DISHONEST RETENTION OF PROPERTY :A CRIMINAL OFFENCE POSING AS A CIVIL RIGHT
“The giant tries to drink the stream”. John Dickson Batten (c. 1916) Europa’s Fairy Book, G. P. Putnam’s Sons, London & New York
QUESTION :
CAN YOU RETAIN PROPERTY BELONGING TO ANOTHER, TO SECURE YOUR POSITION IN A DISPUTE?
EXAMPLES :
TWO BUSINESSES ( COMPANY A AND COMPANY B ) HAVE A DISPUTE. A HAS DELIVERED PRODUCTS TO B. B OWES MONEY TO A. BUT B WILL NOT PAY A BECAUSE THE PRODUCTS ARE DEFECTIVE. TO SECURE ITS POSITION, A RETAINS SOME OTHER PROPERTY BELONGING TO B AS LEVERAGE UNTIL B MAKES THE PAYMENT.
CHONG IS EMPLOYED BY KWONG SDN BHD AND IS PROVIDED A COMPANY CAR FOR HIS USE. DUE TO AN EMPLOYMENT DISPUTE, CHONG RETAINS THE CAR AND DOES NOT WISH TO RETURN IT UNTIL THE DISPUTE IS SETTLED.
ABU OWED MONEY TO HAMID. HAMID CAPTURES ABU’S CATTLE AND HOLDS THEM AS A SECURITY UNTIL ABU HANDS HIM THE MONEY OWED.
ANSWER:
GENERALLY, YOU CANNOT DO THIS — BECAUSE IT IS LIKE TAKING THE LAW INTO YOUR OWN HANDS. YOU CANNOT SIMPLY RETAIN PEOPLE’S PROPERTY AS A BARGAINING CHIP OR LEVERAGE IN NEGOTIATIONS. THIS IS NOT “SELF HELP”.
IT IS NOT PERMITTED IN LAW, WITH CERTAIN EXCEPTIONS.
YOU COULD BE COMMITTING A CRIMINAL OFFENCE AND THE OWNER OF THE PROPERTY CAN SUE YOU IN COURT TO RECOVER THE ITEM TOGETHER WITH DAMAGES.
“Two wrongs do not make a right.”
Note for my esteemed readers : I am taking liberties with classifications. For the purpose of this writing, I am focusing on the criminal law aspect of criminal misappropriation of property. I have observed some cases where a party who felt aggrieved by the conduct of another would take matters into their own hands and commandeer the other’s property to “enforce” a perceived civil or moral right. It is risky and can land you in trouble. The risk to you may also be difficult to estimate because you may or may not be able to foresee the reasonable consequence of holding the property. For example, what if such property would spoil, rot, become damaged, amortise, become obsolete or otherwise lose functionality or value while it is in your custody? What if someone lost an opportunity, became injured or worse, died because you have taken some property as a security?
Please note that the legal authorities referred below overlap among cases of dishonest misappropriation of property, criminal breach of trust and other related offence. Generally the principles are the same, involving “conversion”, an ancient concept of misusing something that you take possession of. In my own words, conversion is wrongly taking something that does not belong to you or which you do not have the right to take.
What is conversion?
Black’s Law Dictionary (I’m using the 9th Edition), describes the following terminologies as follows:
“conversion by detention”: Conversion by detaining property in a way that is adverse to the owner or other lawful possessor. The mere possession of property without title is not conversion. The defendant must have shown an intention to keep to in defiance of the owner or lawful possessor.
“direct conversion” : The act of appropriating the property of another to one’s own benefit, or to the benefit of a third person. A direct conversion is per se unlawful and the traditional requirements of demand and refusal of the property do not apply.
“fraudulent conversion”: Conversion that is committed by the use of fraud, either in obtaining the property or in withholding it.
A person who performs such act is called a “converter”: One who wrongfully possesses or disposes of another’s property; esp., one who engages in a series of acts of wilful interference, without lawful justification, with an item of property in a manner inconsistent with another’s right, whereby that other person is deprived of the use and possession of the property.
