Sotheby's v Mark Weiss Ltd & Ors

This is an application for inspection of certain documents which have been disclosed by Sotheby’s, the Claimant, but in respect of which inspection has been withheld on the grounds of litigation privilege. Mark Weiss Ltd., the First Defendant, claims the right to inspect the documents on the grounds that they are not protected by litigation privilege.

The documents in question are the correspondence passing between Sotheby’s (itself, or through its solicitors Freshfields) and two art experts, Mr. Martin and Mr. Twilley, in the period from 27 April 2016 until 11 July 2016.

The application is made in an action which concerns a painting described as “Frans Hals, ‘Portrait of a Gentleman, half length, wearing Black’, signed with monogram lower right: FH, oil on oak panel, 13 ½ by 10 ½ in.” which had been acquired by Mark Weiss Ltd. (and Fairlight Art Ventures LLP, the Second Defendant) in June 2010. In June 2011 Mark Weiss Ltd. appointed Sotheby’s exclusive agent for a period of three months to sell the painting by private treaty for a minimum price of US$10,750,000. Sotheby’s did so in June 2011 but the contract contained an offer by Sotheby’s to rescind the sale and return the purchase price if Mr. Hedreen, the Buyer, provided written evidence raising doubts as to the authenticity or attribution of the painting, and Sotheby’s determined that the painting was counterfeit. The Buyer did so on 27 May 2016, having obtained a report from Mr. Martin. On 11 July 2016 Sotheby’s, having commissioned Mr. Twilley to conduct a peer review of Mr. Martin’s report, determined that the painting was a counterfeit, rescinded the sale and on 14 July paid US$11,287,500 to the Buyer. In these proceedings Sotheby’s seek rescission of its contract with Mark Weiss Ltd. and repayment of the purchase price. The right to rescission is denied by Mark Weiss Ltd., who relies upon a term referred to in these proceedings as the “generally accepted views” proviso in the agreement between Sotheby’s and the Buyer and alleges that Sotheby’s actions were a breach of a fiduciary duty owed to Mark Weiss Ltd.

There is no dispute that in order to claim litigation privilege in respect of the correspondence between Sotheby’s and Mr. Martin and the correspondence between Sotheby’s and Mr. Twilley that correspondence must have been brought into existence for the “dominant purpose” of being used in contemplated litigation. The relevant principles were summarised in Starbev GP Ltd. v Interbrew Central European Holdings [2013] EWHC 4038 (Comm) at paragraphs 11-13 by Hamblen J.

11.

The legal requirements of a claim to litigation privilege may be summarised as follows:

(1)

The burden of proof is on the party claiming privilege to establish it – see, for example, West London Pipeline and Storage v Total UK[2008] 2 CLC 258 at [50].

(2)

An assertion of privilege and a statement of the purpose of the communication over which privilege is claimed in a witness statement are not determinative and are evidence of a fact which may require to be independently proved. The court will scrutinise carefully how the claim to privilege is made out and the witness statements should be as specific as possible – see, for example, Sumitomo Corporation v Credit Lyonnais Rouse Ltd (14 February 2001) at [30] and [39] (Andrew Smith J); West London Pipeline and Storage Ltd v Total UK Ltd[2008] EWHC 1729 (Comm) at [52], [53], [86] (Beatson J); Tchenguiz v Director of the SFO[2013] EWHC 2297 (QB) at [52] (Eder J).

(3)

The party claiming privilege must establish that litigation was reasonably contemplated or anticipated. It is not sufficient to show that there is a mere possibility of litigation, or that there was a distinct possibility that someone might at some stage bring proceedings, or a general apprehension of future litigation – see, for example, United States of America v Philip Morris Inc[2004] EWCA Civ 330 at [68]; Westminster International v Dornoch Ltd [2009] EWCA Civ 1323 at paras [19] – [20]. As Eder J stated in Tchenguiz at [48(iii)]: "Where litigation has not been commenced at the time of the communication, it has to be 'reasonably in prospect'; this does not require the prospect of litigation to be greater than 50% but it must be more than a mere possibility".

