IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 15th May 2001
B e f o r e :
THE HONOURABLE MR JUSTICE PATTEN
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(Claimant)
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(Defendants)
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MR. G. VOS QC Mr. D. Foxton and MR. A. ROBB (instructed by Freshfields Bruckhaus Deringer for the Claimant)
MR. M. BRIGGS QC and MR. H. TOMLINSON (instructed by Harbottle & Lewis for the First Defendant)
MR. M. LYNDON-STANFORD QC and MR. M. CUNNINGHAM QC (instructed by Allen & Overy for the Second Defendant)
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1. This is the first Case Management Conference in this action which I have conducted since I was nominated by the Vice-Chancellor to deal with this case. The action was commenced and Particulars of Claim were served in March 2000. Defences have been served by both Defendants. The Claimant now seeks directions in respect of mutual disclosure, inspection and expert evidence with a view to a trial commencing in January 2002 before me. The Claimant's current estimate of length is 12 weeks.
2. This ruling however is limited to the Claimant's principal application which is for permission to amend the Particulars of Claim. This is opposed by both Defendants principally on the basis that the Amended Particulars of Claim as served in draft do not disclose reasonable grounds for bringing the claim within the meaning of CPR Rule 3.4 (2)(a). To cater for all possibilities they have also issued applications under Part 24 for the summary disposal of the action in their favour and as an alternative for the striking out of the existing Particulars of Claim should I refuse Mr. Vos the permission to amend which he seeks. It is I think common ground that I should first consider Mr. Vos' application for permission to amend and in so doing rule upon the Defendants' challenge to the viability of the claim. If I accede to that application then the Part 24 applications necessarily fail. If I refuse that application so that Mr. Vos is left to rely upon the existing Particulars of Claim then it may become necessary for me to deal with the Defendants' applications to strike out that pleading and to dismiss the action even in its current form.
3. I say "may be" because if Mr. Vos is right and the new pleading adds little in substance to the old, it is difficult to see how the original pleading could survive a ruling by me that the draft Amended Particulars of Claim do not disclose reasonable grounds for bringing the claim.
4. It is necessary to begin by saying a little about the background to these proceedings. The Claimant, Professor Brian Clarke, brings this action as the executor of the estate of the late Francis Bacon who died in 1992. It is I think beyond dispute that Bacon was one of the greatest artists of the 20 th century but both he and his paintings were controversial in their time and public recognition of his worth was not immediate. Bacon was born in Dublin in 1909. He came to London before the Second World War and lived here for the remainder of his life. By the time of the war he was producing paintings which have subsequently been recognised to be of museum quality. A notable example is Three Studies for Figures at the Base of a Crucifixion, painted in 1944, which is now in the Tate Modern Gallery.
5. In 1958 (when he was 49 years of age) he entered into an agreement with Marlborough Fine Arts Limited (referred to in the pleadings as Old Marlborough) for a period of 10 years under which that company agreed to purchase a number of his works for specified prices and to have the sole and exclusive right to sell and authorise the sale of artistic works by him and to make and/or sell or to authorise the making and/or sale of reproductions of such works. I shall return to these provisions later in this judgment. Old Marlborough ceased trading in 1968 and was dissolved in 1971. Its business was taken over by the First Defendant, Marlborough Fine Art (London) Limited which I shall refer to as Marlborough UK. It is alleged by the Claimant (and not I think disputed) that both companies were owned and run by the same individuals. Principally these were Mr. Frank Lloyd, his son Mr. Gilbert Lloyd, Mr. Harry Fischer and David Somerset, now the Duke of Beaufort. The Second Defendant, which I shall refer to as Marlborough Liechtenstein, started to trade in about 1972 and was at all material times under the same beneficial ownership and control as Marlborough UK. As part of his case the Claimant relies upon a ruling of the Surrogate's Court of New York in the case of Rothko v Marlborough Gallery Inc. where the court said of Frank Lloyd that:
The Marlborough organization is a maze of 21 legal entities. Except for non-majority participations in three galleries, the ultimate interests in the organisation as well as the three mentioned galleries which are not the respondents here rest in a foreign inter vivos trust and 'stiftung'. The beneficiaries of these holdings are respondent Frank Lloyd and members of his family alone Lloyd authoritatively asserted at the trial that he alone dominated and controlled all Marlborough operations. All consequential decisions were made by Lloyd and all employees acted pursuant to his instructions. The finances of the various Lloyd-controlled companies were intermingled and paintings were invoiced to and from these companies as convenience served ... The conclusion must be that Lloyd is Marlborough.
During the course of his submissions Mr. Lyndon-Stanford invited me to treat both Defendant companies to this action in the same way and to regard Bacon's dealings with them as effectively dealings with Frank Lloyd.
6. The 1958 Agreement was terminated by Bacon in 1963 so as to allow him to deal through a Swiss gallery but the arrangements with Old Marlborough were extended by agreement until 1964 purportedly to allow Bacon's tax affairs and accounting problems to be resolved. In fact the intended arrangement with the Swiss gallery seems never to have materialised. It is now common ground that from June 1964 onwards the relationship between Bacon and the Defendants was not governed by a contract derived from or corresponding to the terms of the 1958 agreement. What is alleged by the Claimant is that there continued to exist between the parties an arrangement or relationship which was fiduciary in nature and which imposed upon the Defendants an obligation of loyalty to Bacon requiring them to place his interests before their own and to disclose to him and to obtain his consent to the profits which they received when they sold on his paintings to their third party clients. It is also alleged that this fiduciary relationship was such as to invalidate any sales of paintings between Bacon and the Defendant companies as principals except upon proof that Bacon entered into these sales freely and independently and on a fully informed basis. This, says the Claimant, can only be established in this particular case by evidence that Bacon was informed by Marlborough and understood that his paintings would be sold on for prices considerably in excess of what the Defendants had themselves agreed to pay.
7. In their existing form the Particulars of Claim place considerable (and I think primary) emphasis upon the 1958 Agreement as the source of the Defendants' ; alleged fiduciary obligations to Bacon. In paragraph 3 it is pleaded that by the late 1950's Bacon was a "well recognised" artist but that his earnings from painting were modest. Between April 1956 and October 1958 when he entered into the agreement with Old Marlborough the proceeds of sale from his work totalled only £1725. This plea remains in the amended draft (paragraph 17). The 1958 Agreement to which I have already referred provided Bacon with an immediate payment of £2500 which was stated to be a loan repayable by 1st February 1959 in paintings selected by Old Marlborough from Bacon's current and future production. The agreement specifies a scale of payment or value for the paintings ranging from £165 for a painting 24 x 20 inches in size to £420 for a painting measuring 78 x 65 inches. I am told by Mr. Vos that payment according to size is not uncommon in dealings between artists and their galleries. In addition Old Marlborough was entitled under the agreement to select paintings in each year up to a value of £3500 based upon the same price formula.
8. This agreement is alleged (in paragraph 6 of the Particulars of Claim) to have been subject to a number of implied terms including that Old Marlborough would make and render full and accurate records of all works sold or authorised to be sold on Bacon's behalf and would account for all sums generated as a result. They would also exercise all reasonable skill and care in promoting his career and would not put themselves in a position where their duties might conflict with their own interests.
9. It is then alleged that both before and after entering into the 1958 Agreement Bacon relied upon Frank Lloyd and Harry Fischer to advise and guide him in his career and to advance and protect his own interests. In so doing he reposed trust and confidence in them. He was, it is then alleged, Bohemian, lacking in business and financial experience and without the benefit of any independent advice. The 1958 Agreement contained no provision for a price increase during its term (which taking into account a provision for early termination was for a minimum of 5 years) and therefore took no account of the possibility that Bacon might become commercially very successful during that time. In these circumstances the agreement was to be presumed to have been obtained by undue influence and was voidable in equity.
10. In addition to the 1958 Agreement the Particulars of Claim (paragraph 11) allege a parallel agreement with Bacon made by conduct under which Frank Lloyd, Harry Fischer and Miss Valerie Beston, an employee but not a director of Old Marlborough, agreed "to manage his affairs relating to his professional career and private affairs". This is described in the pleading as the Management Contract and for convenience I shall refer to it in the same way. Under this agreement the individuals I have referred to and through them Old Marlborough are alleged to have made loans to Bacon, to have introduced him to Messrs. Theodore Goddard who subsequently acted for Bacon in his tax affairs and drew up his Will, to have paid Bacon's domestic bills, to have arranged exhibitions, to have protected his copyright and to have managed his finances at least in the sense of opening bank accounts for him and holding money to his account. The Management Contract is said to have given rise in itself to various fiduciary duties on the part of Old Marlborough. Most critically these are pleaded in paragraph 14 as including a duty to act in Bacon's interests and not their own, not to allow their duties to Bacon and their own interests to conflict and not to make a profit from their fiduciary position. These fiduciary obligations are said to have been broken in that Old Marlborough under the 1958 Agreement paid to Bacon prices that were less than the fair market value of the works sold and thereby put their own interests before those of the artist. The prices which Old Marlborough obtained for his works were not disclosed to Bacon or accounted for.
