Bambury v Jensen
[2015] NZHC 2384
•2 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV--2013-404-4230 [2015] NZHC 2384
BETWEEN STEPHEN RONALD BAMBURY
Plaintiff
AND
ANDREW JENSEN Defendant
Hearing: 4-8, 11-15 and 18-19 May 2015 Counsel:
S C Langton and A M Evans for Plaintiff
G J Harley, S A Armstrong and C M Laband for DefendantJudgment:
2 October 2015
JUDGMENT OF FOGARTY J
This judgment was delivered by me on 2 October 2015 at 11.00 am, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
Solicitors: Langton Hudson Butcher, Auckland
Russell McVeagh, Auckland
BAMBURY v JENSEN [2015] NZHC 2384 [2 October 2015]
TABLE OF CONTENTS
Introduction [1]
General considerations on the relationship between the plaintiff
and the defendant [8]
Two conceptual impasses to settlement [25]
The parties to the agency [33] Before Unovis Limited [34] Burdens and benefits of the relationship [35] After Unovis any change: The conditions of novation [41]
The terms of the arrangement between Mr Bambury and Mr Jensen [66] Barkley v Barkley Brown – the duty to account [81] The limitation issues [97] Laches and acquiescence [135]
Extraordinary nature of the remaining disputes [142] Extraordinary expenses of the gallerist [144] Insurance/damaged works [147] Extraordinary sales/purchases/commissions [148]
Defendant’s duty to account – plaintiff ’s onus of proof [150]
Accounting and “Settled Account” [154]
Resolution by a Court in the absence of prior agreement on a term, or of an established custom, or of a proven settlement, formal
or informal [159]
Summary of legal method [161]
Conclusion on fiduciary obligations and the Limitation Act [165]
Equitable compensation [166]
The defendant’s argument [177] The plaintiff ’s acknowledgement of debt to the defendant [185] The current pleadings [187]
The plaintiff ’s first cause of action – breach of agency/fiduciary
duty – failure to deliver up to the plaintiff consigned works [188]
Great Wall (II) 2006 [189]
Ghost (XXXIII) 2005 [207] Blind 2006 [213] Must Form a Unity 1994 [220] And It Conditions Us 1998 [230] The Eternal Persistent 2000 aka
The Eternal Persistent (Aluminium) [234]
Second cause of action – breach of agency/fiduciary duty –
failure to deliver up Seven Witnesses/Seven Truths [245]
Third cause of action – breach of agency/fiduciary duty –
failure to account for sale proceeds from sold works [263]
The first part – failure to account for any of the proceeds [264]
By Its Direct Action (1995) and In His Pursuit of the Absolute
(1999) [269] Letters to Paul (VII) [279] To Hold On To That Consciousness (1998) [284] Sienna (XLIV) [290] Ghost (LII) (2006) [293] Blind (III) (2006) [302] What Remains When the Object is Named (2000) [310]
Third cause of action – second part – failure to account for
for all the proceeds [318]
Necessary Corrections XVIII, The Eternal Present, and
Untitled work on Paper [319] Mudra (II) [326] Of the properties of the materials [327] Insert Cross 089322 [328]
Roller Mills commission: The defendant’s set-off argument versus
Plaintiff ’s claim for full proceeds of saleThe proceeds of the sales of Ngamotu (1993), Newtons Seven
(2004) and Cartesian Circle (XI) (2004) and the shared work, Necessary Correction (XV) set-off against Jensen commission on Roller Mills
Part of plaintiff ’s third cause of action – failure to account for sale proceeds from Ngamotu, Newtons Seven and Cartesian Circle (XI), Part of the plaintiff ’s eighth cause of
of action – seeking sale of co-owned works [333] An agreement? [334] Is the agreement to leave things as they were enforceable? [399] Failure to account [410] Is the claim for commission on these sales recorded in the
spreadsheet out of time? [416]Necessary Correction (XV) [429]
Fifth cause of action – Monograph joint venture – alleged breach
of fiduciary duty [437]
Necessary Correction 14 aka Leaden Echo and Necessary
Correction XIX (1999) aka Golden Echo [437] Necessary Correction 14 [459] Necessary Correction (XIX) aka Golden Echo [465] Analysis of diversion of funds to the Monograph [471]
Plaintiff ’s fourth cause of action – breach of agency/fiduciary duty/failure to account for insurance claim payments on damaged
works [494]
Necessary Correction (XVI), Colour Work and At the Same
Time A New Beginning [494] Necessary Correction (XVI) [496] Colour Work [502] Analysis in respect of both works [504] At The Same Time A New Beginning (a Slipped Cross work) [512]
Sixth cause of action – breach of agency/fiduciary
duty/misappropriation of works [525]
Angkor III [525]
Seventh cause of action – breaches of fiduciary duty/agency [531] Brother/Sister [531] Viba catalogue – The Rhythm of His Truth 2001 [536] China (XXXIX) [546] Ideogram II [556] Alleged underpayment [558] On-sale [559] Not Through The Logical Law Of Dialectics [573] The Air is Filled with an Infinite Number of Lines [583]
Eighth cause of action – claim under the Property Law Act 2007
in respect of joint works and for damages [591]
Necessary Correction (XV) [592]
Defendant’s counterclaims – no commission paid [593] Keeping the Beat for Blake [594] An unnamed work [596] Analysis [597]
Conclusion [599]
Introduction
[1] Stephen Ronald Bambury and Andrew Jensen had an artist-gallerist relationship for 15 years (1995 – 2010). They had considerable success. During this period of time, Mr Bambury enjoyed success as an artist, selling many works through his principal agent, Mr Andrew Jensen. Their professional relationship was mixed with a friendship, a close friendship.
[2] In the course of the long trial it became apparent that they are both strong personalities. By that I mean they had strong views and saw themselves, with some justification, as leading figures in the art world. Together they broke boundaries, exhibiting in Europe. Their relationship was very successful financially, for both of them.
[3] In 2010, the relationship ended badly. Each man has a different explanation for the breakdown – Mr Bambury, because he had lost trust in Mr Jensen. Mr Jensen, because he was shifting to Sydney. Unfortunately, the relationship has never been repaired. Since 2011, Mr Bambury has been seeking at least 60 per cent of the value of all works consigned by him to Mr Jensen which have been sold or are unaccounted for.
[4] Mr Bambury has become very suspicious of Mr Jensen, as a consequence of his loss of trust, and has made some serious accusations.
[5] Both men and their professional advisors have spent hundreds of hours in a painstaking audit of the agency relationship. Numerous claims (about 20) have been resolved. About 40 are left. These disputed claims have been examined over ten days of a High Court hearing.
[6] The remaining disputes have one common characteristic. Each has an extraordinary context. None of them is a simple sale of the work and a failure of the agent to take his commission and remit the net sale price to the artist.
[7] In large measure these disputes remain intractable because the two men did not either reach an agreement at the time or if they reached an agreement, record it in
writing. In many instances there were probably no agreements reached to resolve an issue, even though and because both men knew the nature of the issue.
General considerations on the relationship between the plaintiff and the defendant
[8] Ms White gave evidence as an expert. She is a gallerist. She has had a distinguished career. She was involved in putting together a guide book called “A Code of Practice for Artists and Dealers in Aotearoa/New Zealand”. It is now in its second edition. She did not suggest that the code of practice was binding. She referred to it as evidence of her knowledge of custom and usage in New Zealand, broader than her own direct personal experience in running a gallery.
[9] It was the evidence of Ms White, that the artist/gallerist relationship was one of mutual trust and understanding, subject to established parameters and industry norms. But while there are standard practices within the industry in relation to the basics of representation, there are no hard and fast rules which apply to the relationship. Instead, each relationship tends to be fluid in response to different circumstances that arise over time.
[10] Generally, however, the fundamental terms (commission, exclusivity, pricing, exhibitions and responsibility for various costs) will be discussed at the outset of the relationship. It is still common today for there to be no formal written agreement. Over time there will be a level of understanding of the terms of the arrangement between the artist and the gallerist. The principal role of a gallerist is to sell the artist’s works so that both the artist and the gallerist can make a living through the sale of art. The gallerist is responsible for building the artist’s profile and assisting the artist in managing that profile and its influence on the value of the artist’s work. The relationship is commercial as well as being a personal one.
[11] On the subject of discounts, she said it is common for artists and gallerists to agree a discount arrangement in order to provide flexibility for the gallery to facilitate sales. The exact nature of any discount arrangement will depend on what has been previously agreed between the artist and the gallerist. A shared 10 per cent discount is standard in the industry where the artist and the gallerist lose five per cent
each on the original sale price. In this relationship between Mr Bambury and
Mr Jensen, there was no agreed discount arrangement, as we will see.
[12] It was Ms White’s evidence that there is a starting presumption the gallerist will be entitled to a commission on every sale of an artist’s work, not just purchases made in the gallery itself. As we will see, that is not an agreed term of this relationship. There were no agreements in place as to commission on sales from the studio, contra arrangements, sales to family and friends or to one-off public or private commissions. So that these transactions fall into the category of extraordinary, by which I mean out of the run of the mill transactions. They are the occasion of some of the disputes between the parties.
[13] Ms White gave useful evidence on record-keeping, recording the obvious but easily forgotten fact that during the period of this dispute, between 1995 and 2010, there were considerable developments in record-keeping where systems moved from everything still being written on paper and sent by mail or fax, to emails and electronic databases.
[14] Ms White usefully noted situations which were prone to error occasioned by movement of stock not noted at the time or incorrect notes. She gave as an example an artist might pop into the gallery without warning and want to take one or several works out of the gallery stock room, either to take back to the studio or ship to another subordinate gallery, say in Christchurch. As the works are the artist’s property, so it is his/her prerogative to do so.
[15] It was her evidence that gallerists take a range of approaches to informing artists of any sales or potential sales. There is no common practice within the industry that would require a gallerist to inform an artist immediately after a sale or even shortly after a sale unless it is of particular significance. While the gallery will provide a record of the sale in respect of each payment it makes to an artist, the obligation is to provide sufficient information which is meaningful and useful but there are no standard of categories of information.
[16] She said it was common practice for gallerists to purchase works from artists that they represent. It was her opinion that once sold to the gallerist, the artist has to live with the fact that the gallerist might sell the work later. That while it would be inappropriate for a gallerist to purchase a work knowing that a third party was interested in acquiring the same, it is common for works to be bought and then sold at a later date. She gave some personal examples. She gave some specific examples related to the disputes which I will discuss later in the judgment.
[17] The second expert witness is Mr Lett. His evidence was similar. He is a gallerist and has 15 years of experience of working in art galleries in New Zealand. He has a prior background of working in museums in Australasia. His opinion was by way of comment on three issues:
(a) Whether there is a general industry practice that a discount of up to 10 per cent provided to a prospective buyer is shared by the artist and the gallerist.
