England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MAYOR'S AND CITY OF LONDON COUNTY COURT
(HIS HONOUR JUDGE SIMPSON)
(LOWER COURT No. 5CL13267)

		Royal Courts of Justice Strand, London, WC2A 2LL
		24th April 2007

Lord Justice Ward:

1. This litigation fills me with despair. It is a claim brought on 12 April 2005 by Mr Peter Tavoulareas, the appellant, against Mr and Mrs Lau, which as amended seeks an order for the delivery up of twelve paintings by an artist named Nicholas Moore and three photographic works by a Mr Antonio. Alternatively, the full payment of £23,556, said to be the value of this artwork.
2. Much of the background is undisputed. The appellant, a wealthy man or, his counsel would say, a once wealthy man, decided to invest in a restaurant in Dean Street, Soho, called the Blues Bistro and Bar. The respondents are the lessors of the premises. In addition to his substantial shareholding in the company DEF Restaurants Limited ("DEF"), he provided some of his personal collection of artwork, including some Picasso ceramics and Murano glasswork, and the artwork in dispute, for all of that to be displayed in the restaurant, adding to the attractiveness of its ambience.
3. By July 2004 the business had failed. On 6 July Howe and Keates (solicitors for the appellant) wrote to Rice-Jones (solicitors for the respondents), stating that they acted "for the majority shareholder" but going on to say that there were items in the premises "which belonged to DEF and must be kept safely and returned to our client". It was therefore an equivocal letter. Rice-Jones replied that they had advised their client that:

"your client's property at the premises"

"should not be removed and indeed that an inventory should be prepared of what is on the premises".

4. The next day the company was wound up and Kingston Smith appointed the liquidators. The parties engaged in some negotiation to enable the business to continue at the premises, but this broke down and on 14 January 2005 the appellant called for the return of his personal property in terms I shall have to set out more fully in due time.
5. Four paintings were returned to his agent, who called by arrangement to collect the artwork, but the agent was not permitted to remove any more. Proceedings were threatened in February and, after the respondent's solicitors had indicated that the respondent had no knowledge of the whereabouts of any property allegedly belonging to the appellant, these proceedings were commenced. A year later in April 2006, the respondents openly offered to return some of the artwork and in time nine of the works were returned to the claimant. Assuming that those items had been wrongfully converted, the claim for damages -- for example, for physical damage suffered whilst wrongfully detained -- is vague in the amount of damages; probably of no great significance. The value of the missing five paintings is pleaded to be some £6,000.
6. The first extraordinary aspect of this bitterly-fought litigation is that the claimant has spent some £60,000 on it to date, the defendants £25,000; £85,000 in all, over a claim worth at most £23,500. Now, litigation must be fun if the parties are prepared to spend that much on a rollercoaster ride to judgment without pausing, either of them, to suggest that mediation would be a more sensible way to resolve their differences.
7. I am sorry to say that the second extraordinary feature of the case is the perfunctory judgment under appeal. By paragraph 8 of that judgment HHJ Simpson, sitting in the Mayor's and City of London County Court, had concluded:

"In my judgment, the defendants have not converted any of the pictures placed with their solicitors for safekeeping as mentioned above. They were justified in retaining them until the liquidator's disclaimer because until that point they could not be satisfied as to ownership. The suggestion that enquiry should have been made earlier was not put to Mr or Mrs Lau in cross examination, neither does the point that they could have interpleaded."

By paragraph 14 he had concluded that:

"In the circumstances I cannot be satisfied that the set of lino cuts and two other paintings were at the premises nine years after it is alleged they were supplied. Accordingly on this part of the case the claimant fails also. If you were wrong about that and it was necessary to consider the question of valuation."

He concluded in paragraph 15 that he preferred the expert evidence attended by the defendants and so he concluded in paragraph 18:

"Accordingly if there had been a conversion I would have assessed damages at £100 in respect of damage to the pictures. There is no pleaded claim and no evidence as to the condition of the pictures reflected anything other than fair wear and tear. There is certainly no clear evidence they have deteriorated while in the possession of the defendants."

8. And so, in the result expressed in paragraph 19, he dismissed the claim with costs on 7 August 2006. The claimant appeals with permission granted by Sir Henry Brooke, who observed that:

"It is puzzling that the judge made no reference to the dealings between the parties prior to the issue of the proceedings."

