McBride v Christie's Australia Pty Ltd
[2014] NSWSC 1729
•04 December 2014
Supreme Court
New South Wales
- Summary available
Medium Neutral Citation: McBride v Christie's Australia Pty Limited [2014] NSWSC 1729 Hearing dates: 21, 22, 23, 24, 25, 28, 29, 30, 31 July 2014; 1 August 2014 Decision date: 04 December 2014 Jurisdiction: Equity Division Before: Bergin CJ in Eq Decision: See paragraphs 469-477
Catchwords: See Headnote Legislation Cited: Civil Liability Act 2002 (NSW)
Competition and Consumer Act 2010 (Cth)
Fair Trading Act 1987 (NSW)
Fair Trading Act 1999 (Vic)
Income Tax Assessment Act 1997 (Cth)
Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Superannuation Industry (Supervision) Act 1993 (Cth)
Trade Practices Act 1974 (Cth)Cases Cited: ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 309 ALR 445
Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488
Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682
Azzi v Volvo Cars Australia Pty Ltd [2007] NSWSC 319
Blackman v Gant [2010] VSC 229; (2010) 29 VR 29
Brickenden v London Loan and Savings Co [1934] 3 DLR 465
British Railways Board v Herrington [1972] AC 877
Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592
Calverley v Green (1984) 155 CLR 242
Christopoulous v Angelos (1996) 41 NSWLR 700
Clark & Ors v Urquhart [1930] AC 28
Crocodile Marketing Ltd v Griffith Vintners Pty Ltd (1989) 28 NSWLR 539
Cyril Smith & Associates Pty Ltd v The Owners - Strata Plan No 64970 [2011] NSWCA 181
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Digi-Tech (Aust) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184
FHR European Ventures LLP & Ors v Cedar Capital Partners LLC [2014] UKSC 45; [2014] 4 All ER 79
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 55 ALR 25
Hadglias Holdings Pty Ltd v Seirlis [2014] QCA 177
Hawkins v Clayton (1988) 164 CLR 539
Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271
Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613
Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; (2008) 73 NSWLR 653 Johnson Controls Australia Pty Ltd v Webb Australia Group (NSW) Pty Ltd [2013] NSWSC 1511; (2013) 96 ACSR 640
Jones v Dunkel (1959) 101 CLR 298
Karedis Enterprises Pty Ltd & Greenfriars Pty Ltd v Antoniou (1995) 59 FCR 35
Kuhl v Zurich Financial Services Australia Limited (2011) 243 CLR 361
Leaf v International Galleries (A Firm) [1950] 2 KB 86
Leason Pty Ltd v Princes Farm Pty Ltd [1983] 2 NSWLR 381
Magill v Magill [2006] HCA 51; (2006) 226 CLR 551
Marsh & McLennan Pty Ltd v Stanyers Transport Pty Ltd [1994] 2 VR 232
MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191
Prepaid Services Pty Ltd v Atradius Credit Insurance NV [2013] NSWCA 252; (2013) 302 ALR 732
Registrar-General v Cleaver (1996) 41 NSWLR 713
Robertson & Moffat v Belson [1905] VLR 555
Savage v Dunningham [1974] Ch 181
Scarcella v Lettice (2000) 51 NSWLR 302
Showtime Touring Group Pty Ltd v Mosley Touring Inc [2013] NSWCA 53; (2013) 296 ALR 597
Taylor v Johnson (1983) 151 CLR 422
The Insurance Commissioner v Joyce (1948) 77 CLR 39
The Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525
Tomasetti v Brailey [2012] NSWCA 399; (2012) 274 FLR 248
Vimig Pty Ltd v Contract Tooling Pty Ltd & Ors (1986) 9 NSWLR 731
Wardley Australia Limited & Anor v The State of Western Australia (1992) 175 CLR 514
Yorke v Lucas (1985) 158 CLR 661Texts Cited: Bowstead & Reynolds On Agency, (20th ed 2014, Thomson Reuters)
Clerk & Lindsell on Torts (21st ed 2014, Thomson Reuters)Category: Principal judgment Parties: Louise McBride (1st Plaintiff)
Louise McBride Investments t/as Louise McBride Investments Pty Limited as trustee for the LMB Family Superannuation Fund (2nd Plaintiff)
Christie's Australia Pty Ltd (1st Defendant)
Holland Fine Art & Cars Pty Ltd (2nd Defendant)
Alex Holland (3rd Defendant)
Vivienne Sharpe (4th Defendant)Representation: Counsel:
Mr FM Douglas QC/Mr NJ Owens (Plaintiffs)
McLachlan Thorpe Partners (Plaintiffs)
Mr EC Muston/Ms N Case (1st Defendant)
Mr MA Friedgut (2nd and 3rd Defendants)
Mr P Gray/Mr M Richardson (4th Defendant)
Solicitors:
Minter Ellison (1st Defendant)
Levitt Robinson Solicitors (2nd and 3rd Defendants)
Ash Street Partners (4th Defendant)
File Number(s): 2013/46775 Publication restriction: Nil
HEADNOTE
The plaintiff, Louise McBride, purchased a painting described as Faun and Parrot on 1 May 2000 at an auction held by the first defendant, Christie's Australia Pty Limited. Christie's represented that Faun and Parrot had been painted by Albert Tucker circa 1967. The plaintiff retained Vivienne Sharpe, the fourth defendant, as her agent to bid for her at the auction in May 2000. The vendor of the painting was the second defendant, Holland Fine Arts & Cars Pty Limited (HFA). Its sole director at the time was the third defendant Alex Holland.
The painting was a forgery. The plaintiff only discovered that it was a forgery in early 2010 when making arrangements, with the assistance of Ms Sharpe, for the sale of a number of artworks, including the painting.
None of the parties to the proceedings knew at the time of the auction on 1 May 2000 that the painting was a forgery.
Soon after the auction in May 2000 Christie's had a doubt about the authenticity of the painting. It knew that its representation in the Catalogue that there was no doubt that Albert Tucker had signed the painting was false.
By August 2000 Christie's had been advised by a group of eminent art experts that there were "real concerns" about the authenticity of the painting. Christie's remained silent. It failed to inform its principal, HFA, the plaintiff or Ms Sharpe.
The plaintiff brought proceedings against Christie's for misleading or deceptive conduct, for unconscionable conduct, for deceit and money had and received. The plaintiff brought proceedings against HFA for misleading or deceptive conduct and against Mr Holland for being knowingly involved in HFA's conduct. The plaintiff also brought proceedings against Ms Sharpe for misleading or deceptive conduct, for breach of contract, for breach of fiduciary duty and in negligence.
The plaintiff also sued Ms Sharpe for obtaining a secret commission in breach of her fiduciary duty in respect of the sale of another item in early 2010, a painting by Jeffrey Smart, The Stairs, Florence Station II.
The plaintiff succeeded in her claims against each of the defendants for misleading or deceptive conduct. Each is liable to the plaintiff for her loss of $118,788.71: Christie's as to 85% of the loss; HFA as to 10% of the loss; and Ms Sharpe as to 5% of the loss.
The plaintiff succeeded in her claims against Christie's for unconscionable conduct, deceit and money had and received.
The plaintiff's claims against Mr Holland for being knowingly involved in HFA's conduct will be dismissed.
The plaintiff's claims against Ms Sharpe in negligence, for breach of contract and breach of fiduciary duty in respect of the painting will be dismissed.
The plaintiff's claim against Ms Sharpe for breach of her fiduciary duty in arranging a secret commission is made out. Ms Sharpe had offered to pay the full amount of the commission to the plaintiff during the trial. An order will be made for that payment.
The cross-claims brought by HFA, Mr Holland and Ms Sharpe will be dismissed.
The issues that arise include:
(i) The contractual obligations at the auction;
(ii) The ownership of the painting;
(iii) Whether the claims statute barred;
(iv) Whether the defendants engaged in misleading or deceptive conduct;
(v) The apportionment of liability for the plaintiff's loss;
(vi) Whether Christie's is liable in deceit;
(vii) Whether Christie's engaged in unconscionable conduct;
(viii) Money had and received;
(ix) Whether Ms Sharpe was negligent;
(x) Whether Ms Sharpe breached her fiduciary duty by obtaining a secret commission; and
(xi) The cross-claims
In relation to (i): The contractual obligations at the auction
There were numerous contracts entered into at the time of the auction. There was a contract between Christie's and HFA. There was a contract between the plaintiff as the Buyer and HFA as the Seller. There was a contract between the plaintiff and Christie's in respect of the Buyer's Premium. There was a contract between the plaintiff and Ms Sharpe: [133].
Subsequently there was a contract between Capital Finance Australia Limited (Capital Finance) (with whom the plaintiff arranged finance for the purchase of the painting), as the Buyer, and HFA as the Seller: [136].
HFA was an unidentified rather than an undisclosed principal. Principles discussed: [127].
Marsh & McLennan Pty Ltd v Stanyers Transport Pty Ltd [1994] 2 VR 232, considered.
In relation to (ii): The ownership of the painting
The plaintiff financed the purchase of the painting in 2000. It was purchased by Capital Finance and then leased under two consecutive leases to a family company, Laurentine Pty Ltd, in which legal title vested at the end of the second lease. It was always intended that the plaintiff would be responsible for the lease payments and would ultimately own the Painting. Laurentine held the painting on trust for the plaintiff and conveyed it to her on demand: [187] - [188], [195] - [196].
In relation to (iii): Whether the claims statute barred
Although the Painting was purchased in 2000, its possibly fraudulent nature was not discovered until arrangements were being made for its inclusion in the March 2010 auction. Ms McBride could not reasonably have discovered this defect earlier. The various art experts had failed to detect it. Accordingly the plaintiff's cause of action accrued when the defect in the Painting was discovered and it was withdrawn from the March 2010 auction. Her claims are not statute barred: [222] - [228].
In relation to (iv): Whether the defendants engaged in misleading or deceptive conduct
HFA
It is not necessary for the plaintiff to prove that HFA knew that its representations were false: [241].
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191, considered
Blackman v Gant [2010] VSC 229; (2010) 29 VR 29, considered
Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682, considered
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 55 ALR 25 at 30, considered
Representations (a) to (d) and (g) were false and misleading: [246].
HFA did not merely pass on the representations as it: confirmed as 'correct' its representation that the painting was by Albert Tucker; it requested Christie's to offer the painting for sale as an Albert Tucker in accordance with Christie's Conditions of Business; it confirmed that the painting was its own property and that it was unencumbered; it gave an undertaking that no third party had expressed concerns about the attribution of the painting; and it agreed to enter into a contract with the Buyer for the sale of the painting: [250].
Butcher v Laughlin Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592, distinguished
The Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525, distinguished
At the time HFA consigned the painting to Christie's its representation that the painting was by Albert Tucker was made with the intention that such representation would be passed on to others at the auction. The plaintiff was induced by this representation to purchase the painting. This representation was a cause of the plaintiff's loss and HFA is accordingly liable for that loss: [256] - [257].
Azzi v Volvo Cars Australia Pty Ltd [2007] NSWSC 319, considered
Johnson Controls Australia Pty Ltd v Webb Australia Group (NSW) Pty Ltd [2013] NSWSC 1511; (2013) 96 ACSR 640, considered
While it is not necessary to deal with the indirect causation issue, part of the chain of causation was that the plaintiff relied upon the representation in the Catalogue that the painting was by Albert Tucker. She would not have received this representation if HFA had not made it to Christie's: [266].
ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 309 ALR 445, considered
Mr Holland
For Mr Holland to be knowingly concerned in HFA's misleading and deceptive conduct it is necessary to prove that he knew the representations were false or he knew of the facts that made them false. There is no evidence to support such a finding: [270], [296].
Yorke v Lucas (1985) 158 CLR 661, applied
Showtime Touring Group Pty Ltd v Mosley Touring Inc [2013] NSWCA 53; (2013) 296 ALR 597, applied
Crocodile Marketing Ltd v Griffith Vintners Pty Ltd (1989) 28 NSWLR 539, applied
Christie's
Christie's was no 'mere conduit' for the information provided to it by HFA. It made its own representations regarding the painting, in particular that there was no doubt that it was signed by Albert Tucker: [319].
Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592, distinguished
ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 309 ALR 445, distinguished
In circumstances where Christie's Conditions of Business entitled the Buyer to seek a refund if the painting was discovered to be a forgery within five years of purchase, it was misleading or deceptive for Christie's to remain silent and allow the plaintiff, or her agent or trustee, to incur liability in respect of the painting and deprive them of the information necessary to enable them to seek a refund: [329].
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31, considered
Ms Sharpe
Ms Sharpe represented that the painting was by Albert Tucker and it would be a good investment. Those representations were false and misleading or deceptive: [371].
In relation to (v): The apportionment of liability for the plaintiff's loss
The value judgments in determining proportionate liability "differ from, and are more extensive than, those which inform the question of causation": [447].
Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10 at [57]; (2013) 247 CLR 613
The apportionment should equate to no more than 100% of the loss: [453].
Christie's responsibility for the loss is 85%; HFA's responsibility is 10% and Ms Sharpe's responsibility is 5%: [456] - [461].
In relation to (vi): Whether Christie's is liable in deceit
In late May 2000 Christie's knew that its representation that there was no doubt that the painting had been signed by Albert Tucker was false. The plaintiff had not paid the Buyer's Premium at that time and Capital Finance had not paid the purchase price. The transaction was not yet complete. Capital Finance had a right of reimbursement for forgery for a five year period. Christie's had an obligation to correct the representation: [344].
Spice Girls Ltd v Aprilia World Service BV [2002] EWCA Civ 15, considered
In relation to (vii): Whether Christie's engaged in unconscionable conduct
Christie's conduct was commercially reprehensible and unconscionable: [348].
In relation to (viii): Money had and received
The plaintiff entered into a contract with Christie's to pay the Buyer's Premium. That contract is amenable to be set aside by reason of the common or unilateral mistake that the painting was by Albert Tucker: [358].
In relation to (ix): Whether Ms Sharpe was negligent
Ms Sharpe took the steps that a reasonably competent and diligent art dealer would be expected to take in the circumstances: [421].
In relation to (x): Whether Ms Sharpe breached her fiduciary duty by obtaining a secret commission
Ms Sharpe was in a fiduciary relationship with the plaintiff as she was her agent. She breached that duty by negotiating for herself a share of the hammer upside that the plaintiff had wanted without disclosing that arrangement to the plaintiff. Ms Sharpe must account to the plaintiff for the profit she made by her breach of duty: [438], [444].
In relation to (xi): The cross-claims
The cross-claims are dismissed: [462] - [468].
index
Heading
Paragraph
INTRODUCTION
1
The Painting
2
The Sculpture
11
The Smart
15
The Cross-Claims
17
HEARING
22
BACKGROUND
24
Christie's Catalogue
30
April 2000 meeting
33
Telephone instructions from London
40
Discussions with Christie's
41
Bidding registration
45
Further Instructions from London - the Auction 1 May 2000
46
Painting purchased
55
Offer After Sale Form
58
Invoice for the Painting
60
Deutcher-Menzies Auction - 3 and 4 May 2000
61
Finance for the Painting
62
Statement of Authentication and Valuation
67
The Leases
74
Christie's expresses concern - mid 2000
80
A second 'Tucker' Painting
87
Contact with Mr O'Sullivan
89
The Symposium - 15 August 2000
90
Christie's alerted - August 2000
93
The second painting is sold
94
Provenance documents
96
The problem is exposed - February 2010
103
THE CONTRACTUAL FRAMEWORK
120
The Conditions of Business
121
A. Background to Terms
122
B. The Seller
123
C. Buyers
124
The contracts
125
CREDIT ISSUES
137
WHO OWNS THE PAINTING?
167
IS THE PAINTING A FORGERY?
197
ARE THE CLAIMS STATUTE BARRED?
217
CLAIMS AGAINST HFA
229
Representations made in the Receipt
232
Representations made in the Holland letter
235
Were the representations misleading?
241
Did the contraventions cause the plaintiff's loss?
247
Loss Suffered
268
CLAIMS AGAINST MR HOLLAND
269
CLAIMS AGAINST CHRISTIE'S
298
Misleading and deceptive conduct
299
Deceit
334
Unconscionable conduct
347
Money had and received
349
CLAIMS AGAINST MS SHARPE
359
Breach of contract and breach of fiduciary duty
361
Misleading or Deceptive Conduct
366
Negligence claim
374
Claims in respect of the Smart
423
PROPORTIONATE LIABILITY
445
CROSS-CLAIMS
462
CONCLUSIONS
469
Judgment
INTRODUCTION
These proceedings relate to three artworks: a painting purportedly painted by Albert Tucker known as "Faun and Parrot" (the Painting); a sculpture by Bronwyn Oliver known as "Tracery" (the Sculpture); and a painting by Jeffrey Smart known as "The Stairs, Florence Station II" (the Smart).
The Painting
The first plaintiff, Louise McBride, (to whom I will refer as "the plaintiff") claims that she owns the Painting and it is a forgery. There is an issue about the plaintiff's ownership of the Painting. However no party to the proceedings has propounded a positive case that the Painting is authentic.
The Painting was purchased at an auction conducted by the first defendant, Christie's Australia Pty Ltd (Christie's) on 1 May 2000 at Christie's auction rooms in Melbourne. The vendor of the Painting was the second defendant, Holland Fine Art & Cars Pty Ltd (HFA). Alex Holland, the third defendant, was and is a director of HFA. The fourth defendant, Vivienne Sharpe, an art dealer, acted as the plaintiff's agent at the auction. There is an issue whether Ms Sharpe was the plaintiff's art adviser.
The plaintiff alleges that each of Christie's, HFA and Ms Sharpe made representations regarding the the Painting that were false. It is alleged that each engaged in misleading or deceptive conduct and unconscionable conduct. It is also alleged that Mr Holland was knowingly involved in or a party to HFA's conduct. It is alleged that this conduct caused the plaintiff loss and damage.
It is further alleged that because the Painting is a forgery, there has been total, or practically total, failure of consideration for the plaintiff's payment of the purchase price and it is unconscionable for HFA, Christie's and Ms Sharpe to retain any of the proceeds paid to them in respect of the purchase of the Painting. The plaintiff also alleges that she is entitled to repayment of the purchase price on the basis of money received under a mistake of fact.
It is further alleged that Christie's breached a duty to disclose to the plaintiff the conclusions reached by a group of experts at a Symposium on 15 August 2000, that the provenance of the Painting was doubtful. In this regard the plaintiff relies on clause 17 of Christie's Conditions of Business, which provided that Christie's would refund the purchase price if the Painting was discovered to be a forgery within five years of the purchase. The plaintiff also brings an action in deceit against Christie's. It is claimed that Christie's knew that the provenance of the Painting was doubtful but failed to inform the plaintiff of that fact.
The plaintiff also alleges breach of contract, breach of fiduciary duty and negligence against Ms Sharpe. It is alleged that Ms Sharpe owed the plaintiff a fiduciary duty as her agent and/or adviser and that she breached her fiduciary duty and her contract by offering to purchase the Painting for more than the reserve contrary to the plaintiff's instructions. It is also alleged that Ms Sharpe was negligent in: failing to ascertain that the provenance of the Painting was doubtful; purchasing the Painting for greater than the reserve price contrary to the plaintiff's instructions; and advising the plaintiff to purchase the Painting.
It is alleged that finance for the purchase price of $75,000 (excluding the $10,000 Buyer's premium that was paid separately) was obtained by the plaintiff's family company, Laurentine Pty Ltd (Laurentine), entering into a leasing contract, guaranteed by the plaintiff and her husband, Greg Daniel, whereby legal title to the Painting passed to Capital Finance Australia Limited (Capital Finance). Laurentine was entitled to exercise a right to acquire the Painting for its residual value at the expiration of the Lease. It was alleged that the plaintiff made "all of the Lease instalments and paid the residual value of the Painting" resulting in a loss equal to the acquisition and holding costs of the Painting. The total loss claimed is $124,473.27 consisting of payments of commissions and lease instalments. However it was recognised during the trial that the claim that the plaintiff made all the lease payments would not be sustained.
The financial and personal difficulties the plaintiff and her then husband experienced during the period after the auction and up to trial were exposed in the proceedings. Although they divorced in 2013 they became estranged in 2006. At the time of the trial they had not finalised a property settlement, albeit that their marital home in Whale Beach had been sold and monies distributed in accordance with a consensual arrangement.
In about 2009 the plaintiff, who is a barrister, discussed some personal and financial difficulties she was experiencing with Ms Sharpe. It appears that by this time the plaintiff and Ms Sharpe were on very friendly terms. It was out of these discussions that a plan was made to sell the Painting, the Sculpture and the Smart at auction in March 2010. Ms Sharpe explored various options for such a sale with a number of auction houses. It was during this process in early 2010 that Ms Sharpe was alerted to the prospect that the Painting might not be authentic. The Painting was subsequently withdrawn from the March 2010 auction.
The Sculpture
It was alleged that the plaintiff's self-managed superannuation fund, Louise McBride Investments trading as Louise McBride Investments Pty Ltd as Trustee for the LMB Family Superannuation Fund (the Fund), which is the second plaintiff, owned the Sculpture.
The Sculpture was sold by Menzies at the March 2010 auction for $300,000. The plaintiff claimed that Ms Sharpe lowered the reserve for the Sculpture from $350,000 to $300,000 without her authorisation. Indeed the plaintiff claimed that she (on behalf of the Fund, the alleged owner of the Sculpture) had expressly instructed Ms Sharpe that the reserve was $350,000. It was further alleged that Ms Sharpe breached her contract and her fiduciary duties by failing to inform the plaintiff and the Fund that she had lowered the reserve and did not tell them that the letter of instructions she, or her agent Andrew Sharpe (Ms Sharpe's son), asked the plaintiff to sign contained the lower reserve figure.
It was also alleged that Ms Sharpe acted in a position of conflict between her duty to the Fund to follow instructions and her interest in securing a sale for Menzies and the buyer and her interest in securing a 5% secret commission. Finally it was alleged that Ms Sharpe engaged in unconscionable conduct by not informing the plaintiff that she had lowered the reserve and amended the letter of instructions accordingly.
On the ninth day of a ten day trial, all claims in respect of the Sculpture were abandoned (tr 824). Notwithstanding this abandonment, it is still necessary to refer to some of the evidence in respect of these claims (i) because plans for the sale of the Sculpture were intrinsically intertwined with the plans for the sale of the other artworks; and (ii) for the purpose of considering the attack made on Ms Sharpe's behalf on the plaintiff's credit and reliability in these proceedings.
