Sotheby's v Mark Weiss Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 26 November 2018 |
| Neutral Citation | [2018] EWHC 3179 (Comm) |
| Date | 26 November 2018 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000071 |
[2018] EWHC 3179 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Mr. Justice Teare
Case No: CL-2017-000071
Emily Wood (instructed by Freshfields Bruckhaus Derringer LLP) for the Claimant
Tom Ford (instructed by Stephenson Harwood LLP) for the First and Third Defendants
Richard Wilson QC and ShyamThakerar (instructed by Mackrell Turner Garrett) for the Second Defendant
Hearing dates: 24 October and 14 November 2018
Judgment Approved
Introduction
This is an application for inspection of certain documents which have been disclosed by Sotheby's, the Claimant, but in respect of which inspection has been withheld on the grounds of litigation privilege. Mark Weiss Ltd., the First Defendant, claims the right to inspect the documents on the grounds that they are not protected by litigation privilege.
The documents in question are the correspondence passing between Sotheby's (itself, or through its solicitors Freshfields) and two art experts, Mr. Martin and Mr. Twilley, in the period from 27 April 2016 until 11 July 2016.
The application is made in an action which concerns a painting described as “Frans Hals, ‘Portrait of a Gentleman, half length, wearing Black’, signed with monogram lower right: FH, oil on oak panel, 13 1/2 by 10 1/2 in.” which had been acquired by Mark Weiss Ltd. (and Fairlight Art Ventures LLP, the Second Defendant) in June 2010. In June 2011 Mark Weiss Ltd. appointed Sotheby's exclusive agent for a period of three months to sell the painting by private treaty for a minimum price of US$10,750,000. Sotheby's did so in June 2011 but the contract contained an offer by Sotheby's to rescind the sale and return the purchase price if Mr. Hedreen, the Buyer, provided written evidence raising doubts as to the authenticity or attribution of the painting, and Sotheby's determined that the painting was counterfeit. The Buyer did so on 27 May 2016, having obtained a report from Mr. Martin. On 11 July 2016 Sotheby's, having commissioned Mr. Twilley to conduct a peer review of Mr. Martin's report, determined that the painting was a counterfeit, rescinded the sale and on 14 July paid US$11,287,500 to the Buyer. In these proceedings Sotheby's seek rescission of its contract with Mark Weiss Ltd. and repayment of the purchaseprice. The right to rescission is denied by Mark Weiss Ltd., who relies upon a term referred to in these proceedings as the “generally accepted views” proviso in the agreement between Sotheby's and the Buyer and alleges that Sotheby's actions were a breach of a fiduciary duty owed to Mark Weiss Ltd.
Litigation privilege
There is no dispute that in order to claim litigation privilege in respect of the correspondence between Sotheby's and Mr. Martin and the correspondence between Sotheby's and Mr. Twilley that correspondence must have been brought into existence for the “dominant purpose” of being used in contemplated litigation. The relevant principles were summarised in Starbev GP Ltd. v Interbrew Central European Holdings [2013] EWHC 4038 (Comm) at paragraphs 11–13 by Hamblen J.
11. The legal requirements of a claim to litigation privilege may be summarised as follows:
(1) The burden of proof is on the party claiming privilege to establish it – see, for example, West London Pipeline and Storage v Total UK [2008] 2 CLC 258 at [50].
(2) An assertion of privilege and a statement of the purpose of the communication over which privilege is claimed in a witness statement are not determinative and are evidence of a fact which may require to be independently proved. The court will scrutinise carefully how the claim to privilege is made out and the witness statements should be as specific as possible – see, for example, Sumitomo Corporation v Credit Lyonnais Rouse Ltd (14 February 2001) at [30] and [39] (Andrew Smith J); West London Pipeline and Storage Ltd v Total UK Ltd [2008] EWHC 1729 (Comm) at [52], [53], [86] (Beatson J); Tchenguiz v Director of the SFO [2013] EWHC 2297 (QB) at [52] (Eder J).
(3) The party claiming privilege must establish that litigation was reasonably contemplated or anticipated. It is not sufficient to show that there is a mere possibility of litigation, or that there was a distinct possibility that someone might at some stage bring proceedings, or a general apprehension of future litigation – see, for example, United States of America v Philip Morris Inc [2004] EWCA Civ 330 at [68]; Westminster International v Dornoch Ltd [2009] EWCA Civ 1323 at paras [19] – [20]. As Eder J stated in Tchenguiz at [48(iii)]: “Where litigation has not been commenced at the time of the communication, it has to be ‘reasonably in prospect’; this does not require the prospect of litigation to be greater than 50% but it must be more than a mere possibility”.
