First East Auction Holdings Pty Ltd v Ange

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST D
No. 8593 of 2009

FIRST EAST AUCTION HOLDINGS PTY LTD (ACN 063 112 505)	Plaintiff
v
MIMI ANGE	Defendant

---

JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATE OF HEARING:	8‑11, 16 and 19 February 2010
DATE OF JUDGMENT:	16 March 2010
CASE MAY BE CITED AS:	First East Auction Holdings Pty Ltd v Ange
MEDIUM NEUTRAL CITATION:	[2010] VSC 72

---

CONTRACT – Paintings consigned for auction – Written consignment agreement – Whether agreement incorporated by reference terms contained in another document – Held: terms incorporated and formed part of the consignment agreement.

CONTRACT – Penalty – Whether penalty doctrine applies where allegedly penal provision triggered in absence of breach of contract – Provision capable of being triggered by breach – Held: penalty doctrine inapplicable – Provision enforceable – Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292.

CONTRACT – Paintings consigned for auction – Paintings withdrawn from auction by seller – Whether withdrawal a breach of contract – Held: withdrawal not a breach.

TRADE PRACTICES – Unconscionable conduct – Paintings consigned for auction by wife – Matrimonial dispute with husband – Husband and wife both legally represented in dispute – Auctioneer knew of legal representation and of disputed ownership of the paintings – Whether auctioneer’s conduct in nevertheless entering into consignment agreement with wife was unconscionable – Held: no unconscionable conduct.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Kendall QC with Mr M La Pirow	Simon Parsons & Co
For the Defendant	Mr T Hurley	Robert Hodgens LLB
For the Second Defendant to Counterclaim	Mr T Hodgson	Rigby Cooke Lawyers

TABLE OF CONTENTS

Parties and Introduction................................................................................................................... 2

Factual narrative................................................................................................................................. 4

Were the general conditions incorporated into the consignment agreement?..................... 35

Is the withdrawal fee term an unenforceable penalty?............................................................. 42

If the general conditions were not incorporated, was the withdrawal of the paintings a breach of the consignment agreement?................................................................................................................ 48

If the plaintiff is entitled to recover unliquidated damages, what is the proper measure of that damage?.............................................................................................................................................................. 50

Did the plaintiff act unreasonably in failing to mitigate its damage?.................................... 58

Was the consignment agreement frustrated? If so, was Mrs Ange thereby discharged from performance?..................................................................................................................................... 58

Did the plaintiff engage in unconscionable conduct?.............................................................. 59

Conclusions and orders.................................................................................................................. 62

HIS HONOUR:

Parties and Introduction

The plaintiff, First East Auction Holdings Pty Ltd, is an auctioneer of fine art. At relevant times, it traded under the name ‘Bonhams & Goodman’.

On 20 March 2009, the defendant, Mimi Ange, agreed to consign 22 paintings (‘the paintings’) to the plaintiff for sale at an auction to be held in Melbourne on 6 May 2009.

At the time of the consignment, Mrs Ange was separated from her husband, Con Ange, and they were negotiating the terms of a property settlement between them. They were each represented by solicitors in that negotiation.

Mrs Ange’s solicitors informed Mr Ange’s solicitors of the proposed auction. As a result, Mr Ange applied to the Family Court of Australia for an injunction restraining Mrs Ange from selling the paintings. On 5 May 2009, the day before the auction, the Family Court granted Mr Ange’s application. Orders were made requiring Mrs Ange to withdraw the paintings from sale at the auction. Mrs Ange complied with the order.

The plaintiff contends that the consignment agreement between it and Mrs Ange incorporated its ‘General Conditions of Business’ (‘the general conditions’), and that those general conditions include a term requiring Mrs Ange to pay it a ‘withdrawal fee’ if the paintings were withdrawn from sale before auction (‘the withdrawal fee term’). Given the high value of the paintings, and the lateness of the withdrawal, that fee (including GST) was $731,280. The plaintiff claims that amount from Mrs Ange.

Alternatively, the plaintiff claims unliquidated damages for breach of the consignment agreement.

Mrs Ange denies that the general conditions formed part of the consignment agreement, because they were not attached to the consignment agreement form which she signed on 20 March 2009.

In the alternative, if the general conditions were incorporated into the consignment agreement, Mrs Ange contends that the withdrawal fee term is unenforceable against her on two grounds. First, because the term does not constitute a genuine pre‑estimate of the plaintiff’s loss in the event that the paintings were withdrawn from sale, and the term is accordingly void as a penalty. Second, Mrs Ange contends that the conduct of the plaintiff in imposing the withdrawal fee term as a term of the consignment agreement constituted unconscionable conduct within the meaning of ss 51AB and 51AC of the Trade Practices Act 1974 (Cth). Further or alternatively, Mrs Ange contends that the plaintiff engaged in unconscionable conduct by persisting with its intention to auction the paintings after the receipt of notice from Mr Ange that he claimed an interest in the paintings and required them to be withdrawn from sale. She contends that the plaintiff’s contraventions of ss 51AB and 51AC of the Trade Practices Act form a sufficient basis for the Court to exercise its discretion under s 87 of the Act to set aside the consignment agreement as a whole, or to restrain the plaintiff from enforcing the withdrawal fee term.

Mrs Ange also challenges the plaintiff’s alternative unliquidated damages claim. She contends that her withdrawal of the paintings did not constitute a breach of the consignment agreement and that, accordingly, no damages are payable by her. Alternatively, she challenges the plaintiff’s quantification of its damages and alleges a failure by the plaintiff to take reasonable steps to mitigate its loss.

The plaintiff makes a further claim against Mrs Ange, in respect of legal costs incurred by it in relation to Mr Ange’s claims and the Family Court proceedings. It claims those legal costs under a term of the general conditions (‘the legal costs term’), or as unliquidated damages arising from the withdrawal of the paintings from sale. Mrs Ange denies that the legal costs term forms part of the consignment agreement, contends that some or all of the legal costs claimed by the plaintiff are not contemplated by that term and in any event challenges the quantum of the legal costs which have been claimed. At the commencement of the trial, with the agreement of the parties, the Court directed that issues of quantification of the claimed legal costs would await the Court’s determination as to the categories of costs, if any, which were recoverable by the plaintiff under either the legal costs term or as part of its unliquidated damages claim. The quantum of any amount recoverable on this ground should be assessed by an Associate Justice if a liability is established.

Finally, by way of introduction to the proceeding and the parties, it is necessary to note that Mrs Ange made a counterclaim in the proceeding against the plaintiff and Mr Ange. As against the plaintiff, the counterclaim seeks declaratory relief that the withdrawal fee term constitutes an unenforceable penalty, that the plaintiff has engaged in unconscionable conduct in contravention of ss 51AB and 51AC of the Trade Practices Act, and consequential relief.

As against Mr Ange, Mrs Ange claimed indemnity in respect of any amount which she is adjudged liable to pay to the plaintiff. The Court directed that the counterclaim against Mr Ange would be tried separately from the other issues in the proceeding. Shortly before the commencement of the trial, Mr and Mrs Ange resolved their property dispute. The settlement agreement between them makes provision for any liability of Mrs Ange to the plaintiff, and for the disposition of Mrs Ange’s claims against Mr Ange for indemnity in respect of any such liability.

Factual narrative

Mr and Mrs Ange were married in 1991 They have three children. They separated in December 2007.

During the course of the marriage, Mr Ange conducted a successful business retailing adult products through a chain of shops. There were significant cash takings from this business. Mr Ange kept large amounts of cash in a safe located in the matrimonial home. The evidence indicated that many paintings were bought and sold by Mr and Mrs Ange using that cash. Mrs Ange gave uncontradicted evidence that Mr Ange would pay for paintings with large amounts of cash, sometimes between $50,000 and $100,000. A significant collection of valuable paintings was acquired in this way (‘the art collection’). Mr Ange estimated that approximately 60 per cent of the art collection was acquired by cash payment, and the remaining 40 per cent by cheque. He freely acknowledged that the cash he used was takings from the businesses conducted by him.

Mr and Mrs Ange purchased paintings for very large amounts over a significant period of time. For example, Mr Ange produced three handwritten receipts, two of them undated, from an arts dealer, Ronald Coles, evidencing payments totalling $3.8 million at unspecified times for 25 paintings at prices ranging from $12,000 to $1 million.[1] Mr Ange also produced three copy cheques to Mr Coles totalling $451,000. Mr and Mrs Ange kept no formal records of the considerable art purchases from Mr Coles. Rather, they relied upon Mr Coles to maintain a running account of their dealings. The art collection was totally uninsured.
[1]As referred below, Mrs Ange produced some receipts from Mr Coles to Mr Smith on 12 March 2009. Mr Smith was concerned at the authenticity of the receipts, because they purported to record purchases at times prior to the probable dates of acquisition by Mr and Mrs Ange.

Although the evidence does not enable any conclusions to be drawn as to whether cash receipts of Mr Ange’s businesses were not accounted for to the Australian Taxation Office, the evidence demonstrates a real case to be investigated in that regard, at least during the periods in which Mr Ange was expending large amounts of cash on art purchases which are not the subject of proper accounting records. I make no adverse finding against Mr Ange as to his taxation affairs. In particular, I have not taken the possibility that he may have understated income to taxation authorities as a ground for rejecting him as a credible witness in any respect. As appears below, there are other matters which affect Mr Ange’s credibility as a witness. However, when a Court receives evidence indicating a real case to be investigated as to the avoidance of tax obligations, the Court should not turn a blind eye. In such circumstances, it is appropriate for a Court to refer the evidence to the relevant taxation authority to enable it to make such investigations and take such action (if any) as it determines. The Court will refer the relevant evidence in this case.

By the time they separated, Mr and Mrs Ange had a joint net worth of many millions of dollars. In addition to the matrimonial home, which Mrs Ange estimated to be worth about $3.5 million, and the art collection, they own many other real properties in Australia and have other significant assets.

Following the separation, Mrs Ange remained in the matrimonial home, and accordingly had possession of the art collection.

The Court received evidence of the history of dealings between the plaintiff and Mr and Mrs Ange prior to Mrs Ange entering into the consignment agreement on 20 March 2009. These dealings are relevant for three reasons. First, the course of conduct between the plaintiff and Mrs Ange prior to the making of the relevant consignment agreement on 20 March 2009 is relevant in determining whether the general conditions form part of the consignment agreement. Second, the dealings form the surrounding circumstances in which the consignment agreement was made. Third, the dealings are relevant to Mrs Ange’s defence based on alleged unconscionable conduct by the plaintiff. Further, the dealings between the parties after Mrs Ange consigned the paintings for sale are also relied upon by Mrs Ange as supporting her unconscionable conduct defence. The relevant dealings are described below.

The Chairman and Chief Executive Officer of the plaintiff, Timothy Goodman, first met Mrs Ange in November 2000, when she attended at an auction conducted by the plaintiff and purchased a number of items of artworks. No documents evidencing that transaction were in evidence.

Mr Goodman met Mr Ange in about 2002. Shortly after that time, Mr Goodman dealt with Mr Ange in relation to a number of paintings purchased by him from auctions conducted by the plaintiff.

In March 2005, Mr Ange consigned a valuable painting to the plaintiff for sale.

In May 2005, Mrs Ange attended an auction conducted by the plaintiff and purchased a significant quantity of furniture. Mr Goodman also recalled discussions with Mrs Ange concerning jewellery auctions conducted by the plaintiff, but could not recall whether Mrs Ange was the successful bidder at any of these auctions.

Given their obvious wealth and interest in fine art, furniture and jewellery, Mr Goodman maintained contact with both Mr and Mrs Ange, who he saw as potential buyers or sellers at auctions conducted by the plaintiff. On occasions, Mr Goodman would contact Mr Ange and draw specific artworks which the plaintiff was offering for sale to his attention.

At an unidentified time, Mr Ange invested in a company conducted by Mr Goodman. That company no longer trades and Mr Ange lost his investment.

In October 2006, the plaintiff employed Geoffrey Smith as its National Head of Art. Mr Smith had previously been employed by the National Gallery of Victoria in an number of capacities, and was its Curator of Australian Art when he left that employment shortly before commencing employment with the plaintiff.