(b)The parameters of a gallerist’s entitlement to commission for works sold by his or her artist.
(c) Maintenance and retention of sale records by gallerists.
[18] It was his evidence that while gallerists commonly offer to discount a work, he was not aware of any convention or custom that a shared discount of any amount can automatically be offered by an agent without the agreement of his or her artist. It was not uncommon for a gallerist to absorb a small discount to secure a sale without acknowledging or discussing this with the artist. However, an agent may expressly agree with his or her artist, a certain level of discount to be generally applied.
[19] The scope and exclusivity of a gallerist’s representation of an artist vary and the circumstances around when a gallerist is due commission are not universally defined. While it is an accepted convention that a gallerist who directly sells a work on behalf of his or her artist will receive his or her commission, there are less certain
circumstances outside this standard arrangement. He instanced examples such as when the artist sells or gifts a work to friends or family, noting however it was rare for an artist to sell directly from the studio to a third party without involving the gallerist.
[20] It was his opinion where an artist swaps or “contras” a work, it is unlikely a gallerist would receive a commission on the value of the new work being provided as a “contra”.
[21] As to the maintenance and retention of sale records, he said there was no customary single method. It was his experience that galleries do retain sales invoices and a database and records of sale for a long period of time, if not indefinitely.
[22] Mr Lett provided a supplementary brief where he commented on Ms White’s evidence. (The experts had not met and compared views prior to trial.) He commented that while he was aware of her compiled Code of Practice, it was not being used in the industry as a standard or a guideline. He agreed that the artist/gallerist relationship is built on mutual trust and understanding, on fundamental terms that will be generally agreed at the outset of the relationship, and that it is common as here that there would be no formal written contract. He agreed the relationship between the artist and the gallerist is both commercial and personal. He agreed discounts are common but they are not a given. He reiterated there is no convention or norm that governs discounts.
[23] Mr Lett does not agree that there is a starting presumption that a gallerist is entitled to a commission on every type of sale of an artist’s work. He did say every artist/gallerist relationship is unique. He said he had a lot of experience with public commissions and did not agree that a gallerist is automatically entitled to his or her full commission on the full sale price of the commissioned work. His experience is to discuss the public commission with the artist and reach an agreement.
[24] It was his opinion that gallerists do purchase works from their artists. That might be to provide financial assistance to the artist or because the gallerist
personally purchased for their private collection. He said that these works could be made available as gallery stock in the future at the gallerist’s discretion. He was of the view he did not consider there is a convention which prevents or permits a gallerist from on-selling an artist’s work.
The conceptual impasses to settlement
[25] There are two main conceptual issues that differentiate the parties. The first is who are the proper parties to the dispute. The defendant claims that during the course of their relationship, both Mr Bambury and Mr Jensen began putting their business transactions through corporate entities. The defendant claims that the initial contract between the two men has been novated, such that Mr Bambury is no longer the principal in the relationship and Mr Jensen is no longer the agent.
[26] During their productive relationship, both men began putting their receipts and payments through corporate entities. For Mr Bambury, Unovis Limited (Unovis). For Mr Jensen, Ouroborus Limited (1 and 2). Ouroborus 1 has been struck off.
[27] The defence for Andrew Jensen begins with these propositions:
(a) From January 1995 to March 2003, Mr Jensen was the agent for
Mr Bambury.
(b) From 1 April 2003 to 19 November 2006, Mr Jensen was the agent for
Unovis.
(c) From 20 November 2006 to 10 July 2007, Ouroborus 1 was the agent for Unovis.
(d) From 11 July 2007 to 17 July 2007, Mr Jensen was the agent for
Unovis.
(e) From 18 July 2007 to 23 February 2011, Ouroborus 2 was the agent for Unovis.
[28] The second conceptual dispute is the nature of the relationship between the parties. The defendant claims that the relationship is contractual in nature, whereas the plaintiff claims that the relationship is mixed contractual and equitable. The significance of this dispute is two-fold. First, some of the plaintiff’s claims for breach of fiduciary duty are said to extend beyond the terms of the contract between the parties. Second, the nature of the relationship between the parties affects the relief claimed, and as a result the limitation periods that may apply.
[29] As a consequence of the relationship being in contract, the defendant pleads that many of the claims are out of time, barred by the Limitation Act 1950. These proceedings were filed in 2013. Claims could be entertained only from any breach of agency after 2007, i.e. confined to the last three years of the 15-year relationship.
[30] Mr Bambury argues that the agency relationship was personal to himself, as principal, and the defendant, as his agent. He seeks relief both in contract and in equity. Mr Jensen was entrusted with Mr Bambury’s art for sale and he was entitled to 40 per cent commission on the sale. He further argues that he had the contractual obligation to pay Mr Jensen 40 per cent of the sale price and that Mr Jensen, as the immediate recipient of the sale price, was entitled to discharge Mr Bambury’s obligation by taking the 40 per cent commission.
[31] The contention for Mr Bambury is that the balance of 60 per cent was his property and could not be expended for any other purpose. It had to be held in trust, pending payment to him. This trust obligation was consistent with, but separate from, the common law terms of the agency. Their mutual trust was a trust obligation, a fiduciary obligation, enforceable by equitable remedies. Failure to pay the purchase price monies, after deduction of the commission, was a breach of equity, from which s 21 of the Limitation Act 1950 exempted such enforcement from the six-year limit. Thereby Mr Bambury is able to seek an account from Mr Jensen right back to the commencement of the agency relationship.
[32] It is necessary to resolve the conceptual divides before examining the particular disputes.
The parties to the agency
[33] The character of and parties to the agency relationship are best examined chronologically.
Before Unovis Limited
[34] This was a personal agency between Stephen Bambury and Andrew Jensen. It had no special terms. It can be analysed as a typical artist/gallery relationship in New Zealand.
Burdens and benefits of the relationship
[35] The burden of the contract for the artist is to provide works to the agent and pay commission on his sales. The burden of the contract for the agent is to promote the sale of the works and pay the purchase price, net of the commission, to the artist.
[36] The benefit of the contract to the artist is that the agent has an incentive to promote the quality of the artist’s work and to sell the artist’s work for as good a price as the market will deliver. The benefit of the contract to the agent is the commitment of the artist to provide quality art works.
[37] An artist may have a primary agent, and secondary agents. In this case, Mr Jensen was the primary agent. This was a significant benefit to him as Mr Bambury was (and is) a leading contemporary artist in New Zealand.
[38] I reject the submission on behalf of Mr Bambury that he had no obligation to consign most of his works to Mr Jensen. That submission is contrary to their long history.
[39] Usually an agency has no promised duration. Either the artist or the agent can end it at any time. Here it was ended in one email from the agent.
[40] During this relationship, however, it was in the common interest of both that almost all works were consigned to the Jensen Gallery. The accepted exception was some continued supply to Jonathan Smart in Christchurch.
After Unovis any change: The conditions of novation
[41] At common law obligations assumed by a party to a contract cannot be assigned to a third person without the party to whom the obligations are due consenting. This is explained by Lord Collins MR in Tolhurst v Associated Portland Cement Manufacturers:1
It is, I think, quite clear that neither at law nor in equity could the burden of a contract be shifted off the shoulders of a contractor on to those of another without the consent of the contractee. A debtor cannot relieve himself of his liability to his creditor by assigning the burden of the obligation to someone else; this can only be brought about by the consent of all three, and involves the release of the original debtor. (Emphasis added.)
[42] The requirements of this comprehensive assignment are summed up in its very name “novation”. As the name suggests, a new contract has to be agreed. Here there are burdens on both contracting parties, the artist and the agent. If this agency was assigned by novation, then there needs to be evidence that the burden of the contract was removed from the artist and assigned to Unovis. The assignment must be an agreement. The need for consent carries within it the need for a comprehension by the original parties as to what burden is being removed and to whom it is being transferred. However, as a novation is a new contract, the proper
approach to whether there has been agreement is always objective.2
[43] The Master of the Rolls discussed the reasons for this rule. Sometimes there are assignments of a debt after the performance of the obligation has been completed. In other cases, and here, there is an alleged assignment of an ongoing set of obligations. In this latter regard, the Master of the Rolls said:3
There is, however, another class of contracts, where there are mutual obligations still to be enforced and where it is impossible to say that the whole consideration has been executed. Contracts of this class cannot be assigned at all in the sense of discharging the original contractee and creating privity or quasi privity with a substituted person. “You have a right”, says Lord Denman C.J., in a passage cited by Gray J. in delivering the judgment of the Supreme Court of the United States in the case of Arkansas Smelting
1 Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 (CA) at 668 cited in Burrows Finn & Todd, The Law of Contract is New Zealand (4th ed, LexisNexis, Wellington, 2012) at [17.2.1].
2 See Savvy Vineyards 3552 v Karaka Estate Ltd [2014] NZSC 121, [2015] 1 NZLR 281 at [29].
3 Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd, above n 1, at 669.
Co. v Belden Co.4, “to the benefit you contemplate from the character, credit, and substance of the party with whom you contract”: Humble v Hunter.5 To sue on these contracts, therefore, the original contractee must be a party, whatever his rights as between him and his assignee. He cannot enforce the contract without showing ability on his part to perform the conditions performable by him under the contract. This is the reason why contracts involving special personal qualifications in the contractor are said, perhaps somewhat loosely, not to be assignable. What is meant is, not that contracts involving obligations not special and personal can be assigned in the full sense of shifting the burden of the obligation on to a substituted contractor any more than were it is special and personal, but that in the first case the assignor may rely upon the act of another as performance by himself, whereas in the second case he cannot. He cannot vouch the capacity of another to perform that which the other party to the contract might, however unreasonably, insist was what alone he undertook to pay for – namely, work to be executed by the party himself. If, for instance, he had ordered a painting from some unknown artist of his own choice, he could not be compelled to accept instead of it the work of another artist, however eminent. (Emphasis added.)
[44] Now, of course, not all of those remarks are pertinent. It is not suggested in this case that a novation is not possible. But, as I have endeavoured to explain, such novation has to demonstrably make it clear that the parties understand and so are giving informed consent to the ramifications of assigning ongoing obligations.
[45] It remains to distinguish the Supreme Court decision of Savvy Vineyards 3552 v Kakara Estate Ltd.6 This was a novation case where the Supreme Court split 3:2. It is authority for the proposition that a novation can be implied. Two companies, Kakara Estate Limited and Weta Estate Limited, purchased two separate vineyard properties from a company, Vines Development Management Company Limited (the Vines). On settlement, the Vines also transferred to Kakara and Weta its interest in agreements that the Vines had entered into with Goldridge Estates Limited for the management of the vineyards and supply of grapes to Goldridge. The Vines and
Goldridge were owned by the Vegar family. The family had expertise in viticulture and winemaking.
