TITLE TO GOODS – TORTS AGAINST GOODS

An attempt at rationalising some aspects of the law was made with the Torts (Interference with Goods) Act 1977 but it did not seek a systematic reform. Section 1 of the Act coined a new description for torts affecting goods by introducing the expression “wrongful interference with goods” but no new tort was created. Instead, the following existing torts were included:

  • conversion;
  • trespass to goods;
  • negligence so far as it resulted in damage to goods or to an interest in goods;
  • any other tort so far as it results in damage to goods or to an interest in goods.

The nature of conversion. Any act which is an interference with the dominion of the true owner of goods is a conversion of those goods (Hollins v Fowler (1875) L.R. 7 H.L. 757 at 766, per Blackburn J. referred to in Baker v Barclays Bank [1955] 1 W.L.R. 822: see also Kuwait Airways v Iraq Airways Co [2002] 2 A.C. 883). In some senses, conversion is a tort of absolute liability. Any person who deals with chattels does so at their peril. Although it is not necessary to show that the defendant knew of the claimant’s interest in the goods or of any other interest in the goods. Neither negligence nor intention to harm are ingredients of the tort: fault is similarly irrelevant (OBG Ltd v Allan [2007] UKHL 21 at [308]). Where a man deals with goods as his own “you need not enquire as to his intention” (Caxton Publishing Co v Sutherland Publishing Co [1939] A.C. 178 at 189).

A person therefore is guilty of conversion if he deals with goods in a manner inconsistent with the rights of the true owner intending to negative the rights of the true owner or to assert a right inconsistent with that right (Lancashire & Yorkshire Railway v Mac Nicoll (1919) 88 L.J.K.B. 601).

It is often helpful to consider conversion in terms of the categories of act which usually constitute the tort.

Conversion by taking. Any unauthorised taking of the goods of another with the intention of exercising dominion (however temporary) over them is a conversion (Kuwait Airways v Iraq Airways Co [2002] 2 A.C. 883). If the taking of the goods is without that intention, there is a trespass to goods but no conversion (Fouldes v Willoughby (1841) 8 M. & W. 540). The defendant need not intend to acquire title or to assert a full title. An unauthorised borrowing of a chattel can amount to conversion (e.g. joy-riding in a car; Aitkin Agencies Ltd v Richardson [1967] N.Z.L.R. 65). A taking can be constructive as where the holder of documents of title to goods (e.g. a bill of lading) takes some active steps to exercise dominion over them, as by endorsing the document to another.

If a person merely takes possession of premises in which there are goods belonging to another, there will be no conversion unless he intends to take possession of the goods as well (Thorogood v Robinson (1845) 6 Q.B. 769). However, subsequent use of, disposal of or dealing with the goods will amount to a conversion (W Hanson (Harrow) Ltd v Rapid Civil Eng Ltd (1987) 38 B.L.R. 106).

Conversion by transfer. A person who is in wrongful possession of goods and unlawfully parts with that possession is guilty of conversion. Sale and delivery of another person’s goods is a typical conversion of those goods whether the sale confers no title on the purchaser (Martindale v Smith (1841) 1 Q.B. 389) or whether the sale comes within one of the exceptions to the rule nemo dat quod non habet and does pass title. Sale without delivery, however, will only amount to conversion if the sale is effective to pass title to the goods: otherwise there is no change either of title or of possession to found a claim in conversion. The defendant must take some active steps that brings about the delivery of goods (or the documents of title) away from the true owner (RH Willis and Son v British Car Auctions Ltd [1978] 1 W.L.R. 438).

The transfer need not be by way of a contract intended to pass title. A carrier or warehouseman who delivers goods to an unauthorised person can be guilty of conversion.

Transferring goods in circumstances where the transferee can acquire a lien over them can amount to conversion (Syeds v Hay (1791) 4 Term. Rep. 260). It is sufficient to be a party to an unauthorised transfer of possession (Hiort v Bott (1874) L.R. 9 Exch. 86).