In the period following his employment by the plaintiff, Mr Smith was taken by Mr Goodman to meet a number of substantial clients and to view their art collections. In January 2007, Mr Goodman and Mr Smith attended at the home of Mr and Mrs Ange and viewed the art collection.

On 26 June 2007, Mr Goodman and Mr Smith again attended at Mr and Mrs Ange’s home. The meeting was pre-arranged, following a discussion between Mr Goodman and Mr Ange, in which Mr Ange indicated that some paintings may be placed with the plaintiff for sale.

In their witness statements, Mr Goodman and Mr Smith indicated that this was the first time that Mr Smith had attended at the home, that he was introduced to Mr and Mrs Ange for the first time and that Mr and Mrs Ange then showed the art collection to him. However, when a document evidencing the January 2007 visit was put to Mr Goodman and Mr Smith, they readily acknowledged that they were mistaken and that they had attended at that earlier time. Mr Smith also acknowledged that, given this, it was possible that he has ‘merged’ in his mind some of the events which he described in his evidence as having occurred on 26 June 2007, in particular concerning the matters leading up to the business at hand on 26 June 2007, with the events which took place during his visit in January 2007. Taking the evidence concerning the conversations and dealings between those present on 26 June 2007 as a whole, I do not accept that anything of significance turns upon the initial failure to recall the January 2007 visit or the possible merging of events in Mr Smith’s mind as to the preliminary parts of the two visits. I am satisfied that his recollection of the relevant business dealings and related discussions on that day was not affected by any merging in his mind of the two occasions.

There is no dispute that it was initially proposed that Mrs Ange would consign two paintings for sale at the plaintiff’s forthcoming auction: ‘The Cloud’ by Sir Arthur Streeton (at a reserve price of $400,000) and ‘Seaside Pastoral’, also by Streeton (for a reserve price of $240,000). Nor is it in dispute that, after the relevant consignment agreement form was prepared by Mr Smith, but before it was signed, a decision was made to remove ‘Seaside Pastoral’ from the consignment. Further, following negotiation, it was agreed that the plaintiff would not charge any seller’s commission or its standard insurance charge of 1.5 per cent.

The dispute concerning the conversations on 26 June 2007 concerns the role of Mrs Ange in the negotiations and an alleged statement by Mr Ange that Mrs Ange was the owner of the art collection.

Mr Goodman and Mr Smith gave consistent evidence. They recalled that, at the conclusion of the tour of the home and the viewing of the art collection, Mr Goodman asked a question to the effect ‘Would you like to go ahead and sell any of the paintings?’ (Mr Goodman’s recollection); or ‘Are you interested in consigning something to our next sale?’ (Mr Smith’s recollection). In response, they said that Mr Ange replied with words to the effect ‘It’s not up to me, they are Mimi’s paintings. It’s her decision’ (Mr Goodman’s recollection); or ‘That is entirely Mimi’s decision because it is Mimi’s collection. The art belongs to her’ (Mr Smith’s recollection). They then gave consistent evidence that Mrs Ange nominated ‘The Cloud’ and ‘Seaside Pastoral’ as being paintings she was interested in selling, and there was discussion with her about the likely selling prices. Following this discussion, Mrs Ange decided to consign both paintings for sale at the plaintiff’s forthcoming auction in Melbourne. There was then discussion with Mrs Ange concerning commission and fees, and it was agreed that the plaintiff would not charge any seller’s commission or insurance fees. Mr Smith prepared the consignment agreement. However, once the consignment agreement form had been completed by Mr Smith, Mrs Ange said that she had changed her mind, and only wanted to sell ‘The Cloud’. Following deletion of the reference to ‘Seaside Pastoral’, Mrs Ange signed the consignment agreement form.

Mr and Mrs Ange gave consistent evidence as to the role of Mrs Ange in the negotiations on 26 June 2007. They said that Mr Ange conducted all the relevant negotiations as to price and commissions. Mrs Ange offered no explanation as to why she was the nominated seller who signed the agreement. Mr Ange said it was his decision to put the agreement in Mrs Ange’s name because:

I just thought as part of husband and wife, keep my wife happy, give her a cheque for [$400,000]. Let her put in her account, she’d be happy. Nothing more to it than that.

I turn to consider the disputed statement by Mr Ange. In his witness statement, which was filed after he had had an opportunity to consider the plaintiff’s witness statements, Mr Ange recalled only that his response to Mr Goodman’s question was to the effect: ‘Mimi and I will discuss it and let you know’.

In his oral evidence, Mr Ange gave different and more expansive evidence. He said that he directed Mrs Ange to sign the consignment agreement in respect of ‘The Cloud’ in the following circumstances. He said that Mr Smith was ‘struck’ by ‘The Cloud’ during the course of the viewing of the art collection, and said to Mr Ange that he had a client who would pay $400,000 for that painting. In that context, Mr Ange said that:

I told Mr Goodman, “I don’t have a problem selling that painting. It’s her painting too, you need to talk to her.”[2]

[2]Emphasis added.

On a more general level, as to whether Mr and Mrs Ange wished to place any paintings for sale in the next fine art auction to be conducted by the plaintiff, Mr Ange said:

There was a discussion on putting entries into the next art auction, but I made it clear that she needs to have an input into it. It’s her collection too. It was always my understanding with Mr Goodman, it’s my collection, but for the sake of marriage I said it’s her collection too, you need to talk to her.[3]

[3]Emphasis added.

Next, Mr Ange recalled that he told Mr Smith that Mrs Ange ‘can pick the paintings that she wants to sell’; and that Mrs Ange then spoke with Mr Smith in that regard. Following that discussion, Mr Ange initially said that Mrs Ange told Mr Smith that she wanted to sell two paintings, ‘The Cloud’ and ‘Seaside Pastoral’ and that he disagreed with that course. When Mrs Ange said that she wanted to sell the two paintings, Mr Ange said:

I pulled her aside and said we’re not going to sell two, we’re going to sell one and the reason is the last time Mr Goodman took two of our paintings to put into his auction they were both returned with the highest bid being well under the reserve. I said I can’t trust him to take two, let’s give him one …[4]

[4]Emphasis added.

Later, Mr Ange said that it was in this conversation that he told Mrs Ange that ‘Seaside Pastoral’ was not to be sold.

Later again in his cross‑examination, Mr Ange gave a different version of events. He said that Mr Smith took Mrs Ange aside and they had a discussion about which paintings she wanted to sell. He saw Mr Smith then commence filling out a consignment agreement and, at that time, he said that Mrs Ange came and spoke with him. He gave the following evidence:

He took her aside and he started filling in the consignment note. She came to talk to me. I told her, “We’re not selling the ‘Seaside Pastoral’ at any cost. Go and get it struck off. She went over, she struck it off, she signed off and she got the receipt. I said, “Keep the receipt, you’ll get the cheque”…Exactly what happened.[5]

[5]Emphasis added.

Mr Ange confirmed this second version of events, in the following terms:

Jeffrey Smith and her were doing the selecting. I was talking to Tim Goodman continuously about other things because we had a relationship outside of art as well. She agreed to sell those two. He started to sign them up. He came over to me and said, "Do the consignment note" I said, "No no put it in her name" and she comes over to me and says, "I'm selling two" I said, "Which ones?". I've agreed on [The Cloud] because I agreed on [The Cloud] because he promised me 400. I said, "What's the other one you're selling?" she goes, "I'm selling that one" [a reference to ‘Seaside Pastoral’]. I said, "No we're not selling that. Go and get it struck off".

There is a difference between the two versions of events given by Mr Ange. In the first version, Mr Ange said that he ‘pulled’ Mrs Ange aside when he heard that she wanted to sell ‘Seaside Pastoral’. He also referred to some prior dealings with the plaintiff as being the principal reason for not wanting to sell two paintings; only later saying that he did not want to sell ‘Seaside Pastoral’. In the second version, Mr Ange said that Mrs Ange spoke privately with Mr Smith about the paintings to be sold and then ‘came to talk’ to Mr Ange and told him that she had decided to sell both ‘The Cloud’ and ‘Seaside Pastoral’. It was at that time that he told her that ‘Seaside Pastoral’ would not be sold ‘at any cost’. In the second version, Mr Ange made no reference to the reason which he first gave to Mrs Ange for not wanting to sell both paintings, based on prior dealings with Mr Goodman when two paintings were returned with the highest bids being well under the reserve.

The inconsistency in Mr Ange’s evidence causes me to doubt the accuracy of his recollection concerning the events at the 26 June meeting, including as to the disputed statement. Further, as appears below, there are other reasons for rejecting his evidence concerning the disputed statement.

In her witness statement, Mrs Ange said that all of the discussions concerning which paintings were to be sold were between Mr Ange and Mr Smith, that she listened to that part of the conversation, and that she denied the evidence of Mr Smith and Mr Goodman. In her oral evidence, Mrs Ange said that she could not remember what her husband said in answer to Mr Goodman’s enquiry as to whether Mr and Mrs Ange wished to consign any paintings for sale and that she was not present during all of the discussions. Further, she said that Mr Ange decided what paintings would be sold, a reference to both ‘The Cloud’ and ‘Seaside Pastoral’, and that Mr Ange asked if she agreed with that course, which she did. She then signed the consignment agreement form at Mr Ange’s direction.

Initially, Mrs Ange said that she could not recall if ‘Seaside Pastoral’ was crossed out on the form before or after she signed. Later, she said that both paintings appeared on the form at the time she signed it, at the direction of Mr Ange, and that it was later that he changed his mind and ‘Seaside Pastoral’ was crossed out.

The inconsistency in Mrs Ange’s evidence concerning important aspects of the events which took place on 26 June 2007 causes me to doubt her recollections.

In contrast to Mr and Mrs Ange, Mr Smith and Mr Goodman gave consistent evidence, as summarised above. They presented as more reliable witnesses, and I prefer their evidence to that of Mr and Mrs Ange. Furthermore, as to the disputed statement, that Mr Ange told Mr Goodman and Mr Smith that the art collection belonged to Mrs Ange, the plaintiff’s version of events is the more probable. The following matters support this conclusion.

First, the plaintiff’s version was clearly articulated in witness statements which were served on the representatives of Mr and Mrs Ange before they were required to serve their witness statements. Notwithstanding this, as noted above, Mr Ange did not include his version of his response to Mr Goodman’s question in his witness statement. Instead, he gave a different version: ‘Mimi and I will discuss it and let you know’. Mrs Ange did not say in her witness statement that she did not hear or remember what was said; to the contrary, she said that she listened to the relevant conversations with her husband and denied the evidence of Mr Goodman and Mr Smith.

Second, until the trial of the proceeding, Mrs Ange maintained at all relevant times that it was understood between her and Mr Ange that she was the owner of the whole of the art collection. For example, in an affidavit sworn by Mrs Ange on 5 May 2009, in opposition to Mr Ange’s application in the Family Court for an injunction restraining her from selling the paintings, Mrs Ange disputed Mr Ange’s evidence that he had ‘personally chosen’ the paintings. She swore that most of the art collection was selected by her and that:

[Mr Ange] then normally paid cash for the artwork which I had selected. [Mr Ange] kept large amounts of cash at home and I saw him use the cash to pay Ronald Coles. On occasion I would count the money. Sometimes the amount was $50,000 sometimes it was up to $100,000. Throughout the period that we collected art, [Mr Ange] described the art as “Mimi’s art” or [Mr Ange] would describe the works to me as “your art”. [Mr Ange] had no particular interest in the artwork and his main areas of interest were collecting high value motor vehicles, rare coins and stamps and bloodstock and gambling. Upon our separation, [Mr Ange] took these items with him.[6]

This evidence by Mrs Ange is consistent with the plaintiff’s version of Mr Ange’s response to Mr Goodman’s question.

[6]Affidavit of Mrs Ange sworn 5 May 2009, [7] (emphasis added).

