Mr Justice Henderson :
Introduction
- This is an application by the claimant Calor Gas Limited ("Calor") for an interim injunction restraining the defendant Homebase Limited ("Homebase") from alleged wrongful handling of and interference with Calor's gas cylinders when they are brought to Homebase stores by customers. The question arises in the context of the recent termination by Homebase of its contract with Calor for the supply of liquefied petroleum gas ("LPG"), and the entry by Homebase into a replacement contract for the supply of LPG with BP.
- The action was begun by a claim form issued on 12 March 2007. The first head of relief sought in the Particulars of Claim is an order restraining Homebase from:
"receiving, retaining, offering to receive, retain or otherwise dealing in or disposing of any LPG container or containers which are the property of [Calor] or in any other manner wrongfully interfering with [Calor's] property namely its refillable LPG cylinders."
By an application notice also dated 12 March 2007 Calor gave notice of its intention to seek an interim injunction on a quia timet basis, in essentially the same terms, until trial or further order, together with an order that Homebase should provide Calor with details of all LPG cylinders belonging to Calor received by Homebase since 23 February 2007, that being the agreed effective date of termination of the previous trading agreement between the two companies.
- On 22 March 2007 Calor amended its claim to include allegations of unlawful interference by Homebase with the contractual relations between Calor and its customers embodied in the Cylinder Refill Authority Form (generally known as "Form 167"), which Calor has for many years required to be filled in and signed by any customer who wishes to purchase LPG in a Calor cylinder.
- On 16 March 2007 Calor's application for an interim injunction came before Lindsay J, who gave directions for the expedited hearing of the application on the first available date after 30 March with a time estimate of one day. Homebase also gave an undertaking to Calor (but not to the Court) to keep a record until judgment in the action (unless otherwise agreed in the meantime) of all Calor's LPG cylinders coming into its possession, custody or control, and (when reasonably practicable) of the name and address of any person delivering such cylinders to Homebase.
- In the event, Calor's application did not come on for hearing until 30 April 2007, when I heard argument on it which continued well into the following day when I reserved judgment. I also received some supplementary written submissions from Counsel for Homebase, Mr Guy Tritton, on 3 May to which Counsel for Calor, Mr Jon Turner QC and Mr Ashley Roughton, replied on 4 May.
- I record my gratitude to Counsel on each side for their excellent arguments.
- Written evidence in support of the application was given by Mr David Bain, a solicitor in sole practice engaged by Calor as a consultant who has had conduct of the file relating to Homebase, and by Mr Roger Marshall, who is employed by Calor as an investigator and has acted in that capacity in the LPG industry for some 25 years. Homebase's main evidence in answer was contained in two witness statements of Mr Shaun McCabe, who is Homebase's head of trading finance. In addition, Homebase rely on a witness statement of Emma Anne Bishop, a trainee solicitor at Homebase's solicitors Burges Salmon LLP, giving evidence of a small survey which she assisted the employees at Homebase's store in Bath to carry out on Saturday, 14 April 2007. The evidence before me was completed by a second witness statement of Mr Bain served in reply to the evidence of Mr McCabe and Ms Bishop.
The Facts
- The basic facts are not in dispute, and are briefly as follows.
- Calor gas will need no introduction to most readers of this judgment. Calor is the principal operating company in the Calor group. Since 1936 it has carried on the business of supplying LPG (butane and propane) in refillable cylinders of various sizes. The cylinders are in Calor's livery and bear Calor's markings and trademarks. Calor makes its supplies in the UK through 55 Calor Centres, which it owns, about 700 dealers with whom it has entered into agreements, and approximately 9,000 approved retailers. In addition, Calor appoints certain national retailers who supply Calor cylinders to the public as part of and incidental to a larger business, such as garden centres or the supply of household items or hardware. Until Homebase terminated its agreement with Calor on 23 February 2007, it was one such national retailer.
- Like Calor, Homebase is a household name in the UK. It operates approximately 300 large, out-of-town stores offering a range of over 30,000 products in the home enhancement market. The product range includes gardening and "outdoor living" products, which in turn include gas barbecues and patio heaters, both of which are powered by LPG. When customers buy these products, they will typically make a purchase at the same time of LPG in a refillable bottle so that when they get home they can immediately start using the product. Homebase's sales of bottled gas for social and domestic use in the UK exceed £4 million per annum. Homebase's total sales of all products for the year ending 31 March 2006 were in excess of £1.5 billion and yielded an operating profit of some £52 million.
