Your Response Ltd v Datateam Business Media Ltd

A common law possessory lien cannot be exercised over an electronic database. Such a lien depends upon the lawful, continuing possession of tangible goods. Practical control over intangible information is not possession for this purpose, even where the information is stored physically on computer equipment.

The storage medium and any intellectual property rights may constitute property, but the information itself is distinct from both. Extending possessory liens to electronic information would require a significant change inconsistent with existing authority and could affect creditors and insolvency priorities.

Where a contract of indefinite duration requires reasonable notice, the length of notice is a question of fact. Evidence arising after formation may bear upon that question.

The respondent managed and regularly updated the appellant publisher’s electronic subscriber database. Their informal contract contained no express terms governing termination, return of the database or withholding it for unpaid fees. Following a deterioration in their relationship, the respondent stopped providing services and refused to release the database until its outstanding fees were paid.

The respondent claimed unpaid fees and damages for repudiation. The publisher counterclaimed for the cost of reconstructing the database. District Judge Bell held that three months’ notice was reasonable, that the publisher had repudiated the contract by giving only one month’s notice, and that the respondent could exercise a lien over the electronic data.

The publisher appealed on two issues: whether three months was a reasonable notice period and whether a common law possessory lien could subsist over an electronic database.

1. Appeal allowed in part. The respondent had no common law possessory lien over the electronic database and breached the contract by refusing to provide a current copy. The appeal concerning the three-month notice period was dismissed.

2. A common law artificer’s lien is a right to continue an existing lawful possession of goods delivered for work. It is a possessory remedy in rem and may be excluded expressly or by contractual terms inconsistent with its exercise. Possession in this context concerns physical control of tangible objects. Practical control over intangible information does not amount to possession: Tappenden v Artus [1964] 2 QB 185 applied.

3. The common law distinguishes tangible chattels from intangible choses in action and recognises no applicable third category of possessable intangible property. OBG Ltd v Allan [2007] UKHL 21 established that conversion applies to chattels rather than choses in action. Its reasoning prevented the court from extending possessory liens to electronic data. A database’s physical storage alters the medium, but does not make the information itself a physical object. Practical control of access therefore cannot support either conversion or a possessory lien.

4. The statutory protection of databases under the Copyright, Designs and Patents Act 1988 and the Copyright and Rights in Databases Regulations 1997 reflects the distinction between information, its physical medium and the rights arising from it. Treating electronic material as a document for disclosure purposes does not make it capable of possession as a chattel.

5. Even if an extension of the common law had otherwise been open, it was neither necessary nor desirable. A lien over intangible information could create unregistered proprietary preferences, affect creditors and lenders, and produce consequences beyond database management. Commercial parties can regulate access and withholding rights expressly.

6. The contract necessarily implied that, on termination, the respondent would transmit a current copy of the database electronically. There was no sufficient basis for implying a right to withhold it pending payment. Furthermore, the publisher’s unrestricted access during performance was inconsistent with the exclusive, continuing control required for a lien.

7. The reasonable period of contractual notice was a question of fact. The District Judge could take account of the publisher’s managing director’s later statement that three months would be reasonable. His finding was upheld.

Davis and Floyd LJJ agreed with Moore-Bick LJ. Davis LJ emphasised the possible unintended effects upon insolvency, creditors, lenders and other legal fields. Floyd LJ emphasised the established distinction between information, its physical medium and intellectual property rights.

1. Court of Appeal (Civil Division): The publisher’s appeal was allowed on the database-lien issue and dismissed on the reasonable-notice issue: [2014] EWCA Civ 281.
2. Brighton County Court: District Judge Bell gave judgment for the data manager, dismissed the publisher’s counterclaim, held that three months’ notice was reasonable and upheld a lien over the electronic data. No neutral citation is stated.