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Fast cars, gifts and conversion.

Ecclestone v. Khyami (1)

Ms Ecclestone and Mr Khyami were in a relationship during which they gave each other expensive gifts including cars. In April 2012 Ms Ecclestone allegedly gave Mr Khyami a Lamborghini Aventador motor car ('the car') which she had purchased from Elite Performance Cars Ltd ('Elite'). After Mr Khyami took delivery of the car Elite loaned monies to Mr Khyami which it was agreed would be secured on the car ('the loan').

Following the breakdown of the relationship between Ms Ecclestone and Mr Khyami in July 2012, the car was left with Ms Ecclestone. When it became apparent to Mr Khyami that Ms Ecclestone would not return the car to him he stopped making loan repayments. In January 2013 Elite demanded Mr Khyami repay the loan, and threatened to enforce against the car. The loan made by Elite to Mr Khyami was itself financed by Elite by loans from other parties. Elite wanted to obtain the car so that it could be sold, to enable Elite to repay the loans to one of those parties who had demanded repayment.

In April 2013 the car was taken on behalf of Ms Ecclestone to H.R. Owen, Acton for servicing. Elite, which had had a tracking device installed on the car, was alerted to the presence of the car at H.R. Owen. Elite attended H.R. Owen's premises and demanded delivery up of the car contending that Elite was entitled to the car because Mr Khyami was the owner and Mr Khyami owed monies to Elite which had been secured on the car. The car was not delivered up. Next bailiffs from Central London County Court arrived at H.R. Owen and seized the car purporting to execute a warrant which involved certain third parties and companies unrelated to Mr Khyami and Elite.

When Mr Khyami was informed about the seizure of the car by Elite, he attended Central London County Court and obtained delivery of the car. Having taken possession of the car, Mr Khyami then surrendered it to Elite on 5th April 2013 pursuant to his loan agreement with Elite. Elite later sold on the car to Ansol Trading Ltd ('Ansol'). Ansol agreed to sell the car to a buyer from Turkey and a deposit was paid by that buyer but the sale was subsequently cancelled. Elite retained the benefit of the proceeds of sale of the car.

Ms Ecclestone commenced proceedings against Mr Khyami originally contending that the car was for use by Mr Khyami only during their relationship, and that she remained its owner ('the first action'). Mr Khyami claimed that the car was a gift from Ms Ecclestone to him. By an injunction granted to Ms Ecclestone, Mr Khyami and Elite were ordered not to deal with or dispose of the car, and to provide details of any sale of the car. Ms Ecclestone provided a cross undertaking in damages in the usual form to Mr Khyami and Elite. In response to the injunction Ansol's involvement with the car was disclosed and an order providing for interim delivery up of the car was made. Ms Ecclestone provided a cross undertaking in damages in the usual form to Ansol. The car was then ordered to be delivered up to Ms Ecclestone and was stored on behalf of Ms Ecclestone.

Ms Ecclestone then commenced further proceedings (the 'second action') and made a claim against Mr Khyami, Elite and Ansol for conversion and delivery up of the car, and damages. Mr Khyami defended the proceedings, contending that the car had been a gift from Ms Ecclestone to him, and that he was entitled to deal with it as he had done so. Elite also defended the proceedings and counterclaimed against Ms Ecclestone contending that Mr Khyami owed monies which had been secured on the car, that it had a right to take possession of the car when those monies were not repaid, that the car had been lawfully delivered up to Elite and that Elite was entitled to the car. Elite claimed damages for conversion against Ms Ecclestone, including special damages for the adverse effect on Elite's business resulting from the significant press coverage obtained on behalf of Ms Ecclestone in relation to the seizure of the car. Ansol defended the proceedings contending that it had purchased the car and that Ms Ecclestone, alternatively Elite, who had sold the car to Ansol, were liable in damages for Ansol, and that Ansol was entitled to delivery up of the car.

