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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> CIBC Mellon Trust Co & Anor v Wolfgang Otto Stolzenberg & Ors [2001] EWCA Civ 1222 (13 July 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1222.html Cite as: [2001] EWCA Civ 1222

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(Mr Nigel Davis QC: sitting as a Deputy Judge of the High Court)

		Royal Courts of Justice Strand London WC2 Friday, 13th July 2001

Friday, 13th July 2001

1. LORD JUSTICE PETER GIBSON: I will ask Sir Martin Nourse to give the first judgment.
2. SIR MARTIN NOURSE: This is an application by the claimant in the action for permission to appeal, with the appeal to follow if permission is granted, against a decision of Mr Nigel Davis QC, sitting as a deputy judge of the Chancery Division, given on 15th November 2000. The respondents to the application are Withers, a firm of London solicitors.
3. By an application made on 27th June 2000 the claimants sought an order that Withers file and serve an affidavit setting out the names and addresses of the individual or individuals who own and control the 18th defendant in the action, a Panamanian company called Yosaly Investments Incorporated ("Yosaly"). It also asked for Withers to be joined as the 52nd defendants. That part of the application duly succeeded, but nothing turns on that.
4. The learned deputy judge dismissed the application, being of the opinion that:

(1) the evidence on which the claimants relied in order to establish that Withers were in a position to provide the information sought was derived, directly or indirectly, from a without prejudice meeting between solicitors held on 19th May 1998;

(2)the information sought had been given to Withers in circumstances within the scope of legal professional privilege.

5. The judge refused the claimants permission to appeal. On 9th February 2001 permission was also refused by Chadwick LJ on consideration of the documents, on the ground that the judge was entitled to conclude as he did on each of the two points, so that an appeal had no real prospect of success.
6. The judge correctly described the background facts to the proceedings as being very complex. However, for present purposes they can be stated relatively briefly. It is enough to start by referring to a judgment in default of defence, with damages to be assessed, which was entered against Yosaly on 27th August 1999. The assessment took place on 7th December 1999, when Yosaly was adjudged liable to the claimants for damages assessed at over US$134 million and CAN$246 million in respect of claims for conspiracy to defraud. By a separate judgment against Yosaly a sum of more than $127 million US dollars was found due on the taking of an account in respect of a proprietary tracing claim.
7. Before that, in 1998, attempts had been made on behalf of the claimants to find out more about Yosaly. On 30th April 1998 their English solicitors, Llewelyn Zietman, wrote to Messrs Carnelutti, a firm of Italian lawyers with an office in London whom they believed had been closely involved, through a Mr Attolico, who was then no longer with the firm, in the management of the financial affairs of Yosaly. The letter asserted that the claimants were entitled to production of any documents in Carnelutti's possession, custody or power which would assist in the location and preservation of the money and assets claimed by the claimants from Yosaly. A request for such production having been made, the letter ended with a statement that in the event of Carnelutti being unwilling to provide the necessary copies, the claimants would have no alternative but to apply to the court for production.
8. So, as the judge observed, that letter was a clear intimation of threatened legal proceedings against Carnelutti. Although the evidence does not make this clear, it appears that shortly after the receipt of that letter by Carnelutti Llewelyn Zietman were contacted by Withers, who were not previously known by Llewelyn Zietman to be involved in the matter. In any event, on 19th May 1998 an important meeting took place between Mr Pugh of Llewelyn Zietman and Mr Scott of Withers.
9. On the following day Mr Pugh made a note of the meeting, the accuracy of which is in material respects accepted by Mr Scott and Withers. I read the opening part of the note:

"Meeting with Mr Scott of Withers in connection with Carnelutti. Mr Scott asked if we could speak off the record.

He indicated that, speaking hypothetically, if he and his clients were able to show us that the funds transferred by Yosaly were a genuine payment for interest and not associated with Mr Gambazzi, would we agree to keep his client, the ultimate beneficiary of the Defendant, confidential.

I asked him to confirm on whose behalf he was instructed. He indicated that he was instructed by Carnelutti but also on behalf of the ultimate beneficiary of Yosaly. Carnelutti had acted for the ultimate beneficiary in connection with its investment in the Castor Group."

10. By way of explanation, I should state, first, that Mr Gambazzi, a lawyer, and other members of his firm were the directors of Yosaly and, secondly, that the Castor Group was the group of companies in which it is alleged that the misapplied funds of the claimants were invested.
11. In his first witness statement Mr Scott has said that his recollection is that the meeting was stated to be without prejudice as well as off the record. That seems very possible. But it does not matter whether Mr Scott's recollection in this respect is accurate or not. It is clear to me that it would be enough to make the meeting without prejudice for it to be stated to be off the record. Indeed, as will appear from his own evidence, Mr Pugh has said that negotiations between Llewelyn Zietman and Withers from May to October 1998 were conducted without prejudice. Mr Philip Marshall, for the claimants, did not contend before the judge that the meeting as such was not without prejudice, but he claimed that the material statements made by Mr Scott in relation to the beneficial owner of Yosaly were not made without prejudice. That distinction, which involves a departure from the principle stated by Robert Walker LJ in Unilever Plc v The Proctor & Gamble Company [2000] 1 WLR 2436 at 2448, is not now pressed by Mr Marshall. I should add that Mr Scott's first witness statement also made it clear that it was Mr Attolico who had requested the advice from Withers.
12. Although there appear to have been negotiations between May and October 1998, the next material date is 15th March 2000, being the date of a letter written by Llewelyn Zietman to Withers and being the start of open correspondence between the two firms which lasted at any rate until 3rd May 2000 and was later succeeded by the issue of the application on 27th June of that year. I will refer to that correspondence later.
13. The application was supported by a witness statement by Mr Pugh (his eighth) which was made on 30th May 2000. Having referred to the judgment against Yosaly for the United States and Canadian dollars, he said that the claimants sought the disclosure order for three purposes:

(1)to enable them to enforce the judgment for the damages assessed on 7th December 1999;

(2)to enable the claimants to uncover the true identity of further parties to the alleged fraudulent conspiracy and further accessories to the alleged dishonest breaches of trust, which formed the subject matter of that judgment and other judgments in the proceedings; and

(3)to enable the claimants to obtain information in order to pursue tracing remedies which they continued to seek in the proceedings.

14. In paragraph 23 of that statement Mr Pugh said:

"Between May and October 1998 Messrs Withers purported to act for the beneficial owner of Yosaly. Messrs Withers' involvement arose out of correspondence sent by my firm to the law firm Carnelutti. Messrs Withers responded on Carnelutti's behalf and advised that they took instructions from the beneficial owner of Yosaly."

15. The judge regarded the final sentence of that paragraph as being of central importance in the case for two reasons. First, it was the foundation of the claimants' application for the disclosure of the individual or individuals who beneficially owned and controlled Yosaly. Without it an application against Withers could not have been made. Second, the information that they took instructions from the beneficial owner of Yosaly was given at the without prejudice meeting on 19th May 1998 and was therefore privileged.
16. The judge summarised his reasoning at page 16 E of the transcript:

"As I have found, and as the note of Mr Pugh shows, the entirety of the meeting was to be off-the-record; that is to say both confidential and, in the circumstances, without prejudice.

It is clear that Mr Scott was only prepared to divulge as much as he is recorded as divulging by reason of his having first secured agreement at the very outset that this meeting was off-the-record. The whole point of the discussions was to encourage a degree of debate with a view to exploring the possibility of the compromise of the claim which had been mooted in the letter of 30th April 1978. As it seems to me, one simply cannot, in such circumstances, as it were, pick and choose from a without prejudice meeting certain facts or matters and then assert that those facts and matters are not within the cloak of the without prejudice ambit."

17. In support of his conclusion the judge referred to observations in three cases to which it is no longer necessary to refer, the last of them being the observations of Robert Walker LJ in the Unilever case. At page 20A he said:

"In those circumstances it seems to me that it is not open to the claimants to deploy, as they have to deploy, material which derives from what was said at the meeting of 19th May 1998, and I do not think they should be permitted to do so. Without the evidence that Mr Pugh adduced in paragraph 23 of his first witness statement, it would not have been possible to make this application against Withers."

18. I entirely and respectfully agree with the judge's view which, subject to one outstanding point, effectively disposed of the without prejudice point, as it was argued before him, in favour of Withers. Apart from the outstanding point Mr Marshall does not now contest the judge's view on the without prejudice point as it was argued before him.
19. The simplest way of explaining the outstanding point is to read what the judge said of it at page 13 of the transcript:

"Mr Scott himself made a further, third, witness statement on 8th November 2000. The gist of that witness statement, which was to correct and modify his first statement, is that unbeknown to Mr Scott at the time he made his first witness statement it appeared after enquiry that the firm of which he is a partner, Withers, had in fact received information, in 1996 and 1997, regarding the ownership structure of Yosaly. As Mr Scott says in paragraph 5 of that third witness statement, Withers were consulted at that time, for legal advice by the `ultimate beneficiary' and the trustees of the trust referred to in paragraph 13 of his previous witness statement. For this purpose the trustees were also probably clients of Withers. The ultimate beneficiary and the trustees had a joint interest in seeking the advice of Withers. Advocate Attolico was involved in this but on this occasion he was not the client."

20. The judge rejected the argument based on what Withers had learned in 1996 and 1997. He did so at page 20F:

"It seems to me, however, that Mr Scott only put in that third witness statement in this context because, as a solicitor, he fairly and rightly thought that he was obliged to give the full story to the court and when he realised that, unbeknown to him, Withers had in fact previously acted for this ultimate beneficiary he was obliged to tell the court accordingly. But Mr Scott would never have been put in that position if he had not first had to put in his first witness statement. He would not have had to put in his first witness statement had not Mr Pugh put in his eighth witness statement; and Mr Pugh's eighth witness statement necessitated reliance on the without prejudice discussions of 19th May 1998."