Conversion by detention. The distinction between detinue and conversion used to be that, with the former, mere possession adverse to the rights of the person entitled to possession was sufficient and it was unnecessary to show any intention to deal with the goods in a way inconsistent with those rights. In practice, however, a demand by the person with possessory title followed by an unjustified refusal to deliver up was treated as a conversion, thus rendering detinue largely otiose even before its abolition in 1977.

A demand is necessary before the detention will be actionable (Clayton v Le Roy [1911] 2 K.B. 1031) and the defendant must be in possession at the time of the demand. If he is not, then there is no conversion by detention (although there may have been an earlier conversion by transfer: Featherstonehaugh v Johnson (1818) 8 Taunt. 237).

The demand must be unconditional (Rushworth v Taylor (1841) 3 Q.B. 699) and the refusal must also be unconditional. A detainer may be entitled to a reasonable time in which to make enquiries but, once that has elapsed, whether or not the detainer is satisfied as to the claimant’s rights, he must hand over the goods (Alexander v Southey (1821) 5 B. & Ald. 247).

Delay in complying with the demand will normally render the defendant an insurer of the goods for subsequent damage so that if the goods are stolen during the period after the demand thee bailor is liable (Mitchell v Ealing LBC [1979] Q.B. 1).

Miscellaneous conversions. If goods are wrongfully lost or destroyed or are so treated as to lose their identity (e.g. flour baked into bread), this can amount to conversion. Even conduct which leads to confiscation of the goods so that they are lost to the true owner may suffice. Thus, where a car was used for smuggling and was confiscated by Customs, this was a conversion by the bailee of the car (Moorgate Mercantile Co Ltd v Finch and Read [1962] 1 Q.B. 701). Wrongful use of goods will be conversion, if it displays an intention to use the property as one’s own and such an intention will readily be inferred if the use is such as to damage the goods or to diminish their value.

The copying of works in which copyright exists no longer amounts to an act of conversion (Copyright, Designs and Patents Act 1988).

Conversion by a bailee. A bailee who, in breach of his bailment, makes a transfer unauthorised by his bailor is guilty of conversion (e.g. hirer who purports to sell the goods hired). So also is a bailee who, in breach of his duty to the bailor, permits the goods to be lost or destroyed (s.2(2)). A depositee who returns goods to his depositor does not commit conversion even if the depositor has no right to the goods (Hollins v Fowler (1875) L.R. 7 H.L. 757) but if, before this occurs, he is presented with a demand by the true owner and then returns the goods to the original depositor he will be liable.

Subject-matter of conversion. This is now defined by the Act for all torts of wrongful interference. “Goods” include all chattels personal other than things in action and money (s.14(1)). Realty can only be the subject-matter of conversion when severed (e.g. coal taken from a mine: Mills v Brooker [1919] 1K.B. 555).

The exclusion of “money” is slightly misleading. Money in specie (i.e. coins and notes) can be converted: it is money in the abstract (e.g. in a bank account) which cannot.

Negotiable instruments and title deeds are primarily documents creating “things in action” but they are at the same time physical objects, pieces of paper. If the piece of paper is unlawfully converted, the damages will be assessed on the basis of the value of the rights created by the document (Kleinwort v Comptoir National d’Escompte de Paris [1894] 2 Q.B. 157; Midland Bank Ltd v Reckitt [1933] A.C. 1).

If, by reason of a fraudulent alteration, the piece of paper is valueless (e.g. a fraudulently altered cheque), no rights arise from it and a claim in conversion will fail: Smith v Lloyds TSB Bank Plc [2001] Q.B. 541: [2001] 1 All E.R. 424.

The right to sue

The claimant must show that at the time of the conversion he was either in actual possession of the goods or entitled to immediate possession of them. It is not necessary to show a title of absolute ownership. Title unaccompanied by either actual possession or an immediate right to possession is insufficient to support an action in conversion (The Winkfield [1902] P. 42. The title to possession must be a legal title: an equitable title will not be sufficient: MCC Proceeds Inc v Lehman Bros International Europe [1998] 4 All E.R. 675).

Even a person in possession of goods which he has acquired knowing them to have been stolen has a title good against everyone except the true owner or someone claiming under him (Costello v Chief Constable of Derbyshire Constabulary [2001] 3 All E.R. 150; Jaroo v Attorney General of Trinidad [2002] 2 W.L.R. 705).