[46] The family developed the idea of selling off vineyards which would be managed by Goldridge and under grape supply agreements. Goldridge would
acquire the right to acquire the grapes which were produced. The very important
4 Arkansas Smelting Co v Belden Co 127 US 379 (1888) at 387.
5 Humble v Hunter (1848) 12 QB 310 (QB) at 317.
6 Savvy Vineyards 3552 v Kakara Estate Ltd, above n 2.
material fact is that the contracts between Karaka and Weta and Goldridge Estate anticipated that there could be an “assignment” by Goldridge of both its benefits and burdens under the contract. The documents therefore anticipated the type of novation that eventually occurred. The trial issue was whether Kakara and Weta assented to the novation.
[47] William Young J, for the majority, reasoned:
[96] In the case of assignments by Goldridge to a related party, Kakara and Weta were not entitled to insist on a covenant by the assignee to adhere to Goldridge’s contractual obligations. As noted, this invites the questions of whether, and, if so, how, the assignee was to become contractually committed to Kakara and Weta. For the reasons just given, it does not seem likely that the parties envisaged that the joint venture between them would proceed on the basis that the management of the vineyards in particular would be provided by an assignee with no contractual obligations to Kakara and Weta. All of this suggests that the right of assignment to a related company was envisaged as being by way of novation, with the assignee taking over the role of Goldridge.
[97] That novation was envisaged is consistent with other aspects of the agreements. As we have noted, the grape supply agreements envisage that they will subsist where the buyer is not Goldridge. And both the vineyard management and grape supply agreements envisage assignment by Goldridge not just of its rights but rather of its “interest” in the agreements. Similar considerations apply to the agreements which provide for assignments by Kakara and Weta of their rights and obligations under the agreements on sale of the tied parts of their vineyards. As the British Gas case suggests, this is the language of novation rather than assignment. A construction of the agreements so as to permit termination if an assignor were later liquidated would have the potential to be distinctly awkward for Kakara and Weta. On the approach favoured by the Court of Appeal, Goldridge and later the Savvy companies could have disengaged themselves from the agreements at least with Weta simply by putting Vines into liquidation. And in the case of on-sales by Kakara and Weta of the tied parts of their vineyards, the possibility that later liquidation of those companies would give rise to rights of termination would be likely to cause some anxiety to prospective purchasers.
…
Did Kakara and Weta assent to the novations?
[107] It is helpful to start with the contractual position as between Goldridge and the Savvy companies. The only formal documentation to which they were party were the deeds of 28 August 2009. These deeds provided for substitution of Goldridge by the Savvy companies.
…
[109] From September 2009, the Savvy companies dealt with Kakara and Weta as the successors to Goldridge. Kakara and Weta accepted the Savvy companies as Goldridge’s successor. They paid invoices and then even more significantly, once the disputes arose, they dealt with the Savvy companies explicitly on the basis that they were parties to the agreements and that Goldridge was not. As earlier recorded, Mr Forlong accepted that the benefit and burden of the contracts had passed to the Savvy companies. The corollary is that the pre 1 September 2009 contractual status quo was changed. For the reasons already given, an assignment theory does not explain how the Savvy companies came to be in contract with Kakara and Weta. This necessarily means that there was a novation of some kind. So what were the terms of that novation?
[110] The only terms which Goldridge and the Savvy companies offered to
Kakara and Weta were those set out in the deeds of assignment dated 28
August 2009. These provided for Goldridge to be replaced by the Savvy companies. It is not possible for Kakara and Weta to accept the Savvy companies as contracting parties without at the same time accepting the only proffered mechanism by which this could be achieved.
[48] These material facts are the reverse of the material facts in this case. Far from being contemplated at the outset of the relationship, Unovis and/or Ouroborus 1 and 2 were afterthoughts, conceived by accountants, directed to obtaining tax advantages, not to assume the burdens of the artist or the gallerist. There is no evidence at all that any of the parties in this case had even heard of the term “novation” let alone, on professional advice, intended to novate the obligations/burdens of the agency to these limited liability companies.
[49] There are at least four material facts in Savvy Vineyards not found here:
(a) The initial management agreement with Goldridge Estates anticipated the novations.
(b)Goldridge and the Savvy companies were paid for the services they provided to Kakara and Weta. It was not a case of directing proceeds into particular bank accounts.
(c) There was no relationship of trust.
(d) Kakara and Weta clearly accepted and acted upon what was
anticipated, that the Savvy companies were Goldridge’s successor.
[50] I turn now to the facts of the first contended novation, Unovis.
[51] The history of Unovis is that it was a limited liability company brought into being on the advice of Mr Bambury’s accountant for his purchase of his Shaddock Street studio building in 1992. In or around 2000, his accountant advised him that the income from his paintings should also go through Unovis because managing provisional tax was difficult given his income fluctuations. Mr Bambury’s evidence was:
I told Andrew what my accountant had advised and why, and to now pay me the proceeds from the sales of my works into my Unovis bank account. I did not tell Andrew that he now represented Unovis instead of me. To the contrary, I told him that this did not alter our arrangements; Unovis was just an existing vehicle my tax accountants had recommended the payments for my paintings be paid into. I have never sold a painting under the name Unovis. All of my work is sold personally. The company has no public art profile.
[52] Mr Bambury was cross-examined on this evidence as follow:
Q After that discussion your instruction was that all of Jensen Gallery’s
documents needed to refer to Unovis. A No that’s completely wrong.
Q As the vendor of the art. A That’s completely wrong.
QBut we’ve seen a number of instances Mr Bambury where you have directed the gallery to pay the sale proceeds due to you into Unovis’ account.
AI believe we’ve had two in the course of my cross, one was an invoice which I furnished to Andrew Jensen after termination, on that painting there, At the Same Time a New Beginning, and the other one was to do with the commission I undertook with Roller Mills which I undertook under Unovis, but I don’t think there are any others.
Q Those were certainly two of the sales that were made in Unovis’
name Mr Bambury weren’t they?
A No I haven’t been paid for that painting. It’s damaged beyond repair.
It’s not been sold.
QI understand that but my point was simply to record that I agree with you, we have talked about those two transactions which were in the name of Unovis Limited.
A That is correct, that’s correct.
QMy point was that you also explained in that discussion to Andrew that he needed to pay the sale proceeds to Unovis Limited.
A That was what the conversation was actually about.
QUnovis, not you, was to be treated as the seller of the works to whom the gallery paid all of the proceeds going forward conversationally wasn’t it?
A Well if that had been the case I would have signed the paintings
Unovis.
Q But Unovis is not the artist of the painting Mr Bambury, you are.
We all accept that don’t we?
A Yes I think we do.
QBut you signed those paintings in your capacity as an employee of Unovis with Unovis being the party that gets the proceeds of sale, correct?
AThe last part was, the second part was completely incorrect. Or one part was correct, the other part was wrong.
QNow Mr Jensen also later on in your relationship took the step to incorporate a limited liability company in the name of Ouroborus, do you understand that?
A I understood what you said.
QAnd is it your evidence that you were not aware of that happening at the time?
ACompletely unaware of it. I didn’t find out about this until post- termination.
QCan you take volume 3 please and turn to page 1285. Have you got that page Mr Bambury?
A 1285. Q Mhm.
A Yes I do, thank you.
QThis is an extract from the general ledger that your accounts prepared for the year ending March 2008 isn’t it?
A It doesn’t have their name on it but it certainly looks as though it
would be.
Q The general ledger is for Unovis Limited isn’t it?
A Yes.
QAnd if you look down to the bottom third of the page you’ll see there an entry with a heading, “Sales”, in the middle column, do you see that?
A Sorry where am I trying to find this?
Q If you look down the description column to about a third from the
bottom you can see a bold heading that says, “Sales?”
A Yes I can, thank you. Q Do you see that?
A Yes.
QAnd if you look down to the last three entries on that page you can see that there is a reference to Ouroborus Lim, can you see that?
A I can.
Q And if you turn over the page you can see that there’s a substantial
number of other sale entries also with that name?
A I can.
[53] In support of the novation, Mr Harley submitted that in this case there were three facts necessary to be established:
(a) there has been an annulment of a liability;
(b) the creation of a substituted liability in its place; and
(c) the consent of all parties to the original contract.
This formulation is not complete. It also requires the consent of the new party or parties to the novated contract.
[54] Mr Harley relied particularly on the question and answers set out above and then submitted:
Regardless of whether Mr Bambury said “it did not alter our arrangements”, the legal and practical effect of that request was to extinguish the liability of Jensen Gallery to pay Mr Bambury and to create a new agreement with Unovis as the owner/seller of the works.
Jensen Gallery’s consent to that change can be inferred from its conduct. It put in place the necessary systems to effect Mr Bambury’s request, including paying the proceeds of the artwork sales into Unovis’ bank account.
[55] Mr Harley went on to submit that there were numerous documents that showed that Mr Jensen, his assistant Miss Fox, and other gallery staff were mindful that it was Unovis, not Mr Bambury, that was to be paid. I agree.
[56] But, on the other hand, there were very few documents ever suggesting that it was Unovis Limited, rather than Mr Bambury, who was the principal of the agency contract.7
[57] All payments were subsequently put through Unovis’ books. Yet Unovis was not recognised in the Jensen Gallery payment advice. These forms changed a little over the years. But to take a typical example, the form in 2004 has the following entries to be completed:8
Artist
Title
Stock number Medium Purchaser
Sale price
Date of payment to gallery Date of payment to artist Amount to artist
Gallery commission
Cheque number.
[58] The principal argument in support of the novation was that:
The request and subsequent change in practices cannot be regarded as a mere payment direction by Mr Bambury.
(i) In order for Unovis to legitimately be able to account for sale proceeds of all Mr Bambury’s artwork it must be the art vendor. If not, the very reason he said he made the change (to avoid difficulties associated with managing provisional tax) could not be achieved.
(ii) The art work has to become the property of the company for it to be able to claim GST and report the income from the sale.
7 On one occasion a studio assistant of Mr Bambury, Kane Goulter, signed off Unovis Limited in his email to Andrew Jensen, attaching an installation image of a work, signing it “Kane Coulter, studio assistant, Unovis Limited”. This is inconsequential.
8 CB 0657.
(iii) On the two occasions where Mr Bambury invoiced directly (Manson
– Roller Mills) and to the Gallery for the damage to Slipped Cross, the documentation makes it clear that Mr Bambury held out Unovis
not himself as the owner of those works.
