England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL ( CIVIL DIVISION )
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(HIS HONOUR JUDGE CHARLES HARRIS QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		16th June 2011

Lord Justice Longmore:

1. The question that arises on this appeal is how is one to value an individual pearl. Mr Jabir is an international dealer in among other things pearls of individual and sometimes exceptional quality. He currently lives in New York and Kuala Lumpur. In May 2008 he was offered a pearl by an elderly Swiss dealer with whom he had traded for many years, a Mr Ruff. Mr Jabir went to Zurich to see it and was immediately attracted by its unusual colour and freedom from any flaws. He believed it was a saltwater pearl and therefore more precious than a freshwater pearl and that it was an ideal size for being mounted in a ring. Mr Jabir gave evidence at the trial that after negotiations he agreed to buy the pearl for US $500,000 subject to certification. He took delivery of the pearl in Amsterdam and brought it to London where it was satisfactorily certified by the Gem Testing Laboratory of Great Britain. Mr Ruff invoiced Mr Jabir for the sum of $500,000.
2. Mr Jabir said further that he had agreed to sell the pearl to a Dubai dealer, a Mr Sathak, for $650,000 and to have it mounted in a ring. He took the pearl to H A Jordan and Company Limited, whom I will call Jordans, a business specialising in design, manufacture, repair and restoration of jewellery for the trade, owned by the well-known Bond Street jewellers and pearl dealers, S J Phillips Limited. They gave Mr Jabir a receipt for "intense orangey-pink pearl". At no stage was any formal test done to establish whether the pearl was in fact a saltwater pearl.
3. In circumstances that have never been satisfactorily explained, but in respect of which no one has suggested there was any dishonesty on the part of Jordans' staff, the pearl has been lost. Jordans have admitted liability, the only question therefore is quantum.
4. At the trial of the quantum issues before HHJ Charles Harris QC, sitting in London as a judge of the High Court, Jordans complained of the inadequacy of the documentation supporting the sale and delivery of the pearl from Mr Ruff and Mr Jabir. Mr Jabir's case was that he had a number of agreements with Mr Ruff at the time, which resulted in an ultimate payment by Mr Ruff to Mr Jabir of $167,996. For these and other reasons Jordans submitted that there was never a genuine sale of the pearl by Mr Ruff to Mr Jabir for $500,000 and, while the formal position was that Jordans were putting Mr Jabir to proof that he had made the contracts on which he relied, they were effectively saying that Mr Jabir was bringing a dishonestly inflated claim.
5. Mr Ruff, an old man of 85 by the time of trial, did not give evidence, but both Mr Jabir and Mr Sathak gave evidence, it never being suggested to Mr Jabir that Mr Ruff's invoice was not a genuine document. The judge said this of Mr Jabir in paragraph 10 of his judgment :

"I have seen and heard Mr Jabir who is, and was accepted as being, a long established and highly experienced pearl dealer, one of only 15 or so people who exist in the world who trade at the highest levels in this commodity. He is internationally recognised as one of the leading experts in pearls and he has traded many important pearls, including some of historical significance and value. He explained to me, entirely credibly, that his was a business in which privacy and discretion, not to say secrecy, were of great importance, and that deals were commonly done face-to-face with other dealers and sealed with a handshake, often without documentation. The ultimate customers of dealers like himself are people of great wealth who will be anxious to preserve their anonymity. He also explained how it was quite possible in practice to pass between countries in the EU carrying a pearl or pearls without any Customs declaration or other formality. I found him a convincing witness."

6. The judge also proceeded to say in paragraphs 11 to 13 of the judgment:

"11. Considering the evidence as a whole, not all of which I have rehearsed, it seems clear that pearls of the highest quality are dealt with by a very small number of astute and experienced men, most of whom will be known to each other and who will have traded or whose families will have traded with each other over many years. They rely upon their considerable personal skill and judgment and they negotiate and deal with each other face-to-face in the light of their hands on evaluation of the goods in question. As used once to be the case in the City of London, they reach agreement with each other by word of mouth and a handshake. Trust in each other is utterly essential, and I think it unlikely that a man would survive, let alone thrive in this field if he did not justly have the confidence of those he deals with.

