The Saints Gallery Pty Ltd v Plummer

[1988] FCA 309

Re: THE SAINTS GALLERY PTY. LIMITED
And: WARREN DOUGLAS PLUMMER
No. NSW G100 of 1988
Trade Practices Act s. 52

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Morling(1), Pincus(1) and Burchett(1) JJ.

CATCHWORDS

Trade Practices Act, s.52 - whether the passing on to a purchaser by a corporation of a statement made by another is misleading - meaning of implied disclaimer in relation to such a statement - effect of purchaser's own expertise.

Trade Practices Act 1974, s.52

HEARING

SYDNEY

#DATE 24:6:1988

Counsel for the Appellant: Mr P.F. Esler

Solicitors for the Appellant: Messrs Forshaws

Counsel for the Respondent: Mr J.B. Maston

Solicitors for the Respondent: Messrs Conway McCallum & Co.

ORDER

The appeal be allowed.

The orders made at first instance be set aside, and in lieu thereof, it be ordered that the respondent's application be dismissed with costs.

The respondent pay the appellant's costs of and incidental to the appeal, to be taxed.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is an appeal from a judgment of this Court voiding and ordering rescission of two contracts for the sale of paintings for a total price of $13,250. The applicant below, who is the respondent to the appeal, succeeded on the basis that the identities of the artists were wrongly given, by statements held to be misleading or deceptive within the meaning of s.52(1) of the Trade Practices Act 1974. The appeal raises a difficult question, but one which is in essence factual, rather than one involving a question of principle.

1. The two contracts in question were made on 1 August 1986 and 20 August 1986. The former related to two paintings attributed to the late Ian Fairweather and the latter to two attributed to Lloyd Rees. There was no dispute at the trial that the two "Fairweather" paintings were forgeries. As to the "Rees" paintings, the learned primary judge was confronted with a conflict of expert opinion, but resolved it in favour of the present respondent; there is no challenge to that conclusion. The paintings are said to be virtually worthless. The substantial issue, as a practical matter, is whether the appellant should have been ordered to pay to Mr Plummer the net amount received by the person who brought them in for sale, viz. $10,150.

2. Each of the contracts was a sale "on consignment" by the appellant, an art-gallery proprietor. There was discussion before us as to whether the person on whose behalf the appellant sold the paintings was a principal, the appellant acting as his agent, or whether, on the other hand, the legal effect of what was done was that the appellant, on accepting an offer for the paintings, itself purchased them and resold them to the respondent, Mr Plummer. There is no need to reach a conclusion on that matter, which cannot affect the result of this appeal. It is, however, of importance that from the commercial point of view the appellant was not selling its own stock, but acting as a medium through which the paintings passed from their then owner (one Stephen B. Kehoe) to Mr Plummer.

3. The appellant sold the paintings in the course of its business as the proprietor of an art gallery. Ordinarily, one would expect that a gallery owner who sold forgeries to a customer could hardly resist a claim under s.52 of the Trade Practices Act for such relief as the primary judge gave. The circumstances of the present case, however, were far from ordinary. The appellant gallery owner did not usually deal in the work of artists of any eminence and certainly not in that of Ian Fairweather or Lloyd Rees. The purchaser, Mr Plummer, on the other hand, was a professional art valuer and dealer, who in the course of his work over a period of years had often valued (and therefore necessarily authenticated) works for the appellant. It was common ground that he placed no reliance on the appellant's ability to judge the authenticity of the paintings whose sale is in issue.

4. Nevertheless, it was held against the appellant that it breached s.52 of the Trade Practices Act, by statements made by its director, Mr Flannery, in the course of selling the paintings; the correctness of that conclusion is attacked. The statements identified the artists and explained how Mr Kehoe said he came by the paintings.

5. One of the foundations of the appeal is that the learned primary judge erred in his assessment, in certain respects, of the credibility of witnesses. It is unnecessary to deal with that aspect of the matter, for, in the view which we take, the critical point is whether the ultimate conclusion of the learned primary judge, accepting his primary findings, should stand.

6. The effect of the appellant's contentions was that Mr Flannery was not taken by the purchaser, Mr Plummer, to have been conveying anything more than that he believed the paintings to have been executed by certain artists and that their then owner had given a certain account of their history; neither Mr Flannery's affirmation of his own belief in their authenticity, nor his statements as to the story Mr Kehoe had told, so it was contended, were misleading, for both sets of statements were true.

7. The statement of claim relied upon s.52 of the Trade Practices Act and also pleaded a cause of action in tort; the latter was not pursued, nor was any claim put forward based upon the law of contract. Fraud was not set up and no evidence was adduced to suggest that the statements made by Mr Flannery about the paintings were other than bona fide; the claim stood or fell upon s.52 of the Trade Practices Act.