11. Part C of the Particulars of Claim deals with what it describes as the Marlborough UK Period which begins in 1968 and lasts until Bacon's death in 1992. Once again the underlying relationship between the parties is alleged to be contractual. During this period (paragraph 20) the same two basic arrangements are alleged; (i) an exclusive sales agency for Bacon's works and (ii) an agreement for the provision of management services of the kind I have already described. Both these agreements are based on conduct and both are said to be subject to the same terms and to give rise to the same duties as are pleaded in relation to the Old Marlborough Period. In the alternative it is pleaded in paragraph 25 that the same fiduciary duties (i.e. not to profit nor to allow a conflict of duty and interest) existed after 1968 even if there was no underlying contractual relationship of agency or for the provision of management services. The relationship between Bacon on the one hand and Marlborough UK through Frank Lloyd and Miss Beston on the other is alleged to have been a de facto relationship of trust and confidence under which Bacon was "content to put himself entirely in Frank Lloyd's and/or Miss Beston's and/or Marlborough UK 's and/or Marlborough Liechtenstein's hands, relying upon them to be loyal and to act in his best interests, reposing trust and confidence in them". The factual basis for his plea consists of the same acts or services which Miss Beston and others performed. These include the arrangements under which Miss Beston took custody of any new paintings completed by Bacon, had them photographed as part of a continuing record by Prudence Cuming Associates Limited, prepared a written record of the work and then arranged for the painting to be framed and stored.
12. On the basis of the fiduciary relationship pleaded the purchase of paintings by Marlborough UK and any sales affected by them are said to have been procured by presumed undue influence or breach of fiduciary duty and are accordingly voidable in equity. Although elaborated upon in some detail in the pleading the basic allegation (as for the Old Marlborough period) is that the paintings were sold by the Defendants for prices which far exceeded the amount which they paid to Bacon. Had Bacon, it is said, been fully informed and properly advised he would not have allowed the Defendants such advantageous terms. He was during the Marlborough UK period (paragraph 31(b)) "still a man inexperienced and disinterested in business matters and who was content to put himself entirely in [the Defendants'] hands, relying on them to give him a fair deal".
13. The principal purpose of the Amended Particulars of Claim is to remove the allegations that the relationship between Bacon and the Defendants was governed by some underlying contract. It is now accepted by the Claimant that the 1958 Agreement did not survive its limited extension into 1964 and that the Management Contract as such never existed. Instead emphasis is now placed on the continuing dealings between Bacon and the Defendants both before and after 1964 as giving rise to what is described as "an arrangement of convenience whereby Bacon allowed Marlborough UK and/or Marlborough Liechtenstein to be the sole agent for the commercial exploitation of his artistic output (paragraph 43)." In addition it is said that Marlborough UK was Bacon's agent in relation to his personal, professional and artistic affairs generally (paragraph 42). In support of this plea the Claimant relies upon the same services particularised in the existing Particulars of Claim in relation to the Management Contract although with more detailed information about Miss Beston's role in organising Bacon's tax and financial affairs.
14. Out of these arrangements and the trust and confidence which Bacon is said to have reposed in the Defendants arose the self-same fiduciary duties as previously pleaded. The allegations of breach of fiduciary duty are set out in Section E8 (paragraphs 47-51) of the draft pleading in a slightly revised form. In particular it is now specifically alleged that Bacon never agreed the rate of remuneration or profit which the Defendants made from their dealings with his pictures and never gave nor could ever have given his fully informed consent to such profits. It is pleaded in paragraph 49 that the Defendants either sold the paintings to third party galleries and collectors or purchased them on their own account without prior reference to Bacon. The sums which they paid him were, it is said, manifestly disadvantageous and he would not have consented to such prices had he been fully informed and had he received independent legal advice in relation to such matters (paragraph 50). The allegation of lack of informed consent is further particularised in paragraph 52 (in relation to sales as agent) and in paragraph 54 (in relation to purchases as principal). Bacon, it is said, did not know the price at which the works were offered for sale to third parties, the price at which they were sold, the insurance value or the commission or profit made by the Defendants in respect of each painting.
15. In relation to sales as agents the Defendants are sought to be made accountable for any profit they made beyond what might constitute a reasonable allowance for the work done. In relation to any purchases by them there is a claim to set aside the transactions and for an account on the basis of presumed undue influence or abuse of confidence. There is also a claim for an account in respect of lithographs produced or authorised by the Defendants which I shall deal with separately.
16. In this analysis of the Amended Particulars of Claim I have deliberately omitted any reference to the structure and layout of the proposed pleading. Much criticism has been made about this and I shall have to say something about it later in this judgment. But as Mr. Lyndon-Stanford realistically accepted criticisms of the clarity of expression and style (whilst not unimportant) are secondary to the Defendants' primary objection which is the viability of the claim. It is to that which I now wish to turn.
17. Although this is an application for leave to amend under CPR Part 17 it is accepted by Mr. Vos that I should consider the Defendants' objections to the pleading as part of that application rather than as separate (and subsequent) applications to strike out or for judgment under Part 24. CPR Part 17 also requires me to apply the overriding objective (CPR Part 1) by considering whether the proposed amendments will enable the court to deal justly with the claim in a way that is proportionate to the importance and complexity of the case and to the financial position of each party.
18. It seems to me that an important part of this process must be to ensure that the new pleading will assist the efficient and economic disposal of the claim both in terms of allowing the Defendants to meet the case against them and ultimately by providing the court with an intelligible account of the issues to be tried. As part of this process I have been urged by both Defendants to dismiss on a summary basis what they contend is a speculative piece of litigation or as Mr. Lyndon-Stanford preferred to describe it, "a try-on". If satisfied on their arguments that the case has no realistic prospects of success I should dispose of it now rather than expose their clients to protracted and expensive litigation which will ultimately fail.
19. An application to dismiss or dispose of an action on a summary basis (whether under CPR Part 3.4 or CPR Part 24) cannot be acceded to unless the court can be satisfied that it has before it the material which permits it to achieve a just resolution of the dispute. In order to consider whether the Claimant has no real prospect of succeeding on the claim or whether the statement of case discloses any reasonable grounds for bringing the claim the judge must feel sure that the summary process has allowed the party under attack fairly to present his case. If that can only be achieved through the medium of a trial then the summary application must be dismissed.
20. In Swain v Hillman [2001] 1 AER 91 Lord Woolf CJ (at pages 94 and 95) said this:
It is important a judge in appropriate cases should make use of the powers contained in Part 24. In doing so he or she gives effect to the overriding objectives contained in Part 1. It saves expense; it achieves expedition; it avoids the court's resources being used up on cases where this serves no purpose, and, I would add, generally, that it is in the interests of justice. If a claimant has a case which is bound to fail, then it is in the claimant's interests to know as soon as possible that that is the position. Likewise, if a claim is bound to succeed, a claimant should know this as soon as possible
Useful though the power is under Part 24, it is important that it is kept to its proper role. It is not meant to dispense with the need for a trial where there are issues which should be investigated at the trial. As Mr. Bidder put it in his submissions, the proper disposal of an issue under Part 24 does not involve the judge conducting a mini trial, that is not the object of the provisions; it is to enable cases, where there is no real prospect of success either way, to be disposed of summarily.
This approach has been approved by the House of Lords in Three Rivers District Council v Bank of England (22nd March 2001) where an application was made to strike out a claim against the Bank based on alleged misfeasance in public office. In paragraph 95 of the speeches Lord Hope of Craighead said this:
I would approach that further question in this way. The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be take that view and resort to what is property called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lloyd Woolf said in Swain v Hillman, at p 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.
In approaching the Claimant's application for leave to amend and the grounds of opposition raised to it I have directed myself in accordance with that guidance.
21. Both Defendants strongly dispute the allegation that they either owed or were in breach of any fiduciary duty to Bacon. In summary their position is this. It is common ground that when Bacon first dealt with Old Marlborough in 1958 he was an established artist even if not a commercially successful one. His ability to exploit his talent commercially depended upon forging a relationship with a gallery that could successfully market his work. Marlborough fitted that description. When Bacon contracted with Old Marlborough in 1958 there was no pre-existing relationship which could have given rise to fiduciary duties of the kind alleged whether as implied terms of that agreement or more generally. In particular the duties contended for are inherently inconsistent with the 1958 Agreement. That provided for the purchase by Old Marlborough of a series of paintings at predetermined prices leaving Old Marlborough free to dispose of them to clients for whatever it was able to achieve. It was not a commission agreement and if it was an agency at all it was one which entitled Old Marlborough to any profit over the price agreed with Bacon. To make Old Marlborough accountable for the difference between that price and the market value of the picture ultimately achieved would be to re-write the agreement and render the arrangement a commercial nonsense. The same would go for the alleged extension of the agency on these terms after 1964.
22. The abandonment of the contractual basis for the claim does not, they say, improve it. If there was after 1964 no continuing contractual relationship then there was no agency. Bacon's dealings with Marlborough were simply a series of contracts under which he sold paintings to them at agreed prices. They bought as principals and remained free to sell the paintings as they saw fit and at a profit. The services provided to Bacon by Miss Beston, though doubtless important to the smooth and uncomplicated running of his life, were hardly comparable in importance to his direct dealings with the Defendants and cannot have converted as essentially commercial relationship into a fiduciary one.