In November 2013 Ms Ecclestone and Mr Khyami compromised their claims and counterclaims in the first and second actions, which meant that the whole of the first action had been compromised. The second action between Ms Ecclestone and Elite and Ansol continued. A week before the commencement of the trial and in response to Elite's counterclaim, Ms Ecclestone contended, on various grounds, that there was no enforceable loan agreement and no enforceable security in the car. She also alleged that Elite and Ansol were involved in very serious wrongdoing in planning to wrongfully seize the car with bailiffs if the car could not be seized on any other basis. Further Ms Ecclestone raised issues about whether there was, in truth, a sale from Elite to Ansol.

The agreed issues to be resolved at trial were:

1. whether the car was a gift from Ms Ecclestone to Mr Khyami;

2. whether Mr Khyami transferred title in the car to Elite;

3. whether Elite transferred title in the car to Ansol;

4. whether at the time of the alleged wrongful conduct by Ms Ecclestone, Elite and Ansol had possession and/or an immediate right to possession of the car;

5. whether Ms Ecclestone had a defence to the claims in conversion of either Elite or Ansol based on Ms Ecclestone or Mr Khyami having a better right to the car than Elite or Ansol, or, on the basis that Elite's possession was obtained after it was said to have conspired with bailiffs to seize the car from H.R. Owen;

6. whether the injunction which Ms Ecclestone obtained was wrongfully granted, and if so, whether an inquiry on the cross undertaking in damages should be ordered;

7. the amount of any losses (if any) caused to Elite or Ansol as a result of Ms Ecclestone's conversion and/or the obtaining of the injunction;

8. whether Ansol was entitled to delivery-up of the car.

Elite submitted that Ms Ecclestone's allegations that Elite was prepared to sell cars that it did not own were untrue, that many of its clients were sensitive to publicity, and, both clients and suppliers were unwilling to be associated with a company connected with a theft of the car. Elite stated that persons dealing with Elite had withdrawn from transactions because of the adverse publicity created by Ms Ecclestone.

On the question of whether the cross undertaking in damages should be enforced against Ms Ecclestone, Elite submitted that if there was wrongdoing on the part of Elite the proper forum for punishing Elite was in the criminal courts rather than denying them legal redress.

Ansol submitted that it had no knowledge of the dispute between Ms Ecclestone, Mr Khyami and Elite concerning the car until shortly after it had taken delivery of the car. Ansol relied on its purchase from Elite and claimed delivery up of the car as well as interest on the cost of the car from the time at which it should have had the car until its delivery up. It further claimed the loss of the profit that would have been made on the sale to the Turkish buyer.

Held: application by Ms Ecclestone against Elite and Ansol for conversion dismissed. Counterclaim by Elite against Ms Ecclestone for conversion allowed. Counterclaim by Ansol against Ms Ecclestone for conversion and inquiry into cross undertaking in damages allowed.

Per Dingemans J.:

The car was a gift from Ms Ecclestone to Mr Khyami and Mr Khyami had, at least until 5th April 2013, title to the car and was entitled to raise monies on the security of the car. Although Ms Ecclestone had possession of the car at the end of their relationship she was not entitled to possession of the car as against Mr Khyami who remained the owner of the car and was entitled to seek possession of the car.

As Mr Khyami voluntarily surrendered the car to Elite it was not necessary to determine whether Elite had an enforceable right to take the car under the loan agreement, or whether the loan agreement, purported to be secured on the car, was too uncertain to be enforced or infringed provisions of the Bills of Sale Act 1879 or the Consumer Credit Act 1974. This was because, whether the loan agreement was effective or not, Mr Khyami, having obtained possession of the car at Central London County Court, surrendered the car in return for a reduction of the sums he had been loaned by Elite. Thus Mr Khyami passed the immediate right to possession of the car and ownership of the car to Elite on 5th April 2013. Ms Ecclestone had no better right to the car than Elite after Mr Khyami had passed title to the car.

Elite's act of getting the car transported to Central London County Court by getting a bailiff to seize the car pursuant to a warrant which had nothing to do with the parties was unlawful behaviour which involved serious wrongdoing. Elowever illegality did not prevent Elite from bringing its claim for conversion because the illegality which had occurred was not the immediate cause of Elite's possession and title to the car. Elite derived title from a lawful transaction with Mr Khyami, under which Mr Khyami reduced his indebtedness to Elite, and Elite obtained possession and title to the car. Elite would not be compensated for its own wrongful act, but for Ms Ecclestone's wrongful conversion of the car.