9. I must now deal with the facts in a little more detail. The story unfolds as follows. On 26 November 2004 the liquidator reporting to creditors for the purposes of the creditors meeting stated that:

"The only known asset is the lease."

One can, I think, fairly assume that he would have the company accounts which would have included fixed assets or plant, et cetera. Where any paintings owned by the company might have found mention, there seems to have been none. Nonetheless, he did add at page 218 of the bundle 1:

"I am currently in the process of reviewing documents in my possession for any further potential assets."

Mr Marland, who appears before us as below for the appellant, comments that this is not laying claim to anything.

10. On 14 January 2005, the appellant's solicitors wrote an important letter saying this (page 236):

"He would, however, like his paintings (his personal property) to be removed from the premises as soon as possible. You will remember that this was agreed last July but because the matter then proceeded the removal was delayed.

"My client informs me that he spoke to Mrs Lau about the matter this Monday. She indicated that she would like to keep them showing temporarily in the case that my client's group did not succeed as they would make the site more visually attractive.

"My client is prepared to allow the paintings to remain for the time being, although at the Lau's risk, as long as this personal property (i.e., the paintings) is returned before 1^st March 2005 as they are due to be shipped back to the States at that time. Would you please confirm that these arrangements are agreed on this basis."

It is an important letter because this agreement and this letter as evidencing it are a key allegation in the claim that was eventually brought. It is noticeable also that there was no denial of that meeting or the arrangements that were referred to in that letter.

11. The only response if it was one is dated 14 February and that said, disingenuously to say the least of it, at page 239:

"My understanding was that any paintings belonging to Peter Tavoulareas had been removed."

12. It is the appellant's case that he came to an arrangement with Mr Lau for his agent, a Mr Kiki Jansen, to collect the artwork on his behalf. Mr Jansen duly attended at the restaurant premises on 26 or 27 January. There is some dispute as to what happened. Jansen's evidence was that Mr Lau insisted he could take only four paintings as chosen by Mr Lau; he, Mr Jansen, was not allowed to take what he wanted to take and he came prepared to take the lot. Mr Lau's evidence is confused and difficult to understand as I think Mr Letman, who appears here as below, has to acknowledge. He said he expected the appellant personally to attend, not an agent, and so he disputed his authority. Yet this did not prevent him handing over four paintings. His explanation for allowing no more to be agreed was his concern that there was not much room in Mr Jansen's van for the remainder of the collection to be taken away safely.
13. The fact is that he refused to permit the removal of the other paintings. When cross-examined about this he said among other things this (page 277, 4.17):

"Mr Marland: But you telephoned him to tell him to come and collect them did you not?

"Che Ching Lau: That was from more of a moral point of view.

"Mr Marland: You maintain that you still did not believe that they were his yet you invited him to come and collect them; that is hardly moral is it Mr Lau?

"Che Ching Lau: I still consider this very moral because I am being in the restaurant business for about 20 years and I know what sort of value the paintings will be because in the restaurant you have all the smoke and steam and all these time ageing factors. The paintings themselves shouldn't be worth much. It was only from this point of view that I ask him to collect it.

Later (page 277, 18.19) there was this exchange in the cross-examination:

"Q: And yet you telephoned Mr Tavoulareas to tell him to come and collect the pictures is that right?

"A: I was still very moral because it was after the liquidation was completely finished and the Liquidator was telling my solicitors that everything is finished, "Now everything left was yours", and that the new tenants were redecorating the premises and they wanted to get rid of everything. It was only from a moral point of view that I said rather than throw them away I could ask Mr Tavoulareas to come and collect it.

"Q: Let us be absolutely clear about this. You say it was your view that at that stage the liquidation had finished and you had been told by your solicitor. Is that what you say?

"A: Yes.

"Q: So you did not fear a claim from the Liquidator at all, did you?

"A: I believe the Liquidator wouldn't be joking.

"Q: Would not be what, sorry?

"A: Wouldn't be joking when he said its finished.

"Q: So, this is in February 2005 and as far as you are concerned the Liquidator has said the liquidation is finished, yes?

