Mainline Private Hire Ltd v Nolan

Legal possession of a chattel requires both factual possession, meaning sufficient physical custody and control, and an intention to possess for one's own benefit. Factual possession must also be exclusive. A storage contract or bailment for reward normally gives the bailee possession, but its legal effect is not conclusive. The court must examine what actually occurred, including whether the supposed bailee intended to exercise exclusive control. A genuine and binding storage contract may therefore coexist with possession in another person if, in practice, the bailee lacks exclusivity. Ownership alone does not determine possession. In a conversion claim, the claimant must establish actual possession or an immediate right to possession when the interference occurred.

Mainline Private Hire Ltd owned a Peugeot taxi operated by Anthony Nolan. After the vehicle was recovered from theft, Mr Nolan and his wife arranged for it to be stored with Mercedes of Interest under a contract made by Mrs Nolan as a director of Mainline.

Following a breakdown in relations and a compromise agreement requiring delivery of Mainline assets on written request, Mainline sued Mr Nolan for conversion and breach of that agreement. The Manchester County Court found that the storage contract was genuine and binding but that Mr Nolan retained possession because the vehicle's recovery and location were concealed from Mainline. The central issue on appeal was whether the storage contract meant that possession had passed exclusively to the storage provider.

Lady Justice Arden gave the leading judgment. Lord Justice Sedley and Sir Nicholas Wall P agreed. The appeal was dismissed, the application to amend the grounds of appeal and extend time was granted, and the respondent's notice was dismissed.

1. Conversion and possession. A claimant in conversion must show actual possession or an immediate right to possession at the time of the alleged conversion. Legal possession requires both factual possession and an intention to possess. Factual possession must be exclusive. Ownership does not necessarily confer a possessory right where the chattel has been assigned to another for use.
2. Effect of bailment and storage. A bailee for reward will ordinarily have factual possession and an intention to retain the goods for its own purposes while charges remain unpaid. That conclusion is not automatic. Because both elements of possession are fact-sensitive, the court must examine the whole relationship and what actually occurred, rather than rely only on the terms of a storage contract.
3. Application. The storage contract was genuine and binding on Mainline, but it was not a complete answer to the claim. The judge was entitled to find that the storage provider lacked exclusive possession as against Mr Nolan. The business relationship between Mr Nolan and the storage provider, the concealment of the vehicle's recovery and location, the absence of effective enforcement of the storage lien, and Mr Nolan's motive and conduct provided an adequate factual foundation for concluding that he retained control and intended to possess the Peugeot for his own purposes. The contract was therefore not a sham and had not terminated, but its rights were not asserted against Mr Nolan in the relevant period.
4. Other matters. The Court of Appeal rejected the challenges to the trial judge's factual findings and pleading analysis. It noted that conversion constituted wrongful interference with goods for the purposes of section 1 of the Torts (Wrongful Interference with Goods) Act 1977, but that the Act did not affect the appeal. In an obiter postscript, the court urged the parties to seek agreement on the outstanding damages claim and avoid disproportionate further litigation.

• Court of Appeal (Civil Division) — On 2 March 2011, the court dismissed Mr Nolan's appeal and Mainline's respondent's notice. It granted permission and an extension of time to amend the grounds, but dismissed the amended factual ground.
• Manchester County Court — Following a liability trial, HHJ Armitage QC made an order dated 18 May 2009 finding Mr Nolan liable for conversion of the Peugeot and in breach of the compromise agreement. The judge held that the storage contract was genuine and binding but that Mr Nolan retained legal possession.