23. I propose therefore to consider in more detail the two alternative grounds upon which the claim is put in the Amended Particulars of Claim. The first is that Marlborough UK and Marlborough Liechtenstein acted as Bacon's agent in the sale of his paintings and were under a duty to account to him for the profits they received subject to a due allowance for the services they provided. The second is that Marlborough UK and Marlborough Liechtenstein purchased his works at an under-value in circumstances amounting to presumed undue influence or abuse of confidence. In so doing I propose to ignore the summary of the claim set out in Part A of the pleading which alleges an agency in paragraphs 7(2), 10 and 13(5) but seems to group everything under presumed undue influence in paragraphs 14 and 15.
24. However before coming to the detail of the pleading it is necessary to put the dispute in context. The critical allegation as I see it relates to the position at the end of the 1958 agreement. Paragraph 21 of the Amended Particulars of Claim alleges in terms that by 1964 Old Marlborough had built up a close business and personal relationship with Bacon out of which grew the non-contractual "arrangement of convenience" under which it continued to sell his paintings. This relationship is said to have given rise to fiduciary duties to act in the artist's best interests (see paragraph 23). The elements of Bacon's relationship with Old Marlborough are analysed in more detail in Annex B which I shall come to later. If the Claimant is right and a relationship of trust and confidence of the kind described existed between Bacon and the gallery in 1964 then the dealings between them which followed have to be considered in the light of that relationship. Dealings between parties in a fiduciary relationship are not treated as at arms length. Equity requires a fiduciary to justify such dealings (the fair dealing rule) and in some cases even prohibits them (the self-dealing rule). In Tate v Williamson (1866) 2 Ch.App. 55 Lord Chelmsford LC described the rule in this way:
The jurisdiction exercised by Courts of equity over the dealings of persons standing in certain fiduciary relations has always been regarded as one of a most salutary description. The principles applicable to the more familiar relations of this character have been long settled by many well-known decisions, but the Courts have always been careful not to fetter this useful jurisdiction by defining the exact limits of its exercise. Wherever two persons stand in such a relation that, while it continues, confidence is necessarily reposed by one, and the influence which naturally grows out of that confidence is possessed by the other, and this confidence is abused, or the influence is exerted to obtain an advantage at the expense of the confiding party, the person so availing himself of his position will not be permitted to retain the advantage, although the transaction could not have been impeached if no such confidential relation had existed.
This passage is important because it illustrates the close proximity of what are now usually described as the doctrines of presumed undue influence and abuse of confidence. What is clear from Tate v Williamson is that they have a common origin and purpose in scrutinising the conduct of fiduciaries in their dealings with the confiding party. This was recognised by Lord Browne-Wilkinson in CIBC v Pitt [1994] 1 AC 200 at page 209 when considering the earlier ruling of the House of Lords in National Westminster Bank plc v Morgan [1985] AC 686 that the basis of the doctrine of presumed undue influence is not public policy:
I should add that the exact limits of the decision in Morgan may have to be considered in the future. The difficulty is to establish that relationship between the law as laid down in Morgan and the long standing principle laid down in the abuse of confidence cases viz. the law requires those in a fiduciary position who enter into transactions with those to whom they owe fiduciary duties to establish affirmatively that the transaction was a fair one: see for example Demerara Bauxite Co.Ltd. v Hubbard [1923] A.C.673; Moody v Cox [1917] 2 Ch.71 and the discussion in the Aboody case [1990] 1 Q.B. 923, 962-964. The abuse of confidence principle is founded on considerations of general public policy, viz. that in order to protect those to whom fiduciaries owe duties as a class from exploitation by fiduciaries as a class, the law imposes a heavy duty on fiduciaries to show the righteousness of the transactions they enter into with those to whom they owe such duties. This principle is in sharp contrast with the view of this House in Morgan that in cases of presumed undue influence (a) the law is not based on considerations of public policy and (b) that it is for the claimant to prove that the transaction was disadvantageous rather than for the fiduciary to pr ove that it was not disadvantageous. Unfortunately, the attention of this House in Morgan was not drawn to the abuse of confidence cases and therefore the interaction between the two principles (if indeed they are two separate principles) remains obscure.
25. If the necessary relationship of trust and confidence existed by 1964 (or indeed some later date) then any purchases by Marlborough after that date would prima facie be affected by the fair dealing rule or the presumption of undue influence. To say that Marlborough purchased as principals is not an answer to this claim. A central allegation made by the Claimant in the Amended Particulars of Claim is that the Marlborough companies acted as agents after 1964. This may have the advantage (if correct) of short-cutting the question whether Marlborough was a fiduciary. Most agents are. But it has spawned a dispute between the parties which I shall come to later as to whether in the particular circumstances of this case Marlborough as agent was under a duty not to profit without consent as alleged. Once again this is a question which cannot be answered in isolation from the relationship in which the parties found themselves at the end of the 1958 agreement. Therefore although I intend to analyse the separate parts of the Amended Particulars of Claim by reference to the causes of action I have identified and on which I have heard argument these seem to me to be essentially disputes about characterisation and allocation which ultimately may prove to be unnecessary. If the Claimant succeeds in establishing the necessary fiduciary relationship and the duties alleged then the Defendants will be required to account whether as agents or as principals.
26. In paragraph 1 of the prayer the Claimant seeks a declaration that the Defendants hold all the profits from any sales of Bacon's works (including lithographs) on constructive trust for the estate subject to an allowance equal to the commission to which an art dealer acting at the relevant time would have been entitled to charge for the services rendered. The size of any such commission is obviously a triable issue. The alleged agency is pleaded in paragraph 32 (in relation to Marlborough UK) and in paragraph 33 (in relation to Marlborough Liechtenstein). Both companies are said to have been agents in respect of the receipt, recording, storage, photography, protection of copyright and export of Bacon's work as well as its marketing and sale. Both are alleged to have been involved as agents in the production and commercial exploitation of lithographs. Marlborough UK (but not Marlborough Liechtenstein) is alleged to have been responsible for the administration of Bacon's personal affairs.
27. Various aspects of this agency are particularised in Part E2 (paragraphs 34 to 38). This describes in some detail the role of Miss Beston once Bacon had finished a painting. One of her principal roles was to arrange for the picture to be taken into the custody of the Defendants until sold. It is common ground that Bacon lived in a small flat and studio in South Kensington which had no real storage facilities. He could also be destructive. To preserve his pictures they were removed from him when complete, framed, photographed and then stored. Occasionally they were returned to him at his request for alteration or even destruction. Miss Beston is said to have made a written record of each work and the price at which it was subsequently sold based on information she received from Frank or Gilbert Lloyd.
28. The Claimant's case on sales by the Defendants as agents is now pleaded out in paragraphs 39 and 39A (Marlborough UK) and 40 and 40A (Marlborough Liechtenstein) of the Amended Particulars of Claim. Reliance is placed in paragraph 39 on statements by Marlborough UK in catalogues and correspondence that it acted as Bacon's agent. In paragraph 40 reference is made to transactions between Marlborough Liechtenstein and various third parties in which works were sold to those third parties prior to a purchase price being agreed with Bacon.
29. This matter is taken further in paragraphs 39A and 40A based on documents produced by Mr. Franz Plutschow, a Swiss accountant who has run Marlborough Liechtenstein since 1973, as part of his evidence on these applications. Mr. Vos told me that had the timing been different paragraphs 39 and 39A and paragraphs 40 and 40A would have been combined but no point is taken on that.
30. I start then with paragraph 39. The catalogues referred to in sub-paragraph (1) are at best neutral and really say nothing about the precise nature of the arrangements between Bacon and the gallery. The letter from HM Inspector of Taxes referred to in sub-paragraph (2) confirms that Old Marlborough were assisting Bacon with his tax affairs but cast no light upon the position regarding sales. Sub-paragraph (3) and (5) show that the Defendants took steps to preserve Bacon's copyright and sub-paragraph (4) relates to their assisting in the preparation of an exhibition. Dr. Reber's letter (sub-paragraph (6)) relates to Miss Beston's role in arranging for payment of the proceeds of sale of his work. I shall deal with sub-paragraph (7) later in connection with other parts of the pleading dealing with the sale to Mr. Michael Leventis. These particulars certainly confirm that Marlborough was involved in the matters I have referred to but do not give any direct assistance in relation to the central question of whether there was a sales agency. They are however relevant to the other matters relied upon in paragraph 32.
31. Paragraph 39A specifically alleges that Marlborough UK acted as Bacon's agent in offering paintings belonging to Bacon for sale to third parties and in concluding sale contracts with them. It is also alleged that Marlborough UK was the exclusive outlet for the exploitation of his work. Mr. Lyndon-Stanford quibbled with this on the basis that there were at least two instances of paintings being sold by Bacon other than through the Defendants but such occasions were rare and can really be ignored for present purposes. The allegation of agency is then particularised in relation to seven different dealings by Marlborough UK allegedly as Bacon's agent.
32. The first relates to the painting 2 studies for portrait of Richard Chopping 1978. The Claimant relies on a memorandum dated 14th June 1978 from Miss Beston to Mr. Plutschow. It refers to David Somerset and Frank Lloyd having decided to purchase the diptych instead of another picture or pictures. It goes on to ask Mr. Plutschow to arrange payment to T. Rogers from Marlborough Liechtenstein as payment on account for Bacon. The diptych was then in London to be shown to clients. There is also reference to debiting an unnamed party with a half share presumably of the cost.
