Powell JA said:
"… the debt which is represented by a credit in a bank account, not being a chattel, but being a chose in action, cannot, in law, be the subject of a claim for conversation (sic)."
11 In Penfold Wines Pty Ltd v Elliott (1946) 74 CLR 204 Dixon J said (at 229):
" The essence of conversion is a dealing with a chattel in a manner repugnant to the immediate right of possession of the person who has the property or special property in the chattel. "
12 Telecom Vanuatu accepts that the current Anglo-Australian formulations of the tort of conversion require that the thing converted be a chattel. However, it points to the fiction by which claims for conversion of cheques and other negotiable instruments, and perhaps insurance policies and shares, are allowed, by treating the thing converted to be not the valuable chose in action, but the piece of paper which represents it, and attributing to the piece of paper, the value of the chose. It submits that the fiction was developed to meet the needs of commerce, and that a principled development of the law of conversion would recognise that intangible property, as well as tangible property, can be the subject matter of the tort. Counsel submitted that the fiction of attributing the value of a chose to a piece of paper should be abandoned. He referred to Balkin & Davis, Law of Torts, 3 ed, page 76 where the learned authors said:
" Tangible property, of course, can be the subject matter of conversion, and intangible property such as cheques, shares, insurance policies and the like is not necessarily excluded. Thus, although cheques are of value only as choses in action, the courts have satisfied the demands of commercial convenience by allowing the full value represented by them to be recovered in actions for conversion. So, where a banker has not handled actual cash or notes but has merely made the appropriate entries by way of credit or debit balances, the courts will treat the conversion as being of the goods, that is, of the piece of paper, the cheque, under which the money was transferred, and the value of the goods converted as being the sum represented by the cheque.
This doctrine, which is certainly applicable to all negotiable instruments, makes substantial inroads on any possible rule, traceable to the former fiction of losing and finding, that conversion does not lie in respect of rights in intangible property. "
13 Counsel also referred to three Canadian cases where claims for damages for trespass and conversion were upheld where receivers, who had been wrongly appointed by secured creditors, seized control of the debtors' businesses including debts owed to the debtors, or other contractual rights which they had. (McLachlan v Canadian Imperial Bank of Commerce (1987) 13 BCLR (2D) 300; (1989) 57 DLR (4th) 687; Royal Bank of Canada v W Got & Associates Electric Ltd (1994) 150 AR 93; 196 AR 241; [1999] 3 SCR 408; Kavcar Investments Ltd v Aetna Financial Services Ltd (unreported, 11 April 1986, Ontario Supreme Court, Hollingworth J).
14 These cases were considered by the English Court of Appeal in OBG Ltd v Allan [2005] 2 WLR 1174. Peter Gibson LJ held (at [56]) that there could be no conversion of a chose in action. His Lordship said that none of the Canadian cases contained any analysis of the relevant torts in relation to intangible assets, and that he derived no assistance from them. It was submitted for Telecom Vanuatu that the only analysis offered by his Lordship as to whether the tort could apply to intangible assets was, (at [56]), that as a matter of history the tort of conversion, being derived from trover, required averments that goods had been lost by their possessor and found by the defendant. It was submitted that it was reasonably arguable that this was not a sufficient reason for confining the tort to its historical origins involving dealing with physical chattels, given the advances in technology and the greater importance of information and intangible rights in modern society.
15 Manse LJ (at [76]) held that the strict liability of the torts of trespass and conversion were generally limited to real property in the case of trespass or chattels in the case of trespass and conversion, and that it was only by a fiction that conversion was extended to a very limited category of intangibles, being the conversion of a negotiable instrument, where the face value of the instrument was taken to be the face value of the piece of paper. His Lordship found no significant support in the Canadian authorities for a wider application of the tort to purely contractual rights. Counsel for Telecom Vanuatu submitted that it was reasonably arguable that in this country the Canadian authorities would be found to provide significant support for the application of the tort of conversion to choses in action. Counsel also referred to the fact that, as Carnwath LJ observed (at [116]), in England, the tort of conversion had been largely codified in the Torts (Interference with Goods) Act 1977, so that it was difficult to justify any major development of the law by judicial decision. It was submitted that there was no such impediment in Australia.
16 Counsel also pointed to American authority that the tort of conversion applies to both tangible and intangible property. In Kremen v Network Solutions, Inc. (2003) 337 F 3rd 1024, the United States Court of Appeals for the 9th Circuit upheld an appeal from the grant of summary judgment in favour of Network Solutions. Mr Kremen was the registrant of a domain name, sex.com. Network Solutions was the exclusive domain name registrar. It had no contract with Mr Kremen. It transferred the domain name on the basis of a forged letter from a Mr Cohen. The district court granted summary judgment in favour of Network Solutions. In respect of the claim for conversion it concluded that although the domain name sex.com was Kremen's property, because it was intangible property, it was not property to which the tort of conversion applied, (at 10161). The US Court of Appeals disagreed. It agreed that Mr Kremen had an intangible property right in the domain name. There was a triable issue that Network Solutions had committed the tort of conversion if the tort applied to such intangible property. The US Court of Appeals, following an 1880 decision of the Californian Supreme Court (Payne v Elliot 54 Cal 339 (1880), held that the tort applied to every species of personal property, tangible or intangible (at 10167, 10170-10171). It noted that conversion was originally a remedy for the wrongful taking of another's lost goods and so applied only to tangible property, but said that virtually every jurisdiction in the United States had discarded this limitation to some degree and some had rejected it altogether (at 10166).