(4)

It is not enough for a party to show that proceedings were reasonably anticipated or in contemplation; the party must also show that the relevant communications were for the dominant purpose of either (i) enabling legal advice to be sought or given, and/or (ii) seeking or obtaining evidence or information to be used in or in connection with such anticipated or contemplated proceedings. Where communications may have taken place for a number of purposes, it is incumbent on the party claiming privilege to establish that the dominant purpose was litigation. If there is another purpose, this test will not be satisfied: Price Waterhouse (a firm) v BCCI Holdings (Luxembourg) SA [1992] BCLC 583, 589-590 (cited in Tchenguiz at [54]-[55]); West London Pipeline and Storage Ltd v Total UK Ltd at [52].

12.

In relation to the Court's approach to the assessment of evidence in support of a claim for privilege, it has been stated that it is necessary to subject the evidence to "anxious scrutiny" in particular because of the difficulties in going behind that evidence" – per Eder J in Tchenguiz at [52]. "The Court will look at 'purpose' from an objective standpoint, looking at all relevant evidence including evidence of subjective purpose" – ibid. 48(iv). Further, as Beatson J pointed out in the West London Pipeline case at [53], it is desirable that the party claiming such privilege "should refer to such contemporary material as it is possible to do without making disclosure of the very matters that the claim for privilege is designed to protect".

13.

As was further stated by Beatson J in the West London Pipeline case at [86]:

"(3)

It is, however, difficult to go behind an affidavit of documents at an interlocutory stage of proceedings. The affidavit is conclusive unless it is reasonably certain from:

(a)

the statements of the party making it that he has erroneously represented or has misconceived the character of the documents in respect of which privilege is claimed: Frankenstein v Gavin's House to House Cycle Cleaning and Insurance Co, per Lord Esher MR and Chitty LJ; Lask v Gloucester Health Authority.

(b)

the evidence of the person who or entity which directed the creation of the communications or documents over which privilege is claimed that the affidavit is incorrect: Neilson v Laugharane (the Chief Constable's letter), Lask v Gloucester HA (the NHS Circular), and see Frankenstein v Gavin's House to House Cycle Cleaning and Insurance Co, per A L Smith LJ.

(c)

the other evidence before the court that the affidavit is incorrect or incomplete on the material points: Jones v Montivedeo Gas Co; Birmingham and Midland Motor Omnibus Co v London and North West Railway Co; National Westminster Bank plc v Rabobank Nederland.

(4)

Where the court is not satisfied on the basis of the affidavit and the other evidence before it that the right to withhold inspection is established, there are four options open to it:

(a)

It may conclude that the evidence does not establish a legal right to withhold inspection and order inspection: Neilson v Laugharane; Lask v Gloucester Health Authority.

(b)

It may order a further affidavit to deal with matters which the earlier affidavit does not cover or on which it is unsatisfactory: Birmingham and Midland Motor Omnibus Co Ltd v London and North West Railway Co; National Westminster Bank plc v Rabobank Nederland.

(c)

It may inspect the documents: see CPR 31.19(6) and the discussion in National Westminster Bank plc v Rabo Bank Nederland and Atos Consulting Ltd v Avis plc (No. 2). Inspection should be a solution of last resort, in part because of the danger of looking at documents out of context at the interlocutory stage. It should not be undertaken unless there is credible evidence that those claiming privilege have either misunderstood their duty, or are not to be trusted with the decision making, or there is no reasonably practical alternative.

(d)

At an interlocutory stage a court may, in certain circumstances, order cross-examination of a person who has sworn an affidavit, for example, an affidavit sworn as a result of the order of the court that a defendant to a freezing injunction should disclose his assets: (House of Spring Gardens Ltd v Wait; Yukong Lines v Rensburg; Motorola Credit Corp v Uzan (No. 2)). However, the weight of authority is that cross-examination may not be ordered in the case of an affidavit of documents: Frankenstein's case; Birmingham and Midland Motor Omnibus Co Ltd v London and North Western Railway Co and Fayed v Lonrho. In cases where the issue is whether the documents exist (as it was in Frankenstein's case and Fayed v Lonrho) the existence of the documents is likely to be an issue at the trial and there is a particular risk of a court at an interlocutory stage impinging on that issue."