The Smart
The Smart was sold for $460,000 at the March 2010 auction conducted by Menzies. The plaintiff alleges that Ms Sharpe advised her to accept an offer made by Menzies to guarantee her a price of $320,000 for the Smart. Under this arrangement, if the Smart sold for more than $320,000 the plaintiff would also receive 40% of the difference between that guaranteed price and the purchase price (the hammer upside). If it sold for less the plaintiff would still receive $320,000. It is alleged that the plaintiff accepted this offer in reliance on Ms Sharpe's advice. It is further alleged that without the plaintiff's knowledge Ms Sharpe entered into an arrangement with Menzies, whereby, if the Smart was sold for more than the guaranteed price, Ms Sharpe would receive half of Menzies' 60% share of the hammer upside.
It is alleged that by making this profit-sharing arrangement and/or failing to disclose it to the plaintiff, Ms Sharpe breached her fiduciary duty not to obtain an unauthorised profit. It is also alleged that Ms Sharpe breached her contract and engaged in unconscionable conduct.
The Cross-Claims
In the First Cross-Claim HFA and Mr Holland seek an order that Christie's indemnify them for any amounts for which they are found to be liable to either or both of the plaintiffs. They also seek damages for breach of contract and in negligence as well as equitable compensation for breach of fiduciary duty. There is a further claim for declarations that Christie's engaged in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) (TPA), s 42 of the Fair Trading Act 1987 (NSW) (FTA) and/or s 11 of the Fair Trading Act 1999 (Vic) (FTA Vic) in connection with the sale of the Painting and Christie's failure to disclose to HFA and Mr Holland by 1 May 2005 that it was at least possible, if not also probable, that the Painting was a forgery.
Christie's denies that it is liable to HFA or Mr Holland and in the alternative contends that some of the claims made against it are apportionable under s 34(1)(b) of the Civil Liability Act 2002 (NSW), the TPA, and/or the Competition and Consumer Act 2010 (Cth). It is alleged that the concurrent wrongdoers are Mr Holland, Barry O'Sullivan and Peter Gant.
In the Second Cross-Claim, Ms Sharpe seeks indemnity from Christie's in respect of any verdict for the plaintiff against her. There is also a claim for contribution pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) in respect of any verdict for the plaintiff against Ms Sharpe. There is a further claim for equitable contribution of such proportion as the Court may determine of any verdict for the plaintiff against Ms Sharpe in relation to the Painting.
Christie's denies that it is liable under the Second Cross-Claim and once again alleges that the claim is an apportionable claim for the purposes of the Competition and Consumer Act and the Civil Liability Act.
There are also claims that the plaintiffs' claims and the claims in the first cross-claim are statute barred.
HEARING
The proceedings were heard on 21 to 25 July 2014, 28 to 31 July 2014 and 1 August 2014.
Mr FM Douglas QC leading Mr NJ Owens, of counsel, appeared for the plaintiffs. Mr EC Muston, of counsel, leading Ms N Case, of counsel, appeared for Christie's. Mr MA Friedgut, of counsel, appeared for HFA and Mr Holland. Mr PW Gray SC leading Mr M Richardson, of counsel, appeared for Ms Sharpe.
BACKGROUND
Art forgery in the sense of propounding a work as having been painted by a particular artist when it was not has been going on for centuries. More recently in 1984 and 1999 the Australian Broadcasting Corporation (ABC) broadcast two programs about art forgery in Australia. On 10 May 1999 in the ABC's Four Corners program "Rogue's Gallery" reference was made to the "booming business of art fraud" that was putting the credibility of the industry on the line. Some people who are involved in the events that give rise to this litigation were interviewed in the that program. They include Professor Sloggett, of the Centre for Cultural Materials Conservation (CCMC) at the University of Melbourne, and Ms Lauraine Diggins, an art dealer. Another person who was interviewed was Peter Gant who also gave evidence in these proceedings and was the person who sold the Painting to HFA in late 1999.
During her interview, Ms Diggins discussed her own "horrendous experience" of having dealt with forged paintings of Arthur Streeton and Tom Roberts. Mr Gant was interviewed in respect of some forged paintings of Russell Drysdale and Charles Blackman. In that part of the interview the presenter said "Peter Gant has handled a few fakes in his time". Mr Gant said that he had been "caught with duds" and he did not know any dealers that had not been caught with them. At the conclusion of the program the following was said (Ex PD vol 2 613-614):
The booming public interest in artworks as investment has meant a bonanza for those in the business of art. At the latest round of art sales, $16 million was spent in the space of a week. In scenes reminiscent of the 80's, some works sold for triple the expected price.
The difference now is the entrepreneurs of the 80's have been replaced by small investors, gambling their hard-earned savings on what they can only hope is a sure thing.
Like all games of chance, the odds are stacked heavily in favour of the house.
The rules protect the dealer and the seller at the buyer's expense, and the unchecked culture of confidentiality gives the fakers virtual impunity and perpetuates the cover-up of fraud. The culprits may be few in number, but the whole system is open to suspicion as long as they're allowed to thrive.
It all adds a whole new meaning to the term 'buyer beware'.
On 2-3 December 1999 the Australian Institute of Criminology convened proceedings in Sydney entitled "Protecting Art, Protecting Artists and Protecting Consumers Conference". One of the presenters at the Conference was Professor Sloggett whose presentation included the claim that "artfraud is, as is most fraud, more often an act of opportunity than of planning, and has more to do with blindness (of the purchaser) than with cleverness (of the perpetrator)" (Ex PD vol 2 616). Other topics of discussion at that Conference included the modus operandi of art forgers and their capacity to produce false provenances for the works placed on the market (Ex PD vol 2 626-627).
Albert Tucker died in late 1999. Ms Diggins, in her role as the proprietor of the gallery Lauraine Diggins Fine Art Pty Ltd in North Caulfield published a booklet "Albert Tucker The Endurance of the Human Spirit 1 March - 1 April 2000" in which Ms Diggins recorded that Albert Tucker's "dealers have been Australian Galleries, Sweeney Reed Galleries, Tolarno Galleries, Bonython Galleries in Adelaide and Lauraine Diggins Fine Art" (Ex PD vol 2 656).
Between 1982 and 2004 HFA was an art dealership purchasing and selling artworks. It had its own gallery in Double Bay between 1986 and 1998. In late 1999 Mr Holland attended the Gallery Irascible - Peter Gant Fine Art in Melbourne and had a conversation with Mr Gant, who was the proprietor of the gallery. Mr Gant informed Mr Holland that he had "just got this Tucker in from a private client who has had it in his family for a very long time". Mr Gant informed Mr Holland that he was the first person to see it. Mr Holland agreed to purchase the Painting for "approximately $45,000". The Painting was delivered to HFA's office.
In early February 2000 David Cook, who was then the manager of Christie's in Sydney and with whom Mr Holland had a long standing business relationship, attended HFA's Double Bay office. Mr Cook had a look around the office and informed Mr Holland that he wanted to take six paintings for Christie's next auction. Mr Holland's evidence was that other than advising Mr Cook of the reserve prices that he wanted for each of the six paintings, there was no discussion about any of the individual paintings. Mr Holland signed a Christie's Receipt Form for these paintings that is referred to in more detail later.
Christie's Catalogue
The Catalogue that was produced by Christie's for the auction at which the Painting was purchased was entitled "Melbourne 1 & 2 May 2000 Christie's Australian and International Pictures, including Contemporary Australian Art" (Ex PX). It included the following entry under a coloured reproduction of the Painting (a copy of which is on the last page of this judgment) as Lot 70:
70 Painted circa 1967
Albert Lee Tucker (1914-1999)
PROVENANCE
Faun and Parrot Tolarno Gallery, Melbourne, signed 'Tucker' (lower right), oil on board 1969-1970
75.3 x 60 cm Acquired by the father of the present owner circa 1970
$55,000-75,000
The Catalogue included the following:
Explanation of Cataloguing Practice
For paintings, prints and works of art
A work catalogued with the name(s) or recognised designation of an artist or maker, without any qualification, is, in our opinion, a work by the artist or maker. In other cases, the following words and expressions with the following meaning are used:
"Attributed to ..." in our opinion probably a work by the artist or maker in whole or in part.
"Studio of"...Workshop of..." in our opinion a work executed in the studio or workshop of the artist, possibly under his supervision.
"Circle of ..." in our opinion a work of the period of the artist or maker and showing his influence.
"Manner of..." in our opinion a work executed in the style of the artist or maker but of a later date.
"After ..." in our opinion a copy of any date of a work of the artist or maker.
"Signed"..."Sealed"..."Dated"..."Inscribed" in our opinion the work has been 'signed', 'sealed', 'dated', or 'inscribed' by the artist or maker. The addition of a question mark indicates an element of doubt.
"With signature"..."With seal"..."With date"..."With Inscription" has a signature/seal which in our opinion is not that of the artist.
The Catalogue is analysed in more detail later for the purpose of identifying the contractual relationships between the various parties at the time the Painting was auctioned and sold.
April 2000 meeting
By early 2000 the plaintiff and Ms Sharpe had been known to each other for some years. Ms Sharpe had by this time assisted the plaintiff's husband with the purchase of numerous artworks. The plaintiff claimed that she and her husband visited Ms Sharpe in April 2000 at her house in Clareville. The plaintiff claimed in her affidavit (sworn on 7 August 2013) that Ms Sharpe showed her some catalogues and said, "Look at this Tucker". The plaintiff recalled that she liked the Painting because of its brightness and because of the "birds" (albeit there was only one bird in the Painting) and she thought it was interesting. She claimed that Ms Sharpe said:
Tucker, like many other artists of this period is undervalued. It would be a good buy. He's not flavour of the month. Everyone is collecting modern work. Tucker is good buying.
The plaintiff claimed that she and Ms Sharpe were flicking through two catalogues. Although at that time she thought that the catalogues were in relation to one sale, by the time her affidavit was sworn, she knew that one catalogue was for the Christie's Fine Art auction and one was for the Harold Mertz collection auction (in which her husband was interested). The plaintiff claimed that she said to Ms Sharpe that she would "like to own a Tucker as I like him as an artist, but I don't know much about him or his work".
The plaintiff claimed that she and Ms Sharpe then discussed Albert Tucker and Australian art and that the following conversation occurred (where the initials LM and VS are used for the plaintiff and Ms Sharpe respectively):
VS: This would be a great investment. The painting is a beauty.
LM: Look, I am interested. What is the price?
VS: The estimate is $75,000 but it will go for a lot more than that. It is more likely to go for $120,000 to $150,000 because he is a famous artist even if he is not popular now, so it won't be cheap and good artists are commanding high prices.
LM: That's out of my league. Even $75,000 would be a stretch.
VS: That's what's good about auctions. You can always be lucky and you shouldn't be turned off by the price. Anything can happen.
Let me have a look at it at the viewing for you and I will do some research on it and I will give you a better idea. I am going to the viewing to look at other works, and you can never actually tell until you see something as often the catalogue doesn't do a lot for colour and size.
I need to look at its condition. You rarely ever know from the catalogue.
It's worth you getting me to check it out and if it's a good work and in good condition, and the provenance checks out, I will put in a bid for you.
LM: If it is a good work and in good condition, put in a bid for me but please don't go over the reserve. I can't afford it.
The plaintiff claimed that the figure that she had in mind when she left Ms Sharpe was $75,000. Shortly after this conversation the plaintiff travelled to Paris and London. The plaintiff's evidence was that she did not expect to be buying the Painting because Ms Sharpe had indicated that the Painting would be going for well over the reserve.