(4) It is not enough for a party to show that proceedings were reasonably anticipated or in contemplation; the party must also show that the relevant communications were for the dominant purpose of either (i) enabling legal advice to be sought or given, and/or (ii) seeking or obtaining evidence or information to be used in or in connection with such anticipated or contemplated proceedings. Where communications may have taken place for a number of purposes, it is incumbent on the party claiming privilege to establish that the dominant purpose was litigation. If there is another purpose, this test will not be satisfied: Price Waterhouse (a firm) v BCCI Holdings (Luxembourg) SA [1992] BCLC 583, 589–590 (cited in Tchenguiz at [54]-[55]); West London Pipeline and Storage Ltd v Total UK Ltd at [52].
12. In relation to the Court's approach to the assessment of evidence in support of a claim for privilege, it has been stated that it is necessary to subject the evidence to “anxious scrutiny” in particular because of the difficulties in going behind that evidence” – per Eder J in Tchenguiz at [52]. “The Court will look at ‘purpose’ from an objective standpoint, looking at all relevant evidence including evidence of subjective purpose” – ibid. 48(iv). Further, as Beatson J pointed out in the West London Pipeline case at [53], it is desirable that the party claiming such privilege “should refer to such contemporary material as it is possible to do without making disclosure of the very matters that the claim for privilege is designed to protect”.
13. As was further stated by Beatson J in the West London Pipeline case at [86]:
“(3) It is, however, difficult to go behind an affidavit of documents at an interlocutory stage of proceedings. The affidavit is conclusive unless it is reasonably certain from:
(a) the statements of the party making it that he has erroneously represented or has misconceived the character of the documents in respect of which privilege is claimed: Frankenstein v Gavin's House to House Cycle Cleaning and Insurance Co, per Lord Esher MR and Chitty LJ; Lask v Gloucester Health Authority.
(b) the evidence of the person who or entity which directed the creation of the communications or documents over which privilege is claimed that the affidavit is incorrect: Neilson v Laugharane (the Chief Constable's letter), Lask v Gloucester HA (the NHS Circular), and see Frankenstein v Gavin's House to House Cycle Cleaning and Insurance Co, per A L Smith LJ.
(c) the other evidence before the court that the affidavit is incorrect or incomplete on the material points: Jones v Montivedeo Gas Co; Birmingham and Midland Motor Omnibus Co v London and North West Railway Co; National Westminster Bank plc v Rabobank Nederland.
(4) Where the court is not satisfied on the basis of the affidavit and the other evidence before it that the right to withhold inspection is established, there are four options open to it:
(a) It may conclude that the evidence does not establish a legal right to withhold inspection and order inspection: Neilson v Laugharane; Lask v Gloucester Health Authority.
(b) It may order a further affidavit to deal with matters which the earlier affidavit does not cover or on which it is unsatisfactory: Birmingham and Midland Motor Omnibus Co Ltd v London and North West Railway Co; National Westminster Bank plc v Rabobank Nederland.
(c) It may inspect the documents: see CPR 31.19(6) and the discussion in National Westminster Bank plc v Rabo Bank Nederland and Atos Consulting Ltd v Avis plc (No. 2). Inspection should be a solution of last resort, in part because of the danger of looking at documents out of context at the interlocutory stage. It should not be undertaken unless there is credible evidence that those claiming privilege have either misunderstood their duty, or are not to be trusted with the decision making, or there is no reasonably practical alternative.
(d) At an interlocutory stage a court may, in certain circumstances, order cross-examination of a person who has sworn an affidavit, for example, an affidavit sworn as a result of the order of the court that a defendant to a freezing injunction should disclose his assets: ( House of Spring Gardens Ltd v Wait; Yukong Lines v Rensburg; Motorola Credit Corp v Uzan (No. 2)). However, the weight of authority is that cross-examination may not be ordered in the case of an affidavit of documents: Frankenstein's case; Birmingham and Midland Motor Omnibus Co Ltd v London and North Western Railway Co and Fayed v Lonrho. In cases where the issue is whether the documents exist (as it was in Frankenstein's case and Fayed v Lonrho) the existence of the documents is likely to be an issue at the trial and there is a particular risk of a court at an interlocutory stage impinging on that issue.”
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...on dominant purpose, although he didn't need to reach a decision on that aspect. The deputy judge referred to Sothebys v Mark Weiss [2018] EWHC 3179 (Comm) (considered here), in which the court found that correspondence with an art expert was not subject to litigation privilege as it was pr......
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High Court Finds No Litigation Privilege Where Expert Instructed To Try To Find Backing For Potential Counterclaim
...on dominant purpose, although he didn't need to reach a decision on that aspect. The deputy judge referred to Sothebys v Mark Weiss [2018] EWHC 3179 (Comm) (considered here), in which the court found that correspondence with an art expert was not subject to litigation privilege as it was pr......