33. The particulars allege that the memorandum evidences a purchase by the two named directors for their own account and that Marlborough UK (through Miss Beston) acted as agent in offering the picture to the directors for sale. In support of the alleged agency reliance is placed on what is referred to as Marlborough Liechtenstein's accounting (set out in Schedule 5 to the Amended Particulars of Claim) which is said to record that the painting was not purchased from Bacon until 6th July 1978, several weeks later. Thus it is said that Marlborough UK was negotiating the sale at a time when they did not own the painting and can therefore only have done so as agents for the true owner Bacon.
34. In order to explain the Defendants' riposte to this it is necessary for me to digress a little. The accounting by Marlborough Liechtenstein set out in Schedule 5 has a history to it which was explained to me by Mr. Lyndon-Stanford. In support of his argument that the claim was contrived he referred to the early history of the action. It was he says stage managed by the Claimant with the assistance of a New York attorney, Mr. John Eastman, who still acts for Mr. John Edwards under Bacon's will. The early correspondence between solicitors appeared to focus on the estate's inability to produce a complete record of all Bacon paintings sold through or to the Defendant companies. During Bacon's life Marlborough Liechtenstein had from time to time produced accounts of its dealings with Bacon which Mr. Plutschow says were sent to Bacon care of Miss Beston. Whether Bacon saw them is an issue. They detailed the paintings which were sold, the prices agreed with Bacon and the payments made to him. Following requests for information from the estate Mr. Plutschow says that he instructed Dr. Alfred Reber, Marlborough Liechtenstein's Swiss lawyer, to arrange a meeting with the estate 's representatives. Various meetings were cancelled and, beinh unable to obtain a meeting, Dr. Reber then sent a list of the relevant transactions to Mr. Eastman in August 1998. It was returned unread. Dr. Reber had prepared what is now Schedule 5 to the Amended Particulars of Claim. This is a more comprehensive account of the dealings between Bacon and the Defendants and was intended to provide the estate with the information which it was thought was required. In his third witness statement Mr. Plutschow says that the dates in the list of transactions are not the dates when Marlborough Liechtenstein agreed to purchase the works from Bacon but the dates when the purchase prices were credited to Bacon's account with Marlborough Liechtenstein. This was often later than the date when Frank Lloyd agreed to buy the picture.
35. Mr. Lyndon-Stanford took me to the correspondence between solicitors at the time to indicate his clients had at all times attempted to be co-operative. In fact, he says, no attempt was made to acknowledge this or to respond to requests made by Allen & Overy as to what other matters the estate wished to be satisfied about. Instead the proceedings were launched making serious allegations of the kind I have described. Mr. Lyndon-Stanford relies upon this as further evidence of a lack of sincerity on the part of the Claimant. In reply Mr. Vos says that Marlborough Liechtenstein only provided Dr. Reber' s limited accounting when forced to do so by the change in executors from Miss Beston to Professor Clarke in 1998. I prefer to express no views about the correspondence or any alleged lack of good faith on the part of the Claimant or the Defendants. I am simply not in the position on an application such as this to make findings of that sort. But what is clear and I think undisputed is that nothing in the desire of the estate to clarify what transactions had taken place between Bacon and the Defendants could justify proceedings of this kind. The relief sought goes far beyond a pure accounting exercise and as Mr. Vos accepts is dependent upon his client proving the relevant abuses of the alleged fiduciary relationship.
36. I have mentioned Dr. Reber's accounting because it is relevant to what is a common plea in relation to most of the transactions particularised under paragraph 39A and 40A. This is that purchases from Bacon were made after the date on which the sales on took place. As I have already explained this is put in issue by Mr. Plutschow in his third witness statement. But the strongest argument for the Defendants does not depend upon my accepting that evidence. As I recorded earlier in this judgment the Claimant invites the court to treat both Defendants and Frank Lloyd as the same. This is spelt out in paragraphs 8, 9, 39A(19) and 40A(20). They are said to be indistinguishable. In the face of this plea it is not in my judgment open to the Claimant to rely on the acts of the two companies, their directors and employees as constituting some form of agency for Bacon or as between each other at least in relation to transactions between him and one or other of the Defendants. Even if the correct way of reading the memorandum of 14th June 1978 is as indicating a purchase by Mr. Lloyd and David Somerset for their own account (and there is certainly nothing in the memorandum which says as much) it is quite unrealistic to regard the role of Marlborough UK (whether through Miss Beston or anyone else) as constituting an agency for Bacon. Consistent with the plea that Lloyd was Marlborough this was a sale by Bacon to Lloyd. I do not therefore propose to give leave to amend in relation to paragraph 39A(1) (3). For the same reason I propose to disallow sub-paragraphs (4) (6), (12) (14) and (15) (17) all of which deal with acquisitions by Schaefer & Co. which was a Marlborough entity and acquired the paintings for the price paid to Bacon. I will also disallow sub-paragraphs (12) (14), (15) and (16) (18) of paragraph 40A which relate to Marlborough Liechtenstein and concern transactions of the same kind. Mr. Vos submitted that these pleas of internal agencies within the Marlborough group were in response to the stance taken by Marlborough UK to the effect that the Defendants are separate legal persons and must be treated as such. It was therefore in essence a plea in the alternative. It seems to me that in the interests of simplicity an alternative plea of this kind should wait until a Reply. If Marlborough UK takes up its previous position in any defence it can be addressed then.
37. I come now to sub-paragraphs 39A (7) (9). This relates to a memorandum from Miss Beston to Mr. Plutschow dated 29th September 1979 concerning the painting Lying Figure 1977. It is pleaded that the memorandum records that the painting has been sold by a third party dealer to what we now know was a Japanese museum. Reliance is placed upon the subsequent date (6th October 1979) in the Marlborough Liechtenstein accounting schedule and it is alleged that Marlborough UK (through Miss Beston) acted as Bacon's agent on the sale to the museum although what was recorded was a sale to Marlborough Liechtenstein. This example cannot be dealt with or disposed of except by analysing whether the plea of agency in cases involving sales to third parties by Marlborough Liechtenstein is a correct characterisation of the transaction and I intend to deal with it a little later in this judgment when I come to that question generally.
38. That brings me to sub-paragraphs 39A (10) (11) which relate to the painting Carcass of Meat and Bird of Prey 1980. The memorandum relied upon is from Gilbert Lloyd to Mr. Plutschow dated 22nd July 1980. It evidences a sale of the painting to a third party for $100,000 which is referred to as a prix d'ami at the request of the artist. Bacon is recorded as having agreed to reduce "his price" to $60,000 which is a reference to what is sometimes described as the cost price paid by the gallery to Bacon. Once again the Marlborough Liechtenstein accounting is relied upon to show that the purchase from Bacon took place also on 22nd July 1980. This is said to indicate that the sale to the third party was conducted before the purchase from Bacon. Mr. Lyndon-Stanford submitted that what the memorandum clearly shows is that the entire structure of the deal including both sale price and the price to be paid to Bacon was negotiated in advance of the transaction being put into effect. This was a sale to a friend at a special price and Bacon had adjusted his price as part of it. Although this may be the correct interpretation it is not one which is open to me simply upon reading the document. Whether Bacon was aware that Marlborough Liechtenstein had made a profit of $50,000 on the sale is an issue for a trial. The same goes for sub-paragraphs 40A(8)-(10).
39. Apart from sub-paragraphs (7) (9) that leaves only sub-paragraph (18) which is really referential to a plea about a transaction involving Mr. Michael Leventis set out in paragraph 39(7) but more particularly in paragraph 56(1). I shall deal with this transaction later in this judgment so far as it raises a specific allegation of an unauthorised profit. But reliance on it as part of paragraph 39A is based solely on it being a further example of a sale to a third party effected through an intermediate transaction with Marlborough Liechtenstein. It therefore falls to be considered along with sub-paragraphs (7) (9).
40. I turn now to paragraph 40 dealing with Marlborough Liechtenstein's agency. The letter from Miss Beston described in sub-paragraph (1) does refer to Marlborough Liechtenstein as Bacon's agent but is not more specific than that. Sub-paragraphs (2) and (3) deal with transactions in which the ultimate purchasers were invoiced prior to Bacon being credited with the cost price and it is said prior to any purchase from him. This is the same temporal point which is raised in relation to a number of items in paragraphs 39A and 40A. Sub-paragraph (4) pleads an agreement with Galerie Lelong S.A. relating to an exhibition of Bacon's works in Paris. It shows that Marlborough Liechtenstein agreed with the gallery (with Bacon's authority) to lend various works in its ownership or possession which would be available for sale at the prices specified. Galerie Lelong would receive a commission of 20% on any sales. The agreement does not however deal with the arrangements between Bacon and Marlborough Liechtenstein although it does look as if some of the paintings to be consigned were not necessarily yet in Marlborough Liechtenstein's ownership. The position is therefore arguably similar to that in the cases pleaded under sub-paragraphs (2) and (3) where Marlborough Liechtenstein may have been dealing in paintings by Bacon which it had not yet purchased.
