Mrs Justice Thirlwall DBE :
- At the heart of this dispute are two beautiful embroideries. They are probably medieval. If so, they are worth hundreds of thousands, if not millions of pounds. Mr Simon Franses of the defendant company has described them as potentially a national treasure.
- The embroideries are currently held by the defendant company in its safe. It is agreed that as between the parties the Claimant has title to them. He took them to the defendant company in June 2003. He wanted to sell them. Their age and history were unknown but the Claimant believed that they were very valuable. Before they could be sold a significant amount of research and other work needed to be done to establish precisely what they were. Work was carried out by Mr Franses over many months. There is a dispute about the basis upon which the work was done, and the amount of work that was done. A time came when the Claimant wanted them back. The Defendant refused to return them for reasons I shall come to later. It is the Claimant's case that the Defendant unlawfully retains the embroideries. He seeks their return, together with damages, including aggravated damages. The defendant company asserts that the Claimant is not entitled to their return until (as a minimum) he pays the sums owed in respect of research and other work done in respect of the embroideries. The Defendant also points to an injunction ordered by the Surrogate's Court of New York which, it submits, prevents disposal of the embroideries, even to the Claimant.
- The Claimant has had a number of occupations and business interests. In the mid 1990s he was working in the antiques trade. In 2004 he was involved in a number of different companies, at least two of which (Ian Spencer Antiques Limited and Probate Solutions Limited) were involved with antiques. So far as I can tell he also dealt in antiques on his own, personal, account at that time.
- The defendant company is a long established specialist in the field of antique and historical textiles and embroideries. It is a family business. Over a hundred years it has supplied many great collectors and museums. It established and owns the world's largest academic research archive on figurative embroideries and textiles. The archive is non profit making and provides free information to museums and institutions around the world. The Defendant has a prestigious client list and has acted as agents for a number of major museums, including the Victoria and Albert Museum in London, the Metropolitan Museum of Art in New York, the Art Institute of Chicago and the Rijksmuseum in Amsterdam. The business specialises in the appraisal and sale of museum quality works. Mr Simon Franses now runs the defendant company, having taken over from his father. It is plain from the evidence that he is held in high esteem in his professional world. He has specific expertise in medieval textiles. He has published widely and identified a number of major works.
- In the course of the trial both Mr Spencer and Mr Franses gave evidence. Both were in the witness box for extended periods. I was thus able to assess with some confidence how they were likely to have conducted themselves over the years during which they dealt with each other. I make the following general observations at this stage:
- The Claimant was in the witness box on more than one occasion. He struck me as highly plausible, determined to make a good impression and confident of his ability to do so. He was often straightforward and engaging. On occasions he was vague and evasive and sometimes did not tell the truth. I shall deal with the details of that later in my judgment. He was cooperative and polite when he approved of the questions and overbearing to the point of rudeness when he did not.
- Mr Franses was in the witness box for a very long time. He was very garrulous; his evidence was extremely discursive. He did not avoid questions, but took a very long time to answer them, plainly fearful that the listener may not have understood every nuance of the context and feeling it necessary to explain it ad nauseam. He was extraordinarily anxious that as much as possible should be understood about the embroideries, their history and his involvement with them. That said, I was quite satisfied that throughout he was endeavouring to give me a conscientious and honest account of his involvement with the Claimant and the embroideries.
- In the run up to this litigation, and during it, a number of serious allegations about Mr Franses's bona fides were made. I make it clear at this early stage of the judgment that I reject them all.
- A dispute to which I shall refer later led to the parties going to the gallery to look at the embroideries to see whether or not there was a fold in them. They and their advisers could not agree about what could be seen. The embroideries were therefore brought to court so that I could see them [see paragraphs 44-46 below].
- The difference in the attitude of the two men to the embroideries was striking and revealing. Mr Franses handled them with what I can only describe as reverence, wearing white gloves. By comparison the Claimant treated them carelessly, no doubt because he wanted (reasonably enough) to make his point that the embroideries could easily be folded and set about folding them. I noted Mr Franses physically started when he did so. It is quite plain that Mr Franses considers these embroideries of enormous cultural value, a part of our heritage. For Mr Spencer their value is in the money they will bring him. The difference in their approach, which was clear throughout the trial, may explain the extremely wide gulf there now is between the two men. Mr Spencer plainly cannot believe that Mr Franses is acting other than in bad faith with some (unclear) financial motive. He was extraordinarily hostile towards him. Mr Franses was not hostile, but was plainly perplexed. He cannot believe that Mr Spencer is in the position of custodian of a national treasure having found them among the detritus of a house clearance in the circumstances to which I shall turn at paragraphs 17 to 47 of this judgment.
- I am concerned with events over a 13 year period, 1996 to 2009. I shall set out my findings of fact chronologically. I shall not deal with every dispute of fact (of which there were a very great number). My focus is on those many facts relevant to the issues of law I have to decide. I shall set out the whole story chronologically and then determine the following issues of law:-
i) Was there a contract between the Claimant and the Defendant?
ii) If yes, was there an implied term of the contract that the Defendant was entitled to make inquiries into the Claimant's title?
iii) If there was no contract or if the answer to the question at (ii) is no, did the Defendant have a common law right as bailee to make inquiries into the Claimant's title?
iv) If there was no contract is the Defendant entitled to a Quantum Meruit?
v) If yes, what is the sum to which he is entitled?
vi) Was the Defendant entitled to assert a lien over the embroideries?
vii) Did the Claimant discharge the lien? If yes, when?
viii) Is the Defendant bound by the terms of the New York injunction?
ix) Is the Defendant wrongfully retaining the embroideries?
x) Is the Claimant entitled to damages, including aggravated damages?
- In addition to the Claimant himself, I heard from Mrs Diahn McGrath, a New York Attorney, and from Mrs Linda Parry, an expert in 19th century textiles, both of whom gave evidence on his behalf.
- On behalf of the Defendant I heard from Mr Franses, Mr Oltmann-Reeve, a former employee of the Sutton Estate, Ms Lorraine Coyle, a New York attorney who had been appointed a law Guardian on behalf of Mr Charles Hill, the well known former Police Officer with a particular expertise in the recovery of stolen art.
- I also read witness statements from Mrs Kerry Taylor, formerly of Sotheby's, and Ms Elizabeth Lane, of Christie's.
- The history of this case may be divided into three:-
i) the circumstances in which the Claimant acquired the embroideries;
ii) the dealings between the Claimant and Defendant between 2003 and 2008;
iii) events from September 2008 onwards.
- I shall deal with them in that order.
How the Claimant acquired the embroideries
- In coming to my findings under this heading I am reliant principally on the evidence of Mr Spencer, Mrs McGrath and Miss Coyle. I have taken into account what Mr Spencer told Mr Franses at various stages about how he acquired the embroideries, and with which I deal at length later in the judgment, but where what the Claimant said to Mr Franses differs from what he said in evidence about the acquisition I am satisfied that the latter was more reliable. I have no reservations about what was said by Miss Coyle in her witness statement and in evidence before me. She was a reliable witness. I have a number of reservations about the evidence of Mrs McGrath to which I shall turn in due course. I have relied on her account of events when it is uncontroversial, when there is no evidence to contradict her and when it is supported to some extent at least by other evidence.
- It is not in dispute that as at 1996 the embroideries belonged to Mrs Judy Keele, an American woman who lived in New York. She rented a flat in Bolton Street Mayfair from the Sutton Estate. For many years she spent long periods in London. In the mid 1990s she was elderly and in failing health. As I understand it she was suffering, amongst other things, from the early stages of dementia. She had a partner in New York, Mr John Nevin.
- In 1997 Mrs Keele was admitted to hospital in New York. John Nevin was her Guardian. He was not in good health either. He contacted Mrs McGrath and asked her to sort out Mrs Keele's affairs in London since it was plain that ill health would prevent her from returning here. The assets about which Mr Nevin was apparently aware were Mrs Keele's monthly stipend from her former husband's law firm, $3000 a month, and between $200,000 and $300,000 in a bank account. At that time Mrs Keele was in an expensive hospital and then moved to an expensive care home. Mrs McGrath said that Mr Nevin instructed her to get rid of the flat and its contents.
- Mrs McGrath sought to be appointed Guardian by the New York Court. That application was refused. The Court appointed a Mr Tedeschi who was, apparently, an experienced Guardian. So far as I can tell Mr Tedeschi played no part in any of the matters with which I am concerned. Whilst I find that surprising his role is not a matter for this court.
- Mrs McGrath and her husband, also a lawyer in New York, are frequent visitors to Venice. Before Mr Tedeschi's appointment as Guardian Mrs McGrath had already booked flights to Venice via London in August 1997. She told me that she had spoken to Mr Nevin and offered to stop over in London to arrange for the clearing out of Mrs Keele's London home. At that time the landlords were, she said, seeking rent or repossession. Her instructions were to bring the tenancy to an end. I accept her evidence about that. It was broadly supported by the evidence of Mr Oltmann-Reeve from the Sutton Estate.
- According to Mrs McGrath, Mrs Keele dressed very expensively, in clothes by Chanel. She had a sophisticated interest in and had collected art; paintings and sculpture. John Nevin had told her that he believed there was a Henry Moore bronze in the flat. Mrs Keele had told him that she had bought a Henry Moore bronze some years previously. Her flat had been burgled at some stage and so, to keep the bronze safe, she had hidden it in the fireplace. John Nevin was very keen that the bronze should be found and he asked Mrs McGrath to look for it. I accept Mrs McGrath's evidence about this.
- Before Mrs McGrath and her husband left for London she learned that Mrs Keele had an account with Coutts bank in Zurich. Given the well known minimum balance requirements of that institution there was at least the possibility, if not a likelihood, that Mrs Keele's assets were significantly greater than the money in the bank and monthly income that had already been ascertained.
- Mrs McGrath and her husband came to London in August 1997. They visited the flat. I accept it was in a poor state. Mrs Keele had not been there for some time. It was dirty and disorganised. Mrs McGrath arranged for representatives of Christie's to come to the flat and remove any items which they considered suitable for sale through them.
- Thus far I consider Mrs McGrath's evidence reasonably reliable. Thereafter there were a number of features of it which demonstrated her rather cavalier approach to the truth. It will suffice to mention 2 examples.
- She asserted in evidence to me that she raised $100,000 for the Keele estate via Christie's. This was not true; Miss Coyle, of the New York Public Guardian's office later told me the accounts submitted by Mrs McGrath showed only $8,000 being received from that source. Taken at its highest it can be said that Christie's took a few items and sold them.
- In an affidavit sworn in New York Mrs McGrath asserted that it was she who had taken a sledgehammer to the fireplace and found the Henry Moore. It was not. In evidence to me she took a very relaxed attitude and said that in her eyes she was really the person who found it (notwithstanding the fact that in a later affidavit in New York she said something different).
- I return to the narrative. After 2 or 3 days, so far as Mrs McGrath was concerned Christie's had taken everything of value. She was quite wrong. Far more of value remained than had been taken.
- Mrs McGrath invited a number of house clearers into the flat. She used the American word, liquidators, to describe them. She was asking them to clear out the contents of the flat, which she described as "mostly junk" and to leave the flat "broom clean", as she put it. The Claimant was one of the people who came to look round. According to him Mrs McGrath had been given his name by Christie's. He initially asked to be paid to clear the flat. Ultimately he offered £5,000 for the right to clear the flat completely. Mrs McGrath accepted his offer and said that the work should start on 10th September. It was agreed between them that should the Claimant find the Henry Moore bronze it would not form part of the clearance and he would account for it separately.
- The Claimant borrowed £5,000 and on 10th September he provided a banker's draft in the sum of £5,000 to Mrs McGrath and asked for a receipt. Thus far the evidence of the Claimant and Mrs McGrath coincide and I am content that the account I have set out is, on balance, accurate.
- Mrs McGrath says that Mr Spencer drafted the receipt, a copy of which I have seen. She said that she took it back to New York with her and Mr Nevin signed it. She then sent it back to Mr Spencer in England. I do not accept that. The receipt is drafted on Mr Nevin's own headed paper. There is no evidence that Mrs McGrath took a supply of that with her or that she had access to a computer when in London. It also bears a computer reference which coincides exactly with the computer references on other documents emanating from Mrs McGrath's office at that time.
- In his first witness statement Mr Spencer said that he had telephoned Mrs McGrath in New York on completion of the clearance on 12th September and asked her for a formal receipt, since she had not been able to provide one when he had given her the banker's draft. She told him that the receipt had been typed up and would be sent to John Nevin for signature. In evidence Mr Spencer said that he may have suggested some wording for the receipt. My note of his evidence reads as follows "I didn't dictate the terms of the receipt in its entirety. I said I need a receipt. I said it needs to say you've received the £5,000 for everything in the flat from me, exclude the Henry Moore, say I hold good title in everything in the property". The receipt was duly sent to him. Mrs McGrath said that the wording of the receipt did not sound like hers. Mr Spencer's account from the witness box may be the explanation for that. In any event the receipt reads as follows:
Received from Ian W Spencer the sum of £5,000 in full payment of the purchase of all furnishings, bric-a-brac, clothing and other tangibles, except for one Henry Moore bronze sculpture, which had been located in the ground floor and basement flat at 13 Bolton Street, London; This receipt is irrevocable proof that Mr Spencer holds good title to any and every item and chattel formerly located at said premises".
- Below the date a computer reference appears "Keele\Receipt".
- It is signed John Nevin. The signature is different from the usual signature of Mr Nevin at that time. Although that is odd I cannot, on the evidence, say that it is not Mr Nevin's signature, and I make no finding to that effect.
The clearing of the flat
- Surprisingly, given that Christie's were said to have taken everything of value the Claimant immediately saw a box which turned out to be a Sheraton portable architect's table. When cross examined about it the Claimant first described it thus, with great confidence and enthusiasm "It was made of mahogany, rosewood cross banding". He then added "I think, I'm not sure" He then retracted the detail about the rosewood cross banding but he said it was metamorphic and that the legs were found in the vault (leaning on a cabinet in which he found the embroideries). It was put to him that to describe it as a large wooden box was rather misleading because by the time he prepared his statement he knew what it was and that he had sold it for £8,000. The Claimant denied that the description was misleading. It was, I find, an understatement. It fitted with the overall tone and content of the witness statement which was to the effect that at the time of the clearance, apart from the Henry Moore, (and possibly the embroideries) there was nothing of value in the flat. I cannot see the purpose of including details of the various disappointments at paragraph 22 and the telephone call referred to there other than to give that impression. I have no difficulty in accepting that the flat was dirty and chaotic and that huge effort was needed over three days to empty it. Nonetheless, as became clear during oral evidence the Claimant did extremely well out of this clearance.
- Mr Legge asked him what else he sold from the property. He exclaimed "Dear God… 2 diamond brooches...they were in white wardrobes at street level". He told me that they had been sold for about £20,000. He referred to other less valuable items he had found within the flat. Right at the end of his first period in the witness box, in answer to questions from me, he said he had found cash, also in the wardrobes: US$29,000, £17,500 worth of Swiss francs and £150 sterling.
- He also found a collection of Georgian buttons worth £450, plates and other items worth, in total in the region of £1000 together with a ring. In addition the Claimant found a painting, which he believed (and hoped) to be by Miro. In fact it was by Desmond Morris so it is valuable but worth much less than had it been by Miro. The Claimant said in these proceedings that he had found it torn on the floor in the dining room. I had the impression that he had a clear visual memory of finding it. But in earlier proceedings he had said that he could not remember where he had found it. It is surprising a) that he forgot something quite so memorable and b) that he then remembered it, apparently vividly, less than a year later. This was an early example of Mr Spencer giving detailed evidence that appeared plausible but was probably unreliable.
- The Claimant said in evidence to me that the painting was on paper. It was torn, so it was restored and then put onto canvas. It was then offered for sale. I note that the advert for sale describes it as oil on canvas. That is not an accurate description. In any event it has not been sold.
The Henry Moore Bronze
- Mr Spencer told me that he cleared the flat with the assistance of Mr Jim Field whom he had paid to help. The Claimant knew from his discussions with Mr and Mrs McGrath that there may be a Henry Moore Bronze in the fireplace. The gas fire that had been in position was taken down and the boarding behind it was removed. There was a great deal of soot. Mr Field was given the task of removing the soot. While doing so he discovered a small package wrapped in newspaper which he showed to Mr Spencer. It contained a very small bronze head. It was by Henry Moore. Mr Spencer announced this find to Mr Oltmann-Reeve and invited him to see where he had found it. In evidence before me Mr Oltmann-Reeve remembered being shown the bronze but remembered it as considerably larger than the bronze which was later sold by Christie's. I think it more likely that Mr Oltmann-Reeve has misremembered the size of the statue, given the passage of 15 years, than that the Claimant substituted a smaller bronze for the original.
- The Claimant reported the finding of the bronze to Mrs McGrath and received a further payment in recognition of that. He also sought and received payment for removing the carpets which were not, he said, included in the original agreement. A further $700 was paid for that. He did not tell Mrs McGrath about any of the other discoveries. She did not ask what he had found. The Claimant did not ask for the receipt to be itemised.
- In his statement Mr Spencer described finding the embroideries. He said that the legs for the Sheraton table were leaning against an Edwardian bedside cabinet that had been painted white. Inside there was a folded pink bedspread. He opened it and the embroideries fell out. He put them to one side and continued to clear the room. That, in short, was that.
- Mr Franses says that when he was dealing with Mr Spencer he was given the impression that the embroideries were hidden with the Henry Moore bronze. The Claimant refutes that. I shall deal with those conversations later.
- A great deal of time was wasted in trying to establish the precise size of the package. It is right to say that the Claimant was not consistent about this but in the event it mattered not since the space available in the fireplace and the space available in the bedside cabinet were both sufficient to accommodate the items.