8. The appellant company has conducted the Saints Gallery in the Sydney suburb of Carlton since 1980 and operates another art gallery at Wamberal on the central coast of New South Wales. Its main business is selling, for prices less than $500, realistic paintings by artists of no fame. It also does valuation work and, unless a valuation sought relates to the work of artists ordinarily handled by the Saints Gallery, has entrusted that work primarily to Mr Plummer. According to the learned primary judge's findings, authentication is a part of the task of the valuation of a painting; so that the case is one in which the purchaser had, but the vendor had not, extensive experience in authenticating paintings in the general category of those in issue. Mr Plummer maintained, however, and appears to have been accepted on this, that he had little specialised knowledge either of the work of Ian Fairweather or of the later work of Lloyd Rees; the "Rees" paintings were both dated 1981.

9. A useful indication of the relationship between the parties is to be found in a notice published by the Saints Gallery related to an "Exhibition of Old Australian Artists" in the year 1982. Mr Plummer admitted that he had agreed with the form of the notice, which read in part:
   
   

"Almost every work in this exhibition is by an artist who has solidly established him or herself in the Australian Art Record Books ... All works are personally and unconditionally guaranteed to be authentic by Mr. Warren Plummer, our resident art valuer, who personally put this collection together."

1. The learned primary judge found that "... at the time of the purchases, Mr Plummer knew more about the work of Fairweather and Rees than did Mr Flannery. Moreover, Mr Plummer knew that Mr Flannery lacked the capacity to determine the authenticity of work claimed to be that of these artists."

2. About the end of July 1986, Mr Flannery told Mr Plummer that he was "about to get two paintings in by Ian Fairweather" and inquired whether he was interested. There was a dispute at the trial as to precisely what was said between the parties at that stage. The appellant contended that Mr Plummer was asked to value the paintings and that to do so Mr Plummer would have had to authenticate them. The learned primary judge rejected that contention, remarking:
   
   

"Mr Flannery obviously did not expect any formal valuation. There was never any suggestion of payment for the valuation. The invitation to value was really an invitation to make an offer. I doubt whether the word 'value' was in fact used. If it was, it was used, and understood, in that sense. It is interesting to note that, in the statement which Mr Flannery gave to the police, not long after the relevant events, he described the procedure agreed between him and Mr Kehoe as being to 'get a quote from a buyer and contact him to see if the price was agreeable' (my emphasis)."

1. Mr Flannery's statement to the police was not in evidence. It appears that a police file was produced in response to a subpoena, but the only material which was tendered from it was a statement by Mr Plummer. Owing to a misunderstanding, the learned primary judge treated Mr Flannery's statement as having also been admitted. Since it was not, the reasons given for his Honour's judgment were, with respect, in error insofar as they (in the passage quoted above and elsewhere) relied upon that police statement.

2. To return to the narrative, Mr Plummer responded to Mr Flannery's inquiry by indicating that he could be interested in the Fairweather paintings, depending on the price. Mr Flannery said he did not yet know about price as he had to talk to the owner. The intention was that the appellant would retain a commission on the sales which was, in the event, a total of $3,000 on the four paintings. That sum has been refunded, very properly, to Mr Plummer. The balance of the sums paid was to be passed and was in fact passed, to Mr Kehoe.

3. The next day, by arrangement, Mr Plummer went to the Carlton gallery of the appellant and was shown the two supposed Fairweathers. He then phoned Mr Flannery and again asked the price. He was invited to make an offer. He then said, "Do they have a good history?" and Mr Flannery replied, "Yes, these two Fairweathers came straight from Fairweather direct to my client's legal firm in lieu of payment of fees." Mr Plummer then offered $7,000 for the pair and Mr Flannery said he would find out if that was accepted. Later Mr Flannery said, "I've spoken to my guy about the Fairweathers and he'll sell for $7,000." The next day Mr Plummer paid the price and the paintings were delivered.

4. The "Rees" paintings were also sent by Mr Kehoe to the appellant "on consignment" and Mr Flannery offered them to Mr Plummer as "two lovely blue paintings by Lloyd Rees". After some further discussion, Mr Plummer was invited to make an offer. The following day he came to the appellant's gallery and inspected them. He spoke to Mr Flannery; Mr Plummer's evidence about that was, in part, as follows:
   
   

"I said, 'Where did your client acquire them, Peter?' He said 'They originally came from an exhibition of Rees' work at a gallery in Brisbane. My guy is selling them because of a divorce settlement.' I said, 'What exhibition and gallery did they come from?' He said, 'It was one of three galleries that my client had dealt with in Brisbane, but I'm not sure which one.'"

