Neutral Citation Number [2002] EWHC 2148 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Tuesday, 29th October 2002
Before:
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Between
-and-
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Professor Norman Palmer (instructed
by Ralph Davis) for the Appellant
John McCaughran and Zoe O'Sullivan (instructed by Stephenson Harwood) for the
Respondent
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1. It is the case of the claimant, Mr Philippe Marcq, that he owned a painting, the Backgammon Players by Jan Steen painted in about 1667, which was stolen in 1979. He had purchased it from the defendant auctioneers, Christies, at auction in 1976. The painting was registered as stolen in the Art Loss Register. It appears that in 1994 it was purchased by Mr Carl Schunemann, a German national, from a gallery in Amsterdam. In 1997 Mr Schunemann delivered the picture to Christies for sale at auction. At the auction on 4 July 1997 it did not reach its reserve and at the end of September that year it was returned by Christies to Mr Schunemann. He sold it in 1999. In this action proceeding in the Business List of the Central London County Court Mr Marcq seeks damages from Christies for the conversion of the picture and for breach of duty as a bailee.
2. By notice of application dated 27 April 2001 Christies applied for an order under CPR 3.4 striking out the action on the grounds that the Particulars of Claim disclosed no reasonable ground for bringing the claim, and the claim had no reasonable prospect of success. The application was first heard by His Honour Judge Hallgarten on 17 May 2001. He held that on the material then available the application should succeed, but he also considered that there was an issue as to the good faith of Christies which might depend upon disclosure of documents. Following disclosure the outcome was a further hearing of the application, following which Judge Hallgarten handed down judgment on 25 January 2002. That judgment dealt comprehensively with all the issues and it is unnecessary to refer to the judge's earlier ruling. There was before the court at the hearing draft amended particulars of claim, for which Professor Palmer appearing for Mr Marcq sought permission. He asked that the court take account of the proposed amendments in considering the strike out application, as is the usual course in these situations. There was understandably no draft amended defence before the court. Although the defence was served on 22 January 2001, at no stage was a reply served on behalf of Mr Marcq. In his judgment Judge Hallgarten found that Christies were entitled to succeed on their application. He considered, however, that Mr Marcq and his advisers should have a final opportunity to set out his case as to bad faith. By order of 8 February 2002 it was ordered that Mr Marcq either re-list his earlier disclosure application dated 17 October 2001 or apply for permission to amend the particulars of claim, or to serve a reply, in either case for the purpose of pleading bad faith. Neither of those things were done because, as I infer, Mr Marcq wished to obtain permission to appeal and to progress his appeal. On 2 July 2002 an order was made in a form agreed between solicitors that, if the appeal was unsuccessful, an application to amend the particulars of claim be listed before the judge, and, if it be successful, there be a case management conference. This means that the issues of law which arise, have to be considered not only before the facts have been found but before the claimant's case has been fully pleaded. This is unsatisfactory as will appear.
3. Mr Marcq sought permission to appeal from Judge Hallgarten's judgment. It was refused by the judge. Permission was refused by Mr Justice Garland on the papers on 4 March 2002. He stated that there was clear Court of Appeal authority in favour of Christies on conversion. An oral application was then made to Mr Justice Colman on 21 June 2002. He granted permission on the ground that the issues arising as to the position of an auctioneer who receives stolen goods for auction under his terms and conditions including a lien, and who puts the goods up for auction and later returns them to his bailor, involved a reconsideration of the authorities and of the tort of conversion generally, fit for the Court of Appeal. No order was asked for transferring the appeal to the Court of Appeal pursuant to CPR 52.14.
4. I come now to the substance of the appeal, and will begin by considering how the case of Mr Marcq is put. The originals Particulars of Claim made a single claim for the conversion of the painting by including it in the sale on 4 July 1997 and by subsequently returning it to Mr Schunemann. The value was put as between £100,000 and £150,000, which had been Christies' guide price at the unsuccessful auction. The defence dated 22 January 2001 put in issue Mr Marcq's assertion that he had purchased the painting. It admitted that Christies had received it for sale by auction and that it had then been listed in the Art Loss Register. It stated that Christies had an arrangement with the Register to check whether paintings in Christies' catalogues were on the register: Christies had not been informed that it was. It was denied that Christies' acts constituted a conversion. It set out the facts relating to Mr Schunemann which I have mentioned and asserted that any title vested in Mr Marcq had been lost by limitation under either German law or English law.
5. The proposed amended particulars of claim pleaded the terms of the contract between Christies and Mr Schunemann, including Christies' Conditions of Business. The following clause were relied on:
Clauses 7(a) gives Christies discretion as to the cataloguing and manner of auction.
Clause 7(c) prohibits a seller from withdrawing a lot from sale but permits Christies to do so.
Clause 14(h) permits Christies to refuse a bid and to conduct the bidding as they choose.
Clause 9(c) applies in case of forgery.
Clause 9(d) provides that, if an unsold lot is not collected within 35 days of a notice requiring collection, storage and insurance charges will apply and the seller may not collect the lot until the charges have been paid If the lot is not collected within 90 days of the notice, there is a right of sale.
Clause 15(d) gives a right of retention against a buyer until all charges have been paid
Clause 15(g) covers Christies' rights where the buyer fails to make payment.
6. The new pleading also asserted that Christies (1) became a bailee of Mr Marcq in respect of the painting and owed him a duty to take reasonable care in its custody and delivery to any one other than Mr Marcq; (2) were equivalent to a finder of the painting and owed like duties and a duty to return it to Mr Marcq, (3) were involuntary or unconscious, bailees of the painting and owed a duty to take reasonable care to establish who the owner was.
7. It pleaded that Christies catalogued the painting under a different name to that used previously.
8. Lastly there is added to the claim for conversion a claim for breach of the duties of Christies as a bailee. No particulars are given of the breaches of duty alleged including as to breaches of any duty of care.
9. The draft amended pleading did not include any claim in negligence apart from a duty as a bailee. Professor Palmer told me that Mr Marcq was not advancing any claim in negligence apart from that. There is no claim under the principles refined from Donoghue v. Stevenson.
10. Professor Palmer put Mr Marcq's claim in conversion on two bases. One relied on the whole conduct of Christies in relation to the painting, alleging that it amounted to a conversion of it. One relied on Christies' taking a lien over the painting with a right of sale in certain events, which, he submitted, amounted to a pledge, and so by section 11(2) of the Torts (Inference with Goods) Act 1977 was a conversion.