However, an “innocent converter” defence refers to a person who takes another’s chattel tortiously but in good faith and without knowledge that he or she has no entitlement in it. This writing excludes this latter category.
When does it become Misappropriation?
Very roughly, the ingredients of dishonest misappropriation of property are a subset of criminal breach of trust. For this writing I am generalizing them as a group, they are “misappropriation type offences”.
When you misappropriate or convert something, it means that you use something belonging to someone else, as though it is your own (even though it is not or even though the owner did not consent). For clarity, criminal misappropriation in the criminal sense is more specific than the general concept of conversion, because it entails a situation where a suspect or defendant has first gained possession of an object through lawful means (either by entitlement or even by accidentally finding it lying on the ground in a public space) — but then it becomes unlawful when it is converted — either taken for own use, or retained or wrongfully given to a third party. There is no entrustment.
For this discussion we also focus on movable property only (vehicles and money, excluding real estate and traditionally understood inchoate rights).
For this category of offences, it excludes situations where you wrongly take possession of a property (that would be theft, robbery and the like). As mentioned above, it includes situations where you have initially acquired possession of property lawfully or innocently. That is, initially it was not wrong for you to have possession of the property. Then, it becomes an offence when:
a. The owner tells you to return it, but you refuse;
b. The owner did not say anything, but secretly you misused the property;
c. The owner lost the item and you found it, but you failed to make reasonable inquiries or report it. For example, if you found a wallet containing cash and the IC and credit cards belonging to someone. You cannot keep it for yourself as “finder’s keepers”.
d. You bought someone’s wardrobe and lo and behold, inside one of the locked drawers was some valuable property. You should return it to the owner; but this depends on certain factors such as your expectations in the purchase agreement.
This does not apply for the following situations:
Situations where the law or security allows you to retain someone’s property, for example as a lien, or other agreed form of security. It is not an offence because you are justified in law (it is a legal defence under the General Exceptions of the Penal Code).
Situations where the law does not allow you to take possession of property found. For example, you buy an antique car and some national treasure or government property regulated by law is found inside the hood. Some other legal implications may come into play.
Just because there is an ongoing civil claim between the parties or in respect of the property does not mean that you cannot be charged for misappropriating it from its rightful owner.
To keep things simple, I use the term “owner” in a broad and not technical sense. This can matter in law, because for example, theft is an offence against possession not ownership – with the right set of facts, theoretically you can be charged for stealing your own car!
What can you do if someone has seized or retained your property?
If you wish to recover your property that is unlawfully being held or retained by someone else, you should use the legal process to recover the same. Please consult a lawyer to do this.
Although the law does recognize (read: accommodate) self-help in some situations, you must be cautious about taking the law into your own hands. What you may consider as being morally right to do may be illegal and get sued or worse, arrested or charged. If you work for a company, it can cause your company and your management to get sued too. If you acted in the capacity of a partner in a partnership, all your partners may be jointly and severally liable for your “mistake”.
Lodge a police report to “plant your flag”. Establish the following:
Why the property belongs to you.
Who is keeping the property, when and for how long. Where is it (if you know). Specifically, how long have they NOT been allowed to use it.
How did you realise that they are keeping your property.
How did the property end up with them. This part can make a difference between a theft-type case and misappropriation-type case.
Why they do not have the right to keep it. Be careful about this point – more likely than not it is not advisable to state this in a police report. To much civil-is language early on, may convince the police that this is a civil case only.
What are you suffering because the property is with them. If you can quantify your loss, it is good, otherwise just state that you are suffering loss of use and you must pay the loan etc. and you can provide the actual figure to the police later. The police need this number because they will write it on the outside cover of the investigation paper under “Nilai Kerugian” or other equivalent description.
In case the property is damaged in their custody, you could state that it was in good condition when you last saw the property. Or you can state that the property is of such nature that it will degrade rapidly. I don’t know, maybe valuable sheep skins or rare sand paintings.
The purpose for making the report. No hard and fast rule here. If you need the police to act on the report, then your intention should reflect in the language of the report.