Ms Sharpe accepted in her affidavit (affirmed on 22 January 2014) that she did have a meeting with the plaintiff and Mr Daniel at around the time referred to by the plaintiff but thought it was a different date. Ms Sharpe's recollection was that the meeting took place at the plaintiff's and Mr Daniel's home in Whale Beach. She recalled that they discussed the upcoming auctions to be held in Melbourne including the one by Christie's on 1 and 2 May 2000. She recalled that the plaintiff and her husband had a copy of the Christie's Catalogue for the auction on 1 and 2 May 2000 and she also had a copy of the Catalogue with her.
Ms Sharpe denied that there was any discussion at this meeting about the Mertz Collection. She recalled that the Christie's Mertz Collection catalogue was not published until around 26 May 2000. Ms Sharpe denied showing the Christie's catalogue to the plaintiff and she also denied pointing to a picture of the Painting in the Catalogue.
Ms Sharpe denied that she advised the plaintiff that the Painting would be "good buying" or a good investment. She analysed this part of the conversation that the plaintiff had alleged and made the point that Albert Tucker was a "modern" artist. In those circumstances she claimed that she would not have had the conversation that the plaintiff propounded in which she was suggesting that Albert Tucker did not fall into the "modern" category. Ms Sharpe's recollection of the conversation was as follows (the initials GD are used for Mr Daniel):
GD: Viv. I've looked at the Christie's catalogue. There is nothing much in there for me however Lou likes the Tucker. She wants to have a word to you about it.
LM: I have always liked Tucker. And I like this one. What do you think of it?
VS: It's early and from his Faun and Parrot series - an important series. As you might know, there's a Tucker like this one hanging in the Art Gallery of NSW and another in the Gallery in Canberra. The estimate looks fair. I'm not sure how much interest there is in Tucker at the moment but I'll be going to Melbourne and will check out what kind of interest there is in it and what condition it is in if you're interested in bidding.
LM: I think I am interested but we're going to London. I will let you know. When is the auction?
VS: May 1st.
LM: I will let you know from London.
Telephone instructions from London
Ms Sharpe's affidavit evidence was that to the best of her recollection the plaintiff telephoned her from London and the following conversation took place:
LM: I would like you to bid for me on the Tucker. What do you think it will go for?
VS: I think you might get it at the low estimate of $55,000. You never know what can happen at auction. I am going down to Melbourne for the auction. I'll try to find out what interest there is in it and let you know. Phone me on Monday after I have seen it.
Discussions with Christie's
Ms Sharpe arranged with Mr Cook (who was described in the Catalogue under the heading "Christie's Australia Australian Art Specialists" as "Associate Director & Head of Australian Pictures") to do a Condition Report on the Painting. Ms Sharpe also made arrangements to view the Painting in Melbourne prior to the auction.
On 1 May 2000 Ms Sharpe attended Christie's auction rooms in South Yarra in Melbourne and obtained a copy of the Condition Report for the Painting. She also arranged for the Painting to be taken off the wall so that she could look at it under ultraviolet light.
The Condition Report dated 29 April 2000 included the following (Ex PD vol 2 667):
Christie's specialists are not trained conservators, and the report/s set out below is not a comprehensive condition report prepared by a professional restorer. While we make certain observations on the work, which we trust are helpful, we recommend that you consult your own restorer for a more complete report. We also remind you that this report is given in accordance with the conditions of business printed in the auction catalogue. It is an expression of an opinion only and must not be treated as a statement of fact.
...
LOT 70 ALBERT TUCKER
FAUN AND PARROT
The catalogue illustration is reasonably faithful to the actual picture.
There is some paint loss at the end of the parrot's tail as evident in the catalogue illustration.
Under ultra-violet light there appears to be no signs of re-touching or over-painting.
The painting is in good condition.
Ms Sharpe then had a conversation with Fiona Hayward (who was described in the Catalogue under the heading "Christie's Australia Australian Art Specialists" as "Specialist Melbourne"). Ms Hayward informed Ms Sharpe that there had been "a bit of interest" in the Painting. Ms Sharpe then had the following conversation with Ms Hayward:
VS: Fiona, I notice this Tucker is from the Tolarno Galleries. Is this correct?
FH: Yes
VS: I suppose you can't tell me who the vendor is?
FH: Now Vivienne, you know I can't tell you that!
Bidding registration
On 1 May 2000 Ms Sharpe signed Christie's Bidding Registration Form providing her own name, address and phone numbers under the heading "Client Details". That Form included the following:
I understand that the auction and all bidding will be subject to the contractual terms and conditions printed in the auction catalogue and that a buyer's premium of 15% of the first $50,000 of the sale price of each lot and 10% of the excess of the sale price above $50,000 applies (see conditions of business c. 15)
Further Instructions from London - the Auction 1 May 2000
Ms Sharpe's affidavit evidence was that prior to the auction she had a telephone discussion with the plaintiff in London as follows:
VS: I'm in Melbourne. I viewed the painting today. The Tucker looks to be in good condition. It's a good image and the colours are pretty true to the reproduction in the catalogue. Fiona said there is a bit of interest in it. Are you still interested in bidding?
LM: Why don't you bid to the low estimate of $55,000.
The plaintiff claimed that Ms Sharpe telephoned her in London and they had the following conversation:
VS: I'm at the auction. The Tucker has been passed in for $35,000(???). I was the only bidder on your behalf so I have a right to negotiate to purchase the work. (I can't now remember whether she said "$35,000" or "$33,000".)
LM: I'm surprised. That's amazing. Why so low?
VS: I do not know. The painting is in excellent condition it is a very good piece. It was one of the first up and the room was not fully warmed up every one was focused on the bigger items but there is a lot of post auction interest. I think it was passed in far too quickly. It is a really good work I think people were just not focused but there is a lot of interest now. It's a good picture. It would be a good buy.
LM: I thought it would be out of my league. Do you think Tucker is a good artist to have in our collection?
VS: Yes, he is under-valued at present and it's a good work. I have checked it out, it all stacks up I think you will get a great buy.
The plaintiff claimed that after she spoke with her husband while Ms Sharpe was still on the phone, the following conversation occurred:
VS: Louise, the auction is still going on. I have to go. Do you want me to negotiate it for you? I think I can get it for less than the reserve you will probably get it for $40,000 and then it will be a bargain. It's a valuable work and is a really good work that is representative of Tucker, but you have to be quick as other buyers are also interested.
LM: Ok, if you think it's a good buy, but I can't go above the reserve.
VS: No sweetie, I am sure you will get it for under $40,000. I will do my best.
The plaintiff claimed that the following day, Ms Sharpe telephoned her and the following conversation took place:
VS: I have good news you have acquired a great Tucker but there was heated post auction bidding. It was really competitive. The vendor was reluctant to part with it. It had been in the vendor's family for a long time. He would not part with it for less than the reserve. I bought it for you at $75,000.
LM: Oh that was more than we were talking.
VS: But it is still a good price as it is only the reserve.
LM: I will need to try to get finance in place.
VS: Don't be disappointed, it's still a good buy. It's a great work by a fabulous artist and as I have told you I think his work is undervalued by the market. I am sorry, I thought I would get it more cheaply for you but it is a good sign that lots of other collectors were also interested - you will do well out of it.
During the auction Ms Sharpe observed that there was no genuine bidding for the Painting so she did not bid. Her original recollection was that the Painting was passed in at $35,000. However she later accepted that it was probably passed in at $50,000.
Ms Sharpe's affidavit evidence was that she did not have a conversation with the plaintiff during the auction in the terms suggested by the plaintiff. She denied saying the words "it is a very good piece" or "it would be a good buy" or "yes, he is undervalued at present and it's a good work. I have checked it out, it all stacks up I think you will get a great buy". Ms Sharpe's recollection was that after the Painting had been passed in, whilst she was still at the auction rooms and the auction was still in progress, she had a conversation with the plaintiff as follows:
LM: What happened?
VS: The painting was passed in. I didn't bid. I allowed the painting to be passed in at $35,000. The auction is still going on so I can't talk now. I'll phone you back after the auction.
Ms Sharpe's recollection in her affidavit was that at about 11.00pm Sydney time after the auction, she telephoned the plaintiff in London and the following conversation took place:
VS: There was no real bidding. McIlroy was just running up the bidding taking bids from the wall so I let him pass it in. I don't know why there wasn't any interest because Fiona said there was. But you can never tell what happens in the rooms. This way we get an opportunity to offer at a lower price. Do you want to offer $40,000? You could get it for that!
LM: Yes, why don't you try?
Ms Sharpe claimed in her affidavit that the first offer she put to Ms Hayward was $40,000, either directly after the auction or early the next morning. Ms Hayward advised Ms Sharpe that the Painting was not available for $40,000 and that the vendors wanted the reserve of $55,000 and would not sell it for less. Ms Sharpe advised Ms Hayward that she would have to speak to her client and get instructions and come back to her. Ms Sharpe said that immediately after this conversation she telephoned the plaintiff in London and had a conversation as follows:
VS: Lou, I offered Fiona $40,000 but she said the vendors wouldn't accept any less than the reserve which is $55,000. What do you want to do? You did give me instructions to bid $55,000.
LM: OK. Do you think we will get it for $55,000?
VS: I should think so!
Ms Sharpe then contacted Ms Hayward and made an offer of $55,000. Ms Hayward then advised Ms Sharpe that there had been "a lot of post auction interest" and that she would have to pay $75,000 "to get it now". Ms Sharpe claimed she then telephoned the plaintiff in London and had a conversation in the following terms:
VS: Lou, Fiona has just told me there has suddenly been a lot of interest in the Tucker and if you want it you now need to pay $75,000. What do you think?
LM: That's a lot more than the reserve.
VS: Yes it is. But that's what Fiona said and I don't have any reason to doubt her.
LM: Well, what do you think?
VS: Lou, given there are similar Tuckers from this series hanging in major art museums and featured in books on Tucker and it's from a good period, the 1960's, I think it's probably worth $75,000.
LM: OK. Please offer them $75,000.
Painting Purchased
Ms Sharpe's affidavit evidence was that to the best of her recollection it was either later on 2 May 2000 or early on 3 May 2000 that she phoned Ms Hayward and made the offer of $75,000. Ms Hayward contacted Ms Sharpe again later that day and informed her that the vendor had accepted the offer. Ms Hayward said again that there was a lot of post auction interest in the Painting and offered her "congratulations". Ms Sharpe then telephoned the plaintiff in London and informed her that her offer had been accepted and claimed that the plaintiff said "Great. Thank you".
In her affidavit in reply sworn on 17 April 2014 the plaintiff denied that many of these conversations occurred and said that only "a single telephone conversation on the night of the auction" occurred.
Subsequently, after she analysed her telephone records, Ms Sharpe recalled that she made four telephone calls to the plaintiff on the night of the auction. Ms Sharpe affirmed an affidavit on 4 July 2014 dealing with the telephone records and made the point that as it had been over 14 years since the relevant conversations took place it was "possible" that one or more of the conversations which she recalled as having taken place on 2 May 2000 may in fact have taken place on 1 May 2000 during or after the auction.
Offer After Sale Form
In a Christie's document entitled "Offer After Sale" with a handwritten notation "entered 1/5/00", Ms Sharpe was identified in the section headed "Name". The word "Tucker" was handwritten under the heading "Description" and "$75,000" was handwritten under the heading "Amount Excluding buyer's premium". The Form included the following:
I herewith acknowledge that this offer is subject to the conditions of sale printed in the sales catalogues. This offer is valid for one month and cannot be withdrawn within that period. The above figure is exclusive of premium. (See Conditions of Business Clause C 15).
The initials "FH" are handwritten next to the word "Signature" under this acknowledgement. There was no evidence given by Christies in relation to this entry. It is probable that Ms Hayward wrote these initials.
