Tavoulareas v Lau & Anor Rev 1

This litigation fills me with despair. It is a claim brought on 12 April 2005 by Mr Peter Tavoulareas, the appellant, against Mr and Mrs Lau, which as amended seeks an order for the delivery up of twelve paintings by an artist named Nicholas Moore and three photographic works by a Mr Antonio. Alternatively, the full payment of £23,556, said to be the value of this artwork.

Much of the background is undisputed. The appellant, a wealthy man or, his counsel would say, a once wealthy man, decided to invest in a restaurant in Dean Street, Soho, called the Blues Bistro and Bar. The respondents are the lessors of the premises. In addition to his substantial shareholding in the company DEF Restaurants Limited (“DEF”), he provided some of his personal collection of artwork, including some Picasso ceramics and Murano glasswork, and the artwork in dispute, for all of that to be displayed in the restaurant, adding to the attractiveness of its ambience.

By July 2004 the business had failed. On 6 July Howe and Keates (solicitors for the appellant) wrote to Rice-Jones (solicitors for the respondents), stating that they acted “for the majority shareholder” but going on to say that there were items in the premises “which belonged to DEF and must be kept safely and returned to our client”. It was therefore an equivocal letter. Rice-Jones replied that they had advised their client that:

The next day the company was wound up and Kingston Smith appointed the liquidators. The parties engaged in some negotiation to enable the business to continue at the premises, but this broke down and on 14 January 2005 the appellant called for the return of his personal property in terms I shall have to set out more fully in due time.

Four paintings were returned to his agent, who called by arrangement to collect the artwork, but the agent was not permitted to remove any more. Proceedings were threatened in February and, after the respondent’s solicitors had indicated that the respondent had no knowledge of the whereabouts of any property allegedly belonging to the appellant, these proceedings were commenced. A year later in April 2006, the respondents openly offered to return some of the artwork and in time nine of the works were returned to the claimant. Assuming that those items had been wrongfully converted, the claim for damages -- for example, for physical damage suffered whilst wrongfully detained -- is vague in the amount of damages; probably of no great significance. The value of the missing five paintings is pleaded to be some £6,000.

The first extraordinary aspect of this bitterly-fought litigation is that the claimant has spent some £60,000 on it to date, the defendants £25,000; £85,000 in all, over a claim worth at most £23,500. Now, litigation must be fun if the parties are prepared to spend that much on a rollercoaster ride to judgment without pausing, either of them, to suggest that mediation would be a more sensible way to resolve their differences.

I am sorry to say that the second extraordinary feature of the case is the perfunctory judgment under appeal. By paragraph 8 of that judgment HHJ Simpson, sitting in the Mayor’s and City of London County Court, had concluded:

And so, in the result expressed in paragraph 19, he dismissed the claim with costs on 7 August 2006. The claimant appeals with permission granted by Sir Henry Brooke, who observed that:

I must now deal with the facts in a little more detail. The story unfolds as follows. On 26 November 2004 the liquidator reporting to creditors for the purposes of the creditors meeting stated that:

On 14 January 2005, the appellant’s solicitors wrote an important letter saying this (page 236):

The only response if it was one is dated 14 February and that said, disingenuously to say the least of it, at page 239:

It is the appellant’s case that he came to an arrangement with Mr Lau for his agent, a Mr Kiki Jansen, to collect the artwork on his behalf. Mr Jansen duly attended at the restaurant premises on 26 or 27 January. There is some dispute as to what happened. Jansen’s evidence was that Mr Lau insisted he could take only four paintings as chosen by Mr Lau; he, Mr Jansen, was not allowed to take what he wanted to take and he came prepared to take the lot. Mr Lau’s evidence is confused and difficult to understand as I think Mr Letman, who appears here as below, has to acknowledge. He said he expected the appellant personally to attend, not an agent, and so he disputed his authority. Yet this did not prevent him handing over four paintings. His explanation for allowing no more to be agreed was his concern that there was not much room in Mr Jansen’s van for the remainder of the collection to be taken away safely.