[59] It would not be the first time that the tax treatment of a transaction might not conform to the binding relationship between the parties. I know of no authority on novation which tests its efficacy by reason of the internal management of one of the parties. At the time the alleged novation is said to have taken place, there were no records of Unovis as to execution of the novation. The statutory efficacy of the arrangement between Mr Bambury and Unovis Limited is a matter for the regulatory authorities and does not govern the common law of novation. At best the books of Unovis can be used as circumstantial evidence in support or against the conduct of Mr Bambury with a third party, in this case, Jensen Gallery. In this regard, the books of Unovis are consistent with Mr Bambury’s advice to Mr Jensen at the time. The artworks created by Mr Bambury are not listed in the assets and liabilities statements. Unsold artworks are not listed as assets of the company. It is only revenue from sales which is entered in the income statement.
[60] As between the artist and the gallerist, the artist advised the gallerist to direct payments to Unovis Limited and the gallerist agreed. There is no suggestion in that evidence of novation. Indeed, everything is to the contrary. There was no practical disturbance of the essentially personal character of the relationship between Mr Bambury and Mr Jensen, including the obligations owed by Mr Jensen to Mr Bambury and Mr Bambury to Mr Jensen.
[61] This litigation is the outcome of a mutual loss of personal confidence between the artist and the agent and has nothing to do with the viability or otherwise of the three limited liability companies involved.
[62] Guided by the definition and supporting dicta of Lord Collins MR in Tolhurst, I am of the view that the informal redirection of payments and the agreement of Mr Jensen to so direct payments, was not a novation. The three occasions, amidst a multitude of transactions, in which Mr Bambury raised invoices in the name of Unovis, were not of themselves a novation and could not be and do not function as sufficient evidence to displace the plain and unchallenged content of
his discussion with Mr Jensen of his intended use of Unovis, the reasons for it and what he required of the gallery: solely that the payments be deposited to the bank account of that company.
[63] Mr Harley accepted that if he did not establish a novation in respect of Unovis, he did not have any stronger argument in respect of Ouroborus 1 and Ouroborus 2. In likewise manner, Mr Jensen had advised Mr Bambury that he was putting his business through the books of these two limited liability companies and it was deposits from these companies into Unovis’ bank account which discharged the obligation of Mr Jensen as agent to pay the balance of the purchase price after taking the authorised commission.
[64] The effective principal and agent relationship remained personal between Stephen Bambury and Andrew Jensen. It was, for all sorts of reasons, of which this judgment will reflect many incidental examples, one which depended on personal mutual confidence and trust and, indeed, was so symbiotic that it has some characteristics of a partnership. Mr Jensen was not simply a factor or mercantile agent. He personally, astutely, and with considerable sophistication, promoted his artist, Mr Bambury, both in New Zealand and abroad. Many instances of that appear in this judgment, which I leave the reader to find as I progress through the resolution of the disputes between the two men which followed upon the breakup of their relationship.
[65] I record that following the hearing, the plaintiff invited the Court to add Unovis as a party in the event I found novation. By the time I received that invitation, I had already determined that the contract was not novated and therefore declined to add Unovis.
The terms of the arrangement between Mr Bambury and Mr Jensen
[66] Keeping in mind the qualifications above, it is useful to now consider the plaintiff’s general contentions of Mr Jensen’s obligations. A significant dimension of the plaintiff’s case is that, as a fiduciary, Mr Jensen had certain strict obligations.
[67] As Millet LJ noted in Paragon Finance Plc v DB Thakerar & Co, there is a distinction between an agent having fiduciary duties and an agent having a trust obligation to keep the trust assets separate. 9 It is commonly accepted that agents in the position of Mr Jensen have fiduciary obligations. The issue is always on the facts, the extent of them. To be discussed later in this judgment is whether these fiduciary obligations engender equitable remedies and, if so, what type of equitable remedies.
[68] The relationship between the contractual character of any agency and the notion of fiduciary obligation as independent of a contract is subtle. As the latest edition of Bowstead and Reynolds on Agency acknowledges,10 the law recognises that agency is a contract made between principal and agent and, like every other contract, the rights and duties of the principal and agent are dependent on the terms of the contract between them, whether express or implied.11 As noted above, the notion of fiduciary obligation is independent of the contract in the sense that it is not a contractual obligation. Rather, it derives from the law recognising the need for a degree of supervision to protect the principal.
[69] The regular recognition of fiduciary duties is a rule of recognition of a fiduciary relationship informed by the contractual terms of the parties, but not limited thereto:12
[A fiduciary] is, simply someone who undertakes to act for or on behalf of another in some particular matter or matters. That undertaking may be of a general character. It may be specific and limited. It is immaterial whether the undertaking is or is not in the form of a contract.
[70] The plaintiff’s counsel listed Mr Jensen’s fiduciary obligations as follows:
(a) To act in good faith and in the plaintiff’s best interests, including:
(i) when acting on his behalf;
9 Paragon Finance Plc v DB Thakerar & Co [1999] 1 All ER 400 (CA).
10 Peter Watts and FMB Reynolds, Bowstead and Reynolds on Agency (20th ed, Sweet and
Maxwell, London, 2014) at [6-035].
11 Kelly v Cooper [1993] AC 205 (PC) at 213-214 per Lord Browne-Wilkinson.
12 P D Finn, Fiduciary Obligations (The Law Book Company, Sydney, 1977) at [467].
(ii) dealing with his artworks and sale proceeds; (iii) purchasing the plaintiff ’s artworks; and
(iv)entering into any transactions with the plaintiff (set-offs, contras and trade-ins).
(b) To avoid conflicts of interest unless with the plaintiff’s consent.
(c) To receive the proceeds of sale of the artworks on trust for the plaintiff and to account to the plaintiff for them (less commission).
(d) To maintain and retain appropriate records of the plaintiff’s artworks.
(e) To keep accurate accounts of all transactions entered into on behalf of the plaintiff in respect of the artworks and be ready with correct accounts of all dealings and transactions in the course of the agency.
(f) Not to purchase the artworks himself and to on-sell them for his own benefit.
(g) To deliver up to the plaintiff on demand, or on termination of the
agency, any of the plaintiff’s property in his possession.
[71] Proposition (f) is controversial. Otherwise these are contractual and fiduciary obligations. This is not a trust relationship in the purest sense of the word, as it is intended that the gallery profit from the sale of the artist’s works. There are characteristics of partnership about their relationship. Mr Jensen was a very successful promoter of the artist’s work.
[72] There were occasions in their relationship when Mr Bambury, as artist, owed the gallery funds. For instance, when Mr Bambury won the Roller Mills commission, he was paid directly by Mason Developments and he agreed that he owed commission to the agent, the monies not passing through the agent’s hands.
[73] The obligations set out above are consistent with the normal contract terms and usages between the artist and the agent, as discussed at the start of this judgment.
[74] Part of the plaintiff’s case is, however, that on no account, on no basis, was Mr Jensen ever entitled to make a profit, as distinct from obtaining commission on the works of Mr Bambury, the artist. For example, by buying a work of Mr Bambury on the secondary market and selling it for a profit. This contention is controversial.
[75] Mr Langton relies on the leading case of Regal (Hastings) Ltd v Gulliver.13
In this case, the defendants were directors of a company. The company owned a cinema in the town of Hastings. The directors of the company wanted to acquire two other cinemas in the town, with a view to an eventual sale of all the assets. The original intention was that the appellant company would hold all the shares in a subsidiary company which would acquire these other two cinemas. For various financial reasons, that could not be worked out. The directors ended up holding
3,000 shares in the subsidiary company. The venture made a profit but the directors, as fiduciaries, were obliged to account for the profit. The profit was realised by sales of shares in the company, not by sales of the company. The case was underpinned by the axiomatic principle that directors of a company are fiduciaries in respect of the company.
[76] Here it is critical not to lose sight of a core fact in the relationship between an artist and his principal gallery; the relationship has characteristics akin to a partnership and has characteristics akin to a joint venture. A quality gallery plays a significant role in promoting the artist. Both principal and agent are separately rewarded by the sales of works on a 60:40 split. That core aspect of the relationship triggers a common interest of principal and agent in the market value of the artist’s works. That in turn means that there is often a common interest in maintaining the market value of works that are being resold. This interest can be pursued by purchasing works when they come back onto the open market. Once purchased back
by the gallery, is the gallery expected to absorb that cost and not be able to re-sell? A
13 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 (HL).
common interest of this nature was not present in the facts of Regal (Hastings) Limited v Gulliver.
[77] The defendant’s counsel used these joint venture facts to argue against a true fiduciary obligation and so against equitable remedies. That is a very respectable argument. It has been met with what I see as a “pure” argument of a fiduciary nature as applying to this agency so that, for whatever reason, on no account is it said must the gallery make a profit as distinct from simply obtaining 40 per cent commission on sales made. Therefore, one of the terms is that the gallerist is not allowed to purchase the artworks of the artist and to on-sell them for his own benefit, for whatever reason, and to avoid conflicts of interest unless with the plaintiff’s consent.
[78] No one suggests that the principal gallery here, or commonly in New Zealand, must sell only works of one artist. The gallery will always be selling works of a number of artists. These works will be competing with each other for appeal. Collectors visiting a gallery will expect to see a range of works on sale.
[79] I will return to this common interest and conflict of interest when analysing some disputed purchases by the gallery of the artist’s work and on-sale, particularly one to a public art gallery. It is sufficient to distinguish Regal (Hastings). Whatever the fiduciary duties of the gallery in a particular instance are, they are not comparable to the duties of directors of a company.
[80] As already noted, none of the remaining transactions which are in dispute between the parties were run of the mill. Either the transaction itself or its timing or complexity has an extraordinary quality. By “an extraordinary quality”, I mean, a context not anticipated in the usual terms of trade between the artist and the agent. Because of these extraordinary facts, it was necessary for Mr Bambury and Mr Jensen in each instance to reach an agreement accommodating each other’s interests and consistently these disputed accounts, by and large, reflect a failure to do so. The fact that they remain unresolved, and both parties knew they were unresolved, places these disputes inevitably as not sufficiently significant to bring either party to the point of terminating what was essentially a very mutually advantageous relationship. But when the relationship ended, these disputes, which
had never been settled or abandoned wholly, were revived. Because they were extraordinary, there were no set terms or customs or trade usages which pointed to the immediate solution so the outcome was either a settlement, an arbitration, or a High Court action.
Barkley v Barkley Brown – the duty to account
[81] I turn back to Mr Langton’s list of obligations, a number of the plaintiff’s
claims centre on records, obligations (d) and (e):14
(d) To maintain and retain appropriate records of the plaintiff’s
artworks;
(e) To keep accurate accounts of all transactions entered into on behalf of the plaintiff in respect of the artworks and be ready with correct accounts of all dealings and transactions in the course of the agency.
