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This article was first published on LexisPSL Dispute Resolution on 31 January 2014. Click here for a free 24h trial of LexisPSL.

High Court puts the brakes on conversion case

31/01/2014 Dispute Resolution analysis: Formula One heiress, Tamara Ecclestone, lost a High Court battle with her former boyfriend and two car dealerships over a Lamborghini supercar. Simon Hocking and Liz Wyatt of Anthony Collins Solicitors take a look at some of the legal implications of this high-octane case.

Original news
Ecclestone v Khyami and others [2014] EWHC 29 (QB), [2014] All ER (D) 189 (Jan) There was a claim by the claimant for delivery up, and damages for the conversion, of a Lamborghini Aventador motor car (the car) and also a claim for the discharge of an injunction and an inquiry under the cross-undertaking in damages. The Queen's Bench Division decided that the claimant's claim for conversion of the car would be dismissed. The second defendant was entitled to judgment for damages for conversion in the sum of 7,500. The third defendant was entitled to judgment, both for conversion and under the inquiry into the cross undertaking in damages, for: o o o delivery up of the car interest on 250,000 until delivery up of the car, at a rate to be determined, and damages in the sum of 15,000 and interest to be determined

What does this case tell us about the relationship between illegality and conversion?
Generally, the defence of illegality prevents recovery of compensation for loss suffered either as a consequence of committing illegal acts or as result of being punished for those acts. However, the 'reliance principle', which applies to claims for conversion, allows the ownership rights in goods to be validly transferred to another, even if the contract by which this is achieved involves illegality. If a third party seeks to take those goods, the receiving party can seek compensation for conversion.

How does one prove whether something was a gift?

To establish that a gift of belongings (ie chattels) has been made, it is necessary to prove that the transaction was: o o o o voluntary gratuitous made with the intention that the property will not be returned to the giver, and in the absence of a duly executed deed, that the subject matter of the gift was actually delivered to the recipient

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Conditions can be attached to gifts and, if so, it may be necessary to show that these have been met for the gift to be effective (this in fact is how Ms Ecclestone chose to challenge the gift of the Lamborghini in this case).

How can couples avoid such issues at the breakdown of a relationship?

Practically, very little--there may be some limited benefit in making specific references to individual items in a cohabitation, pre or post nuptial agreement. However, it is difficult to provide for every circumstance which may arise in the future. In the event of divorce, or civil partnership dissolution, the court is not bound by strict issues of legal ownership and retains a discretionary power to distribute a couple's assets in accordance with the Matrimonial Causes Act 1973.

What did the court decide in relation to the claim for conversion?
Here a car dealer, 'Elite' was owed a debt by Mr Khyami, which was secured on a Lamborghini given to him by Ms Ecclestone. She had held onto the car, despite a breakdown in the relationship. The debt was not paid and Elite took the car unlawfully. It arranged return to Mr Khyami so that he could hand it back to satisfy the debt. Ms Ecclestone later took back the car, wrongly claiming it was hers. Elite claimed compensation from Ms Ecclestone for conversion to which the defence of illegality was raised. The court decided that despite the fact that Elite was previously guilty of 'serious wrongdoing', it ultimately obtained possession in a lawful manner. As such, the illegality defence did not defeat the claim--Elite would be compensated for the wrongful conversion of the car and not their illegal acts.

What should lawyers do next?

Where lawyers are instructed by a person who wishes to make a significant gift but only subject to conditions (which are to be met either before or after delivery of the gift) they should give due consideration to whether the gift should be recorded by deed in accordance with the Bills of Sale Act 1878. Interviewed by Anne Bruce. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.