- A member of the public who wishes to buy LPG in a Calor cylinder must first complete and sign a Form 167. Under the Form 167 agreement, the end user makes a one-off payment (currently £29.99) for Calor's permission to be in possession of and to use the cylinder. Thereafter he pays only for the LPG which he consumes. When the end user wants more LPG he can go to any authorised Calor dealer or retailer, or a Calor Centre, and exchange his empty cylinder for a full one, paying only for the LPG. If he does not want a refill, he may return the empty cylinder and upon production of his copy of the Form 167 he is entitled to receive a refund of part of the initial charge, which is calculated on a sliding scale according to the length of time since the agreement was entered into.
- The Form 167 has been in substantially the same terms for several decades. The versions of it used by Homebase, for the supply of "Patio Gas" for patio heaters and the supply of butane gas for barbecues, all contain the same standard terms and conditions. In these terms Calor is defined as "the Company", and "Calor outlet" means Calor Centres, dealers, retailers, stockists or other supply points approved by Calor. Condition 1 provides that in consideration of the refill agreement charge (which in the case of Homebase was £24.99 at the time when its agreement with Calor was terminated) Calor agrees to refill the cylinder with gas during the currency of the agreement, and says that it will normally fulfil this obligation by providing the user with a pre-filled cylinder in exchange for the empty one. Condition 2 records the user's understanding that future supplies of gas will be paid for at the prevailing rate as and when the cylinder is refilled pursuant to Condition 1.
- Conditions 3, 5 and 7 are important, and provide relevantly as follows:
"3. Cylinders remain the property of the Company at all times and may only be filled by the Company. The Company makes the Cylinder(s) available to the User as a means of safely transporting and storing the Gas supplied. This agreement is not a rental agreement and it does not provide the User with title in the Cylinder. The User will not part with possession or control of the Cylinders (other than to a Calor outlet) nor claim to have rights in breach of this agreement, nor claim or attempt to create or create any agency or bailment in relation to the Cylinders or the User's obligations.
5. The Company's rights over the Cylinders. The User is liable for the safe storage and use of Cylinders and the safety of any equipment used with them but the Company may inspect or test Cylinders and any fittings used with them at any time and remove and replace Cylinders if defective, or for any other reason, but without the Company being under any obligation to do so. In any case of wilful damage or breach of this agreement the Company may repossess Cylinders immediately and the User by entering into this agreement irrevocably authorises the Company or their agent to enter on the User's property for these purposes and in that event this agreement is terminated
7. Termination by the User. This agreement remains in force for 50 years. The User may terminate this agreement by returning the Cylinder(s) in good order to a Calor outlet nominated for this purpose and shall be entitled on presenting this agreement to a refund of a proportion of the Refill Agreement Charge as follows [details are then given of the refund on a sliding scale which starts at 70% for cylinders returned within one year from the date of the agreement, and reduces to 25% for cylinders returned more than seven years from the date of the agreement]."
- As appears from the conditions quoted above, Calor retains ownership of the cylinders at all times. This is standard practice in the LPG industry, both for safety reasons (which Mr Marshall elaborates in his evidence) and because the cylinders are valuable assets which represent a major part of the supplier's working capital. There are approximately thirteen million Calor cylinders in circulation in the UK, with an estimated current replacement value of at least £200 million. As well as retaining ownership of the cylinders, Calor also has the right under condition 5 to inspect or test them at any time, and to repossess them immediately upon any breach of the agreement.
- It will be noted that under condition 7 the user may terminate the agreement by returning the cylinder to a "Calor outlet", which by virtue of the definition of that term must be an outlet approved by Calor. In addition, condition 7 requires the outlet to be one that Calor has nominated for the purpose of accepting such returns. Although condition 3 provides in apparently unqualified terms that the user may not create any agency or bailment in relation to the cylinders, it is in my judgment plain that the user is not required to return a cylinder to an approved Calor outlet under condition 7 in person, and Counsel for Calor realistically accepted that any reasonable means could be used for that purpose. Indeed, the Court of Appeal (Eveleigh and Fox LJJ) said as much in Calor Gas Limited v Manchester Bottled Gas and others (24 July 1984, unreported), when they referred to the difficulty that an elderly customer might have in returning a cylinder herself and said
"we do not think that the agreement requires that to be done. In our opinion it permits, or obliges, the customer to return the cylinder by means that are reasonable in the context of the whole agreement."