[82] Mr Langton submitted there is an absolute duty to account whether or not records are available. He relied upon the law as applied in Barkley v Barkley- Brown.15
[83] Mr Barkley was one of the beneficiaries under the will of the deceased, the late Ms Farrell. He sought an order that Mrs Barkley-Brown account to Ms Farrell’s executors in respect of money withdrawn from Ms Farrell’s bank account over the period of February 1999 to 2005, during which time Mrs Barkley-Brown had possession and/or use of Ms Farrell’s bank passbook. Mrs Barkley-Brown was Ms Farrell’s niece and closest living relative.
[84] It was accepted that Mrs Barkley-Brown used Ms Farrell’s bank passbook over the period 1998 to around 2003. She said Ms Farrell instructed her to draw money from her bank account for various housekeeping, pharmaceutical or other requirements and occasionally to purchase shares or investments. She said at the beginning she wrote notations in the bank passbook for the purpose of the withdrawals but that on an occasion Ms Farrell said, “For goodness sake, dear, just put it in the safe. No need to write things in”. When Ms Farrell entered a nursing
home, Mrs Barkley-Brown gave evidence that she was instructed by Ms Farrell to
14 See [70] above.
15 Barkley v Barkley-Brown [2009] NSWSC 76.
use the bank book whenever she needed to buy anything for her - nursing fees and bills or clothes etc.
[85] It was not disputed that Mrs Barkley-Brown withdrew a considerable amount from Ms Farrell’s account over the period from 1999 to 2005. Mrs Barkley-Brown was able to identify a number of specific disbursements. Mr Nelson, Ms Farrell’s accountant, reviewed the passbooks and noted what he saw as an extraordinary number of withdrawals from the account, which were not consistent with his client’s spending and saving habits.
[86] The application to account was based on Mrs Barkley-Brown acting in a fiduciary capacity for Ms Farrell. The application was opposed on the basis, among other things, that the accounts would relate to an excessive period, from February
1999 – eight years from commencement, now ten years ago – and would involve an examination of approximately 840 items. That there were inadequate records to enable Mr Barkley or Mrs Barkley-Brown to identify the items to be included in any account.
[87] Ward J, in the Supreme Court, Equity Division, found that Mrs Barkley- Brown was the agent of Ms Farrell and had a fiduciary duty to account. He held that her first duty was to keep, at least when requested, a clear account of the monies passing through her hands, citing Pearce v Green:16
It is the first duty of an accounting party, whether an agent, a trustee, a receiver, or an executor, for in this respect, as was remarked by the Lord Chancellor in Lord Hardwicke v Vernon.17 They all stand in the same situation, to be constantly ready with his accounts.
Second:18
An agent who fails to render an account when called upon to do so will be in breach of that duty.
He cited the decision of Yasuda Limited v Orion Underwriting Limited:19
16 Pearse v Green (1819) 1 Jac & W 135; 37 ER 327 at 140, 329.
17 Lord Hardwicke v Vernon 14 Ves. 500 and see White v Lincoln 8 Ves 360.
18 Barkley v Barkley-Brown, above n 15 at [101].
19 Yasuda Limited v Orion Underwriting Limited [1995] QB 174 (QB) at 185-186.
Because the agent’s duty to provide records of transactions to the principal is founded on the entitlement of the principal to the records of what has been done in his name, termination of the agent’s authority to enter into further transactions should have no bearing on the continuance of the duty to provide pre-existing records pertaining to the period when transactions were authorised. Accordingly, in the absence of express agreement to the contrary, the agent’s duty to provide to his principal the records of transaction effected pursuant to the agency must subsist notwithstanding termination of the agency’s authority. That, as I have held, is a duty that is imposed by law in consequence of the existence of the agency relationship and is not founded on the existence of a contract of agency.
[88] That led to Ward J’s conclusion that Mrs Barkley-Brown had a duty to keep proper records so she could, if called upon, account for all funds withdrawn by her.
[89] The Judge accepted that Mrs Barkley-Brown had not deliberately destroyed any documents. However, he did go on to say:20
If Mrs Barkley-Brown cannot not account for transactions because of a lack of records which she could easily (and as an agent should) have kept, it seems to me that a presumption that the records would not have assisted her may well be available.
[90] The Judge did not, on the facts of that case, have to draw that inference.
[91] Mr Langton argues that this reasoning should apply right back to 1995 so that where Mr Jensen cannot produce a written record, for example a receipt from Mr Bambury of a cash payment, or a written acknowledgement that the proceeds from the sale of a particular painting had been applied by agreement to an extraordinary expense as agent, such as towards the production of the Monograph, that the onus of proof should be reversed and placed on Mr Jensen to prove the account.
[92] The Jensen Gallery maintained two sets of records relevant to the sales of the works of Mr Bambury. One was a stock list and internal ledger which recorded sales, receipts and payment. The second was a payment notice which recorded the
sale of the work, the receipt of the purchase price and the payment to the artist.
20 Barkley v Barkley-Brown, above n 15 at [130].
[93] Neither document contains a receipt or acknowledgement from the artist of being paid. The artist, however, receives the notice of payment which contains advice as to the date on which he would be paid. Typically this is a couple of days or so after the date recording receipt of the purchase price.
[94] Mr Bambury kept a private ledger where he tracked the notice he received of sales, the details of the sales and the commission he was expecting against deposits to his bank account. It is obvious, if only because of the duration of the partnership that this process served him adequately. Frequently he checked these notices against deposits into Unovis’ bank account.
[95] I am satisfied that, in normal circumstances, the gallery held a consignment note of the work received from Mr Bambury, a record of the sale, the commission and payment to Mr Jensen, and bank records dating at least seven years.
[96] It is one thing for this Court to recognise the fiduciary character of the obligations of the agent. It is another to impose perfect standards of bookkeeping to both of the parties over a long and strong relationship of mutual trust and confidence. Because the material facts are different, the Barkley-Brown case does not assist the Court.
The limitation issues
[97] It is common ground that if legislation applies, it is the Limitation Act 1950, rather than the 2010 Act. These proceedings were commenced in 2013, with the consequence that if the plaintiff’s claims are in contract only, that is, common law claims, then Limitation Act 1950 excludes all claims arising more than six years prior to the commencement of the proceedings on 13 September 2013, that is, prior to 13 September 2007.
[98] Of the 40 odd outstanding disputes, only four date after September 2007.
[99] If, however, the plaintiff has relief in equity, then the six year time limit does not apply, except insofar as any provision of equitable relief would be applied by a Court in equity in like manner to common law relief. And, furthermore, if the action
is in respect of any equitable fraud (which does not mean fraud in the common law sense, equitable fraud is broader), or if the action is to recover trust property, then no period of limitation shall apply. The relevant provisions are s 4(1)(a), (2), (9) and s 21(1):
4Limitation of actions of contract and tort, and certain other actions
(1) Except as otherwise provided in this Act [or in subpart 3 of Part 2 of the Prisoners' and Victims' Claims Act 2005], the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say,—
(a) Actions founded on simple contract or on tort:
…
(2) An action for an account shall not be brought in respect of any matter which arose more than 6 years before the commencement of the action.
…
(9) This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the Court by analogy in like manner as the corresponding enactment repealed or amended by this Act, or ceasing to have effect by virtue of this Act, has heretofore been applied.
21 Limitation of actions in respect of trust property
(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action—
(a) In respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or
(b) To recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use.
[100] The relationship between a gallery and its artist is contractual as well as having a fiduciary character. Where an artist’s claim against the gallery does not rely upon breach of an equitable obligation, here a fiduciary obligation, then the six year
limitation period will apply. The function of s 4(9) is to capture the policy that:21
21 Halsbury’s Laws of England (5th ed, 2008) vol 68 Limitation Periods at [919]. See Laws of New Zealand Limitation of Civil Proceedings at [19]. See, for application, Matai Industries Ltd v Jensen [1989] 1 NZLR 525 (HC) at 544.
Where the same facts which are relied on for alleging breach of contract … are also relied upon for alleging breach of fiduciary duty, the Limitation Act will apply to the claim in equity.
Tipping J in Matai found that the cause of action against the receiver for negligence “is exactly coincidental with part of the first cause of action in respect of the negligent conduct of the receivership”. He went on to find that it was “highly inequitable that … a plaintiff in equity could circumvent the barring [by the
Limitation Act] of his cause of action in law”.22
[101] The plaintiff ’s claim from the outset has been that this is an action for equitable remedies. That the defendant is in breach of fiduciary obligations to the plaintiff.
[102] The defendant’s argument from the outset is that the relationship extends no further than the contract and that while the defendant is a fiduciary, he does not hold the proceeds of sale of the works on trust on behalf of the artist. This is because under the terms of his contract with the artist, the gallerist is entitled to deposit the proceeds of sale into his general business account, so mixing the proceeds with other monies. This ability is said to be fatal to the claim that the proceeds are held on trust, as if Mr Jensen held the proceeds on trust, he could not use them in any way to his personal advantage.
[103] The defendant says that the relationship between the artist and the gallery in this case is at all times contractual. There is no concomitant fiduciary obligation owed by the gallery to the artist. Whereas, the plaintiff argues that there are two consistent but separate relationships. One is the contractual arrangements between the artist and the gallery. The second is the fiduciary obligations of the gallery which attach both to the artist’s works in possession of the gallery and to the proceeds from the sale of those works.
[104] In response to that, the defendant says that the custodial obligations of the gallery for the artist’s works pre-sale are covered by the common law of bailment.
22 At 544.
[105] I have already rejected the proposition that some of the gallery’s obligations do not have a fiduciary character. But it does not follow that all fiduciary obligations and breach thereof warrant or entitle the artist to the full range of equitable relief. Equity responds to particular facts, as I will discuss later. But there is an issue as to whether it is possible for the artist to maintain a claim of a proprietary character over the proceeds of sale of a work and this is a major issue between the parties. It is directly related to resolution of the limitation issues.
[106] The plaintiff’s argument rests on the material fact that the artist’s works remain the artist’s property until they are sold. The plaintiff’s argument does not dispute the existence of the law of bailment but says that in this case the obligation of custody is coupled with a trust obligation which sits alongside but is independent of the bailor/bailee obligations.
[107] Mr Langton cited the dictum of Asquith LJ in the case of Reading v R where Asquith LJ said a consideration of the authorities suggest that for the present purpose a fiduciary relation exists: 23
(a) Whenever the plaintiff entrusts to the defendant property, including intangible property as, for instance, confidential information and relies on the defendant to deal with the property for the benefit of the plaintiff, or for purposes authorised by him, and not otherwise …, and
(b)Whenever the plaintiff entrusts to the defendant a job to be performed, for instance the negotiation of a contract on his behalf or for his benefit, and relies on the defendant to procure for the plaintiff the best terms available …
[108] Mr Langton submitted both branches of this definition of “fiduciary” apply here.