Invoice for the Painting
Christie's issued an invoice directed to Ms Sharpe dated "02/05/2000" recording "Sale Date 01/05/2000". It included the following:
1 Albert Lee Tucker (1914-1999)
Faun and Parrot
Signed 'Tucker' (lower right), oil
Total Hammer Price 75,000.00
Premium 10,000.00
Freight 60.00
Receipts
TOTAL DUE 85,060.00
Payment is due in Australian dollars within seven days from the date of sale by cash or bank cheque. Personal cheques may be accepted, however unless prior arrangements have been made, five working days must be allowed for bank clearance before purchase can be collected.
Deutcher-Menzies Auction - 3 and 4 May 2000
On 3 May 2000 the Deutcher-Menzies "Australian Modern Masters" auction included a painting by Albert Tucker entitled Faun Attacked by Parrots 1967. The Provenance recorded in the catalogue was "Galeria de Antonio Souza, Mexico City (label attached verso) Private collection, Melbourne". The price range was listed as "$150,000 - 200,000". The entry in the catalogue included the observation (by Richard Haese) that this particular painting reflected Albert Tucker's "ambition to personify the mythic resonance of the Australian pioneering struggle to inhabit an alien and potentially hostile landscape" (Ex PD vol 2 699).
Finance for the Painting
The plaintiff made arrangements for lease finance in respect of the Painting through the broker, Peter McAdam Finance Pty Ltd. The plaintiff's personal assistant, Helen Ezzy, provided the plaintiff's instructions to the broker and the plaintiff signed the application on 16 May 2000. One aspect of that application was a statement of assets signed by the plaintiff which included the entry of $1.5 million for "artworks" (Ex PD vol 2 712). It was controversial during the plaintiff's cross-examination because it was clearly an inaccurate figure. It seems to me that this controversy was overtaken by the joint statement of assets and liabilities that the plaintiff and her husband provided to Capital Finance (referred to below).
On 17 May 2000 Ms Ezzy told Mr McAdam that the plaintiff had instructed her to advise that the Painting "will be purchased in Laurentine Pty Limited". The plaintiff said that Laurentine was chosen because Capital Finance had advised that it would only provide this finance to a company and not to an individual. Laurentine had been established when the plaintiff was a partner of a large law firm. It was set up by the plaintiff as trustee of the Laurentine Trust.
On 30 May 2000 Capital Finance wrote to the Manager of Laurentine at the plaintiff's Whale Beach address enclosing the Term Purchase Agreement in duplicate, a direct debit form and a privacy form. That letter included the following (Ex D4-7):
Please have the documentation executed where indicated and return to this office together with the following:
1. Cheque made payable to Capital Finance Australia Limited for $1469.87 (including $180.00 - administration fee)
2. Certificate of Currency of insurance noting the interest of Capital Finance Australia Ltd
3. Copy of rates notice for residential property
4. Signed and dated asset & liability statement
5. Certificate of authenticity
6. Independent valuation
Upon receipt of the above items we will be in a position to settle this transaction.
A personal statement of assets and liabilities signed by the plaintiff and her husband and dated 4 June 2000 showed total liabilities of $2.3 million and total assets of $6.3 million. The assets were divided into real property and "other assets" with the attribution of $1 million to those other assets without any reference to the detail of them. There was no mention of any artworks (Ex D4-7).
The plaintiff wrote a cheque dated 2 June 2000 to Capital Finance for the amount requested, $1,469.87.
Statement of Authentication and Valuation
On 2 June 2000 a Statement of Authentication and a Valuation in respect of the Painting addressed to Capital Finance were signed by Karen Woodbury of Deutscher-Menzies. These appear to have been organised by Peter McAdam in the process of arranging finance with Capital Finance. Each document identified the artist as Albert Tucker (1914-1999) and described the Painting as "Faun and Parrot c 1967 oil on board 75.3 x 60.0 cm signed lower right: Tucker". The Statement of Authentication included the following:
I have inspected the item described above and in the attached valuation and in my opinion the work is genuine and authentic.
The stated purpose in the Valuation was "Leasing". The "Total Valuation" was recorded as $75,000 and it included the statement that "the above material takes into consideration recent prices paid for comparable material".
There is in evidence a facsimile from Christie's addressed to Ms Sharpe dated 30 May 2000 (Ex PD vol 6 2107). There is an issue as to whether this was in fact sent to Ms Sharpe. It was in the following terms:
Re Australian Paintings Sale, 1 May 2000 (THOMAS - 1007)
Lot 70 - Albert Tucker - total amount owing $85,000.00
Dear Vivienne
Further to our phone conversation this morning, following is a copy of the amended invoice for lot 70 purchased in the above sale that has been faxed to Peter McAdam for financing the amount of $75,000.00. As you mentioned, you have the cheque for the difference being $10,000.00.
Attached to that facsimile was an invoice addressed to Capital Finance recording the "Total Hammer Price" of $75,000, the premium of $10,000; receipts of $75,000, and total due of $10,000.
On 14 June 2000 Christie's wrote again to Ms Sharpe advising that it was "still awaiting payment of $10,000 being the premium on this purchase".
Christie's is issued an invoice dated "14/06/2000" to Capital Finance which included the following:
1. Albert Lee Tucker (1914-1999)
Faun and Parrot
total hammer price 75,000.00
premium 10,000.00
freight
receipts 75,000.00
TOTAL DUE 10,000.00
On 16 June 2000, HFA received approximately $70,000 from Christie's in respect of the sale of the Painting.
The Leases
The Equipment Term Purchase Agreement (the Lease) between Capital Finance and Laurentine was dated 4 June 2000. The hirer in the Lease, Laurentine, offered to enter into the agreement with Capital Finance in the terms and conditions set out in the Schedule to the Lease. The Description of Goods was as follows:
SUPPLIER: CHRISTIE'S AUSTRALIA PTY LTD
ONE (1) X ALBERT LEE TUCKER
FAUN AND PARROT
SIGNED 'TUCKER' (LOWER RIGHT), OIL BOARD
75.3 X 60CM
PAINTED CIRCA 1967
The term of the Lease was 48 months from the commencement date, 6 June 2000, with 48 instalments of $1,289.87 with a final instalment of $37,522.50. The cost of the goods was recorded as $75,000 with term charges at $23,916 with a total amount payable of $98,916. The Lease was guaranteed by the plaintiff and her husband. The common seal of Laurentine was affixed and the two signatures against that seal were that of Mr Daniel and the plaintiff. Underneath the plaintiff's signature were the words "Director/Secretary".
The Terms and Conditions included the following:
3. Hirer's Option to Purchase During Term
Hirer may at any time during the Term, provided it is not in default, purchase the Goods by paying Capital the Early Termination Amount, whereupon the hiring will end.
...
7. Capital's Title to the Goods
7.1 Apart from the right of property or interest accruing to Hirer by operation of clause 3, Hirer acknowledges that the Goods remain Capital's property at all times, that Hirer's rights hereunder are personal and as bailee only, and that it has no authority to deal with, and agrees not to purport to deal with, or share or transfer possession of, the Goods. Capital may at any time affix identifying marks on the Goods and Hirer must provide Capital access to the Goods to enable this to be done.
7.2 Hirer must do everything necessary to protect Capital's title to the Goods ...
On 22 June 2000 Peter McAdam Finance Pty Ltd wrote to the plaintiff/ Laurentine at the Whale Beach address. That letter included the following:
We are pleased to advise you that your ASSET PURC transaction for ONE PAINTING BY ALBERT TUCKER has settled on 06/06/00. The financier is CAPITAL FINANCE AUSTRALIA LTD - MELB and the agreement is for 48 months with a $37,500.00 balloon/residual value.
On 29 July 2004 at the conclusion of the 48 month Lease, Laurentine did not elect to purchase the Painting from Capital Finance. Rather it entered into a further Equipment Term Purchase Agreement with Capital Finance (the Second Lease) pursuant to which it agreed to a further 36 months of instalments with a total amount payable, after adjustments of $44,051.40.
Although it was originally claimed that the plaintiff made the payments under the Leases, it was accepted that the payments under the Second Lease were made by Laurentine. However the plaintiff contends that Laurentine was making those payments on her behalf. This raises the issue of whether the plaintiff owns the Painting. Laurentine is not a party to the proceedings.
Christie's expresses concern - mid 2000
In "the middle of 2000" Ms Hayward telephoned Ms Diggins. In her first affidavit (sworn 15 August 2013) Ms Diggins gave evidence that Ms Hayward said:
There are a number of paintings that appear to have come from the same source that we are concerned about.
...
I have a letter from Mr Barry O'Sullivan confirming the provenance of the painting sold by Christie's in May.
In that affidavit Ms Diggins said that she requested a copy of the letter and that Ms Hayward provided it to her.
In her second affidavit (sworn 23 April 2014) Ms Diggins gave the following version of the conversation with Ms Hayward (where LD is Ms Diggins and FH is Ms Hayward):
FH: We are concerned about three paintings that have all come from the same questionable source.
...
I have a document from a Mr Barry O'Sullivan saying that his father bought the painting 30 years before he died.
LD: I've never heard of him. Where did he say he bought them?
FH: From Dominion Galleries.
Although the affidavit recorded that this conversation took place after the Symposium (referred to below), Ms Diggins confirmed in cross-examination (on Ms Sharpe's behalf) that it took place before that meeting (tr 349).
In cross-examination (on Ms Sharpe's behalf) Ms Diggins gave the following evidence (tr 349-350):
Q. So when Fiona Hayward contacted you at about that time, let's say roughly late July or early August, she said she had received a letter from Mr O'Sullivan?
A. Well, when she contacted me, it was - she didn't contact me as a result of a letter from Mr O'Sullivan. She contacted me before that.
Q. She contacted you before what?
A. Before she received the letter from Mr O'Sullivan.
Q. Well, not according to your account in paragraph 18. There you say she contacted you and in that conversation when she contacted you, she told you she had the letter from Barry O'Sullivan?
A. Yes, but that's not the - that's not initiating her contact. She had already contacted me previous to that about this.
Q. Where do you say that?
A. So she may - you know, how many phone calls there were before Fiona and myself, I don't recall.
...
Q. So the first time you spoke to Ms Hayward was some time prior to the conversation that you set out in paragraph 18 is that right?
A. Yes, that's correct.
In re-examination Ms Diggins gave the following evidence as to the timing of Ms Hayward's first expression of concern (tr 423):
Q. Does that assist you in any way to put a time on when you first had a discussion with Ms Hayward?
A. I have always thought the discussion with Fiona Hayward was on the earlier side of mid 2000, but what I am not sure about is if it was before the May auction or immediately after, or closely after that.
Q. You have referred to the fact that you had a conversation with Fiona?
A. Yes.
Q. If you look at the next sentence it says:
"Shortly after that I was visiting Deutcher-Menzies and they showed me a work that they had catalogued for their current exhibition and they asked my opinion of it?
A. Yes.
Q. Could I take you to page 792, you will see that is Deutcher-Menzies May catalogue, is that the painting being referred to?
A. Yes, it is.
Q. Does that assist you in any way to date when you actually first had the conversation with Ms Hayward?
A. I really can't remember whether it was before the May sale or, just after, I just can't remember.
Ms Hayward did not give evidence. I am satisfied that Ms Hayward contacted Ms Diggins in May 2000, at a time after the auction at which the Painting was sold, and expressed her concern about the Painting. I am also satisfied that the concern must have been significant for such contact to have been made in circumstances where Ms Hayward had not only confirmed as "correct" the Tolarno Gallery provenance with Ms Sharpe but had also personally negotiated the sale of the Painting with her. I am satisfied that as at May 2000 Christie's entertained a doubt about the authenticity of the Painting. I am also satisfied that there were discussions in July and/or August 2000 between Ms Hayward and Ms Diggins about the O'Sullivan letter.
