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Case No: SLJ 1999/7545.A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HON. MR. JUSTICE TOULSON
Royal Courts of Justice
Strand, London, WC2A 2LL
Monday 22 May 2000
B e f o r e :
LORD JUSTICE SCHIEMANN
LORD JUSTICE WALLER
and
MRS. JUSTICE ARDEN
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(1)
CLEMENS TOUSSAINT
(2) PATRICK THEWALT
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Appellant
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and -
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NOEME
PERELMAN MATTIS
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Respondent
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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
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Mr. M. McPARLAND (instructed by Messrs. Kennedys) for the Appellant
Mr. D. JOSEPH (instructed by Messrs. Lane & Partners) for the
Respondent
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Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE SCHIEMANN
(giving the judgment of the court):
1. This is an appeal from the order of Toulson J dated 5 July 1999. That order
gave various preliminary pre-trial directions for amendments to statements of
case, expert evidence and witness statements. The first claimant appeals
against it only insofar as it also directed disclosure of the name of an
intermediary referred to anonymously in further and better particulars of his
claim and in his witness statement. The two claimants in these proceedings
were formerly in partnership. Following dissolution of their partnership this
action is continued by the first claimant alone who is referred to below as the
claimant. For simplicity we draw no distinction between the claimant and the
former partnership.
2. As this is an appeal from an interim order, it is sufficient to set out the
facts briefly. The claimant is an art retrieval consultant and he made an
agreement in writing dated 31 March 1992 with the defendant for the recovery of
a stolen painting called Décalcomanie by the well-known surrealist
artist Magritte. This painting had been stolen in 1979 and had not since then
been seen by its owners. The agreement provided that if the painting were
recovered it would be sold at auction in London and that the claimant would be
remunerated by receiving half the proceeds of sale. The claimant found the
painting but, before it could be sold, the police at the defendant's
instigation seized the painting. The painting has now been removed to the
United States of America and the defendant has refused to make any payment to
the claimant. The claimant sues for damages for breach of contract, including
a sum of $300,000 paid to the person who previously had possession of the
painting (referred to below as "the possessor").
3. It is now pleaded that it was an express or implied term of the agreement
that the claimant would be entitled to keep secret the identity of those
through whom he dealt. For the purposes of this appeal, the defendant has been
prepared to accept that there was arguably an implied term of the contract to
this effect. Accordingly the court has to bear in mind the possibility that
such a term might be found to exist. To meet this the defendant submits that
any such implied term was part of an illegal bargain. It was in any event
submitted it could not extend to material necessary to enable a fair trial to
take place, but these submissions were not developed nor have they been
pleaded. In his further and better particulars the claimant says that he made
contact with the possessor through an intermediary whose identity he is not
willing to disclose to the court. It was this intermediary who on the
claimant's case knew the whereabouts of the painting. According to the
intermediary the possessor had purchased the painting for $300,000 in
Switzerland in 1982, did not know that the painting had been stolen and was
prepared to sell the painting if he was paid what he had himself paid for it
(i.e. $300,000). The picture was subsequently delivered to a hotel lobby in
Cologne and after the sum sought had been transferred to the possessor the
picture was released to the claimant. It was subsequently put on a new
stretcher and delivered to Sothebys, the auctioneers.
4. The principal ground of defence is illegality. It is common ground that the
claimant knew that the painting had been stolen. But the defendant also
contends that the possessor was not a purchaser in good faith and that the
claimant knew that the possessor was not a purchaser in good faith. She
alleges that the claimant was acting dishonestly and attempting to profit from
the handling of stolen property and that the contract is tainted with
illegality.