"A: Yes, as I said anything legal, including these terms and conditions etc and any other issues related to legal matters I would refer them to my solicitors and I believed the court would be fairly dealing with things relating to these issues. Therefore, according to the law when I was told the liquidation has been completed and everything else is left for myself to deal with, and I believe that as well. Therefore, when the new tenants wanted to get rid of everything then I was responded by telephoning him on the basis of that.

"Q: So you had no fears about the Liquidator's involvement at all, did you?

"A: I trust the British law. The law paper, the court paper coming, I forward the paper to them. I no worry about it."

14. The appellants wrote on 28 February referring to that meeting in these terms (page 241):

"He [that is Mr Tavoulareas] took the opportunity of contacting Mrs Lau again. It is apparent that, if left to her, the current difficulty could be resolved simply and speedily. She has always accepted that the paintings in the restaurant are the property of my client, as they are, and that, having left them for her benefit in the presentation of the property for marketing, they should now be returned. It is correct that a small number were taken out at an earlier stage but many were left pending the disposal of the premises.

"The stumbling block seems very clearly to be the attitude of Mr Lau. He has been aggressive, uncooperative and the cause of the present difficulty. He has prevented my client and his representative from recovering the paintings, the whereabouts of which are not now known to my client. Neither Mr nor Mrs Lau is entitled to deal with the property, other than to return it to Mr Tavoulareas. I am attaching a short schedule of the items left on the premises and their current replacement values, for your information.

"If the property is not made available for collection by close of business hours on Tuesday 1 March 2005 my client will take all necessary steps to recover the property of its value. In addition, if your clients are set on the intentional deprivation of my client of his property then the matter will be reported to the police."

So here was a clear, unequivocal demand for return, to which there was no immediate response. The appellant's solicitors wrote again on 2 March, observing that it was disappointing that the defendants had made no attempt to respond to the letter of 28 February. They added:

"The only assumption that can be drawn is that they do not have any intention of returning our client's property to him but will deprive him of it without any grounds for doing so. We remind you that in your fax of 6 July 2004 you advised your clients not to remove the property and, on a number of occasions, they have promised to return it."

15. When response did come from the respondents, it was in a letter of 3 March in which the solicitors comment (page 247):

"1) Your client has never demonstrated ownership of any property at 42/43 Dean Street.

"2) My clients have no knowledge at all of the present whereabouts of the items referred to on your list or indeed whether or not they were even at the restaurant.

"3) Your client removed four paintings from the premises. There is no inventory.

"4) Your client's company at the date of forfeiture of the Lease was in arrears of rent of £30,614.00 client is entitled to distrain in any event on goods belonging to the company at the premises.

"5) Your client agreed to pay my client's legal costs …

"6) A third party who has now exchanged contracts on the grant of new lease has been in occupation of the property since 25^th January 2005."

16. The appellant's solicitors replied to those points on 9 March (page 250) observing:

"1) These paintings and artwork were purchased by my client from the artist Nick Moore and the majority of them were commissioned directly by him. We can confirm that this is the case by the evidence of Mr Moore. It was in fact the artist who arranged for the paintings to be collected from the premises at the end of January.

"2) The state of your clients' current knowledge is entirely immaterial. They were well aware of their location when Mr Lau physically prevented the removal of the majority of them.

"3) It is correct that Mr Lau allowed four of the paintings to be removed but he then stopped any more being taken. You specifically warned your client to take an inventory but it seems they failed to heed that advice. That is their misfortune. We have very good evidence from a number of witnesses about the number and nature of the paintings.

"4) What the issue of the company has to do with the present difficulty is wholly irrelevant. Our client put a great deal of money into the venture, much of which went to your clients. The reality is that he is a major creditor of the company. Are you really suggesting that your clients have some form of right to take our client's property based on the company's indebtedness? If so, I would like to know what it is. If the paintings had been the property of the company can you really imagine that they would have been there for more than twenty four hours after the liquidator was appointed? He was quite prepared to accept that they were the personal property of our client on the basis of the evidence available.

"5) There was never any agreement of the nature for which you contend …

"6) It matters not at all who is now in occupation of the premises. Your clients had possession of our client's property and were under an obligation to deliver it up. They have not done so and have determined not to do so. You and your secretary both suggested to me that we contact Mrs Lau to make arrangements to collect the property and from this we can only assume you were well aware of our client's entitlement to recover his property."