If your property is high value and/or will degrade or amortise rapidly, please push the police to seize the item(s).
Many years ago I prosecuted a case involving a shipload of used microprocessors (actually I was but one of many hands involved in that case). They were defective or used or something to such effect. They were set aside for disposal, and were still worth a lot of money even in such state. They were stolen, part of a coordinated inside job where CCTV recordings revealed a lorryload of used microchips leaving the crime scene, under the watchful eye of alleged insiders. The police seized the items. Due to the “sensitive” nature of the microprocessors, the police / prosecution obtained an order from the Magistrate to dispose the exhibits long before trial commenced. I do not remember whether this was done before or after charges were filed. We discuss the return/disposal of exhibits in another writing.
What next for the victim?
The police have the power to seize your property for their investigation into the offence. They do not recover the property for you. They are not your private repo men. So do not consider this as a method of recovery. The police may also be reluctant to seize your property from the clutches of the offender if they get wind that there is a civil dispute amiss.
If you wish to recover the property without the police’s involvement, then as stated above, your first recourse is a civil suit. It is still a good idea to lodge a police report. If there is loss, and insurance is involved, the insurance company may require a police report and a keputusan kes from the investigator.
Under the Criminal Procedure Code read together with the Police Act 1967, the police have the power to seize the property for a particular time period, to assist in investigations. They would issue a search list to the ‘offender’ who retained your property, but this search list is a formality that does not confer any rights upon the property.
If your property happened to be a vehicle and was so situated with the offender that it was used in the commission of an offence, then the police may detain your vehicle for 48 hours. Under Section 413 of the CPC, the police is supposed to refer your property to the Magistrate for an order (I write about this topic in another article). However in practice, this is usually not done.
Your property may then become a “Barang Kes” to be exhibited in trial if the offender is charged. As I have discussed in my other writings, please follow up with the development of your case so that you can track the movement of your property. Sometimes the police may release the property to your custody pending the determination of the case (whether it is determined at the end of investigation – NFA – or trial), via the aforesaid Section 413 CPC order. I am aware of cases where the police released Barang Kes to complainants and suspects or their families without such order.
As you can see, if the police get involved, you can lose control of your property because the investigators could seize it as part of their independent investigation. There is no guarantee that the police will remove your property from the custody of the offender, either. In the right circumstances, it may still be a strategy to seek assistance from the police – perhaps in tandem with other dispute resolution mechanisms. Again, consult your lawyer so that you do not get entangled with overlapping jurisdictions of the criminal vs civil courts and the police versus self-help. Still, recourse to the police is generally safer and more legit than marching to the offender’s house with lathi in hand, flanked by your homies. Who knows, maybe a phone call from the Balai Polis’s land line to the offender is all it takes to dissuade him from continuing the act.
THE PENAL PROVISION:
SECTION 403 OF THE PENAL CODE PROVIDES:
“DISHONEST MISAPPROPRIATION OF PROPERTY
Whoever dishonestly misappropriates or converts to his own use any movable property, shall be punished with imprisonment for term which may extend to five years, or with fine, or with both.
Ingredients – The section requires the following ingredients:
(i) The property must belong to a person other than the accused;
(ii) The accused must have misappropriated property or converted it to his own use; and
(iii) There must be dishonest intention on the part of the accused.”
[This is a bailable offence, and it is non-compoundable. The police may arrest without warrant.]
WHY IS IT WRONG TO RETAIN THE PROPERTY OF ANOTHER AS SECURITY?
The most important ingredient of the offence is the intention, or guilty mind.
The law does not look at the overall motive or rationale why you would hold onto the property of another. It could be a mitigating factor in sentencing, though (or even an aggravating factor, so do not simply put that story forward without first testing it with your lawyer).
Timing : It demarcates between lawful and unlawful possession
What matters most is not your intention at the time that you first had possession of the property, because you actually came into possession of the property lawfully (at first). What matters most is your intention at the time that the property was retained or converted to your own use. There would be a cut-off point – the demarcation between the time where your possession of the property is lawful, and then it becomes unlawful. It is different for each case. The demarcation could be upon the expiry of a period of time, or a demand from the actual owner. I am not prepared to say that if you continue to possess a piece of machinery after the expiry of lease that it amounts to criminal misappropriation. No. It depends on whether the intention at that critical juncture was dishonest.