11. I will take the general case first. It is clear that, if the auction had been successful and the picture sold and later delivered to the buyer, Christies would have been liable for the conversion of the painting. There is no reported case which counsel have discovered where the facts required a decision whether the putting up of goods for auction followed by their return to the would-be seller was a conversion. There is, however, a train of authority which is relevant to the position of auctioneers and which is relevant to that situation. I will take the cases chronologically so it may be seen how the law has developed.
12. Loeschman v. Machin (1818) 2 Stark 311 is authority that an auctioneer is liable in conversion who asserts a lien and so refuses a demand to deliver up made by the true owner of goods which have been delivered for auction to the auctioneer by another without the owner's authority. Conversion by keeping - as it is called in Clerk & Lindsell on Torts, 18th edition at 14-25, or by refusal to deliver up, is simply one category or mode of conversion. It is not relevant on the facts here because Christies never asserted a lien against Mr. Marcq. Abbott J. stated at page 312:
if he [the hirer of goods] send them to an auctioneer to be sold, he is guilty of a conversion of the goods; and that if the auctioneer afterwards refuse to deliver to the owner, unless he will pay a sum of money which he claims, he is also guilty of a conversion.
13. It is a fair comment that the court did not consider that the mere receipt of the goods by the auctioneer was a conversion. So, although the party delivering the goods for auction is liable by reason of that delivery, the auctioneer is not.
14. Tear v. Freebody (1858) 4 C.B.N.S. 228 involved a surveyor who properly relied on a resolution of his vestry to pull down a building built beyond the building line. He also removed the materials from the site to his yard with the intention of exercising a lien over them. It was held that he had no authority to do so and was liable to the owner in conversion. Crowder J. held that the surveyor moved the materials to the yard not for the benefit of the plaintiff but for his own benefit, and so was liable. Willes J. stated at 264:
I apprehend that a person is guilty of a conversion, if he takes away the goods of another for the purpose of depriving the other of the use of them and acquiring the use of them himself.
15. The case was relied on by Professor Palmer because of the intention by the surveyor to exercise a lien. It may be important that the surveyor actually took the goods into his own yard for that purpose. It would appear that he had no right to remove the materials from the site. Nonetheless, if he had done so to preserve them for the owner, there might have been no conversion. The finding of the arbitrator included a finding that the surveyor detained and still detained the materials as security for the costs of demolition, although the plaintiff had never made a demand for them (page 250).
16. In Lancashire Wagon Company v. Fitzhugh (1861) 6 H&N 502 the plaintiffs were the owners of some railway wagons. The defendant, a sheriff, seized the goods and sold them under a writ of fi. fa. without notice of the plaintiff's title. It was held that the sale did not by itself amount to a conversion, but the delivery of the wagons to the buyer made the sheriff liable:
The defendant pleads that the conversion consisted in the selling of them, which he did as sheriff under a fi. fa. We think, if there was no conversion except in selling, that that is no conversion in law, and no cause of action. Therefore we think the fourth plea good. But we think the new assignment thereto good. The plaintiffs new assign that the conversion did not consist in the mere sale but in the delivery also, and in causing the purchasers to use and damage the wagons ... The new assignment shows a cause of action. (page 508 per Pollock C.B.)
17. The case was cited by Blackburn J. in Hollins v. Fowler, to which I will come next, at page 771 as authority that a sale is no conversion, but a sale and delivery to one who uses the goods is.
18. Hollins v. Fowler (1875) L.R. 7 H.L. 757 was an important case in the development of the law. In the Court of Exchequer Chamber the judges were evenly divided and the first instance judgment for the plaintiffs was upheld. The facts were that the defendant brokers came into possession of the plaintiffs' goods thinking that they belonged to another. That other had acquired them fraudulently and the owners had entered no contract to sell them to him. The brokers had bought the goods on their own account and then sold them on. That was clear although the jury found they bought them in the course of their business as brokers. In the House of Lords it was held following the advice of the judges that the defendants were liable. Lord Chelmsford stated at 795:
But to my mind the proposition which fits this case is, that any person who, however innocently, obtains possession of the goods of a person who has been fraudulently deprived of them, and disposes of them, whether for his own benefit, of that of another person, is guilty of conversion.
19. Seen in those terms, and given that no title had passed to the fraudulent party, the outcome is straightforward today. It is apparent that there was discussion of the position if the defendants had sold as brokers and it may be that this led to the consideration of the position of other agents and so gave rise to the passages in the opinion of Blackburn J, which deal with the position of those who deal with goods without intending to transfer title in them. Having quite early in his judgment concluded that the plaintiffs were entitled to succeed Blackburn J. stated commencing on page 765:
It is generally laid down that any act which is an interference with the dominion and the right of property of the Plaintiff is a conversion, but this requires some qualification.
From the nature of the action, as explained by Lord Mansfield, it follows that it must be an interference with the property which would not, as against the true owner, be justified, or at least excused, in one who came lawfully into the possession of the goods.
And in considering whether the act is excused against the true owner it often becomes important to know whether the person, doing what is charged as a conversion, had notice of the Plaintiff's title.
There are some acts, which from their nature are necessarily a conversion, whether there was notice of the Plaintiff's title, or not. There are others, which if done in a bona fide ignorance of the Plaintiff's title are excused, though if done in disregard of a title of which there was notice they would be a conversion. And this, I think, is borne out by the decided cases. Thus a demand and refusal is always evidence of a conversion. If the refusal is in disregard of the Plaintiff's title, and for the purpose of claiming the goods either for the Defendant or a third person, it is a conversion. If the refusal is by a person who does not know the Plaintiff' ;s title, and having a bona fide doubt as to the title to the goods, detains them for a reasonable time, for clearing up that doubt, it is not a conversion: see Isaac v. Clarke (1 Buls. 306, 312); Vaughan v. Watt (6 M&W 492). The principle being, as I apprehend, that the detention, which is an interference with the dominion of the true owner, is, under such circumstances, excused, if not justified.
So the finder of goods is justified in taking steps for their protection and safe custody till he finds the true owner. And therefore it is no conversion if he bona fide removes them to a place of security. And so far the general statement that an asportation is a conversion must be qualified.
I cannot find it anywhere distinctly laid down, but I submit to your Lordships that on principle, one who deals with goods at the request of the person who has the actual custody of them in the bona fide belief that the custodier is the true owner, or has the authority of the true owner, should be excused for what he does if the act is of such a nature, as would be excused if done by the authority of the person in possession, if he was a finder of the goods, or entrusted with their custody.
I do not mean to say that this is the extreme limit of the excuse, but it is a principle that will embrace most of the cases, which have been suggested as difficulties.