41. Paragraph 40A pleads in relation to Marlborough Liechtenstein that the company acted as Bacon's agent in offering paintings belonging to Bacon for sale pending concluding sale contracts with third parties in respect of such paintings. The first alleged example of this which is contained in sub-paragraphs (1)(3) concerns the painting Self Portrait 1974;. The memorandum of 28th April 1975 records that the painting was then the property of Marlborough Liechtenstein and that a cost price of £6000 had been paid (underlined) to Bacon. An unnamed purchaser had been found for the painting for the sum of $45,000 payable in instalments. The Marlborough Liechtenstein accounting schedule, shows a date in respect of this painting of 29th April 1975 which is pleaded in the Particulars as the date of purchase. It is then pleaded that what is to be inferred from the memorandum is that the painting had been marketed by Marlborough UK on behalf of Marlborough Liechtenstein prior to its acquisition from Bacon on 29th April 1975. I shall treat this as another example of a case where the work in question is alleged to have been sold on to a third party by Marlborough Liechtenstein prior to its purchase from Bacon. I shall therefore return to it a little later in this judgment. The next item set out in sub-paragraph (4) concerns the Galerie Claude Bernard. What is referred to is a written agreement dated 8th October 1976 between the gallery and Marlborough Liechtenstein relating to the staging of an exhibition of Bacon's paintings in Paris. The agreement provides that Marlborough Liechtenstein would consign to Claude Bernard a number of works selected by the artist for the purposes of the exhibition for a period of 6 months. All the works consigned would be available for sale at the prices set out in the second paragraph of the Agreement. These prices are stated to have been agreed by the artist. In respect of each painting a net price is set out which is the price payable to Marlborough Liechtenstein in the event of a sale. The agreement then sets out a minimum selling price and an asking price which would be the prices at which the gallery would offer the work in question for sale and below which it would not be permitted under the terms of the agreement to dispose of the painting. The pleading alleges that many of the paintings consigned under this agreement did not belong to Marlborough Liechtenstein but remained at the relevant time the property of Bacon. On this basis it is to be inferred that Marlborough Liechtenstein had Bacon's authority to sell the works on his behalf in accordance with the terms of the agreement and there is in evidence a letter from Bacon indicating that he saw the agreement in draft and approved it. As in the case of the Galerie Lelong agreement the recital to the agreement certainly refers to Marlborough Liechtenstein as the owner or possessor of the paintings which suggests that there were a number of paintings included which it did not own. As and when the gallery found a buyer for the painting it would be required to sell that painting for somewhere between the asking price and the minimum selling price and would be required to pay to Marlborough Liechtenstein the relevant net price. Marlborough Liechtenstein (in the case of any paintings which they had not yet purchased from Bacon) would then pay him the cost price agreed with him. I shall therefore treat this as another alleged example of paintings being sold on to third party purchasers through the medium of a transaction involving Marlborough Liechtenstein prior to being purchased from Bacon.
42. The next item which I need to deal with is set out in sub-paragraph (11) and concerns a memorandum dated 27th January 1981 from Miss Beston to Frank Lloyd detailing various Bacon paintings available for purchase. In the middle column of the memorandum there are various comments relating to the status of each painting. Two of them are recorded as being with one of the Marlborough companies. One of them was the subject of interest by an unknown buyer and the two others are recorded respectively as sold for $182,500 and under offer for $200,000. The painting Study for Self Portrait 1981 which is recorded as sold was not accounted for according to the accounting schedule until 20th March 1981. There is a similar time lag in respect of the painting recorded as being under offer. This is said to be further evidence of the practice already referred to under which Marlborough Liechtenstein is said to have sought purchasers for Bacon paintings prior to having acquired them from the artist.
43. This brings me to consider the various sub-paragraphs of paragraphs 40, 39A and 40A that I have identified which provide instances of sales by the Defendants to third parties in cases in which it is alleged that at the time of such sale they did not yet own the Bacon painting in question and can therefore only have dealt with it as an agent for the artist. The documents relied on in these sub-paragraphs are exhibited to the witness statement of Mr. Plutschow. His evidence is that Marlborough Liechtenstein never sold Bacon's works as his agent; that it always bought them as principal and that it was free to sell them to clients at whatever price it could obtain. He says that he was in almost daily contact with Frank Lloyd from 1973 until 1992 when Mr. Lloyd was disabled by a stroke and ceased to run the Marlborough business. Lloyd would inform him when Bacon had a picture he wished to sell. Lloyd would decide if the picture was worth acquiring and agree the purchase price with Bacon. It would then be acquired by Marlborough Liechtenstein. On occasions the decision whether to purchase the painting was deferred while Marlborough Liechtenstein explored whether it could find a purchaser. If a purchaser was found the acquisition of the painting from Bacon at the price agreed with him would then go ahead. Miss Beston would tell Mr. Plutschow how Bacon wanted to be paid. Sometimes payment would be made to a Swiss bank account maintained for Bacon in the name of a Liechtenstein Stiftung. On other occasions the money would be remitted to Bacon's account in England or even paid to him in cash.
44. The allegations that from 1972 Marlborough Liechtenstein (and very occasionally Marlborough UK) sold paintings to third parties as Bacon's agents involve reliance upon the alleged difference in timing between the sale of the work to the ultimate purchaser and its acquisition by the gallery. All of the pleaded examples are intended to show the Defendants dealing with the paintings at a time when it is said they were not yet the owner. In addition there are the agreements with Galerie Claude Bernard and Galerie-Lelong. But the background is also important. In paragraph 2, 29 and Annex B of the Amended Particulars of Claim reference is also made to the 1958 agreement and to the sole and exclusive agency it provided. Mr. Lyndon-Stanford very fairly pointed out that it is not clearly alleged there was an agency under Clause 2 of the 1958 agreement but the combination of paragraphs 2 and 19 and paragraph 15 of Annex B does I think contain such a plea. Although clauses 1 and 3 of that agreement imposed an obligation upon Old Marlborough to purchase paintings up to a specified value calculated in accordance with the prescribed formula it also (in clause 2) conferred upon Old Marlborough the sole and exclusive right anywhere in the world to:
sell artistic works of any kind, produced by you; the sole and exclusive right in any part of the world to make and/or sell reproductions in any form of such works, and the sole and exclusive right to authorise any person to sell such works or make and/or sell such reproductions.
Old Marlborough was therefore able, it is said, to prevent Bacon from selling through any other means any paintings produced in a given year but not purchased pursuant to the obligations contained in clause 3. Bacon therefore had no option but to allow Old Marlborough to obtain possession of such paintings for the purpose of selling but could not require Old Marlborough to buy. If they sold one of these paintings they were required, Mr. Vos submitted, to account for the proceeds to him less a reasonable commission. That commission could not be calculated in accordance with the formula in clause 1. These prices were a special rate designed to reflect the fact that where Old Marlborough had bought the painting in advance it took the risk of being able to dispose of it at a profit. In other cases where it took no risk because it was not required to buy the painting from Bacon in any event, it could not be entitled to the same rate of discount. This, he said, is recognised in the defence served by Marlborough UK which pleads in paragraph 6.1 that it was an implied term of the 1958 agreement that Old Marlborough would account to Bacon for the sale price of any works sold on the artist 's behalf less reasonable commission. It is also supported by the evidence of Mr. Geoffrey Parton filed on behalf of Marlborough UK who says that galleries which take paintings from artists on a sale or return basis usually pay a commission on any sales made.
45. The Claimant's case is that the post 1964 dealings particularised in Parts E3 and E4 of the Amended Particulars of Claim were dealings with third parties as Bacon's agents and that the recording of the transaction as a purchase by Marlborough Liechtenstein did not accord with the reality. Particular emphasis is laid upon the following factors:
i. that Marlborough Liechtenstein had in effect the exclusive right to sell. It took physical possession of all the paintings on completion and there were at most only a handful of cases in with Bacon sold other than through the Defendants;
ii. the arrangements under which the Defendants would negotiate a sale to a third party prior to having to purchase from or account to Bacon relieved them of any risk which would be inherent in a sale to them as principal;
iii. there are references in the evidence to Bacon being offered a "net price" for the paintings which is the language of commission and agency';
iv. the agreement with Galerie Claude Bernard and Galerie Lelong confirm a sales arrangement made with Bacon's authority for the disposal of paintings of which he was still owner; and
v. all these transactions were carried out under the regime originating in clause 2 of the 1958 agreement.
46. What is I think clear is that Bacon did surrender his completed paintings to the Defendants for storage until sale. It is also obvious that he chose to have this arrangement with a gallery rather than, for example, a firm of carriers and storage agents such as T. Rogers, because he wished to be able to sell his works to the public. But the arrangements under which that might be done can obviously vary. The 1958 Agreement clearly shows that Bacon chose an arrangement under which he sold some paintings to Old Marlborough for agreed prices based on size. In respect of these Old Marlborough was entitled to retain any profit which they made on a sale in excess of the price agreed to be paid to Bacon. They were not limited under the terms of the agreement to receiving commission or to reasonable remuneration for their work. But if Mr. Vos is right in his construction of the 1958 agreement a different regime applied to other sales. Old Marlborough was not contractually entitled to purchase such works at fixed prices. It was limited to a reasonable commission. Mr. Lyndon-Stanford argued that clause 3 did not impose a maximum but rather a minimum limit and that all sales took place in accordance with that provision. But I have no real evidence about that and any such evidence would almost inevitably raise a series of triable issues. For the same reason I decline to express any view about the construction of the 1958 agreement or the manner in which it was operated. These are matters for a trial.