[109] Mr Harley relied upon a dictum by Millet LJ which, at the minimum, qualifies this definition of Asquith LJ. Millet LJ’s dictum comes in the case of
23 Reading v R [1949] 2 KB 232 (CA) at 236.
Paragon Finance Plc v DB Thakerar & Co.24 The plaintiffs had commenced proceedings against the defendants alleging breach of contract, negligence and breach of fiduciary duty. Subsequently, after more than six years had elapsed since the last transaction and so outside any applicable limitation period, the plaintiffs sought to amend their pleadings in order to allege fraud, conspiracy to defraud, fraudulent breach of trust and intentional breach of fiduciary duty. The defendants had acted for both the plaintiff mortgage lenders and the borrowers from the plaintiffs in relation to the purchase and mortgage of a number of flats. On the facts, there was both a sale of a flat and then a sub-sale. In other words, two transactions but at significantly different prices. The borrowers were the sub-purchasers, that is, the purchaser who purchased from the sub-vendors, being the persons who had originally purchased. The sub-purchasers were applying for a mortgage advance in amounts and purporting to buy the flats at prices which were significantly higher than the corresponding prices paid by the first purchaser, the sub-vendor. The solicitors did not inform the mortgage lenders of that fact. So they lent unaware that it was a sub-purchase at a much higher price.
[110] The solicitors had been retained on terms which required them to advise the lenders of any sub-sale. They did not. The original proceedings did not allege fraud. It was held on the facts that these amendments were now alleging intentional wrongdoing which is a distinct cause of action. Leave could only be granted if the pleading involved substantially the same facts. Because of the new pleading of intention, leave to amend was refused.
[111] In the course of his reasoning, Millet LJ dealt with an argument that because the conduct of the lawyers was a breach of fiduciary duty, it was outside the Limitation Act anyway and not subject to any period of limitation. He rejected that argument because he found, in the circumstances, while the defendant’s solicitors had fiduciary obligations, the solicitors had no fiduciary or trust obligations in regard
to the money.
24 Paragon Finance Plc v DB Thakerar & Co, above at n 9.
[112] Millet LJ reasoned by critiquing a decision relied upon by the plaintiffs, Nelson v Rye.25 Millet LJ considered that decision was not on point and, in any event, was wrongly decided.
[113] In Nelson v Rye the plaintiff was a solo musician who appointed his manager on terms that he would collect the fees and royalties which were due to the plaintiff, pay the plaintiff ’s expenses and account to him annually for his net income after deducting his own commission. The Judge in that case had held that the defendant manager’s failure to account was either a breach of fiduciary duty which fell outside the Limitation Act or a breach of constructive trust which fell within s 21 of the Act (the same number as our Act).
[114] Millet LJ said: 26
The law on this subject has been settled for more than a hundred years. An action for an account brought by a principal against his agent is barred by statutes of limitation unless the agent is more than a mere agent but is a trustee of the money which he has received.
He also said:27
Accordingly, the [manager’s] liability to account for more than six years before the issue of the writ in Nelson v Rye depended on whether he was, not merely a fiduciary (for every agent owes fiduciary duties to his principal), but a trustee, that is to say, on whether he owed fiduciary duties in relation to the money. (Emphasis in the original.)
Whether he was in fact a trustee of the money may be open to doubt. Unless I have misunderstood the facts or they were very unusual it would appear that the defendant was entitled to pay receipts into his own account, mix them with his own money, use them for his own cash flow, deduct his own commission, and account for the balance to the plaintiff only at the end of the year. It is fundamental to the existence of a trust that the trustee is bound to keep the trust property separate from his own and apply it exclusively for the benefit of his beneficiary. Any right on the part of the defendant to mix the money which he received with his own and use it for his own cash flow would be inconsistent with the existence of a trust. So would a liability to account annually, for a trustee is obliged to account to his beneficiary and pay over the trust property on demand. The fact that the defendant was a fiduciary was irrelevant if he had no fiduciary or
25 Nelson v Rye [1996] 1 WLR 1378.
26 Paragon Finance Plc v DB Thakerar & Co, above n 9 at 415, line (h).
27 At 416.
trust obligations in regard to the money. If this was the position, then the defendant was a fiduciary and subject to an equitable duty to account, but he was not a constructive trustee. His liability arose from his failure to account, not from his retention and use of the money for his own benefit, for this was something which he was entitled to do.
(Emphasis added.)
[115] Mr Harley emphasised the proposition that it is fundamental that the trustee be bound to keep the trust property separate from his own and apply it exclusively for the benefit of his beneficiary.
[116] Lord Millet is a master of equity. His observations are to be given the greatest weight. But, like all judgments, his observations have to be read in the light of the material facts. The material facts in Nelson v Rye were that the agent was obliged to account only once a year, “only at the end of the year”.
[117] On the evidence before me the norm was for Mr Bambury to receive reasonably prompt payment from the gallery. Both Mr Jensen and Ms Fox, whose evidence I accept, said that the gallery would settle accounts with their artists for sales promptly, not on the very day of the sale, that being usually impracticable. As this judgment records, the Court has examined many gallery advices of sale and payment. Frequently the payment was made two days after receipt of the purchase price.
[118] On the expert evidence, prompt payment was and is the customary norm in New Zealand. I conclude that it was an implied term that the sale proceeds, (net of commission), were to be paid promptly.
[119] Whether an agent holds proceeds on trust does not depend upon a positive duty to bank the proceeds into a trust account. There is a distinction between banking the proceeds of a sale into a general bank account and using the funds banked for the benefit of the gallery rather than the artist. Of course, when the money is banked in, it is mixed immediately. It cannot thereafter be kept separate. Nor can it be said that it is being used if there are drawings against that account. It is trite law that a trust obligation in respect of funds is not lost if the funds are mixed.
See Re Hallett’s Estate and also Lord Millet in Foskett v McKeown. 28 I note this reasoning is also consistent with a case recently brought to my attention, Re Lehman Brothers International (Europe).29
[120] Equity looks at all the facts. In my view, the facts in Nelson v Rye30 were materially different – as the agent accounted only once a year. That fact made necessary Millet LJ’s conclusion that the agent could use the royalties as part of his own cashflow during that year and so did not hold the funds upon a trust for the artist.
[121] It is a classic illustration of the law of equity, looking at all the material facts affecting the relationship, then recognising or not a trust relationship.
[122] In Phipps v Boardman Lord Upjohn said: 31
The facts and circumstances must be examined carefully to see whether in fact a purported agent or even a confidential agent is in a fiduciary relationship to its principal. It does not necessarily follow he is in such a position. (See In Re Coomber).
[123] In Re Coomber, Fletcher Moulton LJ said:32
There is no class of case in which one ought more carefully to bear in mind the facts of the case, when one reads the judgment of the Court on those facts, than cases which relate to fiduciary and confidential relations and the action of the Court with regard to them.
[124] The law of equity is quite settled in this respect: that one must look at all the facts before judging the existence and quality of a fiduciary obligation arising in a context of agency or otherwise.
[125] Accordingly, the issue in this case is not whether the gallery had fiduciary
obligations but whether the gallery’s fiduciary obligations were such that the
proceeds of sale remained the property of the artist, to be handled accordingly.
28 Re Hallett’s Estate (1879) 13 ChD 696 (CA) and Foskett v McKeown [2001] 1 AC 102 (HL).
29 Re Lehman Brothers International (Europe) [2010] EWHC 2914 (Ch) at [250]-[260], on appeal Re Lehman Brothers International (Europe) (in administration)(No 6) [2011] EWCA Civ 1544, [2012] 2 BCLC 151 AT [68].
30 Nelson v Rye, above n 25.
31 Phipps v Boardman [1967] 2 AC 46 (HC) at 127.
32 Re Coomber [1911] 1 Ch 723 (CA) at 729.
[126] The critical criterion, consistent with Millet LJ’s ANALYSIS in Paragon,33 once the facts of Nelson v Rye34 are kept in mind, is that an agent is a trustee only where the contractual terms of the agency forbid the agent to obtain any use or benefit from the proceeds of sale, net of the commission.
[127] That is the case here, there is nothing in the customary usages or in the evidence of the two experts to suggest that the galleries were entitled to use and obtain benefit from the net sums due to the artist after payment.
[128] I do not agree, however, with Mr Langton’s submission that because the agent is a true trustee of the net proceeds of sale, therefore the agent must bank the funds into a separate bank account. On the evidence before me, the artist and gallery customs in New Zealand do not require that of the gallery. Some galleries may operate that way. As explained, the existence of a trust does not depend on an express contractual term to maintain separate bank accounts. That the agent has a true trust obligation in respect to the net proceeds is founded upon the fact, undisputed, that the artist’s work in the gallery for sale, or sold from the artist’s studio, remains the property of the artist until the point of sale when the personal property rights in the art pass to the buyer, not through the agent. The proceeds do not in any way belong to the agent. When the proceeds are, then and only then the agent has the right to take his commission from that property owned by the artist, the purchase price. The agent then has the obligation to pay the balance promptly, not use it as working capital. For the balance is the property of the artist, held in trust by the agent.
[129] Depending on the particular facts, it is possible for a Court to find that the plaintiff’s claim is in equity for equitable relief by reason of the trust obligation described in [128] above or the plaintiff’s claim can be met by application of the law of contract.
[130] Where the gallery’s dealings with the artist are consistent with the contract
between them, the question of equitable remedies may not arise. In case of a breach,
33 Paragon Finance Plc v DB Thakerar & Co, above at n 9.
of an artist’s residency in Slovenia in late 2000.
[537] While in Slovenia, Mr Bambury had completed a suite of Sienna paintings on stone tiles. The paintings were exhibited in Slovenia in 2004. In June 2005, they were transported back to New Zealand. It is Mr Bambury’s evidence that the idea of producing a catalogue of the paintings did not come to him until after they were returned to New Zealand. Mr Jensen says that the idea of the catalogue was discussed much earlier than this.
[538] Mr Jensen dealt with the printer, Source Print, on Mr Bambury’s behalf. The printing cost was first estimated at $14,073 but subsequently Mr Bambury received an invoice for $20,250. Mr Bambury’s evidence was that his original intention was to pay by cheques, that he had written them out, but Mr Jensen did not collect them.
[539] On 16 December 2005, Mr Bambury received an email from Jensen Gallery, written by Emma Fox, attaching the invoice from Source Print and advising:
He [Source Print] has bought The “Rhythm of His Truth” … for $25,000. This is the work he viewed in the gallery of Peter Shaw a wee time ago. I will double-check the paperwork on this with Andrew re the cheque swap etc as I’m not 100% sure of the arrangement you both made in regard to Viba catalogue/Source Print. But for now it’s good to have this close to finalised.