17. It appears from the evidence of Mr Tim Lau, a son of the respondents as I understand it, that a new tenant did indeed move into the premises and Mr Tim Lau says that he removed all the paintings and photographs on 24 February and stored them at 12, Old Compton Street. On 2 November 2005 he delivered them to the respondent solicitors.
18. In the light of all of this, it is all the more astonishing that the respondents should instruct their solicitor to write again on 11 March 2005, saying boldly:

"My clients have no knowledge of the whereabouts of any property allegedly belonging to your client."

It is in those circumstances no surprise that the appellant's solicitors should write on 12 April (page 254) saying this:

"Since your clients have failed to return my client's property and have denied any knowledge of its current whereabouts we are pursuing the actions that we said we would be taken in the circumstances.

"First, my client has reported the matter to the police …

"Secondly, we have instructed counsel who has prepared the attached draft particulars of claim."

And so the action commenced.

19. It may be appropriate at this stage to see how the case was set out in the Particulars of Claim and in the defence. The Particulars of Claim, later amended to set out a different schedule of the paintings and artwork concerned, pleads that the claimant was the owner of the artwork in that schedule, that the defendants were the Landlord and lessors of the premises, that the paintings were at the premises and then (in paragraph 5) that there was an oral agreement between the claimant and the second defendant evidenced by the letter from the claimant's solicitors to the defendants' solicitors dated 14 January 2005. The claimant agreed to leave the paintings at the premises for a period. Then it is pleaded that there was the demand made on 27^th when the arrangement was for Mr Jansen to collect the paintings. It is pleaded that he was only allowed to remove four and prevented from removing the others, and that there is a refusal to deliver up and consequently a conversion of the property.
20. The defence to that claim was to deny that the paintings or other works of art were kept at the premises at any material time, to deny that the defendants knew that the paintings belonged to the claimant. The agreement was denied. It is asserted that if the defendants were bailees, they owed their duties to DEF Restaurants Limited and not to the claimant. It was admitted that the four paintings were taken. In essence, it was a denial of the claimant's title.
21. After the proceedings had been issued, the defendants' solicitors wrote on 1 November 2005 referring to the Particulars of Claim and asking:

"If we were able to track down the paintings would your client be able to arrange to collect them?"

That offer was rejected and there were issues about costs. There was another attempt made by the defendants on 15 November and this letter does assume importance because the judge regarded it as crucial to his decision. That letter reads as follows (page 359):

"A number of paintings and photographs have been delivered to our offices.

"We have been able to identify Blue Bowl, Red Earth Bowl, three photographic works, Big Blue World and Big Red World as now identified by your amended pleading. These could not be identified previously from the schedule annexed to the original Particulars of Claim.

"We refer to the letter of 26^th November 2004 from the Liquidator of DEF Restaurants Limited. This does not disclaim ownership of the paintings. We would invite you to obtain such a disclaimer subject to which we invite you to arrange collection of the seven works.

"The other works in no way correspond to the description of the works in the amended Particulars of Claim and the other items now set out have never been in our client's possession."

It is true that the response to that letter only came after a reminder and in the letter dated 19 January the appellant's solicitors wrote:

"Your 'offer' does not interest our client."

22. Meanwhile, the case was being prepared for trial. Witness statements were served on behalf of the defendants. In Mr Lau's witness statement he said, among other things (page 276):

"My wife, I believe, then spoke to my solicitor who spoke and said that the pictures and contents of the property could be claimed by the Liquidator. On the face of it, the pictures had been in the restaurant and they would have been the company's property … The Claimant has not shown that the liquidator has disclaimed ownership of the pictures …

"The property at the restaurant as far as I am concerned probably belonged to the company. The company is in liquidation and the proper person to deliver the pictures to should be the liquidator. The Claimant has also not demonstrated that the property is not sought by the Liquidator of the company."

Mrs Lau in her witness statement said that at a meeting with the claimant:

"I said if they were his he would have to prove it because the company was in liquidation and we were already being sued by the Liquidator in two claims …

"I still believed that the contents of the restaurant belonged to the company and could be claimed by the Liquidator …

"I do not want to find that the Liquidator claims anything if pictures are handed to the Claimant."

