Da Rocha-Afodu & Anor v Mortgage Express Ltd & Anor

LADY JUSTICE ARDEN: This is an appeal by Mr and Mrs Da Rocha from the order dated 19 January 2012 of District Judge Langley sitting in the Central London County Court whereby the District Judge dismissed the Appellants' claim for damages of conversion of personal chattels. She made an order for costs against the Appellants with an interim payment of £50,000 to be paid by 27 April 2012.

I am indebted to the judge for her clear and concise judgment. I also pay tribute to the able submissions that we have had from both counsel.

I am going to set out the background first and I will do so relatively briefly. The alleged conversion of the Appellants' chattels arose out of events relating to the enforcement by the Respondent, which I will refer to as MX, of its security over 30 Miles Drive, London, SE28, which I will call the property. The Appellants fell into arrears. MX obtained a suspended order for possession on 12 October 2005. The Appellants breached the terms of the suspension. MX obtained a warrant of execution on 11 November 2005. There were attempts to delay execution of the warrant.

The Appellants were finally served with notice of eviction on 4 September 2006, given an eviction date of 9 September 2006 and the letter which accompanied that document or the notice itself warned the Appellants to arrange "to leave the property with all your belongings before this date and time". This, in fact, was only one of the warnings which the Appellants received.

The Respondent's solicitors wrote to them about the need to remove their possessions from the property on 29 November 2005, 22 May 2006 and 5 September 2006. Nonetheless, when the Appellants left the property, they left a considerable amount of their personal belongings on the property.

Mr Da Rocha returned to remove his possessions on some three occasions; 1 October, 5 October and 21 October 2006. Meanwhile, MX's agents had put up notices at the property stating that if the chattels were not removed within 14 days, the agents would be entitled to dispose of the chattels in an appropriate manner. The first such notice was put up on 29 September 2006. Mrs Goodall, an employee of MX, noticed that this had been removed. She replaced it with a second notice warning about removal of the chattels if they were not removed within 14 days.

Mr Da Rocha made a fourth appointment to collect further chattels from the property on 3 November 2006. However, when he and the agent arrived, the subcontractor had already removed and disposed of the chattels remaining in the property. That had led the Appellants to bring this claim.

The judge heard the matter over two days. She held that the Appellants had an obligation to deliver up vacant possession of the property on execution of the warrant. Having considered in detail the decision of Mr David Kitchin QC, as he then was, sitting as a Deputy High Court Judge in Scotland v Solomon [2002] EWHC 1886, she held that on the authorities, the duty of an involuntary bailee was to do what was right and reasonable. Further, she held that what was right and reasonable would depend upon the findings of fact in each case.

These two points were made in paragraph 20 of her judgment. She also held that a mortgagee who finds himself in the possession of chattels on execution of a warrant for possession was in law an involuntary bailee. Such a person is defined by Palmer on Bailment 3rd Edition 2009 at paragraph 13-411 as a person whose possession of the chattel although known and the result of circumstances of which he is aware, occurs through events over which he has no proper control and where he has given no prior consent.

In Scotland v Solomon, the facts were that a charging order had been made over a residential property in favour of the neighbour following a dispute between two neighbours. The former owners were evicted and the locks were changed. Some arrangements were made for the former owners to collect their possessions, but they claimed that they were denied the opportunity to remove all their possessions. The property was sold. The purchasers removed the remaining contents.

Mr David Kitchin QC held that there was a triable issue as to whether or not the Defendants' neighbour who had obtained the charging order had met the test of doing everything right and reasonable to enable the former owners to recover their chattels. However, he also held that if the Defendants had done what they had contended, then even though the former ejected owners may have lost some of their possessions, the Defendants would not, in his judgment, be liable in conversion. Because there was a dispute on the facts, the judge held that there had to be a trial.

Returning to this case, the judge summarised the evidence and found as a fact that Mrs Goodall wrote the second notice on 12 October 2006 and put it up in a window of the property on that date. The judge held that the notice would still have been there on 21 October 2006 when Mr Da Rocha attended again to collect further belongings. She held, in effect, that he must have seen the notice in the window. She further held that while it was not necessary to make a finding on this point, on the balance of probabilities she was satisfied that he had, in fact, removed the notice on that date.

The judge found that MX wanted to sell the property with vacant possession without delay. It would have been simpler for them and their agents if the Appellants had removed their property. However, MX acceded to oral requests for access made by the Appellants. MX offered on one occasion to provide a house sitter so that the removal could be completed under secure conditions. The judge was satisfied that MX had complied with its duties as an involuntary bailee of the Appellants' goods to do what was right and reasonable. On that basis, she held that the claim based on conversion must fail.