Reference was also made to a recent decision of the Court of Appeal in SFO v ENRC Ltd. [2018] EWCA Civ 2006. There was a suggestion that this decision changed or at any rate clarified the law in those cases where a document was brought into existence for two purposes, one of which was for use in litigation. However, I do not consider that the decision changed the law. On the contrary the Court of Appeal confirmed (at paragraph 103) the statement of principle by Lord Wilberforce in Waugh v British Railways Board [1980] AC 520 that:

“It appears to me that unless the purpose of submission to the legal adviser in view of litigation is at least the dominant purpose for which the relevant document was prepared, the reasons which require privilege to be extended to it cannot apply.”

That is entirely consistent with paragraph 11(4) of Hamblen J.’s comprehensive statement of the relevant principles in Starbev GP Ltd. v Interbrew Central European Holdings.

The Court of Appeal in SFO v ENRC added that:

“The exercise of determining dominant purpose in each case is a determination of fact, and that the court must take a realistic, indeed commercial, view of the facts.”

The material facts appear to be these. Mr. Martin provided his services pursuant to a contract (said to be dated 19 April 2016) between his company, Orion Analytical LLC, and Sotheby’s. Sotheby’s, by clause 2, warranted that the Owner (Mr. Hedreen) authorised Sotheby’s to retain Mr. Martin “to conduct the work described herein.” It is to be expected that Sotheby’s would require that authority in circumstances where Mr. Martin’s work was expected to involve tests on the painting. That work was “an independent and objective investigation” of the painting. By clause 6 Mr. Martin was not, “as part of this Agreement, [to] provide expert consultation as a consulting expert or testifying expert.”

Mr. Martin commenced work on 24 April 2016 and within 4 days reached a “negative conclusion” about the attribution and authenticity of the painting.

By letter dated 5 May 2016 Sotheby’s informed Mr. Martin that in the light of his “evolving view” that the painting was not authentic it was possible that there would be litigation “between the Buyer, the Seller and Sotheby’s.” The letter continued as follows:

“All correspondence between you and Sotheby’s relating to this matter is in the context of that anticipated litigation, to enable Sotheby’s to understand the strengths and weaknesses of its position and to make the right legal and commercial decisions in anticipation of that potential litigation. Such correspondence is privileged against disclosure in that litigation if it occurs.”

The letter advised Mr. Martin to mark all correspondence “Prepared in anticipation of litigation: Legally Privilged” but also advised him to ensure that his comments were consistent with his role as an independent expert focussing on technical issues associated with the painting “and not with any strategy associated with the litigation or the various claims”.

By letter dated 18 May 2016 Stephenson Harwood on behalf of Mark Weiss Ltd. advised Sotheby’s that the offer to rescind in the sale contract was “not engaged”. Sotheby’s replied on 20 May 2016 saying that a conclusion on the authenticity of the painting had not yet been reached.

Mr. Martin issued his report on 23 or 24 May 2016. (There appear to be copies bearing each date). Sotheby’s case is that Mr. Hedreen, when providing written evidence to Sotheby’s raising doubt as to the authenticity of the painting, relied upon the report dated 24 May 2016 from Mr. Martin; see paragraph 12 of the Particulars of Claim.

On or about 25 May 2016 Sotheby’s and Mark Weiss Ltd. exchanged experts’ reports. By letter dated 26 May 2016 Freshfields required clarification from Stephenson Harwood of aspects of the expert report relied upon by Mark Weiss Ltd. Counsel for Sotheby’s described the parties as having “locked horns” and as having “drawn battle lines”.

On 28 June 2016 Sotheby’s determined to set up a committee to be chaired by Mr. Goss, the CFO of Sotheby’s, “to take an important decision as to whether Sotheby’s should determine that the Property was counterfeit.” Mr. Goss has said that this was a “corporate decision having legal and financial consequences that would be my responsibility”. The other members of the committee “brought a great deal of experience of evaluating works of art.”

The committee met on 7 July 2016. It had a file of documents which included Mr. Martin’s report, a peer review of that report by Mr. Twilley, a report commissioned by Mark Weiss Ltd. and comments on that report by Mr. Martin and Mr. Twilley. The meeting began with a short presentation, said to be “legally privileged”, on the purpose of the meeting, the gravity of the proceedings, the legal issues associated with the decision and the various contracts Sotheby’s had entered into. The committee had the benefit of telephone advice from Mr. Martin who presented his research and findings to the Committee. The meeting lasted some 75-90 minutes and concluded that it was “overwhelmingly likely” that the painting was counterfeit. As a result Sotheby’s decided that the painting was counterfeit and, on 11 July 2016, decided that the sale should be rescinded. Shortly afterwards the purchase price was returned by Sotheby’s to the Buyer.