- Mr Franses was very clear that, wherever the embroideries had been kept, they cannot have been folded for a prolonged period. He says that because the gum arabic on the back of the embroideries is unbroken. Mr Spencer was adamant that the embroideries had been folded and he says that there is a visible fold on each embroidery. It was this assertion that led to the view to which I have already referred. The parties could not agree so I was asked to look at them when they were brought to court.
- There is unquestionably some disturbance of the threads on the front face of one of the embroideries. It is shown rather more clearly than on the original in a photograph marked 4/ A. The other embroidery has similar disturbance, but it does not extend across its face – see photograph 4/B.
- The embroideries have (by agreement) been removed from the damask backing which was in place when Mr Spencer found them. The back, which is covered in gum Arabic dating from the middle ages, shows no sign of having been folded. I can understand why Mr Spencer considers that there is a fold in the embroideries. That is what it looks like, but it is inconsistent with the appearance of the back. Notwithstanding the best endeavours of both parties the appearance of the embroideries does not help me about how and where they were found.
- Although I have expressed misgivings about the Claimant I am satisfied that he found the embroideries more or less in the way he described. Mrs Keele probably had some idea of their value. The flat had been burgled, hence the steps she took in respect of the tiny bronze. She may well have made some effort at hiding the embroideries by putting them inside a blanket in a bedside cabinet. I find on balance that that is where Mr Spencer found them. If he had found them bricked up in the fireplace I see no reason why he would not have said so; given the whereabouts of the Henry Moore that would not have been inherently unlikely.
The Swiss bank account
- For completeness I should add that in late August 1997 after conversations with Coutts Mrs McGrath discovered that the Swiss bank held $1.9m to Mrs Keele's account. In the light of that she approached the New York public Guardian and sought a very significant increase in her fees for acting on behalf of the Guardians of Mrs Keele's estate. The judge refused and was critical of Mrs McGrath. This was the subject of some commentary in the New York Daily News in 2001. It assumes greater importance later in the chronology and I shall deal with it there.
- Mrs McGrath instructed the Claimant to look for a will. He visited a number of London clubs (including the English Speaking Union and the Lansdowne) in an attempt to find one. Mrs McGrath claimed that adverts had been put in the relevant publications in London (see her affidavit in New York of 31st March 2009). In fact no adverts were placed. It is not apparent that any great energy was put into finding a will or heirs. The Claimant did track down a safe deposit box, he said. He produced a handwritten note purportedly from the company saying that the box had been closed.
- Mr Nevin died on 26th May 1998. Mrs Keele died on October 10 1998, with no known heirs and intestate. The Public Administrator was appointed to administer her estate.
Mr Spencer's dealings with the embroideries between 1997 and 2003
- I accept, broadly Mr Spencer's evidence in respect of events during this period.
- Mr Spencer says that he kept the embroideries on display in a warehouse in Bermondsey for some time. He says he was offered £300. He said he would take £400 but nothing came of it. A year later he was offered $10,000 which he turned down. I could not discern the reasons for these various decisions but it does not matter very much.
- Mr Spencer says that a friend of his took them to show them to Santina Levy who was a highly regarded textile expert at the Victoria and Albert Museum. In evidence he said that she may have shown them to someone else at the V and A.
- In 2002 he gave the embroideries to an antique dealer to see whether anyone would be interested. He also took them to Christie's but made no progress. In May 2003 Mr Spencer's accountant emailed a number of museums to see whether they would be interested. Nothing happened. A friend of his offered them to a German prince, who was not interested.
- On 14th January 1999 Mr Spencer took the embroideries to Sotheby's Bond Street and booked them in for a report and further research. He says that at that point he thought he might create a trust for his embroideries but a solicitor later told him this was inadvisable. He says that he gave the embroideries to Sotheby's in the name of the Piers Haussen trust c/o Ian Spencer. He simply made the name up. It seems likely to me that Mr Spencer made up the Piers Haussen Trust to give the embroideries a spurious additional status. He says (and it is not in dispute) that Kerry Taylor of Sotheby's took the embroideries and began research on them. He does not mention it in his statement but he accepted in cross examination that the figure of £50,000 given on the receipt from Sotheby's was a figure he had insisted upon. It was not a Sotheby's valuation (although in the "Cloth of Gold" memorandum he gave the clear impression that it was – see below).
- Mr Spencer says that at some stage he was told by someone at Sotheby's that an expert in medieval textiles at the V and A museum had said that the embroideries were probably 19th Century. This was a major difficulty for Mr Spencer who says he was sure by then that they were medieval. He had at an earlier stage unpicked the backing cloth from embroideries and formed the view that they were very old indeed.
- Thus Mr Spencer was in a worse position than when he first obtained the embroideries. They had been considered by a number of high profile experts none of whom supported his assessment of the embroideries.
- By 2003 the embroideries had been in Mr Spencer's possession for nearly 6 years. After discussions with a number of friends and acquaintances in the antique trade Mr Spencer decided to approach Mr Franses of the defendant company.
Events between 2003 and 2008
- Mr Spencer and Mr Franses met in June 2003. Between then and 2005 they were in relatively frequent contact with each other. It is the Defendant's case that it was in the first half of this period that a contract was concluded between the parties.
The first meeting between the Claimant and Mr Franses of the Defendant
- Mr Spencer had been advised by an acquaintance in the antiques trade to contact Mr Franses because he was the best in his field. He telephoned Mr Franses and told him that he was the owner of a 14th century Cloth of Gold and wished to arrange an appointment. A meeting was arranged for the 16th June 2003 at the Defendant's gallery. Thus far there is no dispute.
- Amongst Mr Franses's papers there is a post-it note which was probably made at the time of this first phone call. Mr Franses has noted "Ian Spencer dealer – Mayfair, Miro [and] Moore." It is likely that this reflects a conversation in which Mr Spencer explained he was a dealer and had obtained the embroideries from a flat in Mayfair together with a Miro and a Henry Moore. Mr Spencer became very belligerent when asked about this and said he would not have mentioned a Miro. I do not understand that. He had found what he thought was a Miro in the flat. It turned out to be a Desmond Morris. He had found a Henry Moore bronze. No doubt he was seeking to establish his credentials with Mr Franses in advance, just as he did when he met him on the 16th and just as he had done with Sotheby's when depositing the embroideries under the fictitious name of the Piers Haussen Trust.
- Mr Franses says that The Claimant presented himself at the meeting as a wealthy businessman. I accept that for these reasons: -
i) Mr Spencer would have wanted to make a good impression and to be taken seriously by an expert in the field. He wanted him to take on the embroideries.
ii) He was very well dressed. As he acknowledged in evidence he likes to wear good suits.
iii) He is extremely confident and articulate.
iv) He is extremely plausible, with a marked tendency to spin a yarn. He may not have said so in terms but he plainly gave Mr Franses the impression that he banked with Coutts (although, as he said in evidence, he had not done so for 20 years).
v) He gave Mr Franses a business card in the name of Cleanland UK Ltd with the intention that Mr Franses should understand him to be a businessman of substance.
- Mr Franses says, and I accept, that Mr Spencer told him that he dealt in property and investments. His work provided buying opportunities and so he had an interest in art and antiques. He had got to know the antique market while working with the rare books dealer, Simon Finch. He had, he said, important contacts in Iran and Saudi Arabia. Having observed Mr Spencer at some length giving evidence I have no difficulty in accepting that this is what he said – or, at least, that was the impression that he gave. Mr Franses noted most of those details on a piece of paper. He also noted the word "house clearance" to which I shall return later.
- During the course of the meeting the Claimant showed Mr Franses the embroideries. Mr Franses says that it was immediately apparent to him that the embroideries were "unique and exceptional". He had never seen anything like them. He asked Mr Spencer how he had come to own them. Mr Franses said that Mr Spencer told him that he had acquired them privately and that he had owned them for a number of years. That was true, if succinct.
- Mr Spencer refutes Mr Franses's account. He says that he told Mr Franses exactly how he had come to own the embroideries i.e. that he gave the account that he gave in evidence. I do not accept that. I accept that all he said was that he had acquired them privately and that he had owned them for a number of years for these reasons –
i) Although it lacks detail it is, on Mr Spencer's account, true.
ii) It is consistent with the contents of the document which became known as the "Cloth of Gold memorandum" which he gave to Mr Franses a short time later. There he wrote "I acquired the cloth and absolute title in late September 1997. I purchased it amongst many other items from a house in Mayfair, London". There is no hint there of the full circumstances.
iii) In his very detailed first witness statement in these proceedings where he deals with this initial conversation Mr Spencer simply states "I told him how I had come by them". No detail is given. The first time the Claimant's account of how he came by the embroideries is recorded is in a letter from his solicitor Mr Cabot on 14 August 2009 i.e. well after these proceedings were on foot.
iv) At that stage there was no reason for Mr Spencer to give a detailed account of how he had come to own the embroideries. The detail was nothing to do with Mr Franses.
v) The lack of detail is consistent with an email sent by Mr Spencer to a financial adviser in 2004 (see paragraph 118 below).
vi) The story, as I have set it out above, is extraordinary. If Mr Franses had been told it he would have remembered it. Thus either he is lying or Mr Spencer did not tell him. I am satisfied that Mr Franses was telling me the truth about this.
vii) Anxious as he was to be taken seriously it is highly unlikely that Mr Spencer would have thought it wise to recount the extraordinary truth which was that he had got them in an uninventoried house clearance.
viii) His complaint, via his solicitors in 2005, that he was being treated as an "upmarket house clearer". Since the complaint was presumably not about being treated as "upmarket" it must have been directed to the issue of being a house clearer (see, further, paragraph 138 below).
- I accept Mr Franses's evidence that when he wrote "house clearance" he understood that to mean a house being cleared of valuable antiques and so on, not the clearing of detritus, carpets and old white goods.
- When describing the conversation in his witness statement Mr Spencer said "Initially Mr Franses feigned little interest and did not say anything positive about them". I do not accept that. Mr Franses is incapable of hiding his enthusiasm for the embroideries. He says he was excited by them. I accept that. It is entirely consistent with Mr Franses's conduct generally. There was no advantage to him in pretending they were of no interest when he believed they were potentially the most important cultural pieces ever to come into his gallery. Furthermore it seems to me highly unlikely that he would have sought to buy a share in something in which he had no interest (as to which see below). I reject Mr Spencer's evidence about that.
- According to Mr Franses (and he was not challenged about this) Mr Spencer told him that he was convinced the embroideries were medieval but he had suffered a number of setbacks. It was put to Mr Spencer that he did not give a complete account of all his previous dealings with the property. Whilst that is true, the details he omitted were not of any significance and I will not further extend this judgment by referring to them. He was candid about the most important information namely that an expert at the V and A considered them to be 19th Century.
- It is not in dispute that Mr Franses asked whether the Claimant would be interested in selling him an interest in the embroideries. This is a common arrangement in the art world. Mr Spencer was not interested in that. He wanted a straightforward consignment deal. They moved on to discuss commission. Mr Franses explained that he would want 30% because the work involved would be extremely time-consuming, particularly given the negative opinion at the V and A. The 30% would include all the costs and disbursements, including travel costs. He went on to say that it would be a long process. At that stage the textiles were anonymous, unidentified and undated. Extensive research would be needed both in this country and abroad. Mr Franses would need to approach a number of his contacts in many different institutions.
- Mr Spencer accepted that a great deal of work would be necessary. He said that 25% or possibly 27% was the appropriate rate for commission. Mr Franses says, and I accept, that he was very clear that the value of the pieces would depend largely on how successful and specific the Defendant could be about their historical provenance. That is entirely unsurprising.
- The conversation came to an end with Mr Spencer saying that he wanted to think about the level of commission. Mr Spencer believes he returned to the gallery on the 20th and deposited the embroideries. Mr Franses recalls that he left them there on the first occasion. There is no independent support for either proposition and it may not matter very much but given that I accept that Mr Franses began working on the 17th (his evidence about that is supported by his diary entries) it is likely that he already had the embroideries in his possession. Nothing turns on that.
- On the 18th the Claimant and Mr Franses spoke on the telephone about the level of commission. Mr Spencer said that he had taken the advice of an experienced antique dealer who had advised him that it would be better to agree to a higher level of commission with someone of Mr Franses's stature to make sure that in the end he got the best possible price. 30% was therefore agreed as the commission rate. I note that the following appears under the date 18 June in Mr Franses's diary "Agreed: 30% on Metal Thread Panel". On the same day Mr Spencer faxed to the Defendant the receipt given to him by Sotheby's in 1999 (The Piers Haussen trust receipt) which confirmed they had been estimated at £50 - £70,000. This was consistent with what Mr Spencer had told Mr Franses some days earlier. Mr Franses said, and I accept, that he paid no attention to the fact that the name on the receipt was that of a Trust. He simply filed it.
- The following day Mr Spencer telephoned Mr Franses. Mr Franses had asked him to supply as much information as he could about where the embroideries had come from. Mr Franses's diary contains the following notes
Park Street bought
- Mr Franses remembers Mr Spencer telling him that he had acquired the embroideries from Judy Keele of Park Street, W1. She was a wealthy art collector and a client of Mallett's in New Bond Street. She owned works by Max Ernst and Henry Moore. Mr Spencer denies saying anything about Max Ernst, but he must have done. There is no other reason why Mr Franses would have written it down. It is also the case that Mr Spencer retrieved a Max Ernst lithograph from the flat. This is just another example of him gilding the lily, giving an impression which is not wholly divorced from the reality. I have no doubt he wanted to give Mr Franses the impression that the Max Ernst was a valuable painting.
- At about the same time, broad agreement having been reached in principle, Mr Franses asked Mr Spencer for some more details about the embroideries. Mr Spencer produced to him the memorandum headed "Ian Spencer and a Brief History of the Cloth of Gold, subsequently realised to be a pair of gold and silver gilt thread "raised – work heraldic embroideries". I reproduce it here in full since it reflects very well the content and tone of many of Mr Spencer's communications with Mr Franses:
"I acquired the cloth and absolute title in late September 1997. I purchased it amongst many other items, from a house in Mayfair, London. The Cloth itself was with another far larger textile, the other being probably early 19th Century Turkish, but again with raised metal embroidery. I subsequently put the Cloth in my secure store to await full research and investigation. In 1998, one of my staff asked if he could 'run it'. I said no (sic) and he duly took it to the V&A. I understand that it was probably seen by Santina Levy. It was also taken to Christie's, South Kensington, who thought it was a stage prop and worth no more than a couple of hundred pounds. I subsequently took it to Sotheby's, who initially felt it was worth £50 – 70,000 (as per the document you have). After several weeks, Sotheby's returned to me saying that they had shown the Cloth to Santina Levy and or another at the V&A, and they did not feel that it was right. We were all fully aware that it had been laid up on 19th century damask, which it remains on up until now. Sotheby's then suggested it was worth between £3 – 4,000. I naturally declined their kind invitation to enter it into sale, whereupon they suggested that it was probably worth between £4 – 6,000. I started to feel as if people must be treating me as some sort of idiot and returned the item to my strong room. One of my employees offered it to a dealer and subsequently I was told that we could get £19 – 20,000. However, I did not trust my employee so I sacked him for theft and discovered that the person he had offered it to, was somebody with a tiny shop downstairs at Gray's Antiques Market, off Bond Street.
In April 2000, I took a stand at Baileys Antiques Fair in Claridges, Mayfair, where I had the Cloth framed and glazed and on display. I received several offers, the most serious being from a Greek shipping magnate. However, I still felt that I did not understand the item sufficiently at this juncture so I had my assistant take it back to Christie's, whereupon they managed to extol [sic] themselves once more and suggest it was worth probably a few hundred pounds and not worth putting it in for sale. In consideration of the knowledge I had acquired in the interim period, that being that this item was probably German or Polish, I placed an advert in Apollo Magazine in about October, 2001. This ad was a full page in colour and we described the item as a 14th or 15th century heraldic cloth of gold in the form of a banner. We did not receive one single call as a result of this advert (never never advertise in Apollo). I had also in 2000 or 2001 had the Cloth in display at another Bailey Antique Fair in Ascot, where we had the item on sale with a price tag of £250,000 and as it was the most expensive thing at the Fair, some erstwhile TV station of forgettable name and repute, interviewed me with it. However, we would not disclose the price on television, let alone some obscure cable channel.
In 2002, I resurrected the project again and John Hobbs' son, Rupert, asked me if he could do some work on the Piece with a view to earning a commission. Rupert's lady partner is a textile restorer, to which end Rupert took the Cloth back to the V&A. I never did manage to get anything like a coherent or cogent answer from Rupert, pertaining to what the V&A had said, but I know the lady was on holiday that her [sic] was supposed to see, for a very long time. One of my friends, the film director Ben Gooder, thought it would be a potentially good idea to offer it to some absurdly wealthy German Prince that he knew, so I gave him some photos and we offered it to the Prince for £1m. Unfortunately, the Prince was not as responsive as one would have liked! My accountant, Peter Power-Hynes has a passion for the military antique, and he asked if he could have a go with it. He duly e mailed a museum in Poland, who subsequently responded saying that they felt it was two pieces from a funeral coffin shroud and that the crowned head was depicting a forebear and that the images of the crown might not be contemporary to the piece. However, they certainly felt on the images received that it had some very considerable age. Their response showed that whilst they had abundant knowledge, the same abundance did not exist in their coffers and therefore, we did not even ply them with the notion of a sale. I just remembered that when I very first got it, Sam Fog [sic] the Antiquarian Book Dealer, tried to buy it off me for a pittance after I had shown it to my previous employer, Simon Finch. Other than those listed above, the only other people that have had any direct involvement with the Piece, is yourselves.