Further, on 6 April 2009, in correspondence with Mr Ange’s previous solicitor after the paintings had been consigned for sale and Mr Ange had challenged her entitlement to do so, Mrs Ange’s solicitor contended that the art collection belonged to Mrs Ange and that she was entitled to sell it:

The consignment of the artwork was undertaken by our client after considered thought and in the disturbing situation where school fees were unpaid and further wherein your client indicated he was not minded to attend to the payment of same. We are instructed that your client is well aware that the paintings have always been regarded by our respective clients as our client’s property and your client has made representations to this effect not only to our client but to Mr Tim Goodman, the chairman of Bonhams and Goodman.[7]

[7]Emphasis added.

As appears below, the emphasised portion of this letter was based on Mr Goodman’s recollection of Mr Ange’s statement on 26 June 2007, which he conveyed to Mrs Ange’s solicitor on 6 April 2009, that Mrs Ange owned the art collection and that it was her decision as to what paintings should be sold. Accordingly, in April 2009, Mrs Ange, through her solicitor, accepted the truth of Mr Goodman’s recollection; and adopted that recollection in her family law negotiations. Her evidence that she does not remember what was said involves a change of that position. Mrs Ange’s solicitor at the time, Amanda Alidenes, was not called to give evidence. I infer that her evidence on this issue would not have assisted Mrs Ange’s case.

Third, Mrs Ange’s change of position follows the settlement of the property dispute between Mr and Mrs Ange. On Friday 5 February 2010, Mr and Mrs Ange signed consent orders which have since been made by the Family Court and which record the terms of their settlement. An extract of those consent orders was placed in evidence as a confidential exhibit. In general terms, the extract reveals that Mr Ange has agreed to indemnify Mrs Ange in respect of any liability she may incur to the plaintiff in this proceeding and to be responsible for her costs of this proceeding. In return, Mrs Ange has agreed with Mr Ange to give evidence in this proceeding and to use her best endeavours to defend the claims against her in this proceeding. The trial of this proceeding commenced on the next working day following the making of the consent orders, Monday 8 February 2010.

Further, in the absence of the Family Court orders, Mr and Mrs Ange in any event had a common interest in defending the plaintiff’s claims against Mrs Ange, whether or not their property dispute continued.

Fourth, there are a number of factors affecting the credibility of Mr and Mrs Ange as witnesses. As to Mr Ange, he readily admitted instructing his solicitors to write false correspondence to Mrs Ange’s solicitors in connection with the property dispute. His only justification for this was a desire to keep three identified artworks for himself ‘at any price’. This matter is referred to in more detail below.

Further, I found the whole of Mr Ange’s evidence concerning his dealings with the art dealer, Ronald Coles, evasive and unconvincing. For example, Mr Ange said that he had a long standing association with Mr Coles over many years and that the vast majority of the art collection was acquired from Mr Coles, but the last time that he bought a painting from Mr Coles was in about October 2008, shortly before Mr Coles ‘disappeared’ in December 2008. Mr Ange gave inconsistent evidence about whether he had any contact with Mr Coles, by any means, after October 2008. In the first instance, Mr Ange said that he did not recall whether he had any contact with Mr Coles from that time. However, when the extent of his relationship with Mr Coles was revealed, and he was pressed in cross‑examination, Mr Ange said that he was ‘quite sure’ that he had not been in contact with Mr Coles, directly or indirectly, since his disappearance. Notwithstanding this evidence, Mr Ange volunteered the following non‑responsive evidence when he was pressed in cross‑examination about the lie which he instructed his previous solicitor to put in correspondence to Mrs Ange’s solicitors in connection with the property dispute:

The intention [was] to keep the paintings whether I sold them to myself or sold them to a friend of mine to keep till a settlement was done, I wanted those paintings in my possession.
Who was the friend of yours ---? --- Ron Coles was at the time.[8]

[8]Emphasis added.

‘The time’ of the false correspondence was 12 March 2009. When Mr Ange was asked how he could have dealt with Mr Coles at that time, 15 months after he had ‘disappeared’, Mr Ange gave most unsatisfactory evidence. It was in this context that he changed his position from not recalling whether he had dealt with Mr Coles since his disappearance, to a denial that he had done so. He said that he had formed the intention to gain possession of the three paintings before Mr Coles had disappeared, and that he had an understanding with Mr Coles that he would enter into a fictitious sale of the three paintings to him, so that Mr Coles could hold the paintings on his behalf until after he had concluded a property settlement with his wife. Further, he said that his previous solicitor knew about this and knew that his correspondence in March 2009 was false. Taking the evidence on this issue as a whole, I accept Mr Ange’s evidence that he intended to place the three paintings with Mr Coles for safe‑keeping until after he had resolved his property dispute with Mrs Ange. Accordingly, the probabilities favour a finding that Mr Ange gave false evidence when he said that he could not recall, and when he later denied, that he had been in contact with Mr Coles since his disappearance.

As to Mrs Ange, I found her to be an unimpressive witness. She was born in China and came to Australia in 1986. At that time, she spoke no English. However, she acknowledged that she now understands spoken English reasonably well, and that she conversed with her husband in English throughout the duration of their marriage from January 1991 until December 2007. She said that she could read documents written in English, but that her understanding of them was more limited than her understanding of the spoken word. Taking her demeanour as a witness as a whole, I am satisfied that she understood the questions put to her and the documents she was asked to read while she was in the witness box. Further, when pressed about critical matters, Mrs Ange answered questions quickly and articulately. Her broken English improved markedly and she spoke fluently and with confidence. She was well able to protect herself.

Further, Mrs Ange demonstrated a good understanding of the issues in the case, and often became evasive or argumentative when it suited her cause.

Mrs Ange was particularly evasive when it came to questions concerning instructions given by her to her previous solicitor. Taking the evidence as a whole, I am satisfied that the correspondence written by Mrs Ange’s solicitor was written with her knowledge and upon her instructions.

Like Mr Ange, Mrs Ange was evasive in answering all questions concerning Ronald Coles, and hid in generalities and lack of recollection as to the circumstances in which the art collection was obtained.

On the other hand, the evidence of Mr Goodman and Mr Smith was generally consistent and convincing. In particular, I found Mr Goodman’s evidence that he was surprised at Mr Ange’s statement that the art collection was owned by Mrs Ange, and that he ‘will never forget’ that statement, convincing and objectively credible. Mr Smith’s denial of Mr Ange’s evidence, that he said that the paintings were Mrs Ange’s ‘too’, was also convincing. He said that he would have asked for joint signatures to the consignment form signed on that day if that was said. As appears above, and below, their evidence accords more with the probabilities and has some documentary support.

‘The Cloud’ did not reach its reserve of $400,000 at auction. Mr and Mrs Ange were uncontactable on the day. Mr Goodman made an executive decision to sell for the highest bid of $370,000. Mr Goodman initially contacted Mr Ange about the issue. Ultimately, he spoke with Mrs Ange and she refused to take anything less than the full reserve price, which the plaintiff then paid. Mrs Ange said that Mr Ange directed her to insist on the full amount. However, even if that be so, the fact remains that, from the plaintiff’s viewpoint, it was Mrs Ange who consigned the painting, Mrs Ange who insisted on payment of the full reserve price and Mrs Ange who received the full payment.

Following their separation in December 2007, Mr Ange initially provided financial support to Mrs Ange. However, from July 2008, the level of financial support decreased and it stopped completely in January 2009. Accordingly, by late 2008, Mrs Ange was becoming concerned about her ability to pay mounting debts, including overdue and ongoing school fees for the three children, legal costs and living expenses. In this context, Mrs Ange turned her mind towards selling some or all of the art collection.

In the first instance, Mrs Ange asked Mr Smith to value the art collection. An arrangement was made for Mr Smith to attend at the matrimonial home. In company with his Sydney associate, Marika Clenow, Mr Smith attended on 22 December 2008. Although there were some differences between the recollections of Mrs Ange and Mr Smith as to their discussions on that day, it is clear that the purpose of the valuation was to inform Mrs Ange of the likely prices achievable if the art collection was sold. Mrs Ange’s own evidence was that she informed Mr Smith that Mr Ange had ceased providing her with money and that she said to him:

I may have to sell the artwork later on. Will you value it for me?

Further, Mr Smith and Mrs Ange agreed that, during the course of the conversations on 22 December 2008 while Mr Smith and his assistant were photographing and cataloguing the art collection for the purposes of the valuation, Mrs Ange told Mr Smith that she had separated from Mr Ange, that he was not paying her enough maintenance and that she was in financial difficulties and may need to sell some or all of the art collection quickly to raise funds. Mr Smith listened sympathetically and said that he understood Mrs Ange’s position, as he had himself encountered difficulties following separation from a partner.

The valuation was posted to Mrs Ange on 20 January 2009. It is a detailed valuation of each painting in the art collection, including photographs and estimated selling ranges. As appears below, the low estimates were adopted as the reserve prices when Mrs Ange consigned the paintings to auction.

Mr Ange recalled having lunch with Mr Goodman in late February or early March 2009 at ‘Bistro Moncur’ in Woollahra. Mr Goodman could not recall the lunch and believed it did not occur. Mr Goodman’s diary indicated a lunch appointment with Mr Ange on 22 January 2009, which neither man recalled at that time. Having regard to the coffee meeting on 12 March 2009 acknowledged by Mr Goodman, which is referred to below, it is unnecessary to resolve the conflict of evidence as to whether and when they had lunch. This is because Mr Goodman’s account of the 12 March meeting roughly accords with Mr Ange’s recollection of the lunch conversation. Mr Goodman acknowledged that, at this time, Mr Ange informed him that he claimed an interest in the art collection and did not want it sold; at least until he had resolved his property dispute with Mrs Ange.

Following receipt of the valuation, Mrs Ange considered her position. She did so with the benefit of legal advice. Negotiations were continuing between the solicitors for Mr and Mrs Ange with a view to reaching a settlement of their property dispute. Mrs Ange informed Mr Smith that these negotiations were proceeding. Mr Smith asked if Mrs Ange wanted him to send a copy of the valuation to Mr Ange. At some stage, Mrs Ange authorised Mr Smith to send a copy of the valuation to Mr Ange, and he did so.

On 30 January 2009, Mr Smith visited Mrs Ange to discuss the contents of the valuation. During this visit, Mrs Ange said that she asked Mr Smith whether she could sell a particular painting if Mr Ange did not agree to the sale. She said that Mr Smith did not respond. According to Mrs Ange, Mr Smith came to her home again one or two weeks later. Mr Smith denied that this was so. He said that he was overseas in the first half of February 2009. Mrs Ange said that Mr Smith told her during this visit that she could sell the paintings, even if Mr Ange did not agree to their sale. I do not accept Mrs Ange’s evidence concerning this. However, as appears below, Mr Smith acknowledges that Mrs Ange later expressed to him some uncertainty about her ability to sell the paintings, if Mr Ange opposed that course. He denies giving Mrs Ange any advice in that regard, other than to suggest that she obtain legal advice from her lawyers. For the reasons given below, I accept Mr Smith’s evidence on this issue.

Mr Smith was overseas in the first half of February 2009. On his return, he received a telephone call from Mrs Ange in which she asked him whether the plaintiff would store the art collection for her. It is unnecessary to consider the circumstances in which this request was made. Mr Smith agreed and, hoping to secure Mrs Ange’s agreement to the consignment of some or all of the art collection to auction, agreed that the plaintiff would store the art collection at no cost to Mrs Ange, except for the transport costs.

On 24 February 2009, a representative of the plaintiff attended at the matrimonial home to collect the art collection for storage. A few days later, Mrs Ange received in the post a consignment agreement form prepared by the plaintiff, endorsed with the words ‘For Storage Purposes’. The form had been signed on behalf of the plaintiff and was stamped ‘Please Sign & Return’. It was dated 24 February 2009. For convenience, I will refer to it as ‘the 24 February consignment agreement form’. However, it should be noted that no consignment agreement had been reached between the plaintiff and Mrs Ange at this stage.