The claim to privilege in respect of Sotheby’s correspondence with Mr. Martin is explained in this way by Mr. Scott of Freshfields in his witness statement. At paragraph 14 (j) (into which, for ease of discussion, I have inserted sentence numbers) Mr. Scott said :

“(1)

However, following Mr. Martin providing his view that the Property was a counterfeit, Mr. Martin was instructed to produce a formal, detailed report. (2) The draft of that report, and the communications between Freshfields, internal Sotheby’s counsel and Mr. Martin in respect of that report, are privileged, since that report was being developed at a time when litigation was in prospect and for the dominant purpose of being deployed in that litigation (or potentially settling that litigation). (3) It is wrong to suggest that the preparation of this formal report was done by Sotheby’s with the purpose of fulfilling some contractual obligation. (4) All the way through the preparation of the report, the fact that the matter was likely to end up in court (if the report could not be used to persuade the other side to settle) was the perspective from which the report was being prepared by all parties, and was the very reason why Freshfields had been engaged and that Sotheby’s was spending resource on Freshfields’ litigation advice. (5) Freshfields were advising on the report, and on its role in the forthcoming decision as to whether to rescind (which would almost inevitably result in proceedings being issued), from the perspective of how it would be used as evidence in the litigation. (6) I understand from Sotheby’s that had litigation not been contemplated, then findings from Mr. Martin would have been sought, but no detailed written report of this kind would have been embarked upon and Freshfields would not have been engaged to undertake this exercise with Mr. Martin.”

I have not found this explanation easy to accept. There is no doubt that litigation with Mark Weiss Ltd (and/or the Buyer) was contemplated but what was also contemplated was the need for Sotheby’s, in the context of its agreement with the Buyer, to determine whether the painting was counterfeit, and if so, to rescind the sale and return the purchase price. Thus sentence 5 refers to the “forthcoming decision as to whether to rescind.” That decision was taken on (or soon after) 11 July 2016. Thus the correspondence between Sotheby’s and Mr. Martin in the period from 27 April 2016 to 11 July 2016 would appear to have been generated for two purposes: one, to enable that decision to be taken and two, for use in the litigation contemplated between Sotheby’s and Mark Weiss Ltd. (and/or the Buyer).

Mr. Scott said in sentence 3 that “it is wrong to suggest” that the report was prepared “for the purpose of fulfilling some contractual obligation.” That appears to be based upon the suggestion in sentence 6 that had litigation not been contemplated no detailed written report would have been embarked upon and Freshfields would not have been engaged to undertake this exercise with Mr. Martin.

I have carefully considered this evidence of Mr. Scott. I have done so with the required “anxious scrutiny”. I have also sought to take, as Miss Wood on behalf of Sotheby’s submitted I should (quoting from the ENRC case), a “realistic, indeed commercial, view of the facts.”

The agreement between Sotheby’s and the Buyer required the Buyer to provide “written evidence raising doubts as to the authenticity or attribution of the Property.” Thus a written report was required by the Buyer and, consistent with that, I was told that it was always intended that the final report would be provided to the Buyer. The very same written report would doubtless be used by Sotheby’s not only to decide whether to rescind the sale but also in the contemplated litigation with Mark Weiss Ltd. (and/or the Buyer).

This application concerns a claim to privilege, not in respect of Mr. Martin’s report, but in respect of the correspondence passing between Sotheby’s, for whom Freshfields were acting from 27 April 2016, and Mr. Martin. The position, assessed objectively, as it has to be, appears to me to be that that correspondence took place for two purposes. The first was that Sotheby’s had a contractual decision to make as to whether the painting was counterfeit and whether the sale would be rescinded. The second was that Mr. Martin’s report would doubtless be used by Sotheby’s in the contemplated litigation with Mark Weiss Ltd. (and/or the Buyer). Indeed, the letter dated 5 May 2016 from Sotheby’s to Mr. Martin stated in terms that “all correspondence between you and Sotheby’s relating to this matter is in the context of that anticipated litigation, to enable Sotheby’s to understand the strengths and weaknesses of its position and to make the right legal and commercial decisions in anticipation of that potential litigation.” That neatly identifies the two purposes. The commercial decision is obviously the decision whether or not to declare the painting counterfeit and, if so, to rescind the contract with the Buyer.