23. In fact, no step was taken by the respondents to clarify the liquidator's position until 5 January 2006, when their solicitors wrote to the liquidator in these terms:

"Our client forfeited the lease of the premises for non-payment of rent. There were a number of photographs and paintings left at the premises when our clients recovered possession the presumption being that they belong to the company. Peter Tavoulareas has brought proceedings against our clients claiming that certain pictures belong to him. Howe & Keates have produced a letter from your company dated 26^th November 2004, a copy of which we enclose, as proof that they do not belong to the company. It would seem to us that the liquidator does have a claim to the pictures and that you should confirm whether or not you intend to pursue that claim.

"We have invited Howe & Keates to do this but they have not responded. We enclose a copy of our letter to them of 15^th November to which we have not had a reply."

It took the liquidators only 24 days to respond and to inform the respondent's solicitors as follows:

"I will shortly be seeking my release as Liquidator and therefore will not be seeking to retrieve the photographs or paintings left at the premises."

24. One might have thought that the paintings would then have been returned immediately, but they were not. Instead, the parties prepared for a trial fixed for 3 February; it was adjourned. It was re-fixed for 6 April. In his opening submissions for that adjourned hearing, Mr Letman openly invited the claimants to take away all the pictures and photographs in the solicitor's office. The trial had in fact to be adjourned because the claimant's expert evidence was not ready. On 4 April the respondent's solicitors wrote to the appellant's solicitors saying:

"We have thirteen works at our offices which you refuse to take. We have made it clear that our clients do not want them and the liquidator of your client's company has now disclaimed any interest."

25. The appellant's response in that letter of 6 April was to explain that the appellant had refused because he thought the offer was linked to terms the respondents had sought to impose in without prejudice correspondence. On 20 April the respondents made their position quite clear, that it was an open offer not subject to any agreement about costs. That was accepted by return, although collection did not in fact take place until June of 2006. That was the position when the case came on for trial in July 2006. Evidence was led over two days. Mr Lau was saying, in addition to the passages I have already quoted:

"I have no knowledge about who these paintings belong to."

And 277.14:

"I was telling Mr Tavoulareas that before the court has given instructions regarding the owner of these properties, nothing you should be touching."

In re-examination he said that 277.42:

"The solicitor, Liquidator and myself were having a meeting saying that before the Liquidator has made a judgment everything shouldn't be touched. That is the way I read it."

Mrs Lau's reason for not returning the paintings was:

"Because at the time none of us was sure about the owner of the paintings".

26. It is plain that this was not the pleaded defence which, to remind ourselves of it, was a denial that the paintings and other works of art were kept at the premises at any material time. In the light of the way the defence was presented, Mr Marland called for an amended defence to be filed. An amended draft was proffered on the last day when closing submissions were made, and this has not been verified as true by Mr Lau, but be that as it may it asserts that the defendants continued to deny that the six missing paintings were on the premises when the defendants entered. The defendants' case is now pleaded in these terms in paragraph 8 at page 53 of bundle 1:

"It is the Defendants' case that they were justified in refusing to deliver up those pictures kept at the premises after peaceful re-entry because they did not know that the paintings belonged to the Claimant rather than the former lessee of the premises, DEF Restaurants Limited (DEF) and reasonably required to be satisfied in this respect by a disclaimer from the appointed liquidator of DEF. For the avoidance of doubt the Defendants denied that they were refusing to deliver up the missing paintings (because they did not have them)."

27. In his closing written submissions Mr Marland pointed out not only that Mr Lau gave evidence that he thought that by January 2005 the liquidation was finished, but also, as he put it, and I quote from his written submissions:

"What this defence overlooks is that the defendant as tortfeasor is on enquiry. It is not for the claimant to establish that no other party has a competing claim, it is for the defendant to satisfy itself that there is no competing claim - the onus is firmly on the party withholding chattels from someone else claiming ownership. At most what may be said is that the defendant withholding property from a party asserting ownership and demanding return is allowed a reasonable, but limited, time to establish ownership (see eg Perry v British Railways at 1381, Clerk and Lindsell, 17-26)".

He also pointed out there was nothing to prevent the defendants joining the liquidator or interpleading.