[540] Mr Bambury replied to that invoice saying:
We’ll get that invoice paid in the next few days for certain.
[541] On 21 December, there is a note written on the invoice from Mr Bambury to
Mr Jensen:
AJ – when you can please take a look at this and advise me. It doesn’t sound correct to me. Original quotation equals $14,073.00 plus GST. Difference (4K) $3,927.00 plus GST.
I would like to clear this as soon as I can. Thanks. Stephen B.
[542] On 31 March 2006 and on 4 April 2006, emails from Mr Jensen explained that the printing cost was $18,000 (excluding GST) and that the purchase of the painting, of which the artist’s share was $15,000 after deduction of the gallery’s commission, would cover most of the printing invoice.
[543] The plaintiff’s case was that the defendant was not authorised to use the work as a contra. Mr Bambury’s evidence was:
I did not agree with Andrew using my painting By the Rhythm of His Truth, as a contra without my knowledge but by the time he told me the painting had already been given to Daniel Wright and I did not think I could change things.
[544] The defence case includes the proposition that, on the plaintiff ’s case, Mr Bambury still owes Mr Jensen $18,000 plus GST in respect of those printing costs.
[545] Before completing the analysis, I go on to address the balance of the printing costs being paid by the sale of China (XXIX).
China (XXIX)
[546] This was a painting consigned to Mr Jensen on 13 November 2003. This painting was in the possession of Mr Daniel Wright of Source Print, by 11 October
2004, when his assistant requested Mr Jensen to provide Source Print with an invoice for the painting “Daniel bought. I will need to mark it as a payment on this account”. An invoice was raised by the Jensen Gallery to Daniel Wright, Source Print, on 29 October marking the price at $5,000, indicating it as a “contra”. The timing is something of a puzzle because the first quote from Source Print for the Viba catalogue is dated 17 August 2005 but obviously came to be treated as a contra.
[547] Mr Bambury’s attention was drawn to an email sent by Emma Fox to Daniel
Wright on 20 December 2005, which reads:
Just so we are all clear, you have $30,000 worth of paintings, $25,000 for the Diptych and $5,000 for the China painting from October last year. We have invoices for $34,143.75 worth of printing. (Stephen Bambury and Winston Roeth).
So you write us a cheque for $30,000 and we pay you $34,000 in two cheques ($20,250 from Stephen and the balance from us).
Stephen is dropping the cheque round to you, I can pop in to see you and do this tomorrow if that works for you. Let me know. Thanks. Emma.
I will bring invoice for the Bambury PTG for your records.
[548] Mr Bambury responded in cross-examination that that was an arrangement entered into with Mr Wright by Mr Jensen “without telling me”. He was cross- examined on the basis that in his earlier email exchange he said he would call Emma Fox. It was put to him that sometime between her email to him and her email to Daniel, she had talked to Mr Jensen and found out the details of the arrangement. It was also put to him it was likely that she had explained the arrangement to Mr Bambury as well and that that discussion was between Ms Fox’s first email to him on 19 December saying she needed to talk to Mr Jensen and her second email to
Source Print the following day that it was likely that they did speak on the 20th
because that is what he indicated in his email on the 19th that he was going to do. [549] Mr Bambury accepted that by April 2006, he understood the full transaction.
[550] The contra arrangement in respect of China (XXIX) was made after
Mr Jensen and Mr Bambury returned from Slovenia.
[551] There was late notice of the China (XXIX) transaction, but the full picture emerged whereby the printing costs incurred by Mr Bambury, not by Mr Bambury and Mr Jensen, were settled by contra sales of paintings.
[552] As I have had occasion to observe, all personal liabilities of Mr Bambury were going to be settled out of proceeds of sales of his work, because that was his source of income, and the only source of income it would appear from the evidence at the trial. The fact that the printer wanted to buy works of Mr Bambury made contras a natural fit to the cash flow problem that would have occurred to Mr Bambury, in any event, he having unilaterally accepted liability for the cost of printing the Viba catalogue.
[553] It does appear that the matter was taken in hand by Mr Jensen and then explained thereafter to Mr Bambury. That can be characterised as a breach of the principal/agent relationship. But the important fact is that Mr Bambury knew about it all in April 2006.
[554] From April 2006, Mr Bambury could have challenged these transactions with Mr Jensen. He did not. That is not surprising given, first, his natural reluctance to confront Mr Jensen on financial matters and, secondly, the weakness of his position, given that the Viba catalogue was his project. There was no obligation at all on Mr Jensen to meet the costs. Mr Bambury has had the benefit of the contra arrangement with Mr Wright, relieving him of personal liability to meet the printing costs directly. It is now unconscionable for him to pursue this claim against Mr Jensen. Back in 2006, while the agency was continuing, there would have been some ability to unwind the financial aspects of this transaction or come to some other settlement. On the probabilities, Mr Bambury acquiesced in the arrangement after he understood it in April 2006. It was after all a transaction which pursued his interests.
[555] There is also a claim for delivery up of the remaining catalogues. That is not disputed. If there are any remaining catalogues, they can be delivered by Mr Jensen to Mr Bambury.
Ideogram II
[556] There are a number of issues in dispute in relation to this work. It is common ground that Mr Bambury agreed to sell this work to Mr Jensen and another in May
1996. It is also common ground that the work was on-sold by these two men to the Auckland Art Gallery. The first Auckland Art Gallery acquisitions meeting, in which the potential purchase of this work was discussed was in March 1998.
[557] There are a number of issues in dispute in relation to this work:
(a) Did Mr Jensen and his co-purchaser underpay Mr Bambury the first purchase price by $800?
(b) Did Mr Jensen intend at the time to on-sell the work at a profit?
(c) Did Mr Jensen act fairly towards Mr Bambury in setting the price when he purchased the work in 1996?
(d)Did the Auckland Art Gallery know at the time it purchased the work it was not owned by Mr Bambury?
Alleged underpayment
[558] Mr Jensen and a client purchased this work in May 1996 for $25,000. There is a handwritten record of this sale which is a consignment note in the pen of Mr Bambury and records the sale price at $25,000 less 40 per cent, recording a first payment on 8 May of $11,000, with a balance due of $4,000 and a second payment of $3,200, leaving $800 outstanding. That consignment/sale note records that the sale is to Mr Jensen and another advised buyer. Mr Bambury says that he did not object to the sale at the time due to health issues he was having at the time. It is clear Mr Bambury would have known $800 was outstanding.
On-sale
[559] A little over two years later, Mr Jensen and his co-purchaser sold the painting to the Auckland City Art Gallery for $35,000 plus GST. Mr Bambury’s evidence was that this sale must have been put in train well before the actual date of transfer of the work in July 1998. His evidence was that selling to a public art gallery is a long and drawn-out process, it takes many months and sometimes years to complete.
[560] Mr Bambury’s counsel’s submissions are that the onus was on the agent to prove he was entitled to personally purchase the work and on-sell it for a profit for otherwise the relevant fiduciary duty was against him being able to purchase goods acquired from the principal, let alone make a profit from selling those goods acquired. So that it was in breach of his fiduciary duties that the plaintiff purchased the work and on-sold it for a profit, citing two decisions – Regal (Hastings) Ltd v
Gulliver70 and Parker v McKenna.71
[561] Mr Jensen’s argument is that Mr Bambury agreed to sell his work to him and his co-owner in May 1996. Mr Jensen disputes that there is any clear evidence of an
underpayment, as the first payment of $11,000 appears in Mr Bambury’s handwritten
70 Regal (Hastings) Ltd v Gulliver, above n 13.
71 Parker v McKenna (1874-1875) LR 10 Ch App 96 (Ch).
bank ledger as part of a global payment of $17,266 made on 2 May 1996. It is not clear from that ledger how much is attributable to Ideogram II. Second, on 23 July when Mr Jensen sent Mr Bambury a further cheque which included $3,200 stated to be “final payment for Ideogram II”. And on 28 October 1997, Mr Bambury’s bank book records Mr Jensen having a $2,000 credit.
[562] I have examined that ledger and do not think it establishes a $2,000 surplus. The total banked was $69,141.76, accounted for by the columns of GST, sales, fees and sundry, the “sundry” being an item of $270.10.
[563] More significantly, however, the question of an under-payment was not raised at the time until 14 years later, during this audit process.
[564] The defence case is that there is no evidence at all of an intention to on-sell, let alone to the art gallery, when the art was purchased in 1996. The question of acquisition first appears in the art gallery minutes on 25 March 1998 when negotiations were obviously in train for the acquisition of this work.
[565] The defence also relied on evidence indicating that the public galleries had their own ideas as to which works of an artist they want to acquire.
[566] In October 1996, Mr Jensen had written to Mr Bambury recording that Te Papa had begun talks regarding acquiring a Bambury. Mr Ian Webb from Te Papa had asked whether Ideogram II was available and then talked about Rani. This did not result in a sale of Ideogram II by Mr Jensen to Te Papa.
[567] I draw two inferences from this note. The first is that Mr Jensen is reporting Te Papa’s interest in acquiring Bambury works. Second, he was asked if Ideogram II was available. I note that, if it was, it was not sold at that time (1996) by Mr Jensen to Te Papa and, indeed, never acquired by them. (Te Papa ultimately purchased other Bambury works.)
[568] The legal submissions in support of this topic are based on an absolute prohibition of a fiduciary making a profit out of his fiduciary position. I have
discussed this aspect of the artist/gallery fiduciary relationship in the first part of this judgment.
[569] As I concluded there,72 judgments as to fiduciary obligations and dealing in properties previously owned by the person to whom the fiduciary duty is owed, depend on the facts. Equity looks at all the facts. There are good business reasons and customs, supported by the expert evidence, to explain why galleries do purchase works of artists that they show and on-sell them. Normally this is to the advantage of the artist.
[570] In this instance, I consider that there is no breach of fiduciary obligations by Mr Jensen in respect of either the purchase or the sale of Ideogram II to the Auckland Art Gallery. I accept that Te Papa and the Auckland City Art Gallery are very discerning buyers and have their own views as to what examples of an artist’s work that they wish to acquire.
[571] The acquisition of Ideogram II by the Auckland Art Gallery was driven by the judgment of the deceased senior curator, Mr William McAllern. I am satisfied on the evidence from Mr Brownson that this is not a case where Mr Jensen approached the Auckland Art Gallery to sell Ideogram II, let alone a case where Mr Jensen was promoting this work of Mr Bambury over other works for acquisition by the Auckland Art Gallery. When the work was examined by the Auckland Art Gallery, it would appear that it was located in Mr Bambury’s studio, not in the Jensen Gallery’s stock.