I hope and trust that this history is adequate for your requirements and that this will allow you to direct your efforts appropriately. In addition, I think it is important to stress that it has never knowingly been offered in the United States. Now I remember another occasion not long after I first got it, I used Coutts and they were intrigued by it and wanted to offer it to the Queen. The lady at Sotheby's who signed the letter that you have, got it checked out by the Tower of London, at some considerable length apparently, and they ultimately concluded that the Castle that we all hoped depicted the Tower of London, was not. However, the crown and the style of haircut were synonymous with the fashion of the 14th century, throughout Europe. The chaps at the Tower, whoever they might have been allegedly concluded that it was probably circa 1400 and from the area that is now Poland and/or Germany. This attribution was given on the grounds of architectural interpretation. I subsequently became somewhat exasperated with everybody. It seems that everybody wanted a slice of the pie at my expense. That is why I am quite delighted at the thought of paying you 30% of a large amount of money rather than a small percentage of a small amount of money.
I know all of the above is very jumbled chronologically, and therefore if you need to call me and clarify anything, please don't hesitate in doing so.
Again, I wish us both the best of luck with this one!"
It is striking that in such a detailed and lively account of his dealings with the embroideries the account of the acquisition was so brief.
- Mr Spencer was cross examined at length about the memorandum. He accepted that it was not true to say that Sotheby's had initially valued the embroideries at £50,000-£70,000; he may have had little option since he had seen a statement the Defendant had obtained from Ms Taylor of Sotheby's which said that it was he who had insisted on a valuation on the receipt of £50,000 - £70,000. It was not Sotheby's valuation. It is clear that in handing the receipt to Mr Franses, Mr Spencer intended that he should understand that Sotheby's had originally valued it at that figure.
- When asked about the section in which he sets out his connection with Coutts and their interest in the embroideries Mr Spencer accepted he had not used Coutts for 20 years. They were not intrigued by the embroideries. They never saw them. "Spin" may be the kindest description of the account he gave in the memorandum. As he admitted in the witness box he had met one of the directors of Coutts at a drinks party to which he had been invited by a girlfriend. Mr Spencer asked the director if the Queen might be interested in his embroideries. Nothing came of it. Mr Spencer accepted that he may have overstated things in the memorandum. He had.
- Throughout the summer Mr Franses worked on the embroideries. He analysed the construction of the thread. He visited Dr Organ of the Assay Office on 8th August 2003, and showed him the textiles. Dr Organ removed a tiny sample of silver gilt. Mr Franses then commissioned spectroscopic tests at Goldsmiths Hall. On 9th September the test results showed that it was 86% probable that the silver content of the threads used to make the embroideries was pre 1600. Armed with that he contacted Mrs Linda Parry, who gave evidence.
- Mrs Linda Parry is now retired. Up to 2005 she was employed for 36 years as a museum curator. For 34 of those years she was employed at the Victoria and Albert museum. In later years she was Deputy Keeper of the department of Furniture Textiles and Fashion. She was responsible for the care of the collection, organising exhibitions and displays and the acquisition and cataloguing of new exhibits, along with other duties. She knew Mr Franses professionally and had worked with him on various projects from time to time. He had assisted her in her research for her first book on the Textiles of William Morris by putting her in contact with collections and private owners of William Morris. This was a good example of how Mr Franses' expertise was of use to other professionals and of his good working relationships with them. Mrs Parry's particular area of expertise was 19th century textiles. She confirmed that she had attended the Defendant's property at the invitation of Mr Franses to look at some Edward Burne Jones embroideries on 5th August 2003. When first approached by the Claimant's solicitors in 2010 she had no memory of the visit but having consulted her diary she remembered that she had gone to the gallery that day. She had attended the Defendant's premises out of academic interest. She said that she was very enthused by the Edward Burne Jones embroideries; they were substantial embroideries with strong connections to William Morris, on whom Mrs Parry is a renowned expert.
- Mr Franses had a second motive in inviting Mrs Parry to the gallery. He wanted her to look at the embroideries. He knew that another member of the V and A team had told the Claimant that the embroideries were probably 19th century. He was sure that was wrong. Mrs Parry specialised in 19th century textiles. He says that he showed her the embroideries. She did not remember that but she accepted that had she been shown them she would have given the opinion that they were certainly not 19th Century. That is what Mr Franses said happened and I see no reason to think that he would have lied about that.
- I note that in his account of the meeting with Linda Parry in his statement at Paragraph 17 Mr Franses says that she agreed they were medieval. Here I find that Mr Franses was gilding the lily. Mrs Parry was not in a position to confirm that the embroideries were medieval, they were not from her specialist period. She was however able to confirm that they were not 19th century.
- This was an important step. Mr Franses followed it up by contacting the member of the V and A team who had originally expressed the view that they were 19th century. He told her of the silver thread analysis and discussed her earlier view. She asked him if he thought she had made a mistake. He was confident having spoken to her that she would be unlikely to persist in her earlier view. Mr McLinden submitted in his closing written submissions that I should not accept the Defendant's evidence in relation to this expert on the grounds that it was hearsay or, as a minimum, I should place no weight on Mr Franses' evidence about it if I find Mr Franses to be an unsatisfactory witness. I do not find him to be unsatisfactory. I accept his account of the conversation. There was no reason to call the expert other than to cause her embarrassment.
- Thus, within a very short time of taking custody of the embroideries, Mr Franses had made important progress. There is no question but that the progress came about because of his standing in the art world, his expertise and his contacts.
- In October Mr Franses visited the Curator of Textiles at Cleveland Museum of Art which has one of the finest collections of medieval art in the United States. She expressed the view that the pieces were likely to be medieval.
- Thus within 4 months and after considerable effort and some expense Mr Franses had made real progress in achieving the rehabilitation of the embroideries. I pause at this stage to say that I am quite satisfied, as Mr Franses said, that he kept the Claimant informed of all developments. Mr Spencer said that he was only rarely brought up to date. I do not believe that he would have tolerated being kept in the dark, and I see no reason why Mr Franses would not have told him what was going on. I accept Mr Franses's evidence about this.
- I am quite sure that Mr Franses acted as he did because he believed that he had an agreement with Mr Spencer that he would be selling the embroideries and receiving a commission of 30%. The detail of his research, the travel and the work carried out is set out in Paragraphs 17 to 21 of Mr Franses second witness statement. It was not challenged.
- On 25th September Mr Franses made a note of a telephone call from Mr Spencer informing him that he had owned the embroideries for over 6 years. He had by that stage owned them for 6 years and 2 weeks. It is likely that Mr Spencer attached importance to the 6 year limitation period with which he was familiar. Given the circumstances in which he acquired the embroideries it is likely that he felt the passing of the 6 year mark as an important step in consolidating his position. I see no other reason for the call.
- On 6th October 2003 Mr Spencer and Mr Franses met. Mr Franses told Mr Spencer of the latest developments. Mr Spencer said that he would now instruct Mishcons to draft an agreement. Mr Franses had no objection to a written document and he wrote to Mr Spencer on the 10th October with a proposed contract document. The document read as follows:
"I look forward (if you feel we need it) to receiving our existing agreement documented by Mishcon. However in the meantime I confirm below what we have already agreed verbally:
On our side we will have full responsibility for research, conservation, presentation and selling of these textiles and in consideration will receive 30% of the eventual selling price. As you appreciate, the eventual market value will be very dependent on the success and outcome of the research process, currently under way, which is highly specialised and will take time. We have agreed that it would be both premature and unwise to set a price or make any offer for sale until every research lead has been explored. We see it as our objective to establish the extent of these textiles' historical and financial potential and then to conclude a successful sale to a Museum or collector. There will be no separate charges or deduction for any expenses incurred (including travelling) by either party. Whilst you will retain full ownership of the works until title is transferred to the eventual purchasers, it is equally agreed that no sale or offer may take place for either or both textiles without our mutual agreement on price, purchaser and time of sale. It is also agreed that, whatever sum is eventually achieved, we will receive 30% at whatever time this may take place. For clarification, this agreement and venture may not be terminated other than by mutual consent.
Please confirm your agreement to this by signing and returning the enclosed copy or, if you feel necessary, by asking Mishcon to draft this agreement in legal terms."
- Mr Spencer said that the objection he had to the agreement was its open ended nature – i.e. it could only be terminated by mutual agreement. That objection was entirely understandable. I accept that he would never have agreed to such a term.
- Mr Spencer replied on 29th October enclosing a different written agreement. Mr Franses had grave reservations about that. A particular problem was that the agreement could be terminated by either party on 30 days notice to the other side.
- Thus as at 29th October there was no contract since the parties had not agreed upon the length of the term.
- Mr Franses told Mr Spencer that he could not possibly continue with his work if there was a risk of a 30 day notice of termination. It would mean that he was at risk of not being recompensed for any of his work. Mr Spencer agreed to change that. He reassured Mr Franses that he was committed to dealing with the Defendant and he would not seek to terminate the deal. Mr Franses continued to travel and to carry out research.
- In January 2004 Mr Franses went to New York. He had previously shown the embroideries to the curator of the Metropolitan when he visited London in the autumn. He had then gone to New York and carried out some preliminary research in December. He intended to return to the Metropolitan where he had arranged a private view of their medieval embroideries. It was a rare privilege accorded only to visiting experts and scholars. He met Mr Spencer on 22nd January and discussed his position. He told me, and I accept that, he made it very clear to Mr Spencer that he was not prepared to engage in the very substantial expense of continued research unless he was sure of Mr Spencer's commitment. Mr Spencer wrote to Mr Franses on 23 January 2004. His letter included the following "I was delighted with your enthusiasm and therefore, I confirm here that you shall remain the appointed agent to sell these items and that a detailed contract shall be entered into when you have completed your research. I feel that this letter should grant you a period of 12 months as sole agent, prior to any review. Therefore you may make your necessary expenditures in the knowledge that this deal is yours…"
- Mr Franses was not prepared to accept an agreement where the contract was not entered into before the research was completed. Nor was he prepared to work on the basis that the period during which the research should be completed should be restricted to 12 months. He wrote to Mr Spencer on 28th January 2004 on the eve of his trip to New York:
"All we have established to date is that the silver in the silver gilt component of the thread is more similar in composition to material of the 17th century [this was a typographical error, it should have been 16th century], rather than to that used in the 19th century. This does not prove the pieces to be 15th century or earlier. As you know some specialists, wrongly in my view, have believed them to be fabricated in the 19th century.
I am working in New York from tomorrow and will be examining under magnification the embroidery said to be similar in texture, which dates from the end of the 15th century.
To carry out the conservation, research (at no extra charge), quite apart from eventual marketing and sale negotiations requires expertise, commitment, time and travel. We are not willing to continue to expend this time unless we have an irrevocable commitment that we will receive 30% of the eventual sale proceeds whatever the outcome of the research and whatever the circumstances. This was our original understanding and agreement as detailed in my letter of 10 October 2003.
If that is not acceptable and cannot be clearly documented we will be unable to proceed."
That letter has become known as the down tools letter.
- Mr Spencer was on the brink of a breakthrough but he had an expert who was threatening to walk away.
- On 30th January 2004 he replied. He set out "in point detail below, our agreement, which I trust should meet with your approval:
1.0 You are the sole appointed agent to act on my behalf to repair, restore, research and subsequently market, the above items.
2.0 On the receipt of an acceptable offer (that acceptance to be granted by me in writing prior to any sale being confirmed), you shall be paid 30% (net) of the proceeds received. You will not deduct any money or charges for restoration, repair or research.
3.0 You shall retain the item for the period set out in point 6.0.
4.0 I agree to be wholly bound and give my irrevocable undertaking that you shall receive 30% of the total (net) of any sale, but that sale must be authorised by me first.
5.0 In the unlikely event of you or your company's bankruptcy or liquidation, it is understood that I am the outright owner of the item, and it shall be returned to me should this unlikely event happen, free from any lien.
6.0 I agree to be bound by the above terms for a period of 24 months, subject to us having not sold the items prior to the expiry of the above term, which commences from the date of this letter."
- Then Mr Spencer added: "I have endeavoured to commit to paper the assurance that you require. If this assurance is insufficient for you, then please send me a copy of what you would like to include. Having never signed such a stringent undertaking, I hope that this missive should satisfy you. I trust that I have remained within the spirit of our agreement, along with the substantive undertaking that we have agreed verbally before."
- Mr Franses's copy of that letter is in the bundle. It is annotated in manuscript which starts with the words "Thursday 5th telephone" and then "agreed 7 year consignment agreement". Mr Franses says he telephoned Mr Spencer that day, on his return from New York.
- During the conversation he first updated Mr Spencer on the significant progress he had made in New York. Mr Spencer was so excited that Mr Franses felt he had to dampen down his enthusiasm. He then turned to the agreement. He explained to Mr Spencer that if a time limit was required (and indeed there could not have been a binding contract without one, although Mr Franses was unaware of that) he would want a period of 7 years. This would provide him with enough time to make as much progress as could be made in establishing the provenance, history and therefore worth of the embroideries finding a buyer and effecting a sale. He says that Mr Spencer agreed to that. They also agreed the VAT status of the proposed sale and an agreement that if one embroidery was sold the agreement would continue to apply to the other one.
- Mr Franses annotated the letter of 30th January. I find he did so, as the written date indicates, on the 5th February.
- Mr Spencer has no recollection of this discussion. I am satisfied that it did take place. I accept that Mr Franses told Mr Spencer he required a period of 7 years. I find that Mr Spencer probably gave Mr Franses the impression that he agreed the period of 7 years. I also find that Mr Spencer would not have agreed to that without consulting his lawyers. I say that because
i) Mr Spencer clearly believed that any period beyond 6 years was of significance (because of, "statute limitation" as he put it in a letter later that month) and
ii) he consulted his solicitors so frequently that it is inconceivable that he would have committed himself to such a long period without having consulted them first.
- The parties spoke again in mid February. There are references to Mr Spencer on the 17th and 18th February in Mr Franses's diary. It is a matter of inference that the letter dated 18th February 2004 with the cover sheet "Revisions to Agreement as requested" is the document referred to in the diary as being faxed that day. Mr Franses believes that Mr Spencer must have asked him to put into writing the amendments they had discussed on the 5th. Mr Spencer does not remember this conversation either. It seems to me that such a conversation is the only sensible explanation for the document. It contains the 3 items which were foreshadowed in manuscript on the letter of 30th January.
- The letter reads as follows:
"Further to my letter to you of 28 January 2004 and your reply dated 30 January 2004, kindly amend:
1.0 You are the sole appointed agent to act on my behalf to restore, conserve, research, photograph and to market the two embroideries. It is agreed that if offered for sale within the UK or within the EEC, VAT (at the prevailing rate at the time) will be added to the base sale price and, if exported from the EEC, the base sale price should (if allowed at the time) be zero-rated. Accordingly the embroideries will not be offered for sale under the margin scheme.
2.0 Upon the receipt of an acceptable offer or offers, for either or both embroideries, (that acceptance to be agreed by me in writing prior to any sale or sales being confirmed) you shall be paid 30% of the base sale price or prices (see 1.0 above) received from the purchaser (or purchasers if sold separately). All the terms of this agreement continue to apply to the second embroidery in the event of the completion of a sale of the first.
6.0 I agree to be bound by the above terms for a period of 7 years or until a sale (or sales if sold separately) of both embroideries is completed, whichever is earlier. The period of 7 years will commence from the date of signature of the two parties to this agreement."
The letter is signed by Mr Franses.
- As I have already observed I have no doubt that Mr Spencer had given Mr Franses the impression that he agreed to his amendments, without actually agreeing them. Unsurprisingly Mr Franses believed (and still believes) that he had agreed. On 20th February Mr Spencer wrote to his solicitors, enclosing "a third draft of the contract I have forwarded to my agent who has rejected it in part and wants to make various changes as per his attached copy". That supports his assertion that he had not agreed the change. The letter goes on "I would very much like to establish whether seven years is a contractually foolish period on account of statute limitation….From a personal stand point, if I could find a valid reason to reduce the period to six years or less, it would be helpful as it means I would have more years to enjoy the money". The Defendant contends that the need for a "valid reason" to reduce the period to six years supports Mr Franses's evidence that Mr Spencer had agreed this term and was now looking for a respectable way out of it. Equally it supports my assessment that he had given the impression that he would agree the period but wanted to check the consequences of such an agreement with his solicitor.
- On 27th February 2004 Mr Spencer's secretary wrote to Mr Franses on the Claimant's behalf. She referred to some research and in the second paragraph she wrote "I understand Ian's advisors are dealing with other matters pertaining to this matter and will revert to Ian in due course and then he to you". Mr Franses said, and I accept, that he thought this was a reference to the Claimant seeking advice about tax. Since this was something the Claimant did often that was not a surprising assumption. I am satisfied however that it was a rather opaque reference to the fact that Mr Spencer was seeking advice on the agreement.
- In fact no substantive response was ever made. Mr Franses was unconcerned. He believed there was a concluded agreement upon which he was relying and I find that is why he continued to work. He was however, expecting to receive a written contract from Mishcons (see his letter of October 2004 to which I refer below). Mr Franses continued with his research. He sets out the detail at Paragraphs 36, 37 of the second witness statement. I note that on the afternoon of Monday 9th February he did 2 hours of research. He then spent an additional 12 hours of his own time during February (plus 4 hours of the assistant's time) on research into the embroideries. In March he spent 12 hours on research (plus 3 hours of the assistant's time).
- The Parties met on 4th March. Research was discussed. There was no reference to the agreement. Mr Spencer knew that Mr Franses thought he had an agreement. He did not disabuse him of that understanding.
- In April Mr Franses spent 10 hours on research (plus 3 hours of the assistant's time) including a meeting on 1st April 2004 with Guy Evans, the expert on flossed silk, who came to the gallery to see the items and give advice. This fortifies me in my view that Mr Franses believed he had an agreement.
