Conversion of Goods

To constitute a conversion there must be a wrongful taking, or using, or destroying of the goods. Or an exercise of dominion over them inconsistent with the title of the owner. An act of conversion may be committed:

When the property is wrongfully taken.
When it is wrongfully parted with.
When it is wrongfully sold in market overt although not delivered.
When it is wrongfully retained.
When it is wrongfully destroyed.

Conversion by taking

Anyone who without authority takes possession of another man's goods with the intention of asserting some right or dominion over them is prima facie guilty of conversion. But a person who seeks to acquire some property in a chattel not being aware of the title of the true owner is not guilty of a conversion by the mere fact of taking possession. A mere taking unaccompanied by an intention to exercise permanent or temporary dominion may be a trespass, but is no conversion. The taking need not be with the intention of acquiring a full ownership. It is enough if any interest is claimed inconsistent with the right of the person truly entitled. Any asportation of a chattel for the use of the defendant or a third party amounts to a conversion. The taking may be constructive merely, as by a transfer on the books of a warehouseman or an indorsement of a document of title. But a man does not convert goods simply by making a contract for their purchase; the conversion takes place on the acceptance of delivery of the goods or of the document which represents them. Actually dealing with another's goods as owner for however short a time, and however limited a purpose, is conversion. It makes no difference that such acts were done under a mistaken but honest supposition of being lawfully entitled, or with the intention of benefiting the true owner. If a person acts as agent for another who subsequently, although without a knowledge that the sale was illegal, adopts it, the latter will also be liable.

The plaintiff had embarked in the defendant's ferry-boat, two horses, and had paid for their passage. Subsequently, the latter without justification refused to carry out his contract and desired the plaintiff to remove the horses from the boat, which the plaintiff refused to do. The defendant then took them from the plaintiff and turned them loose on the landing place. It was held that the simple removal of the horses by the defendant for a purpose wholly unconnected with any the least denial of the right of the plaintiff to the possession and enjoyment of them, was no conversion. If a man takes the property of another without his consent by abuse of the process of the law, he is guilty of conversion. Taking the property of another by assignment from one who had no authority to dispose of it, and refusing to deliver it up to the principal after notice and demand by him, none other than the person in whose name it is warehoused being able to take it out, is a conversion.

Indian case: Where a pledgee, having power to sell for default, takes over, as if upon a sale to himself, the property pledged, without the authority of the pledgor, but crediting its value in account with him, he is liable for conversion.

Conversion by parting with goods

A plaintiff who sues for conversion and relies on the fact that the defendant unlawfully parted with the possession of his goods gives the go-bye to the question whether that possession was originally acquired wrongfully or innocently; for the moment he is content to treat it as lawful. The defendant, on this assumption, cannot be guilty of any wrong by merely giving a temporary custody to some servant or agent, since by so doing he does not alter his position. The wrongful act is done when he purports to give to some stranger, along with the mere possession, some right over the property itself, whether as owner or dominus pro tempore. The taking and the giving are, in fact, whether actual or constructive, the different sides of one unlawful transaction, and the transferor and the transferee may be considered as joint wrong-doers.

It is a conversion if a man hands over goods to another so as to give him a lien or special property. Misdelivery by a carrier or warehouseman will amount to a conversion.