17 The Re-statement (2nd) of Torts s 242 (1965) recommended the test:
" (1) Where there is conversion of a document in which intangible rights are merged, the damages include the value of such rights.
(2) One who effectively prevents the exercise of intangible rights of the kind customarily merged in a document is subject to a liability similar to that for conversion, even though the document is not itself converted. "
18 The US Court of Appeals held that California did not follow the Re-statement's requirement that a document must represent the owner's intangible property right, but the tort applied to intangibles without inquiring whether they were merged in a document, (at [9], 10167, 10170-10171).
19 The riposte of Optus is that whatever might be the law in America or in Canada, the law in this State is settled by binding authority that the tort of conversion does not extend to intangible property.
20 I accept that for a first instance judge this is so. However, the claim in question, which has as its foundation the claim for conversion of intangible property, is not the only basis upon which relief is sought in respect of the alleged wrongful opening up of Optus's international switch to permit unauthorised persons to generate audio text and dial up services to Vanuatu number ranges. As I understand the Summons, and counsel's submission, Telecom Vanuatu claims payment from Optus of the termination charges in respect of such traffic under the contracts on which it sues, or alleges that such conduct was a breach of those contracts. The same facts will have to be investigated whether the novel claim is struck out or not. There are also other claims for alleged non-payment of termination charges. It is probable that the question of the nature and extent of Telecom Vanuatu's rights under Vanuatu law to control the Vanuatu number ranges will need to be investigated in determining the claims which are not the subject of the application to strike out. In those circumstances, there is little, if any, practical advantage in striking out the restitutionary claim.
21 In Wickstead v Browne (1992) 30 NSWLR 1, Kirby P, when considering whether a cause of action in negligence by a beneficiary of a trust against the trustee should be allowed to go to trial said (at 5):
" But as the trial must now proceed, there is merit (as it seems to me) in permitting the appellant to present his case in various ways. The marginal utility to the respondent of preventing the appellant from proceeding upon the alternative cause of action in negligence is minimal. But the marginal cost of doing so would be very great if, subsequently, the trial was concluded, limited by the orders proposed, and it was then held, either by this Court or by the High Court of Australia , that the appellant's cause of action in negligence was viable;
2. Common experience teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence. Testimony gives colour and content to the application and development of legal principle. " (Emphasis added).
22 His Honour's was a dissenting judgment, but was upheld in the High Court: ((1993) 10 Leg Rep SL2).
23 Two things follow from the passage from Wickstead v Browne quoted in para [21]. First, there is a threshold question as to whether there is a practical advantage which outweighs the potential disadvantage in deciding whether the question is reasonably arguable. Thus, in Williams & Humbert v W & H Trade Marks (Jersey) Ltd [1986] AC 368, Lord Templeman said (at 435-436), that if an application to strike out involves a prolonged and serious argument, the judge should, as a general rule, decline to proceed with the argument unless the judge not only harbours doubts about the soundness of the pleading, but is satisfied that the striking out will obviate the necessity for a trial, or will substantially reduce the burden of preparing for trial, or the burden of the trial itself.
24 Secondly, in assessing whether there is sufficient utility in deciding whether the cause of action is reasonably arguable, the question is not whether the trial judge, but whether the Court of Appeal or the High Court, might consider that the cause of action is viable.
25 In this case, the question comes down to what is the advantage in the preparation for trial, or the conduct of the trial, in striking out the relevant parts of the Summons, weighed against the disadvantage of a new trial if the Court of Appeal or the High Court were to reconsider the essential elements of the tort of conversion and ordered a new trial on that issue. A court at first instance should be wary of summarily disposing of a claim, where there is a reasonable possibility that the law might be developed at an appellate level to uphold the claim. (Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 at 373-374; and see also Gibson v Parkes District Hospital (1991) 26 NSWLR 9 at 35).
26 In this case, Telecom Vanuatu raises plausible arguments as to why, at an appellate level, it might be found that the tort of conversion should not be limited to dealings in chattels. I will not attempt to analyse the merits of the argument as it might be presented at an appellate level. That would involve a wider and deeper analysis than was advanced before me. It would necessarily include a consideration of how such a wider tort of conversion would sit with the existing "economic torts" of interference with business relations. I cannot say that at an appellate level, even if it be the level of the High Court, it is not reasonably possible that Telecom Vanuatu's argument might succeed. The marginal utility in striking out the claim is substantially outweighed by the additional costs the parties would incur if Telecom Vanuatu's argument succeeded and a new trial was necessary. It has not been demonstrated that the parties will be put to any substantially greater expense in preparing for the issues raised by the restitutionary cause of action than they would incur in any event in preparing the remaining issues for trial.
27 For these reasons, I dismiss the defendant's notice of motion of 9 August 2005. I order that the defendant pay the plaintiff's costs of the notice of motion.