It is true that the wording considered by the Court of Appeal in that case was not in all respects the same as in more recent versions of Form 167, but the wording of condition 7 was substantially similar and in my judgment the same qualification must be implied in order to give the term business efficacy.
- Calor began to supply Homebase with LPG in or about 1996. There has never been any "umbrella" supply contract governing the terms of trade between the two companies. At first, Homebase accepted empty cylinders and gave refunds to customers who wished to return them without making a fresh purchase of gas. However, in 2002 Homebase introduced a new customer accounting system and (at least in general) stopped issuing refunds. Instead, customers would be referred to another authorised Calor outlet if they wished to obtain a refund. So, for example, in 2006 Homebase issued internal guidance to their staff which stated that "Homebase no longer refunds empty cylinders", and gave a Calor number that customers should be told to contact in order to find their nearest nominated Calor outlet.
- On 22 December 2006 Homebase gave written notice to Calor terminating the current contract for the supply of LPG in England, Scotland and Wales, and stating that the contract would cease on 16 February 2007, that being the last provisional date for delivery by Calor to Homebase stores. The letter made it clear that the termination would also extend to the supply of gas by Calor for use in Homebase's own store forklift trucks. The termination date was later postponed by agreement for one week to 23 February 2007.
- The termination was accepted by Calor. Various matters arising out of the termination needed to be discussed, and meetings and negotiations ensued in the course of which Calor repeatedly made it clear that Homebase was not to handle Calor's cylinders after the date of termination. For example, on 16 January 2007 Mr Bain sent an email to Mr Christopher Chick of Homebase confirming that upon termination of the agreement Homebase would no longer be entitled to "provide, issue, handle, exchange or in any way deal with" any Calor cylinders, and saying that any customers bringing cylinders to Homebase premises after that date "must be advised that cylinders cannot be accepted by you and should be either retained
or returned to an authorised outlet". This message was repeated in a letter sent by Mr Bain to Mr Chick on the following day, and on several subsequent occasions including a letter dated 15 February 2007 from Calor's solicitors to Homebase's solicitors which said:
"In the circumstances, we must reiterate quite clearly that the acceptance, supply or handling of Calor cylinders by your client must cease on the termination of the agreement on 23 February."
- Homebase questioned the legal basis on which Calor purported to forbid the handling of its cylinders post-termination, and eventually made a deliberate decision to disregard Calor's wishes. As Mr McCabe says in paragraph 42 of his first witness statement:
"In the event, and despite the objections raised by Calor, Homebase decided that it would continue handling Calor cylinders post-termination, as recorded in the internal memo exhibited at DB7. As the memo records, this decision was taken in the interests of maintaining customer service."
- A copy of the internal memorandum to which Mr McCabe refers had come into Calor's possession and was exhibited to Mr Bain's first witness statement in support of the application for an injunction. It leaves no room for doubt about Homebase's intentions. The memorandum begins by saying
"Homebase has decided to continue accepting Calor bottles as returns in order to maintain customer service."
It then sets out the steps to be followed when (a) the customer wishes to terminate his agreement with Calor and obtain a refund, and (b) when he wishes to return the cylinder and obtain more gas. In situation (a), staff are told to inform the customer that "we no longer deal with Calor and do not supply their products", but "we can accept the bottle back and refund them their deposit if they have the original paperwork". The customer is then to be given a refund, and the bottle is to be taken "to our secure holding area". In situation (b), staff are again told to inform the customer that Homebase no longer deal with Calor and do not supply their products, but "we do however offer a same product, supplied by BP which works in the same way", and "in order to offer great customer service, if the customer changes to BP from Calor, we will take the Calor bottle back and discount their gas purchase by £20." A note then states that the purpose of this is to ensure that the customer is only paying for the gas refill element, just as he would if he had obtained a Calor refill. Customers in this category are to be given a new BP bottle, and a new Cylinder Refill Agreement with BP to fill in. The customer's old Calor bottle is again to be taken to the secure holding area.
- With regard to the storage of Calor cylinders, the memorandum emphasises the need to handle them correctly and safely, and says that they can be stored within Calor cages used for forklift truck ("FLT") gas or in bottle cages supplied by BP. The reference to Calor cages for FLT gas reflects the fact that a fresh agreement was under negotiation between Calor and Homebase for the continued supply of such gas to Homebase as an end user, notwithstanding the termination of the previous agreement.
- On 28 February 2007, after Calor had discovered Homebase's memorandum, its solicitors sent a letter before action seeking a written undertaking that Homebase would not handle Calor's cylinders, and warning that otherwise it would issue proceedings and apply for an interim injunction. As I have already said, the proceedings were issued on 12 March 2007.
