CITIBANK NA v (1) ERCOLE LTD [2001] EWCA Civ 1562

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(Mr Justice Bell)
[2001] EWCA Civ 1562Venue Royal Courts of Justice, Strand, London WC2, Monday, 15th October 2001
Between
CITIBANK NAClaimant/Respondent(1) ERCOLE LTD(2) GUIDO CARIERI(3) LIVIA CARIERIDefendants/Applicants
Before
Lord Justice Robert WalkerLord Justice KeeneMR MICHAEL HARTMAN (Instructed by Messrs Abercoin, 258 Belsize Road,London NW6 4BT) appeared on behalf of the Applicants.The Respondent did not appear and were unrepresented.Date 15 October 2001
[1]Monday, 15th October 2001 LORD JUSTICE ROBERT WALKER: This is a renewed application for permission to appeal. The applicants are Ercole Ltd (a Jersey company which was the first defendant below) and Mr Guido Carieri and his wife, Mrs Livia Carieri, (who were the second and third defendants). They are Italian citizens and they own and control, either directly or indirectly, the Jersey company ("Ercole"). Mr and Mrs Carieri and their company wish to appeal from an order of Bell J made in the Queen's Bench Division on 24th May last. There is also an application for a stay and for the admission of fresh evidence, although that is, as I understand it, really directed to the new trial which they wish to obtain.[2]Bell J's order was made after the trial of an action by Citibank, an American bank, so far as the issues in the action had not already been disposed of by summary judgment under Part 24 of the Civil Procedure Rules. The judge gave judgment for Citibank for a sum of just under US$2.5 million and dismissed the defendants' counterclaim. Summary judgment on part of the claim had already been given for a sum of just under $700,000. The grounds of appeal relate almost exclusively to the judge's conduct of the trial, but it will be quickest in the long run if I explain the background and the issues in the case rather than going immediately to what happened at the trial.[3]Mr Carieri and his wife live in Palermo, Sicily. Mr Carieri says that he speaks only a few words of English, and the judge accepted that. (I shall have to come in due course to the implications which that has had for the litigation.)[4]Mr Carieri was a wealthy man with his own luxury goods business. He had an interest in art, especially 19th century Italian painting. He collected works of art and the Bank initially regarded him as simply a collector, although it became apparent that (although not being a full-time dealer) he sold items from time to time as well as acquiring them.[5]The Bank ran an Art Advisory Service (which I will refer to as "AAS") in New York and London for its clients. In 1991 Mr Carieri arranged to borrow $2 million from Citibank in London. Ercole was formed in Jersey as a corporate vehicle to take the loan, but the loan was guaranteed by Mr and Mrs Carieri. Security was to be provided by a chattel mortgage. The relevant documents (all in the English language) were signed on 15th and 19th November 1991. They are fully described in the judge's judgment. All were expressly governed by, and contained an express submission to, English law.[6]The individuals most closely involved in these arrangements on behalf of the Bank were Mr Gherardesca of AAS (who visited Mr Carieri in Italy to appraise various works of art for mortgage purposes) and Mr Ciravegna, the client relationship manager in London responsible for this account. Mr Carieri's evidence is that his communications with these two men were always in the Italian language; and that evidence is entirely credible. Mr Ciravegna later left the employment of Citibank and in this litigation he was for some time acting as an intermediary between Mr Carieri and his wife and Ercole on the one hand and the English solicitors acting for them on the other hand. The applicant's case as put today by Mr Hartman is that Mr Ciravegna was throughout in breach of his duty to the applicants, by whom he was being retained, and failed in many fundamental respects to put their real case to their solicitors and hence to the court.[7]Mr Carieri did not at first become a client of AAS. But then in February 1992 he signed an agreement under which he was to receive recommendations as to art investments, while retaining full control.[8]In December 1992 the overdraft facility was increased to $3.5 million. Further chattel mortgages followed. The general effect was that the Bank had physical control of a pool of works of art as security, with power to sell in the event of default, but with Mr Carieri having the power to make withdrawals from the pool of security provided that suitable substitute works of art were provided.