- The relationship between Mr Spencer and Mr Franses deteriorated significantly in May 2004. Mr Spencer consulted Mishcons at the end of April. On their advice he asked for a receipt for the embroideries. Mr Franses faxed a standard form receipt to Mr Spencer on 7th May 2004. It included a notice that insurance was the responsibility of the owner. Mr Spencer was not happy with that. He also became anxious about the safety of the embroideries. This struck Mr Franses as very strange since he had had the embroideries in his possession for nearly a year. He endeavoured to reassure him; the gallery was in a former jeweller's premises so the safe was more than adequate. Mr Spencer asked about insurance. Mr Franses repeated that insurance was a matter for Mr Spencer, not the Defendant but he agreed to obtain quotes for him. Mr Spencer then asked for quotes valuing the embroideries at £6m. There was no basis for such a valuation but, at Mr Spencer's insistence, a quote was obtained.
- Mr Spencer asserts that he made it clear to Mr Franses that any receipt should make it clear that he was holding the embroideries to Mr Spencer's order. Mr Franses is quite clear he would not have agreed to that. That the embroideries were Mr Spencer's property was not in dispute, but he would not have agreed to hold them "to his order" since that would have had the effect of removing any lien that he may have on the embroideries. I accept Mr Franses's evidence about that.
- Mr Spencer said that he was so concerned as to the safety of his embroideries that he asked for them back in mid May. Mr Franses was working in New York at the time. On 14th May Mr Spencer wrote to Mr Franses saying he was proposing to take the embroideries and put them in a fire proof vault in the bank. Unsurprisingly Mr Franses thought that such a step would make his research much more difficult, if not impossible, and was not in favour of this plan. He wrote to Mr Spencer the same day. The third paragraph of the letter reads "If you propose to remove the items we would then be unable to continue to research and to show them to specialists – therefore making our work impossible. You would in those circumstances be trying to rescind our agreement. A huge amount of time has been spent, including tests and research that have been carried out, as well as inspections of related material in numerous museums. At all times in your letters, and at numerous meetings, you have promised we would receive 30% of the eventual selling price, and guaranteed that we had an exclusive deal. On this basis we have carried out all of the above work on trust – please therefore clarify your intentions."
- Mr Franses returned to London a day or so after that. Mr Spencer asserts that Mr Franses telephoned him on Sunday 16th May. Mr Franses has no memory of that but accepted that he might have done. It is likely that he did, and I so find, since he was no doubt very concerned about the events of the previous few days. Mr Spencer has produced a typed note which he says he made of the call the following day. The Defendant urges me to view this note with some circumspection given that it was the only time that Mr Spencer typed up a note of any conversation with Mr Franses. In any event it was typed up a day after the conversation took place. Whilst I accept that there was a conversation I find that it is likely that Mr Spencer's account will be accompanied by his usual "spin". The post script which reads as though written for his advisers is entirely self serving.
- Turning to the note itself the first two paragraphs are broadly uncontroversial. Mr Spencer then records that he had told Mr Franses that "he had the banners on the grounds that they would enable him to establish a basic price, which would subsequently allow us to start the foundation of a contract". Mr Franses denies that was said. He says that had it ever been said he would never have agreed to it. It is not very different from one of the proposed terms contained in the letter of January 2004 which Mr Franses had rejected. I find that what prompted Mr Spencer to include this in his note was Mr Franses's assertion that there was a binding agreement in place already.
- The note also makes clear that Mr Spencer understood very well that Mr Franses was expecting to be paid for the work that he had already done. Again Mr Spencer did nothing to disabuse him of that.
- The post script is revealing. Mr Spencer writes "What annoys me most and I feel is abusive on Simon's part is that he is endeavouring to take money off me, one way or the other, but to date he has added no information at all that has added to the value of the items. I have not received one single letter confirming what the items are, so therefore, no benefit has been bestowed upon me whatsoever". The assertion that Mr Franses had "added no information that added to the value of the items" is unsustainable. That Mr Spencer was writing this at the same time as he was insisting on insurance quotes being obtained in the sum of £6m demonstrates, at best, a certain lack of clarity in his thinking. The complaint that there was no letter "confirming what the items are" demonstrates either Mr Spencer's lack of understanding of the nature of the work that needed to be done and of the detail and quality of the research that had been done, or it was knowingly misleading. Precisely what the items are will be known, if ever, only after a great deal more work.
- Mr Franses does recall a meeting with Mr Spencer on 19th May. It is recorded in his diary and in Mr Spencer's. (Mr Spencer's diary also includes a reference to Mr Franses on 17th May). I accept that Mr Franses reiterated to Mr Spencer that so far as he was concerned there was a 7 year agreement in place. I have no doubt that Mr Spencer refuted that. Mr Franses said that in the light of the events which had occurred while he was in New York he was prepared to return the embroideries on condition that he was paid for the work he had done. Mr Spencer says that at that stage he still wanted to have a written agreement and that he would ask Mishcons to draft the contract. Mr Franses agrees with that. Mr Spencer went on to say that the two men sat down "with two blank sheets of paper" to draft something. Mr Franses does not remember that. I do not think it happened since they do not survive and there is no reference to them in the covering email to the draft agreement Mr Spencer later sent to Mishcons. Mr Spencer did not type up or even record this meeting and he may be confusing his evidence about this meeting with a meeting that took place with Mr Roodyn the following year about which he gave similar evidence. In any event the meeting finished with the parties on good terms. Mr Franses agreed to insure the embroideries at $500,000 in the spirit of good relations.
- On 1st June 2004 Mr Spencer drafted another agreement. I have seen it. I am surprised that Mr Spencer drafted it since it is in precise and legal language. It appears to have been drafted by a lawyer. It matters not. He sent it to Mishcon for comment. I do not know what happened to it after that. It was never sent to Mr Franses. In fact nothing was produced to him until 11 March 2005 by which time Mr Spencer had instructed new solicitors, Roodyn Manski. In the meantime the correspondence demonstrates that after the events in May the parties settled back into an amicable relationship. Mr Franses continued his research during the summer.
- In July 2004 Mr Spencer emailed a financial adviser in the following terms:
"I bought the entire contents of a flat in Mayfair nearly seven years ago and included in amongst the artifacts [sic] was this peculiar double-sided flag. I later discovered it is what is referred to as 'a cloth of gold'. It did not start life as a flag – the two images (for there is now one either side of the flag) were originally on a blanket-sized piece of cloth which would have been draped over a king's coffin, in this case probably the 14th Century. More probably, Edward II or Edward III, which if this proves to be the case, would make the items worth about £12 million plus, as this would be one of the rarest cloth artifacts in existence. I have had a number of people look at the item and I have finally retained the top dealer in the world on a commission basis to sell the items to leading world institutions, understanding that the export of the items will be initially blocked, but that subsequently we should be to sell one to the British Museum and the other to the Getty. Whilst I have not signed a formal contract with the dealer, it is for the most part a done deal but I am left with the advantage of being able to assign title and the given value at this time stands at £300,000. On the subject of title, I acquired the piece when I was a sole trader, trading under the name 'First London Clearance and Sunburst Trading', however, I could possibly show the item as being owned by a Ltd company. I trust this is the body of information that you required, please revert to me with any questions that you may have and I shall do my best to answer them swiftly. Thank you very much for your attention in this matter."
- Mr Spencer says he was asking about tax. Whatever the purpose of the email his gift for spin is much in evidence. His assertions that the head might be that of Edward II or III were optimistic to say the least. The email also demonstrates a certain lightness of touch in respect of the ownership of the embroideries. I note the way his acquisition is dealt with in the first sentence. As to the contract I note the reference to the fact that "it is for the most part a done deal".
- On 11th October 2004 Mr Franses wrote to Mr Spencer reminding him that he was still "waiting for the draft agreement that Mishcons have prepared re the gold thread embroideries". Nothing came.
- In early 2005 Mr Spencer changed solicitors to a firm called Roodyn Manski. Mr Franses met with Mr Spencer and Mr Roodyn. All agreed that a written agreement should be drafted and Mr Roodyn said that he would do it. A draft arrived in March 2005. It was not acceptable to Mr Franses.
- The details of the to-ing and fro-ing of draft agreements are less important in this period. No one suggests that a contract was concluded at this time. I shall restrict my fact finding to matters relevant to other issues.
- Mr Franses was concerned that in the March 2005 draft the agreement could be terminated if the relationship between the parties broke down. A second concern was the following: "The owner has full title to the Embroideries, which confirmation of title the agent accepts without further investigation." This alarmed Mr Franses. He had never doubted that Mr Spencer had full title to the pieces. On any view that would be a necessary precondition for any sale. Mr Franses was very concerned that title might be an issue. He did not, at that time, as I have already found, know the true circumstances of Mr Spencer's acquisition of the embroideries. I accept that he could not, in any circumstances, conduct the sale of the embroideries under the Defendant's name if he was not allowed to be satisfied as to their legal provenance.
- Mr Spencer came to see Mr Franses at the gallery and in the course of conversation gave him more detail about his acquisition of the embroideries. I can see no reason for him to do that other than that Mr Franses had asked him to do so. The meeting must have taken place because Mr Franses was concerned about the confirmation of title clause. Mr Franses jotted down notes on his copy of the draft agreement from Roodyn Manski.
- The following appears at the top of the document, in Mr Franses's handwriting:
Resident in NY
72 or 75 when died
Elizabeth Love [this should be Lane] Christie's, John Nevin her Guardian signed
Judy Keele English woman
She said Henry Moore bricked up jewellery ring
- Mr Franses recalls being told that Mr Spencer had purchased the embroideries from John Nevin who was the Guardian of Judy Keele, a ward of court. John Nevin had since died. It was he who had provided the receipt for the purchase. Mr Spencer was not sure whether Ms Keele was American or British since she lived in New York and had a flat in London. Mr Franses says that he asked how he had been introduced to Mr Nevin. He was told that it was a social introduction through two Americans whose names he noted but which were unfamiliar to Mr Franses (Parker, Burkes). Mr Spencer repeated that Mrs Keele was a collector with a flat in London and that Christie's took everything of value. (I have already observed that was not true: that may have been their brief but, as Mr Spencer knew very well, they had left far more of value than they had taken).
- At the same meeting Mr Franses suggested taking the embroideries to New York as part of a major exhibition he was holding at his newly opened gallery. Mr Spencer was adamant that the embroideries should not go to New York. Mr Spencer said that he did not wish to risk trouble with certain New York Attorneys (the words New York Attorneys appear on the document in manuscript).
- Mr Spencer denies that he had any concerns about New York lawyers. He says Mr Franses is lying. I think that unlikely. Given that Mr Spencer knew how he had come by the embroideries it is likely that he had some (at least residual) concern that publicity about the provenance of the embroideries in New York could lead to trouble from the Keele estate.
- Mr Franses is quite sure that Mr Spencer told him that the Henry Moore was bricked up with the embroideries and the jewellery and the ring. Mr Spencer is adamant that he did not say the embroideries were bricked up with the Henry Moore bronze. He said: "The only thing I said was bricked up was the Henry Moore bronze... End of" (meaning, as I understand the current usage of those two words, "end of story" or "end of discussion"). It was put to him that Mr Franses had the impression that they were all together. He replied, almost shouting, "It's utter nonsense. Why didn't he write textiles there?"
- I find there was no reason for Mr Spencer to tell Mr Franses about the Henry Moore, the jewellery and the ring unless they were in some way relevant to the embroideries. The note does not record (separately or at all) where Mr Spencer found the embroideries but since they were the subject matter of the conversation it must be the case that Mr Franses was being given the impression that they were found with the Henry Moore, the jewellery and the ring bricked into the fireplace. I doubt that Mr Spencer spelt it out quite like that. He would have said just enough to give the desired impression. I am quite sure that he did not say that he had found the embroideries in a bedside table any more than he told him that he had found valuable jewellery and a large amount of cash in the wardrobe. Had he done so Mr Franses would have remembered. I can see no reason why Mr Franses would lie about this. All sorts of malicious motives have been suggested. None has any substance.
- In the course of cross examination Mr Spencer was asked why he had not shown Mr Franses the receipt at that meeting or at any other stage, given that the receipt had been discussed "(John Nevin signed)". He said "I know I had my holdall with me. I'm pretty sure that I showed Simon Franses the receipt at around that time. I had it with me." He was pressed on this. He said "That is my recollection of it now. I've got a faint recollection." and then "I'm pretty sure". As he spoke he appeared convinced and, frankly, convincing but nowhere in the most voluminous correspondence to which I shall turn later in the judgment, witness statements or pleading had he ever said this before. Having seen the detail in the letters from Mr Cabot, the Claimant's current solicitor, I am quite satisfied that had he been told that the Claimant had shown the receipt to Mr Franses that fact would have been set out in no uncertain terms at some stage. Mr McLinden did not seek to persuade me that Mr Spencer had shown the receipt to Mr Franses on any occasion before 2009. To put it neutrally this evidence was not accurate. Mr Spencer said it, I find, because it was expedient to do so. Later in his cross examination he said he had a "faint recollection that I showed it to him at the earlier stage". He was particularly aggressive when it was put to him that the receipt could not stand on its own as evidence that the embroideries were included in the sale to him. He did not accept the suggestion, which was plainly correct. I am confident that he always had reservations about the validity of the receipt, that is why he delayed several years before approaching Mr Franses. It is why he took counsel's opinion on title and it is why he did not produce the receipt until 2009 when it was produced "with grave misgivings".
- I am also satisfied that had Mr Franses seen the receipt in 2006, he would have appreciated immediately that it would not provide adequate proof of title for a sale to a museum. I am sure he did not see it until March 2009.
- As to other matters in the notes Mr Spencer rejected the suggestion that he had mentioned social introductions – but he must have done. There is no reason for them to be recorded unless they were mentioned. He could not recall mentioning the English Speaking Union. Again he must have done, and I remind myself that he had attended at the English Speaking Union when looking for Mrs Keele's will. He said in evidence that Mrs McGrath had told him Mrs Keele was English (which presumably explains the reference to dual nationality). He accepted that he had not wanted the embroideries to go to the United States but denied that it had anything to do with New York Attorneys. He denied telling Mr Franses that he had counsel's opinion on title, he confirmed that he did have counsel's opinion on tax (a recurring theme), and then said that it partially dealt with title. It is plain that he must have told Mr Franses that he had counsel's opinion on title. How else could it appear in the note? He had taken advice , presumably because he sought reassurance about his position. There is nothing remotely surprising about that.
- Later on in his evidence Mr Spencer was challenged about the fact that he had never told Mr Franses how much (or perhaps how little, relatively) the Henry Moore bronze had sold for. At first he agreed with that. It was put to him "He could have been under the impression it was worth as much as £50,000." He disagreed with that and then said "Now you come to mention it I think I did tell him". Again an expedient answer which he may even have believed to be true at the time he said it. I find it was not true.
- He prevaricated at length when being asked about his knowledge of the limitation period, and the fact that he did not offer the textiles to a museum before 2003. He plainly knew about the Limitation Acts from his study as a law student.
- I should add that Mr Franses recalled being told about some of the facts he recorded in 2006 much earlier, in 2003. Whilst that may be so it does not add anything to the story. I think he my be eliding this conversation with earlier conversations
- Discussions about the latest draft agreement occurred during March and April. There was a meeting which all parties believed had been constructive. Again Mr Spencer spoke about sitting down with blank pieces of paper.
- On 27th April 2005 Roodyn Manski wrote to Mr Franses in the following terms:
"1. Prior to instructing me, Ian sent you several agreements which you refused to sign.
I met with you and Ian in late February. The meeting was, inter alia, to identify your areas of concern, to address these at the meeting and to put them into an agreement to your satisfaction. However, since that time you have sent us two further agreements and it is quite apparent from our recent and lengthy telephone call that you have new areas of concern. Thus, Ian is sceptical that any agreement can ever be concluded with you, given past experience and my own intervention.
One of your concerns is that you do not care for the tone of the agreement. Equally, Ian feels that he is being treated as an up-market house clearer and that he is entitled to more respect [my emphasis]. Quite apart from the fact that he was prepared to offer an extremely generous commission of 30%, the embroideries belong to him and he showed no little initiative in both acquiring them and establishing title".
- The complaint about being treated as a house clearer (even an upmarket one) destroys Mr Spencer's assertion that he had always told Mr Franses how he had come by the embroideries. Mr McLinden was not able to explain what his client was complaining about.
- It is not at all clear what was meant by the assertion in the letter that Mr Spencer "showed no little initiative in both acquiring them and establishing title". It does not inspire confidence.
- The solicitors said that Mr Spencer would collect the embroideries personally. In the event he did not attend at the Defendant's gallery.
- Correspondence continued between the parties. Messrs Keelys who were representing the Defendant asserted that there was a binding promise between the parties that research and sale would be conducted by S Franses Ltd and the Claimant was to pay 30% of the sale proceeds. Keelys indicated that they had advised the Defendant to hold onto the embroideries until the issue had been resolved.
- Roodyn Manski replied on 18 May 2005. In so far as it is material they said:
" 1. No agreement either verbal or written has ever been concluded by our respective clients.
2. As there is no agreement, our client cannot be in any breach thereof.
3. Our client's title to the Heraldic Embroideries is not in dispute.
4. It follows that no compensation is appropriate".
- There were other terms as to the return of the pieces. Proceedings would follow in the absence of delivery up of the embroideries.
- Keelys replied on 30th May, seeking proposals as to compensating the Defendant for the work done.
- On 15 July 2005 Roodyn Manski replied as follows:
"1. No written agreement has ever been concluded.
2. There is insufficient evidence to establish any oral agreement and it is extremely unclear what terms you allege were agreed orally.
3. In relation to time spent by your client engaging in research, it appears that he agreed he would carry out research at his own cost: see the letter dated 20 January 2004.
4. Your client has quite correctly always accepted that our client has title to the embroideries.
5. Your client does not have, and has never asserted, any lien or other property right over the embroideries.
6. Accordingly, there is no basis upon which your client can properly refuse to return the embroideries to our client".
- In a without prejudice letter of the same date Roodyn Manski asked to be informed of the Defendant's reasonable out of pocket expenses "Our client would consider paying these expenses provided your client returns the heraldic embroideries. Your client must also undertake to supply such information as he has already established and warrant the accuracy of any findings and conclusions he has reached."
