Tavoulareas v Lau & Anor Rev 1

A bailee or other person holding another’s goods must normally deliver them forthwith on demand. A genuine doubt about the claimant’s entitlement permits only a reasonable period to investigate, obtain advice or, if necessary, interplead. The court must assess both whether the doubt was bona fide and whether the period taken was reasonable. Once that period expires, continued withholding is conversion and the goods remain at the defendant’s risk. An appellate court may interfere with factual findings where the first-instance judge has failed to identify the issues, apply the governing law or give adequate reasons, so that the judgment is unsafe.

The claimant placed personal artwork in a restaurant operated by his company, whose premises were leased by the respondents. After the business failed and the company entered liquidation, the claimant demanded return of the artwork. Four works were released, but other works were withheld while the respondents sought assurance that the liquidator did not claim them. Their correspondence also denied knowledge of the works’ whereabouts. The Mayor’s and City of London County Court, HHJ Simpson, dismissed the conversion claim with costs on 7 August 2006. The appeal concerned whether the retention was justified while title was investigated, whether the remaining works had been in the respondents’ possession, and whether the judge’s reasoning and findings were adequate.

Appeal allowed. Lord Justice Ward delivered the principal judgment. Lord Justice Scott Baker and Lord Justice Wilson agreed with it and with the proposed order.

1. The County Court judgment was unsafe because it failed to identify the pleaded issues, analyse the alleged January collection arrangement, make findings about the attempted collection by the claimant’s agent, or address the respondents’ earlier denials that they knew where the works were. It also treated a belatedly raised justification as decisive without considering the earlier acts of withholding.
2. The governing law required consideration of the rule that a bailee or person in possession must normally deliver goods forthwith on demand. If there is a bona fide doubt about the claimant’s entitlement, the holder may have a reasonable time to make enquiries, take advice and, if necessary, interplead. The court must assess both the genuineness of the doubt and whether a reasonable time has elapsed. Continued withholding after that period constitutes conversion. This reasoning was supported by Vaughan v Watt 6 M&W 492, Pillott v Wilkinson [1864] 3 H&C 345 and Howard E Perry & Co Ltd v British Railways Board [1980] 1 WLR 1375 at p 1381.
3. The respondents knew of the claimant’s demand at least by January 2005 but made no enquiry of the liquidator until January 2006. The liquidator replied within 24 days. Their delay was unreasonable. Their conduct, including releasing four works while withholding others and falsely denying knowledge of the works’ whereabouts, was inconsistent with any bona fide doubt. The respondents had therefore converted at least the works ultimately returned, and judgment was entered for the claimant with damages to be assessed.
4. The remaining issues concerning works said to be missing were remitted to the County Court. Although appellate courts should ordinarily respect factual and expert findings, the judge’s failure to engage with the issues and law so infected the judgment that those findings could not safely be relied upon. The formal order recorded that the application was refused and the appeal allowed.

• Court of Appeal (Civil Division) In [2007] EWCA Civ 474, the appeal was allowed. Judgment was entered for the claimant for damages for conversion to be assessed, and the remaining matters were remitted to the County Court.
• Mayor’s and City of London County Court HHJ Simpson dismissed the claim with costs on 7 August 2006.