There are a number of features of the 24 February consignment agreement form which must be noted:

(1)The 24 February consignment agreement form was the current version of the standard form used by the plaintiff to record consignment agreements reached between it and sellers engaged by it to auction items, including fine art. There are three copies of the first page of the form, printed on self-carbonising paper. The third copy attachs a three page document titled ‘General Conditions of Business As at 19 June 2008’.
(2)There are three further pages of the 24 February consignment agreement form, each headed ‘Annexure’. As there is insufficient space on the first page to list all of the paintings in the art collection, the subsequent pages list the remainder of the collection. Each of these subsequent pages is also in triplicate and printed on self-carbonising paper.
(3)The 24 February consignment agreement form was obviously prepared by the plaintiff with a view to some of all of the art collection being consigned to it for auction at some future time. Each painting is given a detailed description and estimated selling range, in accordance with the descriptions and selling ranges contained in the valuation prepared by Mr Smith.
(4)The first and subsequent pages describe Mrs Ange as ‘the seller’ and provide for her to sign underneath the following printed words (‘the signature clause’):
It is agreed by the parties to this Consignment Agreement, that the goods listed above and/or on the attached schedule have been consigned to Bonhams & Goodman and will be disposed of, or assessed for disposal or for any other purpose, subject to the General Conditions of Business of Bonhams & Goodman attached. The Seller acknowledges that they have read these General Conditions of Business and that they accept them prior to signing the space provided below. Any changes to the Agreed Reserves or Estimates referred to above or determined in the future, or any other variation to these instructions provided to Bonhams & Goodman by the Seller may result in the Seller incurring additional costs.

Mrs Ange did not sign the 24 February consignment agreement form. She kept it in her records, together with the envelope in which it was received and the stamped self-addressed envelope forwarded to her by the plaintiff for the purpose of her returning it once signed. Mrs Ange denied that she read the signature clause quoted above, or the general conditions attached. She treated the form as a receipt for the goods which she had entrusted to the plaintiff for storage, and said that she only read the form to confirm that it listed all of the paintings which had been collected by the plaintiff. I accept that evidence.

The closing date for the consignment of items to be included in the plaintiff’s auction catalogue for its May auction of fine art (‘the May auction’) was Friday 20 March 2009. This was known to Mrs Ange. In the period between receipt by her of the 24 February consignment agreement form and her agreement on 20 March 2009 to consign the paintings for sale, there were a number of conversations between Mr Smith and Mrs Ange. During these conversations, Mrs Ange told Mr Smith that she was in regular contact with her lawyer.

Mr Smith said that he spoke with Mrs Ange on approximately six occasions by telephone. There may have been some emails. In general terms, he described Mrs Ange’s conduct as ‘toing and froing’ as to whether she would consign paintings for sale at the May auction. In his witness statement, Mr Smith stated:

37…I do not recall the precise details of each [telephone] call. I know that in these calls she often asked for confirmation of the closing date. In those several conversations, she asked me several times what would happen if she did not make a decision by 20 March to include the paintings in the May sale. I told her if she did not make her decision by 20 March, the items could not be included in the auction, and the next scheduled auction after that was in August 2009. She said that she needed funds sooner than 2009.
38In these conversations I told her that she had to be clear what she wanted to do. I said if she had any doubts about selling the paintings she should talk to her lawyer. I told her that once the works were consigned, there would be a commitment on her part at that time to the plaintiff and if she then changed her mind, it would cost her money. I said to her that she would have to pay the plaintiff substantial withdrawal fees as were detailed in the Terms on the Consignment Agreement.
39In the same series of conversations she also asked me what would happen if Con objected to her selling the paintings. I said to her in reply that she should speak to her lawyer. I told her if she made a decision to list the paintings for auction, that she would have to pay substantial withdrawal fees if she changed her mind. I told her she should not list the paintings for auction if she had any reservations about selling them.
40We also spoke several times about the costs of the auction. She said words to the effect of ‘Geoffrey, you must look after me. I need the money.’ We spoke specifically about seller’s commission. I told her that if she was prepared to offer the paintings for sale at the May 2009 sale, we would offer a discounted seller’s commission. She then negotiated a 0 % seller’s commission and for a 0 % insurance levy. She said that she had been previously given these terms in other dealings with the plaintiff.

Mrs Ange did not dispute that she knew of the closing date for including paintings in the May auction. Nor did she dispute that she told Mr Smith that she may need funds earlier than August 2009. It was also common ground that, during the course of the telephone conversations, Mrs Ange and Mr Smith discussed which of the paintings in the art collection should be offered for sale in the event that Mrs Ange decided to consign any paintings for the May auction. After some ‘toing and froing’, Mrs Ange accepted Mr Smith’s advice in this regard, and the discussions thereafter related to the 22 paintings which were in fact consigned.

It was also common ground that Mrs Ange knew that, if she decided to consign the paintings for sale, the plaintiff would incur costs in advertising and preparing the paintings for sale; for example, by preparing the auction brochure and catalogue. Indeed, Mrs Ange said that she was disappointed that the most valuable painting she consigned for sale, Frederick McCubbin’s ‘Midsummer’s Eve’, was not pictured on the front page of the main auction catalogue, as she understood it would be from discussions with Mr Smith.

Further, Mrs Ange acknowledged in her evidence that she knew that the only money which the plaintiff stood to earn from a consignment of the paintings was by charging a buyer’s premium of 20 per cent in respect of sales. In these circumstances, Mrs Ange said that she believed that there would be no charge to her if she withdrew the paintings from sale.

Mrs Ange disputed, however, the other aspects of Mr Smith’s account of their telephone conversations in this period.

First, Mrs Ange disputed that she had any discussions with Mr Smith at this time concerning the possibility, or the desirability, of her obtaining legal advice as to her position if she was in any doubt. She maintained that she had previously asked Mr Smith whether she could sell the paintings, notwithstanding her belief that Mr Ange was unlikely to agree to a sale, and that Mr Smith replied with words to the effect: ‘they are your paintings, of course you can sell them.’ Mr Smith denied having any conversation with Mrs Ange to this effect.

Second, Mrs Ange disputed that Mr Smith made any mention of a withdrawal fee.

Third, Mrs Ange disputed that she negotiated an agreement with Mr Smith for no seller’s commission or insurance charges. She said that Mr Smith offered these terms, in response to her saying to Mr Smith: ‘You have to look after me. I need the money.’

It was put to Mr Smith in cross‑examination that his evidence concerning this telephone conversations with Mrs Ange was false where it differs from her evidence. He did not make any concessions. On the other hand, Mrs Ange’s evidence on these issues was less than satisfactory. In particular, she appeared very uncomfortable when denying that Mr Smith had told her that she should consult her lawyer if she had doubts about her ability to sell the paintings. She fidgeted in the witness box, raised her eyes and looked away. Furthermore, Mr Smith’s account of this aspect of the conversations has a ring of truth to it. He was faced with a woman who was having difficulty in making a decision. It must have been apparent to him that she was trying to delay making a decision until as late as possible, hoping that she could reach a settlement with her husband and thus avoid the need to auction the paintings. In these circumstances, it is natural that Mr Smith would wish to ensure that Mrs Ange understood the consequences of her actions if she did commit to consigning paintings for sale. I accept his evidence.

In the period leading up to 20 March 2009, correspondence continued to pass between the solicitors acting for Mr and Mrs Ange respectively. Further, Mr and Mrs Ange were themselves engaging in negotiations with the assistance of a friend.

On 12 March 2009, Mr Goodman and Mr Ange met for coffee. By this time, Mr Ange had received a copy of the valuation of the art collection. Mr Goodman acknowledged in his evidence in chief that Mr Ange contended at this meeting that the art collection was not owned by Mrs Ange, but was owned by him or by them jointly. Further, Mr Goodman acknowledged in his evidence in chief that Mr Ange told him that he objected to any sale of the art collection. In cross‑examination, Mr Goodman acknowledged also that Mr Ange told him at this meeting that the art collection could not be sold until the matrimonial dispute between Mr and Mrs Ange had been settled. In reply, Mr Goodman said that he told Mr Ange that Mrs Ange was his client and that Mr Ange should seek legal advice, or words to that effect.

Mr Goodman acknowledged that he was ‘concerned’ about Mr Ange’s claims in this conversation. He told Mr Smith about the conversation, and left it to him to deal with Mrs Ange. Later, when Mr Ange’s solicitors threatened legal proceedings to restrain the May auction, Mr Goodman became involved in correspondence with the solicitors for Mr and Mrs Ange. However, he left it to Mr Smith to continue dealing with Mrs Ange directly. He had no dealings with her.

According to Mr Goodman, his conversation with Mr Smith following the 12 March coffee meeting with Mr Ange was to the following effect:

I think I may have said something like, ‘I believe you should convey this to our client.’ I think that he said something like, ‘Mrs Ange is well aware of Mr Ange’s claims.’

Mr Smith recalled Mr Goodman informing him about the coffee conversation with Mr Ange. He took no action to inform Mrs Ange about it. In his view, he was dealing with Mrs Ange who was treating the art collection as hers to sell. In these circumstances, he viewed the dispute between Mr and Mrs Ange as to her entitlement to sell the paintings as a matter to be dealt with between them and their respective lawyers. He said that he did not see it as his role to interfere with their discussions. When it was put to him that he should have taken steps to warn Mrs Ange of Mr Ange’s claims, he replied:

I'm not sure what I should have done in that instance. I knew that Mr and Mrs Ange were speaking - their lawyers were constantly talking to each other, and I'm sure that the content of Mr Goodman's conversations with Mr Ange would have been expressed to Mrs Ange already through their lawyers.

At this time, Mr Smith was dealing with Mrs Ange on the basis that she was the owner of the art collection. He based his understanding on the dealings in June 2007 concerning the consignment of ‘The Cloud’ for sale by the plaintiff and the payment of the sale proceeds to Mrs Ange following its sale. Although he couldn’t recall an express statement to him by Mrs Ange that she was the owner of the art collection, I am satisfied that he was justified in dealing with Mrs Ange on this basis. This finding is reinforced by the fact that, also on 12 March 2009, Mrs Ange attended at the plaintiff’s offices and produced 10 or 12 receipts from Mr Coles for the acquisition of paintings in the art collection. There can have been no other purpose for this conduct than a desire by Mrs Ange to establish that she was entitled to sell the paintings. Mr Smith had doubts about the authenticity of the receipts, and said that he gave them back to Mrs Ange without keeping copies of them.

Also, on 12 March 2009, Mrs Ange’s solicitors wrote to Mr Ange’s solicitor and noted an offer which had been put by Mr Ange to Mrs Ange and sought detailed information to enable assessment of that offer. On 17 March, in response to that letter, Mr Ange’s solicitors, on instructions, put forward what Mr Ange knew was a deliberate lie, stating that Mr Ange needed to retain three specified paintings in any property settlement, in order to discharge large debts to the Taxation Commissioner and the State Debt Recovery Office. In cross‑examination, Mr Ange acknowledged that this was a lie, and said that he wanted to keep the three paintings ‘at any price’. The three paintings were ‘Mantilla’ and ‘Magnolia Summer’ by Norman Lindsay, and ‘Midsummer Eve’ by Frederick McCubbin. Each of them was included in the consignment agreement signed by Mrs Ange.

On 19 March 2009, Mr Smith telephoned Mrs Ange and reminded her that the following day was the last day to consign paintings for the May auction. Mrs Ange remained non‑committal and asked Mr Smith to call her back the next day.

At about 10:00 am on 20 March 2009, Mr Smith telephoned Mrs Ange. She said that she was still undecided, and asked Mr Smith to ring back later. Mrs Ange then had a conversation with the solicitor acting for her at the time, Amanda Alidenes. In a non‑responsive answer, Mrs Ange gave the following evidence as to this conversation:

my lawyer called me. She has [been] talking to the barrister. Then she couldn’t find [the] barrister, she told me. Then I say it wasn’t happening if I can’t want to sell. Then she say that she can’t answer the question but I say I really need the permission [by] five o’clock.

Mrs Ange was not asked to elaborate on this evidence. Read as a whole, it would appear that Mrs Ange recalls that Ms Alidenes said she could not advise Mrs Ange as to whether or not she could sell the paintings, because she had been unable to contact the barrister she had briefed to advise on this issue. If that is what transpired in the conversation, it would appear that Mrs Ange determined that she would take the risk as to her entitlement to sell the paintings, because she agreed to consign them for sale when Mr Smith telephoned her shortly afterwards.