She then turned to consider a claim based on breach of the Mortgage Terms and Conditions 200 ("the Mortgage Conditions"). She referred to section 9 of the Mortgage Conditions, which I will set out in detail below, which stated that particular steps would not be taken for a period of 7 days. That period would run from the date on which notice was given to the mortgagors at their new address or, if no such address was given, 7 days after they left the property.

The judge held that no new address for correspondence was ever provided. Accordingly, she held that MX was not liable for breach of the Mortgage Conditions 2000 and that the Claimants' claims for damages for breach of those Conditions failed.

She then turned to consider the quantum of the Appellants' claim. In the claim form, damages of some £800,000 had been claimed. She accepted that a considerable amount of property had been lost. However, she held that there was insufficient evidence to substantiate the Claimants' claim. She accepted that there was no documentary evidence to support the cost prices given for the chattels that were left in the property. She pointed out that there was no information as to when the items were purchased and as to their value at the date of the conversion. She described the photographs that had been taken on the day that the property was removed, but she held that it was impossible to form any view from them as to the value of the goods in the property.

She held that the burden of proof rested on the Claimants to prove their loss and to provide evidence as to the value of the items at the date of the alleged conversion and that they had not discharged this burden. The judge referred to a second schedule showing the replacement costs of certain goods. This was furnished by receipts. However, there was no evidence as to the value of the goods at the date of conversion.

Thus, all the Court could, in her judgment, do was to award a fairly nominal sum, which she had fixed at £5,000. She was unable to form a view as to what items it would be reasonable to replace. She noted that the photographs did not cover any obviously new or valuable items. For reasons which she gave, she held that the evidence raised questions as to the reliability of the contents of the schedule as to the loss.

I now turn to the submissions. The arguments on this appeal have taken rather a different course from that before the judge. Mr Michael Paget has appeared on this appeal for the Appellants. He did not appear below. He has presented their case in a different way.

The focus of the argument of the Appellants on this appeal has been on section 9 of the Mortgage Conditions which are headed "our rights when in possession of the property". This section is set out at page 317 of the trial bundle. Section 9 reads:

The essence of Mr Paget's argument is that this section sets out certain trigger events and that those trigger events are all encompassing, leaving no further option for the mortgagee. Accordingly, MX could only dispose of the Appellants' chattels if they first removed them and stored them elsewhere. Since MX failed to do this, they acted in a way which was unreasonable. They did not satisfy the right and reasonable procedure laid down in the agreed Mortgage Conditions. In other words, MX could only dispose of the goods if they had first stored them. They did not do this.

Mr Paget goes on to argue that notice could have been given to the Appellants at their solicitor's address, but he does not lay any particular emphasis on this because, in any event, on his argument, the trigger events were simply not satisfied so that MX cannot rely on the powers conferred by this clause.

MX is represented by Mr Rupert Higgins who appeared below. He submits that section 9 does not define reasonableness. It, therefore, does not define what an involuntary bailee must do to charge the test of doing everything that is right and reasonable. It is, in his submission, simply a deeming condition. If it was not followed, that did not mean that MX had not acted reasonably.

He submits that the Appellants had to supply an address to be used for this purpose and that they failed to do so. They had three possible addresses and the recipients could have sent a communication to one of those. They had two other properties which were, in fact, also mortgaged to MX. In addition, MX could have written to the Appellants at their solicitors' address.

However, there was no one address selected and identified as the address for the purpose of communications under section 9. Therefore, Mr Higgins submits that the solicitors were not authorised to receive any such communication. There was, therefore, no address to which MX could write. In those circumstances, it was the second dash of the second bullet point which applied.

As Jackson LJ pointed out in argument, the core question is whether section 9 is exclusive as to the steps which a mortgagee can take to dispose of chattels left by the mortgagor on the property after the mortgagee has taken possession. Jackson LJ pointed out that, in point of fact, chattels may be more likely to be damaged if they have removed to some other place. Indeed, it might be more difficult for the mortgagor himself to identify the property he wanted to keep if it was first put into storage.

In my judgment, it would lead to absurd results to interpret section 9 in the way Mr Paget submits. It would be impossible on his interpretation to store property at the premises even though it might be much more costly to store the items elsewhere.

Suppose, for instance, that the mortgagor left two guard dogs on the premises. It might be much more sensible to leave the guard dogs on the premises so that they continued to carry out their work guarding the property and to look after them there. On the other hand, if the mortgagor has completely disappeared, as sometimes happens, it might make more sense for the mortgagee to dispose of the guard dogs immediately without sending them to expensive kennels and to do so as soon as possible. There may be a negative equity in the property so that if the dogs are in kennels for more than the required period of 7 days, funds would have to be paid by the mortgagee. He could not in practice regain recoupment out of the secured property.