21. Again, I am in complete agreement with the judge's view of the outstanding point.
22. In this court, Mr Marshall, while relying again on the outstanding point, has also relied on further documentary material which he says enables the claimants to make the application without having to rely on what was said by Mr Scott to Mr Pugh at the without prejudice meeting on 19th May 1998. First, he relies on the open correspondence before action between 15th March and 3rd May 2000. In my view it is clear that, although that correspondence was, on the side of Withers, primarily directed to laying the foundation for an alternative claim of legal professional privilege, it nevertheless maintained to the full the complaint that the claimants were relying on without prejudice communications which were inadmissible.
23. Mr Marshall has relied in particular on a passage in the letter of 3rd May 2000 from Withers to Llewelyn Zietman, which reads as follows:

"On and after being retained by Avv. Attolico for the purposes of dealing with your request, Avv. Attolico has conveyed confidential information to us for the purpose of this firm providing legal advice to him. That confidential information has included the names of the names of the persons for whom he is and has since 1998, the date when you first made your request, been acting."

24. Mr Marshall says that that is entirely independent evidence which shows that it is highly likely that Withers knew the identity of the ultimate beneficiary. That is the first category of material and the material on which he places principal reliance. The second is Mr Scott's third witness statement, which again was primarily directed to laying the foundation for a plea of legal professional privilege.
25. The third category of material consisted of a letter from Withers to Llewelyn Zietman dated 19th July 2000, after the application had been issued. The relevant passage reads as follows:

"As regards the clarification you seek in respect of Mr Scott's witness statement, we do not consider there to be any ambiguity. We have never suggested that Avv. Attolico has been given any instructions to us on behalf Mr Carnelutti. He is no longer with Carnelutti and has not been with them at any time since our correspondence commenced in 1998. We were initially instructed by a Carnelutti in respect to your request for documents from them. Avv. Attolico subsequently instructed us in his own capacity as an Italian lawyer looking after the interests of the `ultimate beneficiary'. For the purpose of the communications that took place between Withers and your firm in 1998, Withers were instructed by both Carnelutti and Avv. Attolico. Carnelutti's involvement, however, was merely as the recipient of a request for documents by your firm. The proposals that were put forward on behalf of the `ultimate beneficiary' came from Avv. Attolico. The information as to the ownership structure came from Avv. Attolico."

26. So, that is the further material on which Mr Marshall relies and he submits that it must be viewed against a background which appears from the involvement of Richards Butler in acting for Yosaly at an earlier period. He says that from the information supplied by Richards Butler to the claimants it is clear that Yosaly's affairs were organised on the instructions of the ultimate beneficial owner who did not want his name to be disclosed. Further, it is clear that the persons who organised Yosaly's affairs were Mr Gambazzi and the other members of his firm, its directors, and Mr Attolico, a partner in Carnelutti.
27. Against that background Mr Marshall submits, as I have said, that it is shown to be highly likely that Withers knew the name of the ultimate beneficiary and that the whole of the further material is completely independent of what was said at the without prejudice meeting on 19th May 1998.
28. As I have said, the correspondence and Mr Scott's third witness statement were primarily directed to laying the foundation for the plea of legal professional privilege. That was necessary because such a plea cannot be made unless it is asserted on behalf of the client whose privilege it is. Conversely, someone who wishes to rely on the privilege afforded by without prejudice negotiations simply has to refer to the negotiations and their without prejudice character, and it is then for the party who desires the negotiations to be admitted in evidence to show that there is some good ground for that to be allowed.
29. Mr Marshall has very frankly accepted that the case which is now put forward on behalf of the claimants is that Withers, in seeking to raise the alternative plea of legal professional privilege, have put themselves out of court on the plea of privilege founded on the without prejudice negotiations. I am not saying that in other circumstances a case of that kind ought not to succeed, and I would further accept that if you look at some of the documentary material out of context it might be said to be independent evidence of the kind on which Mr Marshall wishes to rely. However, it seems to me that the answer to the whole of this new case is the broad answer put forward by Mr Phillip Jones for Withers.
30. Mr Jones says that, had Mr Pugh not agreed that the meeting of 19th May 1998 should be without prejudice, there would never have been a meeting between Withers and Llewelyn Zietman and, if there had been no meeting, it would have been impossible for the application to be made at all because the claimants would never have found out that Withers knew the name of the ultimate beneficiary. For this purpose, Mr Jones relies on the important finding of the judge at page 16F of the transcript. I read it again:

"It is clear that Mr Scott was only prepared to divulge as much as he is recorded as divulging by reason of his having first secured agreement at the very outset that this meeting was off-the-record."

31. In my view the new points which are raised are of the same character as that to which I have referred as the outstanding point before the judge. The new points are simply an attempt to get round the undoubted origin of the claimants' case on this application, the whole of that case being derived from the without prejudice meeting on 19th May 1998.
32. Accordingly, I would dismiss this application for permission to appeal by rejecting the claimants' case on the without prejudice point. It is agreed that that makes it unnecessary to go on and consider the legal professional privilege point.
33. LORD JUSTICE PETER GIBSON: I agree.
Order: Application dismissed with costs on the standard basis, subject to detailed assessment, with payment on account of £7,000 within 21 days. (Order does not form part of approved judgment)