After some haggling, there was an agreement to sell the two of them for $6,250.

1. In that account of the matter there was no mention by Mr Plummer of having checked the value of the paintings, but it appears clear that he did. Mr Flannery gave evidence that, during the discussions about the sale, Mr Plummer said he would ring another gallery "where there are Lloyd Rees paintings for sale so that I can check the going rate". He then phoned the Artarmon Gallery and reported to Mr Flannery:
   
   

"They said that they sell this size and style of painting for a starting price $10,000-$15,000 each. I'll give you $6,000 for the two of them."

In cross-examination, Mr Plummer admitted the correctness of that version of the conversation.

1. It seems clear that the paintings were bought as a speculation, pure and simple. Mr Plummer gave evidence that he expected to sell them for perhaps twice or two-and-a-half times his outlay.

2. It should be added that there was no evidence, nor suggestion in the evidence, that Mr Flannery's account of the background to his acquisition of the paintings was false. Indeed, so far was the issue excluded from consideration that evidence as to those circumstances was held inadmissible, on objection being taken. It was not Mr Plummer's case that Mr Flannery had told him lies on that subject.

3. In the result, the principal question before the learned primary judge appeared to be whether statements made by Mr Flannery about provenance were misleading or deceptive. His Honour remarked:
   
   

"... it being conceded that Mr Plummer had no confidence in Mr Flannery's ability to judge the authenticity of a Fairweather or a Rees - in the absence of any information about provenance, Mr Plummer would be left in the untenable position of arguing that he did not rely upon his own judgment but of conceding that, in deciding to buy, he had nothing but his own judgment with which to support authenticity."

1. His Honour held that Mr Plummer had asked Mr Flannery about the provenance of the paintings before deciding to purchase and that he relied upon the answers given. That was not enough, however (in our view) to justify holding the appellant liable, for there remained the question whether the circumstances were such as to make it apparent that the appellant was not the source of the information and that it disclaimed any belief in its truth or falsity, merely passing it on for what it was worth: see Yorke v. Lucas (1985) 158 CLR 661 at p 666 per Mason ACJ. (as he then was) Wilson, Deane and Dawson JJ. The learned primary judge remarked, as to Mr Plummer's understanding:
   
   

"But it is important to note that, according to his evidence, he did not understand Mr Flannery to be merely repeating what he had been told. According to him - and I accept this evidence - Mr Plummer understood that Mr Flannery had satisfied himself as to the accuracy of the information which he had been given. As he said in evidence: 'I took it as a fact'. Mr Plummer trusted Mr Flannery. He did not know the identity of Mr Flannery's client but it would be natural for him to assume that Mr Flannery would know whether or not he was a solicitor. If he was, it would be a small step then to accept the alleged history."

It should be noted that there was no evidence as to whether Mr Kehoe was, at the time he acquired any of the relevant paintings, a solicitor.

1. The learned primary judge thought it sufficient that Mr Plummer trusted Mr Flannery and had a certain understanding of what he was told. We would accept that it was necessarily implicit in Mr Flannery's account of the history of the paintings that he had no information contrary to what Mr Kehoe had told him, and that he, Mr Flannery, believed what Mr Kehoe had told him. We do not see, however, why in the circumstances of the case it should have been assumed against the appellant that Mr Flannery might have had more positive knowledge of the matter than he had retailed to Mr Plummer. For example, one would hardly have expected that Mr Flannery would have a personal knowledge of the details of Mr Kehoe's alleged divorce settlement, or of the "Rees" paintings' alleged original sale from a Brisbane gallery. Indeed, Mr Plummer admitted that Mr Flannery said he did not know which Brisbane gallery had originally sold the paintings; nor was there any evidence to suggest that Mr Flannery had any particular knowledge of galleries in Brisbane, nor that Mr Plummer thought he had such knowledge.

2. Mr Plummer was pressed in cross-examination to explain the sense in which he had relied upon what he was told by Mr Flannery. At no stage did he say that he assumed Mr Flannery to have any specific knowledge, great or trivial, of the paintings, other than that which Mr Flannery had stated to him. He appeared to be conscious of some potential disadvantage to his own case in claiming reliance upon Mr Flannery's statements as to provenance. For example, when it was suggested that he had bought the "Fairweathers" on his own judgment, he said: "I did not assess any judgment. I purchased them because I was told they were Ian Fairweather and that was it." His Honour could not have accepted that statement literally, as he found that Mr Plummer knew of Mr Flannery's incapacity to determine the authenticity of the paintings. It was suggested in argument that the appellant could have been held liable on the basis of the initials ("L.R." and "I.F.") on the paintings, or on the basis that the appellant's employee gave Mr Plummer a book of reproductions of Fairweather paintings to examine. We do not think those circumstances could have made the appellant's conduct misleading, if not otherwise so.