- Keelys replied on 2nd August 2005. They asserted that the Defendant had a lien over the embroideries in respect of the money owed for the work done. In that letter the Defendant accepted there had not been a written contract but asserted that there was an oral contract, made in about January 2004. If that failed they were asserting a quantum meruit. The letter concludes as follows: "Accordingly, we are comfortable that our client is entitled to exercise a lien over the embroideries until such time as he is paid in respect of services he has provided. In that regard, we attach details of that, and you will see that, based on reasonable remuneration for his skill and professional services at the sum of £300 per hour, which is more than reasonable for a person of our client's expertise and skill, the amount which our client claims is £93,183.38. We should stress that this note sets out the key background, and is not a full statement or recitation of the terms which were discussed and agreed. Our client accordingly exercises a lien for that sum".
- Enclosed with the letter was an account of the work done by Mr Franses, in outline form. In a side letter without prejudice the Defendant offered to mediate in advance of issuing proceedings. Mr Franses carried out no work after that date.
- Notwithstanding the correspondence between solicitors the parties did attempt to maintain their working relationship. Mr Franses was concerned that Mr Spencer did not really understand what he had been doing over the months. I have no doubt he is right about that (see my earlier observations about the May 04 note). Mr Spencer's interest is in what the embroideries are worth, not in their history for its own sake. Draft contracts were drawn up and exchanged, meetings took place.
- In February 2006 Mr Franses wrote to Mr Spencer without prejudice. He expressed the hope that they may be able to re establish a positive and cooperative relationship. He went on "However in the period up until a satisfactory agreement is signed or 13 April 2006 whichever is sooner we would accept a charitable donation of £50,000 made to the St James's Charitable Trust .. in compensation for all our work and disbursements on this matter.
Upon confirmation of such payment being made to that charity, we will return the two embroideries to you, together with all documents reflecting and/ or recording such research and investigation into value as has been obtained to date".
- Mr McLinden makes the point that the letter makes no reference to any concerns about the need to verify the Claimant's title. The point is well made and I shall return to it in my analysis of the law.
- Relationships continued much as before with draft contracts going backwards and forwards. On the topic of title Mr Spencer was very clear. He set out his position in an email of 21 November 2006 "I will not indemnify the agent in relation to any claims or demands, and this clause, i.e. number 12 of your last document offering should be removed. I am quite happy for you to have confirmation of my good title from an independent third party i.e. [sic] lawyer or such similar if you so wish". This was, inevitably, unacceptable to Mr Franses.
- No progress was made. No work was done on the embroideries. They remained on the Defendant's premises.
- In August 2007 Mr Spencer instructed a third firm of solicitors, Davies Arnold Cooper. They contacted Mr Franses and asked for an electronic copy of the last draft contract drafted by Keelys. In November Davies Arnold Cooper sent a draft agreement. It included an indemnity in the following terms:
"3.4 The Agent shall be liable for and shall indemnify the Owner against any costs, claims or other liabilities incurred by the Owner:-
3.4.1 as a result of the Agent breaching any law from time to time in force in relation to the Embroideries;
3.4.2 as a result of any error, tortuous [sic] fraud or negligence of the Agent, its representatives or employees; or
3.4.3 the incurring of which is otherwise not authorised by the Owner under the terms of this Agreement,
and the Agent undertakes to be insured to the reasonable satisfaction of the Owner at all times against such risks. The Owner may request and the Agent will provide a copy of such policy at any time during the term of this Agreement".
- There was some discussion between the parties and on 3rd December 2007 Ms Swirski, Mr Franses's wife, in house solicitor to the Defendant (and formerly of Keelys) wrote as follows:
"The writer has now had an opportunity to discuss the matter with Mr Franses and review your client's most recent proposals. We find there are contained in the draft several terms which Mr Franses cannot accept, however given your client's assertion that he is neither willing to negotiate any of these nor deal with the matter by way of mediation, these details must remain academic and we do not propose, therefore, to go into any detail, unless specifically requested to do so by your client.
Given the above, it would seem more sensible to turn to the matter of remuneration for the considerable work Mr Franses has already undertaken pursuant to the oral agreement made by the parties in January 2004 and we understand that Mr Spencer would agree to pay any expenses incurred by Mr Franses as a result of that agreement.
In relation to the time spent by Mr Franses on authentication, comparative study, research and discussions with various experts in the UK, Europe and in the United States, our position remains the same, namely that Mr Franses is entitled to reasonable remuneration based on part-performance of the original oral agreement terminated by your client. Whilst we believe Mr Spencer has details of these, we will be happy to provide these again should you so request."
- Davies Arnold Cooper sought the Defendant's comments on the contract, notwithstanding the Defendant's reticence. They were provided during the course of 2008. By May it was clear to the Defendant that there was no point in continuing. A letter was sent which concluded as follows:
"Mr Spencer has apparently voiced concern over the fees he has paid out to solicitors instructed by him in this matter. We are, of course, unable to comment on this aspect save perhaps to suggest that if he can persuade another firm to act as his agent then those fees will not have been in vain. Mr Franses has, after all, now established that the items are in fact medieval in origin and not victorian stage props as Mr Spencer had originally been advised by other experts. Once Mr Spencer has paid for the work undertaken by S Franses Ltd, Simon Franses will be happy to discuss his investigations and conclusions thus far with Mr Spencer or his new agents."
- Mr Franses heard no more from Davies Arnold Cooper.
September 2008 Onwards
- In September 2008 Mr Franses received a letter from John F S Cabot, the Claimant's current solicitors. It sought delivery up of the embroideries and refuted the contention that the Defendant was entitled to payment for work that had been done. It was intemperate and was a most unfortunate opening gambit. I include one paragraph by way of example:
"In short your firm's demand for the £93,183.38 against the return of our client's goods is and was indefensible and unjustifiable. It will be put to the court that your demanding a sum of £93,183.38 from our client in all the circumstances was an outrageous and opportunistic try-on that was reckless, if not dishonest. In our view the court will uphold that contention. Accordingly we believe that any claim as to your integrity and that of Mr Franses will be left in tatters after Mr Franses' cross-examination in relation to your claim for £93,183.38." The letter included draft Particulars of Claim.
- The Defendant through Ms Swirski replied on 22nd September 2008, setting out its position and confirming that proceedings could be served at their address.
- On 24th September the Defendant wrote to Mr Cabot saying that the offer made to settle the case for £50,000 first made in February 2006 [to which I refer above] was still on the table, on the basis that each party paid their own costs. The letter asked that any monies be donated to the St James' Charitable Trust. "Mr Franses is not motivated by any desire to benefit from any potential proceedings but in a business where most of his work is undertaken on trust and where a hand shake is a binding agreement, he cannot afford to set a precedent whereby it is acceptable for the other party to breach an oral agreement and profit at the Company's expense".
- Mr Cabot replied in January 2009 with a Part 36 offer. It offered £35,000 in full and final settlement of the Defendant's claim. That was combined with an energetic attack on Mr Franses's bona fides particularly with regard to the Charity. As to the request for £50,000 Mr Cabot wrote "...it is obvious that the "donation" is almost half the value of the August demand. Our client believes that this is another indication that the August demand is a false and grossly inflated figure that bears no relation to the true extent of any work carried out by SFL into the value and provenance of the embroideries". This was on any view extraordinary. No one who has listened to Mr Franses could be in any doubt about how much time effort energy and expertise had gone into researching these embroideries. Mr Spencer either did not listen or ignored what he had told him about it. I am in no doubt that he was kept informed. It is unfortunate that these unfounded allegations were made.
- Mr Cabot asked for a breakdown of the costings. He finished the letter thus: "Notwithstanding the protestations of Mr Franses to the contrary, we believe that the probity and credibility of his conduct and the nature of SFL's dealings in relation to its demands for remuneration in this case will receive adverse substantial publicity. In particular we reiterate our warning as to the impact of SFL's inappropriate conduct will have in respect of its liability for the costs of the proceedings that will be issued by our client to recover his property".
- Mr Franses was understandably disconcerted by the tone and content of Mr Cabot's letters. That was presumably the intention behind them. On 26th January 2009 the Defendant wrote "We are pleased to record that Mr [Franses] is taking a commercial view and will accept £35,000 from your client in full and final satisfaction of all claims potentially arising between the parties regarding the above pieces on condition that Mr Spencer pay the company's costs (see attached schedule) and that payment be received and cleared in full before the pieces are released." There was also a without prejudice offer to accept £7,800 by way of costs.
- There is no reference to concerns about title in that letter.
- In December 2008 Mr Franses had consulted counsel. In early February 2009 Counsel was drafting proceedings. He needed to know who was to be named as the Defendant. Ms Swirski reviewed the paperwork and read the Sotheby's document of 14 January 1999 which named the owner as the Piers Haussen trust c/o Mr Spencer. Ms Swirski asked Mr Franses whether he knew anything about that. He plainly did not. Nor had he given the document any thought in the nearly 6 years since he had received it. Mr Franses began to worry about Mr Spencer's title. He says he had had suspicions before. That may well be true but it was not until early 2009 that he did anything about them. He and his wife re read all the notes that he had retained of all the meetings. He read the name Judy Keele. He carried out an internet search which produced an article from the New York Daily News, dated 8 June 2001 with the headline : "Judge raps Guardians - Give two a fraction of fat fees requested"
- So far as is relevant the article read "– In one ruling, Manhattan Supreme Court Judge Justice Edward Lehner refused lawyer Diahn McGrath's request to increase total fees to $300,000 for her work on behalf of 91 year-old Judy Keele, and awarded her only $31,000.
Keele's assets were believed to total $200,000 before McGrath went to work four years ago. McGrath's dogged sleuthing uncovered a $1.7 million Swiss bank account and a prized Henry Moore sculpture that Keele had hid behind a fireplace in her London flat.
Acting on a hunch, McGrath took a sledgehammer to the brick fireplace and in the debris found a Moore bust.
But Lehner accused McGrath of an attempt to "grossly overreach" and said she shouldn't be rewarded for non legal services normally performed by a Guardian. He awarded her just $5,000 on top of $26,000 that he'd already granted.
Upon Keele's 1998 death, McGrath requested the extra $274,000 as a premium for having uncovered the extra funds. She said she found the numbered Swiss account by scouring through thousands of slips of paper found in Keele's Manhattan apartment.
"I do the sort of things that people don't do in these cases." McGrath said. "It looks like it was a punitive award." She said she was considering an appeal."
- Mr Franses was very concerned since it appeared that Mrs McGrath was the Guardian, not Mr Nevin. Mrs McGrath was credited with finding the Henry Moore, not Mr Spencer. On 17th February Ms Swirski established that there was no record of Mrs Keele's death in the UK. She then telephoned the Defendant's New York gallery and asked them to make inquiries of the court record to see what was known about the proceedings to which the article referred.
- The gallery manager went to the New York records office and copied parts of 2 affidavits sworn by Mrs McGrath in October 1999 and May 2000. She sent them to Mr Franses. Mr Franses was concerned that there was no reference to Mr Spencer, but there were references to an investigator and also to an unnamed liquidator who had purchased low value odds and ends. At this stage Mr Franses did not think that could be Mr Spencer. He knew that Mr Spencer had purchased items after Christie's' appraisal but he could not understand how he could be described as a "liquidator".
- There were further letters. As at 18th February 2009 the Claimant through Mr Cabot offered to pay £3,900 on account of the Defendant's costs, in addition to the £35,000. That was rejected.
- In a letter of 20th February 2009 (incorrectly dated January) Mr Cabot repeated the risk to the Defendant's reputation of any adverse publicity "it faces adverse publicity about improperly padding or loading its fees". He then offered that the Claimant would pay the costs of £7,800 (as set out in the letter from the Defendant on 26th January 2009). There was then a request for a certificate that the embroideries "are the items that were deposited by the Claimant and that they have been maintained in the same condition as before (save that the backing has been removed). Together with a report and all relevant accompanying documentation and materials on the fruits of your clients research for which you are receiving the £35,000."
- By that stage I find that Mr Franses was extremely anxious. He was concerned that were he to return the embroideries to Mr Spencer when they belonged to someone else the repercussions for the Defendant could be very serious.
- On 24th February Mr Cabot wrote again, asserting that there was an agreement and berating the Defendant for not having withdrawn instructions from counsel.
- On 25th February the Defendant wrote to the Claimant
"In order for any settlement to be reached we request that your client perform as follows:
1. That your client will furnish such information and documents as may be required to deduce title to the embroideries. We would suggest you provide us with a copy of the original Bill of Sale certified by you as Mr Spencer's solicitor.
2. That your client warrants that he has full and unencumbered title to the embroideries and there are no other beneficial owners and that this has remained the case since the date of his acquisition.
3. That your client will indemnify S Franses Ltd and it's [sic] Directors and employees in relation to any demands (including legal costs) from any third parties claiming superior title to the embroideries."
The letter concluded: "Mr Franses wishes also to put on record that the research carried out was limited, at the behest of your client, to the historical provenance, design and medieval origin of the embroideries and that this research can only be used by Mr Spencer for his own information. Any work, archival images, or material cannot be published or reproduced without our client's prior written consent as these may be subject to copyright."
The reference to non use of copyright material referred, as Mr Franses said in evidence, to the photographs. There was no difficulty in Mr Spencer discussing his research with others.
- By a letter of 26th February 2009 the Claimant's solicitors asserted (again) that their letter of 24 February constituted acceptance of the Defendant's offer of 26 January 2009. That was plainly wrong. There had been intervening offers and counter offers.
- The requests in the 3 numbered paragraphs were refused. Mr Cabot said, quite rightly, that this had not been raised before.
- On 26th February 2009 Mr Cabot wrote that his client would attend at the Defendant's offices on Friday 6 March 2009 at 11am with a cheque for £42,800 in exchange for:
" 1. The embroideries (which he warrants are his).
2. A certification from our client that the embroideries are the items deposited by our client, and that since the date of deposit they have been maintained in the same condition by your client.
3. A report and all relevant accompanying documentation and materials on the fruits of your client's research, for which your client in receiving the £35,000. If this material is not available by the deadline, your client must provide it as soon as practicable after.
The unavailability of (3) must not stop the handover of the embroideries."
- If that did not happen the Claimant would issue proceedings for delivery up of the embroideries.
- In a letter of 2 March 2009, amongst other matters, the Defendant challenged Mr Cabot to demonstrate that the Claimant did indeed have title. The following appears in the letter:
"We cannot and will not permit your client to use our good name and physical possession of the pieces and scholarly research as confirmation that he has clear and absolute title and to assert (in your words) that there is "no controversy with title". It is apparent from everything you have written that this is certainly his intention.
Since your rejection of our counter offer of 26th January 2009 we have actually begun making those enquiries into (recent) title to which you refer. As your client refuses to back his assertions as to title with documentary evidence we must protect the company's position and make our own detailed investigations. We are spending a considerable amount of time and incurring costs to do so. However we will be happy to consider any papers your client may be persuaded to release to us in order to speed up our investigations or indeed render them unnecessary. Please appreciate this might have been avoided by your client with the appropriate disclosure.
As soon as we can be satisfied that Mr Spencer has absolute unencumbered title and that we are not at risk of a claim we will release the pieces. Under these circumstances, and contrary to your suggestion, we do not wish to retain this property for a moment longer than necessary."
- The letter finished as follows "Please note that the pieces will not be released until we are satisfied as to title. Your proposed visit on 6 March would be a wasted journey". There was no immediate response.
The letter to the New York Public Administrator
- On 3rd March 2009 the Defendant wrote to the Public Administrator for the state of New York. The purpose of the letter was to alert the Public Administrator to the existence of the embroideries and to his concerns about title. Mr Franses justifies what he did thus "I would prefer to be criticised for being too energetic in due diligence, than for being careless and risk the company's name and reputation being attached to pieces with a potentially defective title, especially if there was any irregularity, and being exposed to future litigation from third parties". I accept that was his motivation, not malice. He was genuinely perplexed by the contents of Mrs McGrath's affidavit where (as I have observed already) she claimed she had found the bronze herself, in the soot having borrowed tools to break open the fireplace. It was rubbish, but Mr Franses was not to know that. He was comforted by the fact that the Henry Moore had been sold by Christie's. He hoped that he would learn that when going through the flat the Christie's valuers had made a mistake when appraising the embroideries, which would explain a very low price paid.
- I shall deal with the letter in a little detail since it is the basis for many of the allegations of bad faith. The first page contains nothing about which the Claimant complains. On the second page Mr Franses writes that he had been told by Mr Spencer that "Whilst the apartment was being cleared out [the tapestries] had been found by Mr Spencer bricked up in a fireplace, along with a Henry Moore sculpture and a ring". He was challenged about that account. I have already determined that, broadly, that is what Mr Franses understood from his conversations with Mr Spencer. There is nothing wrong with the rest of the content of page 2.
- On page 3 in the second paragraph Mr Franses wrote "Last year Mr Spencer appointed a new aggressive firm of solicitors. On our side we began to investigate his title. We started to review diaries and notebooks of various meetings and telephone conversations since 2003. I had managed to note down scraps of information about the circumstances in which Mr Spencer had obtained those pieces." As Mr McLinden pointed out those investigations did not begin until after January 2009. Up until then they were content to receive payment and return the embroideries. According to Mr Franses's third witness statement it was the discovery of the Piers Haussen receipt by Ms Swirski on 16 February 2009 that precipated their real concerns. I am satisfied that was the case.
- The letter continues "I had been told [by Mr Spencer] that the works had been owned by an elderly woman who had dual US-UK citizenship, Judy Keele, who had a court appointed Guardian, John Nevin." That correlates with his evidence and the note to which I have referred.
- Mr Franses wrote "Last year…I recalled being told by Mr Spencer that he had been introduced and recommended by Christie's as a liquidator to clear unwanted items prior to the apartment being vacated. I also found a note saying that Mr Nevin had signed confirming Mr Spencer's purchase of these and other works".