The hirer of a piano, who sends it to an auctioneer to be sold, is guilty of a conversion; and so is the auctioneer who refuses to deliver it up, unless the expense incurred be first paid. The plaintiffs in consequence of a telegram from their agent, consigned certain barley to the defendant, and sent him a delivery order on production of which he was entitled to receive the barley from the carriers. The defendant had, in fact, ordered no barley. The agent called on him the next day and said that it was a mistake. The defendant thereupon by way of setting matters right, and believing that he was in effect returning the barley to the plaintiffs, endorsed over the delivery order to the agent, who thereby obtained the barley and absconded with the proceeds. It was held that the defendant was liable for a conversion, since he had in effect parted with the plaintiff's property to a person who had no right to receive it. Wrongful sale of goods is a conversion. If a man who is entrusted with the goods of another puts them into the hands of a third person, contrary to orders, it is a conversion; so if the pawnee of goods with the power of sale, sells them before the day stipulated for the exercise of the power of sale, has arrived. If a vendor, who has sold goods on credit, resells the goods before the day of payment has arrived, he is guilty of conversion, and so, he is, though the purchaser makes default in payment, unless he has given the purchaser due notice of his intention to sell. If the holder of a bill for a specific purpose gets money on it by discount without authority, this is a conversion of the whole, though he may have received only part of the money due on it; and the whole amount may be given as damages. But if A is entrusted with a bill to get it discounted, and afterwards misapplies the proceeds he is not liable for conversion. A, the owner of a personal chattel, sold a half share to B on a special agreement that A should retain possession until the chattel was sold. A handed it to B to take it to an auction room, and B pledged it to defendants to secure a debt. Held, that A had special property in it sufficient to maintain an action. N pledged with the plaintiffs as security for an advance eighteen hogsheads of tobacco which were in the custody of the defendants as warehousemen. He subsequently repaid the advance on one of the hogsheads, and presented to the plaintiffs for their signature a delivery order on the defendants. On the order the place for the quantity was left blank. The plaintiffs signed the order, and N, having filled in the blank space with the words “eighteen hogsheads,” obtained delivery of them all from the defendants, and then disposed of them. In an action against the defendants for the conversion of the seventeen hogsheads, it was held that the plaintiffs could not succeed, since they had impliedly given N authority to fill up the blank in the delivery order, and were estopped from shewing that that authority was limited. In the second action it appeared that N had pledged with the plaintiff two separate consignments of tobacco. He paid off the advance on one consignment, and presented to the plaintiffs a properly drawn delivery order in respect of it. They signed it, and N subsequently added above their signature the description and distinguishing marks of the other consignment, and thus obtained from the defendants delivery of both consignments. Held, that an action for conversion would lie against the defendants, since the plaintiffs had not been guilty of any negligence which was the proximate cause of the wrongful delivery. In the third action it appeared that X, after fraudulently obtaining the tobacco as above stated, had pledged it with the defendant bank as security for an advance, and before the fraud was discovered had repaid the advance and recovered possession of the tobacco. Held, that no action for conversion would lie against the defendant bank, since N's dealing with it had been concluded before the plaintiffs discovered the fraud. If a person aids and assists in the sale of goods under a fraudulent and void warrant of attorney, he may render himself liable for conversion.

Indian case: K received into his godown certain goods belonging to the plaintiff and in charge of his servant concerning which there was a dispute between the plaintiff's agent and B, of which circumstances K was aware; and he advanced money to B on the security of such goods, which were subsequently delivered to B and sold by him with the knowledge of K; and, notwithstanding the plaintiff's servant objected to it, delivered them to the purchaser. Held, that K was liable for damages at the instance of the plaintiff in an action for conversion of the goods.

Conversion by sale in market overt

Unless it be in market overt, there can be no conversion by a mere bargain and sale without a transfer of possession; such an act is void and does not change the property or the possession; but in market overt the property is passed to the purchaser by the sale, which is therefore equivalent to physical destruction, and the vendor is liable in trover to the true owner though the goods be never delivered to the purchaser in pursuance of such sale.

A employed auctioneers to sell her furniture by auction at her house; she had previously granted a bill of sale to B, of which the auctioneers had no notice. The auctioneers sold the furniture and delivered it to the purchaser. Held, that they were liable for conversion.

Conversion by keeping

The ordinary way of showing a conversion by unlawful retaining of property is to prove that the defendant having it in his possession refused to give it up on demand made by the party entitled. It is necessary that at the time of the demand made the defendant should be so far in a position to return the property, that he has it in his custody or under his control. The demand as well as the refusal should be unconditional in their terms.

