Conversion by Sale
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This article is written by Komal Kumari, a 4th-year student of B.A. LL.B. in Lloyd Law College, Greater Noida. The article focuses on the various aspects of Law of Conversion under the law of torts and the various other aspects related to the same.

“An individual is liable to be sued for conversion if he treats goods of another as if they were his when they are not.”

A conversion is any act of wilful interference, without any lawful justification, in a manner which is inconsistent with the right of another, whereby that other is deprived of the use and possession of the chattel. The expression ‘wilful interference’ is used for describing the element of intention referring to the intentional commission of the act resulting in conversion. If a person deals with a chattel in a manner which is of such a nature that is necessarily inconsistent with the rights of the plaintiff, such dealings will be considered as intentional and will amount to conversion even if he did not know of the right held by the plaintiff and honestly believed that he was entitled to do so. For example, an auctioneer is held liable for conversion even if he honestly believed that the goods which are being auctioned belongs to the seller and not to the plaintiff. Conversion can be committed in various ways but the main link in every act that constitutes conversion is that it consists of dealings with goods by assertion of rights which is either inconsistent with the rights of another or unjustifiable denial of the rights of another in them.

The tort of conversion is applicable only to chattels and does not extend to cover the appropriation of chooses in action.

Conversion by Taking

If any individual without the proper authority takes possession of another man’s goods with the sole intention of asserting dominion over them is guilty of conversion. The reason being that the act will be inconsistent in regards to the general right of dominion which the owner of the chattel, who is entitled to the use of it at all times and in all places, has in it. An act that is constituted by taking the goods but without any intention of exercising permanent or temporary dominion can be termed as trespass but not as conversion.

If there is a wrongful taking, even though such an act was done under a mistaken but honest supposition of being lawfully entitled, or with the intention of benefiting the true owner it does not make any difference.

Refusal to deliver property taken from agent

The decision in the case of M’Combie v. Davies, (1805) 6 East 538 : 8 RR 534, explains how conversion can be committed by refusing to deliver the property taken from agent. In this case, the property of another person was taken through an assignment from agent, having no authority to dispose of the property, and the person who took it refused to deliver it back to the principal even after notice and demand by him. This was held as an act that amounted to conversion.

Principal ratifying purchase of chattel by agent 

The decision in the case of Hilbery v. Hatton, (1864) 2 H & C 822, explains the point that whether a principal ratifying purchase of chattel by agent can be held as conversion. In this case it was held that the purchase of a chattel done by an agent which the vendor had no right to sell, is ratified by the principal then he is guilty of conversion even though at the time of the ratification he had no idea about the sale being unlawful.

Pledge taking property pledged 

If a pledgee, who only has the power to sell for default, takes over, as if upon a sale to himself, the property pledged, without the authority of the pledger (or without notifying him), but credits its value in his account, he will be held liable for conversion.

Taking the goods without any right 

Taking the goods on which a person has no rights can be termed as conversion. For instance, if an individual lopped branches of the fruit trees overhanging his land and consumed the fruit, then he can be held liable to the owner for its value as he would be held guilty of conversion as he had the right to lop the branches but it did not allow with it the right to pick and consume the fruit.

Conversion by Parting with Goods

If any individual who is entrusted with the goods of another, put them into the hands of a third person contrary to orders, it will be termed as a conversion. The wrongful act is done when he aims at giving the third person rights over the property itself and not merely the possession. Any individual who without lawful justification deprives a person of his goods by delivering them to someone else so as to change the possession is guilty of conversion. The individual giving the goods and the person receiving it will be held liable as joint tortfeasors. If an individual borrows another’s horse for riding, and afterwards leaves him at an inn, this act will be termed as a conversion, as though the owner may have the horse back but he does have to pay for its keeping. Similarly, if an individual has hired a piano and later on sends it to an auctioneer for selling, the hirer of a piano is guilty of conversion; and so is the auctioneer who refuses to deliver it up until and unless the expense incurred be paid first. 

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Conversion by Sale

An individual who even though innocently obtains the possession of certain goods and disposes of them, whether be for his own benefit or for that matter for anyone else, will be guilty of conversion if these goods were of another person who has fraudulently been deprived of them. The auctioneer is liable to the true owner when he gets possession of the articles sent to be sold by him, for the purposes of sale, and in result he sells them. Lord Denning explained this concept as, when the sale of goods are done through the involvement of an auctioneer, then he is liable in conversion to the owner if the goods are sold as a result of a provisional bid or under the hammer, where the seller was having no title of those particular goods. Although an attempted disposition, for example, a mere bargain and sale without the transfer of possession, i..e., delivery will not be held as a conversion. Thus, when the auctioneer returns the good in good faith without notice of title of the plaintiff, back to the person from where he received them without selling them, he is not liable for conversion.