Thus a warehouseman with whom goods have been deposited is guilty of no conversion by keeping them, or restoring them to the person who deposited them with him, though that person turns out to have had no authority from the true owner: see Heald v. Carey (11 CB 977); Alexander v. Southey (5 B&A 247).
And the same principle would apply to the cases alluded to by my Brother Hannen in his judgment in the Court below, of persons 'acting in a subsidiary character, like that of a person who has the goods of a person employing him to carry them, or a caretaker, such as a wharfinger.' It will enable us also to answer a question put during the argument at your Lordships' Bar. It was said:
Suppose that the Defendant had sent the delivery order to Micholls, who had handed it to the railway company, requesting them by means of it to procure the goods in Liverpool carry them to Stockport, and the railway company had done so, would the railway company have been guilty of a conversion?
I apprehend the company would not, for merely to transfer the custody of goods from a warehouse at Liverpool to one at Stockport is prima facie an act justifiable in any one who has the lawful custody of the goods as a finder, or bailee, and the railway company, in the case supposed, would be in complete ignorance that more was done. But if the railway company in the case supposed could have been fixed with knowledge that more was done than merely changing the custody, and knew that the company's servants were transferring the property from one who had it in fact to another who was going to use it up, the question would be nearly the same as that in the present case. It would, however, be very difficult, if not impossible, to fix a railway company with such knowledge.
And on the same principle I take it the ruling of Lord Tenterden in Grenway v. Fisher (1 Car & P 190) may be supported; for the packer was merely giving facilities for the transport of the goods from one place to another, and was ignorant of the circumstances which, made it wrong against the true owner to remove the goods though I admit that his decision is not put by Lord Tenterden on this ground, but on that of the packer's being a public employment, which I think my Brother Brett in his judgment below, correctly shows to be a mistaken ground; I think the public nature of his employment was strong evidence that he was doing no more than assist in the change of custody, which was, on the principle suggested, excused in one ignorant of all that made the change of custody wrongful, but I do not see how in itself it made any difference. A packer is not, like a carrier or innkeeper, bound to receive all good brought to him.
I think, however, it is but candid to admit that the principle I have submitted to your Lordships, though it will solve a great many difficulties, will not solve all.
In Comyns' Digest (2) it is said, 'if a man deliver the oats of another to B to be made oatmeal, and the owner afterwards prohibits him, yet B makes the oatmeal, this is a conversion:' Per Berkly, 16382.
To this every one would agree; but suppose the miller had honestly ground the oats and delivered the meal to the person who brought the oats to him before he even heard of the true owner. How would the law be then? Or suppose the Plaintiffs in the case at your Lordships' Bar had, for some reason, brought the action against Micholls' men who assisted in turning this cotton into twist? The principle I have suggested would hardly excuse such conversions; and yet I feel that it would be hard on them to hold them liable. If ever such a question comes before me, I will endeavour to answer it. I think it is not necessary now to do so, for I think that what the Defendants are found to have done in the present case amounts to a conversion, and is not in any way excused.
20. This passage is sometimes cited as the basis for a rule that a 'ministerial' handling of goods is not a conversion. But clearly the rule or principle has earlier origins nonetheless.
21. The important statement of principle which ends '... if he was a finder of the goods, or entrusted with their custody' does not help Christies here because a finder or a custodian is not entitled to have goods put up for auction. If the statement is to be taken as comprehensive, it would mean that Christies, not being within it, were liable. In my view, however, it is plain that it is not to be treated as comprehensive in that way. The next sentence reads: 'I do not mean to say that this is the extreme limit of the excuse.' For the position of auctioneers, what acts by them will constitute a conversion, and what will not, one must look elsewhere.
22. Baron Cleasby stated at page 787
If this was the ordinary case of a broker merely acting as middle man and making the contract between two principals and having himself no interest in either contract, then the mere making the contract would not, I conceive, involve any responsibility to third parties. And how far the intermeddling with the goods themselves by delivering them would do so admits of question, and was the subject of much argument at the Bar, and might depend upon the extent to which the broker in each case could be regarded as having an independent possession of the goods, and delivering them for the purpose of passing the property. For example, an auctioneer delivers possession for the purpose of passing the property, and it would not be disputed that he would be liable; as upon a conversion, to the real owner. But according to my: view of the present case no such question of difficulty arises, because the Defendants took upon themselves the character of purchasers for the profitable carrying on of their business as brokers, and having thus bought the cotton, they afterwards, equally for their own profit, dispose of it by sale and delivery, and receive the purchase-money.
23. It is also worth citing from the judgment of Brett J. in the Court of Exchequer Chamber at page 630, albeit he was in favour of the defendants:
The true position as to possession and detention and asportation seems to me to be, that a possession or detention, which is a mere custody or asportation made without reference to the question of the property in the goods or chattels, is not a conversion.
The passage is cited in Clerk & Lindsell at 14-80.
24. Cochrane v. Rymill (1879) 40 L.T.N.S. 744 concerned an auctioneer who received some horses from a man named Peggs with instructions to sell them. They in fact belonged to the plaintiff to whom Peggs had given a bill of sale. The auctioneer sold the horses and was held liable. But in the course of his judgment in the Court of Appeal Bramwell L.J. stated at page 746:
Supposing a man were to come into an auctioneer's yard, holding a horse by the bridle and to say, 'I want to sell my horse: if you will find a purchaser I will pay commission.' And the auctioneer says: 'Here is a man who wants to sell a horse; will anyone buy him?' If he then and there finds him a purchaser and the seller himself hand over the horse, there could be no act on the part of the auctioneer which could render him liable to an action for conversion. But, looking at this case, there is a clear dealing with the property, an exercising dominion over the chattel, and a delivery of it by the defendant to another person to do what he likes with it.
25. It is clear from the opening of the judgment in that case of Thesiger LJ at page 746 and from his references to the judgments in Hollins v. Fowler that Thesiger LJ decided the case on the basis that there was a transfer of possession of the goods with the intention of transferring property. He also cited the passage from the judgment of Brett I. in Hollins v. Fowler quoted above. He continued
But clearly this case would not be treated as not amounting to a conversion within that rule. Hollins v. Fowler shows the distinction between cases such as the present and the cases of warehousemen, factors, and carriers. In this case there was clearly a conversion, and one in no way protected.