The fact is that he refused to permit the removal of the other paintings. When cross-examined about this he said among other things this (page 277, 4.17):

The appellants wrote on 28 February referring to that meeting in these terms (page 241):

When response did come from the respondents, it was in a letter of 3 March in which the solicitors comment (page 247):

The appellant’s solicitors replied to those points on 9 March (page 250) observing:

It appears from the evidence of Mr Tim Lau, a son of the respondents as I understand it, that a new tenant did indeed move into the premises and Mr Tim Lau says that he removed all the paintings and photographs on 24 February and stored them at 12, Old Compton Street. On 2 November 2005 he delivered them to the respondent solicitors.

In the light of all of this, it is all the more astonishing that the respondents should instruct their solicitor to write again on 11 March 2005, saying boldly:

It may be appropriate at this stage to see how the case was set out in the Particulars of Claim and in the defence. The Particulars of Claim, later amended to set out a different schedule of the paintings and artwork concerned, pleads that the claimant was the owner of the artwork in that schedule, that the defendants were the Landlord and lessors of the premises, that the paintings were at the premises and then (in paragraph 5) that there was an oral agreement between the claimant and the second defendant evidenced by the letter from the claimant’s solicitors to the defendants’ solicitors dated 14 January 2005. The claimant agreed to leave the paintings at the premises for a period. Then it is pleaded that there was the demand made on 27^th when the arrangement was for Mr Jansen to collect the paintings. It is pleaded that he was only allowed to remove four and prevented from removing the others, and that there is a refusal to deliver up and consequently a conversion of the property.

The defence to that claim was to deny that the paintings or other works of art were kept at the premises at any material time, to deny that the defendants knew that the paintings belonged to the claimant. The agreement was denied. It is asserted that if the defendants were bailees, they owed their duties to DEF Restaurants Limited and not to the claimant. It was admitted that the four paintings were taken. In essence, it was a denial of the claimant’s title.

After the proceedings had been issued, the defendants’ solicitors wrote on 1 November 2005 referring to the Particulars of Claim and asking:

Meanwhile, the case was being prepared for trial. Witness statements were served on behalf of the defendants. In Mr Lau’s witness statement he said, among other things (page 276):

In fact, no step was taken by the respondents to clarify the liquidator’s position until 5 January 2006, when their solicitors wrote to the liquidator in these terms:

One might have thought that the paintings would then have been returned immediately, but they were not. Instead, the parties prepared for a trial fixed for 3 February; it was adjourned. It was re-fixed for 6 April. In his opening submissions for that adjourned hearing, Mr Letman openly invited the claimants to take away all the pictures and photographs in the solicitor’s office. The trial had in fact to be adjourned because the claimant’s expert evidence was not ready. On 4 April the respondent’s solicitors wrote to the appellant's solicitors saying:

The appellant’s response in that letter of 6 April was to explain that the appellant had refused because he thought the offer was linked to terms the respondents had sought to impose in without prejudice correspondence. On 20 April the respondents made their position quite clear, that it was an open offer not subject to any agreement about costs. That was accepted by return, although collection did not in fact take place until June of 2006. That was the position when the case came on for trial in July 2006. Evidence was led over two days. Mr Lau was saying, in addition to the passages I have already quoted:

It is plain that this was not the pleaded defence which, to remind ourselves of it, was a denial that the paintings and other works of art were kept at the premises at any material time. In the light of the way the defence was presented, Mr Marland called for an amended defence to be filed. An amended draft was proffered on the last day when closing submissions were made, and this has not been verified as true by Mr Lau, but be that as it may it asserts that the defendants continued to deny that the six missing paintings were on the premises when the defendants entered. The defendants’ case is now pleaded in these terms in paragraph 8 at page 53 of bundle 1:

In his closing written submissions Mr Marland pointed out not only that Mr Lau gave evidence that he thought that by January 2005 the liquidation was finished, but also, as he put it, and I quote from his written submissions:

I turn back to the judgment. I have already said that the judge regarded the letter from the defendants’ solicitors of 15 November to be crucial. He recited it in full in paragraph 2 of his judgment. In paragraph 3 he commented on the appellant’s rejection of the offer and then he said in paragraph 4:

I readily acknowledge the merit of short and concise judgments, and I confess this one of mine is already too long, because I felt it necessary, if I am to criticise the judge, that the full facts should be set out. I very much regret to say that I am critical of this judgment, which I note is a reserved judgment, even if I make due and proper allowance for the initial lack of a defence which properly put the defendants’ case and for the difficulties in following the evidence of the defendants given through the interpreter.

