Bill of Lading. Conversion Last updated 18-Nov-2015

If the [respondents] have disposed of [the goods] according to the terms on which they received them, having no notice of any claim, title, or right, other than that of the person from whom they received them, it is clear that they have not converted them to their own use, that they are not guilty of conversion, indeed have done nothing wrong.
Glyn Mills Currie & Co v The East and West India Dock Company CA (1880) 6 QBD 475 per Bramwell LJ at p.491.

Dealing with goods in manner inconsistent with rights of owner

As long ago as in 1919 Atkin J held in Lancashire and Yorkshire Railway v MacNicholl (1919) 88 LJKB 601 that conversion is a dealing with goods in a manner inconsistent with the rights of the true owner … provided … there is an intention on the part of the defendant in so doing to deny the owner’s right or to assert a right which is inconsistent with the owner’s right.

Deprivation of possession of the goods alone is not enough to constitute a conversion. Lord Nicholls described the basic features of the tort of conversion in Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, [2002] 2 AC 883, at paras 38-39:

38. … Denial of title is not of itself conversion: see section 11(3) of the Torts (Interference with Goods) Act 1977. To constitute conversion there must be a concomitant deprivation of use and possession.

39. … Conversion of goods can occur in so many different circumstances that framing a precise definition of universal application is well nigh impossible. 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 contrast is with lesser acts of interference. If these cause damage they may give rise to claims for trespass or in negligence, but they do not constitute conversion.

Lord Nicholls judicially approved description of conversion in Clerk & Lindsell on Torts, 17th ed (1995), p 636, paragraph 13-12: ‘conversion is an act of deliberate dealing with a chattel in a manner inconsistent with another's right whereby that other is deprived of the use and possession of it’.

In Sang Stone Hamoon Jonoub Co Ltd v Baoyue Shipping Co Ltd (The Bao Yue) [2015] EWHC 2288 (Comm) another passage from Clerk & Lindsell 20th Edition at paragraph 17-08, received judicially approval:

It is not possible to categorise exhaustively all modes of conversion for while some acts are necessarily an absolute abrogation of the claimant's rights and deprive him of the whole value of his interest in the goods, there may be others where the courts retain a degree of discretion in deciding whether those acts amount to a sufficient deprivation. Nevertheless the principal ways in which a conversion may take place can be set out under the following headings, dealt with more fully below:
(a) when property is wrongfully taken or received by someone not entitled to do so;
(b) when it is wrongfully parted with;
(c) when it is lost by a bailee in breach of his duty to the bailor;
(d) when it is wrongfully sold, even without delivery, so as to pass good title to the buyer;
(e) when it is wrongfully retained;
(f) when it is wrongfully misused or destroyed; and (g) when the defendant, without physically interfering with it, wrongfully denies access to it to the claimant.

Conversion and symbolic possession

The carrier may face possible conversion claim as a result of his dealing with the transferee of the bill of lading, i.e. person whom the bill was endorsed, and who request delivery of the goods to him. Generally, transfer of bill of lading, at common law, gives to transferee symbolic possession of the goods. Lord Hatherly LC in Barber v Meyerstein (1870) LR 4 HL 317 characterized this process in the following words:

[T]he parting with the symbol of property the possession of which cannot be delivered is the parting with the property itself; and that persons who have not a complete ownership and possession of the property cannot be said to have such a title to that property as to divest the operation of the symbol to give a title to it, until something occurs which brings the symbol and the property itself into contact, — and that for the purpose of so bringing the property and the symbol into contact, there must be a complete concurrence of title in the person who holds the symbol and the person who has the right to demand the property ; and until that happens the symbol, as in the present case, has not exhausted its office.

This generalization, however, is always qualified that the indorsement of a bill of lading prima facie transfer the whole property in the goods; but this was subject to be controlled by the evident intention of the parties. See also Document of Title chapter. When property in the goods was not intended to be passed to the transferee or was transferred independently from the bill of lading (see Hibbert v Carter (1787) EngR 3; TR 745), a person to whom the bill of lading was has been endorsed has no possessory right to the delivery of the goods. Such person without possessory rights cannot claim conversion because goods were never intended to become his property, e.g. in Hibbert v Carter case bill of lading was transferred to shipper’s creditors for the purpose to let creditors have the net proceeds from the sale of goods only and not the goods themselves.

It may sound illogical but the carrier is obliged to deliver the goods against production of the bill of lading, even if a person to whom it was endorsed has no possessory right to request delivery. The carrier therefore has immunity under common law against third party claims when he delivers the goods against production of the bill of lading. This immunity based on principle that if a man acts as a merely conduit through which the goods pass he is not liable for conversion if he disposes goods accordingly with the term on which he received them, having no notice of any claim, title or right other than that of person from whom he received them. Immunity is lost if the carrier disposes goods with the knowledge of an adverse claim.

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