A second 'Tucker' Painting
On 21 June 2000 a painting entitled "Faun being attacked by Parrots" was consigned to Christie's by HFA. Mr Holland agreed that he consigned it to Christie's for its auction in August 2000 (tr 564). He claimed that he purchased this painting from Mr Gant. However Mr Gant claimed that he was only aware of one Tucker that he sold to Mr Holland (tr 595).
Christie's catalogue entitled "Australian and International Paintings Melbourne 22 August 2000" included Lot 76 described as follows:
76
Albert Lee Tucker (1914-1999)
Faun being attacked by Parrots
signed and dated 'Tucker 70' (lower right)
and inscribed with title
and further dated on the reverse, oil on board
55x70cm
$55,000 - 75,000
Contact with Mr O'Sullivan
On 14 August 2000 Ms Diggins telephoned Mr O'Sullivan. Ms Diggins' affidavit evidence was that the following conversation occurred (where LD is Ms Diggins and BO'S is Mr O'Sullivan):
LD: I'm ringing on behalf of the Tucker Estate. I represent Albert Tucker's widow and I am making enquiries about a number of paintings which I understand you owned and have been auctioned recently.
BO'S: My father died about twenty years ago and he had some paintings which he acquired approximately thirty years ago from a Sydney gallery.
LD: Do you know anything more about the works?
BO'S: I sold these works too cheaply to a dealer who lied to me about the value of the works.
LD: I'm worried about the source of these works. Is there any information that you could help me with.
BO'S: My father died in 1980 and that (sic) me and my brother knew about these paintings.
LD: Do you have any photographs or anything in the house to show the existence of the paintings or any insurance policies?
BO'S: No, my father didn't have the paintings insured.
LD: Are you able to give me any further information?
BO'S: No.
LD: Do you know where the paintings were bought from?
BO'S: No, I have no idea. My dad bought them about thirty years ago.
The Symposium - 15 August 2000
On 15 August 2000 a meeting was held at the Ian Potter Art Conservation Centre (referred to in the proceedings as "the Symposium"). Present at that meeting were Ms Diggins, Albert Tucker's widow (Barbara Tucker), Richard Crichton, Warwick Reeder from the Heide Museum and Sally Carew-Reid who was the painting conservator at the University of Melbourne. The proceedings at the meeting were tape recorded and it was noted that the transcript and the information provided at the meeting was to be expressly used for the establishment and development of a database of materials and techniques employed by Albert Tucker.
During this meeting Ms Diggins reported that she and Mrs Tucker had looked at the Painting prior to the Christie's auction in April 2000 and that they "had some degree of not actually at that stage concern about the picture being right, but some degree of dis-ease about the quality of the painting just didn't seem to be what we would have expected". Ms Diggins then referred to another painting that was auctioned by Deutscher-Menzies at around the same time. She reported that both she and Mrs Tucker were quite sure that this painting was "correct". Ms Diggins then reported (Ex H):
Following that I'd had some time later a discussion with Fiona Hayward from Christie's when Fiona had brought to my attention a number of paintings of very very similar subject matter coming through the one source and it was a source that she had problems with in regard to that particular dealer handling at times ambiguous work. Shortly after that I was visiting Deutscher-Menzies and they showed me a work that they'd had catalogued for their current exhibition and they asked my opinion of it and when I saw the painting I was very alarmed by it. It exhibited the same type of characteristics that the other Christie's picture had had and then seeing the two of them together there were a lot of characteristics that seemed to me to be out of character with Bert's work.
...
In regard to the first work through Christie's and the two works through Deutscher-Menzies they all come originally from the one source and that man's name is Barry O'Sullivan. I spoke to Barry O'Sullivan yesterday. I do not know how old he is but he has told me that his father was a great fan of Albert Tucker's and that they have four works of Albert Tucker's all of which were bought in the very very early 1970s. He, in my discussion with him, was quite aggressive, quite angry. The line that he was taking was that he had sold these works too cheaply to a dealer who'd misrepresented the value of the works and was not really co-operative to start with. As I slowly persuaded him that his works may have been caught up with some works through other sources that perhaps were not correct and they had actually been sold through the same dealers. We needed his support and his help so we can unravel the situation. He told me that his father died in 1980, that as kids he and his brother always knew about these pictures in the household. There are no, from questioning him, there are no photographs showing the paintings in the house and there are no insurance policies because his father didn't have the paintings insured. So I'm not able to get out of him anything that totally gives a provenance that is unquestionable and all we have is his word as to the situation. He didn't know where the pictures were bought from.
Mrs Tucker said that Ms Diggins had not mentioned that at one stage Ms Diggins had been informed that the paintings were "bought directly from Bert". Ms Diggins then said: (Ex H):
Yes, the provenancing of the three paintings has been very very confusing and very mixed. As far as I'm able to clear is that Barry O'Sullivan has sold them through a dealer that he will not name, that they have gone to Alex Holland who is a dealer in Sydney and then to John Playford. Playford was the vendor of the Mexican picture to Deutscher-Menzies and also to the current painting that is in Deutscher-Menzies. The one that was in Christie's the vendor was Alex Holland. And in trying to unravel the provenance no-one has been really clear. There is suggestion that Peter Gant is somewhere involved and John Playford most definitely is and so is Alex Holland and we do not know who the first dealer is and there is this back and forward.
Christie's alerted - August 2000
After the Symposium, Ms Diggins telephoned Ms Hayward and said:
Fiona, the Group has met and we have real concerns, not only about Lot 70 which sold in May, but lot 76 for the August auction which we believe should be withdrawn from sale. I could not support either of these paintings as works by Tucker in light of what we have seen. You will need to make some further investigations.
The second painting is sold
Notwithstanding Ms Diggins' communication with Ms Hayward, Lot 76 "Faun being attacked by Parrots" was put up for auction at Christie's on 22 August 2000 as a work by Albert Tucker and it was sold to the Australian Club in Sydney for $69,165 (hammer price of $58,000 plus premium and GST) (Ex PD vol 5 page 1811). Years later the Australian Club became aware that this painting was possibly a forgery and after protracted negotiations, Christie's agreed in December 2012 to reimburse the Club by way of credit in the amount of $96,070 ($69,165 "increased to take account of inflation") to be spent at any Christie's saleroom worldwide (Ex PD vol 5 page 1859). Although the evidence (referred to later) discloses that HFA consigned this painting to Christie's, Mr Holland did not give any evidence in relation to the return of the painting or any demand by Christie's on HFA for reimbursement, nor was he cross-examined about this.
During the protracted negotiations Christie's advised the Australian Club that when it closed its saleroom operation in Australia in 2006 its paper work was then housed in an archive in Melbourne. Christie's also advised that it had reviewed the records and files that it still had in its possession and that they "did not reveal any information relating to the provenance" of "Faun being attacked by Parrots" (Ex PD vol 5 page 1828). Christie's further advised that (Ex PD vol 5 page 1830):
The catalogue description is on the Christie's LotFinder database and there is no provenance listed there, and this was borne out by the lack of any provenance documents in the file in Melbourne. As a general rule, if there is a document or note on provenance, in the sale file, it will be printed in the catalogue.
Provenance documents
There are two documents in evidence relating to the provenance of the Painting. The first is an undated, unsigned document on a plain sheet of paper without any letterhead or other feature identifying the author or the sender (the Holland letter) (Ex PD vol 4 page 1515). It is in the following terms:
Attention: Alex Holland
Fax No: 02 9327 8587
Provenance on Albert Tucker
FAUN & PARROT 1967
Oil on Board
76 x 62cm
SLR
This painting was purchased from Tolarno Gallery, St Kilda in 1969-70. It has been in the collection of Mr. B. O'Sullivan since 1980 - he acquired it from his father.
The painting is a study for Faun being attacked by Parrots 1967, which was exhibited in Mexico City in the late 1960s.
In its Defence to the Amended Statement of Claim Christie's admitted that "at a time presently unknown" it was provided with the Holland Letter.
The other document, also undated, is on the letterhead of Southern Bearings Pty Ltd purportedly signed by Barry O'Sullivan (the O'Sullivan letter) (Ex PD vol 4 page 1511). It is in the following terms:
Christie's Australia
Fiona Haywood
Re: Albert Tucker "Fawn being attacked by a Parrot."
This painting comes from the collection of my late father John O'Sullivan. It along with several others, have been in our family for 25 years or so. I believe that they were originally purchased through a gallery in Sydney called "Dominion".
Yours Sincerely
Barry O'Sullivan
In its Defence to the Amended Statement of Claim Christie's admitted that "at a time presently unknown" it was provided with the O'Sullivan Letter.
The plaintiff's former personal assistant gave evidence that she received the O'Sullivan letter attached to a with compliments slip from Fiona Hayward at Christie's. There was no date on the with compliments slip, nor was there any note accompanying it. The personal assistant thought that the O'Sullivan letter was received at about the time that finance was being arranged for the purchase of the Painting through Peter McAdam. However there was no copy of the O'Sullivan letter in the Peter McAdam file or in Capital Finance file.
I am satisfied the O'Sullivan letter was probably received by Christie's at about the time of the consignment of the second painting. The title at the top of the letter is more apt to the second painting than the Painting. However there was no reference to the provenance in the O'Sullivan letter in Christie's Catalogue for the August auction. It is clear that the O'Sullivan letter was placed on Christie's file in relation to the Painting and it appears a copy was not placed on any file relating to the second painting.
The fact that Christie's connected the O'Sullivan letter to the Painting assists the plaintiff's case. Obviously if Christie's had two letters relating to provenance that were inconsistent, it should have been alerted to the prospect that the authenticity of the Painting might be in question. If Christie's had made the mistake of placing the O'Sullivan letter on the file relating to the Painting rather than the second painting, this needed to be explained. The Australian Club was able to question the provenance relating to the second painting because there was no provenance in the Catalogue. The catalogue suggested there was no doubt about the second painting being signed by Albert Tucker (and thus an authentic Tucker) because once again there was no question mark next to the word "signed". Christie's was in a difficult position. However it called no evidence to explain these peculiarities.
The problem is exposed - February 2010
In December 2009 or early January 2010, Ms Sharpe met with the plaintiff on several occasions. The plaintiff explained to Ms Sharpe that she was in financial need. The discussions included the prospect of selling the Painting, the Sculpture and the Smart. After these discussions Ms Sharpe did some research and had discussions with various auction houses. One of the people with whom Ms Sharpe had discussions was Geoffrey Smith, the Vice Chairman and National Head of Art at Sotheby's in Melbourne. Mr Smith (GS) and Ms Sharpe (VS) had the following conversation:
GS: I've looked up the Tucker and I have to tell you I think this painting is problematic.
VS: Geoffrey, what do you mean?
GS: As you know I am now the Tucker expert and I have done a lot of research with Barbara (Tucker) and we can't find the documentation or provenance for this painting. There have been a few like this that appeared on the market after Bert died in 1999 that we have problems finding provenance for. I am pretty sure this is one of them.
Ms Sharpe also had a discussion with Ronan Sulich, Christie's Australian Representative, who said that he would check the records and get back to her. Mr Sulich advised Ms Sharpe that the computer records only went back to June 2000 and it would have to be a "paper chase in the storage archive".
