Your Response v Datateam (2014)

This important decision of the Court of Appeal clarifies that, in contrast to tangible property, it is not possible to exercise a possessory lien over intangible property, such as an electronic database. The Court accepted that there was a powerful case for the law recognising that possession might be exercised over digitised materials, of which an electronic database is a prime example, but confirmed emphatically that that was not the current state of the law and that such a change would be best effected by Parliament.

A magazine publisher, Your Response, had engaged a data manager, Datateam, to hold and maintain its database of subscriber information. As it was dissatisfied with Datateam’s service, Your Response purported to terminate the parties’ contract and there was a dispute between them over outstanding fees. In light of the dispute, Datateam refused to release the database back to Your Response. The Brighton County Court decided that Datateam had been entitled to hold onto the database (i.e. exercise a possessory lien over the database) pending payment of the outstanding fees.

The Court of Appeal disagreed and allowed the appeal. It found that there was a sharp distinction between tangible and intangible property. If property is tangible this could give rise to a right to retain possession of goods (a lien) which have been delivered for the purposes of the “possessor” carrying out work on the goods. This possession of tangible goods could also give rise to the possessor committing the tort of “conversion” (where the possessor of the goods wrongfully interferes them e.g. sells them). However, if the property is intangible, the Court confirmed that no such right to a lien (or conversion) may arise.

The Court of Appeal gave several reasons why Datateam was not permitted to exercise a lien over the database: (i) Datateam could not identify any pervious case in which a right to a lien over intangible property had been recognised; (i) the Copyright and Rights in Databases Regulations 1997 recognised that databases were not tangible property; (ii) although entering information into an electronic data storage system altered the physical characteristics of the equipment, this did not render the information a physical object capable of possession; (iv) Datateam had been entitled to exercise practical control over the information constituting the database, but could not exercise physical control over the information, which was intangible; and (v) although the CPR provided for the disclosure of electronic documents, it was a “far cry from that to hold that documents held in electronic form are capable of being possessed” in the same way as physical objects.