- In his second witness statement, Mr McCabe gives details of two further sets of internal instructions issued to Homebase staff since termination of the agreement. The first is a store training pack which was issued on 2 March and remained in force until at least 14 April 2007. It takes the form of a series of slides. Under the heading "What are we doing to keep refill customers?", slide 14 says this:
"Customers who come into store with an empty gas bottle will be expecting to be able to refill with Calor.
If we did not offer a swap or made it more expensive these customers would go to other outlets.
Stores will be provided with a discount code for £20 to discount the cost of a new hire when a customer comes in with the empty Calor bottle for a refill.
Customers will only then pay for the Gas and a small part of the new bottle hire.
The customer have [sic] to bring the Calor bottle with them to receive the discount as a refill customer."
A note at the foot of the slide emphasises that this offer is only for refill customers. Slide 15 is headed "What are we doing to keep Homebase customers?", and refers to the provision of incentive vouchers for such customers saying "Changing to BP will not cost any more than staying with Calor", and referring to the "simple changeover process".
- Slide 16 is headed in capital letters "IMPORTANT ALL STAFF TO READ". It provides as follows:
"Calor have requested that all UK stores (that sell gas) do not handle their bottles now that we have finished trading with them as they remain the property of Calor.
Homebase have decided to assist the customer, taking bottles back and returning them to Calor on the customer's behalf.
When handling customers with a Calor bottle returning for a refill/return, please ensure that you use the following wording
To Customer "Homebase is no longer an authorised Calor outlet and, as such, is not authorised to accept Calor cylinders. Phone the Freephone Calor number
and they will collect the cylinder from your home. However, if that is inconvenient for you we will return it to Calor on your behalf provided you contact Calor and advise them that the cylinder is available for collection from this store."
To Calor "A customer has returned a Calor cylinder(s) at our
Homebase store. We asked them to advise you that they have left it on our premises. They have asked Homebase to return it to Calor on their behalf can you please come and collect it as soon as possible. Thank you." "
A note at the foot of slide 16 repeats that stores should ensure that they also contact Calor to say that a bottle has been left at the store by a customer "just in case the customer failed to get through/forgot".
- Slides 17 and 18 then deal with the procedure to be followed when (a) the customer returns a Calor cylinder and wishes to obtain a refund, and (b) the customer returns the cylinder but wishes to buy more gas. In the former situation, staff are instructed to give the customer a refund if the cylinder is in good order and the customer has the original Form 167. In the second situation, staff are told to explain to the customer that Homebase no longer deal with Calor, but sell BP gas instead and, because the customer has a Calor cylinder, Homebase will give him a discount of £20 on the combined BP price for a new bottle and gas.
- On 14 April 2007 Homebase distributed an updated training pack which contained some inaccurate figures and was then revised on 17 April. The main difference from the previous version of the training pack is that the customer returning with a Calor cylinder is now to be told that he can buy a BP cylinder and gas for £19.95 or £24.95 depending on the size of the cylinder, and staff are instructed "IMPORTANT: do not tell the customer that there is a discount". However, this was not a change of any substance. As Mr McCabe says, this is "essentially the same as if [the customer] was offered the £20 discount but focuses on the price paid by the customer rather than the discount message". In other respects, the revised training pack differs in some points of detail from its predecessor, but the essential features are the same, and in particular the form of words to be used to a customer who wishes to obtain a refill and leave his Calor cylinder is the same as before. Likewise, staff are still instructed to give a refund to any customer who does not want a refill, who has a Calor cylinder with him, and who also has his Form 167.
Wrongful interference with goods
- Against this background, Calor's primary submission is that this is a plain and obvious case of wrongful interference by Homebase with Calor's goods, and Homebase has no arguable defence to the action. An injunction should therefore be granted as of course to restrain the conduct complained of.
- On the facts, submits Mr Turner QC, Calor retains the property in its cylinders, for good business reasons, and has made an express agreement with end users in the Form 167 that they are not to part with possession or control of the cylinders other than to a Calor outlet. Homebase ceased to be a Calor outlet on 23 February 2007. Furthermore, Calor has at all material times had a right to immediate possession of the cylinders by virtue of conditions 3 and 5 in the Form 167. Homebase is well aware of these matters, and has been specifically warned by Calor on several occasions not to receive or handle its cylinders after the termination date. Nevertheless, Homebase has made a deliberate choice to deal with the cylinders in a manner which is inconsistent with, and denies, Calor's rights. Instead of the customer either arranging for collection of the cylinder by Calor, by calling the specified telephone number, or taking it to a Calor centre, dealer or stockist, the customer accepts Homebase's express offer to take possession of the empty cylinder if that is "convenient". Furthermore, the offer by Homebase is in practice part and parcel of a "swap" transaction under which the customer is allowed to buy a new BP cylinder at a reduced price.