Ms Sharpe then discussed the prospect of selling the Painting, the Sculpture and the Smart with Rod Menzies of Menzies Art Brands Pty Ltd. She did not mention the possibility that the Painting was "problematic" at that time because she was still awaiting a response from Christie's.
On 20 January 2010 Ms Sharpe received information that it appeared that the vendor was Alex Holland and that she should speak with David Cook. Ms Sharpe had spoken to Mr Smith about the possibility of speaking with Mr Cook who was by then working with Sotheby's but Mr Smith suggested that she should not do so.
On the same day Ms Sharpe telephoned Mr Sulich to inform him that she had discovered that Alex Holland consigned the Painting to the May 2000 auction. It was suggested that Ivan Holland must have owned it and Ms Sharpe asked Mr Sulich to get in touch with Alex and Ivan to confirm the position. Ms Sharpe also asked for purchase records or insurance records so that she might satisfy Geoffrey Smith.
On 29 January 2010 Ms Sharpe phoned David Cook at Sotheby's. The following conversation took place:
VS: David. As you may recollect, I purchased a Tucker from Christie's May 1 2000 sale-lot 70. You worked at Christie's then. Geoffrey Smith has now proclaimed it "problematic" and I'm trying to trace the provenance to satisfy Geoffrey so he can include it in the Tucker catalogue raisonne. I'm not sure if Geoffrey has told you anything about it but it's very upsetting. I have been in touch with Ronan but he says the record for this sale are in the archives stored some place in Melbourne and he can't get to them right now. Can you help me?
DC: Vivienne, I'm afraid I can't help you. You will have to speak to Geoffrey.
VS: I already have and can't understand why you can't talk to me about it. And by the way, I offered some paintings to Geoffrey for auction, one of them was this Tucker but I haven't had a proposal or heard anything back from Geoffrey. Do you know anything about this?
DC: No. Can I speak to Geoffrey about the proposal?
VS: Yes, please do.
On the same day Ms Sharpe received a telephone call from Mr Smith. Ms Sharpe expressed her concern that Mr Smith could be condemning the Painting without seeing it. After further discussion Mr Smith said he would forward a proposal to Ms Sharpe. In a further discussion with Mr Smith later that day, Mr Smith advised Ms Sharpe that he thought that she would find that the Painting was "linked to Peter Gant". Mr Smith also said he was willing to inspect the Painting.
Ms Sharpe was overseas from 31 January 2010 to 12 February 2010. In her absence, Mr Sharpe took instructions from the plaintiff and dealt with Menzies in respect of the proposals for the March 2010 auction. Mr Sharpe informed the plaintiff that Menzies had offered a $300,000 guarantee with a 40% upside. The plaintiff advised Mr Sharpe that she wanted a guarantee of $350,000 and 60% of the upside. She also wanted a settlement less than the 90 days as requested by Menzies. Mr Sharpe advised the plaintiff that this was "not how a guarantee works". He informed the plaintiff that in his experience a 60% upside did not give Menzies enough value to defray the risk if the work did not sell. He reminded the plaintiff that even if the Smart were to be passed in at auction on the day of the auction, she would still receive the guaranteed price. He advised her that the longer settlement period was needed to entice buyers. In response the plaintiff asked Mr Sharpe to try to get $350,000 as a guaranteed price and at least 50% of the upside.
After further negotiations Mr Sharpe advised the plaintiff that Menzies had increased the guarantee to $320,000 and was not willing to move on the 40% upside and that he thought "that's it on the Smart".
On 10 February 2010 Menzies wrote to Ms Sharpe (who was still overseas) in respect of the Smart in terms that included the following:
I have much pleasure in offering you a Menzies Art Brands guarantee of $320,000, plus hammer upside, for the above mentioned picture in return for its immediate consignment to our March 25th auction.
This exclusive Menzies Art Brands (MAB) guarantee provide settlement of the base guarantee of $320,000, plus hammer price upside as follows:
Every dollar by which the hammer price on March 25th 2010 exceeds $320,000, the seller will receive 40% of any such upside in addition to the guarantee amount.
Also on 10 February 2010 Menzies wrote a separate letter to Ms Sharpe in the following terms (the side letter):
Re: 50/50 share in vendor commission on the hammer price of your clients works in our March 2010 Fine Art Auction plus equal share in MAB's upside for Jeffrey Smart's The Stairs, Florence II
I have much pleasure in confirming our offer of 50/50 share in vendor commission (inclusive of any applicable GST) of the actual knockdown hammer price for your client's works in our March 2010 Fine Art Auction.
Please refer to individual contracts of sale for full commission structures and please note introductory commission is payable 35 days after sale on consigned works and 90 days after sale for guaranteed lots.
We thank you for your enormous efforts in securing this major collection and look forward to achieving a successful outcome for all parties concerned.
The topic of such an arrangement (although not the fact that it would be in a side letter) was discussed with Ms Sharpe by Mr Menzies prior to her departure for overseas on 31 January 2010. There is no issue that the side letter was not shown to the plaintiff nor was she made aware of the arrangement prior to the auction. Mr Sharpe said that because his mother had the primary relationship with the plaintiff it was up to her to disclose it (tr 639).
Ms Sharpe gave evidence that she did not make the "arrangement" with Menzies. She said that she did not request the letter, rather it was sent to her. She said (tr 762):
I never requested this letter or a separate letter. It was mentioned to me at our meeting with Rod Menzies on the 28th of January with his first proposal. At the time I didn't think a lot of it and I was really focusing on getting the best deal for Louise and I also was of the opinion that Louise knew that I was in receipt of remuneration for transactions - in the art transactions that I did for her, so that she would know that I was getting some kind of payment for the work that I have done because we had had a long 17 years association buying and selling art for them.
Ms Sharpe was cross-examined as follows (tr 764):
Q. See, I want to suggest to you that you did not wish Ms McBride to know about this arrangement?
A. No, I had no reason to deceive Louise at all. None at all.
Q. Because you were planning on taking a very substantial commission for her at a time when you were suggesting to her that you were looking after her best interests?
A. That's not true.
In re-examination, to which there was no objection Ms Sharpe gave the following evidence (tr 777-778):
Q. Did you in your mind think of the arrangement with Menzies concerning the hammer upside as something to be kept secret?
A. No, I didn't.
Q. Did you have any intention of doing anything behind Ms McBride's back?
A. No, definitely not.
Q. If whatever you said to her, if anything, on this arrangement did not make the position clear to her what is your feeling about that now?
A. Well, I regret that if it wasn't made clear to her that it hadn't been made clearer to her, I felt that she was aware that I would be receiving some commissions as we had, as I had in the past. And I regret that now and offer her the money that Menzies still has in their trust fund, because you know, it's not worth the risk, the breakdown of a long term friendship. So I am happy to pass it on to her. And I have, you know.
Q. You have made that offer?
A. Yes.
Q. Was it ever your intention somehow to profit at her expense?
A. No.
It was submitted that this arrangement placed Ms Sharpe's interests in conflict with those of the plaintiff. It was contended that it was in the plaintiff's interest that the guaranteed price would be as high as possible; whereas it was in Ms Sharpe's interest that the guaranteed price be as low as possible; it was in the plaintiff's interest that she receive as much of the "upside" as possible; whereas it was in Ms Sharpe's interest that Menzies receive as much as the upside as possible. It was also submitted that by taking a significant portion of Menzies' share of the upside, Ms Sharpe made it more difficult for the plaintiff to obtain a better deal from Menzies.
It was submitted that the fact that there was a side letter has not been explained by Ms Sharpe. I do not believe that Ms Sharpe requested the side letter. It appears that this may be a practice in the industry. It must be remembered that at the time that this arrangement was documented by Menzies, Ms Sharpe was overseas and Mr Andrew Sharpe was handling the negotiations. The plaintiff does not accept that the failure to provide the copy of the side letter to her or to disclose the arrangements was mere inadvertence. The plaintiff submitted that this was not an ordinary commission. It was a particular deal offered by the only participant in the auction market prepared to give guarantees to the plaintiff.
It is claimed that the plaintiff is not limited in her entitlement to recovery to the amount of the commission. Rather, it was submitted, she is entitled to be put in the position she would have been but for the breach by Ms Sharpe of her fiduciary duties. In this regard, the plaintiff relied upon the following passage of Brickenden v London Loan and Savings Co [1934] 3 DLR 465 at 469 where it was said:
When a party, holding a fiduciary relationship, commits a breach of his duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, he cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the constituent's action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged. Once the Court has determined that the non-disclosed facts were material, speculation as to what course the constituent on disclosure would have taken is not relevant.
There is no doubt that Ms Sharpe was trying to assist the plaintiff in exquisitely difficult circumstances. The plaintiff had taken Ms Sharpe into her confidence in relation to her very difficult personal and financial circumstances with a clear need to obtain some financial facility to enable her to purchase a residence. The proposals that Ms Sharpe negotiated with the various auction houses included the forged Painting. This of course impacted not only on those negotiations but also on the relationship between the plaintiff and Ms Sharpe in this already difficult situation.
Ms Sharpe was dealing with Mr Smith and others at the very time that the side letter was sent to her. The discussions with the plaintiff in relation to the problems with the Painting occurred at around the same time. I have no doubt that these discussions were very intense and caused both Ms Sharpe and the plaintiff serious anxiety.
Auction houses must be free to negotiate the best commercial deal possible to support the profitable operation of their businesses. The same may be said for private art dealers. However when a person or a company takes on a fiduciary role as agent for and/or adviser to a vendor (or indeed a purchaser) the deals that they strike are constrained, in that they are not permitted to make a profit by use of that fiduciary position. If an agent negotiates a share in the percentage of the hammer upside due to the auction house when the principal herself seeks a greater percentage of that upside, the agent profits from the fiduciary position and must account to the principal.
This should not be seen as any criticism of agents and auction houses agreeing to a share of the upside in a guaranteed price arrangement. The criticism is that in this instance the arrangement was kept secret from the principal, the plaintiff. The principal was entitled to know that the agent had negotiated for herself the very share of the upside that the principal had wanted. Had the agent obtained informed consent from the principal there could be no criticism.
The plaintiff claimed that had she been made aware of the true circumstances of the arrangements into which Ms Sharpe entered with Menzies, she would not have proceeded with the guaranteed price for the Smart. It was submitted on Ms Sharpe's behalf that the plaintiff's evidence in this regard should not be accepted. It was submitted that the plaintiff needed the guarantee so that she could advise any prospective financial institution from whom she was going to obtain finance to purchase a residence that she had such a guarantee.
I am very conscious of the unreliability of the plaintiff's evidence. I do not accept the plaintiff's evidence in this regard. Rather the plaintiff's evidence in cross-examination leads me to the conclusion that it was imperative that she obtain the guaranteed price and she would have proceeded with it in any event. That evidence was as follows (tr 243):
Q. Now, just in terms of the words that you attribute to Tia McCarthy, she is telling you, according to you, that even with a guaranteed price for the Smart, the bank will only lend you money after the works have been sold, is that right?
A. That's correct.
Q. That was something, that is a guaranteed price for the Smart, which up to that meeting you had been putting forward to the bank was a point in your favour if they were considering lending you money?
A. For an apartment.
Q. Yes. That is so, isn't it?
A. That's correct.
Q. And here they were telling you on the morning of 5 February that even with a guaranteed price for the Smart, the bank would only lend you money after the works had been sold?
