England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BRISTOL MERCANTILE COURT
His Honour Judge Havelock-Allan QC
2BS41149

		Royal Courts of Justice Strand, London, WC2A 2LL
		4th July 2014

Lord Justice Moses:

1. This appeal should have been concerned with whether a court is entitled to require the Environment Agency to return copies of documents and digital material in circumstances where those documents do not comprise or constitute records within the meaning of s.108 of the Environment Act 1990. The appeal has, mistakenly, been confined to the question whether the tort of conversion may be extended to copies of documents or intangible goods. It is now too late to focus on the logically prior question concerning the return of material obtained by an unlawful exercise of statutory powers.
2. The facts and procedural history of this matter, fully recorded by His Honour Judge Havelock-Allen QC, from whose judgment the Environment Agency appeals, will explain why the appeal has become so limited.
3. In his judgment dated 2 October 2013, based on the assumption that the material was copied outwith the powers of the Environment Agency, the judge ruled that in an action for conversion he had jurisdiction to order the delivery up of all copies of such material. Accordingly, pending determination as to whether the material was, in fact, copied in excess of the Agency's powers, the material would not be released to the Agency's investigators and instead would remain quarantined.
4. During the course of a criminal investigation arising out of the removal of hazardous waste from various locations, on 25 September 2012 the Environment Agency purported to exercise the powers conferred by s.108 of the Environment Act 1995 at Churngold's premises in Avonmouth and Hallen. Warrants had previously been issued by the Bristol Magistrates Court pursuant to Schedule 18 of the 1995 Act and there has been no legal challenge to those warrants.
5. The volume of documentation that the Environment Agency's officers thought it needed to inspect for the purpose of the investigation was substantial. Electronically held information was copied on site by electronic transfer to storage media owned or controlled by the Environment Agency and in excess of 700,000 paper documents were temporarily removed from the premises for electronic scanning. The powers to investigate, inspect and copy are contained in s.108 of the Environment Act 1995. For the purposes of performing its functions as an enforcing authority (defined in s.108(15)) a person suitable to the authority may be authorised in writing to exercise any of the powers specified in s.108(4) (s.108(1)). Those powers include the power to enter at any reasonable time premises which the person has reason to believe it is necessary to enter (4(a)) and to make such examination and investigation as may in any circumstances be necessary (4(c)). By s.108(4)(k) the person authorised by the Agency is empowered:-

"(k) to require the production of, or where the information is recorded in computerised, the furnishing of extracts from, any records –

(i) which are required to be kept under the pollution control enactments for the enforcing authority under whose authorisation he acts, or

(ii) which it is necessary for him to see for the purposes of an examination or investigation under (c) above,

(iii) and to inspect and take copies of, or of any entry in, records;"

6. Churngold issued Particulars of Claim on 26 November 2012 asking for delivery up of original documents and copies. There can be, and was, no dispute but that the claim was for conversion. In the brief details of claim it is stated that Churngold was seeking an order for delivery up of goods "pursuant to s.4 of the Torts (Interference with Goods) Act 1977". There was a claim for wrongful breach of the Computer Misuse Act 1990 which has not been pursued. By paragraph 8 of the Particulars of Claim:-

"By reason of the aforesaid unlawful seizure and failure to deliver up all documents and copies of the claimant's material the defendant has converted the same and the claimant has thereby suffered loss and damage."