- On the law, Mr Turner submits that Homebase is clearly liable both for conversion of the cylinders and for trespass to Calor's goods. Taking conversion first, it is well established that a person has title to sue for conversion where, at the time of the conversion, he had either actual possession of the property in question or the immediate right to possess it: see Clerk & Lindsell on Torts, nineteenth edition, para 17-40. As to the substance of the tort, Mr Turner relies on Clerk & Lindsell, paras 17-09 and 17-10, and the principle that any unauthorised receipt or dealing with a person's goods with the intention of asserting some right or dominion over them, or in a manner inconsistent with the right of the true owner, will prima facie constitute conversion. He relies in particular on Lancashire and Yorkshire Railway v MacNicoll (1919) 88 LJKB 601 where Atkin J referred at 610 to conversion as:
"dealing with goods in a manner inconsistent with the rights of the true owner
provided that it is also established that 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."
- So far as trespass is concerned, Mr Turner again relies on Calor's right to immediate possession of the cylinders as giving Calor the necessary title to sue, at any rate once the customer has given up possession of the cylinder to Homebase and the bailment of the cylinder to him is at an end. It is true that, whereas as action in conversion is founded on property, an action in trespass is founded on possession: see Clerk & Lindsell at para 17-128. However, there are various exceptions to this rule, one of which is that, where a bailment is determinable at will, the bailor retains sufficient possession to enable him to sue third parties: ibid, citing Nicolls v Bastard (1835) 2 C.M. & R. 659. Mr Turner also referred me to the speech of Earl Jowitt in USA and Republic of France v Dollfus Mieg [1952] AC 582 at 605, where he said:
"Under English law, where there is a simple contract of bailment at will the possession of the goods bailed passes to the bailee. The bailor has in such a case the right to immediate possession, and by reason of this right can exercise those possessory remedies which are available to the possessor. The person having the right to immediate possession is, however, frequently referred to in English law as being the "possessor" in truth the English law has never worked out a completely logical and exhaustive definition of "possession". "
- The circumstances of the present case, submits Mr Turner, are that Homebase is not a mere passive and unwilling recipient of Calor cylinders. On the contrary, Homebase has made a clear business decision to continue receiving and handling Calor cylinders against the wishes of the owner of the property. The case is therefore materially identical to the decision of Mr Justice Walton in Calor Gas Limited v DIY Motor Caravan Centre Ltd and another (25 January 1985, unreported). That case also involved a former Calor dealer, which sought to argue, after termination, that it could lawfully receive Calor cylinders as agent for the end user, for the sole purpose of returning them forthwith to Calor. Mr Justice Walton rejected that argument as an artifice.
- Having pointed out on page 2 of the transcript that the effect of Form 167 is that the cylinders remain the property of Calor at all times, and that the real dispute between the parties related to the retention of customers, Walton J stated the question before him on page 7 as follows:
"Now the question is, in spite of the fact that the [Form 167] says that when the customer wishes to terminate his authority he must return the cylinder to a Calor centre, dealer or stockist, is he entitled to disregard those provisions entirely and return it to a person who is not, although he has once been, a Calor centre, dealer or stockist? I would have thought, put in that way, there can only be one answer to the question, namely No. The whole idea of the relevant clause is that you must go back to somebody who has a connection with Calor, and you must not go with your Calor cylinder to somebody who has not a connection with Calor. But then the matter becomes more complicated because, although under the terms and conditions of the agreement the customer has to remain in full possession, and so on and so forth, of the cylinder, it is I think quite obvious that there could be no objection in law to the customer returning the cylinder via other persons
"
Having given some examples of circumstances in which it would be clearly be reasonable for a customer to return a cylinder by entrusting it to a carrier, or an agent, the learned judge went on to consider whether it was possible for the customer to appoint the former Calor dealer or stockist as his agent for the return of the cylinder. He said:
"Of course, that has a great deal of artificiality in it because it is quite clear that the former dealer is not in the business of carriage or haulage as such at all. It is also quite clear in the real world that what has happened has not been that the customer has, at any rate in the first instance, been wanting to terminate his agreement. In the real world what has happened is that, wanting a fresh supply of Calor gas, he has been cajoled, to use a neutral word, into an exchange. He has not of his own motion gone to the defendants and said "Please will you act as my agents for returning the cylinder to Calor Gas Ltd?" The suggestion is quite absurd. What he has done is to go to the defendants and say "Please will you supply me with some Calor Gas?" and the defendants have said "Oh no, we are very sorry we cannot do that but what we can do is to take in your cylinder, which will enable us to repay you whatever amount of your payment is due to come back and we will then supply you with something else". So the whole thing is totally unreal."