A. That's correct.
It is possible that had the plaintiff been asked by Ms Sharpe whether she would consent to Ms Sharpe having 50% of Menzies' 60% upside, the plaintiff and Ms Sharpe would have negotiated for the plaintiff to obtain what she originally wanted, being 60% of the upside. Thus the plaintiff would have 60% of the upside, Menzies would have 30% of the upside (that to which it agreed with Ms Sharpe in any event) and Ms Sharpe 10% of the upside.
However I am of the view that if Ms Sharpe had turned her mind properly to the position in the absence of the excoriating events relating to the forged Painting she would have offered her share of the hammer upside to the plaintiff.
Recently the United Kingdom Supreme Court held that a principal whose agent had received a secret commission from a third party could claim to be the proprietary owner of the commission: FHR European Ventures LLP & Ors v Cedar Capital Partners LLC [2014] UKSC 45.
I am satisfied that Ms Sharpe must account to the plaintiff for the profit made by reason of the breach of her fiduciary obligations to her. Payment of the amount in trust should be made to the plaintiff.
PROPORTIONATE LIABILITY
There is no issue between the parties that the misleading or deceptive conduct under the FTA and the TPA are apportionable claims under Part VIA of the TPA and/or the Competition and Consumer Act and Part 4 of the Civil Liability Act 2002. A concurrent wrongdoer is a person who is one of two or more persons whose acts or omissions caused, independently of each other or jointly, the damage or loss the subject of the claim.
Section 35 of the Civil Liability Act provides relevantly:
Proportionate liability for apportionable claims
(1) In any proceedings involving an apportionable claim:
(a) the liability of a defendant who is a concurrent wrong doer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the Court considers just having regard to the extent of the defendant's responsibility for the damage or loss,
(b) the court may give judgment against the defendant for not more than that amount.
Christie's contends that the plaintiff's claim in respect of the Painting against it is an apportionable claim and its liability is limited to an amount reflecting the proportion of the loss suffered that the Court considers to be just, having regard to Christie's responsibility for that damage or loss. Christie's submitted that this determination must be made having regard to the conduct of Ms Sharpe, Mr Holland and/or HFA and on a comparative examination of the whole conduct of each of the identified parties. The "value judgments" involved in determining the extent of each defendant's responsibility "differ from, and are more extensive than, those which inform the question of causation": Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10 at [57]; (2013) 247 CLR 613 at [57].
Christie's submitted that it was merely the auctioneer and was acting as agent for the true vendor and receiving a commission for performing that service. It claimed that it was not the source of the false information. It was contended that at the highest it might be said that it should not have trusted Mr Holland/HFA and instead should have taken independent steps to confirm that what was being said was true. Christie's also contends that it was not paid for the Painting. It was HFA who received the payment for the Painting. The only payment received by Christie's from the plaintiff was the $10,000 Buyers' Premium. In those circumstances it was submitted that it is difficult to see how Christie's share of the responsibility for any losses proved by the plaintiff should exceed the overall proportion of the price paid which the $10,000 reflects.
HFA submitted that the representations were made by Christie's in the Catalogue and that HFA (and Mr Holland) had no control over them. It was submitted that HFA was in a position of vulnerability relative to Christie's because Christie's had exclusive control over what went in to the Catalogue. It was entirely responsible for designing the Catalogue content and did not consult with HFA. It was also submitted that this position of vulnerability remained for a period of five years by reason of the provisions of clause 17 of the Conditions of Business.
Ms Sharpe submitted that her responsibility for the plaintiff's loss is extremely low in relation to the other defendants. By way of comparison it was submitted that HFA's conduct in failing to inform Christie's of the complete provenance of the Painting and Christie's incorrect reference in the Catalogue to the provenance of the Painting were serious matters that led to the plaintiff's loss. It was submitted that the plaintiff's loss could have been avoided by Christie's disclosing to the plaintiff in mid-2000 the problems and concerns that have arisen in relation to the Painting.
Ms Sharpe highlighted the fact that there is no evidence from Christie's of the checks, if any, they performed nor of the reasons for the incorrectness of the entry in the Catalogue. It was also submitted that it would seem most unfair for Christie's to offload responsibility for its role to Ms Sharpe. Ms Sharpe relied on the representations in the Christie's Catalogue and on the further confirmatory representation by Ms Hayward as to the reliability of the Tolarno provenance.
Another factor to be considered is that Ms Sharpe did not have either the Holland letter or the O'Sullivan letter. Although it was suggested to Ms Sharpe that she did have the O'Sullivan letter I am not satisfied that she receive it. HFA had the Holland letter and also the information (undisclosed) that the Painting was purchased from Gallery Irascible /Mr Gant. Christie's had both the provenance letters.
Although there may be some suggestion that responsibility could be apportioned to a greater amount than 100% (for instance making two parties each responsible for 100%) (Tomasetti v Brailey [2012] NSWCA 399 at [154]; but see Hadglias Holdings Pty Ltd v Seirlis [2014] QCA 177 at [18]) it seems that the better view is that in a case such as this the apportionment should equate to no more than 100% of the damage: Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd at [7].
Christie's submissions on this aspect of the matter bear little resemblance to the reality of the situation. Christie's called no evidence and yet sought to shift the blame to HFA by the suggestion in cross-examination of Mr Holland that people in the art market (presumably including respectable auction houses) would have nothing to do with a transaction that involved Mr Gant because his "name was poison" (tr 534). This suggestion was made notwithstanding the reality that Christie's continued to do business with Mr Gant, evidenced by the numerous invoices from Christie's to Mr Gant in 2005 that Mr Gant brought to Court when he was called to give evidence (annexed to his affidavit sworn 28 July 2014). This was a most unedifying outcome for Christie's.
Christie's had doubts about the Painting in May 2000 before Capital Finance and/or the plaintiff made their respective payments in relation to the Painting. In August 2000 Christie's knew that there was real concern in the art industry about the authenticity of this Painting. Although it may have been placed on the file by mistake, Christie's clearly associated the O'Sullivan letter with the Painting and accordingly had conflicting provenances. Even if that probable mistake had been rectified and the O'Sullivan letter provenance had been applied to the second painting, Christie's had not only its own concerns, expressed by Ms Hayward, but those of an eminent group of experts in the art world. Had those matters been raised with HFA, Capital Finance, Ms Sharpe or the plaintiff, it is probable that the loss could have been avoided.
I am satisfied that having regard to the extent of Christie's responsibility for the plaintiff's loss, it is just to limit its liability to 85% of such loss.
HFA's conduct requesting Christie's to sell the Painting as an Albert Tucker painting and in arming Christie's with an unattributed provenance document was a cause of the plaintiff's loss. Although HFA's failure to advise Christie's of the involvement of Mr Gant in the transaction may be seen as unsatisfactory for the reasons stated earlier, having regard to Christie's continued dealings with Mr Gant, the disclosure of his involvement would probably have made no difference to Christie's conduct. Indeed it appears from the transcript of the discussion at the Symposium that as early as August 2000 there was "a suggestion that Peter Gant is somewhere involved".
HFA was not aware of its agent's (Christie's) concerns about the Painting. Nor was it made aware of the eminent experts' concerns about the Painting as communicated to Christie's in August 2000. Christie's kept HFA in the dark in particular at the time it paid HFA approximately $70,000 on 14 June 2000 when it harboured doubts about the authenticity of the Painting. HFA was given no proper opportunity to prevent the transaction from being completed.
I am satisfied that having regard to the extent of HFA's responsibility for the plaintiff's loss, it is just to limit its liability to 10% of such loss.
The steps that Ms Sharpe took described earlier were in all the circumstances the steps of a reasonable art dealer and agent. Ms Sharpe was duped by the forgery and recommended to the plaintiff that the Painting was probably worth $75,000. However she relied upon Christie's as a reputable auction house with a reputation for reliability. She too was kept in the dark in relation to any of the concerns harboured by Christie's about the Painting. At the very time that she forwarded the plaintiff's payment of the Buyer's Premium, Christie's knew that the representation that there was no doubt that it was Albert Tucker's signature on the Painting was false.
I am satisfied that having regard to the extent of Ms Sharpe's responsibility for the plaintiff's loss, it is just to limit her liability to 5% of such loss.
CROSS-CLAIMS
Ms Sharpe's claim for indemnity or contribution from Christie's falls away by reason of the findings in respect of proportionate liability. Section 36 of the Civil Liability Act provides as follows:
36 Contribution not recoverable from defendant
A defendant against whom judgment is given under this Part as a concurrent wrongdoer in relation to an apportionable claim:
(a) cannot be required to contribute to any damages or contribution recovered from another concurrent wrongdoer in respect of the apportionable claim (whether or not the damages or contribution are recovered in the same proceedings in which judgment is given against the defendant), and
(b) cannot be required to indemnify any such wrongdoer.
Accordingly Ms Sharpe's cross-claim will be dismissed.
HFAs claims in its cross-claim for similar relief will be dismissed.
HFA also brings other claims in its cross-claim against Christie's. In this regard HFA submitted that Christie's, who admits owing HFA a fiduciary duty in respect of the sale of the Painting, breached its obligations in failing to inform HFA of the fact that it had received information relevant to the provenance of the Painting after the Symposium in August 2000. In failing to advise HFA Christie's caused it to lose the opportunity to offer to purchase the Painting from the purchaser for the price which the purchaser paid for the Painting.
The submissions on the Cross Claim were relatively sparse. However Christie's owed a fiduciary duty to HFA. In circumstances where Christie's knew that there was a doubt as to whether Albert Tucker had signed the Painting and thus a doubt about the authenticity of the Painting before the transaction was completed by payment of the Buyer's Premium, it had an obligation to advise HFA of these matters. However having regard to the findings in respect of proportionate liability HFA is better off than it would have been than if it had to return the amount paid to it by Christie's if the contract had been cancelled. It has also had the benefit of the $70,000 for the last 14 years.
HFA's Cross Claim is dismissed.
Mr Holland's cross-claim was defensive and as the claims against him are to be dismissed, his cross-claim will be dismissed.
CONCLUSIONS
The plaintiff has established that HFA, Christie's and Ms Sharpe contravened s 52 of the TPA, s 42 of the FTA and/or s 12 of the FTA (Vic). The plaintiff has established that she suffered loss by and/or because of those contraventions. Each of HFA, Christie's and Ms Sharpe is liable to the plaintiff for that loss. Damages are assessed at $118,788.71.
Christie's responsibility for the plaintiff's loss is limited to 85% of the loss. HFA's responsibility for the plaintiff's loss is limited to 10% of the loss. Ms Sharpe's responsibility for the plaintiff's loss is limited to 5% of the loss.
The plaintiff has established her case in deceit against Christie's. The plaintiff has also established that Christie's conduct was unconscionable.
The plaintiff's claims against Mr Holland are dismissed.
The plaintiff's case in negligence, for breach of contract and breach of fiduciary duty against Ms Sharpe in respect of the Painting are dismissed.
The plaintiff's claim against Ms Sharpe for breach of fiduciary duty in respect of the arrangement in respect of 50% of Menzies share of the hammer upside in respect of the Smart succeeds. Ms Sharpe has agreed to account to the plaintiff for that amount. An order is to be made for that payment.
The Cross-Claims brought by HFA, Mr Holland and Ms Sharpe are dismissed.
It will also be necessary to finalise the orders in respect of the claims abandoned during the trial by the Fund and/or the plaintiff in respect of the Sculpture.
I will hear the parties on what orders, if any, should be made in respect of the Painting and on the questions of interest and costs when the matter is listed for the filing of Short Minutes of Order to reflect the findings in this judgment on a date to be fixed by arrangement with my Associate.
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Decision last updated: 04 December 2014
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