5. In a nutshell the defendant's case is that disclosure of the intermediary's
identity is necessary for a fair trial of her defence based on illegality to
take place. There is an alternative plea, with which this court has not been
concerned, that the claimant exercised economic duress over the defendant or
the defendant's goods. Mr Joseph, who appeared for the defendant, submitted
that the contract was thus illegal at common law as being a contract illegal as
to performance alternatively as a contract tainted with illegality or as a
contract which was collateral to an illegal contract and in this connection he
relied upon Chitty on Contracts, 28 ed (1999) paras 17-009 and 17-158 to
17-159.
6. The agreement in issue in these proceedings was an agreement to recover the
stolen painting. It is common ground that there are some circumstances in
which an agreement of this kind, whereby one party agrees for a reward to
recover another's property which has been stolen, is lawful and enforceable.
What have not been fully analysed at this stage are the grounds on which it
would be said that such an agreement is illegal. Mr Joseph asserts that it is
sufficient if the claimant had an intention to perform the contract illegally
and submits that it was not necessary to show that both the claimant and
defendant intended to perform the contract illegally. We agree, but it may
also be that for her defence to succeed the defendant will have to show that
the claimant knew of the facts making the contract illegal. Furthermore, if on
further analysis it turns out that the knowledge of the claimant is the one
crucial fact in issue, it may be possible to determine whether the defence of
illegality can succeed on the basis that the other material facts are assumed
in the defendant's favour. One matter is however clear and that is that the
defendant cannot simply assert that the contract is illegal and then rely on
interrogation of the claimant in order to establish the facts which would
enable such a defence to succeed.
7. Both sides have impressed on us facts supporting their respective cases. In
particular, Mr McParland for the claimant has emphasised that the claimant
was a highly reputable art retrieval expert who had achieved major results in
the recovery of art collections, particularly art collections which were lost
during the Second World War. In this particular case he had consulted the
French and Belgian police before he contacted the defendant. Initial
communications were on an anonymous basis through lawyers but in due course
when the agreement was signed the claimant's name was disclosed. The defendant
for her part says that the circumstances surrounding the recovery of the
painting are suspicious. The painting is well known and thus says the
defendant it is unlikely that a purchaser would not have been aware of its
provenance. Moreover, the claimant insisted on a half-share of the proceeds of
sale and not just what the defendant says is the customary finder's fee.
Furthermore, the painting had been rolled up for a considerable time although
no one knows how long. The defendant also points out that there is no
documentary evidence to support the claimant's case as to how the painting was
recovered, or as to how the payment of $300,000 was made or as to the work
carried out to put the painting on a new stretcher. The defendant says that
the claimant's story as to how he discovered the whereabouts of the painting
and recovered it is not credible. According to the defendant's expert the
painting had only ever been on two stretchers. The stretcher on which it was
placed before the theft was found in a garden immediately after the theft. It
is also common ground that the painting was put on a new stretcher in 1992.
The defendant submits that these facts supports her case for disclosure.
8. Toulson J in his judgment rejected the claimant's argument that any order as
to disclosure of this evidence should be left to the trial judge to decide
having heard the evidence of the claimant. In his judgment the test to be
applied was whether disclosure was necessary to do justice between the parties.
He was here referring to the test laid down by Lord Wilberforce in Science
Research Council v. Nassé [1980] AC 1028. That case concerned the
question whether the court should order discovery of documents in breach of a
duty of confidentiality owed to non-parties. Lord Wilberforce said:
"It is sometimes said that in taking this element into account, the court has
to perform a balancing process. The metaphor is one well worn in the law, but
I doubt if it is more than a rough metaphor. Balancing can only take place
between commensurables. But here, the process is to consider fairly the
strength and value of the interest in preserving confidentiality and the damage
which may be caused by breaking it; then to consider whether the objective - to
dispose fairly of the case - can be achieved without doing so, and only in a
last resort to order discovery, subject if need be to protective measures.