These examples point to the absurdity of treating section 9 as inflexible and lying down a set of strict and sequential steps which must be taken in the prescribed order in order for the mortgagee to be protected in the way he acts in relation to chattels left on the property.

In my judgment, the correct approach to section 9 is to look to its purpose. Its purpose is evident from the second bullet point. The main purpose of this section is to give the mortgagor a 7 day grace period in which he can remove his property. If he has provided a new address, the 7 days will run from the date on which the mortgagee writes to the mortgagor. If there is no address given, this 7 days will run from the date on which the property was vacated. That, as I see it, was the practical purpose of section 9.

The first bullet point serves the purpose of setting out the events which are likely to have adverse effects on the mortgagor. They are (1) removal of and storage of goods and animals; and (2) disposal of goods or return of the goods to their owner. Any of these events may have adverse consequences for the mortgagor because it may result in further costs for him or loss of his property. That is why the conditions require him to give notice before those things happen.

Moreover, in the third bullet point he is given the assurance that no lien over the goods will be created for the storage charges or other charges incurred. That means, as Mr Paget accepted, that when the mortgagee makes a contract for storage, it in practice will have to be the mortgagee which becomes primarily liable for the charges of the person providing storage. He will then have to seek reimbursement from the mortgagor personally or add the cost to his security. But as I have pointed out, he can only effectively do the latter if that is permitted by the terms of his security and if there is no negative equity.

The first sentence of section 9 starts:

The word "may" is used. That is open to the interpretation that the mortgagee can select one of the following steps or that the steps mentioned are only some of those which he can take. As explained, it would make no sense if the steps outlined in the first bullet point have to be taken in strict sequential order; that is removal in storage followed by disposal or return to the owner. Not all those steps may need to be taken because the mortgagor may arrive before they are completed.

Moreover, as Mr Paget accepted, the word "then" in the second sentence appears to mean "secondly". It follows that the second step may simply be an alternative to the first.

In my judgment, a purposive interpretation leads to this interpretation of section 9. The first sentence merely says that the steps which are specified in section 9 are optional steps and does not contain an exclusive set of steps.

That interpretation, as I see it, is supported by a textual interpretation. The second bullet point starts:

Now, the "previous paragraph" must obviously be the first bullet point, as I have called it. If the steps mentioned in the first bullet point are strictly sequential and must be followed in a strictly sequential way, then it would have been enough for the drafter to say that the mortgagee would not remove property from the premises unless the requisite steps had been taken within the two dashes in the second bullet point. The fact is that the drafter thought it necessary to refer to all the steps mentioned in the previous paragraph. That is the first bullet point. That supports the interpretation that not all of those events may occur, that they need not all occur and that they certainly need not occur in the order set out in the clause.

It is sufficient that the second bullet point applies to any of the events in the first bullet point. On that basis, it is clear that MX could dispose of the property after giving the requisite notice provided for in the second bullet point without first removing the goods from the property and storing them. This would have the advantage to the mortgagors, as Jackson LJ pointed out, that it would not be necessary to put the chattels into some convenient storage place first.

This point of interpretation is fundamental to the arguments which Mr Paget went on to develop. He submits that there is no clear separating line in some cases between an involuntary bailee and a gratuitous bailee.

He refers to the classic statement of involuntary bailment which is set out in Elvin & Powell Ltd v Plummer Roddis Ltd [1933] Solicitors Journal 48. In this case, a rogue ordered goods for delivery to a well known shop. The rogue then went to the shop and he intercepted the goods. The shop delivered the goods to the rogue who then disappeared. It was held that the shop was an involuntary bailee, but that the shop was not liable in damages to the true owner of the goods because it had acted reasonably.

The classic statement of the liability of involuntary bailee is to be found in the judgment of Hawke J who held that the shop had done everything which was reasonable. They were not liable for taking steps, therefore, which led to the loss of the property:

It was that statement of the law that was relied on by Mr David Kitchin as he then was in Scotland v Solomon.

There is some support for the proposition that that the distinction between the concept of an involuntary bailee and a gratuitous bailee should not be drawn too sharply. That support is to be found in a dictum of Staughton J in AVX v EGM Solders set out in Palmer on Bailment, but this particular dictum is not clear because the case from which it is drawn is unreported and the proposition in the text is partly contradicted by another reference to the judge's judgment in a footnote to Palmer on Bailment at paragraph 13-30.