[9]The judge in his judgment traced in detail the deterioration in the relationship between Mr Carieri and Citibank and AAS from November 1995 until the formal demand for repayment was finally made by Citibank on 2nd January 1998. I need not, I think, go through the details of that deteriorating relationship. When repayment was demanded it was not made. The Bank consigned items which it held as security to Sotheby's for sale. Mr Carieri claims that the Bank was in breach of duty in the way that these sales were conducted. This was what the judge called the second live counterclaim in the case.[10]The Bank commenced proceedings on 20th July 1999. Summary judgment in a substantial sum was obtained by Citibank, but that sum was reduced on appeal and the issues left open were correspondingly extended. The judge in his judgment indicated five salient matters on the defence and counterclaim as they originally stood: (i) it was alleged that the loan was not repayable for 10 years unless there was significant default (a point which was denied by the applicants); (ii)the loan agreement was said to be unenforceable because it was tainted with illegality arising out of gross undervaluations, known to be false, made in order to obtain export licenses for the export of works of art from Italy; (iii)it was said that Mr Carieri had increased his borrowings in reliance on negligent over-valuations of security items made by Mr Gherardesca of AAS; (iv)it was said that Mr Carieri also purchased other items in reliance on negligent over-valuations made by Mr Gherardesca; and finally (v)there was a claim for breach of contractual or equitable duty in failing to obtain adequate value on realisation of items comprised in the security.[11]By the time of the appeal in the summary judgment proceedings, points (i) and (ii) had been abandoned. On the appeal (which was heard by Sir Christopher Bellamy QC on 6th July 2000) point (iii) was held to be unarguable (principally but not solely on the ground of there having been no duty of care owed to the applicants) and there was no appeal on that but points (iv) and (v) alone were allowed to stand as possible defences by way of set-off or as matters of counterclaim.[12]It had never been suggested at any stage until then, or indeed until the trial of the action, that the defendants were simply not bound by the loan agreements, guarantees and mortgages on the ground that they did not understand them. The judge did not allow this point to be raised, for the first time, at trial. Until that late stage the defendants had throughout been advised by well-known and respected London solicitors and counsel.[13]Mr Carieri's case at trial, as it emerged, was that he had not truly given any instructions to his solicitors or counsel at all, that all instructions had been given by Mr Ciravegna, who had misrepresented fundamentally the nature of his case and that Mr Carieri had repeatedly signed statements of truth, witness statements and other documents wholly ignorant of their contents and simply in blind reliance on Mr Ciravegna.[14]I should read what the judge said about the course of the trial itself. "Mr Carieri told me that he did not have the funds to instruct solicitors and counsel for the trial. Citibank does not accept that, but it matters not why Mr and Mrs Carieri took over their own representation. They attended court on 25 April 2001, the first day of the trial, and throughout all seven days of the trial. They always brought an interpreter with them. The interpreters translated everything said in English into Italian for Mr and Mrs Carieri. Apart from the odd word, everything said by Mr and Mrs Carieri was said in Italian and translated into English. Mr Carieri conducted the defence case on behalf of himself, his wife and their company, Ercole, with very occasional contributions from Mrs Carieri. He made opening and closing submissions. He cross-examined witnesses who were called by Mr Lord, counsel for Citibank. He gave evidence, both orally and by a number of written statements. Mrs Carieri gave evidence by written statements. Mr Lord sympathetically accepted this course in the light of her past illness. Mr Carieri put in written statements by Mr Ciravegna, and at Mr Lord's request I therefore accepted letters by Mr Ciravegna in evidence. Mr Carieri also put in written statements by a Mr Morgan. Despite Mr Carieri's lack of English, and his lack of familiarity with English legal procedures, and an understandable, occasional nervousness, he appeared to make every point he could legitimately make on behalf of himself, Mrs Carieri and Ercole, together with a number of others which counsel or solicitor advocate would not have been allowed to make, if acting for him, because they had already been decided against the defendants, or abandoned, or never pleaded or properly pleaded so as to give timely notice of them."[15]I should also read what

