(Majority) Cheques were made payable to a company which had entered into a factoring agreement with the plaintiffs. The cheques were sent to the company in settlement of debts owed to the company but which had been assigned to the plaintiffs. The defendant, a Director of the company, paid the cheques into the company’s bank account.
Held: A mere contractual right to possession of cheques was insufficient to found an action in conversion, but the plaintiffs had more than a mere contractual right to possession, because they had equitable rights in the cheques.
Buckley LJ (minority) said that a contractual right to demand immediate delivery was a sufficient right to possession to give a status to sue in conversion.
Sir David Cairns said: ‘so a contractual right is not sufficient.
In my view, however, there was here something more than a contractual right. Clause 11(e) of the [Factoring] agreement provided both that the company was to hold any debt paid direct to the company in trust for the plaintiffs and immediately after receipt of a cheque, in the case of payment by cheque, to hand over that cheque to the plaintiffs. Taking together the trust which was thereby set up and the obligation immediately on receipt to hand over the cheque to the plaintiffs, I am satisfied that the plaintiffs had here a sufficient proprietary right to sue in conversion’.
Bridge LJ said: ‘It is manifest on the terms of clause 11(e) of the agreement that the intention of the parties was that the cheque itself, if payment was by cheque, should be handed on, endorsed if necessary to the plaintiffs, and that confers upon the plaintiffs, as it seems to me an immediate right to possession if any such cheque quite sufficient to support a cause of action in conversion against anyone who wrongfully deals with the cheque in any other matter.
I think that there is a contractual right here for the plaintiffs to demand immediate delivery of the cheque to them, and that that is a sufficient right to possession to give them a status to sue in conversion’.
Judges:
Sir David Cairns and Bridge LJ, Buckley LJ
Citations:
[1979] 1 QB 351, [1978] 3 WLR 877
Jurisdiction:
England and Wales
Cited by:
Per incuriam – MCC Proceeds Inc (Incorporated Under the Laws of the State of Delaware, USA As Trustee of the Maxwell Macmillan Realization Liquidating Trust) v Lehman Brothers International (Europe) CA 19-Dec-1997
The owner only of an equitable interest in goods may not assert his interest against a bona fide purchaser of the legal title to the goods. International Factors v. Rodriguez was decided per incuriam to the extent that it held that equitable rights . .
Cited – Mazur Media Limited and Another v Mazur Media Gmbh in Others ChD 8-Jul-2004
Proceedings were brought in England. The respondents sought a stay, saying the company was subject to insolvency proceedings in Germany.
Held: Our domestic insolvency law was not applicable to foreign proceedings, and so could not be used to . .
Cited – Iran v The Barakat Galleries Ltd QBD 29-Mar-2007
The claimant government sought the return to it of historical artefacts in the possession of the defendants. The defendant said the claimant could not establish title and that if it could the title under which the claim was made was punitive and not . .
Lists of cited by and citing cases may be incomplete.
Jurisdiction, Torts – Other
Updated: 13 May 2022; Ref: scu.199745