Mrs Ange’s conduct in consigning the paintings for sale immediately after speaking with her solicitor, causes me to doubt her recollection of the conversation with her solicitor. Mrs Ange is clearly no fool. She is unlikely to have consigned the paintings for sale if she was waiting on legal advice as to her entitlement to sell. There are other matters which cause me to doubt Mrs Ange’s recollection of the conversation with Ms Alidenes:

(1) As noted elsewhere in these reasons, Ms Alidenes was not called to give evidence. I infer that her evidence would not have assisted Mrs Ange’s case.

(2) In the family law settlement orders, Mrs Ange has assigned any claims she has against Ms Alidenes to Mr Ange.

(3) As appears below, Mr Smith recalls Mrs Ange telling him that her lawyer had advised her that she could sell the paintings.

In all the circumstances, I find that Mrs Ange either received legal advice that she could, or should as a tactical matter, consign the paintings for sale at the May auction.

Mr Smith telephoned Mrs Ange at about 12 noon. In this telephone conversation, Mrs Ange agreed to consign the paintings for sale at the May auction and Mr Smith said that he would ‘send someone’ with a contract for Mrs Ange to sign. Mr Smith said that the conversation went further than this. He said in his witness statement:

On 20 March 2009 I had another telephone conversation with Mimi. She told me that she had checked with her lawyer. She told me that her lawyer said the paintings were hers to sell, and that she wanted to have them included in the May 2009 auction. She asked me to make those arrangements.

Mrs Ange denied this conversation. For the reasons given above, I accept Mr Smith’s evidence as to the more probable. Further, it is unlikely that Mrs Ange would have offered no explanation for making a decision to sell the paintings since the 10:00 am conversation and, for the reasons stated elsewhere, I generally prefer the evidence of Mr Smith to that of Mrs Ange where there is a conflict. However, even if there was no discussion on 20 March 2009 to the effect recalled by Mr Smith, the fact remains that Mr Smith well knew that Mrs Ange was represented by a lawyer and, for the reasons given above, I accept his evidence that he told Mrs Ange that she should get legal advice if she had any doubt as to her position.

Following Mrs Ange’s oral agreement to consign the paintings for sale, the plaintiff prepared a document to record that agreement. Given the lateness of Mrs Ange’s decision, which would have made it difficult to prepare a new consignment agreement form listing the 22 paintings, the plaintiff prepared the following documents and dispatched a junior employee, Alex Clark, to attend on Mrs Ange and obtain her signature to them.

First, it appears that the plaintiff had retained a photocopy of the first copy of each of the four pages comprising the 24 February consignment agreement form. The plaintiff altered the first page of its copy to record the oral agreement with Mrs Ange that the plaintiff would not charge any seller’s commission, insurance or other fees.

Second, following these alterations, the plaintiff made a second photocopy of the four pages. On one photocopy, that retained by the plaintiff, the words ‘For Storage Purposes’ have been struck out by drawing a line through them.

Third, the plaintiff used a yellow highlighter on each photocopy to indicate the 22 paintings which were to be auctioned.

Fourth, the plaintiff prepared a separate list of those 22 paintings, including the estimated selling range and the agreed reserve prices.

Mr Clark took these documents to Mrs Ange and asked her to sign them. There is no dispute that she signed nine times, by affixing her signature to each page of the two photocopies of the 24 February consignment agreement form and to the first page of the separate list of the 22 paintings to be auctioned. For convenience, the references below to Mrs Ange signing ‘the consignment agreement’, refer to these nine signatures.

As the above description of the documents demonstrates, the general conditions were not attached to any document signed by Mrs Ange. However, she has signed her name on eight occasions underneath the signature clause set out above.

After Mrs Ange signed the consignment agreement, her solicitors wrote to Mr Ange’s solicitors on the next working day, in the following terms:

RE: ANGE & ANGE
FAMILY LAW MATTER
We refer to the above matter and to previous correspondence.
We are instructed that our client has executed an Agreement with Bonham & Goodman in respect of the artwork.
Our client has instructed us that she has listed the collection to be offered for sale at an auction to take place on 6 May 2009.

The fact and timing of this letter further evidences the role of Mrs Ange’s solicitor in the decision to consign the paintings for sale.

I infer that Mrs Ange’s decision to consign the paintings for sale was a tactic used by her, with her solicitor’s knowledge, to pressure Mr Ange to settle their property dispute. This became apparent when Mrs Ange was cross‑examined as to why she did not withdraw the paintings from sale after Mr Ange’s solicitors threatened an injunction to restrain the sale. Mrs Ange said that she decided to proceed with the sale because she needed the money, in circumstances where her husband had sold properties, sold his business and had borrowed money to increase the indebtedness secured on the matrimonial home. In these circumstances, notwithstanding his claims, she determined to proceed with the sale. Mrs Ange said that she was also influenced by the fact that she did not perceive there was any risk in consigning the paintings for auction, because she would get back the paintings which did not sell.

On 24 March 2009, Mr Ange telephoned Mr Goodman. In his witness statement, Mr Ange recounted the conversation in the following terms:

[Mr Ange]Tim I don’t want my paintings going to auction. You know that they are my paintings and I’ve got all the receipts. It’s in the hands of lawyers, nothing can be sold until it’s worked out who gets what. You can’t do this without me agreeing. I want you to withdraw the paintings from the auction.

[Mr Goodman] Con you will have to go and get legal advice.[9]

Mr Goodman agreed that this was the effect of the conversation. Following the conversation, he sent an email to Mr Ange in conciliatory terms, trying to encourage Mr Ange to allow the paintings to go to auction and to then argue with Mrs Ange over the proceeds of sale.

[9]Emphasis added.

Mr Smith said that Mr Goodman informed him of this conversation with Mr Ange. However, given that the paintings had already been consigned for sale, he left it to Mr Goodman to deal with. At this time, Mr Smith was fully occupied in preparations for the May 2009 auction. Further, as far as he was concerned, Mr and Mrs Ange were represented by lawyers and it was a matter for them to work out. I accept Mr Smith’s evidence.

Mr Goodman then became involved in dealings with the solicitors acting for Mr and Mrs Ange. He approached those dealings on the basis that he believed Mrs Ange was entitled to sell the paintings, because Mr Ange had said in June 2007 that the art collection belonged to her and, as a result, it was Mrs Ange who had sold ‘The Cloud’, Mrs Ange who had negotiated the terms of that sale and Mrs Ange had received the full reserve price following sale of that painting. In these circumstances, he treated Mr Ange’s claim as just that: a claim in the context of a matrimonial dispute.

Mr Goodman did not, however, simply dismiss Mr Ange’s claims. He said that they increased his level of concern and that, accordingly, he gave consideration as to whether the plaintiff should exercise its power to withdraw the paintings from the May 2009 auction. He decided that the paintings should not be withdrawn. He said that he was concerned that Mrs Ange might sue the plaintiff for damages if the paintings were withdrawn without her instructions, given that she claimed to have serious financial problems.

There is no evidence that Mrs Ange ever sought to withdraw the paintings from sale in light of Mr Ange’s claims. To the contrary, as appears below, when Mr Ange’s solicitors demanded that the paintings be withdrawn from sale, and threatened injunctive relief if they were not, Mrs Ange’s solicitors adopted Mr Goodman’s recollection of the statement made by Mr Ange in June 2007 that the art collection belonged to Mrs Ange, and refused to withdraw the paintings from sale.

On the next day, 25 March 2009, Mr Goodman sent an email to Mrs Ange’s solicitor. In that email, Mr Goodman made no mention of his conversation with Mr Ange the previous day, in particular Mr Ange’s request that the paintings be withdrawn from auction. Notwithstanding this, I am satisfied that Mrs Ange and her solicitor knew that Mr Ange had objected, or would object, to the sale of any of the paintings unless that sale formed part of an agreed property settlement.

With that knowledge, Mrs Ange’s solicitor wrote to Mr Ange’s solicitors on 1 April 2009. In that letter, her solicitor sought to justify the decision to consign the paintings for sale and gave Mr Ange notice of Mrs Ange’s intentions as to the disbursement of the proceeds of sale of the paintings.

On 3 April 2009, Mr Ange’s new solicitor, Julie Singleton, wrote directly to Mr Goodman. She alleged that the art collection was jointly owned by Mr and Mrs Ange and informed Mr Goodman that she had been instructed to seek an urgent injunction to prevent the sale of the paintings. This letter caused Mr Goodman to email Ms Alidenes. He referred to the letter from Mr Ange’s solicitor as ‘rather alarming’ and asked that Ms Alidenes contact him urgently to arrange a conference on the following Monday. Further, Mr Goodman stated in the email:

You will be aware of the withdrawal provisions in our General Conditions of Business. If the pictures are withdrawn it will be very unfortunate for Bonhams & Goodman and for Mrs Ange. The pictures have been catalogued, announced to the media and advertised. The catalogue has been printed.

In response, Ms Alidenes emailed Mr Goodman in the following terms:

I have forwarded Ms Singleton’s correspondence to our Counsel and Senior Counsel.
As soon as I have spoken to Counsel, which will be over the weekend, I will contact you in order to arrange a telephone conference.

A few days passed. In that period, I infer that Ms Alidenes obtained advice from senior and junior counsel and instructions from Mrs Ange.

Further, on 6 April 2009 Mr Goodman spoke with Ms Alidenes on the telephone. He described the conversation in the following terms:

Your Honour I phoned Ms Alidenes several times, she was I think from memory away, but not on the day that I initially started contacting her. I spoke to her father over the weekend, who happened to be I believe a lawyer in the office. Finally I think one day – or approximately one day later I finally contacted the lawyer and she asked me at the outset had I given Mr Ange any undertaking or any reason to believe that we considered that he had title to the pictures, and I said no. Then I said to her does Mrs Ange have the right to sell the paintings, and to which she responded, "Yes, she does", because I gather she had sought some advice from – she'd sought some advice I think from memory, and then I went on further to discuss the various communications I'd had with Mr Ange. I got the impression, although I don't recall the detail, but I got the impression that Ms Alidenes was far more briefed on Mr Ange's claim than I was.[10]

Later Mr Goodman said that he could not remember whether Ms Alidenes said she had obtained advice or was going to get advice.

[10]Emphasis added.

Mr Goodman could not recall any other relevant aspects of his conversation with Ms Alidenes. However, as appears below, I infer that he informed her of his recollection of the conversation on 26 June 2007, when Mr Ange said that the art collection was owned by Mrs Ange. This is obvious from the terms of Ms Alidenes’ letter of 6 April 2009 to Mr Ange’s solicitor, and from Mr Goodman’s email to Ms Alidenes on 7 April confirming this aspect of their conversation.

As noted elsewhere in these reasons, Ms Alidenes was not called as a witness and no explanation was given for her absence.

On 6 April 2009, Ms Alidenes responded to Ms Singleton’s letter. In that letter, Ms Alidenes contended that the art collection was owned by Mrs Ange and that she was entitled to sell it:

The consignment of the artwork was undertaken by our client after considered thought and in the disturbing situation where school fees were unpaid and further wherein your client indicated he was not minded to attend to the payment of same. We are instructed that your client is well aware that the paintings have always been regarded by our respective clients as our client’s property and your client has made representations to this effect not only to our client but to Mr Tim Goodman, the chairman of Bonhams & Goodman.

Ms Alidenes then referred to the conduct of Mr Ange in unilaterally disposing of matrimonial assets, and continued:

In the circumstances, our client does not consent to the withdrawal of the consignment.
We note that the damages suffered by the parties if the sale were to be aborted would be very substantial and in the order of $500,000 being 25% of the lower estimate. Should you be instructed to seek any order for injunctions notwithstanding the contents of this letter we have instructions to appear in order to oppose those injunctions.[11]

[11]Emphasis added.

Mrs Ange was cross‑examined about this letter. She sought to disown it. In the end, she said that she could not remember her solicitor giving her any advice at that time about a possible withdrawal fee of $500,000.