47. The Defendants' primary submission is that there is nothing to support any pre-existing fiduciary relationship between Bacon and Frank Lloyd prior to the making of the agreement in 1958 or the fiduciary duties not to profit which are alleged. The allegation of presumed undue influence in relation to the making of that agreement has been abandoned in the Amended Particulars of Claim. Bacon simply moved to Old Marlborough from another gallery. The existing pleading relies upon business efficacy as the basis of an implied term in the 1958 agreement that Old Marlborough would not allow its interests and duties to conflict. This is expanded upon in paragraph 11 partly in reliance upon the wider range of services provided by Old Marlborough under the Management Contract which I described earlier in this judgment. Although the allegation of implied terms if now abandoned in what has become Annex B to the Amended Particulars of Claim, the plea remains (Annex B, para 8) that during the Old Marlborough period Miss Beston arranged for the collection, photography and storage of Bacon's completed works until sale. It is also still alleged (Annex B, para 11) that Old Marlborough (through Frank Lloyd, Harry Fischer or Miss Beston) performed the services for Bacon described in paragraph 11 of the existing Particulars of Claim.
48. In paragraph 13 of Annex B it is pleaded by way of amendment that the fiduciary duties owed to Bacon by Old Marlborough included a duty not to allow its personal interests and its duties to Bacon to conflict and a duty not to profit from Bacon without his fully informed consent. These duties are alleged in paragraph 12 to arise by reason of Old Marlborough's "said agency", its "professional and personal proximity to Bacon" and the trust and confidence which by 1964 Bacon reposed in Old Marlborough. Reference to the "said agency" is a reference back to paragraphs 6 and 7 which plead:
6. The Claimant admits that the 1958 Agreement was terminated on the 12 th June 1964, as Marlborough UK contends. By that time, Old Marlborough had built up a close business and personal relationship with Bacon. From then there existed between Old Marlborough and Bacon an arrangement of convenience whereby Bacon allowed Old Marlborough to be the sole agent for the commercial exploitation of his artistic output.
7. Between 1964 and 1968, Old Marlborough acted as Bacon's sole and exclusive agent as aforesaid. In particular, Marlborough acted for Bacon in relation to the following matters:-
(1) The receipt, recording, photography, storage and protection of Bacon's work;
(2) The cataloguing, exhibition and marketing of Bacon's work;
(3) The sale of Bacon's work;
(4) Protection of copyright in Bacon's works; and
(5) The administration of Bacon's personal affairs.
49. This arrangement of convenience (even if not contractual) is not suggested in the pleading to have been other than similar to the arrangements under the terms of the 1958 agreement. In the existing Particulars of Claim it is pleaded that the sales agency and management services provided between 1964 and 1968 remained the same as before. The paintings were still being " acquired and/or sold by or through Old Marlborough": see Annex B, para 8(2).
50. On the basis that there was no discernible change in the way in which Bacon dealt with Old Marlborough during the entirety of the Old Marlborough period I have been invited to examine with some care the basis upon which Old Marlborough came to be subject to the fiduciary duties pleaded in Annex B, para 13. The relationship between Bacon and Old Marlborough began as a contractual one under the terms of the 1958 agreement. Where the parties' rights and obligations are governed by contract the courts are cautious when faced with any attempt to superimpose some additional fiduciary obligations. In Henderson v Merrett Syndicates [1995] 2 AC 145 and page 206 A-D Lord Browne-Wilkinson summarised the position in this way:
the derivation of the general principle from fiduciary duties may be instructive as to the impact of any contractual relationship between the parties on the general duty of care which would otherwise apply. The phrase "fiduciary duties" is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. That is not the case. Although, so far as I am aware, every fiduciary is under a duty not to make a profit from his position (unless such profit is authorised), the fiduciary duties owed, for example, by an express trustee are not the same as those owed by an agent. Moreover, and more relevantly, the extent and nature of the fiduciary duties owed in any particular case fall to be determined by reference to any underlying contractual relationship between the parties. Thus, in the case of an agent employed under a contract, the scope of his fiduciary duties is determined by the terms of the underlying contract. Although an agent is, in the absence of contractual provision, in breach of his fiduciary duties if he acts for another who is in competition with his principal, if the contract under which he is acting authorises him so to do, the normal fiduciary duties are modified accordingly: see Kelly v Cooper [1993] A.C. 205, and the cases there cited. The existence of a contract does not exclude the co-existence of concurrent fiduciary duties (indeed, the contract may well be their source); but the contract can and does modify the extent and nature of the general duty that would otherwise arise.
In Hospital Products Ltd v United States Surgical Corporation (1984) 156 C.L.R. 41 and page 97 Mason J in the High Court of Australia said this:
That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.
This passage was approved by the Privy Council in Kelly v Cooper [1993] A.C. 205 , another case in which the usual duties of an agent were radically restricted by the terms and circumstances of her appointment.
51. The Defendants submit that clause 3 of the 1958 agreement allowed Old Marlborough to purchase Bacon's paintings for prices to be determined in accordance with an agreed formula. Clause 3 was not a commission agreement and imposed no restriction upon Old Marlborough as to the price or other terms upon which it could subsequently dispose of the paintings. Old Marlborough was free to deal with the paintings it bought as it thought fit. Nor was it under any duty to account to Bacon for the ultimate sale price to its clients. On the basis that clause 3 was an all embracing provision relating to all sales of Bacon paintings then the fiduciary duties pleaded under the existing Particulars of Claim and repeated for the period from 1964 in the Amended Particulars of Claim would totally re-write that contract. Old Marlborough would become no more than a commission agent and would be required to account to Bacon for the ultimate sale price of the paintings. If the premise contained in this submission is made out I would require to be persuaded that any such fiduciary obligations could be implied as part of those contractual arrangements. But as already mentioned the Claimant contends that Clause 2 of the agreement does deal on a commission basis with sales outside the Clause 3 limits and if that is right then the fiduciary duties alleged do fit neatly into that part of the contractual arrangements. The problem identified in the Hospital Products case does not exist. The question which will have ultimately to be resolved in this case is whether the sales of Bacon paintings after 1964 (where clause 3 no longer applied) continued to be governed by that or by the clause 2 regime and why.
52. The resolution of that question cannot be achieved simply by the construction of the 1958 agreement against the background of the circumstances in which it came to be made. As I indicated earlier in this judgment an important and perhaps almost the central question will be to determine how Bacon's relationship with the Marlborough galleries stood and developed after the termination of the 1958 agreement. The Defendants' submissions based on Hospital Products, attractive as they are, depend upon one taking the view that nothing changed in Bacon's relationship with Old Marlborough between 1958 and 1964. But the pleaded case is that it did change. There developed, it is said, a relationship of trust and confidence under which Bacon relied upon Lloyd, Fischer and Old Marlborough "to advise and guide him in relation to his career and to advance and protect his interests"; see Annex B para. 4(1). It is also pleaded that Lloyd, Fischer and Miss Beston knew this. In the current defence of Marlborough UK (paragraph 14.1) this is effectively admitted although it is denied that Bacon placed exclusive reliance on their advice and guidance or that such advice and guidance as they gave created a confidential relationship. Mr. Vos took me to a number of documents which are in evidence and which he says support his client's case that there was by 1964 a confidential and fiduciary relationship of the kind pleaded. They include a Theodore Goddard internal note dated 10th June 1964 which records that Bacon is "wholly in the hands of Marlborough". Similar references to Marlborough and Miss Beston managing or organising Bacon's affairs can be found in notes and correspondence right up to his death. It is pleaded (see Parts C and D of the Amended Particulars of Claim) that the fiduciary relationship was transposed to Marlborough UK and after 1972 to Marlborough Liechtenstein and that both companies through Mr. Lloyd, Miss Beston and others continued to manage most aspects of Bacon's artistic and personal life including his finances and his tax affairs (see Amended Particulars of Claim Parts E1 to E6). I decline to express any view about this evidence. I accept the submissions of Mr. Briggs and Mr. Lyndon-Stanford that documents taken in isolation can give a false and misleading picture of what was actually taking place. But because I have to decide as part of this application whether there is an arguable case for a fiduciary relationship in 1964 and thereafter on the basis pleaded in Annex B paragraph 4 then I can say that I am satisfied on the material presented to me that there is at least an arguable case that such a relationship existed sufficient to satisfy the threshold tests in CPR Part 3 and Part 24.
53. In these circumstances it is not possible for me to accede to the Defendants arguments that on a summary basis I should regard Bacon's dealings with Marlborough after 1964 as a series of contracts free from any fiduciary duties of the kind alleged or even to resolve the question whether Marlborough bought and sold as principals. These questions seem to me to depend upon a detailed examination of Bacon's relationship and dealings with Marlborough both before and after 1964. If the Claimant is right about a fiduciary relationship subsisting in 1964 whether by virtue of an agency under clause 2 of the 1958 agreement or a combination of that and the matters pleaded in Annex B paragraphs 4 and 11 and after 1968 in Parts E1 to E6 then from 1964 each of the successive Marlborough companies were as between themselves and Bacon only entitled to deal with him as fiduciaries. They no longer had the protection of clause 3 and but for some new contractual arrangement on similar lines they would be required to account for their profits. The Defendants' case is that those arrangements were put in place in the form of a series of principal to principal sales as and when each painting came to be sold. An arrangement of that kind could obviously be created but only, says the Claimant, if Bacon gave his full free and informed consent to the arrangements. In my judgment that is not an issue which I can resolve on an application of this kind.