Both purposes were, it seems to me, of equal importance and relevance. At any rate Sotheby’s is unable, in my judgment, to establish that the second purpose was the dominant of the two purposes.

Mr. Scott also said in his evidence:

“Aside from the production of the report, Mr. Martin had a separate role in this litigation, of advising and assisting Sotheby’s and Freshfields in the presentation of Sotheby’s case to the Defendants, to Stephenson Harwood and to the experts appointed by the First and Third Defendants…. Mr. Martin’s communications in that role are very clearly privileged as they are all either: (i) from a time at which litigation was reasonably in prospect and for the dominant purpose of the conduct of litigation; or (ii) communications for the purpose of settling and/or narrowing the dispute between Sotheby’s and the Defendants.”

Mr. Scott does not say, but it seems likely, that this suggested “separate role” refers to the letter dated 5 May 2016. However, that letter expressly recognises that one of the purposes of the contemplated correspondence between Sotheby’s and Mr. Martin was to enable Sotheby’s to make the right “commercial” decisions. The important commercial decision which Sotheby’s had to take was whether the painting was a fake and if so to rescind the contract with the Buyer. Thus there was no “separate role”.

Mr. Martin, in his statement, said that his “work” was done in two phases. The first was an initial examination of the painting over 4 days from 24 April 2016. “Subsequent to this initial examination and conclusion, I was instructed by Sotheby’s to undertake further work to respond to questions raised by the seller and the seller’s experts”. This is also likely to be a reference to the letter dated 5 May 2016. At first sight this might be regarded as support for Mr. Scott’s evidence that Mr. Martin had a “separate role.” But that, as I have said, is not consistent with the terms of the letter.

Moreover, it seems clear from Mr. Martin’s report that he continued doing further work of the type required by the consultation agreement; see paragraph 21 of the report and by way of particular examples paragraphs 40, 65-66 and 83. That work was the investigation of the authenticity of the painting. In circumstances where he had expressed a negative opinion about the authenticity of the painting after his initial examination his further work was required to confirm and support that opinion. That further work, culminating in a formal written opinion dated 24 May 2016, was required by Sotheby’s both to enable it to decide whether or not to exercise its option to rescind the sale and to provide evidence to support Sotheby’s in the contemplated litigation with Mark Weiss Ltd. But both purposes were, in my judgment, of equal importance. Neither could be said to be the dominant purpose. After 24 May 2016 it seems likely that the correspondence between Sotheby’s and Mr. Martin related to how to deal with points made by Mark Weiss Ltd. and their expert. But that correspondence was also required to enable Sotheby’s, and in particular the Committee, to form its opinion as to whether the painting was fake. Thus the Committee had before it, not only Mr. Martin’s report, a peer review of that report by Mr. Twilley and a report commissioned by Mark Weiss Ltd. but also comments on that report by Mr. Martin and Mr. Twilley. Those comments must have been elicited after 24 May 2016.

Miss Wood submitted, on behalf of Sotheby’s, that it was wholly unrealistic and uncommercial to suggest that the communications between Sotheby’s and Mr. Martin would have existed had there been no threat of litigation. But Sotheby’s needed to be sure that it was entitled to rescind the sale and that its position in the contemplated litigation with Mark Weiss Ltd. was sound and well supported. Mr. Martin’s written report, its drafts and the associated correspondence were created for both purposes. That appears to me to be the “realistic, indeed commercial view of the facts”. The commercial decision which Sotheby’s had to take was whether or not the painting was counterfeit and, if so, to rescind the contract with the Buyer. Mr. Goss described the decision as “important”. One can readily understand why. Sotheby’s, one of the world’s leading fine art auction houses, cannot have relished taking a decision that a painting it had sold was a fake. That is no doubt why a committee was specially convened to take that decision. Of course, Mr. Goss had also been advised of the “the legal issues associated with the decision”, which must have included the contemplated litigation. But it appears to me to be unrealistic to suggest that had there been no threat of litigation there would have been no correspondence with Martin beyond requesting and receiving his report.