On 7 April 2009, Mr Goodman wrote to Ms Alidenes. He referred to the telephone conversation on the previous day, 6 April 2009, and, with reference to that telephone conversation, said that he wished to ‘confirm’, amongst other things, the following matters:

1 We understood that Mrs Ange owned the Art collection as:
1.1On 26 June 2007 Geoffrey Smith, National Head of Art and a Director of Bonhams & Goodman and I attended the Anges’ North Sydney residence to discuss the sale of pictures. At that meeting we valued several pictures for auction purposes. At the conclusion of the discussions I said to both Mr and Mrs Ange, “well, would you like to go ahead and sell any of the pictures?” Mr Ange replied, “it is not up to me as they are Mimi’s pictures and it is her decision.” Geoffrey Smith then asked Mrs Ange, “Mimi would you like to sell any of the pictures?” Mrs Ange then responded with, “I would like to think about it. If I was to sell the Streeton [The Cloud 1936] I would want $400,000 for the other Streeton [Seaside Pastoral] I would want $240,000 for it”. Mrs Ange consigned in her own name the painting ‘The Cloud’ by Arthur Streeton which was subsequently sold at auction and the proceeds were paid to Mrs Ange.
1.2Mrs Ange has acquired items at auction on a number of occasions in her own name. I do not recall ever seeing Mr Ange at an auction.

2If the pictures are withdrawn there are withdrawal provisions in the Consignment Agreement which will be very costly.

In my view, the emphasised statement in the letter from Ms Alidenes to Ms Singleton on 6 April 2009, to the effect that Mr and Mrs Ange always regarded the art collection as Mrs Ange’s property, is likely to have been based upon Mr Goodman’s recollection of the conversations on 26 June 2007, as set out in Mr Goodman’s email confirming his conversation with Ms Alidenes. As appears above, this statement forms part of my reasons for accepting the evidence of Mr Goodman and Mr Smith on this issue.

Ms Singleton replied on behalf of Mr Ange on the same day. She said that Mr Ange denied making any representations to Mrs Ange or Mr Goodman that he regarded the art collection as Mrs Ange’s property. She confirmed her instructions that the art collection was ‘jointly owned by the parties’. She again threatened an application for an urgent injunction.

There was then a delay, due to Mr Ange becoming suddenly ill and requiring hospitalisation. As a result, it was not possible for Mr Ange to make an urgent application for an injunction.

Mr Ange’s injunction application was not heard until the afternoon of 5 May 2009, the day before the scheduled auction. The Family Court of Australia granted the injunction sought. Mr Ange gave an undertaking as to damages. Mrs Ange was required to withdraw the paintings from sale. Mrs Ange then withdrew the paintings from sale.

During the hearing in the Family Court, Mrs Ange contended that the art collection was owned by her. The relevant portion of her affidavit is set out above.

Were the general conditions incorporated into the consignment agreement?

As appears above, it is common ground that the consignment agreement form signed by Mrs Ange did not have the general conditions annexed to it. In these circumstances, it is necessary to consider whether the general conditions were nevertheless incorporated as terms of the consignment agreement.

There is no issue that Mrs Ange, by signing the consignment agreement, intended to enter into contractual relations with the plaintiff.

In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors,[12] the High Court considered a case where a letter of quotation to perform carriage services stated that the services were to be subject to the conditions on the reverse side of an attached consignment note. No consignment note was in fact attached to the letter. The letter also requested the customer to complete and sign a credit application form. The credit application form was provided to the customer at a later time and was then completed and signed. The signature was placed immediately underneath the words:

Please read ‘Conditions of Contract’ (overleaf) prior to signing.

[12](2004) 219 CLR 165.

The relevant conditions of contract were in fact ‘overleaf’, and it was held that those conditions bound the customer in the contracts of carriage entered into between the parties after that time. In these circumstances, it was unnecessary for the High Court to consider whether the conditions on the reverse side of the consignment note, which had not been attached to the letter of quotation, formed part of the contracts of carriage. Notwithstanding this, the case is relevant, as it confirms the objective theory of contract and the importance which the law attaches to the act of signing a document intended to create legal relations. The case also confirms the test to be applied in determining whether terms and conditions which are not included in a signed contract have nevertheless been incorporated as terms of the contract. Relevantly, for the purposes of this case, the High Court made the following statements.

First, the High Court stated that trial judges should avoid the uncritical reception of inadmissible evidence of subjective intent in contract cases because such evidence:

tends to distract attention from the real issues, give rise to pointless cross‑examination and cause problems on appeal where it may be difficult to know the extent to which the inadmissible material influenced the judgment at first instance.[13]

[13]Ibid, [35].

In this case, the Court received some evidence of Mrs Ange’s subjective intention which was inadmissible on contractual issues, but, perhaps, admissible in relation to the unconscionable conduct claims made by her. That evidence has formed no part of my reasoning process in reaching a conclusion as to whether the general conditions formed part of the consignment agreement. Nor has it influenced my reasoning as to the interpretation of the consignment agreement or the determination of Mrs Ange’s contention that the withdrawal fee term constitutes an unenforceable penalty. Those issues must be determined objectively.

Second, the High Court restated the settled principle that a person who signs a document, intending thereby to enter into legal relations, is bound by the terms of that document irrespective of whether the person reads the document before signing. In particular, the High Court rejected the proposition ‘that a person who signs a contractual document without reading it is bound by its terms only if the other party has done what is reasonably sufficient to give notice of those terms.’[14]
[14]Ibid, [53], [54]-[67].

The High Court rejected this proposition because it confuses cases where a person signs a document including terms and conditions in that document with ‘cases, such as ticket cases, in which one party has endeavoured to incorporate in a contract terms and conditions appearing in a notice or an unsigned document.’[15] The High Court concluded that:

where a person has signed a document, which is intended to affect legal relations, and there is no question of misrepresentation, duress, mistake, or any other vitiating element, the fact that the person has signed the document without reading it does not put the other party in the position of having to show that due notice was given of its terms.[16]

[15]Ibid, [54].

[16]Ibid.

Third, the High Court reaffirmed the statement of Scrutton LJ in L’Estrange v Graucob that:

In cases in which the contract is contained in a railway ticket or other unsigned document, it is necessary to prove that an alleged party was aware, or ought to have been aware, of its terms and conditions. [17]

[17]Ibid, [55]; L’Estrange v Graucob [1934] 2 KB 394, 402-3 (emphasis added).

Further to that statement, there is a substantial body of law concerning the incorporation of terms by reference in the document which is signed to the terms contained in another document. It is question of fact in each case, to be judged objectively, as to whether reasonably sufficient steps have been taken to give notice of terms contained in the other document.[18]
[18]For example, Bremer Handelsgesellschaft mbH v J H Rayner & Co Ltd [1979] 2 Lloyd’s Rep 216; Smith v South Wales Switchgear Co Ltd [1978] 1 WLR 165; Miramar Maritime Corp v Holborne Oil Trading Ltd [1984] AC 676; Gilberto v Kenny (1983) 48 ALR 620. These cases are cited by the learned authors of J W Carter, E Peden, G J Tolhurst, Contract Law in Australia, (5^th ed 2007), [10-19], 219-20.

In paragraph 51 of his witness statement, Mr Goodman acknowledged that the plaintiff’s alternative damages claim, for lost buyer’s premiums of 20 per cent, was mathematically less than the liquidated amount arising under clause 11.4 of the liquidated damages term ‘because the plaintiff and the defendant agreed that no seller’s commission would be payable.’ Mr Goodman then referred to the fact that the withdrawal fee term ‘was drawn on the basis that the normal seller’s commission would be payable’. Mr Goodman’s acknowledgments accord with the objective facts.

The plaintiff relies upon its standard consignment agreement form, incorporating the general conditions as at 19 June 2008. The first page of the form states that the seller must pay a ‘seller’s commission’ of 12 per cent. The general conditions state that the buyer will be charged a buyer’s premium of 20 per cent. Accordingly, the plaintiff’s standard form provides that it will be paid commissions totalling 32 per cent in the event that an item is sold at auction. This is to be compared with a withdrawal fee of 30 per cent under clause 11.4. In the absence of Mr Goodman’s evidence, I would nevertheless have inferred that clause 11.4 was designed to operate in the normal circumstance that the plaintiff will have been deprived of the standard 32 per cent commission in the event, as here, of a late withdrawal attracting the operation of that clause.

In the normal case, I would have no hesitation in concluding that this was a genuine pre‑estimate of the plaintiff’s loss. However, this is not a normal case. By agreeing with Mrs Ange to alter its standard terms of trading requiring a seller’s commission of 12 per cent, and making no adjustment to the withdrawal fee term to account for this alteration, the withdrawal fee term ceased, on any objective view, to represent a genuine pre‑estimate of the plaintiff’s loss in the event that clause 11.4 was triggered.

It was submitted on behalf of the plaintiff that there are a number of other aspects to its loss, including loss of reputation arising from the late withdrawal of the paintings from sale. I accept that this is so. However, those intangible losses cannot bridge a gap of 12 per cent between the 30 per cent specified in the withdrawal fee term and the plaintiff’s likely loss of commission (buyer’s premium) in the event that the paintings were withdrawn from sale. Accordingly, if the penalty doctrine applied, I would have found that the withdrawal fee term was out of all proportion to the likely loss which the plaintiff could suffer, estimated at the time of the making of the consignment agreement.

If the general conditions were not incorporated, was the withdrawal of the paintings a breach of the consignment agreement?

It was submitted on behalf of Mrs Ange that the plaintiff is unable to recover unliquidated damages in the event that the general conditions were not incorporated into the consignment agreement. It was submitted that the withdrawal of an item consigned for auction does not constitute a breach of the relevant auction agreement unless the agreement contains a term, express or implied, that the seller must not withdraw the item from auction.

In the usual case, a seller who engages a commission agent to find a purchaser does not thereby promise the agent that the property will not be withdrawn from sale, or sold by the seller by other means, thus depriving the agent of the opportunity to earn a commission.[36]
[36]For example, Luxor (Eastbourne) Ltd v Cooper [1941] AC 108; L J Hooker Ltd v W J Adams Estates Pty Ltd (1977) 138 CLR 52; John Meacock & Co v Abrahams (Loescher, Third Party) [1956] 3 All ER 660, 663; Colliers Jardine (NSW) Pty Ltd v Balog Investments Pty Ltd [1994] FCA 1553, [98]-[105].

In Luxor (Eastbourne) Ltd v Cooper,[37] an agency agreement provided that the agent would be paid a specified commission if he introduced a purchaser ready and willing to purchase a property at a minimum price. A prospective purchaser fitting that description was introduced by the agent to the principal, but the principal refused to sell to that potential purchaser. The House of Lords unanimously held that there was no implied term of the agency agreement which required the principal to sell to the prospective purchaser. However, it was emphasised that the result depends in each case upon a proper construction of the agency agreement read in light of the surrounding circumstances.[38] For example, Viscount Simon LC stated:

There is, I think, considerable difficulty, and no little danger, in trying to formulate general propositions on such a subject, for contracts with commission agents do not follow a single pattern and the primary necessity in each instance is to ascertain with precision what are the express terms of the particular contract under discussion, and then to consider whether these express terms necessitate the addition, by implication, of other terms. There are some classes of contract in which an implied term is introduced by the requirements of a statute (for example, under the Sale of Goods Act or the Marine Insurance Act); there are other contracts where an implied term is introduced by the force of established custom (for example, the necessity of a month’s notice in the case of hiring a domestic servant); but in contracts made with commission agents there is no justification for introducing an implied term unless it is necessary to do so for the purpose of giving to the contract the business effect which both parties to it intended it should have.
It may be useful to point out that contracts under which an agent may be occupied in endeavouring to dispose of the property of a principal fall into several obvious classes. There is the class in which the agent is promised a commission by his principal if he succeeds in introducing to his principal a person who makes an adequate offer, usually an offer of not less than the stipulated amount. If that is all that is needed in order to earn his reward, it is obvious that he is entitled to be paid when this has been done, whether his principal accepts the offer and carries through the bargain or not. No implied term is needed to secure this result. There is another class of case in which the property is put into the hands of the agent to dispose of for the owner, and the agent accepts the employment and, it may be, expends money and time in endeavouring to carry it out. Such a form of contract may well imply the term that the principal will not withdraw the authority he has given after the agent has incurred substantial outlay, or, at any rate, after he has succeeded in finding a possible purchaser. Each case turns on its own facts … But there is a third class of case (to which the present instance belongs) where, by the express language of the contract, the agent is promised his commission only upon completion of the transaction which he is endeavouring to bring about between the offeror and his principal. As I have already said, there seems to me to be no room for the suggested implied term in such a case. The agent is promised a reward in return for an event, and the event has not happened. He runs the risk of disappointment, but if he is not willing to run the risk he should introduce into the express terms of the contract the clause which protects him.[39]

[37][1941] AC 108.

