Ever heard of the saying “finders keepers, losers weepers”?
In the real world, “finders” may not get to be keepers and may even risk getting sued under the tort of conversion.
A tort of conversion exists where a person takes goods that rightfully belongs to another and treats it as if it were his own.
A formal definition is found in Osborn’s Concise Law Dictionary (7th Ed) which writes “conversion is a tort, committed by a person who deals with chattels not belonging to him in a manner inconsistent with the rights of the owner.”
The definition above was cited in the Federal Court in Director of Forests & Anor v Mau Kam Tong & Mau Kim Siong (the executors of the estate of Mau Ying, deceased) & Anor and Another Appeal [2010] 3 MLJ 509.
When does “conversion” occur?
A conversion is said to exist when there is a “lack of mandate or authorization before the goods of another are taken, detained, sold or dealt with in such manner as to usurp the rights, title, ownership or possession of the other.”, per Mary Lim JCA in the Court of Appeal decision of OSK Trustees Bhd (as trustees for Sunway Real Estate Investment Trust) & Anor v Metroplex Holdings Sdn Bhd [2020] 3 MLJ 358.
According to the textbook “Halsbury’s Laws of Malaysia”, conversion exists in three forms:
- The first form consists of a positive wrongful act of dealing with the goods in a way which is inconsistent with the rights of the owner, and an intention in so doing to deny the owner’s rights or to assert a right inconsistent with them. It is important to note that the said intention is not pertaining to the wrongdoer’s knowledge that the goods belongs to someone else but the intention to deal with the goods as if it were his own.
- The second form of conversion relates to the defendant wrongfully detaining the goods of the plaintiff. Wrongful detention is usually established where the plaintiff makes a demand for the return of the goods and the defendant refuses to comply within reasonable time.
- The third form of conversion is committed where goods are wrongfully disposed of by the defendant. Wrongful disposal occurs where there is a sale or auction of the goods belonging to the plaintiff.
What must be proven to commence an action under the tort of conversion?
The Court of Appeal in Director of Forests & Anor v Mau Kam Tong & Mau Kim Siong (the executors of the estate of Mau Ming, deceased) & Anor and another appeal [2010] 3 MLJ 509 found that the trial judge erred in holding that to sustain a claim under the tort of conversion, it was not essential for a claimant to establish that it was the true owner of the goods but mere possession would suffice.
What does this mean?
In order to sustain a claim under the tort of conversion, a plaintiff must prove that he/she had ownership rights over the goods.
It is important to note that a plaintiff must have possessory right over goods and not mere ownership.
This principle is founded in the Halsbury’s Laws of Malaysia (Vol 5) at paragraph 80.468:
“To sustain a claim founded in conversion the claimant must show that he had either possession, or an immediate right to possession, of the chattel at the material time of the act. Either relationship with the chattel would provide the claimant with the required possessory title to support the action in conversion.”
Moving on, we now look into how the courts determine the measure of damages under the tort of conversion.
Damages
[1] The Burden of Proof
The burden of proving the loss suffered lies with the plaintiff, that is the person seeking damages for the tort of conversion.
In Mary J Lim JCA in Joseph Paulus Lantip v Tnio Chee Chang and another appeal [2020] 5 MLJ 708, at paragraph 65 said:
“As for the tort of conversion, damages would be compensatory, the burden would be on the plaintiff to prove what his profits were.”
[2] How are damages measured?
As a general rule, the damages awarded under the tort of conversion is the market value of the goods at the time where the wrongdoer expropriated them.
This principle was adumbrated by SM Komathy JC in Chin Wooi Keat v Isberg Corp Sdn Bhd (in receivership) & Anor [2014] 10 MLJ 1.
His Lordship went further to consider the measure of damages where goods taken have been returned, which can be summarized in the following points:
- The owner of the goods would be able to recover the damages suffered as a result of a wrongful act, that is the losses flowing directly from the act of conversion; and
- The owner would also be entitled to the difference in the market value at the time of the conversion and the time when the goods were returned, i.e. value of the goods at the time of conversion – value of the goods when returned
[3] Case examples of the measure of damages awarded by the Court
In Kemajuan Kuari (M) Sdn Bhd v Ptb Suramix Sdn Bhd [2015] MLJU 1018, Abdul Rahman Sebli JCA awarded damages of the market value of armour rocks and rock by-products whereby the prices and value of the rocks had been substantiated by a Quantity Surveyor which was supported by a report drawn up.
In the English case of Sajan Singh v Sardara Ali [1960] 1 All ER 269, the subject matter was for the sale of a lorry and the court held that the plaintiff was entitled to an order for the return of the vehicle and for the value of the lorry at the time it was seized.
In the aforementioned case of Chin Wooi Keat v Isberg Corp Sdn Bhd (in receivership) & Anor [2014] 10 MLJ 1, the machinery being claimed by the plaintiff was returned however, the court held that the plaintiff was entitled to the deterioration of the machinery while it was retained by the defendant.
Further, the plaintiff had adduced evidence to show that the machinery had to be sold for scrap metal as it was in an irreparable state. The plaintiff was entitled to recover for: (i) the fall in the value of the machinery, (ii) loss of use, and (iii) loss of spare parts.
Conclusion
The principles on the tort of conversion are strict however they are applied consistently whereby an action lies only where it can be proved that a plaintiff has possession or a right to immediate possession of the goods in question.
However it should be appreciated that in certain cases, an owner who does not have possession of goods at the time of conversion may run into difficulties satisfying a claim of conversion.
The justification for the above is that the tort of conversion is intended to protect property hence a defendant need only disprove a plaintiff’s claim of actual possession or immediate possession. This was opined in OSK Trustees Bhd (as trustees for Sunway Real Estate Investment Trust) & Anor v Metroplex Holdings Sdn Bhd [2020] 3 MLJ 358 at paragraph 40.
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