26. Rymill was also the defendant in the next case, again in the Court of Appeal, National Mercantile Bank Limited v. Rymill (1881) 44 LTNS 767. It again involved horses subject to a bill of sale. They were entered for auction subject to the defendant's conditions. The grantor of the bill of sale then sold the horses himself in the yard. The defendant received the purchase money and deducted his commission. He gave a delivery order for the-horses to the purchaser. The court overruled the judgment at first instance and found for the defendant Bramwell L.J. again gave the leading judgment. He stated, at page 767:
I am never very confident as to what is or is not conversion, but still there does not seem to be so very much difficulty in this case. The defendant has received the horses and harness from Seaman, and has delivered them back to the person to whom Seaman had given a delivery order. That is all that he has done, he has not claimed to transfer the title, and he has not purported to sell: all the dominion he exercised over the chattels was to re-deliver them to the person to whom the man from whom he had received them had told him to redeliver them.
27. He went on to make an analogy between the facts of the case and the situation where a railway company receive a stolen portmanteau at its cloakroom, which it later delivers back to the thief who had deposited it. For myself, I do not find the analogy helpful because it takes a very plain situation, which in my view the situation before the Court of Appeal was not.
28. Brett L.J. stated on the same page:
I think, therefore there was no sale by the defendant, that he only gave the delivery, order in consequence of the consent of Seaman, and the judgment cannot be supported.
29. Turner v. Hockey (1887) 56 LJ (QB) 301 is a case at first instance which has given rise to some difficulty. I will assume that the facts and judgments are correctly reported. The headnote, stating that an auctioneer who sells by auction and accounts for the price to the consignor of the goods, is not liable to the true owner, is plainly wrong. The case was carefully analysed by Collins J in Consolidated Co v. Curtis [1892] 1 QB 495 at 502-3. The defendant was a cattle salesman who received a cow for sale from a man named Phillips. The cow was subject to a bill of sale granted by Phillips to the plaintiff. The defendant did not know of the bill: there is surely the word 'no' missing from the first sentence on page 503 of the judgment of Collins J - 'The defendant had no notice of the bill of sale'. He got an offer for the cow, which he communicated to Phillips who accepted it. The purchase money was paid into the defendant's account at a bank and thence to Phillips. Phillips had paid the defendant's commission in cash. Nonetheless the defendant was held not to be liable. Day J decided the case on the basis that the defendant sold not for his own benefit but for the benefit of Phillips, and it seems Wills J. did also. Both referred to the dictum I have quoted above from the judgment of Bramwell LJ in Cochrane v. Rymill. As the defendant obtained the offer, received a commission and dealt with the sale, Phillips' sole contribution being to agree the offer, it is difficult to see why he should not have been liable.
30. Barker v. Furlong [1891] 2 Ch 172 is again a decision at first instance. The plaintiff was entitled to certain furniture in his capacity of executor. Arthur Sharless, a beneficiary under the will, went to live in the house where the furniture was and sent it to the first defendants for sale at auction. Part of it was sold by them for £121.6s.6d., which was paid to Arthur Sharless. The remainder of the furniture was returned to him and appropriated by him. The plaintiff sought judgment against the auctioneers for £121.6s.6d and succeeded. A brother of Arthur Sharless, Henry, was involved in sending the furniture for auction. Judgment was also given against him in the same sum. It was not claimed that the auctioneers were liable for the value of the furniture returned by them to Arthur Sharless. If that point had been argued, the case would be of direct assistance here. The claim against the auctioneers for the furniture auctioned by them appears straightforward. In giving judgment Romer J. stated a page 181:
As to Furlong & Son it is urged on their behalf that they have only acted as auctioneers, and that, so acting, they have not been guilty of any conversion, and they rely on the case of Turner v. Hockey. Now, I agree that if an auctioneer or broker does nothing more than settle the price as between a vendor and a purchaser of goods and takes his commission, he is not liable as for a conversion should it turn out that the vendor was not entitled to sell. That is the case put by Lord Bramwell in Cochrane v. Rymill, as one where the auctioneer would act merely as a conduit-pipe, and not be liable for conversion. But where, as here, the auctioneer receives goods into his custody, and, on selling them hands over the goods to the purchasers with a view to passing the property in them, then I think the auctioneer has converted the goods, and is liable accordingly, and for this case of Cochrane v. Rymill is an authority, and I may also refer to Featherstonhaugh v. Johnston (8 Taunt 237), and Adamson v. Jarvis (4 Bing 66). The general rule is that where an agent takes part in transferring the property in a chattel and it turns out that his principal has no title, his ignorance of this fact affords him no protection. I was referred to the cases of a carrier and packing agent as supporting the case of the auctioneers. But the carrier and packing agent are generally held not to have converted, because by their acts they merely purport to change the position of the goods, and not the property in them. In answers of the Judges and the addresses of the Lords in the case of Hollins v. Fowler I find statements supporting the views above mentioned.
Citations followed.
31. Consolidated Co v. Curtis [1892] 1 Q. 13. 495 contains a helpful review by Collins J of the authorities to that date. The defendant auctioneers sold furniture subject to a bill of sale. They were held liable to the grantee of the bill. The main point taken on their behalf appears to have been that the auction was held at the house of the grantee of the bill and so the auctioneers never had possession of the furniture. That point failed. In the course of his judgment Collins J stated at page 498:
All acts, therefore, as suggested by Blackburn J., in his opinion given to the House of Lords in Hollins v. Fowler which are consistent with the duty of a mere finder such as the safe guarding by warehousing or asportation for the like purpose, may well be looked upon as entirely compatible with the right of the true owner and therefore as not constituting a conversion by the defendant. It may be, as suggested by Brett J., in the same case, that the test is whether there is an intent to interfere in any manner with the title of or ownership in the chattel, not merely with the possession. The difficulty is, I think, rather in drawing the true inference from facts in particular cases than in grasping the principle. There are, however, happily many cases which fall clearly on one side or other of the line. It is clear that there can be no conversion by a mere bargain and sale without a transfer of possession. The act, unless in market overt, is merely void, and does not change the property or the possession: Lancashire Wagon Co. v. Fitzhugh, and per Brett, J., in Fowler v. Hollins. A fortiori, mere intervention as broker or intermediary in a sale by others is not a conversion. This is the case put by Bramwell, L.J., in Cochrane v. Rymill of an introduction by an auctioneer of a purchaser to a vendor. But, unless Turner v. Hockey decided the contrary, I should have thought it equally clear that a sale and delivery with intent to pass the property in chattels by a person who is not the true owner and has not got his authority is a conversion.
What, then, is the position of an auctioneer who sells and delivers in ordinary course? Is he a mere broker who negotiates a sale between two other persons, and then, as suggested by Brett J., was the case in Fowler v. Hollins, acts only as forwarding agent 'without any actual intention with regard to, or any consideration of, the property in the goods being in one person more than another,' a mere conduit-pipe, as it has been called? In my opinion, an auctioneer who sells and delivers in ordinary course is more than a mere broker or intermediary.
