COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
OF JUSTICE QUEEN'S BENCH DIVISION
David Steel J.
London, WC2A 2LL
B e f o r e :
LORD JUSTICE TUCKEY
MR. JUSTICE NELSON
| BERRY TRADE LTD. AND ANOTHER
|- and -
|MOUSSAVI AND OTHERS
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr. Antony Zacaroli (instructed by Messrs Watson Farley & Williams of London) for the Appellant Mohammad Ghadimi-Gheshlaghi, the Seventh Defendant
AS APPROVED BY THE COURT
CROWN COPYRIGHT ©
Crown Copyright ©
Peter Gibson L.J. (giving the judgment of the court):
"(3) Mr. Ghadimi agreed to supervise the entire project and to arrange for the transportation of BTL's oil from the north to the south of Iran for a price comprising: (a) the amount of Mr. Ghadimi's actual costs relating to the successful implementation of the transportation …. and (b) a fee of US$9 per metric tonne of cargo".
"In or about June or July 1995, Mr. Moussavi suggested a variation to the terms of the May 1995 Agreement, so that Mr. Ghadimi's fee of US$9 per metric tonne was substituted with a fee of US$2 per metric tonne plus an entitlement to 30% of BTL's net profits from all BTL's operations or business in Iran, payable at regular intervals. Mr. Ghadimi stated that he would be prepared in principle to agree to such variation provided he had first satisfied himself as to BTL's accounts. No such accounts were ever produced and accordingly no such variation to the May 1995 Agreement was effected."
The Claimant's application of 28 February 2003
"I refer to my manuscript notes of this meeting …. which show that a large part of the meeting was occupied by Mr. Ghadimi giving an explanation of his role in the Claimants' oil transit operation. I would ask the court to note in particular that my note records …. that Mr. Ghadimi claimed that Mr. Moussavi had initially offered him $2 per metric tonne of oil transported and then later offered a profit sharing arrangement with "a minimum of $2."
16. The overall position adopted by Mr. Ghadimi at the meeting was that he was owed more than he had retained. "
- Initially talked of $2 per ton + costs.
- Then said wanted to be more committed. Would have ½ of all profits made by the operation.
- He would give input/output figures.
- Said had to clear with partners (although he had authority).
- With a minimum of $2."
"It can be seen from my manuscript note that he again agreed to a fee having been agreed; "verbally agreed $2.""
In fact, as the judge noted, what Mr. Hickey recorded appears to have been followed by an arrow, which might suggest that what was verbally agreed was not simply $2. But Mr. Hickey has not commented on that. The manuscript note also records: "Contract for transportation was Cost plus dated 9 July 1995. NB Says it is genuine". We must revert to that later.
"12. I do recall that Mr. Ghadimi claimed that he had verbally agreed with Mr. Moussavi a commission or "management" fee of US$2 per metric tonne for handling the initial transit of oil between the north and south of Iran."
He said that he immediately challenged that and that he specifically made a point of drawing to Mr. Ghadimi's attention the fact that he could not recall having seen any mention of commission or management fees at anywhere near the level of $2 per metric tonne amongst all the evidence reviewed by him; but he said that Mr. Ghadimi continued to assert that a US$2 per tonne fee had been verbally agreed with Mr. Moussavi.
"G says to have agreed $2 p/mt
+ Rials 500
G & KM had a j/v covering the transportation and other efforts for BT – Berm
that also included profit made by Berry
He expect to make a lot of money because KM did the j/v and G would get 30% of the overall profit."
"This is not what I told him. Indeed such an account would have been nonsensical. I distinctly recall that I informed Mr. Hickey that Mr. Moussavi had initially offered me a fixed management fee plus transit costs and thereafter had said that he wanted both sides to be more committed and had therefore proposed a management fee of US$2 per m/t plus a percentage (which Mr. Moussavi initially proposed to be 50% but, very shortly thereafter, to be 30%) of all the profits made by BTL's operations in Iran. I told Mr. Hickey that Mr. Moussavi had promised to provide to me figures showing BTL's entire throughput of oil in Iran and to provide proper accounts in order that I could ascertain BTL's genuine profits from its Iranian operations. I did not inform Mr. Hickey that the initial agreement was a management fee of only US$2 per m/t."
"I clearly recall that I told those present at the meeting that the agreement was US$2 per metric tonne plus 50% of the operational profits from all of BTL's operations in Iran , which profit-sharing figure had very shortly afterwards been reduced to 30%."
That, he said, was supported by a note made by Mr. Rechnic. That meeting he recalled lasting for about 3 hours.
9 July 1995
2USD, 30% and 50%."
A little later, in the context of payments, Mr. Rechnic recorded:
"UAB [a bank] – 120K – 130K USD – 2 USD – commission."
But that comment is not explained.
"For present purposes the standard of proof, in my judgment, must be such as to establish a serious and substantial risk of perjury, which only the content of the negotiations would readily reveal."
"31. As I understand it, there is no documentary support, contemporary or otherwise, for a proposal by Mr. Moussavi of $9 per metric tonne at any time, let alone an agreement to that effect. The meetings and telephone conversations during the summer of 2002 were arranged for the purposes of negotiation. Mr. Ghadimi accepts that he used, in particular, the second and third meetings to explain his case in great detail. Indeed, they lasted three hours and seven hours respectively. Yet equally unambiguously the position adopted by Mr. Ghadimi throughout was that the only agreed fee as regards tonnage delivered was $2 per tonne. Furthermore, the only discussion on the sums payable to Mr. Ghadimi under the agreement was by reference to a rate of $2 per tonne.