- This, Mr McLinden correctly submits, suggests that Mr Franses knew perfectly well from the beginning that Mr Spencer had been acting as a house clearer in the generally accepted sense. Mr Franses was cross examined closely and persistently about it. He said that he had written the letter in haste. I accept that, but given the seriousness of what was going into it he should have been careful about accuracy. He said, in effect, that he had elided what he had read in Mrs McGrath's affidavit with what he had been told by Mr Spencer at an earlier stage. Having considered his evidence carefully I accept his explanation. He uses the word liquidator in the American sense. Mr Spencer would not have used that term. That word appears in Mrs McGrath's affidavit. He refers to Mr Spencer clearing unwanted items from the flat; that too reflects the contents of the McGrath affidavit.
- I accept Mr Franses's evidence that he had never thought that the embroideries were unwanted items or unknown about. He always believed that the windfall had reached Mr Spencer via a more conventional route namely by someone making a mistake as to their value, rather than being wholly unaware they existed at all. As Mr Spencer put it in a different context "antiques is taking advantage of other people's mistakes".
- In writing that he "recalled" being told by Spencer etc Mr Franses misled the Public Administrator. Fortunately the information was not detrimental to Mr Spencer since it would have suggested to the Public Administrator that Mr Spencer's account of the acquisition was consistent with Mrs McGrath's account of paying a liquidator.
- He wrote "I find the circumstances in which these exceptional works could be described as odds and ends and of low value (and by implication refused for auction by Christie's) to be very questionable. I hope you agree having seen the photographs. Especially as Mr Spencer asserted to me that the owner had bricked them up as she had considered them so precious". Mr Franses was cross examined closely about this. Mr Franses believed that the embroideries had been bricked up or bricked into the fireplace. He believed the owner had done that to keep them safe. It is difficult to see why else that would be done. It may well be that Mr Spencer did not say that to Mr Franses in terms but I reject the suggestion that this was misleading.
- The concluding two paragraphs encapsulate the position the Defendant found itself in.
"We are nervous to release the works in light of what we have discovered, yet we are concerned that we could appear unreasonable to a Court by continuing to hold them. However considerable our suspicions they are not tantamount to proof. If your investigations provide any evidence of superior title you may consider it appropriate to seek a court order here in London freezing the pieces.
Ms Keele was wise to secure these previous works behind bricks. We feel the way in which they have been removed from her ownership to be suspicious. We would reiterate that quite apart from their significant monetary value these works are quite unique and of international importance, and would grace any of the world's foremost museum collections. This is a matter not just of private concern but of public interest."
- Finally on the topic of the accuracy of Mr Franses's evidence I turn to the question of the indemnity. Mr Franses asserted in his first statement (in support of an extension of time for the defence) that the reason enquiries were pursued in New York was that Mr Spencer had refused to provide an indemnity. Mr McLinden points out that the indemnity was only requested on 24th February 2009 (see above) and refused by letter of 4 March i.e. after inquiries had begin in New York. It is right that an indemnity had been refused before, most recently in 2006 but since Mr Franses was prepared as at January 2009 to compromise it is clear that it cannot have been just on the basis of the absence of an indemnity that he began investigations in New York.
- It is absolutely clear that as of February 2009 Mr Franses was in a complete panic; he was being assailed by aggressive correspondence, he realised that his understanding of the provenance of the embroideries may be wrong, his wife had realised the significance of the Piers Haussen Trust receipt, which precipitated the inquiries in New York. To add to Mr Franses's anxiety the defendant company had been closely involved in the rehabilitation of the embroideries. Any difficulties that might arise would reflect very badly on them.
- I accept that there are errors in the letter to the New York Public Administrator and there is the odd error in his statements but I reject the suggestion that Mr Franses set out to mislead.
- I return to the narrative.
- On 4th March when Mr Franses rang the Public Administrator to check that the letter had been received he was put through to Miss Griffin, the Public Administrator. She confirmed that there was no record of the embroideries anywhere in the accounts.
- On 4th March 2009 Mr Cabot replied. He complained that it was very late in the day to be raising issues as to the Claimant's title. He wrote: "Our client's concern is that any information as to our client's title will be used as a vehicle by your client to engineer further delays in returning our client's property to him and in generating or attempting to generate issues as to title, motivated by ill will at losing the commission on the sale of the embroideries.
Against the foregoing background it is therefore with grave misgivings that we provide a copy of the receipt dated 12 September 1997 recording that in exchange for £5000 paid by our client to the Guardians of Judy Keele, our client purchased and thereby acquired good title to the items referred to in the receipt (which included the embroideries, which were amongst the items cleared from the property). We reiterate that we believe our client is not obliged to provide your client with such evidence because as a bailee your client is required to return the embroideries to our client as bailor. The only reason your client is given the receipt is that if this was not done, the court might think that even though our client might have been legally correct, it might have avoided the ensuing litigation had it been supplied." The need for the section in brackets neatly illustrates why the receipt is not sufficient on its own to prove that Mr Spencer has title to the embroideries.
- As to the indemnity Mr Cabot wrote: "Our client will not be providing you with the indemnity your client seeks in its letter of 25 February 2009. First, for the reasons we have given in this letter, your client has no legal right to demand such an indemnity, and second no right to refuse to return our client's property to him if he refuses to provide such an indemnity. Third and in any event, our client has no trust or confidence in your client's integrity, and he is unwilling to provide any indemnity to your client in such circumstances."
- The Defendant received the receipt at about 9pm on 4th March 2009. He faxed it to the Public Administrator in New York on 5th March 2009 at 5.26pm London time (about mid-day in New York). He sent with it copies of other documents with Mr Nevin's signatures on which he had obtained from the New York Public Record Office.
- On the evening of the 5th March 2009 the Public Administrator's lawyer, Mr Reddy, rang Mr Franses and speaking of the receipt he said "she [Mrs McGrath] couldn't have written that". As I have observed earlier that is what she says too. Mr Reddy said, as did Mrs McGrath, that the wording was implausible. I have already found that Mr Spencer had provided some of the wording. This would not have reassured Mr Franses.
- Keelys were reinstructed on behalf of the Defendant. They wrote to Mr Cabot on 5 March 2009 in the following terms:
"It is clear that quite a lot has happened since our last involvement a few years ago, and we are still reading into the papers. We have your letter of yesterday's date to our client's in-house solicitor, which we will need to consider in detail. However, we can usefully state our client's broad position here…
…It is clear that, historically, your client has been extremely reticent to disclose details of his title to the textiles. You will appreciate that, beyond a certain point, this in itself generates unease. If, hypothetically, it were to emerge that there was a problem over title, our client could be exposed in the tort of conversion (or worse) to any putative owner. Our client has sought indemnities from your client to provide at least some safeguard against that (they may not be enough now), but these have been steadfastly refused. Your client originally sought express acknowledgements from our client of his title, which occurs to us as unwarranted, but which again served only to heighten concerns...
…Our client has conducted certain enquiries of its own more recently with regard to the current provenance of the textiles, and again this has served only to increase their concerns, such that our own client's fees have ceased to be the primary issue for them at this stage.
Your letter and the enclosure now compound these concerns. The receipt your client has provided raises some very serious questions, especially when taken against information given by your client previously. The wording in the receipt strikes us as being odd. It purports to record a sale of these textiles by a Mr John Nevin, as co-Guardian of an incapacitated person. We can infer from this that Guardians were appointed at the behest of the court, and there are issues of public trusteeship and Guardianship involved. We are not New York Attorneys, but would suppose that if the court there saw fit to appoint more than one Guardian, receipts and dealings with estate property would need to be co-signed by all Guardians. What of the other co-Guardians?
The receipt records that amongst the items excluded from sale was a Henry Moore bronze sculpture; we can fairly deduce from this – and indeed the Mayfair address of the premises at which these items are found – that this incapacitated person was a person of some considerable means. If that person was in possession of a Henry Moore bronze, then textiles also found at the premises ought to have been appreciated (a fortiori by Guardians appointed by the court) as items of potentially significant value.
The receipt for the valuation at Sotheby's shortly afterwards referred to the owner as being the Haussen Trust. What of their role?
Despite all this, we are to understand that the textiles were seen as 'bric-a-brac', and sold – with numerous other items - for £5,000. It is simply not credible to suppose that these textiles could ever have been valued as worthless by Christie's."
- Mr Cabot responded that the issue as to title was a smokescreen. "Our client has not the slightest doubt that your client is acting maliciously, as it (unwarrantedly) sees itself cheated of its opportunity to sell the embroideries and to obtain a 30% commission on the proceeds; alternatively cheated of a grossly inflated claim in excess of £94,000 for work allegedly carried out in researching the provenance and value of the embroideries which (sic) it subsequently accepted £35,000". Mr Cabot repeated that the bankers draft would be presented. If the Claimant was turned away proceedings would be issued to recover possession and for damages.
- I repeat that I reject the allegations of malice.
- On 6th March 2009 Mr Cabot attended with money and made an effective demand for the embroideries. The Defendant refused to give them up.
- Mr Cabot sought to issue proceedings. Due to an error by the court they were not issued until 3 April 2009. They were served on Keelys under cover of a letter of 15 May 2009.
- In the meantime on 5th March 2009 Public Administrator applied to the Surrogate's Court of New York for an order to show cause "including a temporary restraining order restraining the Defendant from selling transferring, delivering or releasing possession of the two large medieval silver-gilt textiles alleged to be the property of the Estate of Judy Keele"
- An order was made on 6th March 2009 (after the demand for the embroideries had been made in London) in the following terms:
"Ordered, that pending the further order of this Court, S Franses Ltd, doing business in New York as Franses of London, is hereby restrained and enjoined from selling transferring delivering or releasing possession of the two large medieval silver-gilt textiles alleged to be property of the Estate of JUDY KEELE, deceased, until the further order of this Court". There was provision for service of the order on Mr Spencer and on the Defendant at its London address.
- Paragraph 8 of the Petition states that Mr Spencer "Obtained possession of the textiles by theft or fraud…." That was not pursued by the Public Administrator. The Defendant had not made that allegation.
- There followed a great deal of correspondence which does not assist me on any of the issues I need to determine. Suffice it to say that the Claimant was and remains certain that the Defendant is motivated by malice. The Defendant remains amazed and indeed disbelieving that Mr Spencer could have obtained the embroideries in the way he says.
- There was a hearing in New York in April 2009. The Claimant contacted Mrs McGrath in early 2009 to say that he had problems in London and that he might need an Attorney in New York. He must have made it clear that it was to do with the Keele estate because Mrs McGrath said she could not act for him because of a conflict of interest. She recommended her husband who took on the case for the Claimant. She and her husband had a Chinese wall, apparently. Even more surprisingly Mr McGrath was a witness of fact in respect of the search of the flat in 1996. His stance as Attorney for the Claimant seems even more strange, but this case is not about the failings or otherwise of Mr and Mrs McGrath and I do not need to resolve questions of their professional conduct. Mrs McGrath then filed an affidavit in support of the Claimant. Given this extraordinary story Mr Legge asked Mrs McGrath whether or not she and her husband had come to a deal with the Claimant in respect of the embroideries. She denied it. Whilst I understand why the allegation was made there is no evidence in support of it and I ignore it.
- Although he was in the United States Mr Spencer did not attend the hearing. Mr McLinden attended, as did Mr Franses although the Defendant did not enter an appearance and was not represented. The judge ordered that the temporary restraining order should remain in force. She also directed examinations of various witnesses. So far as I know they have not taken place.
- Mr Franses sought the advice of Professor Norman Palmer QC in conference on 3 July 2009. He raised the possibility that it might be wise to report these events to the police. Mr Franses was, rightly, in my view, anxious about taking such a course. He therefore consulted former Chief Inspector Charles Hill who had been Head of the Art and Antiques Department at Scotland Yard. Mr Franses had worked with him at some time in the past. Mr Hill now works as a consultant to museums and insurance companies. He has recovered some of the most famous stolen art works in the world. By the time they met Mr Franses had come across a handwritten letter from the Berkeley Safe Company to Mr Spencer, saying that Ms Keele's safe deposit box had been closed. No other information was given. Unsurprisingly Mr Franses and Mr Hill were suspicious. I have no doubt they wondered whether the embroideries had been in there. Although I have made a number of criticisms of Mr Spencer in this judgment I have made it clear that I accept his account of where he found the embroideries.
- Mr Hill gave evidence. He confirmed Mr Franses's evidence that he had advised him to make an online police report. No investigation was expected since there was no victim, but the report ought to be made. He had also approached Mishcons to suggest they may want to make an NCIS report.
- Mr Spencer is very angry about the police report and the approach to Mishcons. In fact he knew nothing of the police report until disclosure. I suspect that he has lived with the circumstances in which he acquired this windfall for so long that he cannot see why anyone should look at it suspiciously. The reality is that no one would look at it without suspicion. Whoever hears the circumstances in which Mr Spencer acquired these embroideries would consider it perplexing that such important and valuable items should have been removed from the home of a person who was not able to manage her own affairs, without any proper assessment, payment or documentation.
- In April 2009 the Claimant issued proceedings against the Defendant for conversion.
- Amended particulars of claim were served on about 18 May 2009.
- The defence and counterclaim were served on 14 July 2009.
- On 8 February 2010 the Defendant issued notices under CPR rule 19.5A (2) against possible Claimants to the embroideries: the Attorney General (on the basis, I was told, that Judy Keele may have died domiciled in England without next of kin); the New York Public Administrator (on the basis that Mrs Keele may have died domiciled in New York without next of kin) and Irene Pollmer who appears to be Ms Keele's next of kin. She was identified by the heir hunting organisation, Kin. They were made aware of the existence of the estate by the Defendant.
- On 23rd April 2010 debarring orders were made against the Attorney General and the New York Public Administrator.
- Ms Pollmer instructed Farrers solicitors and brought Part 20 proceedings against the Claimant and Defendant. Ms Pollmer served notice of discontinuance of the Part 20 claim on 20th October 2010, i.e. just before the trial began. The Defendant sought a barring order against Ms Pollmer, pursuant to CPR 19.5 (5)(3). I was told that she has claimed the $1m currently standing to the account of the estate of Judy Keele in New York and proposes to pursue the Attorneys in New York for breach of fiduciary duty in relation to the sale at an undervalue of the textiles and other items from the flat.
- On the first morning of the trial the Claimant made an application (which was opposed) to add to his claim a claim for aggravated damages. I permitted the amendment and gave leave to the Defendant to produce a further witness statement to deal with the new claim. A statement from Mr Franses was produced under extreme pressure of time.
- I turn to the issues of law.
Was there a Contract?
If yes, was there an implied term that the Defendant was entitled to make inquiries into the Claimant's title?
- There was no contract. It follows that there was no implied term that the Defendant was entitled to make inquiries into the Claimant's title. Even had I found that the parties had entered into a contract I would not have found that such a term should be implied.
Discussion and Reasons
- The Defendant's case is pleaded thus at paragraph 6 (16) of the Defence and Counterclaim. "In the premises, in or about February 2004 the Claimant and the Defendant entered into an agreement ("The Embroideries Agreement") that was partly oral and partly written, being partly contained in and/or evidenced by the aforementioned letters of 10 October and 29 November [this should be October] 2003 and 23 January, 28 January, 30 January (both the original copy and the copy bearing Mr Franses handwritten amendments from 5 February 2009 [this should be 2004] and 18 February 2004".
- In oral argument, in answer to a question from me, Mr Legge submitted that in fact the contract was an oral contract evidenced in writing. I have considered the matter both ways.
- Mr McLinden submits there was no contract. He reminded me that the Defendant had put its case in a number of different ways during the course of meetings and correspondence before this litigation began, asserting different agreements with different terms at different times. He is right about that. I am not going to rehearse the various assertions. My focus is on the contract contended for at trial. The fact that the Defendant or his advisers may have sought to rely on other agreements does not assist on this issue; either there was a contract or there was not.
- In the light of my findings of fact, the conclusion that there was no contract is inevitable. The parties simply never reached agreement. No authorities are necessary. It is a matter of first principles.
- Even if Mr Spencer had agreed to the terms set out in the letter of 18th February (which I find he did not) his earlier signature was to the unamended agreement. Thus there was never an effective start date for the contract.
- It follows that there was no implied term. I note that although the term was pleaded Mr Legge did not address it in either his skeleton arguments or oral submissions, preferring to concentrate on the common law right to investigate title to which I shall turn later. That was a sensible approach. There was, in my judgment, simply no basis upon which it can be said that the term contended for could be implied.
Is the Defendant entitled to a Quantum Meruit? Yes
In what sum?
£79,305 plus VAT
Discussion and Reasons
- Both parties referred me to the extremely helpful review and analysis of the relevant authorities conducted by Nicholas Strauss QC sitting as a Deputy High Court Judge in Countrywide Communications Ltd v ICL Pathway Ltd  CLC 324. It was endorsed by Christopher Clarke J in MSM Consulting Ltd v United Republic of Tanzania  EWHC 121 (QB) and by Beatson J in Benourad v Compass group plc  EWHC 1882 (QB). Mr Strauss identifies the following principles:
"The first is whether the services were of a kind which would normally be given free of charge. Secondly, the terms in which the request to perform the services was made may be important in establishing the extent of the risk (if any) which the Plaintiffs may fairly be said to have taken that such services would in the end be unrecompensed. What may be important here is whether the parties are simply negotiating, expressly or impliedly 'subject to contract', or whether one party has given some kind of assurance or indication that he will not withdraw, or that he will not withdraw except in certain circumstances. Thirdly, the nature of the benefit which has resulted to the Defendants is important and in particular whether such benefit is real (either 'realised' or 'realisable') or a fiction, in the sense of Traynor CJ's dictum. (This is a reference to Traynor CJ's judgment in Coleman Engineering Co v North American Aviation 420P 2d 713, 729 (1966) where he said that 'If in fact the performance of services has conferred no benefit on the person requesting them, it is pure fiction to base restitution on a benefit conferred' but that recompense in respect of such services is based on the performing party's justified reliance on the request of the other.) Plainly a court will be more inclined to impose an obligation to pay for a real benefit, since otherwise the abortive negotiations will leave the Defendant with a windfall and the Plaintiff out of pocket. However the judgment of Denny LJ in the Brewer Street case [ 1QB 428] suggests that the performance of services requested may of itself suffice [to] amount to a benefit or enrichment. Fourthly, what may often be decisive are the circumstances in which the anticipated contract does not materialise and in particular whether they can be said to involve 'fault' on the part of the Defendant, or (perhaps of more relevance) to be outside the scope of the risk undertaken by the Plaintiff at the outset. I agree … that the law should be flexible in this area, and the weight to be given to each of these factors may vary from case to case."