If the goods are upgraded from raw materials into the final product – For instance, the green tea leaves are converted into black tea, the decision in the case of Carritt Moran & Co. v. Manmatha, (1941) ILR 1 Cal 285, explains the point. In this case it was held that even if the tea leaves are dried, shrunk and blackened it remains the same tea which was plucked or on the shrubs as green leaves. Accordingly, if a person trespassing into a tea-garden just by plucking and changing the green leaves into black tea does not acquire any right in respect thereof. As a result of such a case where the auctioneer who sells the black tea on behalf of the trespasser and pays the price to him will be held liable to the real owner in damages for conversion. The measure of such damages, where the trespasses were deliberate and criminal would be the actual price at which the manufactured tea would have been sold without any of the deductions for the expenses which were incurred in relation to its manufacture.

Sale of motor car – The decision in the case of R.H. Willis & Son v. British Car Auctions, (1978) 2 All ER 392, explains the point. In this case, the plaintiffs were motor dealers who sold a car to the defendant after receiving about half of the amount on the hire- purchase terms that he was not to sell the car before he paid the balance of the price. The defendant became bankrupt, and the car as well as the purchaser were not traceable, resulting in the plaintiffs filing a suit for conversion. The plaintiff recovered damages in the form of the balance price from defendant. 

In the case of Munro v. Willmott, (1949) 1 KB 295, where the defendant allowed the plaintiff to leave her motor-car without any payment in the yard of his hotel (of which he was licensee and tenant), this storage was intended to be for a short duration of time, but the car remained there for several years. Resulting in it becoming an obstacle and in the conversion of the yard into a garage. After several unsuccessful efforts to contact or communicate with the plaintiff, the defendant spent a specific amount in repairs and renovation of the car for making it saleable as the car was in poor condition, and had suffered from long exposure in the open air. Afterwards, it was sold at auction. For this the plaintiff sued the defendant i.e., damages for conversion and detinue of the car. The court held that the plaintiff was entitled to damages based on the value of the car on the day of judgement in the action; but the defendant was entitled to credit for what he had spent to render the car saleable, since the value of the car on the day of judgement included the amount spent by the defendant, the property of the defendant in the shape of work done and materials supplied for the car.

Conversion of the goods by an agent selling it to a third party who acquires it in good faith. – In the case of Jerome v. Bentley & Co., (1952) 2 All ER 114, the plaintiff who is the owner of a diamond ring, entrusted it to C (the agent) who undertook to try to sell it on his behalf. The plaintiff was to receive the price specified by him and if there was any surplus it was to be received by C with the condition that the ring has to be returned to the plaintiff if not sold within seven days. C sold the ring after the seven days had elapsed, representing himself as the owner of the ring, and sold it to the defendants, for a price which was one-third of the price mentioned by the plaintiff, who bought it in good faith and re-sold it. C was subsequently convicted of the larceny of the ring as a bailee. In an action for damages for wrongful conversion of the ring by the plaintiff against the defendants, it was held that, at the time of the sale to the defendants, C was not an agent of the plaintiff to deal with the ring and was not in the position of a person who might be presumed as an agent having authority to sell it, and that, by the sale he converted the ring to his own use; and, therefore, he did not pass any property in it to the defendants, who were thus liable to the plaintiff.

Conversion by Keeping

When an individual has the possession of another’s chattel, and still refuses to deliver it, this act violates the right of general dominion of the plaintiff over it, and the use of it at all times, and in all places, which he is entitled to make of it, this act of assertion of rights are contradicting with the plaintiff’s rights and consequently results into an act of conversion.

Demand and Refusal 

If certain goods of a person are in the possession of another, then he should send someone with proper authority to demand for them and receive them; and in result of this, if the individual holding the possession refuses to deliver them then this will be held as an evidence of conversion. A demand and refusal in itself does not constitute a conversion, but they are and can be taken as an evidence of a prior conversion.

A qualified (reasonable and justified) refusal is not considered as conclusive evidence of conversion, but an unqualified refusal is always considered as conclusive evidence of a conversion. 

Illustrations 

  1. A refusal by a railway servant who is doubtful regarding the consignor’s title to the goods which are to be delivered will be termed as qualified refusal and therefore is not a conversion. 
  2. A refusal by a railway clerk to deliver a consignment at a place to which it is not booked, does not amount to conversion. 
  3. Although, if the defendant refuses to deliver up the goods except on a certain condition which he has no right to impose, that would result into absolute refusal. 
  4. Refusal by an advocate to give up the deeds except on condition, which he had no right to impose, that his charges in respect of business done for his own client should be paid, would be evidence of conversion.