3. To return to the principle stated in Yorke v. Lucas referred to above, the reference to express or implicit disclaimer of belief in the truth or falsity of the statement made was emphasised by Mr Maston, counsel for the respondent. He argued that there was no evidence of any disclaimer. It is true that Mr Flannery did not claim to have warned Mr Plummer of the possibility that the information Mr Kehoe had given was untrue, or to have suggested that he (Mr Flannery) had any doubts about its accuracy.

4. The reference in Yorke v. Lucas (ubi supra) to an express or implied disclaimer of belief in an instruction conveyed by an agent does not involve that an agent who does believe his client, and makes that fact apparent, may not at the same time impliedly disclaim personal responsibility for what he conveys. In Yorke v. Lucas itself, the first instance decision (Yorke v. Ross Lucas Pty. Ltd (1982) 45 ALR 299) makes it quite clear the agent's director, while stating the source of his information and that he had not verified it, did indicate on his company's behalf an acceptance of the facts asserted, for he proceeded to make calculations, which he put to the purchaser, on the basis of those facts. Yet the passage referred to in the joint High Court judgment makes the observation that "the facts as found by the trial judge raise the question whether (the corporation which was the agent) was guilty of any contravention of s.52".

5. In any case, it does not appear to us that the High Court's reference to an implied disclaimer should be read as strictly as if it were in the statute. In the end, the question is whether, on the proper construction of s.52, it has been breached. The circumstances in which works of art are sold no doubt vary widely. Here, in summary, they were that Mr Flannery, known by Mr Plummer to be devoid of relevant expertise, offered the paintings to Mr Plummer, the appellant's valuer, on the basis of Mr Kehoe's account of them. Since it was not suggested that he omitted any part of or falsified that account or lacked belief in its truth, it is difficult to see in what sense his passing it on could be said to be misleading or deceptive. A disclaimer of any personal knowledge of the paintings' authenticity was deducible from the parties' relationship and the whole of the circumstances we have recounted.

6. It is true that Mr Flannery did not disclaim belief in the truth of what the owner had told him, but that did not in itself make his statement misleading. A statement of belief may not, depending on the circumstances, be misleading if what is stated truly is believed and does not imply any misleading fact. It does not appear to us to be right to conclude the matter against the appellant on the basis that Mr Plummer gave evidence that he took "as a fact" the information Mr Flannery had given him. If by that was meant that Mr Plummer assumed that Mr Flannery had more knowledge of the matter than he had placed before Mr Plummer, we think any such assumption was unjustified. For example, there was no reason to think that Mr Flannery was personally acquainted with Mr Kehoe, other than as the vendor of the paintings in question.

1. Mr Maston also pointed to the difficulty of upsetting factual conclusions on appeal. We are conscious of the respect which needs to be paid even to ultimate as opposed to primary factual views of a trial judge, but also keep in mind the remarks of the majority of the High Court in Warren v. Coombes (1979) 142 CLR 531 at pp 552, 553:
   
   

"... we can see no justification for holding that an appellate court, which, after having carefully considered the judgment of the trial judge, has decided that he was wrong in drawing inferences from established facts, should nevertheless uphold his erroneous decision. ... The duty of the appellate court is to decide the case - the facts as well as the law - for itself. In so doing it must recognize the advantages enjoyed by the judge who conducted the trial. ... The interest of the community in the speedy termination of litigation might, no doubt, be an argument in favour of the complete abolition of appeals, although that would be far too high a price to pay merely for finality. However, if the law confers a right of appeal, the appeal should be a reality, not an illusion; if the judges of an appellate court hold the decision of the trial judge to be wrong, they should correct it."

1. In the end, we have felt compelled to adopt the view that, on the primary findings of the learned trial judge, his Honour was not justified in holding s.52 to have been breached. In the particular circumstances of the case, we think it should have been held that nothing said or done on behalf of the appellant should have been taken by Mr Plummer to convey more than that the paintings' owner had represented them to have a certain origin and history; the appellant claimed no more knowledge of the matter than that. It stood in the position of an intermediary between Mr Kehoe, the source of information and the then owner of the paintings, and Mr Plummer, who, like the appellant, did not check Mr Kehoe's assertions and assumed them to be true. The matter would raise quite a different issue if Mr Flannery were shown to have done, or purported to do, anything other than explain what Mr Kehoe had claimed to be the facts.

2. The appeal must be allowed with costs. The orders of the learned primary judge will be set aside and the application dismissed with costs.