may never

8 See, for example, Punch, above note 5 at para 27.