- Mr Legge's primary submission was that I should follow the approach of the House of Lords in Way v Latilla  3 All ER 759. But in that case the House of Lords found that there was a contract of employment which entitled the appellant to reasonable remuneration. That was not the situation here. In any event, whichever approach I adopt I reach the same conclusion.
- It is plain from my findings of fact that from June 2003 to January 2004 Mr Franses, on behalf of the defendant company believed that he had an oral agreement with the Claimant whereby (in broad terms) the Defendant would research the embroideries, introduce them to the market and sell them. The Defendant would receive commission of 30%. Mr Franses believed that a written contract would be prepared and signed by the parties. From February 2004 Mr Franses believed he had a contract with Mr Spencer. Mr Spencer knew that Mr Franses believed that, although he was confident that there was no contract. I note that he described the position in the email to his adviser in June 2004 as "almost a done deal".
- Throughout the period June 2003 to March 2005 the Defendant (via Mr Franses and employees) expended significant time and money working on the embroideries; their composition, their likely history. Mr Spencer, as I have found, knew that and was content to encourage Mr Franses to carry out the work. Even on his own case he reassured Mr Franses that the Defendant would "get the deal".
- Mr Spencer asserted (wrongly) in the memorandum dated May 2004 that he had had no benefit from the work. That assertion was repeated in the submissions. I reject it. The benefit is very significant. It allowed Mr McLinden to describe the embroideries in opening as "unique and valuable antiquities", without fear of contradiction. He could not have done that without Mr Franses's work. As a minimum, Mr Spencer no longer had the same disadvantage as he had in June 2003. The rehabilitation of the embroideries had begun. They had gone from being Victorian to being recognised as medieval and potentially of great importance. They were recognised as such by international experts in the field. Their value had gone from a few thousand pounds to (as a minimum) several hundred thousand pounds. The Claimant submits that Mr Franses has been unreliable on the subject of value. I disagree. He has written a number of letters for different purposes but he has always made it clear that a great deal of detailed research is required in order correctly to identify the embroideries and therefore to realise what he regards as their potential value which could well be in seven figures. It is unreal to suggest that the embroideries are worth no more now than in March 2003. They are, and the reason for that is the work done on them by the Defendant. That the Claimant should take that benefit without paying for the work that had been done would be unconscionable.
- The Claimant knew very well that the Defendant was expecting to be paid for the services he was providing (see e.g. the exchanges in January and May 2004).
- Mr Franses's reputation brings with it a unique and important benefit, that is why Mr Spencer wanted him to do the work.
- By way of completeness I add that Mr Franses indicated that the Defendant would produce a report, even though there is no compulsion upon it to do so.
- Mr McLinden submits further that the Defendant is not entitled to any of its quantum meruit because Mr Spencer was not informed of the cost of the work being done. That is true but Mr Franses did not know that he was working on the basis of a quantum meruit; he believed he had a contract. The Claimant had gone to the Defendant precisely because Mr Franses was a leading expert and he wanted (and got) the benefit of that. Mr Franses kept him up to date with the work he was doing and why he was doing it. Thus Mr Spencer knew what was being done, and where it was being done, and that Mr Franses was incurring expenses in the belief that he would be paid; he was plainly sufficiently informed.
- I am satisfied that the Defendant is entitled to be remunerated on the basis of a quantum meruit.
- The Claimant says that the figures provided by the Defendant are unreliable. I reject that. It is not surprising that Mr Franses did not keep detailed notes of the number of hours he was working, and upon what. He believed he had a contract for a percentage commission, so precise hours mattered not. It was important to get the work done to put the embroideries in a position where they could be offered for sale with an accurate history. He carried out a reconstruction to assess precisely how many hours he had spent and on what tasks. That accompanied the Defendant's letter of 11th February 2010.
Rate of Remuneration
- Mr Franses is a leading expert, as the Claimant recognises. His contacts are excellent. His reputation is high. His experience is enormous. All of this leads me to the view that an average hourly rate of £300 for his time over the period is reasonable, and a rate of £100 per hour for the assistant. No other rate was sensibly suggested.
Number of hours worked
- These are set out in detailed schedules which I do not repeat. The total number of hours claimed is 242 for him, together with his assistant's time (58 hours). In evidence Mr Franses said that he had forgotten to include some research on a particular subject (John of Gaunt) and he had not charged for that time. He said, and I accept, that this represented at least 25 hours work. Having observed Mr Franses over many days I have no difficulty in accepting that his record keeping does not measure up to his enthusiasm for research.
- Mr McLinden cross examined him on a number of topics but he made little progress. Mr Franses' knowledge of the tapestries and the work he has done is encyclopaedic. The more he was asked about what he had done the clearer it became that he had approached the task with intelligence, interest and enormous diligence in the context of his very significant knowledge and expertise. It was put to Mr Franses that he could have read some research papers more quickly but in reality there was no proper basis upon which the hours spent by him and his assistant could properly be challenged.
- I reject the suggestion that the sum was calculated by working out what the commission would have been on a sale and working backwards. I accept that Mr Franses has constructed his bill by reference to his diaries and other documents. He has done his best to work out how many hours he spent, and has identified what he was doing. I am confident that where he has erred his error is in favour of the Claimant, not the Defendant.
- I find therefore that the Defendant is entitled to the sum of £80,750.00 + VAT by way of quantum meruit. If there are errors in the calculation I can be told so that they may be corrected before the judgment is handed down.
The Defendant was entitled to assert a lien over the embroideries.
Discussion and Reasons
- It is the Defendant's case that it had (and has) a lien over the embroideries for the sums owed to it by the Claimant. Mr Legge submits "it is trite law that SFL is entitled to retain the items until its charges are paid (Halsbury's Laws vol 68 Lien para 841)."
- In opening Mr McLinden attacked the lien on the basis of
ii) failure to provide adequate information in support of the lien and
iii) retention of goods on grounds other than a lien.
In closing he submitted that the facts of this case could not in law give rise to a lien in any event. He submitted that the assertion that the Defendant's entitlement to a lien was trite law was simply wrong.
- Mr Legge referred me to Halsbury's Laws. The current relevant paragraph reads: "It is a common law principle that if a person has an article delivered to him on which he has to do some work and to bestow trouble or expense, he has a right to retain it until his charge is paid. Thus, the artificer to whom goods are delivered for the purpose of being worked up, the farrier by whose skill an animal is cured of disease and the horse breaker by whose skill an animal is rendered manageable, have liens on the chattels for their charges. Similarly a solicitor has a lien over his client's papers for recovery of fees as well as a statutory power to take security for his costs or to apply for a charging order under the Solicitors Act 1974. The lien applies only to the chattel produced or on which the work is done". That is not in dispute.
- Mr McLinden submitted that as a starting point physical improvement of the chattel is required. He relied on the statement in Palmer on Bailment (3rd ed, 2009) at 15-077: "It is established that for a possessory lien to take effect the labour or skill of the artificer must improve the condition of the chattel". He also submitted that a lien attaches where the work done and the object upon which it is done are indivisible. Where the physical condition is improved, the benefit is obviously and immediately transferable.
- It is not in dispute that when the embroideries were given to the Defendant they were considered to be of relatively low value. I have found that by mid 2003 Mr Franses and Mr Spencer were confident that they were medieval, and possibly of great cultural importance. Further work consolidated that progress. Thus although they look exactly as they did in June 2003 the Defendant's work had begun to reveal their true nature and importance.
- Mr Legge referred me to the decision in Hollis v Claridge (1814) 4 Taunton 807. This was an action of trover for title deeds. A lien was being relied on as against the owner of the title deeds who had given them to a third party (Basson, who was considering granting the owner an annuity provided he was satisfied as to security) so that he might enquire into title. Basson gave them to a conveyancer who was then to prepare the securities. The conveyancer informed Basson of matters adverse to the character of the owner of the title deeds. Basson decided not to continue and told the conveyancer to present a bill for the work he had done to the owner of the title deeds. The conveyancer did so and claimed a lien over the deeds. The conveyancer failed. Heath J said "We are all clearly of opinion that the Defendant cannot support his lien as against the Plaintiff. It is not true that the Plaintiff gave these papers to Basson to be submitted to the Defendant, he gave them to Basson that he might look at them himself, or take the opinion of others, as he would, but that gives the Defendant no lien". Chamber J agreed. Gibbs J went further and it is upon this that Mr Legge relies. He said:
"Suppose one having a diamond, offers it to another for sale for 100l and gives it him to examine, and he takes it to a jeweller, who weighs and values it; he refuses to purchase, and being asked for it again, he says, the jeweller, must be first paid for the valuation; as between the jeweller and purchaser, the jeweller has a lien; but as against the lender, he has no right to retain the jewel; it seems to me that this case is similar". Mr Legge says this is authority for the proposition that a valuer is entitled to a lien over a jewel if the owner refuses to pay for the valuation. The jewel has not intrinsically changed, but its value has been enhanced enormously by the valuation. So too with the embroideries.
- Mr McLinden took me to Rolfe B's judgment in Steadman v Hockley (1846) 15 Meeson and Welsby 553; 153 E.R. 969 where Gibbs J's judgment was considered. Rolfe B doubted his analysis:
"I rather doubt whether some of the cases which have been mentioned, as that of weighing the jewel, are not a straining of the rule; if they are sound, it must be upon the principle stated by my Lord."
- The principle to which Rolfe B referred was enunciated by Pollock CB thus:
"With respect to the cases which have been referred to, of the jeweller weighing the diamond, and of the measuring of corn, by which the value of the thing is not apparently increased, the answer is that the labour is bestowed upon the article itself. If a man has a lien for carrying corn, why should he not also for letting it pass through any other process which makes it more valuable, or appears to do so? An ingot of gold is more valuable when it has been assayed by the standard; it is more likely then to find a purchaser, its quality having been ascertained: so also is an article the quantity of which has been ascertained. These cases, therefore, fall within the rule that the lien exists wherever labour has been bestowed upon the article itself; here all that appears is that something has been done "with respect of" it: that does not create a lien."
Accordingly for that principle to apply to the jewel and the gold it must be that the valuation or assessment is considered to be bestowed upon the article even though it makes no physical difference to it.
- In Steadman a conveyancer contended that he was entitled to a lien for his charges upon deeds delivered to him "with and in respect of" which he did certain business for the owner of the deeds. I note that the conveyancer did not do any work on the deeds by which their value was increased. It was not pleaded (see the interjection of Alderson J) "that the Defendant employed his labour on this deed; that he has read it, or written an opinion on it; in which case he would redeliver it, with the opinion upon it". Alderson J found "a lien at common law exists only in respect of articles on which the labour of the bailee has been expended; but it does not appear by this plea that any labour has been expended on this article."
- In Hatton v Car Maintenance Company Ltd  1 Ch. 621 the fact that labour had been expended in maintaining the article was not enough to give rise to a lien for charges. What was required was improvement in the condition of the article, in that case, a car. I am not really assisted by that case where the lien sought was in respect of a lump sum to cover a number of sums owed in respect of wages, supply of petrol and oil and repairs.
- Mr McLinden approached improvement to value thus: "However in cases of alleged improvement to value, the improvement is dependent on the person who has performed the service standing by the work they have done, and they often have it in their gift to remove the benefit. If the hypothetical jeweller, for example, subsequently stated that his opinion may have been mistaken, or at least that he could not be sure, the claimed 'improvement' to the chattel evaporates."
- In light of the principles to which I have referred the issues for me are:-
i) Whether, as at March 2009 the embroideries had increased in value;
ii) Whether an increase in value equates to improvement;
iii) If yes, whether that improvement was due to work carried out upon them by the Defendant or whether it was due to work carried out in respect of them, which could be severed from the embroideries themselves.
- As to (i) the answer is plainly yes for the reasons I have set out in earlier sections of this judgment.
- As to (ii) in my judgment where, as here, the increase in value is both financial and cultural it is inescapable that the embroideries have been improved.
- As to (iii) Mr Franses had physically worked on the embroideries in inspecting and analysing them macro and microscopically. In addition he had showed them to other experts who did the same thing with the benefit of significant expertise. The expertise was added to the physical examination.
- The embroideries and what is known about them are (and as of 2005 were) effectively indivisible; the Defendant could not return the embroideries without giving Mr Spencer the benefit of the work he had done. It is inconceivable that Mr Franses would have taken or would take the course of the hypothetical jeweller in Mr McLinden's example and, if asked, deny his previously expressed opinion that they are medieval. He may, I suppose, have refused to speak about them but that would not affect the letters he had written which were in Mr Spencer's possession, nor would it affect the views of those other experts to whom he had spoken.
- The embroideries will never again be considered 19th century or stage props.
- In my judgment, subject to Mr McLinden's other arguments, the Defendant was entitled to a lien over the embroideries.
- £42,800 was tendered on 6 March 2009. That was not sufficient to discharge the lien. I have already found that there was no compromise at this sum in any event. I need say no more about this argument.
Failure to provide adequate information in support of the lien
- The Claimant submits that the Defendant refused to provide the Claimant with adequate particulars from which he could meaningfully calculate the value of any lien.
- The law is clear – see Albemarle Supply co v Hind & Co.  1 KB 307 at 318 per Scrutton LJ:
"A person claiming a lien must either claim it for a definite amount, or give the owner particulars from which he himself can calculate the amount for which a lien is due. The owner must then in the absence of express agreement tender an amount covering the lien really existing. If he does not, unless excused, he has no answer to a claim of lien. He may be excused from tendering (1.) if he has no knowledge or means of knowledge of the right amount; (2.) if the person claiming the lien for a wrong cause or amount makes it clear that he will not release the goods unless his full claim is satisfied, and that claim is wrongful. The fact that the claim is made for more than the right amount does not matter unless the Claimant gives no particulars from which the right amount can be calculated, or makes it clear that he insists on the full amount of the right claimed: see Scarfe v. Morgan ; Dirks v. Richards; Huth & Co. v. Lamport, per Lord Esher; and Rumsey v. North Eastern Ry., per Erle C.J. and Willes J."
- In this case particulars of the amount claimed were set out clearly by Keelys in their letter of 2nd August 2005, as was the method used to calculate it. The particulars were plainly adequate. They do not contain the calculation but the essential information was all there. As I have said already in the context of the quantum meruit claim the Defendant was carrying out the work it expected to be paid on a commission basis and so therefore did not keep time sheets or a detailed record of work at the time but the Claimant could have been in no doubt as to what the Defendant said was owed.
- The Claimant made much of the fact that the underlying (reconstructed) documents were not provided until after a Part 18 Request. That matters not; in the event they simply demonstrate that the figures in the 2005 letter were correct, as Mr Franses had said they were.
It follows that the Claimant is not excused from making an appropriate tender for lack of particulars.
Retention on grounds other than a lien
- This is a two fold argument:
i) That there has been waiver of the lien. The embroideries are being retained and would always have been retained because of the New York injunction.
ii) The embroideries were being retained for some improper collateral purpose.
- I reject (ii). There was no bad faith. There was no improper purpose.
- As to (i) the Claimant relies on the following excerpt from the Defendant's letter of 5 March 2009, in particular the section in bold:
"Our client has conducted certain enquiries of its own more recently with regard to the current provenance of the textiles, and again this has only served to increase their concerns, such that our client's own fees have ceased to be the primary issue for them at this stage."
- It is submitted that this amounts to a waiver of the lien. It comes nowhere near that. It simply identifies the current primary concern. Nothing is to be gained from a review of the authorities in respect of waiver. Nowhere do the Defendant's words or actions begin to amount to a waiver of the lien.
- The Claimant further submits that the Defendant's position is that it would not give up the embroideries even if the Claimant had paid the full amount of the lien. Mr McLinden relies on the Defendant's skeleton which says
"Now that Miss Pollmer's claim has been settled, SFL has indicated that it is willing to deliver up the embroideries to IS subject to satisfaction of its lien and discharge of the New York injunction currently restraining SFL from disposing of the items"
- I do not accept that it therefore follows that the lien had in some way been waived. In the event the question was not tested in practice as a sufficient sum was not paid and the defendant was not asked about what he would have done in that situation. Having seen the draft judgment in which this paragraph ended after the second sentence Mr McLinden invited me to make a specific finding as to what the Defendant would have done had a sufficient sum been paid. Mr Legge submitted that in that situation the defendant would have been advised to interplead. That may well be so but it is absolutely plain from the tenor of the correspondence on the issue of the quantum of the Defendant's charges that such a situation would never have arisen. I therefore decline Mr McLinden's invitation to decide what would have happened if it had.
- Accordingly I find that there has been no conversion.
- The other issues do not in practice arise, but given the time and effort that was expended in evidence and argument upon them I set out my conclusions.
Did the Defendant have a common law right to enquire as to title?
The Defendant did not have a common law right to enquire as to title. Even if it did, the right was not exercised within a reasonable time.
Discussion and Reasons
- It was Mr McLinden's primary submission in closing that a bailee has no right to make reasonable inquiries as to title where the immediate Claimant is the bailor of the possessor. He refined that submission to include the following: "at least in the absence of a positive demand from a third party." The submission was accompanied by a comprehensive and impressive analysis of the authorities and writings on bailment, a subject I have not found easy.