Dishonesty in law is not the same as dishonesty we recognize in our day-to-day life, or dishonesty as our parents taught us. Dishonesty in law refers to that intention to cause wrongful gain to yourself or wrongful loss to the actual owner.
The paragraph above deals with unlawful retention. Actually, the on dishonest misappropriation of property also covers situation where you have misappropriate the property instead of retaining it. For example, you sell the property, give it away, wear it, drive it, or spend it.
What if you did it?
If you have been called out on this offence, or if you have not been called out but believe you may have unwittingly done so, please get legal advice. Do not take matters into your own hands and do not assume that if you return the property with an apology and RM50.00 that things will reset to 0-0. You could risk returning the item with the hope that no one would find out, but be prepared to answer for it.
Depending on the type of property, the relationship between yourself and the actual owner, it is primarily a human thing. Good communication, putting aside your pride, taking a bit of flak if you deserve it, can sometimes help ensure that a simple problem remains simple. We are taught from young that if you own up to a mistake, and make good of it as soon as possible, it is just the right thing to do.
I am not writing about the civil recovery aspect of this, which is the remedy if you are the owner.
THE LAW
Below I refer to different parts of Ratanlal & Dhirjlal’s Law of Crimes and the pages and (renumbered) footnotes are from the 25th Edition.
Page 2024, 3rd paragraph of Ratanlal & Dhirjlal’s Law of Crimes Vol 2. 25th Edition.
“English law and Indian law – According to the English law, innocent taking followed by conversion, owing to subsequent change of intention, is a civil wrong but not an offence. According to the English law only the intention of the accused at the time of obtaining the possession of property is taken into account. In India, on the other hand if a change of intention occurs, viz. from honest to dishonest, the offence of criminal misappropriation is committed.”
Page 2026, 2nd paragraph of Ratanlal & Dhirjlal’s Law of Crimes Vol 2. 25th Edition.
“Retention of money for a sufficiently long period by a person who is bound under law to return it to another legally entitled to it raises an inference of a temporary misappropriation within the meaning of this section. When the prosecution proves such retention it is not incumbent on it to prove that the accused did not refund it to the person from whom he received it and the accused is liable to be convicted of an offence under this section if he fails to prove that he returned it to the person legally entitled to it, or from whom he received it. Where it is the duty of the accused to pay over moneys received by him, his non-payment is prima facie evidence that he has wrongfully appropriated them to him, his non-payment coupled with a false account either as to the receipt of the money or its disposal conclusive evidence.”
Penal Code Section 25
The term “dishonestly” in the Penal Code differs from its normal meaning used in daily language, which is ‘deviation from probity’ (untruthful, immoral).
Dishonestly under the Penal Code relates to property only and in respect of whether wrongful gain is obtained by the suspect, or wrongful loss is incurred by a victim.
“Dishonestly” – Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person is said to do that thing “dishonestly”.
“A person can be said to have dishonest intention if in taking the property it is his intention to cause gain, by unlawful means, of the property to which the person so gaining is not legally entitled or to cause loss, by wrongful means of property which the person so losing is entitled[1]. An actual intention to convert an illegal or doubtful claim into an apparently legal one makes an action dishonest[2].
The term ‘dishonestly’ must relate to an advantage to which a party perpetrating a deceit is not legally or equitably entitled. Thus where A, although entitled to possession of his house from B, sues B for arrears of rent basing his claim on a rent note which is found to be not genuine, Am clearly intends to cause wrongful gain[3].”
“The law takes into account the primary or immediate intention and not the secondary, mediate or remote. Thus, if A takes an article belonging to Z out of Z’s possession, without Z’s consent, with the intention of keeping it until he obtains money from Z as a reward for its restoration, he takes it dishonestly and commits theft[4].”
