Tat Seng Machine Movers v Orix Leasing

DMC/SandT/10/08

Singapore

TAT SENG MACHINE MOVERS PTE LTD V. ORIX LEASING SINGAPORE LTD: [2009] SGCA 42

Singapore Court of Appeal: Andrew Phang Boon Leong JA, Chao Hick Tin JA, V K Rajah JA: 11 September 2009

Subhas Anandan, Irving Choh and Lim Bee Li (KhattarWong) for the appellant, Tat Seng: Prem Gurbani and Bernard Yee (Gurbani & Co) for the respondent, Orix Leasing

BAILMENT – BAILOR’S RIGHT TO IMMEDIATE RIGHT TO POSSESSION IF BAILEE’S BEHAVIOUR REPUGNANT TO TERMS OF BAILMENT – WHETHER CONTRACTUAL RIGHTS RESTRICTED BAILOR’S RIGHTS UNDER COMMON LAW

TORT – CONVERSION – WHETHER ACT OF REMOVING MACHINE FROM PREMISES AND DELIVERING IT AS INSTRUCTED AMOUNTED TO CONVERSION OF MACHINE – WHETHER ACT OF STORING MACHINE AT WAREHOUSE AMOUNTED TO CONVERSION OF MACHINE – WHETHER ACT OF REDELIVERING MACHINE TO PURPORTED OWNER AMOUNTED TO CONVERSION OF MACHINE

Summary

The common law position that the right of possession re-vests in the bailor if the bailee behaves in a manner repugnant to the terms of the bailment can be modified by contract, provided clear language is used.

The removal or storage of a machine by moving contractors does not amount to conversion if the contractors did not have actual notice of impropriety in such removal or storage, and were acting in the ordinary course of business.

A bailee who re-delivers goods to his bailor without title is not liable for conversion. However, if a bailee has actual notice of the existence of competing claims to the goods, the bailee will be liable for conversion.

This case note is contributed by & Partners, the International Contributors to this website for Singapore

Facts

Orix let a Heidelberg 4-colour off-set print machine (“the machine”) to a company, RGPL, on hire-purchase terms. In 2006, RGPL shifted its office from Toh Guan (“Toh Guan premises”) to new premises. One Crispian Tan (“Crispian”), who was a director and shareholder of RGPL, hired Kenzone Logistics Pte Ltd (“Kenzone”) to facilitate the shift. Kenzone then approached Tat Seng to transport the machine to the new premises.

The initial instruction from RGPL was to shift the Heidelberg 4C to a warehouse owned by a third party, Hock Cheong. The warehouse refused to accept the machine when the Tat Seng lorries arrived. Kenzone then requested Tat Seng to provide temporary storage space for the machine. Tat Seng stored the machine for 4 days until 4 September 2006, when it was removed from their premises at the request of Crispian and loaded on Malaysian registered trailers pursuant to an alleged sale that Crispian had arranged.

Orix later sued Tat Seng for conversion of the machine and succeeded at first instance. Tat Seng appealed.

Issues

(a) Whether Orix had requisite title to sue for the conversion of the machine under the Hire-Purchase Agreement.

(b) Whether the conversion of the machine took place by reason of Tat Seng delivering the machine to the warehouse, storing the machine at its own premises for a few days and/or redelivering the machine on 4 September 2006.

Judgment

Held, allowing the appeal:

(a) Whether the Respondent had the requisite title to sue.

It was a term of the Hire-Purchase Agreement that, if RGPL breached the Agreement, RGPL would be deemed to have repudiated the Agreement and Orix was entitled to determine the Agreement by notice in writing. Thereafter, RGPL would no longer be in possession of the machine with Orix’ consent.

The common law position is that the right of possession re-vests in the bailor if the bailee behaves in a manner utterly repugnant to the terms of the bailment. However, it is possible to contract out of the common law rule and to deprive the bailor of his common law rights, provided very clear language is used.

In this case, the requirement for notice under the Hire-Purchase Agreement was not absolute – it was not a condition precedent for such notice to be issued for the Hire-Purchase Agreement to be terminated. Orix had, therefore, an immediate right to possession of the machine when the machine was removed from the Toh Guan premises and had the requisite title to sue for conversion of the machine.

(b) Whether conversion took place by reason of Tat Seng delivering the machine to the warehouse, storing the machine at its own premises for a few days and/or redelivering the machine on 4 September 2006

The act of removing the machine from the Toh Guan premises and delivering the machine to the warehouse did not amount to conversion of the machine. Tat Seng had no reason to question the propriety of the move and had dealt with and delivered goods which apparently belonged to their clients, RGPL. Tat Seng’s conduct was purely ministerial as it had merely changed the location of the machine entrusted to it, and did not assist in the sale of the machine or take any step that amounted to the transfer or interference of ownership.

Tat Seng’s act of storing the machine could be said to have been in the ordinary course of its business and did not amount to conversion. While it had not charged for storage, labour or materials used in wrapping the machine, this was not probative of an intention to do an act inconsistent with the right of the true owner. There was no evidence or suggestion that Tat Seng had intended to use or keep the machine as its own or to withhold the machine from the true owner.

Finally, Tat Seng did not commit conversion by returning the machine to Crispian or RGPL. A bailee who delivers goods to his bailor without title is not liable for conversion unless he has actual notice of the existence of competing claims to the goods. Tat Seng’s conduct was reasonable as there was nothing to indicate to it that competing interests were involved.

Comment

The Court made several observations on the burden of proof in an action for conversion.

When an allegation of conversion is made against a carrier or bailee, the defendant must plead in its defence the relevant facts to show that it acted reasonably in the ordinary course of business. To discharge this burden of proof, the defendant will need to adduce sufficient facts to show that the transaction was of the type usually undertaken by it in the course of its ordinary business.

Once the defendant has adduced credible evidence that it has acted in the ordinary course of business, the evidential burden of proof of conversion is transferred to the claimant. The claimant must plead in its reply all facts that show the defendant had actual notice of some impropriety or was not acting in the ordinary course of business. These matters must be pleaded and proven for the plaintiff to succeed in its claim.