OBG Ltd v Allan [2008] 1 AC 1

Facts

• OBG Ltd brought an action against Allan alleging conversion, a tort involving the intentional interference with the claimant’s right to possession of goods.
• The dispute arose over the handling and interference with goods or assets, with questions as to whether the defendants’ actions amounted to conversion under English law.
• The House of Lords addressed the commercial context, including cases involving misappropriation of goods and application in insolvency situations where assets are placed under the control of an insolvency practitioner.
• Key considerations included whether third parties intentionally interfered with another’s right to possession, and if such acts met the legal test for conversion.
• The court considered the distinction between acts performed voluntarily and those under duress or accidentally.

Issues

1. Whether conversion requires intentional interference with the claimant’s right to possession of goods.
2. How conversion is distinguished from related torts such as trespass to goods and negligence.
3. What constitutes sufficient interference by a defendant to amount to denial of the claimant’s right to possession.
4. How damages in conversion cases should be assessed.
5. Whether third parties interfering with goods or assets in an insolvency context can be liable for conversion.

Decision

• The House of Lords held that conversion strictly requires intentional interference with the claimant’s right to possession.
• Mere negligence or inadvertent acts do not constitute conversion; the defendant’s conduct must be voluntary and deliberate.
• Conversion is actionable per se, and claimants do not need to show actual damage to succeed.
• The interference must be substantial enough to amount to a denial of possession, such as taking, using, or disposing of goods.
• Damages were to be measured by the value of the goods at the time of the conversion, with the possibility for additional damages in particularly egregious cases.
• The judgment clarified the boundaries of conversion, ensuring claimants can identify the appropriate cause of action, particularly in commercial and insolvency contexts.

Legal Principles

• Conversion arises from intentional interference with another’s right to possess goods, requiring knowledge or belief that such interference would occur.
• A clear distinction exists between conversion, trespass to goods (which involves direct physical interference), and negligence (which is based on a failure to exercise reasonable care).
• Only substantial, voluntary, and intentional acts which deny the claimant’s possessory rights amount to conversion.
• In insolvency, deliberate interference with assets under the practitioner’s control may constitute conversion, but unintentional or negligent acts do not.
• Damages in conversion reflect the value of goods at the time of interference and may be increased for egregious conduct.

Conclusion

The House of Lords in OBG Ltd v Allan established that the essence of conversion is intentional interference with possessory rights, distinguished conversion from trespass to goods and negligence, and set clear standards on damages and liability, particularly in commercial and insolvency situations.