Unlocking the value

The case of Spencer v S Franses Ltd [2011] EWHC 1269 (QB) concerned the issue of lien. At the heart of the dispute were two rare and beautiful embroideries that were thought to be medieval and very valuable both monetarily and culturally. The decision of Thirlwall J in the case deals with important questions concerning the right to exercise a lien and aspects of bailment.

The case highlighted a number of issues. Not least, that it is trite that a person working on an item may exert a lien over it. A mason working on stone and a horse breaker rendering an animal manageable have liens in respect of the chattels for their charges. A solicitor has a lien over his client’s papers for the recovery of his fees. However, a lien applies only to a chattel on which work is done. One of the central questions in Spencer v S Franses Ltd was whether research into the provenance of a chattel can permit the researcher to claim a lien over it.

Another important question was to what extent the researcher was permitted to research as bailee the bailor’s title before returning the chattel to the bailor.

In order to deal with those issues it is necessary to consider the unusual facts ?of the case.

Lifting the lid

The embroideries were found by the claimant, Mr Spencer, in a cabinet hidden within a bedstead. They had been owned by an elderly lady for whom New York guardians had been appointed due to her incapacity. Christie’s had surveyed her flat but had missed the embroideries. Mr Spencer had been authorised by one of the guardians to clear the flat and dispose of the contents (save for a Henry Moore bronze hidden in the fireplace) for which he paid £5,000.

Mr Spencer was concerned to establish the date and provenance of the embroideries. He was told they were Victorian. He engaged the defendant (‘the company’) to research them. The company, in particular Simon Franses, was well known in this field and Mr Franses had important museum contacts in the area of medieval textiles.

Mr Spencer and the company agreed that Mr Franses would carry out research on the embroideries and would receive a commission of 30 per cent of their eventual sale price. Mr Franses commenced research and commissioned various scientific tests on the embroideries and invited others who specialised in historic textiles to comment on them. The tests showed that it was 86 per cent probable that the silver content in some of the threads was pre-1600. Mr Franses made considerable progress in researching the embroideries, finding them to be probably medieval and therefore rehabilitating their status. This progress came about because of his standing in the art world, his expertise and contacts. Mr Spencer was regularly kept informed of Mr Franses’s progress.

The agreement was never put in writing because there was a dispute as to the precise terms, in particular how long Mr Franses should have to research the embroideries and whether he would have to agree to any eventual sale.

Mr Spencer and Mr Franses fell ?out. Mr Franses had concerns about ?Mr Spencer’s title to the embroideries. He informed the public administrator in New York. He was concerned that he might be sued in conversion by the true owner and that if Mr Spencer did not pay him this would set a bad commercial precedent.

Mr Spencer threatened to sue for the return of the embroideries. The company refused to return them on the basis of a lien for £93,183.38 and the fact that it was restrained by an injunction in New York. The beneficiaries of the estate of the elderly lady made claims that the estate owned the embroideries but these were settled shortly before trial.

Value added

Thirlwall J held that Mr Spencer gave Mr Franses the impression that they had a concluded agreement, but this was not the case because, in fact, they had not agreed the length of time Mr Franses would ?have to research the embroideries. However, the company was entitled to a quantum meruit because it had expected to be paid and Mr Spencer knew that. Mr Spencer had benefited from the work in a significant manner. Because of the company’s research they had been recognised as medieval and potentially of great importance. Their value had increased dramatically. It was unconscionable for Mr Spencer to take the benefit of the work without paying for it. Quantum was assessed at £80,750 plus VAT.

It was also held that the company was entitled to exert a lien over the embroideries for the payment of its fees. The work done on the embroideries ?was of sufficient improvement as to allow the imposition of a lien. This is ?an important clarification and extension of the law of lien.

The company relied on Hollis v Claridge (1814) 4 Taunton 807. That was an action of trover for title deeds and the lien was being relied on against the owner who had given them to a third party. The third party was considering granting an annuity provided the security was satisfactory and wished to investigate title. The deeds were then given to a conveyancer in order to prepare the securities but the conveyancer advised that there were issues ??with the title. The conveyancer claimed a lien over the deeds but failed. In the course of his judgment Gibbs J suggested that a jeweller who weighs a diamond and values it has a lien over it. Although the jewel has not itself changed, the value has been enhanced enormously ?by the valuation.

Thirlwall J agreed and held that the same applied to the embroideries: the research had increased their value and equated to an improvement which was both financial and cultural. In so doing she dismissed the doubts that Rolfe B (in Steadman v Hockley (1846) 15 Meeson and Welsby 553) had expressed in relation to the theoretical valuation of the jewel given by Gibbs J. In that case, a conveyancer asserted a lien over deeds delivered to him in respect of which he undertook business for the owner of the deeds. None of the work done by the conveyancer enhanced their value and a lien was rejected in that case because no labour was bestowed on the deed itself. Thirlwall J commented that the improvement was not due to work carried out merely in respect of the embroideries: in fact it could not be severed from the embroideries themselves, not least because Mr Franses had physically worked on them and added ?his expertise; they would never again ?be considered nineteenth-century ?stage props.

Owning up

It was also in issue whether or not a bailee who receives a demand from a bailor has a right to a reasonable period within which to inquire into title. The general rule is that title to personalty is possessory. The bailee must render up possession to the bailor who has a better title to the goods, even if they are stolen (see Costello v Chief Constable of Derbyshire Constabulary [2001] 1 WLR 1437). However, a bailee may expose himself to claims from a person who has a better title than the bailor if he renders the goods up to the bailor.

Thirlwall J did not find that a bailee could never have a reasonable period to inquire into a bailor’s title. But the right had not arisen in this case and in any event had not been exercised within a reasonable period. Mr Spencer had informed the company early on that he might not be the true owner of the embroideries. Furthermore, the company was for a time happy to return the embroideries even when Mr Franses subjectively became aware of the possibility that Mr Spencer did not have good title to them.

This case has cleared up a controversy regarding the law of lien. It will permit liens to be asserted where services are rendered in relation to a chattel where, although the services do not change the nature of it, they render it more valuable, such as research or valuation. It remains to be seen whether a lien could be asserted if the research had proven that the embroideries were fakes rather than medieval. Lien is of course most important where a person has become insolvent.

Thirlwall J’s judgment leaves open the possibility of a bailee having a relatively short time to investigate the title of the bailor. If this possible right is to be utilised, title must be investigated immediately after the bailee has notice that the bailor’s title may be faulty. If a bailee client is left in a situation where he is holding goods that are the subject of a dispute between two competing parties and he does not wish to assert a lien over the goods, he should interplead so that the issues of title can be dealt with between the competing parties and any liability in for example conversion can be limited for the future. n

Ruth Hughes is a barrister at ?5 Stone Buildings