12. Mr Jabir is clearly a very successful practitioner in his field and I do not accept the defendants' implicit contention that what he was doing here was in effect to conspire with Mr Sathak, and indeed Mr Ruff, to assert to the defendants and then pretend to the court that he had a pearl which he had bought for $500,000 and agreed to sell for $650,000 when he had not. Nor do I find that Mr Sathak, who came to England from Dubai to give evidence, attended court to lie. He gave the court the names of a number of the families whom he buys for and deals with. He said he expected to be able to sell on the pearl for a profit of 'a little over 20 per cent', which would indicate a price of about $780,000. He was going to sell, he said, to a 'royal family in the Gulf'. It was suggested to him that he was being 'paid to give evidence'. In the event, I am satisfied that Mr Jabir only, and not unreasonably, agreed to meet his travel and hotel expenses.

13. Accordingly, and without much hesitation, I find that the pearl which the defendants have mislaid was one which the claimant had purchased at a price of $500,000 and which he had an agreement to sell on to Mr Sathak for $650,000."

7. The judge accordingly decided that the claim was an honest claim albeit subject to argument as to the true value of the pearl. The judge therefore went on to consider the value of the lost pearl. Mr Jabir claims that the pearl was worth the price which Mr Sathak had agreed to pay, namely $650,000, and that, whether the claim is put as a breach of contract, breach of duty as a bailee or as simple negligence, he is entitled to recover that sum. Jordans say that all pearls and certainly this pearl have an open market value and the market value of this pearl was no more than $250,000 and probably rather less.
8. Mr Jabir felt that he had to take steps to obtain independent expert evidence as to value in case his own claim was held by the judge to be dishonestly inflated. An order was made permitting expert evidence to be called and for reports to be exchanged. The difficulty about such evidence was of course that neither Mr Jabir's expert, Ms Rosamund Clayton nor Jordans' expert, Mr Truman, had ever seen the pearl, whereas Mr Jabir and Mr Sathak had. Mr Denyer of Jordans had also seen the pearl but had said that pearls were not his field and he would not know if he was looking at a valuable pearl or not.
9. Once the judge had held that Mr Jabir and Mr Sathak were truthful and credible witnesses, it became relevant that both expert witnesses who had not seen the pearl accepted that Mr Jabir who had seen the pearl was just as experienced, if not more experienced, in assessing the quality and thus the value of pearls than they were. Both experts assumed that the pearl was a freshwater pearl and could therefore be valued by reference to known sales of other freshwater pearls. Mr Truman put the value as being below $50,000 and Ms Clayton at between $150,000 and $200,000 on the basis of comparable transactions.
10. Ms Clayton, in her cross examination, said that she was proceeding on the assumption that the pearl was a freshwater pearl because it looked, presumably from photographs, like a freshwater pearl from the colour and look. She added:

"And also I think people who had seen the missing pearl, again it had not been tested, so they would not be able to say positively, but their view was that it looked like a natural freshwater pearl so I was influenced in that way too"

11. Ms Day for Jordans did not explore further whom Ms Clayton had in mind as having seen the pearl, nor did Mr Marland for Mr Jabir explore the matter in re-examination. Ms Day submitted in closing that Ms Clayton must have been referring to Mr Jabir and Mr Sathak. When that submission was made, Mr Marland for Mr Jabir intervened and said it was not from either Mr Jabir or Mr Sathak that she had received that information.
12. There are now three grounds of appeal. 1) the judge never found that the pearl was a saltwater pearl and should have proceeded on the basis that the pearl was a freshwater pearl. 2) The judge should not have accepted Mr Jabir's evidence that he had paid $500,000 for the pearl or sold it to Mr Sathak for $650,000 in the absence of documents evidencing those transactions. 3) The judge should have decided that there was an open market for the pearl as a freshwater pearl of $200,000. If on the other hand he was entitled to assume and had proceeded on the assumption that the pearl was a saltwater pearl $250,000 was the maximum value of the pearl.