Demand and refusal

Whenever the goods of one man have lawfully come into the hands of another, the owner, or person entitled to the possession of them, should go himself, or send some one with a proper authority, to demand and receive them; and, if the holder of the goods then refuses to deliver them up, or to permit them to be removed, there will be evidence of a conversion. A demand and refusal do not in themselves constitute the conversion. They are evidence of a conversion at some previous period. A refusal must be proved, it need not be express. It is no conversion, if the goods are not in the possession, and under the control of the defendant, at the time of the refusal. A refusal by a servant to deliver up goods he has received from his master, without order or authority from the latter, is a qualified, reasonable and justifiable refusal. But a refusal by a general agent is not evidence of a conversion by the principal, without proof of the authority for the particular refusal. If when goods are demanded, the person in possession of them refuses to deliver them except upon a condition which he has no right to impose, such as giving a receipt in writing for the goods, that is tantamount to an absolute refusal, and he is guilty of a conversion. If the person in possession of the goods says, when the goods are demanded of him, that he shall do nothing but what the law requires, and does not produce or tender the goods, this is evidence of a conversion of them. But, though, he at first refuses, if he afterwards, and before a writ is issued against him, goes to the plaintiff and offers to deliver them up to him, the effect of the previous refusal is done away with, and there is then no evidence of a conversion.

A chimney sweeper found a very valuable jewel and he took it to a jeweller's to ascertain its value. The jeweller taking advantage of the boy's simplicity, told him it was worthless and offered him three half-pence for it, which the lad declined and demanded the jewel back. The jeweller refused to do so; whereupon the boy successfully sued him for it. In this case the jewel was considered to be of the highest value. Certain cattle of the plaintiff, wrongfully taken in execution, had been left in a stable of an inn. The plaintiff demanded them several times of the wife of the inn-keeper, who refused to hand them over on the ground that she had received no indemnity. Held, that this was good evidence of possession and conversion by the wife. The defendant had the charge of a warehouse for his employers and kept the key. The plaintiff demanded certain of his goods which were deposited there, and not obtaining them, at once commenced an action. It was held that the defendant had not refused in such a manner as to afford reasonable evidence of a conversion. The defendant having been entrusted with the plaintiff's gun damaged it. The plaintiff sent him a written notice to return the gun in the same good plight and condition as he had received it. It was held that a failure on the part of the defendant to comply with the demand could not only by itself be sufficient evidence of a conversion. Where a warehouseman refused to give up goods without an order, and being thereupon invited to consult with his principal, and warned that it was intended to bring an action against him, neglected to take any further steps, it was held that he was guilty of a conversion. The plaintiff having shipped a certain portion of a cargo on board the defendant's vessel, dispute arose, and the master subsequently refused to give the plaintiff bills of lading in his own name and sailed on his voyage, and ultimately refused to deliver the goods to the plaintiff's agent at the port of destination. It was held that there had been a conversion when the ship sailed away. But, where the master had refused to sign bills of lading except in a certain form, and sailed away, but subsequently made a proper tender of the cargo to the plaintiff at the port of destination, it was held that the master was not guilty of a conversion because he had always held the goods for the plaintiff.

Indian case: Two notes are stolen from A, which B (not a bona, fide holder for valuable consideration) tenders to C in payment of certain articles. C, not knowing B, refuses to deal with him, whereupon B brings D, who is known to C, and the purchase is made by him. Held, that the part which D performed in the transaction amounted to a “conversion of the notes to his own use,” and that he was liable to A. A refusal to deliver up an idol, whereby the person demanding it was prevented from performing his turn of worship on a specified date, gives the party aggrieved a right to sue for damages. In a suit to recover the value of the plundered property it was ruled that, unless the defendant produced the property and showed it not to be of the value stated by the plaintiff, the strongest presumption should be made against him, and the highest value assumed.

Leading case: Armory v. Delamirie.