- Walton J then went on to refer to the decision of the Court of Appeal in Calor Gas Limited v Manchester Bottled Gas (24 July 1984, unreported). He pointed out that the Court of Appeal recognised in that case that the rights of the defendant to have and return the cylinders must depend upon the rights of the customer, the so-called "jus tertii", and that it was incumbent on the defendant to establish that right. Having cited a passage from the judgment of the Court of Appeal, Walton J continued on page 11 of the transcript as follows:
"The plaintiffs, say the Court of Appeal, own these cylinders. As owners they have the right to say what is to happen to them and to forbid people from handling them unless they, that is Calor, have in some way given up that right. It is for the defendants to show that they have. In my opinion it is impossible to say that the terms of the agreement entitle the customer to deliver the cylinder to the defendants when the plaintiffs do not wish it and also to enable the defendants, who know that the plaintiffs do not wish it, to rely upon such jus tertii, i.e. the right of the customer to send the containers back through third parties. So it is therefore as plain as a pikestaff that what the Court of Appeal are there saying is that if Calor Gas said to a person who has been its stockist, or its dealer, or has run a centre on its behalf "We do not wish you to handle these cylinders", then that is an end of the matter, that person may not handle them.
The thing is really unarguable. "
- On behalf of Homebase, Mr Tritton accepts that Homebase ceased to be an authorised Calor outlet on 23 February 2007. He also accepts that a right to immediate possession of goods is sufficient to give a claimant title to sue in conversion. However, he submits that both on the facts and as a matter of law it is at least properly arguable that Homebase is guilty of neither conversion nor trespass, so the question of interim relief should not be decided without going on to consider the balance of convenience, which he says comes down clearly against the grant of an injunction.
- In support of his submissions on conversion and trespass to goods, Mr Tritton makes a number of points which I would summarise as follows:
(1) Conversion requires at least an intention to exert dominion over the goods on a temporary basis (see Clerk & Lindsell, paras 17-09 and 17-10). The mere unpermitted keeping of another's chattel is not a conversion of it: see Clerk & Lindsell at para 17-22 and Barclays Mercantile Business Finance Ltd v Sibec Ltd [1992] 1WLR 1253 at 1257-8 per Millett J. In particular, Millett J said at 1258A:
"Such an act [i.e. an overt act of withholding possession of the chattel from the true owner] may consist of a refusal to deliver up the chattel on demand 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."
See too 1258G-H, where Millett J said that an overt act of withholding goods from the true owner is a condition precedent to the tort of conversion.
(2) In the present case, Homebase is doing no more than taking possession of the empty Calor cylinders and then storing them so that Calor can collect them. Homebase makes no use of the cylinders. Far from there being any assertion of dominion or refusal to surrender the goods, Homebase is actively encouraging Calor to pick the cylinders up as regularly as it can.
(3) In any event, on the true construction of the Form 167 it is at least arguable that Calor had no right to immediate possession of the cylinders during the currency of the agreement, and although it may have acquired such a right after the customer has handed over the cylinder to Homebase (assuming that to be a breach of the Form 167 agreement), Calor cannot rely on the handing over and acceptance of the cylinder by Homebase as an act of conversion because the right to immediate possession arose only on completion of that transaction.
(4) The handing over of the cylinder to Homebase for return to Calor is, at least arguably, a reasonable method for the customer to adopt in order to fulfil his obligations under condition 7 of the Form 167. If that is right, there would be no breach of contract between the customer and Calor when the cylinder is handed over, and Homebase would be entitled to rely on the customer's right to return the cylinder in this way as a defence to any claim for wrongful interference with Calor's goods.