(1) Saltwater or freshwater?

13. It is true that the judge made no express findings that the pearl was a saltwater pearl but his award of $650,000 could only have been on the basis that on the balance of probabilities the pearl was a saltwater pearl. The experts had proceeded on the basis that it was a freshwater pearl and on that basis had valued it at a maximum of $200,000. The judge was clearly aware of the difference between saltwater pearls and freshwater pearls and in my view it is implicit throughout his judgment that he accepted Mr Jabir's evidence that the pearl was indeed a saltwater pearl.
14. Ms Day submits that the judge should not have gone behind the experts agreement that the pearl was a freshwater pearl, but Mr Marland for Mr Jabir made it clear on the first day of the trial that Mr Jabir's case was that the pearl was a saltwater pearl. Ms Day did not ask the judge to rule that it was too late to go behind the experts' reports and the case proceeded on the basis that it was an issue whether the pearl was a saltwater pearl or a freshwater pearl. Mr Jabir was cross-examined on the basis that the pearl was a freshwater pearl and was asked why the issue had come forward so late. He gave his reasons and in my view the judge was entitled to accept those reasons. If of course Mr Jabir had been disbelieved and had been held to be pursuing a dishonest claim, the expert's view would no doubt have prevailed but he was held to be an honest man.
15. Ms Day submits, as she submitted to the judge, that Ms Clayton had been told by Mr Jabir and Mr Sathak that the pearl was a freshwater pearl. That was an assumption on her part and the judge appears to have accepted Mr Marland's correcting intervention that that was not so. Since neither counsel had chosen to explore the identity of the persons on whom Ms Clayton had relied, that was entirely a matter for him as the manager of the trial. Mr Marland has sought to adduce fresh evidence from Ms Clayton, stating in terms that she did not derive the information from Mr Jabir or Mr Sathak but that is in my judgment an unnecessary application.

(2) The genuineness of Mr Jabir's agreements to buy and sell the pearl

16. The judge found as a fact that Mr Jabir did make genuine agreements to buy and sell the pearl. Jordans made no specific allegation of dishonesty but they were entitled to put Mr Jabir to proof and he surmounted that hurdle. Mr Jabir said (and the judge believed him) that there were other documents evidencing the sum of money he eventually received from Mr Ruff, but that there was no documentary evidence of legal export from Switzerland. The judge found that both transactions were genuine. Ms Day submits that the judge should not have found that the agreements were genuine because there was insufficient documentation evidencing the sales and because the prices in both the agreements were completely out of line with the evidence of comparable transactions given by the experts. She also submits that the judge never explained why the absence of proper documentation was not fatal to Mr Jabir's case when Jordans, as they were entitled to do, had put him to proof of the genuineness of the transactions.
17. As far as the absence of documentation is concerned, it is noteworthy that no application was ever made for specific disclosure of any documents evidencing the eventual payment by Mr Ruff to Mr Jabir which took account of the $500,000 due for the pearl which Mr Jabir said Mr Ruff had sold to him. The judge accepted in paragraph 9 of the judgment that more documentation could have been produced. Nevertheless he concluded that the transaction with Mr Ruff had taken place and the pearl had been paid for on the basis of the oral evidence of Mr Jabir and Mr Sathak. He declared himself satisfied that "in practice" pearls could be carried between countries in the EU without any customs declaration or other formality. His reasoning is set out in paragraph 10 of the judgment which I have read out. It is not, in my view, defective reasoning. Judges can often say little more than that having seen and heard a witness give evidence they believe him. This court cannot possibly reverse the judge and say that it is satisfied that the transactions were not genuine.
18. As far as the expert evidence of comparables is concerned, it is, as I have said, vitiated by the fact that the experts proceeded on the basis that the pearl was a freshwater pearl. It is true that Ms Clayton said that she thought that the difference between the two kinds of pearl could be exaggerated, but the judge was in my view entitled to prefer his own assessment of Mr Jabir and Mr Sathak, who had given evidence to him, to the evidence of transactions which were not strictly comparable when he came to his conclusion that the transactions were genuine transactions.