28. I turn back to the judgment. I have already said that the judge regarded the letter from the defendants' solicitors of 15 November to be crucial. He recited it in full in paragraph 2 of his judgment. In paragraph 3 he commented on the appellant's rejection of the offer and then he said in paragraph 4:

"In my judgment the letter from the defendants' solicitors was entirely reasonable. Mr and Mrs Lau were justified in retaining the paintings at that point and there was no conversion. They needed to be satisfied as to ownership. The subjective state of Mr Lau's mind as to whether the liquidation had been completed is not determinative of the matter. On the other hand, the attitude of Mr Tavoulareas, is inexplicable. Subject to disclaimer, he had the offer to collect the goods which was the object of the litigation. He rejected it out of hand."

He noted in paragraph 5 that the liquidator had disclaimed any interest on 30 January, and in paragraphs 5, 6 and 7 he set out the exchange of correspondence on 4, 6 and 20 April, but that was it. His conclusion followed in paragraph 8, as I have already set out.

29. I readily acknowledge the merit of short and concise judgments, and I confess this one of mine is already too long, because I felt it necessary, if I am to criticise the judge, that the full facts should be set out. I very much regret to say that I am critical of this judgment, which I note is a reserved judgment, even if I make due and proper allowance for the initial lack of a defence which properly put the defendants' case and for the difficulties in following the evidence of the defendants given through the interpreter.
30. These are my essential criticisms of the judgment. First, there is a complete failure to identify the issues in the case. There is no analysis of the claim which asserts that the defendants became bailees of the property, that they refused collection in January and that they continue to refuse to deliver up the paintings. The plaintiff's claim is for acts of conversion which were by that stage complete and therefore the judge entirely misses the point when he says, in paragraph 4 of his judgment, that the Lau's were justified in retaining the paintings at that point, ie November 2005. He fails to address whether they were justified in withholding the paintings from the claimant at times earlier than that.
31. There is secondly no finding at all about the arrangements that were made in January between the parties for the paintings to be collected. That was a crucial part of the claimant's case. There is no finding about what happened when Mr Jansen came to collect the paintings and that is a vital part of the case. How, I ask rhetorically, could an agreement for collection of the paintings be consistent with a claim of right to detain at that time because of some interest that might have been shown by the liquidator? Why, if the claim by the liquidator was a bona fide reason for not returning the paintings, were four of them returned; why not the others?
32. Thirdly, the judge makes no comment at all about what appeared to me to be the thoroughly disingenuous, Mr Marland would say dishonest, denials in the correspondence in March of any knowledge of the whereabouts of any of the paintings. That is an utterly absurd statement given that the paintings were at that time, according to the evidence of Tim Lau, in the actual possession of the defendants in their property at Old Compton Street. There were paintings that they knew Mr Jansen had not been able to collect. So that is an extraordinary averment by the defendants and one to which the judge pays no attention at all.
33. So he founds his case on a justification pleaded belatedly in the amended defence, though heralded imprecisely in the witness statement, and not always clearly supported, for example, in the evidence of Mr Lau. The judge does not address that discrepancy at all, but taking it at its face value the next crucial question for the judge to have considered was the point urged upon him by Mr Marland, namely that it was for the defendants to ascertain the position of the liquidator, not for the claimants to obtain a disclaimer from the liquidator.
34. Mr Marland referred the judge to Clerk & Lindsell on Torts. The 19^th edition has been placed before us and paragraph 17-26 reads as follows:

"Delay in complying with demand. A bailee or person in possession of the goods of another must normally deliver them up forthwith on demand. Thus it has been held to be no defence to an action for conversion based on a demand and refusal that the defendant in possession of goods fears unpleasant consequences, such as industrial action, if he returns them."

The footnote is a reference to Howard E. Perry & Co Ltd v British Railways Board [1980] 1 WLR 1375, where there was threat of a strike by the carrier's employees which was relied upon as a reason for not returning the goods there. The text continues:

"Indeed, delay in complying with the demand will not only render the defendant liable in conversion, but will normally make him an insurer of the goods in respect of all subsequent damage on the basis that he is thereafter in breach of bailment."