(5) The decisions of the Court of Appeal in the Manchester Bottled Gas case, and of Walton J in the DIY Motor Caravan case, turned on their particular facts and in particular reflected the fact that there were strong grounds for believing the defendants to be rogues. By contrast, Homebase is a large and respectable company which has traded successfully with Calor, and without giving any grounds for complaint until the present dispute, for some eleven years. Furthermore, in neither case did the court examine the legal grounds for holding that the defendant had wrongfully interfered with Calor's cylinders because such interference was effectively conceded subject to the limited points which were dealt with by the Court of Appeal and Walton J.
(6) With regard to trespass, the correct proposition, at least arguably, is that a bailor only retains sufficient possession to enable him to sue third parties where the bailment is not only determinable at will but also gratuitous. In support of this proposition Mr Tritton relies on Nicolls v Bastard, loc.cit, and also on a passage in the speech of Lord Porter in Dollfus Mieg, loc.cit, at 611 where after referring to certain authorities as establishing the proposition that "where the bailor can at any moment demand the return of the object bailed, he still has possession", he then said:
"In each of the authorities referred to the right of the bailor is limited to a case of gratuitous bailment, a requisite which, in my opinion, is fulfilled in the present case. The bank held the bars, without any right of lien, at the will of the Commission."
- Mr Tritton advanced these submissions with skill and vigour, but I am unpersuaded by them. I agree with Mr Turner that this is a plain case of wrongful interference by Homebase with Calor's cylinders. I will now give my reasons for reaching this conclusion.
- I begin with the terms of the Form 167 agreement. In agreement with Mr Tritton, I consider it to be well arguable that Calor's rights over the cylinders in the first part of condition 5 (that is to say, the right to inspect or test the cylinders at any time, and to remove and replace them if they are defective, or for any other reason) do not amount to a right of immediate possession sufficient to ground a claim in conversion. Calor's right to take possession of the cylinders is limited, and may only be exercised for certain specified purposes (inspection, testing, or removal and replacement). Subject to Calor's limited rights, the customer has exclusive possession of the cylinder as bailee. However, the second part of condition 5 then goes on to provide that Calor may repossess the cylinder immediately "in any case of breach of the agreement". Accordingly, if a breach has taken place, it follows in my view that Calor thereupon acquires an immediate and unqualified right to possession of the cylinder. Such an immediate and unqualified right would in my judgment clearly be sufficient to ground a claim by Calor in conversion.
- I would add that, even if condition 5 did not make express provision in these terms, the same result would follow from application of the well-established principle that a breach of the contract of bailment by the bailee terminates the bailment and leads to the revival of the bailor's right to immediate possession, thereby entitling him to maintain an action for conversion: see Halsbury's Laws of England, vol 3(1), fourth edition, 2005 Re-issue, para 88 and Transcontainer Express Ltd v Custodian Security Ltd [1988] 1 Lloyd's LR 128 at 137 per Slade LJ (where he said that the essential feature of this line of cases is that there has been conduct on the part of the bailee repudiating the contract).
- Accordingly, the next question is whether the handing over of the cylinder by the customer to Homebase is a breach of the Form 167 agreement. In my judgment I am bound by the decision of the Court of Appeal in Manchester Bottled Gas to hold that it is. As I have already pointed out, the Court of Appeal accepted that condition 7 must be read as enabling the customer to return the cylinder by means that are reasonable in the context of the whole agreement. However, the Court went on to say on page 7 of the transcript:
"The plaintiffs owned these cylinders. As owners they have the right to say what is to happen to them and to forbid people from handling them unless they have in some way given up that right. It is for the defendants to show that they have. In [our] opinion it is impossible to say that the term[s] of the agreement entitle the customer to deliver the cylinder to the defendants when the plaintiffs do not wish it and also to enable the defendants, who know that the plaintiffs do not wish it, to rely upon such just tertii."
In my judgment the above reasoning is directly applicable to the facts of the present case. Calor has expressly and repeatedly forbidden Homebase from handling its cylinders after the termination date, and has consistently maintained this position since the start of the dispute. Furthermore, Homebase has instructed its staff to inform any customer who brings in a Calor cylinder that "Homebase is no longer an authorised Calor outlet and, as such, is not authorised to accept Calor cylinders". In those circumstances, it is in my view impossible to read condition 7 as entitling the customer to deliver the cylinder using Homebase as his agent, and equally impossible for Homebase to rely on the customer's right to return the cylinder by means that are reasonable in the context of the whole agreement. In the light of Calor's express prohibition, Homebase's offer to accept and return the cylinder on behalf of the customer can in my judgment only be regarded as a wholly unreasonable method to adopt for that purpose, whatever attractions it may have as a matter of practical convenience. The customer will therefore be in breach of the agreement when he hands over the cylinder to Homebase, and Calor's right to immediate and unqualified possession of the cylinder will immediately revive.