These are my essential criticisms of the judgment. First, there is a complete failure to identify the issues in the case. There is no analysis of the claim which asserts that the defendants became bailees of the property, that they refused collection in January and that they continue to refuse to deliver up the paintings. The plaintiff’s claim is for acts of conversion which were by that stage complete and therefore the judge entirely misses the point when he says, in paragraph 4 of his judgment, that the Lau’s were justified in retaining the paintings at that point, ie November 2005. He fails to address whether they were justified in withholding the paintings from the claimant at times earlier than that.

There is secondly no finding at all about the arrangements that were made in January between the parties for the paintings to be collected. That was a crucial part of the claimant’s case. There is no finding about what happened when Mr Jansen came to collect the paintings and that is a vital part of the case. How, I ask rhetorically, could an agreement for collection of the paintings be consistent with a claim of right to detain at that time because of some interest that might have been shown by the liquidator? Why, if the claim by the liquidator was a bona fide reason for not returning the paintings, were four of them returned; why not the others?

Thirdly, the judge makes no comment at all about what appeared to me to be the thoroughly disingenuous, Mr Marland would say dishonest, denials in the correspondence in March of any knowledge of the whereabouts of any of the paintings. That is an utterly absurd statement given that the paintings were at that time, according to the evidence of Tim Lau, in the actual possession of the defendants in their property at Old Compton Street. There were paintings that they knew Mr Jansen had not been able to collect. So that is an extraordinary averment by the defendants and one to which the judge pays no attention at all.

So he founds his case on a justification pleaded belatedly in the amended defence, though heralded imprecisely in the witness statement, and not always clearly supported, for example, in the evidence of Mr Lau. The judge does not address that discrepancy at all, but taking it at its face value the next crucial question for the judge to have considered was the point urged upon him by Mr Marland, namely that it was for the defendants to ascertain the position of the liquidator, not for the claimants to obtain a disclaimer from the liquidator.

Mr Marland referred the judge to Clerk & Lindsell on Torts. The 19^th edition has been placed before us and paragraph 17-26 reads as follows:

The authorities in support of that are old, but nonetheless authoritative. In Vaughan v Watt 6 M&W 492, Baron Parke said this:

A case of more modern vintage is Howard E Perry Ltd, a judgment of the Vice Chancellor, Sir Robert Meggary. It does not add to the law I have cited but is clearly consistent with it. He said at page 1381, in the passage referred to by Mr Marland:

That law ought to have been considered and applied by the judge. He ought to have directed himself to enquire whether the withholding by Mr and Mrs Lau was bona fide and whether or not a reasonable time had elapsed for them to make enquiries of the liquidator as to any claim he may have had to the goods. The point was made that they could interplead and they did not.

In my judgment, those defects in the judge’s approach render this judgment utterly unsafe and in my view the appeal must be allowed. The question is what should we do about it and whether we should remit the matter back for hearing. In my judgment, there is no point in doing so. Leaving aside an issue of whether or not a lack of bona fides could be established on the part of the defendants, the separate question is whether or not a reasonable time had elapsed for them to make enquiries of the liquidator after they became aware of the demands of the claimant.

They were aware of the demands of the claimant from at least the July of 2004, or certainly by January when the critical letter was written. They took absolutely no steps whatever to enquire of the liquidator until a year later in January 2006. It took barely three weeks for him to reply. There is no reason to believe that he would not have dispelled their anxieties immediately had they enquired of him in good time. They did not do so; they allowed an unreasonable time to elapse; they wrongly relied upon a claim the liquidator was not making; they did so at their risk, and in my judgment it is plain as can be and every judge would have to find on those facts that they had converted the claimant’s property. And the claimant is therefore, in my judgment, entitled to his declaration that the defendants have converted at least the paintings which were eventually returned and I would for my part enter judgment with damages for that conversion to be assessed.