(3) The valuation exercise conducted by the judge

19. Again, Ms Day relied on the comparables referred by the experts in their evidence and submitted that they showed that, even if Mr Jabir's agreements to buy and sell the pearl were genuine agreements, the prices at which he bought and sold were grossly inflated. The judge recorded Ms Day's argument that the claimant was only entitled to the open market value and not any inflated price at which Mr Jabir had bought or agreed to sell on a private sale basis. He also recorded her submission as to what the open market value was in the following terms. In paragraph 25:

"When asked during final submissions how an open market price was to be found, Miss Day submitted that it was 'a price which would be agreed between a willing buyer and a willing seller who are both reasonably informed by the subject-matter of the bargain and not the price achieved by sale to a private client in the retail trade for two or three times its purchase price.'"

20. The judge then said at paragraph 26:

"It is to be observed that the claimant is explicitly claiming the price agreed between willing and informed buyers and sellers. The short answer in the instant case is that the claimant has demonstrated not just one but two sales between well informed and willing buyers and sellers, a sale between Mr Ruff and Mr Jabir and the sale agreed between Mr Jabir and Mr Sathak. Thus three expert dealers have demonstrated at what price they could sell. Mr Ruff got $500,000 from the astute and careful professional buyer, Mr Jabir, and Mr Jabir was able swiftly to resell to Mr Sathak, a successful Middle East pearl expert, at a 30 per cent mark up."

21. The judge then asked what better demonstration of value in the market could be found. He relied in the support of that rhetorical question on the judgment of Devlin J in Biggin v Permanite [1951] 1 KB 422 at page 438 and Zabihi v Janzemini & Ors [2009] EWCA Civ 851 at paragraph 36 per Sir Andrew Morritt C. He then concluded:

"Here the very article in question had in effect been twice professionally valued at $500,000 and once at $650,000. Mr Sathak indeed envisaged an ultimate sale of a further 20 per cent profit to a final purchaser, but no reliance is put upon that."

22. For my part I can see nothing wrong with this reasoning. Once the judge concluded that the sale and purchase of this particular and remarkable pearl were in fact genuine transactions at genuine prices, those transactions are indeed better evidence of market value than prices paid for other pearls which did not necessarily have the characteristics of the missing pearl. No doubt the pearl was not so individual an item as perhaps an oil painting but on any view it was a special object.
23. Ms Day is effectively reduced to saying that both Mr Jabir and Mr Sathak, experienced traders though they were, were mistaken as to the value of the pearl and the judge should have so found because the price agreed was greatly in excess of any known pearl which did not have a particularly prominent prominence, but the judge refused to accept that that was the position. He said at paragraph 32:

"The position might be different if I was satisfied that Mr Jabir had been duped or deceived and had bought an ordinary cheap pearl under the misapprehension that it was valuable. Perhaps a counterfeit Rolex or a bogus gold coin would be other examples of this. If that were the case then he would never had had the genuine article and so would not have lost its value when it vanished. But what he had was a clearly remarkable pearl, and accepted as such by three dealers. It cannot therefore, in my view, be just to award him only a fraction of the value attributed to it by the three expert dealers on the basis that two retained expert witnesses, who have never seen the pearl in question, could present evidence of much lower prices for other pearls."

24. If the judge had been satisfied that the price was inflated in the way suggested, no doubt he would not have made the award which he did, but he was not so satisfied and for my part I am far from being convinced that he was wrong. Indeed any other conclusion would be unfair to Mr Jabir, who has undoubtedly lost a special pearl through the fault of Jordans, for which they have had to admit liability. Even Ms Clayton agreed that a mark up of 30 per cent was normal in genuine transactions and it seems to me therefore that the judge was right to award $650,000 rather than merely $500,000 and I would dismiss this appeal.

Lord Justice Munby:

25. I agree and there is nothing that I can usefully add.

Sir Henry Brooke:

26. I also agree.

Order: Appeal dismissed