The interest on which the claimant relies must have vested in him at the time of the act of conversion (The Future Express [1993] 2 Lloyds Rep. 543; Smith (Administrator of Cosslett Contractors Ltd) v Bridgend CBC [2002] 1 A.C. 336), unless the right to sue passed to the claimant as part of the transfer of the goods to him (Bristol and West of England Bank v Midland Ry [1891] 2 Q.B. 653).

Where goods have been bailed, it will depend on the terms of the bailment who is to be treated as being in possession of the goods or as entitled to possession. If the bailment confers exclusive possession on the bailee as long as the bailment lasts, only the bailee can maintain an action for conversion as the bailor has no immediate right to possession. Examples of such bailments are letting on hire, pledging or delivering the goods to someone, who acquires a lien (Milgae v Kebble (1841) 3 M. & G. 100). An unpaid vendor protected by his lien has exclusive possession. The purchaser cannot bring an action unless he has tendered the price and thus becomes immediately entitled to possession (Lord v Price (1874) L.R. 9 Exch. 54).

Title to sue was considered by the Court of Appeal in Iran v Barakat Galleries Ltd ([2007] EWCA Civ 1374; [2008] 1 All E.R. 1177). Where the owner of goods who had an immediate right to possession of them, albeit that they were in the possession of a third party, by agreement transferred his title to a new owner, the new owner could bring a claim in conversion against the person in whose possession they were. Where the owner of goods with an immediate right to possession of them by contract transferred the latter right to another, so that he no longer had an immediate right to possession but retained ownership, it would seem right in principle that the transferee should be entitled to sue in conversion. A fortiori, if the contract provided that when the transferee entered into possession, ownership would be transferred to him.

If the bailee commits an act inconsistent with the bailment which terminates the bailment or entitles the bailor to do so, the bailor has the necessary right to possession to sue the bailee or any transferee from him (Jelks v Hayward [1905] 2 K.B. 460). A breach of bailment by a pledgee or an unpaid seller does not give the pledgor or buyer a right of action: only if redemption or payment of the price is tendered can they sue (Halliday v Holdgate (1868) L.R. 3 Exch. 299).

A bailee at will (e.g. the borrower under a gratuitous loan) has a concurrent possession with his bailor: either may sue. A servant or agent may have merely custody of the goods and possession will remain exclusively with the employer or principal who alone can sue.

As mere possession will suffice to ground an action, a finder or other person who has come into actual possession of goods may sue. Much of the old law concerning the difference between such possession (called “special property”) and title to the goods (“general property”) has become academic with the abolition of the rule known as jus tertii which prohibited a defendant from setting up as a defence the fact that some person other than the claimant or a person through whom the defendant claimed had a better title than the claimant (see s.8(1)). A co-owner can sue his fellow owner in conversion where the goods have been destroyed or disposed of whether or not such disposal was effective to transfer title to the transferee (see s.10).

Not every act by a bailee which may set up a right inconsistent with that of the bailor will amount to a conversion by the bailee. This was emphasised by the Court of Appeal in BMW Financial Services (GB) Ltd v Bhagwanani ([2007] EWCA Civ 123; [2007] All E.R. (D) 26).

Relief

The available relief is:

  • an order for delivery of the goods and for the payment of any consequential damages;
  • an order for delivery of the goods, but giving the defendant the alternative of paying damages by reference to the value of the goods, together in either alternative with payment of any consequential damages;
  • damages (s.3(2)).

Relief under (a) is at the discretion of the court (s.3(3)) and such an order can later be altered by the court (s.3(4)). The claimant may choose between (b) and (c). An order under (b) can be satisfied by the delivery of the goods (subject to payment of consequential damages) (s.3(5)).

If the defendant is no longer in possession of the goods only damages can be claimed.

Damages

The starting-point for the measure of damages is the market value or replacement value of the goods at the date of the conversion (Joe Hall Ltd v Barclay [1937] All E.R. 620). If the value of the goods has increased since conversion the increase can be recovered as consequential damages (IBL v Coussens [1991] 2 All E.R. 133). If the value of the goods has declined, the claimant may recover damages assessed by reference to the value at the date of conversion thereby preventing the tortfeasor profiting from his wrongdoing (Solloway v McLaughlin [1938] A.C. 247; Kuwait Airways v Iraq Airways Co [2002] 2 A.C. 883).