[38]Ibid, 119-20, 130-1.

[39]Ibid, 119-21 (emphasis added).

It was submitted on behalf of the plaintiff that this case falls within the other class of cases referred to by Viscount Simon in the emphasised portion of the above quote. Reliance was placed upon the fact that, at the time the consignment agreement was made, Mrs Ange well knew that the plaintiff would necessarily perform work, and incur expense, in connection with preparing the paintings for sale and marketing their sale as part of the auction. For example, by the preparation of the auction catalogue and brochure. Further, reliance was placed upon the statement by Mr Smith to Mrs Ange that there would be a withdrawal fee, or a penalty, if Mrs Ange changed her mind after consigning the paintings for sale and withdrew them from the May auction.

In my opinion, these facts do not take this case outside the usual case. The plaintiff chose to agree with Mrs Ange that there would be no seller’s commission, no insurance fee and no other recoverable expenses, whether or not any paintings were sold. The plaintiff chose to contract with Mrs Ange on the basis that its only opportunity to earn remuneration was if some or all of the paintings were sold and it earned the buyer’s premium. The fact that the commission was to be paid by the buyer and not the seller, is not to the point. The plaintiff took the risk that the paintings may be withdrawn from sale, in circumstances where it knew that Mr Ange made a claim to ownership, sole or joint with Mrs Ange, of the paintings.

If the plaintiff is entitled to recover unliquidated damages, what is the proper measure of that damage?

The conclusion that the withdrawal fee term is enforceable by the plaintiff, involves two findings: (1) that the general conditions were incorporated into the consignment agreement; and (2) that Mrs Ange’s withdrawal of the paintings from sale did not constitute a breach of the consignment agreement.

If the first finding is wrong, and the general conditions do not constitute terms of the consignment agreement, then the plaintiff will be unable to recover any damages unless it can establish that Mrs Ange’s withdrawal of the paintings from sale constituted a breach of the consignment agreement. For the reasons given above, the plaintiff has failed to establish that Mrs Ange’s withdrawal constituted a breach. However, if I am wrong in that conclusion, the plaintiff would be entitled to damages for breach of agreement.

If the first finding is right and the second finding is wrong, then the effect of the Court deciding that the withdrawal fee term constitutes an unenforceable penalty would be to give the plaintiff an entitlement to damages for breach of the consignment agreement. In Bridge v Campbell Discount Co Ltd,[40] Lord Denning stated:

When equity granted relief against a penalty, it always required the recipient of its favours, as a condition of relief, to pay the damage which the other party had really sustained.[41]

[40][1962] AC 600.

[41]Ibid, 632; Meagher Gummow & Lehane’s Equity Doctrines & Remedies, 4^th Edition, [3-090].

Further, if the general conditions were not incorporated into the consignment agreement, I would nevertheless hold that the consignment agreement contains an implied warranty by Mrs Ange that she was entitled to consign the goods for auction. Such an implied warranty satisfies all of the necessary elements for an implied term. Although Mrs Ange did not acknowledge at any time that her sworn evidence in the Family Court was false, she later acknowledged in that court that the paintings were joint property with her husband. The implied warranty of authority was breached. The plaintiff should be entitled to recover damages for that breach, as it was the cause of the Family Court injunction and the consequent withdrawal of the paintings from sale.

In these circumstances, given that the matter was fully argued and that an appeal is possible, I will consider the quantum of the loss suffered by the plaintiff by reason of Mrs Ange’s withdrawal of the paintings from sale.

The plaintiff’s claim for unliquidated damages is comprised of two heads. First, the plaintiff claims loss of the buyers premium which would have been paid to it in respect of the paintings if they had been sold at auction. Second, the plaintiff claims legal costs arising from the withdrawal of the paintings from sale. When dealing with the second head of damage, it is also convenient to consider whether all or part of the plaintiff’s claims in respect of legal costs are recoverable under the legal costs term of the general conditions.

In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd the High Court stated:

The “ruling principle”, confirmed in this Court on numerous occasions, with respect to damages at common law for breach of contract is that stated by Parke B in Robinson v Harman:
“The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.”[42]

[42](2009) 236 CLR 272, [13] per French CJ, Gummow, Heydon, Crennan and Kiefel JJ (citations omitted).

Although damage is not an element of the cause of action for breach of contract, a plaintiff will be limited to nominal damages only unless, on the balance of probabilities, the plaintiff has affirmatively established that the breach has caused ‘assessable damage … which is capable of being measured in monetary terms’.[43]
[43]The Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 118.

Once a causal link is proved, the plaintiff must also establish that the damages claimed are not too remote. In Hadley v Baxendale it was stated that a loss caused by a breach of contract is not too remote if it:

may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. [44]

[44](1854) 9 Exch 341 at 354; 156 ER 145 at 151.

The ruling principle is also qualified by the need for a successful plaintiff to establish that reasonable steps have been taken to mitigate the damage caused by the breach of contract. Where such steps are taken, the plaintiff can recover money which was reasonably spent in mitigating or attempting to mitigate the effects of the breach of contract.[45]
[45]Lloyds & Scottish Finance Ltd v Modern Cars & Caravans (Kingston) Ltd [1966] 1 QB 764 at 782; Also see, Whitehouse Hotels Pty Ltd v Lido Savoy Pty Ltd (1975) 49 ALJR 93 at 99.

Finally, difficulty in the calculation of damages is not a bar to recovery, unless it is impossible to say that there is an assessable loss resulting from the breach.[46]
[46]Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83; Fink v Fink (1946) 74 CLR 127 at 143.

I will first deal with the claim for lost buyer’s premium.

If the consignment agreement had been performed, and the paintings auctioned on 6 May 2009, some paintings would have been sold at or above the reserve prices and that the plaintiff would have earned a buyer’s premium of 20 per cent of the sale price on each sale. By reason of Mrs Ange’s withdrawal of the paintings from sale, the plaintiff has lost the likely buyer’s premiums which it would have received. Damages in this amount are not too remote, being the likely loss in the event of withdrawal. Put simply, the plaintiff lost the opportunity to earn income from the auction of the paintings.

The plaintiff contends that it was more likely than not that all of the paintings would have been sold. In respect of all but one of the paintings, it claims the lost buyer’s premium (20 per cent) calculated by reference to the mid‑point between the reserve price and the high estimates. As to the remaining painting, ‘Midsummer Eve’ by Frederick McCubbin (’the McCubbin’), the plaintiff contends that its loss should be calculated by reference to a probable sale of that painting for $1.4 million, notwithstanding that the reserve price was $800,000 and the estimated selling range was $800,000 to $1.2 million.

The plaintiff relies upon the evidence of Mr Smith and Mr Goodman in this regard. Mr Goodman has specialised knowledge based on his experience as to the likely clearance rates and selling prices at fine art auctions. Mr Smith has specialised knowledge as to those matters based on his training, study and experience. Each of them is qualified to express an opinion based on their specialised knowledge.[47] Objection was taken to Mr Goodman giving evidence as to the likely result of the May auction if the paintings had not been withdrawn. Based on Mr Goodman’s experience, his evidence was allowed. No objection was taken to Mr Smith’s opinion evidence. However, it was submitted that I should be cautious in accepting the evidence of Mr Smith and Mr Goodman on this issue as they are obviously interested in the case and not independent experts.
[47]Evidence Act 2008 (Vic), s 79(1).

Mr Goodman gave evidence in his witness statement that, following Mrs Ange signing the consignment agreement, the plaintiff proceeded to prepare the auction brochure and catalogue. The relevant designs were finalised by 1 April 2009. This was necessary to allow distribution to interested parties in preparation for the May auction. Following distribution of the brochure and the catalogue, the plaintiff conducted a public showing of the artworks, in both Sydney and Melbourne. Further, the plaintiff committed considerable time, and some expense, to promoting the May auction. By the time that the paintings were withdrawn from auction, the plaintiff had done all that it needed to do prior to auctioning the paintings, as part of the May auction, on the following day. None of this evidence was challenged.

In his witness statement, Mr Goodman also gave evidence as to the concept of ‘clearance rates’ at auction, being the percentage of the total items auctioned which are sold. He said that the clearance rate for the May auction was 78 per cent of the items which were ultimately offered for sale, following the withdrawal of the paintings. Further, Mr Goodman referred to an auction conducted by a rival auctioneer immediately prior to the May auction, which achieved a clearance rate of 84 per cent. Mr Goodman described that clearance rate as ‘a very good statistic, better than the percentage sold at most auctions during recognised ‘boom times’. No challenge was made to this aspect of Mr Goodman’s evidence.

In his oral evidence, Mr Goodman said that, in his opinion, the paintings would have achieved ‘a very high clearance rate … nearer 100 per cent than 78 per cent’. He based this opinion upon his long experience as an auctioneer of fine art.

As to the likely prices to be achieved at the May auction, Mr Goodman expressed the opinion that the reserve prices set for the paintings were realistic and ‘were likely to be met by the market’. With reference to the McCubbin, Mr Goodman expressed the view that ‘it was going to do what we call in the business fly … which means it was going to exceed expectations’. Based on a number of identified factors, including discussions with Mr Smith, Mr Goodman expressed the view that the McCubbin ‘may have brought’ $1.4 million; which is $200,000 greater than the $1.2 million high estimate.

Mr Smith supported Mr Goodman’s evidence concerning the McCubbin. He referred to comparable works by McCubbin and their recent sale prices. He referred to the McCubbin as ‘exceptional’ in a number of respects and said that the plaintiff was able to market it as ‘a lost or a hidden masterpiece by an Australian Impressionist coming for public sale for the first time.’ In his opinion , the high estimate of $1.2 million was conservative and deliberately so. He expected it to be bettered on the day of the auction, and referred to the plaintiff having received interest from ‘very serious collectors’, one in particular who had recently purchased another important McCubbin painting about 18 months prior to the May auction.

As to the remaining 21 paintings, Mr Smith said that, in his opinion, the level of interest in them prior to auction was such that he expected a clearance rate of ‘perhaps 80 or 90 per cent’.

Against this evidence, the plaintiff called a forensic accountant, Peter Wilkinson. Mr Wilkinson gave his evidence in an honest and straightforward manner. He acknowledged that he did not have a specialised knowledge of fine art auctions, including as to likely clearance rates and achievable prices. Based on his experience in attending auctions, including some fine art auctions, he said that it would be most unlikely for all of the paintings to have been sold – a 100 per cent clearance rate. He put forward a national average clearing rate, based on official statistics, of 68.4 per cent. Mr Wilkinson performed some arithmetical calculations based on a range of hypothetical clearance rates and prices achieved at auction for the paintings, including the McCubbin.

Considering the evidence as a whole, and taking into account the fact that Mr Goodman and Mr Smith are not independent experts (and have understandably taken an optimistic view of the likely results if the paintings had not been withdrawn from auction) I have reached the following conclusions. First, the McCubbin would have been sold if it had not been withdrawn from auction. I accept that it was an exceptional and rare painting, and that it was likely to reach, and possibly exceed, the high estimate of $1.2 million. Doing the best I can on the limited and interested evidence which is before me, I find that the likely sale price of the McCubbin at auction would have been the high estimate, $1.2 million. Second, I find that the likely clearance rate for the remaining 21 paintings would have been between 80 and 90 per cent. I will adopt a figure of 85 per cent for the clearance rate. Third, I accept the plaintiff’s submission that, having regard to the quality of the remaining 21 paintings, those sold would have achieved prices approximating the mid‑point between the reserve prices and the high estimates.