- The primary submission took Mr. Legge by surprise since it represented a shift from the Claimant's position in opening. I allowed Mr Legge to reply at some length in oral submissions. It was the Defendant's case, essentially, that because as at early 2009 the Defendant was on notice as to the rights of third parties it had a common law right to enquire as to title, subject to a requirement that the right should be exercised within a reasonable period. Mr Legge submitted that the Defendant had exercised its right accordingly in early 2009.
- Mr McLinden's secondary submission was that if the Defendant had a right to make enquiries as to title the right had to be exercised in good faith and within a reasonable time (see Tavoulareas v Lau  EWCA Civ 474). The Defendant, he submitted, was not acting in good faith and failed to exercise its right in anything like a reasonable time.
- There are thus 3 questions: first, is there a common law right? If there is did the Defendant exercise it in good faith and did he exercise within a reasonable time? As is plain from the rest of my judgment I am satisfied that the Defendant was acting in good faith. I turn then to the other two questions.
Common law right
- In closing submissions Mr McLinden went back to first principles. He relied on the following statement of the position in Bridge Personal Property Law (3 ed) at 29:
"Commerce...would become paralysed if the care and deliberation taken when investigating title to land were also taken when chattels are bought and sold. This is why the owner of a chattel may be described as the person with the best possessory interest in it. The affinity between possession and ownership has long been recognized by the law."
- Mr McLinden reminded me of the decision of the Court of Appeal in Costello v Chief Constable of Derbyshire Constabulary  1 WLR 1437 where the police were obliged to return to a car thief a stolen car because the true owner had not been found and the thief had greater title to the car than anyone but the true owner In giving the judgment of the Court Lightman J said at :
In my view on a review of the authorities, (save so far as legislation otherwise provides) as a matter of principle and authority possession means the same thing and is entitled to the same legal protection whether or not it has been obtained lawfully or by theft or by other unlawful means. It vests in the possessor a possessory title which is good against the world save as against anyone setting up or claiming under a better title. In the case of a theft the title is frail, and of likely limited value (see e.g. Rowland v Divall  2 KB 500,  All ER Rep 270), but none the less remains a title to which the law affords protection.
- Mr Legge did not disagree with the statement in Bridge on the judgment in Costello but he submits that the law recognises the right to enquire in some situations.
- As invited by Mr McLinden I adopt as my starting point the opinion of Lord Diplock in China Pacific S A v Food Corporation of India (The Winson)  AC 939 "It follows from the existence of the legal relationship of bailor and bailee as a matter of general principle of the law of bailment …that as between the cargo owner and the salvors the latter as bailees were estopped from denying the title to the goods of the former as their bailor, including as an incident of that title its right to possession." – Lord Diplock described this as "hornbook law".
- Both parties took me to the decision of the House of Lords in Hollins v Fowler (1875) L.R.7H.L. 757, Mr McLinden relies on the following at 765:
'If the refusal is by a person who does not know the Plaintiff's title, and having a bona fide doubt as to the title to the goods, detains them for a reasonable time, for clearing up that doubt, it is not a conversion'. In this case the Defendant knew the Claimant was the bailor, therefore he could not say he did not know the Claimant's title. But Mr Legge points to the speech of Blackburn J in the same case:
"I cannot find it anywhere distinctly laid down, but I submit to your Lordships that on principle, one who deals with goods at the request of the person who has the actual custody of them in the bona fide belief that the custodier is the true owner, or has the authority of the true owner, should be excused for what he does if the act is of such a nature as would be excused if done by the authority of the person in possession". There is force in Mr Legge's argument that the reference to a "bona fide belief" implies that in the absence of such a belief different consequences may flow. Accordingly, Mr Legge submits there cannot be an absolute prohibition on a bailee making inquiries as to the bailor's title.
- I was taken by both parties to a number of cases where the courts have decided that a bailee is entitled to make inquiries into the title of the person seeking to recover them. As Mr McLinden pointed out in each case the person seeking to recover the item from the bailee was not the bailor himself. I adopt Mr McLinden's analysis of those authorities which was as follows.
- In Vaughan v Watt 151 E.R. 506; (1840) 6 M. & W. 492, a pawnbroker received goods from A and issued a receipt (which would allow their recovery on payment of the appropriate charge). A then returned on two separate occasions to the pawnbroker and obtained duplicate copies of the receipt, claiming that she had lost the original and first copy respectively. A third party, B (who was A's husband but did not identify himself as so), subsequently appeared with a copy of receipt, tendered the amount owing and demanded the goods. The pawnbroker refused to release the goods on the basis that he was unsure whether B was entitled to the goods in the circumstances. He was entitled to do so.
- In Pillott v Wilkinson 159 E.R. 564; (1864) 3 Hurl. & C. 345 C had bought goods in the possession of a warehouse owner from a third party vendor. The warehouse owner had been told by the sheriff not to dispose of any of the third party vendor's goods so that he could satisfy debts owed by the vendor. When C demanded the goods that were stored at the warehouse, D who was unsure if he was allowed to release them asked for time to consult his Attorney. He was entitled to do so.
- In Clayton v Le Roy  2 KB 1031 a watch that had been stolen from C and subsequently purchased by B was sent to the Defendant jewellers to be valued. D recognised the watch as one that C had said had been stolen from him, and he contacted C and B to ask them what they wanted him to do. A representative from C's solicitors went to D and demanded that D hand the watch over. D refused. The majority in the Court of Appeal held that D was entitled to do this, because he was entitled to take reasonable time to find out whether C was in fact entitled to claim the watch. Fletcher Moulton LJ said at 1051:
'The authorities show clearly, as one would expect, that a man does not act unlawfully in refusing to deliver up property immediately upon demand made. He is entitled to take adequate time to inquire into the rights of the Claimant.'
- Vaughan Williams LJ said at 1055
'A man may not assert any other person's title, but he may nevertheless do an act which is inconsistent with the dominion of the true owner. Very often such an act may be justified, as, for instance, if the thing is detained for the purpose of making a reasonable inquiry about the title.'
- The majority emphasised that the Defendant had been entitled to retain the watch because:
'The man sent to demand the watch was a solicitor's clerk, a stranger to the Defendant, who produced no written authority to receive it. I cannot conceive any one in the position of the Defendant being so foolish as to hand over a watch to a man whom he had never seen before and who presented no credentials in writing' (per Farwell LJ, at 1053) and
'the question as to title was one which might most properly be a subject for inquiry; the moment had not then arrived for the Defendant's final decision' (per Fletcher Moulton LJ, at 1052).
- Both parties sought to derive support from the writings of Professor Palmer (who pleaded the case on behalf of the Defendant) - see Palmer on Bailment (3rd Ed 2009). Both were able to do so because Professor Palmer sets out the arguments, and identifies the dilemmas and difficulties on both sides. I note the following at 1-085:
Where the possessor was already the bailee of the Claimant, and has therefore ostensibly undertaken not to deny the Claimant's title, it is arguably in conflict with that undertaking for the possessor to insist on delaying the return of the chattel to the Claimant until the possessor has had a reasonable period in which to investigate the Claimant-bailor's title. If the bailee is forbidden to contest his bailor's title in any event, it would seem otiose and contrary to the terms of the bailment, if not downright mischievous, to allow him time to investigate that title... Arguably a distinction must be drawn for this purpose between a bailee who receives a positive demand from a third party (who should be entitled to a reasonable time for inquiry following the Claimant-bailor's demand for the return of the goods) and a bailee who receives no positive demand but merely suspects the existence of some ulterior interest (who should not be entitled to a reasonable time for inquiry but should comply immediately with a demand that he return the goods to his bailor).
- Alternatively, Professor Palmer argues, since the bailee can invoke Section 8 of the Torts (Interference with Goods) Act 1977 he does not need the privilege of reasonable inquiry. Mr McLinden submits that this is correct. The proper course of the Defendant was to plead rule 19.5(a), as it eventually did.
- Professor Palmer's helpful and erudite text identifies the problems. It does not however answer the questions in this case.
- It was Mr Legge's submission that in considering whether or not the Defendant bailee was entitled to investigate the title of the Claimant bailor the court should have regard to the Defendant's understanding of its potential exposure to a claim in conversion or negligence to the true owner. I am not sure that adds anything to his proposition that where the Defendant has notice of the true owner's title he is entitled to make enquiries, the proposition he derives from Hollins v Fowler. The reason for the enquiries is to protect the bailee against a potential claim from the true owner. The desire to protect its reputation would not entitle the Defendant to make enquiries – see Howard E Perry & Co Ltd v British Railway Board  1 WLR 1375, 1381.
- Although Mr Legge suggests that constructive notice would suffice the authorities to which he refers me suggest that what was required in the sale cases is actual notice. In Marcq Christie Manson and Woods Ltd  4 All ER 1005 notice meant actual knowledge of facts indicating that the bailor was not in fact the owner. In the absence of notice the auctioneer bailee was under no duty to make inquiries as to title. At first instance Jack J stated that it was for the true owner to establish that the bailee had notice.
- Mr Legge referred me to two other first instance decisions involving auctioneers, Kurtha v Marks  EWHC 336 (at para 140) and De Preval v Adrian Alan (unreported) 24.1.97. I was not much assisted by those authorities, in both of which the auctioneer had been engaged in the sale of the items to a third party. In this case there was no question of a sale or other disposal to a third party. The man with possessory title simply wanted his property back.
- As to notice Mr Legge relies on the position as the Defendant knew it in March 2009. He points to the following:-
i) There was no bill of sale.
ii) The "Piers Haussen" receipt showed an entity with better title than the Claimant.
iii) Mr Spencer's account of finding the Henry Moore bronze was inconsistent with the article in the New York Daily News article and with most of the papers filed in the New York Court, all of which attributed the find to Mrs McGrath of whom the Defendant had not previously heard.
iv) The receipt
a) was not signed by both Guardians
b) did not describe the items. Mr Legge submits that even without any question of fabrication, the receipt left open the possibility that the sale would be challenged by Tedeschi, the second Guardian. It relied on the Claimant to establish that it applied to the embroideries
c) The fact that the signature of John Nevin on the Nevin receipt did not include his middle name or initial (which (put at its lowest) he appears nearly always to have used) raised the possibility that the signature was forged.
v) Charlie Hill indicated that the Berkeley Safe Deposit letter raised grounds for suspicion. The inference I am asked to draw from that is, I think, that the embroideries may have been in the safe deposit box and not in the flat at all. In the fevered atmosphere of early March 2009 that may have seemed likely. It is not an inference I have drawn.
- To those concerns I add the fact that the Claimant once again refused to provide an indemnity to the Defendant in respect of the embroideries. I have no doubt that this troubled Mr Franses.
- I remind myself that as at January 2009, had its charges been paid the Defendant would have returned the embroideries notwithstanding any doubts it had about title.
- I am not satisfied that a bailee who receives a demand from a bailor for the return of his goods can never have a right to a reasonable period to inquire into title when he is on notice that the bailor does not have good title. However I am not persuaded that the Defendant had that right in this case. If I am wrong about that I am satisfied that the Defendant did not exercise his right within a reasonable time.
I draw together the following matters:-
i) The Piers Haussen Trust receipt constituted clear actual notice that Mr Spencer may not be the owner of the embroideries. That is why Ms Swirski was so concerned to read it in February 2009. It was that document that caused the Defendant to begin the inquiries in New York, as Mr Franses says in his third witness statement. I am satisfied that is correct. None of the other private doubts and concerns were sufficient to cause the Defendant to do anything to research title. That is why it was prepared to return the embroideries as late as January 2009.
ii) The Claimant handed over the Piers Haussen receipt in 2003. He had his own reasons for doing so, but the issue of title was clear on the face of the document. Whilst I accept Mr Franses did not pay any attention to it that was not as a result of anything the Claimant did.
iii) Had the Google search been carried out in 2003 (which it could have been) it would have revealed the New York Daily News Article in the same way as the search in 2009. All the other New York information would then have been instantly available, as it was in 2009. The Defendant is not entitled in my judgment to rely on the cumulative effect in 2009 of lots of discoveries when all of them could have been made years earlier.
iv) Whilst the refusal of the indemnity in 2009 further worried Mr Franses, an indemnity had been refused on several occasions over several years.
v) The Claimant had sought the return of the embroideries on more than one occasion before 2005 so the Defendant had been alerted to that possibility.
- My analysis of the authorities leads me to conclude that the principle underpinning such right as the authorities may allow is an acceptance that a bailee should have a reasonable opportunity to protect himself from a claim by the rightful owner.
- In all of the authorities where a bailee has been permitted to rely on the right to make reasonable inquiries right is said to arise when the demand is made and time runs from that date. In this case the demand relied on by the Claimant was in March 2009, and the Defendant submits that the period runs from that date, although the Defendant has acknowledged throughout that the first demand was 2005. In none of the reported cases where a right has been found to exist has the period before inquiry been prolonged, still less 5 ½ years.
- In this case the length of time the embroideries were in the Defendant's custody coupled with what the Defendant knew throughout the period gave the Defendant ample opportunity to inquire into the Claimant's title long before the demand in March 2009. Inquiry during that period would have led to the Defendant obtaining much earlier the information it obtained in 2009. Those facts taken in conjunction with the availability of Rule 19.5a satisfy me that the underpinning principle justifying the right that I have set out in paragraph 301 above has no application here. Indeed, on closer analysis I consider this to be the ratio of the decision in Tavoulareas v Lau  EWCA Civ 474 (see paragraph 39) although the Claimant relies on it as authority for the proposition that any inquiry should be carried out within a reasonable time.
- In the end it matters not; having spent many years making no inquiries, notwithstanding what it knew, the Defendant had no right to start doing so in March 2009. Alternatively the requirement that the right be exercised within a reasonable time is of no avail to the Defendant; when 51/2 years had already elapsed during which sufficient information to put it on inquiry was known to it, and all relevant information could have been known to it, no further time was reasonable. It comes to the same thing.
- I should add that Mr Legge submitted that the "reasonable time" for investigation cannot have started while either the Defendant had a lien or it reasonably assumed that it had a lien. I reject that submission. The purpose of a lien is to protect the financial interest of the bailee. It has nothing to do with bailor's title. It is always liable to be discharged by the tender of the sum owed. It would not be reasonable in my judgment for a bailee to delay investigating title about which it had doubts until such time as a lien were discharged.
New York Injunction
- Given my earlier findings this is now of little importance. Like every other issue in this case it was bitterly contested and I shall make some, short, observations upon it.
- Since March 2009 it has been the Defendant's case that it will give up the embroideries upon satisfaction of its lien and upon discharge of the New York injunction.
- When dealing with the effect of the New York injunction, in his closing written submissions Mr Legge submitted that in practice
i) the New York injunction should be viewed as the intimation of a claim to title by the New York Public Administrator, so that the Defendant was under no obligation to give up the embroideries while the injunction remained outstanding and
ii) given that the injunction is binding on the Defendant in New York, the Defendant was entitled to a reasonable time to discharge the injunction before making delivery of the items.
The position is analogous, he argued, to an employee being allowed time to check with his principal before giving up goods. He relies on Clerk & Lindsell at paragraph 17-25 and Alexander v Southey). There is no reason to think, he submits, that the New York court would have discharged the injunction while the estate's claim to the items (whether via the Public Administrator or Ms Pollmer) remained outstanding.
- Even if Mr Legge's characterisation of the proceedings is right (and I am not satisfied that it is) since (at latest) October of last year there has been no reason to think that the estate maintains a claim to the embroideries (see the procedural history). The focus of the next of kin is elsewhere.
Thus, even if the order could have been considered an intimation of a claim to title, that is no longer the case and it is not a proper basis upon which to refuse to return the embroideries now.
- If the Defendant is concerned about the Order it can apply to have it discharged. For what it is worth, I can see no basis upon which the continuation of the temporary restraining order against the Defendant by the New York Court could possibly be justified. The Public Administrator has had her opportunity to pursue proceedings in respect of the embroideries in London and has chosen not to do so. So has the next of kin. There are no proceedings concerning the embroideries themselves in New York.
- Mr McLinden submitted that the parties to these proceedings are domiciled in England. The embroideries are and were at all material times in England. England is forum conveniens for this dispute which is governed by English law. As at March 2009 any claims on behalf of Mrs Keele's estate to an interest in the embroideries could have been determined in this country. Indeed the Defendant clearly anticipated in its letter to the Public Administrator that consideration would be given to issuing proceedings in this country. All of that is correct. He submitted that the New York order was of no effect in this country (at any stage) and that to find otherwise would give it extra territorial effect. He relied on two decisions Fox v Henderson Investment Fund Ltd  2 Lloyd's Rep. 303, 305-306 and Libyan Arab Foreign Bank v Bankers Trust Co  1 Lloyd's Rep 259 to which he applied his customary rigorous analysis. Mr Legge submitted that the cases were distinguishable on a number of bases from the current one.
- Whilst I pay tribute to the diligence of counsel on this, as on every other issue in the case, it is unnecessary for me to conduct an analysis of the various propositions for which they contend in the light of my conclusions at paragraphs 301 - 305.
- The claim for damages was restricted to the cost of defending the New York proceedings. The cost was, it was submitted, a loss consequent on the conversion. Since I have found there was no conversion no damages are recoverable. I add that the only sum particularised (and of which there was evidence via an invoice) was the cost of Mr McGrath's fees at $38,000. Mr McLinden submitted that the matter could go off for an inquiry as to damages. Even had I found that there had been a conversion I would not have acceded to that submission. It was for the Claimant to prove his case at trial. Had I made any award it would not have exceeded the cost of Mr McGrath's fees.
- The claim for aggravated damages claim relied on the allegations of bad faith against the Defendant, all of which I have rejected.
- Accordingly I dismiss the claim and give judgment on the counterclaim. The mechanics of payment and delivery up are set out in the order of today's date.