Later the text goes on:

"However, in the event of doubt as to the claimant's entitlement the defendant is entitled to a reasonable time to make enquiries. In Pillott v Wilkinson [[1864] 3 H&C 345] the owner of warehoused wine demanded it, but was told (correctly) that a purported notice of attachment had been served, and that therefore there was a difficulty. The warehouseman asked for time to consider, but the plaintiff issued proceedings forthwith on which he obtained a verdict. Although the Exchequer Chamber refused to order a new trial, it was made clear that it was a question of fact whether the defendant had a bona fide doubt as to the plaintiff's right of possession and whether a reasonable time had elapsed for clearing up such a doubt. Similarly, where a person is in possession of property of questionable ownership it is submitted that he is entitled to a reasonable opportunity to take advice and, if necessary, interplead: and again, it has been held that police in possession of such property are allowed a reasonable time to take proceedings under the Police (Property) Act 1997. But once the reasonable time has elapsed, the defendant must hand over the goods. If he does not do so he will be liable in conversion, and in addition the goods will be entirely at his risk hereafter."

35. The authorities in support of that are old, but nonetheless authoritative. In Vaughan v Watt 6 M&W 492, Baron Parke said this:

"The learned Judge was incorrect in telling the jury that the mere refusal to deliver the goods to the real owner was a conversion. It was a question for the jury, whether the defendant meant to apply them to his own use, or assert the title of third party to them, or whether he only meant to keep them in order to ascertain the title to them, and clear up the doubts he then entertained on the subject, and whether a reasonable time for doing so had elapsed, without which it would not be a conversion."

That dictum was applied in Pillott v Wilkinson where Williams J added:

"It was a question for the jury not only whether the defendant entertained a bona fide doubt as to the plaintiff's title to the goods, but also whether a reasonable time had elapsed for clearing up that doubt, and if the jury were satisfied that there was unreasonable delay on the part of the defendant, they would be warranted in finding a conversion."

36. A case of more modern vintage is Howard E Perry Ltd, a judgment of the Vice Chancellor, Sir Robert Meggary. It does not add to the law I have cited but is clearly consistent with it. He said at page 1381, in the passage referred to by Mr Marland:

"There is no brief withholding made merely in order that the defendants may verify the plaintiffs' title to the steel, or for some other purpose to confirm that the delivery of the steel would be proper. This is a withholding despite the plain right of the plaintiffs to the ownership in possession of the steel, on the ground that the defendants fear unpleasant consequences if they do not deny the plaintiffs what they are entitled to."

37. That law ought to have been considered and applied by the judge. He ought to have directed himself to enquire whether the withholding by Mr and Mrs Lau was bona fide and whether or not a reasonable time had elapsed for them to make enquiries of the liquidator as to any claim he may have had to the goods. The point was made that they could interplead and they did not.
38. In my judgment, those defects in the judge's approach render this judgment utterly unsafe and in my view the appeal must be allowed. The question is what should we do about it and whether we should remit the matter back for hearing. In my judgment, there is no point in doing so. Leaving aside an issue of whether or not a lack of bona fides could be established on the part of the defendants, the separate question is whether or not a reasonable time had elapsed for them to make enquiries of the liquidator after they became aware of the demands of the claimant.
39. They were aware of the demands of the claimant from at least the July of 2004, or certainly by January when the critical letter was written. They took absolutely no steps whatever to enquire of the liquidator until a year later in January 2006. It took barely three weeks for him to reply. There is no reason to believe that he would not have dispelled their anxieties immediately had they enquired of him in good time. They did not do so; they allowed an unreasonable time to elapse; they wrongly relied upon a claim the liquidator was not making; they did so at their risk, and in my judgment it is plain as can be and every judge would have to find on those facts that they had converted the claimant's property. And the claimant is therefore, in my judgment, entitled to his declaration that the defendants have converted at least the paintings which were eventually returned and I would for my part enter judgment with damages for that conversion to be assessed.
40. Then the question arises what are we to do about the judge's findings that he was not satisfied that the claimant had proved his case that he had other paintings in the property and that those other paintings came into the possession of the defendants. Mr Letman argues with appropriate force that this was a matter of fact for the judge and that this court should not lightly interfere. I accept the force of that proposition. Likewise, Mr Letman argues with equal vigour that when the judge preferred the evidence of the defendants' experts this court should be, again, loathe to interfere. And again I acknowledge the force of those submissions. But in this case I regret to say that the judge's manifest failure to get to grips with the issues, his total failure to analyse the law and to give reasons for his decision leave me to conclude that his failings have so seriously infected the whole of his judgment that I, for my part, cannot rely upon those additional findings.
41. In my judgment, his inadequate reasoning compels the conclusion that the appeal must be allowed in that respect also, but that in this case it is impossible for us to make any findings as to whether or not that part of the claim is satisfied. Regrettably, the remainder of this claim must be remitted back to the County Court for further consideration when the issue of damages, if any, can also be considered.
42. In the result I would allow the appeal and enter judgment for the claimant for damages for conversion to be assessed and for the remaining matters to be remitted to the County Court for further decision and I hope counsel will draft the appropriate order.
43. But I end as I began. This is extraordinary litigation and it will be even more extraordinary if it continues any longer than this court. What is now in issue is a question of damage to the paintings that have been recovered, allegedly because they have been splattered with white paint or possibly damaged. Although Mr Marland boldly submitted that that claim might be measured in an amount up to £1,000, I would have thought he is optimistic and, indeed, at one point he seemed inclined to accept that that part of the claim would be abandoned. I do not hold him to the concession, but I remind him of it and observe that it makes eminently good sense to me.
44. What the remainder of the claim is worth I do not know, but since it is perfectly obvious that paintings are in the possession or were in the possession of the defendants' solicitors, I would have thought that there are very easy ways through mediation and a bit of common sense to resolve this matter and hopefully to resolve it quickly and without a further extraordinary waste of money.
45. To that extent the appeal is allowed.