32. Moreover, it is common ground, one, that there was no mention by Mr. Ghadimi of an agreement or even a proposal for a fee of $9; two, there was no suggestion by Mr. Ghadimi that the rate of $2, whether with or without a profit share agreement, was in substitution for any other rate; and three, there was no suggestion that a rate of $2, whether with or without a profit share agreement, was proposed by Mr. Moussavi but not, in fact, accepted.
33. It may be that in due course during the trial a different account of the content or context of the negotiations may emerge. I recognise that it would not be appropriate to lift the privilege of the negotiations simply because, as I have said, of inconsistency or implausibility as compared with the pleaded case. On the material available, the position seems to me to be clear: one, the agreed rate per tonne is a central but uncomplicated issue in the case; two, the disparity between the defendants' pleaded case and the account put forward in the negotiations on this central issue is both clear and unchallenged; three, only the content of the negotiations would readily reveal that the pleaded case must be false.
34. Bearing in mind the need to restrict applications of this kind to the clearest cases of abuse, I am satisfied that there is a serious and substantial risk that the exclusion of the evidence of this part of the negotiations would act as a cloak for perjury, and accordingly I accede to the application."
The application and appeal to the Court of Appeal
"It is that parties should be encouraged as far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations …. may be used to their prejudice in the course of the proceedings. They should …. be encouraged fully and frankly to put their cards on the table …. the public policy justification, in truth, essentially rests with the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the Court of trial as admissions on the question of liability."
"If one analyses the relationship between the without prejudice rule and the other rules of evidence, it seems to me that the privilege operates as an exception to the general rule on admissions (which can itself be regarded as an exception to the rule against hearsay) that the statement or conduct of a party is always admissible against him to prove any fact which is thereby expressly or impliedly asserted or admitted. The public policy aspect of the rule is not in my judgment concerned with the admissibility of statements which are relevant otherwise than as admissions, ie independently of the truth of the facts alleged to have been admitted."
"But to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties (in the words of Lord Griffiths in [Rush & Tomkins Ltd. v Greater London Council  AC 1280,] 1300) "to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts." Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers or patent agents sitting at their shoulders as minders."
"These are clear cases of improper threats, but the value of the without prejudice rule would be seriously impaired if its protection could be removed from anything less than unambiguous impropriety. The rule is designed to encourage parties to express themselves freely and without inhibition. I think it is quite wrong for the tape recorded words of a layman, who has used colourful or even exaggerated language, to be picked over in order to support an argument that he intends to raise defences which he does not really believe to be true."
"There are in my judgment powerful policy reasons for admitting in evidence as exceptions to the without prejudice rule only the very clearest of cases. Unless this highly beneficial rule is most scrupulously and jealously protected, it will all too readily become eroded."
In Unilever (at p. 2444 G) it was said that the exception should be applied only in the clearest cases of abuse of a privileged occasion.
"It is not to be set on one side simply because a party making a "without prejudice" communication appears to be putting forward an implausible or inconsistent case or to be facing an uphill struggle if the litigation continues. Those are questions to be decided at trial or, if the claimant's case is strong enough, on an application for summary judgment. Either the claimant's case for summary judgment is strong enough or it is not, and it should not be bolstered up by denying to the defendant the benefit of the doubt in relation to a "without prejudice" communication."
"40 In the discussions there was a plain acceptance of Mr Raffa's involvement in the fraud though he raised the question of collaborators. If it is true that Mr Raffa did admit at least his involvement, it means that any defence which denies that involvement will be a dishonest defence and if he supports it with his word it will involve perjury. This does not relate to some peripheral matter but is the heart of the litigation.
43 In his summary of the law in Unilever Robert Walker L.J. expressly refers [to] the situation where the exclusion of the evidence would be a cloak for perjury. That situation will arise here if Mr Raffa made the admissions and seeks to defend the case on the basis that he was not involved in the fraud. I would hold the admissions admissible on that basis. It would be a very clear case.
45 I therefore hold that Merrill Lynch are entitled to rely such part of the evidence relating to admissions made by or on behalf of Mr Raffa in the discussions that he was concerned in the fraud in order to rebut any defence advanced by Mr Raffa which denies his involvement in the fraud. I point out that Dr El-Said [Mr. Raffa's lawyer] was present on two of the three occasions and can speak to what occurred."
"40. It seems to me that the exception identified by Robert Walker LJ can extend, in appropriate cases, not only to instances where the without prejudice occasion is abused by the making of threats but also cases where there is an unambiguous admission of facts which is intended to be followed by an equally unambiguous denial of those facts by the same party. Circumstances of that kind amount to an abuse and the exclusion of such evidence by virtue of the rule would act as a cloak for perjury.
41. I am also satisfied, for what it is worth, that circumstances of that kind constitute unambiguous impropriety of the kind envisaged by Lord Justice Hoffmann. That is not to say, as I hope I have indicated, that every admission, legal or factual, can be open to the court in subsequent proceedings regardless of the circumstances. The sort of cases that I have in mind are cases where in an uncomplicated situation and not for the purpose of establishing a negotiating position on a hypothetical basis the party has made a clear admission of relevant facts which he or she then subsequently chooses to deny."
"largely concerned with ensuring that what may be complicated without prejudice negotiations should not subsequently be scrutinised with a view to constructing admissions which when made, and particularly in the context in which they were made, were never intended to be and were not in truth unequivocal and unambiguous admissions of liability."
1. Appeal allowed.
2. Order of Judge below to be set aside.
3. Claimant's application to adduce certain witness statements refused.
4. Claimant to pay 7th Defendant's costs here and below assessed in the sum of £8,500 in this court and £13,500 in the court below.
5. Permission to appeal to the House of Lords refused.