Euromex Ventures Ltd & Anor v BNP Paribas Real Estate Advisory and Property Management UK Ltd & Ors

Conversion requires deliberate conduct inconsistent with another’s rights, which substantially excludes that person from use and possession of the chattel. A sale may constitute conversion even if it cannot pass title, but mere unauthorised possession or retention is insufficient without adverse detention. A refusal to comply with a demand is the usual, though not exclusive, evidence of such detention.

Office-holders are protected by Insolvency Act 1986, section 234, where they dispose of property reasonably believing that they are entitled to do so, subject to liability for their own negligence. The protection applied where the office-holders had ample grounds for believing that the assets belonged to the company.

The consolidated claims concerned allegations that administrators and liquidators of HDS Studios Limited had converted television, studio and other equipment located at the Studio. The claimants asserted ownership through companies, individuals and disputed assignments, and alleged conversion through asset sales, exclusion from the Studio, refusal of access and surrender of the lease.

The defendants denied the claim and relied, among other matters, on estoppel and section 234 of the Insolvency Act 1986. They also counterclaimed for HDS’s administration costs and for money received by Digital under a BBC facilities contract. The trial concerned liability, with valuation deferred.

1. The conversion claim failed. The claimants did not establish ownership of the assets sold under the 2004 and 2005 sale agreements. The disputed invoice and disputed assignments were fabrications. The evidence showed that assets formerly owned by Hardial had become the property of HDS.
2. Mr Bhabra was in any event estopped from denying HDS’s ownership. He had represented ownership through accounts, affidavits, asset registers and statements to the administrators and valuers. The defendants relied on those representations.
3. The defendants were also protected by section 234 of the Insolvency Act 1986. They reasonably believed that the assets belonged to HDS and were entitled to dispose of them. Their belief was amply justified by the documentary and witness evidence.
4. Applying the principles stated in Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, conversion requires deliberate conduct inconsistent with the owner’s rights, together with an interference sufficiently extensive to exclude the owner from use and possession. Mere unauthorised retention is insufficient. In the present case, no demand for the return or removal of the relevant goods, followed by refusal, was proved. The exclusion and access allegations therefore did not establish conversion.
5. The claimants established only that Mr Bhabra Senior owned an altar in the Studio and that Mr Assi owned certain personal items there. The court nevertheless found no conversion in relation to those items.
6. The counterclaim succeeded. Mr Bhabra and Mr Daljit Bhabra had undertaken an unqualified obligation to meet HDS’s administration costs, subject to assessment. Digital was ordered to pay £130,000 representing money received under the BBC contract.