This is a more complex process than merely using the scales: it is an exercise
in judicial judgment". (p.1067D-F)
9. Toulson J held that the balancing exercise could equally well be done in
advance of the trial and that the defendant could not fairly make consequential
inquiries arising out of the disclosure of the name of the intermediary unless
that information was available in advance of the trial. It may be necessary to
cross-examine that individual or to arrange for evidence to be taken in another
jurisdiction. If there was an order for disclosure in the course of a trial
there would probably have to be an adjournment. Toulson J took into account the
damage to the claimant in the course of his trade from disclosure of his
source. He also pointed out that the defence of illegality was not one which
could be dismissed summarily. We do not doubt the need to perform a balancing
process: the issue is how it should be performed in this case.
10. We now turn to the submissions on this appeal.
11. The claimant submits as follows. First, the information as to the name of
the intermediary is confidential information. Second, it would ruin his
business if the information had to be disclosed, and he would not disclose it.
Third, it would endanger the life of the intermediary if his name was known.
Fourth, disclosure of his name would in any event be in breach of the implied
term of the agreement.
12. The claimant points out that on the defendant's pleading the defendant had
formed the view that the claimant was handling stolen property before the
defendant entered into the agreement with the claimant and that accordingly at
all material times the defendant had intended not to perform the agreement.
The claimant for his part had performed the agreement and recovered the
painting and incurred expenditure of some $300,000 in the process.
13. The claimant has put in a lengthy witness statement giving his account of
the recovery of the painting. Mr McParland accepts that adverse inferences can
be drawn from the fact that the claimant refers to an intermediary whose name
he refuses to disclose. The judge treated part of this evidence as hearsay
evidence and held that the defendant had a right to require the production of
the intermediary for cross-examination. An alternative to that course however
could be that if the claimant persists in refusing to disclose the name of the
intermediary the judge could rule that the evidence should not be admissible
at trial. Mr McParland furthermore in fact asserts that the claimant does not
have to rely on these parts of the witness statement in order to succeed in his
claim for damages for breach of contract, and of the two alternatives, would
submit that the latter is to be preferred since it at least allows his client
to proceed with his action.
14. In this matter an application for permission to appeal was adjourned by
Potter LJ to this court who suggested that the claimant might put forward
proposals for preserving the confidentiality of the name of the intermediary.
The claimant has been criticised for not producing any such proposals.
However, the claimant's position is that if the intermediary's name were
disclosed, then, given the defendant's intention to obtain first hand evidence
as to the whereabouts of the picture prior to its recovery, there is no way in
which the information could be kept confidential. We are inclined to agree and
Mr Joseph has rightly not pressed these criticisms.
15. The defendant submits as follows. First, the question of whether there
should be disclosure of the name of the intermediary is a question of
discretion and it has to be shown on appeal that the judge was plainly wrong.
Second, the evidence as to possible damage to the claimant's business or risk
to the intermediary is thin. The claimant has given evidence of a very
different situation: the assassination of another intermediary who discovered
art looted during the Second World War and deposited in Russia. However, as to
this, we note that in his witness statement the claimant states that he has no
doubt that disclosing his acquaintance as an investigator of stolen art with
some experience in the secret service would involve some considerable danger to
the intermediary (witness statement, paragraph 11). The defendant says that
there is no evidence that the intermediary is still working in this field.
However, the risk could remain even if the intermediary is not still working
in the field. Third, the defendant contends that the claimant cannot rely on
the existence of an implied term, because of the illegality and because
justice cannot be done unless there is disclosure of the name of the
intermediary. Fourth, the defendant contends that the information is
necessary for an effective cross-examination of the claimant. Fifth, the
defendant contends that there are no other means available to the defendant of
tracing the story back to the original possessor of the painting.
Conclusions
16. The starting point is that this application is made under CPR Rule 18(1)
which empowers the court to order a party at any time to give additional
information in relation to the matter. The exercise of the power is subject to
the overriding objective in CPR Rule 1(1). The overriding objective of the
Civil Procedure Rules is to enable the court to deal with cases justly.