7. Following the issue of proceedings in November 2012, Churngold made an immediate interlocutory application for the return of all materials arising from what it said was the Environment Agency's unlawful seizure. Rather than contest this application Churngold and the Environment Agency entered into a compromise agreement recorded by consent in an order of the court dated 5 December 2012. By consent, Churngold was to be provided with copies of all of that which the Environment Agency had had scanned, as well as digital copies of computer material that had been copied on-site by electronic transfer, subject to particular arrangements where legal professional privilege was in dispute.
8. The digital or electronic copies were to be quarantined until further agreement by the parties or further order (paragraphs 2 and 3). Churngold was to notify the Environment Agency in writing of any material as to which it claimed to be entitled to withhold production (paragraph 4). Where any claim by the respondent to withhold production was on the grounds of legal professional privilege it was only to be made on legal advice specifying the type of privilege asserted (paragraph 4). Where Churngold did not claim to be entitled to withhold production under paragraph 4, the parties were jointly to instruct those holding the quarantined material to release it to the Environment Agency. Where Churngold claimed to be entitled to withhold production in relation to legal professional privilege, the appellant was to instruct an independent lawyer to inspect the material and in the event that the parties were unable to agree the validity of Churngold's claim, the matter was to be referred to a high court judge for resolution (paragraph 6).
9. Subsequently, by letter dated 19 February 2013, Churngold's solicitors stated that the basis for its claims for materials to be withheld were not limited to legal professional privilege and argued that, under paragraph 4 of the consent order, it was entitled to claim and did claim that the material was not "a record" for the purposes of s.108(4)(k) of the 1995 Act.
10. This assertion resulted in two applications heard by His Honour Judge Havelock-Allen QC. First, the Environment Agency sought an order that Churngold was not entitled to withhold production of material obtained from certain premises or copies of such material on the basis that it is not a record and, second, a declaration that even if the material is not a record within the meaning of s.108(4)(k) that the Agency is not thereby precluded from examining or inspecting that material. Churngold issued a counter-application requiring an independent reviewer to examine copy documents to see whether there are copies of any records and for consequential directions, dependent upon the outcome of that filtering exercise.
11. By the time of the hearing the originals of all documentary material had been returned to Churngold. Legal professional privilege issues had substantially been resolved and no decision was sought from the court. The Environment Agency was not prepared to wait for a document by document, e-mail by e-mail analysis and ruling as to whether any particular document was a record. It did not accept that any such ruling would determine the question of access to copies. In those circumstances, the Environment Agency, for the purposes of the hearing of the applications, accepted that the originals were not records for the purposes of the 1995 Act. Accordingly, the only subject-matter of the hearing was the copies of the original documents. The judge was asked to determine whether or not the Environment Agency was entitled to keep those copies and use them for the purposes of their ongoing criminal investigation. The judge held that, on the assumption that the Environment Agency had unlawfully taken the original documents, it was not entitled to retain copies and the court had power to order delivery up of those copies. It is that conclusion which is the subject matter of this appeal.
12. The essence of the tort of conversion was summarised by Lord Nicholls in Kuwait Airways Corporation v Iraqi Airways Co (Nos. 4 and 5) [2002] 2 AC 883 [2002] UKHL 19:-

"In general, the basic features of the tort are threefold. First, the defendant's conduct was inconsistent with the rights of the owner (or other person entitled to possession). Second, the conduct was deliberate, not accidental. Third, the conduct was so extensive an encroachment on the rights of the owner as to exclude him from use and possession of the goods."

The copies the Environment Agency made belonged to the Environment Agency. It was the owner of those copies and, accordingly, there can be no question of any conduct by the Environment Agency inconsistent with the rights of the owner of those copies, still less any encroachment on those rights.

13. The judge took the contrary view. He said:-

"67. If copies are taken of documents which have been unlawfully seized, the Court has power to order delivery up of the originals and, in my judgment the copies as well. There is at least a strong argument that the Court has power to order delivery up of the copies.

68. An order for delivery up of the copies as well as the originals would involve a conclusion that in the events that have occurred, the copies had not become the property of the party who unlawfully seized the originals. If they had, then as Mr Westwood rightly says, the ownership of the copies would be an absolute defence to the claim in conversion. In my judgment, it is at least arguable that the Environment Agency does not have property in the copies that it has taken…"

14. This was an interim application which explains the language the judge used. But, nevertheless, in my view it was not arguable that the goods with which it was alleged the Environment Agency wrongly interfered, namely the copies, were goods belonging to Churngold. Churngold had not acquired any proprietary rights in those copies.
15. The next problem, from the point of view of Churngold, arises in connection with the electronically stored information. This, as opposed to the media upon which it is stored, is intangible. It is, accordingly, not a chattel and therefore outwith the scope of the Torts (Interference with Goods) Act 1977. Section 14(1) does not contain any definition of goods but provides that:-

"Unless the context otherwise requires:-

'Goods' includes all chattels personal other than things in action and money."