On the above basis, I assess the plaintiff’s loss at $446,720, as follows:

(1) Buyer’s premium (20 per cent) on a notional sale of the McCubbin for $1.2 million - $240,000;

(2) 85 per cent of buyer’s premium on the mid‑point between the total of the reserve prices and the total of the high estimates for the remaining 21 paintings, calculated as follows:

(a)

total reserve prices -

$1,019,000

(b)

total high estimates -

$1,413,000

(c)

mid‑point -

$1,216,000

(d)

85 per cent of $1,216,000 ‑

$1,033,600

(e)

20 per cent of $1,033,600

$206,720

(3)       Total of (1) plus (2)

$240,000

$206,720

$446,720[48]

[48]These calculations are based on paragraph 5.10 of Mr Wilkinson’s witness statement.

I turn to consider the claim for legal costs. Clause 11.8 of the general conditions provides:

11.8 If the Company incurs any legal and other costs investigating or defending any Claims concerning the ownership of a Lot, the accuracy of the description of the Lot contained in the Catalogue or the warranties of the Seller, the Seller shall indemnify the Company for all such costs.[49]

[49]Exhibit 1, 164.

In the event that the general conditions were not incorporated into the consignment agreement, the plaintiff submitted that these legal costs are nevertheless recoverable because Mrs Ange breached her implied warranty of authority to sell the paintings, or her withdrawal of the paintings constituted a breach of the consignment agreement.

I have considered the bills of costs provided by the solicitors acting for the plaintiff. The first bill, dated 30 April 2009, relates to legal advice sought by the plaintiff as a result of Mr Ange’s formal claim to sole or joint ownership of the paintings, and his threat to obtain an injunction restraining their sale. It was reasonable that the plaintiff take advice in investigating those claims. Subject to matters of quantum, which are to be determined by an Associate Justice, I find that this category of costs is recoverable under clause 11.8 of the general conditions. Alternatively, this category of costs is recoverable for breach of the implied warranty of authority.

The second bill from the plaintiff’s solicitors is dated 29 May. It relates to legal advice and assistance given to the plaintiff in connection with Mr Ange’s application in the Family Court for an injunction, and to other matters. Insofar as the bill relates to the costs of the injunction application, the plaintiff is entitled to recover them under clause 11.8. The plaintiff had a legitimate interest in defending Mr Ange’s claims for an injunction. Those claims related to the ownership of the paintings and the accuracy of Mrs Ange’s warranty that they were free from any claims. Alternatively, these costs arose from Mrs Ange’s breach of her implied warranty of authority to sell the paintings.

However, the second bill goes far beyond the plaintiff’s costs of and incidental to the injunction hearing. In my view, once the injunction hearing was completed, the costs ceased to fall within clause 11.8 or to be recoverable as damages for breach of Mrs Ange’s implied warranty of authority. From this time, the plaintiff ceased to be acting in response to claims made against its interests, and commenced acting as a claimant seeking to recover the withdrawal fee. In that regard, it is entitled to its costs of this proceeding, and no more. For similar reasons, the third bill representing part of the plaintiff’s claim, dated 9 July 2009, is irrecoverable.

In summary, on the question of legal costs, the plaintiff is entitled to recover under either clause 11.8 or as a result of Mrs Ange’s breach of her warranty of authority, costs incurred by the plaintiff in respect of the matters described in the first bill, and the costs of and incidental to Mr Ange’s application for injunctive relief in the Family Court which was heard on 5 May 2009. Otherwise, the plaintiff is not entitled to recover the costs described in the second bill or any of the costs in the third bill.

Did the plaintiff act unreasonably in failing to mitigate its damage?

It was submitted on behalf of Mrs Ange that the plaintiff failed to mitigate its loss because it did not withdraw the paintings from sale when it was faced with Mr Ange’s demand that it do so, under threat of an injunction. I reject the submission. Mrs Ange maintained at all relevant times that she was entitled to sell the paintings. She contended that she was the owner of the paintings, and actively resisted Mr Ange’s application for an injunction. In these circumstances, it was not unreasonable for the plaintiff to refrain from exercising its power to withdraw the paintings from sale. In any event, the only claim for damages is for lost buyer’s premiums. The amount of that claim would not have been mitigated by an earlier withdrawal of the paintings from sale.

Was the consignment agreement frustrated? If so, was Mrs Ange thereby discharged from performance?

It was submitted on behalf of Mrs Ange that the consignment agreement was frustrated when the Family Court made orders restraining Mrs Ange from selling the paintings, and ordered that she withdraw them from sale. If the general conditions are incorporated into the consignment agreement, clause 25.1 provides that the governing law is Victoria. If the general conditions do not form part of the consignment agreement, the parties agreed that the consignment agreement was governed by the law of New South Wales.

I have found that the general conditions formed part of the consignment agreement. Accordingly, clause 11.6 (quoted above) makes express provision for the frustrating event relied upon: ‘If the Company or the Seller is restrained by order of any Court …’. In these circumstances, the Family Court injunction did not frustrate the consignment agreement. Under clause 11.6, Mrs Ange assumed the risk that such an injunction might be granted.[50]
[50]Ockerby & Co Ltd v Watson (1918) 25 CLR 431; J L R Davis (ed), Contract: General Principles, The Laws of Australia, [7.8.460], 620-6.

If the consignment agreement does not incorporate the general conditions, the Family Court injunction may well have operated as a frustrating event, thus calling into operation the Frustrated Contracts Act 1978 (NSW). However, in light of the view I take, that the general conditions were incorporated into the consignment agreement, it is unnecessary to consider this matter further.

Did the plaintiff engage in unconscionable conduct?

Mrs Ange relies ss 51AB and 51AC of the Trade Practices Act 1974 (Cth). Those sections prohibit a corporation from engaging, in trade or commerce, in conduct that is in all the circumstances unconscionable in connection with the supply or possible supply of goods or services to a person. The plaintiff is a corporation and there is no issue that the consignment agreement is in connection with the supply or possible supply of auction services to Mrs Ange.

Sections 51AB and 51AC of the Trade Practices Act do not, like s 51AA, prohibit ‘conduct that is unconscionable within the meaning of the unwritten law’. The term ‘unconscionable’ in ss 51AB and 51AC is not so limited. The question arises as to whether unconscionable conduct in these sections is a concept which differs from the equitable concept of unconscionable conduct. The authorities favour the conclusion that, in order for there to be unconscionable conduct under ss 51AB or 51AC, there must be conduct which is unconscionable within the ordinary dictionary meaning of that word.

In Hurley v McDonald’s Australia[51] Heerey, Drummond and Emmett JJ considered an application for leave to appeal a trial judge’s decision not to allow an amendment to a statement of claim. The Full Court held:

[22]For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated – Cameron v Qantas Airways Ltd (1994) 55 FCR 147 at 179. Whatever ‘unconscionable’ means in s 51AB and s 51AC, the term carries the meaning given by the Shorter Oxford English Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable – Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262. The various synonyms used in relation to the term ‘unconscionable’ import a pejorative moral judgment – Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 283-284 and 298.
...
[31]Before s 51AA, s 51AB or s 51AC will be applicable, there must be some circumstance other than the mere terms of the contract itself that would render reliance on the terms of the contract ‘unfair’ or ‘unreasonable’ or ‘immoral’ or ‘wrong’.[52]

[51](2000) ATPR 41-741.

[52]Original emphasis.

It was submitted on behalf of Mrs Ange that the plaintiff engaged in unconscionable conduct in connection with the consignment agreement, in the following respects.

First, it was contended that the plaintiff acted unconscionably in failing to give Mrs Ange unequivocal notice of the withdrawal fee term, before asking her to sign the consignment agreement. I reject that submission. Mrs Ange had the 24 February consignment agreement form in her possession for over three weeks before she signed the consignment agreement. This was known to both parties. Mr Smith informed Mrs Ange that there would be a penalty if she consigned the paintings for sale and then later changed her mind and withdrew them. Further, as appears above, a party signing a contractual document which includes or incorporates an exceptional, unusual or unexpected term is nevertheless bound by the term, unless its inclusion without attention being drawn to it involves a misrepresentation. No such case was advanced here.

Second, it was contended that it was unconscionable for the plaintiff to secure Mrs Ange’s signature to the consignment agreement in circumstances where Mr Smith well knew that she was involved in a matrimonial dispute and was desperate for money because Mr Ange had ceased paying her. It was not submitted that this amounted to some sort of special disadvantage, rather that Mr Smith should have known that Mrs Ange was relying upon him to look after her interests. It was also submitted that Mr Smith knew that Mrs Ange was a person of ‘relative naivety in the art world’.

I do not accept that any unconscionable conduct arises by reason of these matters. Although Mrs Ange was going through a difficult period in her life, and was short of money, she had prior experience in negotiating favourable consignment terms in 2007; to the knowledge of the plaintiff, she was represented by a solicitor throughout the relevant events; she reflected for many weeks on her decision to consign the paintings for auction; and she was told by Mr Smith to seek legal advice if she was in any doubt as to her position. Further, she did not present in the witness box as a vulnerable person. To the contrary, she appeared to understand the business of purchasing and selling fine art and to have considerable experience in it.

Third, it was contended that it was unconscionable for the plaintiff to secure Mrs Ange’s signature on the consignment agreement in circumstances where the plaintiff knew that Mr Ange was claiming an interest in the art collection; and that further unconscionability arose from the plaintiff’s decision that it would not withdraw the paintings from sale once Mr Ange made formal claims through his solicitor, and threatened injunctive relief.

I do not accept that this conduct was unconscionable. As appears above, Mr Smith was entitled to assume that Mrs Ange well knew that her husband claimed an interest in the art collection. As Mr Smith explained, he knew that both Mr and Mrs Ange had lawyers acting in their matrimonial dispute and that negotiations were continuing. Indeed, this was the reason why Mrs Ange was delaying in making a decision as to whether to consign the paintings for sale. She hoped that she could reach a settlement with her husband, thus avoiding the need to sell the paintings.

In all the circumstances, particularly having regard to the fact that Mrs Ange was represented by a solicitor at all relevant times, and that this was known to Mr Smith before the consignment agreement was signed, and by both Mr Smith and Mr Goodman after the consignment agreement was signed, the conduct of the plaintiff was not unconscionable. Mrs Ange clearly wanted to sell the paintings, in order to raise money. She was legally represented. There was nothing clearly unfair, clearly unreasonable or immoral in the plaintiff accepting the paintings for auction. In the end, Mrs Ange, with the benefit of legal advice, took the risk that Mr Ange would object to the sale and take steps to have the paintings withdrawn from sale.

Finally, on this issue, my acceptance of the plaintiff’s evidence concerning the statements made by Mr Ange on 26 June 2007, that Mrs Ange owned the art collection, is relevant. Mr Ange made that statement at a time when there was no matrimonial dispute. The fact that he made a contrary claim in the context of a matrimonial dispute, shortly prior to the consignment agreement being signed by Mrs Ange, was not a matter which Mr Goodman was bound to accept as true. As he said in his evidence, many claims are made by opposing parties in the context of matrimonial and insolvency disputes. In these circumstances, it is not unconscionable for Mr Goodman to have accepted the word of his client, Mrs Ange, and proceeded to allow Mr Smith to conclude the consignment agreement with her. Nor was it unconscionable for Mr Goodman to decline, in accordance with Mrs Ange’s own wishes, to withdraw the paintings from sale.

Conclusions and orders

For the above reasons, there will be judgment for the plaintiff for the amount of the withdrawal fee (and GST) in the sum of $731,280, together with damages to be assessed in respect of the limited categories of legal costs which I have found to be recoverable under clause 11.8 of the consignment agreement.

I will hear the parties as to costs.

(a)	total reserve prices -	$1,019,000
(b)	total high estimates -	$1,413,000
(c)	mid‑point -	$1,216,000
(d)	85 per cent of $1,216,000 ‑	$1,033,600
(e)	20 per cent of $1,033,600	$206,720
(3) Total of (1) plus (2)			$240,000
$206,720
$446,720[48]

[2010] VSC 72

16 March 2010