Right of finder 

In regards to the finders, the law is that the finder of chattel who did not trespass and is not a trespasser acquires a right to keep it, against all but the true owner, if the chattel had been abandoned or lost and if he took it into his care and control. But this right is subject to the superior right of an occupier of a building to retain chattels attached to that building and also to retain chattels on or in it, if he exercises his exclusive control or an intention to exercise exclusive control over the building and the things which were on or in it. 

The decision in the case of Waverley BC v. Fletcher, (1995) 4 All ER 756, explains this point, as the same rule applies to goods/articles found in or attached to land which was restated in this case as follows:

  1. When any object is found in or attached to a land, as between the finder of the article and the lawful possessor of the land, the lawful possessor of the land has the better title. 
  2. When any object is found unattached on land, then in between the finder and the lawful possessor, the lawful possessor of the land will have a better title only if he exercises his exclusive control over the land as to indicate an intention to control the land and anything that might be found on it.” 

In the present case, the defendant by the use of a metal detector discovered the presence of an object below the surface and after digging upto some nine inches he found a valuable medieval gold brooch. Although in the suit by the plaintiff (the local authority), owning the public park, it was held that by applying the above principle, the local authority do have the superior right to have the brooch as against the finder.

In the case of Armory v. Delamirie, (1721), the plaintiff was a chimney sweeper who found a very valuable jewel and had taken it to a jeweller to ascertain its value. The jeweller took advantage of the boy’s simplicity, told him it was worthless and offered him three pence for it, which the boy clearly declined and demanded for the jewel to be returned back. The jeweller refused to do so; causing the boy in successfully suing him for it, and for the purpose of calculating damages the court decided to consider the jewel to be of the highest value.

In the case of Hannah v. Peel, (1945) KB 509, the defendant was the owner of a house which he had never himself occupied. While the house was requisitioned, the plaintiff, a soldier, found a brooch on the top of a window frame, the owner of which was unknown. There was no evidence that the defendant had any knowledge of the existence of the brooch before it was found by the plaintiff; the plaintiff handed the brooch to the police to ascertain its owner, but the police in turn delivered it to the defendant who claimed it as being on premises of which he was the owner. It was decided by the court that the plaintiff, as finder, was entitled to the possession of the brooch as against all others except its owner.

In the case of Parker v. British Airways Board, (1982) 1 All ER 834, the plaintiff who was a passenger found a bracelet in the executive lounge at London Airport. He handed the bracelet to an employee of the Airlines with a particular direction that the bracelet be returned to him if it was not claimed by its owner. The Airlines sold the bracelet and kept the proceeds instead of returning it back to the plaintiff when not claimed by the owner. The plaintiff sued for conversion and was awarded as damages the value of the bracelet. The plaintiff being the finder was held entitled to the bracelet against everyone except the owner. Even though the Airlines being the occupier of the premises, neither showed the intention of exercising control over the lost chattel in their lounge nor did they expressed the intention that the permission granted to the public to enter the premises was on the terms that the commonly applied maxim ‘finders keepers’ would not be applicable.

Indian cases 

In Indian context, the case of Kishorymohan Roy v. Rajanarain Sen, (1862), explains the point. In this case two notes were stolen from A, which B (not a bona fide holder for valuable consideration) gave to C in payment of certain goods. B had to bring D, a person known to C, as C had refused to deal with B as he was unknown to him. Hence, the purchase was made by him in turn. It was held that B was liable to A as the part performed by B in the transaction, amounted to a “conversion of the notes for his own use” resulting in him being liable for the same. 

In the case of Debendronath Mullick v. Odit Churn Mullick, (1878), the refusal to deliver the idol by A, through which the person demanding it was prevented from worshipping or performing the rites on the specified date was held as a valid ground for the aggrieved party to sue for damages.

In the case of Haryana Cotton Mills Co. Ltd v. B.B & C.I. Ry. Co., (1927), it was held that the refusal or neglect by the railway company in delivering the goods even after the demand was held to be liable in conversion. 

Conversion by Destruction

Destruction of a chattel belonging to another is an act of conversion, as it does have the effect of depriving the owner of it altogether. If the object has been destroyed, for example by burning it, that would be in a way depriving the plaintiff of his property even if the defendant has not taken or considered of taking the goods for his own use. If an act is done without the authority of the owner, i.e., replacing wine with water is a conversion of the whole liquor and so is the spinning of cotton into yarn or grinding corn into flour.

Conversion by Denial of Right

If the defendant has never been in physical possession of the goods but his act amounted to an absolute denial and repudiation of the plaintiff’s right on them, then it will be termed as conversion. The applicability of this view was doubted and it has been overruled by Section 11(3) of the Torts (Interference with Goods) Act, 1977 which provides that denial of title is not by itself conversion.

If there has been an interference with a chattel in a certain manner that is inconsistent with the right of the owner along with the denial of title to the owner results in conversion. 