Conversion by destruction

A conversion by destruction takes place not merely when a chattel is burnt or broken to pieces, but when it is so dealt with that its identity is destroyed. Every wilful and wrongful destruction of a chattel, or wilful and wrongful damage to it, whereby the owner is deprived of the use of it in its original state is a conversion of it.

If a man draws wine out of a cask and fills up the deficiency with water, he converts the whole cask as to part by taking the wine, as to the residue by turning it into something different and therefore destroying it. To spin cotton into yarn, to grind corn into flour, or to apply any process of manufacture to raw material, may undoubtedly be an act of conversion if done without the authority of the person entitled. But if the chattel continues to exist as such, any injury done to it is a trespass and not conversion. Hence, where the defendant had sawn asunder a log of timber belonging to the plaintiff, it was held that he was not liable for conversion.

Defendant's ignorance no defence

Defendant's ignorance of the unauthorised character of his act cannot always be relied upon as a defence. In most cases of conversion there are two elements, first of all a dealing with the goods in a manner inconsistent with the right of the person entitled to them; secondly, an intention in so doing to deny his right or to assert a dominion which is in fact inconsistent with such right. Ignorance of the right will not affect the quality of the act done, but it may have a material bearing on the question of intention. The following principles will generally apply where a defendant is ignorant of a plaintiff's title:

A defendant is always liable if he has taken the goods as his own, or used them as if they were his own. Persons deal with property in chattels or exercise dominion over them at their peril.
When a person, though only as agent, takes part in a transaction which purports to effect a transfer of property in a chattel, and it turns out that his principal had no title, his ignorance of this fact does not protect him, for he has clearly intended an act which is inconsistent with the right of the true owner.
If an agent intermeddles merely with the custody of a chattel in ignorance of his principal's lack of title, and also in ignorance that any alteration of property is intended, he is not guilty of conversion.

Dealings under authority of apparent owner

A merely ministerial dealing with the goods at the request of an apparent owner, having the actual control of them, is not conversion. A person dealing with the goods as the servant or agent of such apparent owner, and according to his direction, is not liable if:

the act done does not purport to involve a transfer of the supposed property in the goods;
the ostensible owner's direction is one which he could lawfully give if he were the true owner; and
the apparent owner's direction is obeyed in the honest belief that he is owner.

If A steals corn, and takes it to a miller to be ground and returned to him, the miller is not liable in conversion; but if A tells his servant B to sell the stolen corn to C, and B does so, B is liable in conversion, even though believes that the corn belongs to his master A. This principle has been recently applied so as to render an auctioneer liable for selling goods in the ordinary course of his business, although he had no notice of the apparent owner's want of title. The payee of a crossed cheque specially indorsed it to plaintiffs and posted it to them. S, having obtained possession of the cheque in transmission, altered the indorsement, presented it at the defendants' bank, and requested them to collect it. They did so and handed the proceeds to him in France. Held, that the defendants' bank were liable in an action for conversion.

Distinctions between Trespass and Conversion

Trespass is essentially a wrong to the actual possessor and therefore cannot be committed by a person in possession. Conversion, on the other hand, is a wrong to the person entitled to immediate possession. The actual possessor is frequently, but not always, the person entitled to immediate possession, so that conversion may, but does not necessarily, include trespass.
To damage or meddle with the chattel of an other, but without intending to exercise an adverse possession over it, is a trespass. A conversion, is a breach, made adversely, in the continuity of the owner's dominion over his goods, though the goods may not be hurt.
The gist of the action in trespass is the force and direct injury inflicted; in conversion, it is the deprivation of the use.