Ms Ecclestone had no better right to the car than Elite after the handover from Mr Khyami. Mr Khyami had no better right to the car because he had surrendered his rights in exchange for a reduction in his debt. Elite on sold the car to Ansol but was entitled to retain possession until the car was transferred to Ansol on 16th April 2013. Ms Ecclestone was liable to Elite for conversion. She converted the car by obtaining an injunction obtained as a result of her false statement that the car was not a gift to Mr Khyami. The injunction, granted on 15th April 2013, interfered with Elite's right to possession of the car by requiring delivery up of the car, and interfered with the sale made by Elite by requiring Ansol to deliver up the car.

Ansol was, after purchasing the car on 11th April 2013, the owner of the car, and obtained possession of it on 16th April 2013. Although Ansol purported to sell the car on 17th April 2013, Ansol retained possession, and the sale was subsequently rescinded. Ms Ecclestone was liable to Ansol for conversion because she obtained an injunction against Ansol requiring delivery up of the car, and obtained delivery up of the car up of the car.

The interim injunctions granted to Ms Ecclestone should not have been granted because they were obtained on the basis of evidence which was false. Accordingly they were set aside. In the case of Ansol an inquiry under the cross undertaking in damages was ordered because Ansol was not involved with Elite in wrongful dealings with the bailiff.

In the case of Elite, Elite's wrongful actions with the bailiff were part of the basis on which the injunction was obtained. The actions involved the abuse of the coercive powers of a warrant for private purposes, and involved wrongful actions by a public official, namely the bailiff, for the private purposes of Elite. On the other hand Ms Ecclestone obtained the injunction through false statements denying that the car was a gift to Mr Khyami. There was interference with a proper sale made by Elite. In such circumstances Elite was entitled to an inquiry almost as of right. However an inquiry into damages for Elite should be refused because:

a. Elite's wrongful actions with the bailiff were the background against which the injunction was granted, and although there was the critical involvement of Mr Khyami, who owned the car, in passing possession and title after the wrongful seizure to Elite, Elite part brought the injunctive proceedings on itself;

b. the wrongdoing on Elite's part was very serious, and partly destructive of the integrity of the civil enforcement process;

c. as a result of the sale on to Ansol, and the agreement between Ansol and Elite that the sale should stand, there was no question that Elite would have lost either the car or the value of the car, so refusing an inquiry into the cross undertaking in damages would not have involved any disproportionate punishment of Elite;

d. Elite would have been entitled to damages for conversion in any event, and it was not necessary for the court to become involved in exercising its equitable jurisdiction to assist Elite.

Elite had not been able to prove a loss of profit in accordance with its claim that it had lost business as a result of the public nature of the conversion of the car by Ms Ecclestone. The analysis of Elite's previous years' business showed that levels of business were erratic and that there was no discernible pattern which showed any measurable fall off of business from the date Ansol took possession of the car until the date of the trial. Elite was not entitled to damages where Elite had cash flow difficulties which were not caused by Ms Ecclestone's conversion of the car. However it was shown that the sale of a Ferrari F430 on which Elite hoped to have made profit or commission on sale was withdrawn as a result of Ms Ecclestone's wrongful claims against Elite, and Elite was entitled to compensation for that loss. An award representing the loss of opportunity to earn commission was made.

As Ansol was the owner of the car, and entitled to an order for delivery up of the car, interest was ordered on the cost of the car from the time at which Ansol should have had the car until delivery up of the car. Ansol was also awarded a sum representing profit on the sale of the car to the Turkish buyer and was entitled to interest on that sum. In addition Ansol was entitled to the interest and damages both for the conversion of the car, and pursuant to the inquiry under the cross-undertaking in damages.

Before: Dingemans J.

Katharine Mason, Independent Legal Analyst, B.A. (Hons), LL.B., University of Sydney.

Ecclestone v. Khyami (1)

(1) [2014] EWHC29(Q.B.), 20 Jan. 2014.
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Author:Mason, Katharine
Publication:Art Antiquity & Law
Date:Jul 1, 2014
Words:2487
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