Unlawful use of the goods of another in such a manner that the goods might be rendered liable to forfeiture by the authorities would also amount to conversion. Defendant’s ignorance of the unauthorised character of his act cannot always be relied upon as a defence.

For instance if the payee of a crossed cheque especially endorsed it to the plaintiffs and posted it to them. A stranger, having obtained possession of the cheque in transmission, obliterated the endorsement to the plaintiffs’, and having substituted a special endorsement to the plaintiffs, and having substituted a special endorsement to himself, presented it at the defendants’ bank, and requested them to collect it for him. They did so and handed the proceeds over to him. Then the defendants were liable to the plaintiffs in an action for conversion for the amount of the cheque.

Distinction between Trespass and Conversion

  1. Trespass is basically a wrong done to the actual possessor and therefore cannot be committed by a person in possession. On the other hand, conversion is a wrong to the person entitled to immediate possession. The actual possessor is frequently, but not always the person entitled to immediate possession, and sometimes a person entitled to immediate possession is allowed to sue in trespass so that the conversion may, but does not necessarily, include trespass.
  2. Trespass is without intending to exercise an adverse possession, damaging or meddling with the chattel of another. A conversion is referred to a breach made adversely in the continuity of the owner’s domination over his goods though the goods may not be hurt.
  3. The gist of the action in trespass is the force and direct injury inflicted; in conversion, it is the deprivation of the goods or their use.

For instance, if a person snatches my gold ring with a view to steal it, the act amounts to both trespass and conversion. But if a person borrows my ring for his use but later on sells it he will be held liable for conversion only.

Action for Conversion

(i) Who can sue?

The plaintiff, during the time of conversion, should either have the right of immediate possession or the right of property in the thing, coupled with possession thereof. Any possession, even if temporary, is sufficient against a wrongdoer, e.g. that of a carrier. As already mentioned that a finder of goods is in a position to sue in conversion except the real owner. Actual possession or an immediate legal right to possession is required and necessary as it enables a person to sue. A claim for conversion of goods is not maintainable by a person who had merely an equitable interest in them against another who had acquired legal title to the goods as a bona fide purchaser for value without notice of the prior equitable claim. 

A thief or a receiver of stolen property – This point was explained through the case of Costello v. Chief Constable, that a thief or a receiver of stolen property in possession has a possessory title which is good against all the world except the true owner and so he can sue every other person for conversion.

(ii) Defences

The justification or defences to an action for conversion are:

  1. Lien, either general or particular – Demand and refusal are not considered as evidence of conversion, if the party has a lien upon the chattel.
  2. Right of stoppage in transit – This defence arises out of contract which is related to the sale of goods.
  3. Denial of plaintiff’s right of property (jus terii) – Where the plaintiff sues relying on his right only, or denial of possession. Where the plaintiff was in possession of the goods at the time of the conversion, the defendant cannot set up a plea of jus tertii (i.e. that a third party has superior title). Against a wrongdoer possession is a good title. But when the plaintiff was not in possession but had only the right to possess, the plea of jus terii can be set up by the defendant.
  4. Distress – If the goods are taken under distress or under execution.
  5. Sale in market overt – As per the English law, sale of goods in market overt gives a good title to the purchaser. The purchaser cannot be sued for conversion if he parts with the goods or refuses to give them up on demand; although the seller can be sued if he has no title. This doctrine is not applicable in India but such cases are governed by sec. 27-30 of the Indian Sale of Goods Act.

(iii) Damages

In general, the measure of the damage is calculated through the value of goods at the time of conversion, where no particular damage has been sustained, and the goods have not been tendered and received back after the action. This refers to the market value of goods during the time of the conversion. 

As and when the defendant unlawfully sold shares which belonged to the plaintiff and later on replaced them by an equal number of shares purchased at a lower price, it will be held that the measure of damages was the value of shares on the date of the conversion, i.e., sale price less the value of replacement shares. If the defendant does not produce the goods, then the presumption will be that it is of the highest value of any goods of that kind. But if the goods that have been returned, have fallen in price, the difference in the price at the time of the return, will have to be provided as damages.

Illustrations 

  1. If there is an action against a shipowner for non-delivery of goods, the measure of damages will be the value of the goods at the date of non-delivery.
  2. If the damages which have been awarded to the owner of land is in respect of digging the earth for making bricks out of it, the plaintiff will be awarded the whole amount which includes the cost of manuring and levelling the land, and also the next value of the bricks into which the earth has been converted and not simply the value of the site affected.

Conclusion

Conversion can be referred to as the forgotten tort because as a matter of fact, every year there are several cases of conversion reported, but either they are too similar to the case of trespass or are mostly concerned with the ownership of the particular disputed property but the tort in itself is not the issue.


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