54. It is worth recording that the Defendants have adduced evidence which does indicate that Bacon was on a number of occasions fully aware of the discrepancy in price between what he sold his paintings to Marlborough Liechtenstein for and what they were able to obtain from the ultimate purchaser. The Claimant has produced no evidence to contradict this other than the statement of truth made by Professor Clarke. In particular no evidence has been adduced to support the statement contained in paragraph 50 of the Amended Particulars of Claim that Bacon would not have consented to the profits made by Marlborough Liechtenstein had he been fully informed and properly advised. But again these are matters for a trial. If the alleged fiduciary relationship is established then the burden will shift to the Defendants to show that there was informed consent. That is not a matter which I either can nor need to resolve on this application.
55. One of the transactions referred to in the pleadings (Amended Particulars of Claim para. 56(1)) concerns Michael Leventis, a friend of Bacon, who purchased the picture Study of a Man and Woman Walking 1988. In so far as this is relied upon as another example of Marlborough Liechtenstein dealing with Bacon's works as agents then it gives rise to a triable issue for the reasons already explained. But it is also pleaded as a specific example of an instance when Marlborough Liechtenstein made a profit on a sale which was neither disclosed to nor authorised by Bacon.
56. The allegation is that Bacon agreed to arrange a special price for Mr. Leventis. Mr. Leventis went to see the picture which was at the gallery in London and was told by Miss Beston that Marlborough would give him a special deal and would waive its commission. She said that the painting was worth $1.7m but that the gallery would sell it to Mr. Leventis for $1m. It was later sold to Mr. Leventis at this price. In the light of Miss Beston's agreement to waive its commission Mr. Leventis thought that Bacon would receive the full $1m for the picture. In fact as the documents show Bacon received only $500,000 out of the purchase price.
57. These allegations were objected to by Mr. Lyndon-Stanford as being over blown and scandalous. They are based upon information from Mr. Leventis given originally to the firm of Payne Hicks Beach (who acted for the estate) and which will, I am told, in due course be contained in a witness statement. At the moment there is no evidence before me from Mr. Leventis but only a witness statement from Mr. Lomas of Freshfields deposing to what Mr. Leventis has said. This stops short of confirming the last sentence in paragraph 56(1) that Bacon did not give his fully informed consent to Marlborough receiving $500,000 from the sale proceeds.
58. Mr. Vos accepted that this sentence was based only on inference. Mr. Leventis was not able to say for certain that Bacon did not consent to what Marlborough Liechtenstein did but it is to be inferred from his being told by Miss Beston that Marlborough would waive its commission that Bacon was not told of the true nature of the arrangements. Mr. Lyndon-Stanford relied upon an attendance note prepared by Theodore Goddard dated July 1989 which records Bacon's decision to change his will and to omit Mr. Leventis as an executor. The reason for this was that Mr. Leventis subsequently sold the painting for a profit having been able to buy it on favourable terms. The attendance note records Bacon as referring to his having sold the painting to Leventis at a "reasonable price". This is said to indicate that Bacon was aware of the price paid by Leventis and therefore of the profit made by Marlborough. It may very well be that Mr. Lyndon-Stanford is right about this but again this is an issue for trial.
59. In the light of my judgment that there is a triable issue as to the existence of a fiduciary relationship in 1964 and thereafter, I can deal with this aspect of the case very shortly. If proved the fiduciary relationship would require the successive Marlborough companies to justify any purchases at the prices they paid for as long as the fiduciary relationship subsisted. It will be the Claimant's contention that this continued until Bacon's death. After 1964 Old Marlborough through Miss Beston and others continued to act in the management of Bacon's artistic and personal affairs (Amended Particulars of Claim paragraph 22) and this state of affairs is said to have persisted thereafter under both Marlborough UK and Marlborough Liechtenstein (Amended Particulars of Claim paras 26 and 28).
60. Mr. Briggs submitted to me that I could resolve the issue of undue influence on the basis that if the fiduciary duties pleaded were not part of the "arrangement of convenience" between Bacon and the gallery then it was difficult to see how a case of presumed undue influence could arise. I can see the force of that submission but the premise upon which it is based cannot (for the reasons I have given) be established on this application. Nor is the alleged fiduciary relationship based solely on the continuation of a sales agency. It depends both on that and the wider relationship referred to in Annex B, paras 4,7 and 11 and Part B of the Amended Particulars of Claim. This relationship was transferred through Frank Lloyd and others to Marlborough UK and from 1972 Marlborough Liechtenstein and continued from then on in the same vein: see Amended Particulars of Claim Sections E1 E6. Clearly the case on presumed undue influence and abuse of confidence arises out of the same factual relationship. In Re Brocklehurst [1978] Ch. 14 at page 42 Bridge LJ described the essential features of the necessary relationship in these terms:
In my view, the distinguishing characteristics which are more helpful in enabling the court to recognise a relationship between donor and donee giving rise to the presumption are a duty on the donee to advise the donor, or a position of actual or potential dominance of the donee over the donor. In all the decided cases to which we have been referred one or other or both of these characteristics can be discerned.
But the courts have also warned of the dangers of too strict a formulation. In Goldsworthy v Brickell [1987] Ch. 378 at page 401 Nourse LJ said this:
At least since the time of Lord Eldon, equity has steadfastly and wisely refused to put limits on the relationships to which the presumption can apply. Nor do I believe that it has even been distinctly held that there is any relationship from which it cannot in any circumstances be dissociated. But there are several well defined relationships, such as parent and child, superior and member of a sisterhood, doctor and patient and solicitor and client, to which the presumption is, as it were, presumed to apply unless the contrary is proved. In such relationships it would seem that you only have to look at the relative status of the parties in order to presume that the requisite degree of trust and confidence is there. But there are many and various other relationships lacking a recognisable status to which the presumption has been held to apply. In all of these relationships, whether of the first kind or the second, the principle is the same. It is that the degree of trust and confidence is such that the party in whom it is reposed, either because he is or has become an adviser of the other or because he has been entrusted with the management of his affairs or everyday needs or for some other reason, is in a position to influence him into effecting the transaction of which complaint is later made. And with respect to certain arguments which have been advanced in the present case it is here necessary to state the obvious, which is that in cases where functions of this sort constitute the substratum of the relationship, there is no need for any identity of subject matter between the advice which is given or the affairs which are managed on the one hand and the transaction of which complaint it made on the other. Nor, as will be shown, is it necessary for the party in whom the trust and confidence is reposed to dominate the other party in any sense in which that word is generally understood.
It will be a matter for the trial as to whether a relationship of this kind existed and if so whether it was abused.
61. In paragraphs 32 and 33 of the Amended Particulars of Claim it is alleged that both Marlborough UK and Marlborough Liechtenstein acted as Bacon's agent in the production, distribution and commercial exploitation of lithographs. It is further alleged (Amended Particulars of Claim para 57) that they have failed to account for some lithographs "made or authorised to be made by them and/taken into their possession or control". Particulars are given in Part E5 of various editions of lithographs known to exist and schedules of various editions and their dates, numbers and publishers are contained in Schedules 3 and 3A to the Amended Particulars of Claim.
62. The pleading accepts that the production of lithographs was authorised and indeed clause 2 of the 1958 agreement provided a contractual authority to that effect. The claim is that the lithographs were produced in effect for Bacon and the Defendants must account to his estate for the lithographs or their proceeds unless they can show that Bacon authorised them to keep them. In some cases this was done but the estate does not have a complete record of which editions were given away and requires Marlborough to account. The claim is therefore a claim to ownership of the lithographs or the proceeds of their sale. It is not a claim for breach of copyright.
63. A considerable amount of evidence has been produced as to whether Marlborough UK as opposed to Marlborough Liechtenstein produced lithographs and as to whether Bacon agreed to transfer ownership in particular editions. I do not intend to enter into an examination of that evidence short of a trial and Mr. Briggs accepted that there were obvious issues about consent. His principal argument was that the claims were time barred but I shall come to that when I consider the question of limitation.
64. The proposed amendments do not add or substitute new claims within the meaning of CPR. Rule 17.4 and limitation is not therefore an objection to my granting permission to amend. It is a matter relied upon by the Defendants as part of their application for judgment under Part 24 and to strike out under Part 3.4.
65. The Defendants' case is that each of the claims set out in the prayer based on the alleged breaches of fiduciary duty and presumed undue influence is now time barred because a Court of Equity would before 1st July 1940 have applied the statutory time limits to those claims by analogy: see Limitation Act 1980 Section 36(1)(f). I was referred by Mr. Cunningham and Mr. Briggs to the decision of Mr. Jules Sher Q.C. (sitting as a Deputy High Court Judge in the Chancery Division) in Coulthard v Disco Mix Club Limited [2000] 1 WLR 707 where he had to consider the application of the statute by analogy to claims for breach of fiduciary duty in relation to some management and agency agreements between a disc-jockey and the defendant companies. Under these agreements the defendants were to market and exploit remixed sequences of popular songs prepared and recorded by the plaintiff. In the action the plaintiff sought an account based on allegations of deliberate under-accounting in breach of fiduciary duty. The breaches of duty were alleged to have been dishonest and the defendants were said to be liable to account as constructive trustees for certain monies in their hands.