16. Electronic data was retained by the Environment Agency through the off-site electronic scanning of some 700,000 paper documents and the on-site electronic transfer to storage media (owned by the Environment Agency) of electronically held information. The question whether intangible property is capable of being wrongfully interfered with so as to constitute the tort of conversion has been put beyond doubt, since the decision of HHJ Havelock-Allen QC, at least so far as a court at this level is concerned. In Your Response Limited v Data Team Business Media Limited [2014] EWCA Civ 281 this court considered whether it was possible to exercise a lien over a database pending payment of outstanding fees. The Court of Appeal founded itself upon the decision of the House of Lords in OBG v Allan [2007] UKHL 21 [2008] 1 AC 1. The House of Lords held that there could be no wrongful interference with contractual rights so as to constitute the tort of conversion because that tort applies only to chattels and not to choses in action. In Your Response Limited Moore-Bick LJ cited OBG v Allan as clear authority for the proposition that the essence of conversion is a wrongful interference with the possession of tangible property and that the common law draws a sharp distinction between tangible and intangible property (paragraph 15). The Court of Appeal acknowledged that there was a powerful case to be made for recognising that the essential elements of possession could be exercised over digitised material and that the dichotomy between choses in possession and choses in action and the recognition of a third category of intangible property susceptible to possession should be reconsidered (paragraph 27). But, bound as the Court of Appeal was by OBG, Moore-Bick LJ took the view that the database could not be regarded as a form of intangible property to be distinguished from choses in action and capable of being possessed and wrongly interfered with (paragraph 25).
17. In those circumstances, the Court of Appeal took the view that the data manager was not entitled to exercise a common law lien over the database (paragraph 33). Floyd LJ, in agreeing with Moore-Bick LJ, drew attention to the sharp distinction between information itself, the physical medium on which the information is recorded, and the rights to which the information gives rise (paragraph 42). "Information, even if it is confidential, cannot properly be regarded as a form of property" (per Lord Walker in OBG Limited v Allan at paragraph 275). Floyd LJ remarked that if the database could be possessed and could be the subject of a lien, "one would be coming close to treating information as property" (paragraph 42 in Your Response).
18. This court was fortunate to hear a summary of his submissions by Professor McMeel arguing for the proposition to the contrary: a distinction could and should be drawn between the information which belonged to Churngold and the electronic media on which it was retained. But in the light of the authorities of OBG and Your Response Limited there is, in my view, nothing this court can or should do by way of reconsideration in the light of modern technology.
19. In those circumstances, I conclude that His Honour Judge Havelock-Allan QC was not entitled to take the view that it was strongly arguable that the copies, including the electronic data, could be the subject matter of the tort of conversion: he was not entitled to order their delivery up to Churngold.
20. That is a limited conclusion. As I sought to emphasise at the outset of this judgment, the important and interesting question is as to what remedies are available to Churngold in circumstances where the Environment Agency has acted in excess of those powers conferred by s.108 of the Environment Act 1995. There were rival written arguments as to whether the courts would be powerless to do anything in relation to the taking and use of copies obtained by the exercise of powers which exceeded those conferred by statute. But in my view it is not open to the court to deal with those arguments in the context of a claim restricted to one of conversion. In this case, the proper course would have been for there to be a dispute at the outset as to whether the documents which the Environment Agency had obtained were records, rather than as to the remedy available were they not. I have considerable sympathy with the Environment Agency whose investigation becomes balked by possibly spurious arguments as to the nature of the documents inspected and copied. But, equally, a court should be careful not to appear to sanction the exercise of powers which have not been conferred by statute. But these are questions that must be considered in other proceedings and not in those confined to questions arising in relation to the tort of conversion. For those reasons, I would, on this limited basis, allow the appeal.

Lady Justice Gloster:

21. I agree.

Lord Justice Vos:

22. I also agree.