Action for conversion

The plaintiff, at the time of conversion, must either have an absolute or a special property in the goods, coupled with possession or the right of immediate possession thereof. Absolute property is deemed to exist where a person, having the possession of goods, has also the exclusive right to enjoy them, and which can only be defeated by his own act. Thus, an owner who is either in actual possession of goods, or entitled to the immediate possession thereof, can maintain an action; but one who has let them to another for a certain term cannot. Special property conveys the idea that he who has the possession of goods holds them subject to the claims of other persons. For instance, a carrier has a special property in the goods intrusted to him for carriage, and he may bring an action for conversion against a stranger who takes them out of his possession. Thus, to maintain an action for conversion, plaintiff must be the person in actual or constructive possession of the goods. Any possession, however temporary, is sufficient against a wrong-doer. A trustee, having .the legal property, may sue in respect of goods, although the actual possession may be in his cestui que trust. The action may be brought against any person who was a party to the conversion, although the goods were actually converted by another.

Before the Judicature Acts the action of trover lay for the value (not for the return) of the goods. Action of replevin lay in theory for recovering damages for the unlawful taking of a chattel away from its owner, but in practice it was almost invariably confined to cases of unlawful taking by way of distress.

Defences to an action for conversion

The justifications or defences to an action for conversion are:

Lien, either general or particular. If a man has a lien upon goods, he may refuse to deliver them up until his lien is satisfied; but, if, having a lien upon goods, he claims to retain them on grounds quite distinct from a claim of lien, his refusal to deliver them up will be evidence of a conversion and the existence of the lien will be no answer to an action for the conversion of the property. A man does not waive his right of lien merely by omitting to mention it when the goods are demanded.
Right of stoppage in transit: This defence arises out of contract: See Section 50 of the Sale of Goods Act, 1930 and the repealed section 99 of the Indian Contract Act (IX of 1872).
Denial of plaintiff's right of property, where plaintiff sues relying on his right only.
Denial of possession, or showing that the detainer was in the exercise of a legal right consistent with the fact of a right of property being in the plaintiff, as that what the defendant did was in the exercise of his legal rights as joint owner with the plaintiff.
Denial of some qualified right in the chattels.

Damages

The measure of damages is in general the value of the goods at the time of the conversion, where no special damage has been sustained, and the goods have not been tendered and received back after action. This would be the market value of the goods at the time of conversion. Where the plaintiff has only a special property in the goods, the damages recoverable in respect of conversion of them by the actual owner would be measured by the limited character of the plaintiff's interest in the goods; but if the conversion is by a stranger, the plaintiff is entitled to the full value of the goods notwithstanding the limited nature of his interest. Malice and insult may be taken into consideration as also the fact that the taking was under a false pretence of a legal claim. If the goods are injured, the damages in respect to the value are the amount of deterioration. If the goods are not returned, their value is to be taken at their market price, if any, or otherwise their actual value to the owner at the time of conversion. If the defendant got or retains possession forcibly or fraudulently, and does not produce the article, the presumption will be, that it is of the highest value of an article of that kind. If the goods have been returned, but have fallen in price, the difference in the price at the time of the tort or of the demand by the plaintiff, and at the time of the return, may be given as a special damage. Special damages, far exceeding the value of the goods, are recoverable if shown to be the natural and necessary consequence of the wrongful act. In mitigation of damages partial title may be proved, or it may be shown that the goods were returned, or anything equivalent to it, or that the interest of the plaintiff is nominal only.

Indian cases: The defendants had wrongfully converted to their own use a box of indigo belonging to the plaintiff. The plaintiff sued for the recovery of the box and damages. Held, that the measure of damages was the value of the indigo at the time of the wrongful conversion minus its value at the date it was to be returned to the plaintiff plus interest at 6 p.c. for the intervening period. In an action for the wrongful conversion of certain timber, the plaintiff claimed to recover as damages the market value of the timber at the town of Rangoon to which it was being conveyed at the time of the conversion. Held, that the cost of carriage to Rangoon from the place where the wrongful conversion occurred must be deducted. In an action for damages for the detention of ornaments pledged with the defendant which the defendant has wrongfully converted to his own use, the measure of damages is the value of ornaments, less the sum for which they have been pledged.