- I am prepared to accept in favour of Homebase that it is at least arguable that the mere act of handing over and receiving the cylinder cannot itself be treated as an act of conversion, because it is only on completion of that act that the customer will have breached his contract and Calor's right to immediate possession will have arisen. However, I am unable to accept the proposition that Homebase's subsequent retention and storage of the cylinder, in the teeth of Calor's express prohibition, can be equated with a mere unpermitted keeping of a chattel which does not sound in conversion. When Homebase staff take the cylinder and place it, without authority, in a cage for safe-keeping, and when they telephone Calor to request its collection, purportedly acting on behalf of the customer who had no right to return the cylinder in this way, and when arrangements are subsequently made for Calor to collect the cylinder, it seems clear to me that Homebase is exercising temporary dominion over the cylinder and dealing with it in a way which is inconsistent with Calor's rights. The position might arguably be different if Homebase took immediate steps to deliver every cylinder, at its own expense, to an authorised Calor outlet, but that is not what happens. Homebase retains the cylinder in its own safe custody, although expressly forbidden to do so, until Calor decides to come and collect it. If, as Millett J said in Barclays Mercantile v Sibec Ltd, loc.cit., at 1258A and G, it is necessary to find an overt act of withholding goods from the true owner, I would describe Homebase's deliberate act of placing the cylinder in a cage when it knows it does not have Calor's authority to do so as constituting just such an act.
- Turning now to trespass, I agree with Mr Tritton that the starting point is that trespass is founded on possession, not property. However, I cannot see how this proposition assists Homebase. The handing over of the cylinder in breach of contract terminates the bailment of the cylinder to the customer, and leaves Calor with both ownership of the cylinder (which it has always had) and with the right to immediate possession of it (which it has now regained). There is no longer any bailment of the cylinder in existence, whether gratuitous or otherwise. Accordingly Calor is free to exercise its possessory remedies, which include a claim for trespass. The position is a fortiori that which would obtain if a bailment at will were still subsisting, and when according to Earl Jowitt in Dollfus Mieg the bailor would still be entitled to exercise his possessory remedies. There may be some room for doubt whether that is still an accurate statement of the law: see Halsbury's Laws, vol 3(1), para 88, where it is said that "the preferable modern view appears to be that the bailee has possession even under bailment at will", and the cases cited in footnote 10. However, it is unnecessary for me to examine or resolve this doubt, because as I have said the bailment is simply at an end once the cylinder has been handed over. For the same reason, it is unnecessary for me to consider whether Lord Porter was intending to lay down a further requirement when he said in Dollfus Mieg at 611 that in each of the authorities referred to the right of the bailor was limited to a case of gratuitous bailment.
- Once it is clearly established (as in my view it is) that Calor's immediate right to possession upon termination of the bailment entitles it to sue for trespass to the cylinders, it cannot in my judgment be seriously argued that the acts of Homebase in handling and storing the cylinders, in defiance of Calor's wishes, do not constitute an actionable interference with the cylinders. Even if no damage has been caused to them, the English authorities clearly support the proposition that a direct and deliberate interference with goods is trespass even if no damage ensues. There may be a limited exception to this principle when the action complained of has not in the circumstances gone beyond generally acceptable standards of conduct: see Clerk & Lindsell, para 17-123. However, I am unable to see how Homebase could hope to succeed in relying on this exception, assuming it to exist, when Homebase has deliberately flouted the clearly expressed wishes of Calor in handling and storing the cylinders.
Conclusions
- The conclusion which I have reached makes it unnecessary for me to consider Calor's alternative claim based on alleged interference by Homebase with Calor's contractual relations with its customers. My conclusion also makes it unnecessary, and indeed inappropriate, for me to go on to consider where the balance of convenience would lie if Homebase had satisfied me that it had an arguable defence to Calor's claims in conversion and trespass. As Balcombe LJ said in Patel v Smith Ltd [1987] 1WLR 853 at 861C:
"If there is no arguable case, as I believe there is not, then questions of balance of convenience, status quo and damages being an adequate remedy do not arise. Prima facie the plaintiffs are entitled to an injunction
"
See too Snell's Equity, thirty first edition, para 16-24 at pp.409-10.
- For the reasons which I have given, I consider that Calor is clearly entitled to the interim injunction which it seeks.
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