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Testing the boundaries of conversion: account-holders, intangible property and economic harm

Goymour, Amy and Watterson, Stephen (2012) Testing the boundaries of conversion: account-holders, intangible property and economic harm. Lloyd's Maritime and Commercial Law Quarterly, 2012 (2). pp. 204-226. ISSN 0306-2945

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The House of Lords’ decision in OBG v Allan has prompted much academic debate about whether the tort of conversion should be expanded beyond its historic sphere of application, to protect intangible assets—such as contractual rights. This article seeks to advance this debate, by examining in detail the practical implications of an extended conversion tort for the contractual rights of banks’ account-holding customers. It finds that, whilst it is technically possible to fashion an extended conversion tort to protect these rights, there is no pressing need for such protection, and the tort would be ill-equipped to offer a more coherent form of protection than is already available. These findings at least suggest reasons for caution. The creation of a new strict liability tort is a dramatic step, and would generate significant uncertainty in commercial transactions until case law has settled the scope of the tort and its practical implications in concrete settings. It seems right to demand that, before this leap is made, its practical benefits should be clearly demonstrated. I. INTRODUCTION Traditionally understood, the tort of conversion protects against unauthorised interferences with possessory rights to tangible goods. 1 In OBG v Allan, 2 the House of Lords was invited to expand the tort beyond its familiar territory. Receivers of a company in administration, acting consistently with their duties and in good faith, sold the company’s chattels and allowed contractual debts due to the company to be settled for significantly less than the actual sums owing. It was subsequently discovered that, for technical reasons, the receivers had been invalidly appointed. 3 The company, now represented by a liquidator, sued the receivers inter alia in conversion for their unauthorised dealings with its assets. Conversion clearly lay in respect of the tangible goods, but it was also argued that, to protect the company’s assets coherently, its intangible contractual rights should also be protected by the tort. Despite the obvious appeal of this argument on the facts, the House of Lords refused by a bare majority to move the tort’s established boundaries judicially. The option of reform was left to the Law Commission and Parliament.

Item Type: Article
Official URL:
Additional Information: © 2012 LLP
Divisions: Law
Subjects: K Law > K Law (General)
Date Deposited: 30 May 2012 15:20
Last Modified: 16 May 2024 01:26

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