Section 23 Penal Code:
Wrongful Gain / Wrongful Loss
Gaining wrongfully : Losing wrongfully – A person is said to gain wrongfully when such person retains wrongfully, as well as when such person acquires wrongfully.
“Theft of aircraft -- Taking out of the aircraft by the appellant for unauthorised flight gave the appellant the temporary use of aircraft, for his own purpose and had temporarily deprived the owner of the aircraft of its legitimate use, constituted wrongful gain to appellant and wrongful loss to the owner, the Government[5].
“Wrongful gain: wrongful loss – The words ‘gaining wrongfully’ or ‘losing wrongfully’ need not be confined only to the acquisition or to the actual deprivation of property, and would cover also cases of wrongful retention of property in the one case and wrongfully being kept out of property in the other[6].”
“Wrongfully kept out of any property – When the owner is kept out of property with the object of depriving him of the benefit arising from the possession, even temporarily, the case will come within the definition[7].”
SOME READING FROM INDIAN DECISIONS
For evergreen Penal Code offences, I like to start with Indian cases which are very helpful jurisprudentially. Both excerpts below were lifted with thanks from the good people from indiankanoon.org.
Budhan Singh And Anr. vs The State on 7 January, 1960
“9. Mr. Ugra Singh has not drawn my attention to any other decision; but I may refer to an old Full Bench decision of the Calcutta High Court in Queen Empress v. Sri Churn Chungo, ILR 22 Cat 1017. It has been held in that case that a creditor, who removes his debtor's property from his possession without his consent with the intention of coercing him to pay the debt, commits the offence of theft. In that ease, Pigot, J. has observed :
"We think that an intention on the part of the accused to use the possession of the property when taken for the purpose of obtaining satisfaction of a debt due to him, and only for that purpose, has no bearing on the question of dishonest intention under the Penal Code. To hold that such a purpose could render innocent what would be otherwise a wrongful gain within the meaning of Section 23 would amount to the recognition of a right on the part of every individual to recover an alleged debt by the seizure of property of his alleged debtor, and would tend to a state of things in which every man might, if strong enough, take the law into his own hands."
Althought this case below is over 100 years old, it is contains a discussion on wrongful gain that is still relevant today.
Queen-Empress vs Sri Churn Chungo (1895) ILR 22 Cal 1017
W C Petheram, Prinsep, Pigot, Macpherson, Banerjee
[Calcutta High Court]
W. Comer Petheram, C.J.
“When the section is read in this way it is evident that it was the intention of the Legislature that it should be theft under the Code to take goods in order to keep the person entitled to the possession of them out of the possession of them for a time, although the taker did not intend to himself appropriate them, or to entirely deprive the owner of them. This is precisely what a creditor does, who by force or otherwise takes the goods of his debtor out of his possession against his will in order to put pressure on him to compel him to discharge his debt; and it must follow that a person who does so is guilty of theft within the provisions of the Indian Penal Code.”
Pigot J
“8. We think that an intention on the part of the accused to use the possession of the property when taken for the purpose of obtaining satisfaction of a debt due to him, and only for that purpose, has no bearing on the question of dishonest intention under the Penal Code. To hold that such a purpose could render innocent what would be otherwise a wrongful gain within the meaning of Section 23 would amount to the recognition of a right on the part of every individual to recover an alleged debt by the seizure of property of his alleged debtor, and would tend to a state of things in which every man might, if strong enough, take the law into his own hands.”
Banerjee J.
“15. It remains now to consider whether the taking in this case was a dishonest taking according to the definition of "dishonestly" in Section 24, that is to say, whether the taking was "with the intention of causing wrongful gain to one person or wrongful loss to another." I think the question must be answered in the affirmative, as the creditor in taking and detaining the animals intended to cause both wrongful gain to himself and wrongful loss to the debtor within the meaning of Section 23; for he retained, by unlawful means, property to which he was not legally entitled, and he unlawfully kept his debtor, who was legally entitled to the property, out of possession and enjoyment of the same. "Wrongful gain" according to the definition in Section 23 is constituted not only by wrongful acquisition of property (which is in accordance with the ordinary meaning of the words) but also by wrongful retention of the same, even though such retention does not result in any profit to the person retaining it: so "wrongful loss" is constituted not only by wrongful deprivation of property, but also by the being wrongfully kept out of the same.”