32. I am now able to make a substantial leap forward in time to the Report of the Law Reform Committee on Conversion and Detinue of September 1971. 1 should begin with paragraph 41 of the Report:
41. Disposition:- A sale, pledge, or other disposition of a chattel, with or without a transfer of possession, in such circumstances as to pass a title to the transferee, and also a purported disposition which does not operate to transfer the title, if coupled with a delivery of the chattel or its documents of title, amounts to a conversion and in such a case, not only the vendor but also an agent employed by him to effect the disposition is liable, even though he may have acted in good faith and in ignorance of any adverse title. This principle has been applied to a broker and also to an auctioneer, whether selling on his own or his customer's premises, but was held by the Court of Appeal in National Mercantile Bank v. Rymill not to apply to an auctioneer who did not purport to sell, but merely, on the instructions of his customer, delivered goods (deposited with him for sale) to a third party to whom he knew that his customer had sold them by private contract. This decision has been criticised as inconsistent with earlier authority and with the opinion of Blackburn, J. in Hollins v. Fowler. If rightly decided, it is an authority for the proposition that a bailee escapes liability for conversion not only where he merely re-delivers to his bailor, but where he delivers at the bailor's directions to a third party without knowledge of any adverse claim, though with knowledge that such delivery is in pursuance of a sale or other disposition. We revert to this question under the heading of 'Innocent Handlers' (paragraphs 45-60 below).
33. In paragraph 42 the Committee referred to the well-settled rule that, while it was not conversion merely to possess a chattel without title, receipt under a purported sale even if in good faith and without notice of an adverse claim, was a conversion. In paragraph 43 the Committee gave its view that there were good reasons for retaining that rule. It stated:
... we consider that the mere receipt under a purported sale should be regarded as a sufficient denial of the plaintiffs title and that a similar rule should be applied to other purported dispositions, including pledge, but subject to the principle that a bailee who has accounted for goods to his bailor should be exempt from liability to any other person.
34. I can now go to paragraphs 46 and 47 headed 'The Problem of the Innocent Handler'.
46. It is clear from the foregoing summary that there are many cases in which the existing law imposes liability in conversion upon an 'innocent handler' of goods (we here use that term, in contradistinction to an 'innocent acquirer', to denote someone who, without knowledge of any adverse interest and without purporting to assert a title, deals with goods as agent for another). But it is not entirely clear which acts of a handler will, and which will not, attract this liability. It has been said that a merely ministerial handling of goods at the request of an apparent owner having the actual control of them is not a conversion and that a handling is ministerial where it merely changes the position of the goods and not the property in them. It has been also suggested by Blackburn J in Hollins v. Fowler that the test to be applied is that 'one who deals with goods at the request of the person who has actual custody of them in the bona fide belief that the custodier is the true owner, or has the authority of the true owner, should be excused for what he does if the act is of such nature as would be excused if done by the authority of the person in possession, if he was the finder of goods or entrusted with their custody.
47. Where the handler, having received goods from an apparent owner and without knowledge of any adverse claim, merely re-delivers them to the same person, we consider that all the above tests can fairly be said to have been satisfied, and we think that the same applies where the handler delivers the goods at the direction of the apparent owner to a third party without knowledge of any adverse claim or that any question of title is involved. But difficulties arise where the handler has knowledge that a question of title is involved, as where the act he is required to do is to his knowledge in pursuance of a sale or other disposition by the apparent owner to a third party. In such a case, on the authority of National Mercantile Bank v. Rymill no liability attaches unless the defendant himself effected the sale as agent for the apparent owner; and, although the facts of that case hardly satisfy the test propounded by Blackburn, J. (whether the act done by the defendant can fairly be said to have changed no more that the position of the goods), we do not, on a balance of the conflicting considerations involved, recommend a statutory reversal of this decision.
35. The Report resulted in the Torts (Inference with Goods) Act 1977. There is nothing in the Act which affects the questions I have to decide save the provision in section 11 as to pledge, to which I will come.
36. In Willis & Son v. British Car Auctions Ltd [1978] 1 W.L.R. 438 the plaintiffs were the owners of a car let on hire purchase. The hirer delivered the car to the defendant auctioneers and they put it up for auction. A bid was made which was below the reserve. The defendants then operated their 'provisional bid' procedure. They asked the bidder whether he would stand on his bid and asked the hirer whether he would accept the bid if they lowered their commission. In that way the car was sold. It was held by the Court of Appeal affirming the judgment in the county court that the auctioneers were liable. Lord Denning referred to the problem faced by the law as to which of two innocent persons should suffer loss following a fraud, which is answered generally in English law by placing the loss on the innocent acquirer or handler. He stated that proposals for reform had been blocked by the decision in Hollins v. Fowler. He suggested that businessmen protect themselves today by insurance. He then turned at page 442 to the position of auctioneers:
Sales under the hammer
The position of auctioneers is typical. It is now, I think, well established that if an auctioneer sells goods by knocking down with his hammer at an auction and thereafter delivers them to the purchaser - then although he is only an agent - then if the vendor has no title to the goods, both the auctioneer and the purchaser are liable in conversion to the true owner, no matter how innocent the auctioneer may have been in handling the goods or the purchaser in acquiring them: see Barker v. Furlong [1891] 2 Ch. 172, 181 per Romer J. and Consolidated Co. v. Curtis & Son [1892] 1 QB 495. This state of the law has been considered by the Law Reform Committee in its 12th Report Transfer of Title to Chattels (1966), Cmnd. 2958, as to innocent acquirers (see paragraph 39 at to 'Liability of Auctioneers'); and in its 18th Report (Conversion and Detinue) (1971). Cmnd. 4774 as to innocent handlers: paragraphs 46-50. But Parliament has made no change in it: no doubt it would have done so in the Torts (Interference with Goods) Act 1977 if it had thought fit to do so.