If a chattel is one of the kind used by the claimant in the course of the business (e.g. let out for hire), the claimant can recover the loss of income from the chattel and if the claimant has been put to additional expense by being deprived of the chattel (e.g. by hiring in a replacement), he can recover his loss.

If the claimant has only a limited interest in the goods, he may nonetheless recover the full measure of damages against a third party with no claim to the goods. Where, however, two or more persons have different interests in the goods (e.g. a finance company and a hirer) each is entitled to sue. Where both are claimants, s.7(2) provides that the wrongdoer is relieved of the effect of double recovery. Where one owner only is a party, that claimant has a duty to account in the proper sum to any other owner with a right to claim. If enforcement results in double recovery, a claimant must reimburse the wrongdoer to the extent that the claimant is unjustly enriched (see s.7(3) and (4)).

Where an innocent converter has improved the goods, he and bona fide purchasers from him can claim an allowance against the damages to reflect the value of the improvement (s.6).

Where damages are or would fall to be assessed on the footing that the claimant is being compensated for the whole of his interest in the goods (whether or not there is an allowance for contributory negligence), actual payment of the damages or settlement of the action will in general operate to extinguish the claimant’s title to the goods (s.5).

Trespass to goods

The overlapping nature of torts relating to goods may have largely deprived the tort of trespass to goods of an independent existence. The fact, however, that the circumstances giving rise to a claim in conversion of goods by destruction or taking also give rise to a claim in trespass, should not blur the essential differences in the two claims. Similarly, where goods are damaged by the careless act of the defendant. The same facts may give rise both to a claim in negligence and a claim in trespass.

A deliberate taking away out of possession of the claimant is the most obvious form of trespass to goods, as in any unpermitted contact or damage to another’s goods/ both are direct and immediate interference. It is not clear whether the tort is actionable without damage. The defendant’s conduct must be blameworthy so that in the absence of negligence, accidental damage will not amount to trespass (National Coal Board v JE Evans & Co [1951] 2 K.B. 861 – the case of damage to an underground cable caused without negligence). However, deliberate conduct (in the erroneous belief held by the defendant that he was acting lawfully) does not amount to a defence if the act otherwise amounts to trespass (Wilson v Lombank Ltd [1963] 1 W.L.R. 1294).

The right to sue. The only person who can normally sue is the person in possession of the goods at the time of the trespass. A trustee with legal title to the goods is treated as being in possession although physical possession may be with the beneficiary (White v Morris (1852) 11 C.B. 1015). A bailment at will confers a joint possession on bailor and bailee and either may sue. An owner may be in possession through a servant or agent. The personal representatives of a deceased may sue in trespass notwithstanding the fact that probate or letters of administration have not been granted. As with conversion, one co-owner can sue another only if the goods are destroyed or disposed of (s.10).

Interim orders to delivery

Section 4 confers jurisdiction on the High Court and the County Court concurrently to make interim orders for the delivery up of property, pending a decision on the rights of the parties. The procedure is governed by CPR r.251(1)(e). Under RSC Ord. 29 r.2A applications before the issue of proceedings were not permitted: no such limitation exists under CPR r.25.1(1)(e).

The court has an unfettered discretion under the 1977 Act but will balance the needs of the parties and take into account the adequacy of damages as an alternative remedy (Howard E Perry & Co Ltd v British Railways Board [1980] 2 All E.R. 579).

For the factors to be taken into account on an application, see CBS UK Ltd v Lambert [1983] Ch. 37. There must be clear evidence that the defendant is likely, unless restrained by the court, to dispose of the chattels. The court will not normally make an order in relation to household goods, tools and stock-in-trade. There should be evidence of wrongdoing on the defendant’s part. An order made under s.4 should clearly identify the chattels, permit the claimant to enter the defendant’s premises only with his permission, and order delivery up of the chattels to the claimant’s solicitors. In addition, the defendant should be given liberty to apply to vary or set aside the order.