However that may be, as Mr Paget developed his submissions, he said that the liability imposed on a bailee in this type of situation should be at the upper end of the scale because a mortgagee who takes possession of property and evicts a mortgagor must accept and expect that there will be chattels left in the property. Therefore, this court should be impose a more exacting duty on such a bailee than it would in the circumstance that the bailee did not enjoy that pre-existing relationship with the bailor. In other words, the duty imposed on some involuntary bailees could be higher than that of others.

Mr Paget drew support for this proposition from the dictum of Ormrod LJ in Houghland v RR Low [1962] All ER 159 where Ormrod LJ said obiter:

The approach that Mr Paget advocates is, in fact, supported by the approach of this court in a later case called Toor v Bassi which is unreported, 30 January 1999. In that case, this court held that where a car had been parked on the Defendant's premises with their consent and the true owner asked the Defendant's agents for permission to remove it, the Defendants were in breach of duty in allowing the car to be removed without the consent of the true owner. The inference is that it may have been stolen.

In that case, Waller LJ who gave the leading judgment was content to decide the case on the basis that the Defendants were either an involuntary bailee or a gratuitous bailee. In his judgment, the standard of care to be expected was the same. In that case, the Defendants, who were landlords of the property next to the place where the car was parked, knew that the true owner wanted to remove the property, but nonetheless took no steps to secure the car which was left unlocked.

In this way, Mr Paget has developed a sophisticated argument before us, but at the end of the day, as Sharp LJ pointed out, the position in law is that stated by the judge in paragraph 20 of her judgment, to which I have already referred. In my judgment, that paragraph was correct. I reject the submission that the judge was wrong in that proposition of law.

I should add that, in my judgment, the point that Ormrod LJ was making was that within each category of bailee there will indeed be a wide variety of circumstances. However, the Court can take those into account when applying the duty which is imposed on involuntary bailees that they should do what is right and reasonable in all the circumstances. The Court must be alert to have regard to all the particular circumstances in the case.

Mr Paget goes on to submit the judge failed to refer to the specific procedure in section 9. In his submission, the judge should have held that that which was right and reasonable could only be discharged by full compliance with section 9 of the Mortgage Conditions. I have already dealt with this submission. In my judgment, the Mortgage Conditions did not define the steps which the mortgagee had to take or if it did so, it did not do so in a strict sequential order.

Rather, as I see it, section 9 provided a framework within which the common law duty of care is imposed on a voluntary bailee is a framework within which the common law duty of care which is imposed on an involuntary bailee is to operate. Accordingly, section 9 is merely a starting point. Any of the trigger events is merely a starting point. The Court has to go on to ask whether what the mortgagee did was, in the particular circumstances of the case, what was right and reasonable.

The fact that section 9 is only provides a framework is illustrated by the fact that if the mortgagee were to take the property into storage, there is no indication in the clause as to where the property was to be stored or what the costs might be or as to how long the goods were to be held in storage before they could be disposed of.

Now, in this case, there was no investigation at the trial of the question whether it would have been more reasonable for MX to have removed the goods from the property and to have stored them in a third place before disposing of them. As it was, MX satisfied the judge that they had taken all right and reasonable steps. They had given the Appellants access to their goods on several occasions. They had given them several warnings that they needed to dispose of the property. They had offered to provide a house sitter to permit proposals. The notices had made it clear that if the property was not disposed of, the agents would be free to dispose of it.

In my judgment, the judge was entitled to come to the conclusion that MX had discharged its duty as an involuntary bailee. It would, in my judgment, be wrong for this court to form a view as to whether some other course was more reasonable and that course was not properly investigated at trial. It would all depend on the facts. It is sufficient to say that there has been no investigation of what the costs of storage might have been for these chattels if that course had been taken. Nor was there any investigation into where the goods would have been stored or for how long.

That leaves the question of the judge's approach to quantum. However, in my judgment, if my Lord and my Lady agree, that point does not arise for decision in the light of the conclusions I have already reached. It suffices for me to say that the judge went into the matter of quantum in some detail. She was very critical of the evidence that had been provided.

Contrary to the submission of Mr Paget, there is no rule of law which says the Court must find the value of the chattels by applying some discount to the cost of replacing items. As the judge pointed out, there was no evidence whatever on which he could rely about the value of the goods at the date of conversion. These were all matters of fact to be dealt with at trial. The judge was entitled to come to her conclusion and she did so in the course of a very thorough judgment.

In my judgment, there is no basis on which an appellate court could interfere. I would, therefore, dismiss the appeal.

LORD JUSTICE JACKSON: I agree.

LADY JUSTICE SHARP: I also agree.