Provisional Bids
Such is the position with sales 'under the hammer.' What about sales which follow a 'provisional bid'? I see no difference in principle. In each case the auctioneer is an intermediary who brings the two parties together and gets them to agree upon the price. They are bound by the conditions of sale which he has prepared. He retains the goods in his custody. He delivers them to the purchaser on being paid the price. He pays it over to the vendor and deducts his commission, So in principle, I think that on a 'provisional bid' an auctioneer is liable in conversion, just as when he sells under the hammer. There are two decisions, however, in which suggest a difference. Each followed a dictum of Bramwell LJ. in Cochrane v. Rymill (1879) 40 L.T.N.S 744, 746. One is the decision of the Court of Appeal in National Mercantile Bank v. Rymill (1881) 44 L.T.NS 767. The other is that of the Divisional Court in Turner v. Hockey (1887) 56 L.J.Q.B. 301. In those two cases it was held that the auctioneer was not liable in conversion, because he had not actually effected the sale. It had been made by the parties themselves. I doubt whether those decisions are correct. Although the auctioneer had not actually effected the sale, his intervention in each case was an efficient cause of the sale and he got his commission for what he did. To my mind those two decisions are a departure from the principles stated by Blackburn J in Hollins v. Fowler, L.R. 7 HL. 756, 766-767. That is the principle which should guide us, especially as it was inferentially accepted by the House of Lords. I cannot help thinking that in those two cases the courts were anxious to protect the auctioneer, as an innocent handler, from the strictness of the law. In doing so they introduced fine distinctions which are difficult to apply. I do not think we should follow those two cases today, especially when regard is had to the insurance aspect to which I now turn.
I underline that Lord Denning began by stating that both a sale and delivery were required for liability.
37. In a short judgment Roskill LJ stated that he found National Mercantile Bank v. Rymill hard to reconcile with the decision in Hollins v. Fowler, in particular the opinion of Blackburn J. He thought that Turner v. Hockey, if correctly reported, was wrongly decided.
38. Having analysed the facts Browne LJ concluded his judgment as follows, on page 445:
I am clearly of opinion that this car was sold by the auctioneers to Mr. Worth. Accordingly, they are in my judgment liable to the plaintiffs in conversion.
On my view of the facts, the difficult questions raised in argument do not arise, and I think it would be wrong to express any detailed conclusions about them which would be obiter. I will only say - (a) whether or not National Mercantile Bank v. Rymill 44 L.T.N.S. 767, was rightly decided, it is in my view clearly distinguishable from the present case on the facts; (b) I entirely agree with the criticisms of Turner v. Hockey, 56 L.J.Q.B. 301, made by Collins J. in Consolidated Co v. Curtis & Son [1892] 1 Q.B. 495, 502-503.
39. Professor Palmer submitted that what he referred to, as the rule or exception in Hollins v. Fowler concerning ministerial acts was obsolete. But he accepted that a carrier who accepted goods for carriage and delivered them to the consignor's order would not without more be liable for conversion. I think that in reality he had to accept that the 'rule' was still relevant today. His real submission, as it seemed to me, was that the facts here gave rise to a conversion and did not fall on what I might call the 'ministerial' side of the line. I use that word for convenience: I do not myself find it particularly helpful by way of description otherwise. Professor Palmer took me to a number of definitions or descriptions of conversion to be found in the authorities. As was stated by Lord Nicholls in Kuwait Airways Corporation v. Iraqi Airways Company [2002] UKHL 19 at paragraph 39 conversion of goods can occur in so many different circumstances that a precise definition of universal application is well nigh impossible. Lord Nicholls did then set out three basic features of the tort. The third was that 'the conduct was so extensive an encroachment on the rights of the owner as to exclude him from use and possession of the goods.' It is this element which is at issue here. The court have, however, come some way to answering it in the situations in which auctioneers may find themselves. Thus, it is clear that an auctioneer who receives goods from some one other than the true owner, who auctions them and delivers them to the purchaser, all in good faith, will be liable to the owner. Such conduct is an encroachment within the words of Lord Nicholls.
40. There is no decision in which an auctioneer has been held liable where there was not a sale with which he was involved, as a result of which delivery was made to a third party and the property in the goods purported to be passed. I use the expression 'involved' because it avoids any problem as to the correctness of the decisions in National Mercantile Bank v. Rymill and Turner v. Hockey. It was held in the Lancashire Waggon case that a sale by itself was insufficient to amount to a conversion: it must be combined with delivery. It may be appropriate to enlarge that to 'delivery to a third party purchaser with the intention of passing title'. That there must be a delivery with the intention of passing title was apparently the view of Baron Cleasby in Hollins v. Fowler, and of Brett J in that case in the Court of Exchequer Chamber. In each of National Mercantile Bank v. Rymill, Turner v. Hockey and Willis & Son v. British Car Auctions there was a sale and a delivery with the intention of passing title. The issue, which arose in those cases, was whether the involvement of the auctioneer in the sale was sufficient to render him liable. The Law Reform Committee recommended that National Mercantile Bank v. Rymill should continue to represent the law. It is a decision of the Court of Appeal and in Willis' case Roskill L.J. and Browne L.J., unlike Lord Denning did not state that the National Mercantile case should not be followed, though they had their doubts as to it. In my judgment, it is a proper deduction that all the judges in these cases, and also the Law Commission in its Report, considered that there must be a sale. The Report expressly stated that where the handler merely delivers the goods back to the same person there would be no conversion.
41. I deduce that there is a strong line of authority in the Court of Appeal that, for an auctioneer to be liable where he receives in good faith and without notice goods for auction from a non-owner, there must be a sale in which he is sufficiently involved followed by delivery to the purchaser. I am therefore so far against Professor Palmer's submission. So I would uphold the similar conclusion of Judge Hallgarten reached in paragraph 22 of his judgment.
42. Professor Palmer rightly said that the whole of the conduct of Christies had to be taken into account to see if it amounted to a conversion. He placed considerable emphasis on clause 7(c) of Christies' Conditions, which bars the sellers from withdrawing a lot and thus provides Christies with a right to retain possession of it until sale. He also emphasised the rights given by clause 9(d) in respect of unsold lots including a lien and a right of sale.
43. I will take the right of lien first. It is commonplace for an auctioneer to take such a lien. As long ago as 1788 in holding that an auctioneer could himself sue for the price of goods auctioned by him Lord Loughborough referred to an auctioneer having a lien at common law for his costs and commission: Williams v. Millington I H BL 81, cited in Woolfe v. Horne (1877) 2 QBD 355. The former case is cited in Halsbury's Laws, Volume 2, for the proposition that by the custom of their business, auctioneers have a lien on goods entrusted to them for sale for their charges and remuneration. The taking of a lien by contract cannot, in my view, affect the position as regards conversion as established in the authorities. For, given that in all cases the auctioneer would have a right at common law, it is immaterial.
44. Secondly it is clear that the lien here was never exercised against any one, let alone against Mr Marcq. Nor did a right to exercise the lien arise. For the right would only arise after a notice had been sent requiring collection. No such notice was sent by Christies here. Even if a right of lien had been exercised by Christies against Mr Schunemann. I think it doubtful whether that would amount to a conversion as against Mr Marcq: contrast Loeschman v. Muchin (above).