Lord Justice Scott Baker:

46. I agree that this appeal should be allowed for the reasons given by my Lord, Lord Justice Ward. Had the judge conducted an appropriate analysis of the correspondence and history of events before the commencement of proceedings, it seems to me that he could not have come to any conclusion other than that the defendants were guilty of conversion. I further agree with the order proposed by my Lord.

Lord Justice Wilson:

47. I agree with both judgments. The most substantial part of the claimant's claim for conversion issued on 12 April 2005 related to the pictures, including photographs, which were ultimately to be restored to him in June 2006, pursuant to offers to return made conditionally in November 2005 and unconditionally in April 2006. The judge held that in and after January 2005 such pictures had not been converted by the defendants because the latter reasonably required to be satisfied that they were owned by the claimant rather than by the company, and thus by its liquidator. Such was a defence raised by amendment of the defence made in the course of Mr Letman's final submissions to the judge on 20 July 2006.
48. Prior to its amendment the pleaded defence had proceeded on entirely different lines, namely that the defendants had no knowledge of the whereabouts of the pictures. Such a contention reflected the two letters written on their behalf by their solicitors in March 2005. That contention had been wholly untrue. As they knew, the pictures were stored by them or on their behalf at 12 Old Compton Street from 24 February 2005 until delivery of them to their solicitors on 2 November 2005.
49. In upholding the belatedly-raised defence the judge made no reference to the dishonesty inherent in the stance of the defendants during the preceding 16 months. Nor did he explain why in such circumstances he felt able to conclude that the defendants escaped liability for conversion by reference to the need to make enquiries about the claimant's title. As my Lord, Lord Justice Ward, has pointed out, Mr Marland had referred the judge to the passage in Clerk & Lindsell on Torts, 19^th Edition, paragraph 17-26, which indicates that, if a defendant has bona fide doubt about a claimant's title to goods, he has a reasonable time in which to satisfy himself of it. Ten months elapsed between January 2005 and November 2005. There is no evidence that during that time the defendants were in any way seeking to satisfy themselves of the claimant's title to the pictures. On the contrary, they were pretending that they were unaware of their whereabouts.
50. In those circumstances, as well as those of the defendants' delivery of four pictures to Mr Jansen on behalf of the claimant in January 2005 (being an event also wholly inconsistent with bona fide doubts on their part about the claimant's title), the belated defence which the judge upheld, and by primary reference to which he dismissed the claim and ordered the claimant to pay the defendants'costs of the action, was demonstrably spurious.


Order: Application refused. Appeal allowed.