A sister suing her brother because he refused to tell her where he had hidden her taxi is not the subject matter of a dispute that you would expect to be before the Court of Appeal, especially when the taxi in question had been off the road for 5 years. However, that was exactly what happened in Mainline Private Hire Limited v Anthony Nolan  EWCA Civ 189, where the Court had to decide what constituted possession of the taxi for a claim for conversion.
Mr Nolan’s wife and his sister, Mrs Glover, were directors of Mainline Private Hire Limited (“Mainline”). Mainline owned a Peugeot taxi which was used by Mr Nolan and, when not in use, was parked outside his house. The taxi was stolen in December 2005 and recovered in January 2006. The taxi was not recovered in a driveable state and was therefore delivered by Mr and Mrs Nolan to Mr Coulter for storage pending repairs. For Mainline, Mrs Nolan signed an agreement with Mr Coulter agreeing to store the taxi for a fee of £10 a day.
Mr and Mrs Nolan did not, however, tell Mainline that the taxi was in storage with Mr Coulter. In January 2006, Mrs Nolan sold her shares in Mainline to Mrs Glover and Mr Nolan signed an agreement stating that he would return, on request, any Mainline assets that were in his possession. This left Mrs Glover as the sole remaining director of Mainline. Mrs Glover asked Mr and Mrs Nolan where the taxi was but they did not tell her. In July 2006, despite each party being related and the taxi worth very little, Mrs Glover issued proceedings for delivery up and damages for conversion against her brother, Mr Nolan. The main issue for the Court was whether Mr Nolan had possession of the taxi or whether its storage by Mr Coulter meant that he no longer had possession of it. If Mr Nolan was not in possession of the taxi, the claim would fail.
The County Court
At trial, His Honour Judge Armitage QC decided:
- Despite Mainline’s arguments, the storage contract with Mr Coulter was genuine.
- Mr Nolan had been in possession of the taxi until it was stolen and then regained possession of it when it was recovered.
- Despite the fact that the taxi was then placed under Mr Coulter’s control (and he would have been entitled to exercise a lien over the taxi for his storage charges), Mr Nolan remained in possession of the taxi as he had personally chosen the storage site, knew Mr Coulter, and his general intention to possess the taxi had not changed.
- Mr Nolan remained in possession of the taxi until he directly, or through his wife, told Mainline about its location.
- Mr Nolan converted the taxi from the date of Mainline’s demand following the compromise agreement in January 2006.
Court of Appeal
The Court of Appeal broadly agreed with the Judge’s findings. In particular, it agreed that Mr Coulter did not have exclusive possession of the taxi because anyone authorised by Mainline could, at any time, pay the storage charges and collect the taxi. The Court of Appeal also agreed that by keeping Mainline in the dark about the storage contract, Mr Nolan had obtained factual possession of the taxi since Mr Coulter could not enforce the storage contract against Mr Nolan (only against Mainline). This, coupled with Mr Nolan’s hope that he would get to keep the taxi at the end of the day, meant that he maintained possession of it. The Court of Appeal concluded:
“…as a matter of law, it cannot universally be the case that a person who receives a vehicle for storage for reward obtains possession. Since both elements of possession turn on the facts, the court must look at all the circumstances of a case, and not simply, where there is a contract, at the terms of that contract.”
The Court of Appeal unsurprisingly criticised the proportionality of the litigation over a taxi that had been in an un-driveable state for around 5 years. It urged the parties to reach an agreement over damages rather than wasting further costs.
The decision clarifies that a key element for possession in conversion claims is intent. Just because one does not have physical possession of something does not mean that there is no factual possession.
Whilst the case did not involve finance companies, it is a useful decision for lenders seeking to recover assets from insolvent companies where one of the former directors has apparently sought to put the asset beyond the lender’s reach. It is a fairly common scenario where a director moves assets formerly subject to finance agreements to a location that will be difficult for the lender to find. This decision confirms that as long as the requisite intention on the director’s part can be proved, he or she can be liable for conversion and a delivery up order may be made even if he is not in physical possession of the asset.
If a director has also procured the sale of an asset subject to a finance agreement, lenders should also consider pursuing directors. Following the Court of Appeal’s decision in Joiner and another v George and others  All ER (D) 64, a director may be liable for the torts of a company:
- if he personally committed the tort;
- if, though carrying out his duties for the company, he nevertheless assumed a personal liability; and
- if, although he did not commit the tortious act himself, he procured the company to do it.
Whilst it will be difficult to impose liability on a director merely carrying out his duties as company director (such as voting in board meetings); a director who goes further and personally procures the commission of a tortious act will be as liable for the tort as the company.