45. I do not consider that the fact that Christies took a right as against Mr Schunemann to refuse to permit the picture to be withdrawn prior to auction can by itself, or if added to the other circumstances, convert what would not otherwise be a conversion, into one.
46. It was the view of Judge Hallgarten, paragraphs 24, 30 and 31 of his judgment that what matters in conversion is not the taking of powers by a bailee against his consignor but their exercise. I agree. This can he demonstrated by the example of the right taken by Christies to refuse to allow Mr Schunemann to withdraw the picture. If he had tried to withdraw it and Christies had refused and put the picture up for auction and sold it and had delivered it to the purchaser, there would have been a conversion. But, if Christies had later relented and permitted the picture to be withdrawn, or had put it up for sale and it having failed to reach the reserve had returned it to Mr. Schunemann, there would not. So far as a lien in particular is concerned support for the proposition is to be found in the judgment of Millett J in Barclays Mercantile Business Finance Ltd v. Sibec Developments Ltd [1993] 2 All E.R. 195 at 199:
Demand is not an essential pre-condition of the tort in the sense that what is required is an overt act of withholding possession from the true owner. Such an act may consist of a refusal to deliver up the chattel on demand made, but it may be demonstrated by other conduct, for example by asserting a lien. Some positive act of withholding, however, is required; so that, absent any positive conduct on the part of the defendant, the plaintiff can establish a cause of action in conversion only by making a demand (My underlining).
47. I should lastly mention Professor Palmer's submission that the cases on auctioneers need now to be re-examined and in the light of modern conditions, particularly those of the art market. He submitted that it should be held there was a conversion in this case even if those authorities indicated otherwise. He did not persuade me of such a need. In my view the principles which have been applied in the auctioneer cases are of wider application and long established. If there is a conversion where the auctioneer sells and delivers the goods to a third party, and no conversion where he returns them to his consignor, the law is clear. Mr Palmer's submission that one must examine all the circumstances including in particular the terms, under which the auctioneer receives the goods, would leave an uncertain position. Professor Palmer's submission held that a lien with a right of sale which applied to the goods of the plaintiff held by the defendant was a pledge rather than a charge, and so the plaintiff company's administrator had no right to them. In Gunnedah Municipal Council v. New Zealand Loan & Mercantile Agency Company Limited [1963] NSWR 1229 the plaintiff slaughter house operators had a lien with a right of sale over hides which they held. The court found that they were pledgees and entitled to recover the proceeds of sale of the hides from a third party. In each of these cases the goods in dispute were subject to the immediate effect of the contractual terms held to amount to a pledge.
52. A party who takes possession of the goods of another and deals with them in a manner which would not amount to conversion will be liable for conversion nonetheless if he does not act in good faith and without notice. This was not in dispute before me. I can refer to the opinion of Blackburn J in Hollins v. Fowler and to Clerk & Lindsell, paragraph 14-80. There were, however, two areas of dispute: what was meant by 'good faith' and 'without notice', and was it for Mr Marcq as claimant to plead absence of good faith and the presence of notice in his particulars of claim?
53. Professor Palmer's position was that he did not allege bad faith against Christies but he did allege notice. His position as to notice was that notice included what could have been ascertained on reasonable enquiry. As it appears (though I do not hold) that Christies did enquire of the Art Loss Register by sending the catalogue listing it to the Register for checking whether the painting was on the Register, this may be a difficult case for him to establish on the facts: but I am not concerned with that on this appeal. He submitted that the burden was on Christies to establish both that they acted in good faith and without notice. Therefore, he submitted, Mr Marcq need not plead the contrary in his particulars of claim but could set up any positive case on which he wished to rely in a reply. Mr McCaughran submitted that notice meant actual notice or what I may abbreviate as 'shut eye' notice. He submitted that the burden was on Mr Marcq to establish notice. He submitted that, whether or not he was right about that, under modern procedure a claimant should set out his case in the particulars of claim, where the defendant could respond to it.
54. I was not addressed on the distinction between absence of good faith and the presence of notice. Although they are usually treated separately, it seems to me that the one may truly be the converse of the other.
55. Judge Hallgarten held (paragraph 39) that it was for the true owner to establish that a bailee was not acting in good faith or had notice. He distinguished the positions under section 2 of the Factors Act 1889 and under sections 24 and 25 of the Sale of Goods Act 1979, where in each case the equivalent burden is on the purchaser rather than the true owner, on the ground that those sections extended to purchasers title and defences where there would otherwise be none. Here, he said, Christies were merely returning the painting to their client: they did not need to show their good faith. He stated in paragraph 41 that, if he had been with the claimant on burden of proof, he would have required a properly particularised reply.
56. In addition to the sections to which I have referred Professor Palmer relied by analogy on sections 3 and 4 of the Limitation Act 1980, and on the law that a bailee who has lost or damaged goods has the burden of explaining their loss and rebutting negligence. In all of these situations the purchaser or bailee has the knowledge of what occurred and how he came to do what he did. The owner does not. That is the justification for placing the onus on him. Professor Palmer submitted that this was also the position here.
57. I should mention Whitehorn Brothers v. Davison [1911] 1 K.B. 463 where the Court of Appeal held that under the predecessor of section 23 of the Sale of Goods Act (sale under a voidable title) the burden lay on the true owner to show bad faith or notice. The decision has been criticised: see Benjamin's Sale of Goods, 4th edition, paragraph 7-031.
58. In my view the analogy with factor and sale of goods situations is a close one. There is also now the following passage of Lord Nicholls in paragraph 103 of the Kuwait Airways case:
You deal with goods at the risk of discovering later that, unbeknown to you, you have not acquired a good title. That is the strict common law principle. The risk is that, should you not have acquired title, you will be liable to the owner for the losses he can expect to have suffered as a result of the misappropriation of his goods. That seems the preferable approach, in the case of a person who can prove that he acted in the genuine belief the goods were his. A person in possession of goods knows where and how he acquired them. It is up to him to establish that he was innocent of any knowing wrongdoing. This is the approach Parliament has taken in section 4 of the Limitation Act 1980.
59. In my judgment it is in accordance with principle and leads to consistency to hold that the burden is here on Christies to establish that they dealt with the picture in good faith and without notice. On this I differ from Judge Hallgarten.