Dealing with a case justly includes so far as practicable a number of specified
matters including "(a) ensuring that the parties are on an equal footing". The
new rules also impose a duty on the court to further the overriding objective
by effectively managing cases (CPR Rule 1.4(1)). Active case management
includes "(b) identifying the issues at an early stage;" and "(d) deciding the
order in which issues are to be resolved;" (CPR Rule 1.4(2)). The court's
power to require further information to be given under CPR Part 18 is one of
the court's case management powers, and its exercise here should be considered
in the context of the case management of this action. The court now has a wide
range of case management powers, and they are capable of being used flexibly to
meet the precise needs of an individual case.
17. As Mr Joseph has submitted, the question of disclosure was one for the
discretion of the judge. Mr Joseph submits that the judge applied the correct
test. The application for disclosure was resisted by the claimant (for whom Mr
Simon Rainey QC then appeared) on the basis that the question of disclosure
should be reserved to the trial judge and no distinction was drawn between
confidentiality arising by virtue of some rule of law and confidentiality
arising by virtue of an implied term. According to the note of the learned
judge's judgment (which is not an approved transcript) the submission for the
claimant was "that the question of whether disclosure of the information should
be directed ought to be decided at trial and not now because the judge will at
that stage have the opportunity of assessing the claimant and considering him
bona fide in deciding whether the claim for confidence is a reasonable
one which ought to be upheld."
18. We agree that the exercise of discretion by a judge is not reviewable on
appeal save in limited circumstances. This must particularly be so in relation
to the decisions made by a judge as case manager. It has been said before in
this court that in these days of new procedural philosophy and rules judges
acting as trial managers should be given proper freedom by the appellate court
in which to exercise the powers now conferred on them and that the margin of
appreciation so allowed to them should be generous (see for example
Thermawear Ltd v. Linton and Citroen & Wells , Court of Appeal, 17
October 1995 per Henry LJ. There are sound policy reasons for this.
Case management requires a knowledge of many aspects of a case not all of which
will be known to the appellate court. Review on appeal is not to be encouraged
as it will lead to delays in bringing cases to trial.
19. However, possibly because of the limited course the argument took before
the judge, we do not consider that he gave sufficient or separate consideration
to the issue which has been more prominent in this appeal, namely that the
agreement between the parties may have contained an express or implied term
that details of the identity of the intermediary should be kept confidential by
the claimant, or to the implications of that issue for the exercise by the
court of its case management functions, or, even if there was no implied term,
to the real relevance to the pleaded issue of the identity of the intermediary
and whether a fair trial of certain issues on certain assumptions without
identification would not be possible. No one on this appeal has suggested that
a contract containing the alleged implied term would necessarily be contrary
to public policy or unenforceable if the contract was otherwise lawful. In the
absence of authority we do not consider that that would be the position. The
existence of such a contractual term raises a distinct and separate question of
principle, namely that of enforcing a contractual right freely entered into.
If there was such a term, it follows that unless the contract is unenforceable
by reason of the pleaded illegality the defendant has simply no right to this
information. Moreover, if the claimant is simply not prepared to disclose
because of danger to the intermediary, an order for disclosure might force the
claimant to abandon what might otherwise be a good and substantial claim. That
would prima facie be unjust. Of course we also have to bear in mind
that the defendant claims that the contract was not binding on her. We also
bear in mind that Mr Joseph asserts that on her case disclosure is needed to
enable the issue of the binding nature of the contract to be resolved. But we
are not convinced that this is necessarily so.
20. How are the conflicting interests of the parties to be reconciled by the
court? In giving procedural directions, the overriding objective is to deal
with the case justly (CPR Rule 1(1)). To achieve that in this case, given in
particular the conflict identified, we consider that the issues need to be
identified at the pre-trial stage. We are also of the view that there needs to
be exploration of whether issues can be identified, based if necessary on
assumptions, which would allow a fair trial without disclosure, and/or which
would identify with precision to what issue the identity of the intermediary
becomes critical It seemed from the argument before us that the possibility of
identifying issues to be tried on assumptions had not been fully considered.