Miss Wood also sought to adopt the reasoning of the Court of Appeal in SFO v ENRC Limited in support of its conclusion that the documents in that case were brought into existence for the dominant purpose of resisting or avoiding criminal proceedings. In that case, which concerned an allegation by a whistleblower of alleged corruption and financial wrongdoing and the documents created thereafter, the question was whether the dominant purpose behind the creation of those documents was the need of ENRC to investigate the facts to see what had happened and deal with compliance and governance issues or to defend a contemplated criminal prosecution; see paragraph 108. The Court of Appeal approached that question in paragraph 109 as follows:

“Although a reputable company will wish to ensue high ethical standards in the conduct of it business for its own sake, it is undeniable that the “stick” used to enforce appropriate standards is the criminal law and, in some measure, the civil law also. Thus, where there is a clear threat of a criminal investigation, even at one remove from the specific risks posed by the SFO should it start an investigation, the reason for the investigation of whilstle-blower allegations must be brought into the zone where the dominant purpose may be to prevent or deal with litigation.”

The Court of Appeal then addressed the evidence and the judge’s conclusions in paragraphs 110-112 before concluding in paragraph 113 that the documents in question were brought into existence for the dominant purpose of resisting or avoiding criminal proceedings.

Miss Wood submitted that the ENRC case and the present case were analogous, in that litigation would “inevitably” follow from the taking of a particular commercial decision. She said that in the present case the “stick” which motivated the correspondence with Mr. Martin was the contemplated civil proceedings with Mark Weiss Ltd. and so, using the same reasoning as the Court of Appeal, the dominant purpose of that correspondence was to assist Sotheby’s in that litigation.

The assessment of dominant purpose is fact sensitive and so it is unsafe to use the determination of dominant purpose in one case to assist in identifying the dominant purpose in another. That is particularly so where the facts of the two cases are so very different, as they are here. The “stick” analogy was no doubt appropriate in SFO v ENRC where criminal proceedings were used to enforce appropriate standards of corporate governance. But in the present case whilst civil proceedings were in contemplation they were not a “stick” in the sense used in SFO v ENRC Ltd. I do not read the ENRC case as deciding that whenever litigation is the “inevitable” consequence of taking a particular commercial decision, the dominant purpose of documents produced for the making of that decision is necessarily their use in the contemplated litigation.

Miss Wood also relied upon the decision in Re Highgrade Traders [1984] BCLC 151. However, that also concerned a quite different factual context, namely, a report commissioned by insurers into the cause of a fire where arson was suspected. It was argued that the report was brought into existence for two purposes: one, to inform the insurers’ solicitors as to whether the insurance claim could be resisted and, two, to ascertain the cause of the fire. But Oliver LJ held at p. 173 H that it was “entirely unrealistic to attribute to the insurers an intention to make up their minds, independently of the advice which they received from their solicitors, that the claim should or should not be resisted.” As was said by the Court of Appeal in SFO v ENRC Ltd. at paragraph 107 it was “difficult to see what the alternative purpose” in Highgrade was. By contrast, in the present case there are two purposes which cannot in a realistic and commercial sense be regarded as one and the same. They are connected in the sense that if Sotheby’s determined that the painting was a fake and rescinded the contract of sale, it was likely, perhaps inevitable, that litigation would ensue with Mark Weiss Ltd. But I am unable to regard them as being one and the same as was the case in Highgrade.

The decision in the present case must be based upon the evidence in this case. I have paid particular regard to (i) the terms of the contract between Sotheby’s and the Buyer pursuant to which Sotheby’s would, in certain circumstances, have to form a view that a painting which it had sold was a fake, (ii) the terms of the contract between Sotheby’s and Mr. Martin pursuant to which Mr. Martin was to provide his opinion as to the authenticity of the painting but was not to provide “expert consultation as a consulting expert or testifying expert”, (iii) the terms of the letter dated 5 May to Mr. Martin which identified two purposes for correspondence with Mr. Martin, one being the commercial decisions which Sotheby’s had to take, (iv) the importance or gravity of any decision by Sotheby’s that a painting it had sold was a fake, and (v) the fact that the Committee had before it the comments of Mr. Martin on the opposing expert’s views which must have been elicited in correspondence with him. Those matters show, in my judgment, that Sotheby’s are unable to establish that the dominant purpose of the correspondence with Mr. Martin was use in contemplated litigation. That was a purpose of the correspondence. But it was not the dominant purpose.