the judge said about Mr Ciravegna:

"I can draw no useful inference from the fact that Citibank did not call Mr Ciravegna. Witness statements made by him were served by the defendants' solicitors in support of their case in the Part 24 proceedings, and Mr Carieri told me that he had been paying Mr Ciravegna $50,000 a year to manage his case on his behalf with his solicitors, until November 2000 when Mr Carieri broke off relations with Mr Ciravegna because, he said, Mr Ciravegna betrayed his trust. Nevertheless, Mr Carieri was insistent that I should take account of Mr Ciravegna's written statements as part of the defendants' case."
[16]In his judgment the judge considered the surviving parts of the set-off defence and counterclaim in great detail. He rejected parts of Mr Carieri's evidence and preferred the evidence of other witnesses. The judge dealt successively and in detail with a large number of different works of art, the particulars of which I need not go through. The judge concluded that the first live counterclaim failed. The judge then examined the second live counterclaim, that is of alleged breach of duty in realisation of the security in relation to 13 items which were sold, or in some cases not sold, by Sotheby's, and the judge made detailed findings on those matters as well. He concluded that the second cross-claim also failed.[17]The defendants' provisional skeleton argument, settled by counsel (Mr Michael Hartman) states at the outset that the application for permission to appeal "is based primarily on breaches of his client's fundamental rights to a fair trial." This point has been developed at some length both in written submissions, which Mr Hartman has prepared in the course of the last three or four days, and in his oral submissions this morning. The recurring theme is that Mr Carieri's ignorance, not only of English law and procedure, but also of the English language, added to the handicaps which he was facing as a litigant in person. To that Mr Hartman has added the plea, which he has clearly and forcefully put, that this was a litigant in person whose case had never properly been placed before the court because of the delinquent behaviour of Mr Ciravegna, his chosen intermediary for communication with his solicitors.[18]The judge had the first set of difficulties, that is those arising out of Mr Carieri's position as a non-English speaking litigant in person, well in mind (see for instance paragraph 26 of his judgment, which I have read, and also paragraph 16). The judge did not have clearly in mind (until Mr Hartman appeared when judgment was to be handed down at the end of the trial) the extraordinary claim that Mr Carieri's case had never really been put properly either in the pleadings or indeed in the witness statements which the court had seen. The judge had to deal with all those difficulties either in the course of the trial or on the occasion when judgment was handed down. The judge also had to see that Citibank had a fair trial of its claim. An adjournment of the trial, with many witnesses and a mass of documentary evidence, would have caused great hardship and potential injustice. So would a reopening of the case when judgment was to be handed down. Mr Hartman says that he asked to be permitted to cross-examine two witnesses and said that it would not take more than one and a half to two days. That plainly would have been a considerable disruption, especially if it had led to a claim for a new trial.[19]This is an extraordinary application, because the position is that there were pleadings and witness statements in the English language, the pleadings being verified by Mr and Mrs Carieri having signed a statement of truth and the witness statements being signed by them. All these documents were placed before the court by competent and responsible lawyers apparently on their instructions. There must be a very strong presumption that the pleadings and witness statements produced in that way have been prepared on the client's instructions and do represent the case which they wish to place before the court.[20]Proceedings in an English court must be conducted in English, if necessary through an interpreter, although for a litigant in person to address the court rather than to give evidence through an interpreter is a truly exceptional course. The only two authorities in which the matter seems to have been discussed at any length are the decision of Roxburgh J in Re Trepca Mines Ltd [1960] 1 WLR 24 and the interlocutory ruling of Scarman J in Re Fuld [1965] 2 All ER 653. Both judgments make it clear that the judge has a wide discretion as to what is the appropriate course to take in an attempt to do justice to both sides.[21]In this court Mr Hartman has drawn attention to paragraph 21 of the Practice Direction relating to Part 32 of the Civil Procedure Rules and also to paragraph 23, which would have applied if this was a case in which there had been a direction for witness statements to be made in Italian. But it was not. The witness statements were produced in the English language, and at any rate at the interlocutory stages, there was no reason to suppose that they were not witness statements from litigants who, although Italian citizens, were conversant with the English language. Mr Hartman tells me, on instructions, that everyone throughout this litigation knew that Mr and Mrs Carieri did not speak English. Without in any way being critical of Mr Hartman for that statement, it seems to me that its mere breadth, the suggestion that everyone knew, is bound to lead to some scepticism.[22]As to the conduct of the trial after it became apparent that Mr Carieri was to conduct the matter as a litigant in person, it is said that the judge and counsel on the other side failed to extend to him the indulgence and the assistance which litigants in person are entitled to expect. However, in relation to the detail of the criticisms, it seems to me that the suggestion that Mr Ciravegna, who had put in a witness statement on behalf of Citibank, should then be called by the judge of his own volition (after Citibank decided not to call him) is a remarkable one. The judge is recorded at the end of the first day as stating that he was not going to decide who should be called as witnesses and that was a matter for the parties. Similarly in relation to the judge's decision not to have Mr Gherardesca recalled, that application having been made not during the course of the trial but on the occasion when judgment was to be handed down.[23]In his supplementary submissions, Mr Hartman has also drawn attention to about 15 passages in the course of Mr Carieri's long cross-examination, in which it is said that Mr Carieri was prevented from answering or fully explaining his answers to questions put to him. We have referred to all these instances. The great majority of them are cases where either Mr Lord (counsel for Citibank) or the judge had to remind Mr Carieri of the need to listen to the question and to answer it, rather than to embark on discursive addresses which were appropriate not to evidence but to closing submissions. The only exceptions are, I think, two instances where Mr Carieri was stopped from making what would or might have been an inadvertent waiver of privilege as regards communications between himself and his lawyers. It is therefore correct to say that Mr Carieri was on several occasions stopped from continuing with remarks which were not really answering the questions put to him or which might have led Mr Carieri into peril.[24]I have no doubt that the trial was an exceptionally difficult one for everyone: for Mr Carieri, for counsel on the other side and for the judge. But having listened carefully to all Mr Hartman's submissions, I am quite unpersuaded that Mr Carieri's difficulties were increased by any unfairness on the part of the judge, who seems from the transcripts to have been calm and patient throughout, or by any failure by the other side's lawyers in their duty to a litigant in person. It may be that Mr Carieri has a claim, and if Mr Hartman is right in all he tells us an unanswerable claim, against Mr Ciravegna for having failed so lamentably, in spite of a substantial retainer, to have conveyed the applicants' true case to their London solicitors. But again I am quite unpersuaded that justice would require or even permit that on that ground the whole of this matter should be reopened.[25]It seems to me that an appeal would be hopeless, and I would dismiss these applications.

LORD JUSTICE KEENE: I agree.

Order

Applications dismissed.

Cited in 1 later judgment