60. As to the pleading, I think it desirable that a claimant should plead in his particulars of claim what his case is. He can do so stating that it is without prejudice to the burden of proof. There is then a better chance that in setting out the defendant's case the defence will then deal with the real issues between the parties. If that would today be desirable, there is no rule to that effect. The established position set out in Spurling v. Bradshaw [1956] 2 All E.R. 121 at 125: 'A bailor by pleading and presenting his case properly can always put the burden of proof on the bailee. In a case of non-delivery, for instance, all he need plead is the contract and a failure to deliver on demand.' I do not think that a claimant can today be held at fault for keeping his positive case to his reply.
61. I heard submissions as to what was involved in the concept of notice in this context. I was referred in particular to Feuer Leather Corporation v. Frank Johnstone & Sons [1981] Com. L.R. 251. There Neill J. was concerned with whether a parcel of leather had been bought in breach of trust and without notice of breach of trust or breach of duty. He held that the court was concerned with actual and not constructive notice and set out a number of indicia. I note the definition of good faith in section 61(3) of the Sale of Goods Act 1979 - 'A thing is deemed to be done in good faith within the meaning of this Act when it is in fact done honestly, whether it is in fact done negligently or not.' That is a codification of the common law - Benjamin's Sale of Goods, 4th edition, paragraph 7-049 and the authorities collected there including Feuer, as to the meaning of notice, which may be applicable also to the area under consideration in the appeal. The paragraph begins:
It is submitted that, in the context of the Factors Act 1889 and of the Sale of Goods Act 1979, 'notice' of a fact prima facie means actual knowledge of that fact. But as was pointed out by Lord Tenterden in Evans v. Trueman (1830) 1 Moody & R 10 at 12: 'A person may have knowledge of a fact either by direct communication, or by being aware of circumstances which must lead a reasonable man applying his mind to them, and judging from them, to the conclusion that the fact is so. Knowledge acquired in either of these ways is enough, I think, to exclude a party from the benefit of the provisions of this statute: a slight suspicion, I think, will not ...'
62. Applying that test, it may be asked: what is it that Christies actually knew which might have led them to sufficient knowledge that the painting was, or might be, stolen. It is not easy to give a positive answer to that question.
63. As has been stated, Mr Marcq's case as to notice has yet to be pleaded. Mr McCaughran submitted that there were no matters that could be pleaded on Mr Marcq's behalf to rebut Christies' case and to build a positive case as to notice. When I asked him during his reply to Mr McCaughran's submissions, the only point which Professor Palmer advanced was that Christies should have made an enquiry of the Register on receipt of the picture and prior to cataloguing the picture and sending the catalogue to the Register. As the foundation for an allegation of notice, this seems to me to bound to fail. Christies knew there was a register. It was not open to them to check the Register themselves. Without considering its justification I will assume in Mr Marcq's favour that, if Christies had not enquired of the Register, they could not say they did not have notice of what was on it. Nonetheless it appears that they did enquire and received a negative answer. If so, I do not see that an earlier check would have made any difference.
64. On the basis of what Professor Palmer had said in his reply, as originally drafted this judgment provided for the action to be dismissed. When, however, the time came to deliver it Professor Palmer told me that there were two further points on which the claimant relied. One was that is not established that Christies did in fact send the catalogue to the Register. The other is that the name of the picture given in the catalogue was different to that which had been applied to it previously. I do not consider that I am in a position to decide these points on this appeal. I have reluctantly decided that I should not dismiss the action but should give the claimant 21 days to make an application to Judge Hallgarten for permission to serve a reply out of time, the draft reply to he annexed to the application, and that if no such application is made the action stand dismissed.
65. Professor Palmer submitted that Christies were to be treated as the bailees of Mr Marcq and so were under the duties of a bailee. He said that they were in the position of a finder or an unconscious bailee. Mr McCaughran's answer was that as Christies had no knowledge of the existence of Mr Marcq, they were not his bailees and owed no duty to him. He submitted that Christies were the bailees of Mr Schunemann only. He said that this was not to he treated as equivalent to the position where there is a bailment and sub-bailment, where the sub-bailee is found to owe duties to the bailor, for, he said, it is essential to the existence of such duties that the sub-bailee has some knowledge of the existence of the bailor, even if he does not know his identity.
66. Judge Hallgarten dealt with these submissions quite shortly, rejecting those made on behalf of Mr. Marcq (paragraph 44 of his judgment). I think that he was right. For otherwise, as Mr McCaughran submitted, the law of bailment and conversion would he quite different. Sufficient authority can be found in the judgment of the Privy Council given by Lord Goff in the Pioneer Container [1994] 2 AC. 324 at 342:
Their Lordships wish to add that this conclusion, which flows from the decisions in Morris v. C W Martin & Sons Ltd [1966] 1 Q.B. 716 and the Gilchrist Watt case [1970] 1 W.L.R. 1262, produces a result which in their opinion is both principled and just. They incline to the opinion that a sub-bailee can only be said or these purposes to have voluntarily taken into his possession the goods of another if he has sufficient notice that a person other than the bailee is interested in the goods so that it can properly be said that (in addition to his duties to the bailee) he has by taking the goods into his custody, assumed towards that other person the responsibility for the goods which is characteristic of a bailee. This they believe to be the underlying principle. Moreover, their Lordships do not consider this principle to impose obligations on the sub-bailee which are onerous or unfair, once it is recognised that he can invoke against the owner terms of the sub-bailment which the owner has actually (expressly or impliedly) or even ostensibly authorised. In the last resort the sub-bailee may, if necessary and appropriate, be able to invoke against the bailee the principle of warranty of authority.
67. I therefore consider that the case is to be described in accordance with the principles set out in Hollins v. Fowler and developed in the subsequent cases.
68. Professor Palmer relied on AVX Ltd v. EGM Solders Ltd, 7 July 1982, Staughton J., unreported. I do not find the case helpful as it deals with a very different factual position to that here. EGM received back from AVX some defective solder sold by it to AVX. With the solder EGM also received by mistake some capacitors manufactured by AVX. EGM destroyed the whole delivery. Staughton J. held that EGM were unconscious bailees of the capacitors and owed a duty to exercise a sufficient duty of care to ascertain that the goods to be destroyed were truly EGM's. Here Christies received the picture in good faith from Mr. Schunemann. He was their bailor. They had no knowledge of Mr. Marcq. They returned the picture to Mr. Schunemann.
69. I would hold that the Judge was right on all matters save as to the burden of proof in connection with the issue of good faith and notice. As set out in paragraph 64 there will be an order that the claimant apply to the Inner London County Court within 21 days for permission to serve a reply out of time, and that otherwise the action stand dismissed.