Mr Joseph and Mr McParland appeared to us willing to try to assist the court in
the identification of issues as indicated above.
21. The result of this exercise of identifying issues may well be to show that
disclosure of the name of the intermediary is unnecessary. Alternatively, it
may show that it is unnecessary to order disclosure of the name of the
intermediary until it has been established whether there was a term of the
agreement between the parties that the name of the intermediary should be kept
confidential. Self evidently, if the judge is satisfied that disclosure of the
name of the intermediary would involve great risk to the claimant and the
personal safety of the intermediary, disclosure should only be ordered if it is
necessary to do so to do justice between the parties. In evaluating what is
necessary to do justice between the parties, the learned judge should in our
view take into account that, if there is an enforceable contract for
confidentiality between the parties, justice does not require that contract to
be breached simply because the defendant would find the information useful for
the purposes of her defence. On the contrary in that situation justice would
require the court to uphold the bargain between the parties. In our judgment,
therefore, disclosure of the intermediary's name should only be ordered if it
is relevant to issues which need to be tried at that stage, and in reaching a
determination on that issue the judge should have regard to the possibility of
trying other issues first in such a way as to avoid the need for disclosure.
In that way the question of disclosure of the intermediary's name and the
determination of the order in which issues should be tried will involve a
process of iteration.
22. However, even if the court decides that all the issues in the case should
be heard together, we do not consider that the claimant should be required to
give disclosure before the court has considered any of the evidence. To do so
would give insufficient weight to the alleged contractual term, whose existence
will depend on the evidence. Moreover, as stated above, on this appeal each
side has urged on us the need to have regard to facts relevant to his or her
case. None of those facts has of course yet been established or any evidence
heard. We do not consider that in this case the court can satisfactorily deal
with the question whether there should be the disclosure sought on the basis of
the pleadings alone. In this instance some regard has to be had to the
strengths of the parties' respective cases and it may be that this can only be
done after the start of the trial.
Disposition of the Appeal
23. For the reasons given above, we grant permission to appeal and allow the
appeal. We do not require the claimant at this stage to disclose the identity
of the intermediary. We do not consider it appropriate for this court to
exercise the discretion of the judge. We consider, however, that the court
should consider in advance of the trial what the issues in this case really are
that require to be tried and the appropriate order in which to hear those
issues (see CPR Rule 1(4), above). Subject to any further submissions by
counsel, we direct that the claimant should within the next 14 days restore the
application for case management directions, this time, if at all possible,
before the judge who is to take the trial of this action, and we give the
following further directions. That application should not be heard before the
expiration of 5 weeks. We direct the claimant within 14 days of today to serve
on the defendant his proposals as to the issues which need to be tried and the
order in which they should be tried together with a list of any further
pre-trial directions sought, and we direct the defendant within 14 days of
receipt of those proposals to respond with the defendant's proposals as to the
same matters. The parties are then to do their best to agree a list of issues,
the order in which those issues should be heard and any further pre-trial
directions that are required. A document setting out the orders sought
approved by both counsel should be prepared and lodged with the judge at least
2 days in advance of the date fixed for the further case management conference.
These directions are without prejudice to the further requirements of CPR Rule
29 and PD 29 (Multi-Track) and any further requirements of the Commercial
Court Guide. It will then be a matter for the judge at the case management
conference to give further directions and (as far as can be done at that stage)
directions as to the order in which issues should be tried. The judge can also
then indicate the stage at which the court would propose to consider further
the question of disclosure of the name of the intermediary. We remit that
question to the judge.
Order: Permission to appeal granted; appeal allowed; the
Claimant is not required at this stage to disclose the identity of the
intermediary; Respondent to pay the Appellant's costs of the appeal.
(Order does not form part of the approved judgment)
***** ***** *****
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