I recognise that Mr. Scott has expressed a different view in his witness statement and has said that the dominant purpose was use in the contemplated litigation but, using the language of Beatson LJ (see above, as quoted by Hamblen J) I am “reasonably certain” that he has misconceived the character of the documents.

In these circumstances it is unnecessary for me to deal with the alternative argument advanced by Mr. Ford on behalf of Mark Weiss Ltd. that the contract with Mr. Martin was made by Sotheby’s on behalf of the Buyer so that Mr. Martin’s work was not for Sotheby’s at all. This submission was made on the basis of statements made by Sotheby’s and indeed on the basis of Sotheby’s own pleading. I will simply say that the contract itself does not suggest Sotheby’s entered into the contract solely as agent for the Buyer. Once this issue came to light Sotheby’s decided that its pleading was mistaken and that it will amend its pleading. There appears much to be said for the view now put forward by Sotheby’s that Mr. Martin was instructed by Sotheby’s to undertake an examination of the painting and that Sotheby’s was permitted by the Buyer to so instruct him.

The purpose of Sotheby’s engagement of Mr. Twilley was set out in Freshfield’s letter dated 13 May 2016 in these terms:

“1.4

To ensure that it has a proper basis for exercising its discretion to rescind the Seller’s contract, if necessary, and that this position is robust in any litigation, Sotheby’s would like to have Mr. Martin’s analysis subjected to a peer review.”

Clause 3.2 further said:

“3.2

Your role is not argue for or against the Painting’s authenticity but to reach your own independent view on the quality and reliability of Mr. Martin’s work, any flaws that you may identify, any particular challenges that could be made to it and, hence, as to how robust his conclusions, whatever they may be, are.”

It seems to me that clause 1.4 encapsulates the dual purpose of Mr. Twilley’s work, namely one, to ensure that Sotheby’s had a proper basis for rescinding the sale and, two, to ensure that Sotheby’s position in the contemplated litigation was robust. That being so it is clear, in my judgment, that use in litigation cannot be said to be the dominant purpose of Mr. Twilley’s work for Sotheby’s. Just as with Mr Martin, such use was one of two purposes.

Mr. Scott has expressed a different view. In his witness statement at paragraphs 24 and 25 he said:

“24.

Mr. Twilley was engaged on 13 May 2016, at a time when, as I have explained, litigation was in contemplation: both sides had appointed external litigation counsel and were preparing rival reports. The peer review by Mr. Twilley was commissioned in order to strengthen Sotheby’s case before a Court or to increase the prospects of settlement. Had this litigation not been contemplated, the Twilley review would never have been commissioned.

25.

The dominant, indeed the sole, purpose of Mr. Twilley’s engagement and all of the Legal teams’ communications with him was therefore the contemplated litigation between Sotheby’s and the defendants. Accordingly, Mr. Twilley’s review, and the correspondence between him and the Legal Team in relation to it, is protected by litigation privilege.

Mr. Scott does not mention clause 1.4 which demonstrates that Mr. Twilley was engaged for two purposes, not one. Again, I am “reasonably certain” that his approach to the question of litigation privilege is in error. Mr. Scott referred to clause 4.2 which stated:

“4.2

All correspondence and all preparatory papers for your advice will be legally privileged, as they are being prepared in contemplation of litigation…”

It is true that they were being prepared in contemplation of litigation but unless that was their dominant purpose they are not privileged. Thus clause 4.2 cannot assist Sotheby’s in showing that on an objective basis the correspondence and preparatory papers are privileged.

Miss Wood submitted in her skeleton argument that “it ought to be beyond argument” that the communications with Mr. Twilley are privileged but she too made no reference in her skeleton argument to clause 1.4.

For the reasons I have given the correspondence with both Mr. Martin and Mr. Twilley was for two purposes, first, to enable Sotheby’s to decide whether the painting was a fake and, if so, to rescind the sale of the painting, and second, to enable Sotheby’s to defeat the arguments of Mark Weiss Ltd. in the anticipated litigation. Sotheby’s own decision as to the authenticity of the painting and whether to rescind the sale was an important decision for Sotheby’s. Recovering the sale price from Mark Weiss Ltd. in the anticipated litigation was also important to Sotheby’s. But Sotheby’s is unable to show that the latter was the dominant purpose of the correspondence. It must follow that the correspondence is not protected by litigation privilege. Inspection is therefore ordered.