66. The learned Deputy Judge held that the claims were time barred by analogy because the claims for failure to account were essentially contractual and the allegations of breach of fiduciary duty were based upon the same facts as a common law claim for fraud to which a six year limitation period would apply. Equity would therefore follow suit. The breaches of fiduciary duty were no more than the equitable counterparts of the claim at common law. In that case reliance was also placed upon the allegation of a constructive trust as attracting s.21 of the 1980 Act which provides that no limitation period shall apply to a claim by a beneficiary under a trust in respect of a fraudulent breach of trust or to recover from the trustee trust property in the possession of the trustee or converted to his use. Section 38 of the Act defines "trust" and "trustee" by reference to s.68 (17) of the Trustee Act 1925. This extends the meaning to include "implied and constructive trusts". Mr. Sher Q.C. rejected reliance upon s.21 on the basis that the constructive trust pleaded was essentially remedial in nature or to use his words "was nothing more than a formula for equitable relief". It was to be contrasted with a true constructive trust which arose when a person had already assumed the duties of a trustee or fiduciary and had then received the trust property as a result of a transaction "by which both parties intended to create a trust from the outset". In reaching this conclusion he relied upon the earlier decision of the Court of Appeal in Paragon Finance plc v D.B. Thakerar & Co. [1999] 1 AER 400 in which the plaintiff also sought the protection of s.21 in relation to a remedial constructive trust. At page 409 Millett L.J said this:
A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another. In the first class of case, however, the constructive trustee really is a trustee. He does not receive the trust property in his own right but by a transaction by which both parties intend to create a trust from the outset and which is not impugned by the plaintiff. His possession of the property is coloured from the first by the trust and confidence by means of which he obtained it, and his subsequent appropriation of the property to his own use is a breach of that trust. Well-known examples of such a constructive trust are McCormick v Grogan (1896) LR 4 HL 82 (a case of a secret trust) and Rochefoucald v Boustead [1897] 1 Ch 196 (where the defendant agreed to buy property for the plaintiff but the trust was imperfectly recorded). Pallant v Morgan [1952] 2 All ER 951, [1953] Ch 43 (where the defendant sought to keep for himself property which the plaintiff trusted him to buy for both parties) is another. In these cases the plaintiff does not impugn the transaction by which the defendant obtained control of the property. He alleges that the circumstances in which the defendant obtained control make it unconscionable for him thereafter to assert a beneficial interest in the property.
The second class of case is different. It arises when the defendant is implicated in a fraud. Equity has always given relief against fraud by making any person sufficiently implicated in the fraud accountable in equity. In such a case he is traditionally though I think unfortunately described as a constructive trustee and said to be 'liable to account as constructive trustee'. Such a person is not in fact a trustee at all, even though he may be liable to account as if he were. He never assumes the position of a trustee, and if he receives the trust property at all it is adversely to the plaintiff by an unlawful transaction which is impugned by the plaintiff. In such a case the expressions 'constructive trust' and ' constructive trustee' are misleading, for there is no trust and usually no possibility of a proprietary remedy; they are 'nothing more than a formula for equitable relief': Selangor United Rubber Estates Ltd v Cradock (No.3) [1968] 2 All ER 1073 at 1097 [1968] 1 WLR 1555 at 1582 per Ungoed-Thomas J.
The importance of the distinction between the two categories of constructive trust lies in the application of the statutes of limitation. Before 1890 constructive trusts of the first kind were treated in the same way as express trusts and were often confusingly described as such; claims against the trustee were not barred by the passage of time. Constructive trusts of the second kind however were treated differently. They were not in reality trusts at all, but merely a remedial mechanism by which equity gave relief for fraud. The Court of Chancery, which applied the statutes of limitation by analogy, was not misled by its own terminology; it gave effect to the reality of the situation by applying the statute to the fraud which gave rise to the defendant's liability.
Millett LJ went on in his judgment to express the view that the distinction between true and remedial constructive trusts did survive the passing of the 1939 Limitation Act so as to exclude the protection of the latter by what is now s.21 of the 1980 Act. This view was followed and applied by Mr. Sher Q.C. in Coulthard. At page 732 he said:
What the Paragon Finance case makes clear is that the critical boundary in these cases lies between those cases where the defendant is a true trustee (be it of an express trust or a constructive trust) and those where he is not. In the Nelson v Rye relationship, which is the same in this respect as Mr. Coulthard's and Mr. Prince's relationship, the relationship is not that of trustee and beneficiary. The touchstone of a true trusteeship is trust property. There is no allegation or evidence (save possibly in two minor respects) that D.M.C. was required to keep moneys reaching it as a result of commercial exploitation of Mr. Coulthard's mixes separate from its own moneys. Everything in the pleading and evidence is consistent with the idea that D.M.C. was free to mix such moneys with its own and then account at some later point in time to Mr. Coulthard, after deduction of the appropriate commission. In its essence the commercial relationship engendered personal claims between them rather than proprietary ones. At no stage in Mr. Coulthard's pleading or evidence is an asset or fund identified as an asset or fund which is or should have been held in a trustee capacity. That is why this dispute attracts the application of the six year limit under section 5 of the Act, directly or by analogy. Had there been a true trust of property alleged, the relevant s ection would have been section 21; and to the extent to which there was fraud, or a receipt by the trustee and conversion to his use, there would not have been any limitation defence.
67. Based on this the Defendants contend that the constructive trusts pleaded in paragraphs 1 and 2 of the prayer are of the remedial kind and the claims for breach of fiduciary duty which underpin them are now time barred more than six years after Bacon's death. This applies to both the claims in breach of fiduciary duty and abuse of confidence and also to the claims for presumed undue influence.
68. The Claimant's response to this is that the constructive trusts alleged are not merely remedial as such but arise from a pre-existing fiduciary relationship under which the Defendants were obliged to account for all their dealings with Bacon's work and for all monies received: see Amended Particulars of Claim paragraph 46(3). Their duties therefore related to the use of his property. They received it as fiduciaries and were in fact trustees of it liable to account for its subsequent use and disposal. It does not matter, says Mr. Vos, that there was no express requirement to keep the proceeds of sale separate. That follows from the existence of the trust. The need to identify an obligation to keep monies separate may be essential to convert a contractual obligation to account into a claim for a constructive trust but it is unnecessary when it is clear that the trust relationship in respect of the property has always existed. In respect of undue influence it is clear from the authorities, he said, that the Courts of Equity did not and would not have applied the statute by analogy before 1940.
69. I am very far from satisfied that a Court of Equity would ever have barred a claim in undue influence by analogy with the statute. No case has been found in which this was done and in Coulthard Mr. Sher Q.C. seems to have accepted (see page 725G) that the only available defences would be laches and acquiescence. Further confirmation of this can be found in Allcard v Skinner (1887) 36 Ch.D.145 at pages 174 and 186. I am not therefore prepared to strike out these claims on the basis that they are time barred. Although the arguments relating to breach of fiduciary duty are more difficult I am again not satisfied that this is a case which clearly falls into the category of a remedial as opposed to a true constructive trust and I prefer to reserve that question to the trial. Given that the claims based on presumed undue influence must go forward I can also see no advantage in attempting to eliminate the claims for breach of fiduciary duty which are based on essentially the same facts. This includes the claims to the lithographs and the Prudence Cuming archive. In these circumstances it is unnecessary for me to deal further with the Claimant 's alternative plea of concealment contained in Part E 12 other than to record that sub-paragraphs 71(1) to (3) which refer to the 1992 £1.6m invoice are no longer relied upon as instances of deliberate concealment and will be deleted from the pleading when served.
70. I now turn to some matters of detail affecting the form of the amended pleading. As I indicated earlier in this judgment I am concerned that this pleading should be easily intelligible and avoid later disputes as to the true scope and nature of the Claimant's case. With this in mind the following matters need to be re-considered before I am prepared to give permission to amend.
71. The summary of the case contained in paragraphs 1-15 should be deleted. It is unnecessary and because it compresses and summarises the main components of the claim it may lead to disputes and misunderstandings.
72. Part B: The Old Marlborough Period: the pleading should clearly address the position not only as at the end of this period but also in 1964 when a fiduciary relationship and agency is alleged to have existed. For the reasons explained earlier the Defendants are entitled to know in clear terms precisely what fiduciary duties are alleged to have existed in the period from 1964 to 1968. It is also unsatisfactory for paragraph 23 of the Amended Particulars of Claim to plead duties in rather general terms and for paragraph 13 of Annex B to plead a number of specific duties. It should be made clear whether paragraph 23 is merely a shorthand for paragraph 13. Annex B also needs to be tidied up and re-arranged. The relationship between paragraphs 13 and 14 is awkward (why do they need to be separate paragraphs?) and the references to a "said agency" should be eliminated. This is a point which is of general application to the proposed pleading. References to "said" should (unless clearly unnecessary) be replaced by references to the agency referred to in a stated paragraph. The pleading of clause 2 of the 1958 agreement in paragraphs 19 and 22(3) of the Amended Particulars of Claim should also be revised to expressly plead the alleged continuation of those arrangements after 1964.
73. Those parts of section E which are intended only to serve as particulars of primary allegations in other paragraphs should be clearly identified as such and that part of the pleading re-ordered. The opportunity should be taken to amalgamate the remaining parts of paragraphs 39 and 39A and 40 and 40A.
74. Subject to the changes referred to above I will grant the Claimant permission to amend the Particulars of Claim. This will be on the usual terms as to costs thrown away. It follows that the Part 24 and the Part 3.4 applications fail and will be dismissed.