MALAYSIAN DECISIONS
Below are excerpts from 3 different eras. All three relate to criminal breach of trust which can be seen to be the gravest of the misappropriation-type offences. It is different from Section 403 from the Penal Code but the main elements of dishonesty and misappropriation are similar.
SATHIADAS v PP [1970] 1 MLRH166 (Raja Azlan Shah J)
“The gist of the offence of criminal breach of trusts is entrustment and dishonest misappropriation or conversion to own use. Once the prosecutions have succeeded in proving the receipt of the money for a particular purpose the case of entrustment is made out. Dishonest misappropriation or conversion to own use involves wrongful gain to the appellant or wrongful loss to his employers for the period of the retention of the money. That must depend on the facts and circumstances of each case.”
“It may be observed that mere retention of money would not necessarily raise a presumption of dishonest intention but it is a step in that direction. The fact that money entrusted to be used for a particular purpose, was not used for such purpose; that there was retention for a sufficiently long time would, together with other facts and circumstances justify the inference that the appellant had dishonestly misappropriated or converted the money to his own use. There was the intention in the appellant to deprive his employers of their monies, and the appellant misappropriated the monies for a time, intending to make it good eventually when any further retention became impossible.”
PUBLIC PROSECUTOR v WONG KIM FATT [1983] 2 MLRH 132 (George Seah FJ)
“Dishonesty may be inferred from surrounding circumstances and the terms upon which the accused had the money in his hands. When such money is rightfully in the hands of the accused, mere non-production of it will not, except in exceptional circumstances, amount to an offence under s. 409. To establish dishonesty, it is not necessary that the prosecution should establish an intention to retain permanently the property misappropriated. An intention wrongfully to deprive the owner of the use of the property for a time and to secure the use of the property for one's own benefit for a time may be sufficient. It is not necessary to prove in what precise manner the money or property was misappropriated. The essential thing to be proved is that the accused was actuated by dishonest intention. The failure of the accused to account for the money proved to have been received by him or giving a false account as to its use is generally a strong circumstance against the accused. The mental act of intent to deprive the owner of his property is the gist of the offence. Criminal breach of trust is not an offence which counts, as one of its factors the loss that is the consequence of the act. It is the act itself which in law amounts to an offence.”
SUHANI MAT DAUD v PP [2011] 1 MLRH 294.
“[78] A person is said to gain wrongfully when such person retains wrongfully, as well as when such person acquires wrongfully. A person is said to lose wrongfully when such person is wrongfully kept out of any property, as well as when such person is wrongfully deprived of property.”
“[87] If the essential elements of the offence of criminal breach of trust have been made out, the fact that at the time of the offence, the accused had intended to make restitution as soon as possible, could not in law constitute a defence because even temporary misappropriation or conversion of money, or dishonest use or disposal of it in violation of any direction of law or of any legal contract express or implied or wilfully suffering any other person so to do, would amount to criminal breach of trust within the meaning of s. 405 of the Penal Code .”
Editorial Note: This writing was first drafted on 12 July 2021 but not uploaded until 6 June 2022 because I was searching and awaiting for any new decisions exactly on point. While there are local reported Section 403 Penal Code cases here and there, they are not really on point for the purposes of this article. For that reason I have maintain the CBT examples as they are. I will update this writing if I find anything helpful to better explain this subject.
[1] Madhavan Pillai Somanadhan Pillai 1966 Cri LJ728
[2] Kalyanmal AIR 1937 Nag 89
[3] Krishnarao Raojirao AIR 1953 Nag 165
[4] Section 378m illustration (1).
[5] Mehra K K AIR 1957 SC 369
[6] Krishnan Kumar v Union of India AIR 1959 SC 1390
[7] Nabi Bakshi (1897) 25 Cal 416; Budhan Singh 1960 Cri LJ 1485 (Pat).