Then the question arises what are we to do about the judge’s findings that he was not satisfied that the claimant had proved his case that he had other paintings in the property and that those other paintings came into the possession of the defendants. Mr Letman argues with appropriate force that this was a matter of fact for the judge and that this court should not lightly interfere. I accept the force of that proposition. Likewise, Mr Letman argues with equal vigour that when the judge preferred the evidence of the defendants’ experts this court should be, again, loathe to interfere. And again I acknowledge the force of those submissions. But in this case I regret to say that the judge’s manifest failure to get to grips with the issues, his total failure to analyse the law and to give reasons for his decision leave me to conclude that his failings have so seriously infected the whole of his judgment that I, for my part, cannot rely upon those additional findings.

In my judgment, his inadequate reasoning compels the conclusion that the appeal must be allowed in that respect also, but that in this case it is impossible for us to make any findings as to whether or not that part of the claim is satisfied. Regrettably, the remainder of this claim must be remitted back to the County Court for further consideration when the issue of damages, if any, can also be considered.

In the result I would allow the appeal and enter judgment for the claimant for damages for conversion to be assessed and for the remaining matters to be remitted to the County Court for further decision and I hope counsel will draft the appropriate order.

But I end as I began. This is extraordinary litigation and it will be even more extraordinary if it continues any longer than this court. What is now in issue is a question of damage to the paintings that have been recovered, allegedly because they have been splattered with white paint or possibly damaged. Although Mr Marland boldly submitted that that claim might be measured in an amount up to £1,000, I would have thought he is optimistic and, indeed, at one point he seemed inclined to accept that that part of the claim would be abandoned. I do not hold him to the concession, but I remind him of it and observe that it makes eminently good sense to me.

What the remainder of the claim is worth I do not know, but since it is perfectly obvious that paintings are in the possession or were in the possession of the defendants’ solicitors, I would have thought that there are very easy ways through mediation and a bit of common sense to resolve this matter and hopefully to resolve it quickly and without a further extraordinary waste of money.

To that extent the appeal is allowed.

I agree that this appeal should be allowed for the reasons given by my Lord, Lord Justice Ward. Had the judge conducted an appropriate analysis of the correspondence and history of events before the commencement of proceedings, it seems to me that he could not have come to any conclusion other than that the defendants were guilty of conversion. I further agree with the order proposed by my Lord.

I agree with both judgments. The most substantial part of the claimant’s claim for conversion issued on 12 April 2005 related to the pictures, including photographs, which were ultimately to be restored to him in June 2006, pursuant to offers to return made conditionally in November 2005 and unconditionally in April 2006. The judge held that in and after January 2005 such pictures had not been converted by the defendants because the latter reasonably required to be satisfied that they were owned by the claimant rather than by the company, and thus by its liquidator. Such was a defence raised by amendment of the defence made in the course of Mr Letman’s final submissions to the judge on 20 July 2006.

Prior to its amendment the pleaded defence had proceeded on entirely different lines, namely that the defendants had no knowledge of the whereabouts of the pictures. Such a contention reflected the two letters written on their behalf by their solicitors in March 2005. That contention had been wholly untrue. As they knew, the pictures were stored by them or on their behalf at 12 Old Compton Street from 24 February 2005 until delivery of them to their solicitors on 2 November 2005.

In upholding the belatedly-raised defence the judge made no reference to the dishonesty inherent in the stance of the defendants during the preceding 16 months. Nor did he explain why in such circumstances he felt able to conclude that the defendants escaped liability for conversion by reference to the need to make enquiries about the claimant’s title. As my Lord, Lord Justice Ward, has pointed out, Mr Marland had referred the judge to the passage in Clerk & Lindsell on Torts, 19^th Edition, paragraph 17-26, which indicates that, if a defendant has bona fide doubt about a claimant’s title to goods, he has a reasonable time in which to satisfy himself of it. Ten months elapsed between January 2005 and November 2005. There is no evidence that during that time the defendants were in any way seeking to satisfy themselves of the claimant’s title to the pictures. On the contrary, they were pretending that they were unaware of their whereabouts.

In those circumstances, as well as those of the defendants’ delivery of four pictures to Mr Jansen on behalf of the claimant in January 2005 (being an event also wholly inconsistent with bona fide doubts on their part about the claimant’s title), the belated defence which the judge upheld, and by primary reference to which he dismissed the claim and ordered the claimant to pay the defendants’costs of the action, was demonstrably spurious.