[572] This claim fails. There was no breach by Mr Jensen of a fiduciary obligation.
Not Through The Logical Law Of Dialectics
[573] This is a work of Mr Bambury’s which was in the Jensen Gallery stock in August 2004. The plaintiff alleges that the defendant on-sold this work, in breach of fiduciary duty. By email dated 4 August 2004, Mr Jensen wrote to Mr Bambury.
After discussing other matters, he went on:
72 At [74]-[79].
I also need your bank account details for two separate payments to you for the sale of one of the resin and graphite horizontal diptychs and a Cartesian Circle. These works are being purchased by my family to hold in perpetuity for the boys.
[574] There is a handwritten note dated 6 August, two days later to the effect:
AJ is direct crediting these payments into my
[575] On the same day, about an hour later, the email exchanges continue, first with a thank you from Mr Bambury for Mr Jensen buying the works, a reference to the payments being made directly to him (keep in mind Unovis was the normal recipient of payments) and then a reply by Mr Jensen about 11.26 a.m. at this point saying, inter alia:
Re the paintings – it’s in our best interests I’m sure. I sold a work of yours that I own to [ ] and have regretted it ever since. I feel an obligation to replace that and so I sold other works which I didn’t want [two other works by two different artists].
[576] The plaintiff defined the issue as being to:
(a) Was the defendant entitled to on-sell the work; and
(b) Were the full sale proceeds paid to the plaintiff by the defendant.
[577] The defence case was that, as to payment, that came through another entity,
Fisher’s On-Line, who owed Mr Jensen a considerable sum of money.
[578] Fisher On-Line is another bank account of Mr Jensen’s, related to a closed gallery, the Fisher Gallery. The documentation shows a credit to Mr Bambury for
$16,631.25 coming in and him querying it. The money came in on 6 August. It is difficult to discern the distinction between the audit notes many years later and whether some of the queries were at the time. The other work of two, Cartesian Circle (XII), was valued at $12,000.
[579] The first work, Not Through the Logical Law of Dialectics, was on-sold by
Mr Jensen to the art consultant, Ms M Vavasour, who gave evidence in the case, for
$16,200, being less than the $19,000 purchase price for the work in 2004. The sale
was made at a time when Mr Jensen’s marriage was breaking up and he was short of
funds.
[580] I am satisfied that the most probable explanation of the direct credit of
$16,631.25 was related to this purchase of Cartesian Circle (XII) and Not Through the Logical Law of Dialectics. The sum received is short of the $18,000 Mr Bambury would have received if both works had been sold to a third party. What is of no doubt is that he did receive $16,631.25 and no other explanation, apart from these two sales, has been offered by either party.
[581] Arguably, there is a shortfall of $1,368.75. Mr Bambury is still pursuing the shortfall. His legal submissions are that the defendant does not have any records to show the shortfall was paid and the on-sales were in breach of his fiduciary obligations.
[582] Mr Jensen is not in breach of the fiduciary duties by on-selling the artwork as that was within the terms of his agency, as explained earlier in the judgment.73 The shortfall dates from August 2004. Accordingly, it is statute barred from being litigated unless ss 21 or 28 of the Limitation Act 1950 apply. There is no evidence that the shortfall was deliberate. Mr Bambury did query it at the time. If it were to breach a fiduciary obligation, it was minor and not deliberate. This case falls far
short of meeting the criteria enabling the application of ss 21 or 28. The claim is dismissed.
The Air is Filled with an Infinite Number of Lines
[583] This was a work completed in 1988, at which time Mr Bambury estimates its value was $6,000 and now he estimates its value at $19,000. It was Mr Bambury’s evidence that in the mid-1990s Mr Jensen purchased the work, the agreement being he would pay $2,700 for the painting, a special price. Mr Bambury said he remembered having to chase Mr Jensen for the payment, who said he would
negotiate his payment via a commission (which never went ahead). He did,
73 At [74]-[79].
however, receive $1,000 from Mr Jensen for the painting but never received the balance of $1,700.
[584] Mr Jensen agrees he did buy the work, he says in 1993. But he is not able to confirm the arrangement for payment. He says he must have paid Mr Bambury for the work. He points out it is recognised in the Monograph as belonging to him.74 He says that Mr Bambury had not previously taken an issue in respect of payment for this work.
[585] Mr Bambury was cross-examined on the basis that a note he made “Tondo
1000 paid, never balance”. It is undated and Mr Bambury could not be sure when he made that note. Mr Bambury pointed out that prior to 1999, there weren’t any artist payment forms as such. Mr Jensen agreed he could not produce any documentary proof that all the payments of the work had been made. He agreed that there was at least one point in time when Mr Bambury wanted the work back but he had said, “No, I really want to keep the disc” and he declined to return the work.
[586] The plaintiff’s argument relies on the legal duty to account, to shift the legal onus on the agent to prove that he had paid the plaintiff the full price of the work and that the absence of records should be construed against him.
[587] I accept Mr Jensen’s evidence that this is a very late claim.
[588] It is definitely possible that the balance of the purchase price was never paid. But it is more probable than not that the matter has never been raised by Mr Bambury until after the relationship came to an end. The Monograph was published in 2000. At that time the relationship between the two men was strong. Mr Bambury will have read the Monograph carefully.
[589] There are two alternatives. Either the $1,000 was not paid, to the knowledge of Mr Bambury, but he elected during the course of their relationship not to raise the point, or Mr Bambury simply forgot that he was owed $1,000 and only remembered
in the course of the scrutiny of the relationship after it collapsed, or that he was paid
74 Monograph, p 97.
and has now forgotten the circumstances. In the first case, the defence of laches would apply. In the second case, I think any duty to account had fallen away more than 15 years later without any complaint.
[590] This claim is dismissed.
Eighth cause of action – claim under the Property Law Act 2007 in respect of joint works and for damages
Also Relieve the Heaviness of Materials (1991)
The Air is Filled with an Infinite Number of Lines (No 3) (1989) The Direction of a Metalic Organisation (1988/89)
Necessary Correction (XV) (1998)
[591] The first three works in the above list are agreed by the parties to be jointly owned and in the possession of the defendant. The parties have jointly instructed an Auckland firm to take possession of the works from the Fox Jensen Gallery, report on condition, provide an opinion as to the timing of offering the works for sale by auction and paying the parties, net of all costs, 50 per cent of the sale proceeds.
Necessary Correction (XV)
[592] I have dealt with the dispute over this work in the course of the Roller Mills commission.75
Defendant’s counterclaims – no commission paid
[593] These are two sales by Mr Bambury - one of an artwork called Keeping the Beat for Blake and an unspecified work sold to a couple. The issue between the parties is whether or not Mr Bambury is obliged to pay Mr Jensen a commission on
these sales of art.
75 See [428]-[434].
Keeping the Beat for Blake
[594] Keeping the Beat for Blake was sold on or about 9 September 2003, when the value of the work was approximately $18,000, says Mr Jensen. He seeks commission of $7,200.
[595] Keeping the Beat for Blake was sold to the daughter of one of Mr Bambury’s main collectors. It was put to Mr Bambury that the sale was really no different substantially to any other sale to any member of that same family, whether they live in New Zealand or overseas. He argued no, because he did not have a relationship of exclusivity, his answer was:
AYou would be absolutely right if I had a relationship of exclusivity with Andrew Jensen but I never did, neither in New Zealand or outside of New Zealand.
Q He has a different view on that. A I know that.
An unnamed work
[596] The unnamed work was sold for $3,200 in about October 2000 and came out of a relationship developed when Mr Bambury’s wife worked with one of the couple at UNITEC in Auckland. That was concluded at Mr Bambury’s studio in Auckland.
Analysis
[597] I refer to the discussion on the customary terms of the agency at the beginning of this judgment. I am satisfied that these are two sales, both New Zealand based and both arising in the context where Mr Jensen was the principal agent. Commission was payable to Mr Jensen. As I have explained earlier in this judgment, the commission is due not because the sale has been made by the agent but ultimately as a reward for the ongoing and necessary commercial support of the artist’s profile and value in the marketplace by the agent.
[598] This counterclaim was lodged for the first time in the fourth amended statement of defence and counterclaim dated 21 April 2015. As artist, Mr Bambury
had a contractual duty to pay commission to the gallery. But it was not a fiduciary obligation. These two claims are out of time.76
Conclusion
[599] A schedule of the findings and awards follows. It is drafted to collect the findings and awards made in the course of the judgment.
[600] The defendant is entitled to recover the debts admitted by the plaintiff, being the balance of commissions due the defendant in respect of the Roller Mills commission and the Bell/Wyndham commission, as recorded in [185] and [186] of this judgment.
[601] This judgment reserves leave to apply for further relief on three matters: the plaintiff’s acknowledgement of two debts of $1,250 and $13,000;77 Blind (2006);78 and At the Same Time A New Beginning.79 Leave is also reserved to both parties to apply for resolution of any issue pleaded, which, upon analysis, has not been resolved by this judgment.
[602] I reserve the question of costs.
76 Limitation Act 2010, s 32.
77 See [186].
78 See [308] and [309].
79 See [524].
SUMMARY OF FINDINGS AND AWARDS Title Result Plaintiff ’s acknowledgement of debt to
the defendant
$14,250, leave to apply for interest. Great Wall II $3,600 and interest from 30.7.07 Ghost XXXIII Failed Blind 2006 Failed Must From a Unity Failed And it Conditions Us Failed The Eternal Persistent Failed By Its Direct Action Failed In His Pursuit of the Absolute Failed Seven Witnesses Seven Truths Jointly owned 60:40. Leave to apply. Letters to Paul (VII) Failed To Hold On To That Consciousness Failed Siena (XLIV) Failed Ghost (LII) Failed Blind (III) 2006 Adjourned, leave to apply. What Remains When the Object is
Named
Failed Necessary Correction (XVIII), The
Eternal Present and untitled work on paper
Failed Mudra (II) $8,100 and interest from 1 November 2007. Of the properties of the materials $4,000 and interest from 1 April 2009. Insert Cross 089322 Failed Ngamotu $65,000 and interest from 28 May 2004. Newton Seven $35,000 and interest from 14 June 2004. Cartesian Circle (XI) $11,000 and interest from 17 June 2004. Necessary Correction (XV) $12,500 and interest from 19 June 2004. Leaden Echo aka Necessary
Correction 14
Failed Golden Echo aka Necessary
Correction XIX
Failed Funds from Monograph sales Failed Necessary Correction XVI Failed Colour Work Failed At the Same Time A New Beginning Adjourned, leave to apply. Ankor III Failed Brother/Sister Failed The Rhythm of His Truth 2001 Failed China (XXIX) Failed Delivery up of Viba catalogues Granted Ideogram II Failed Not Through The Logical Law Of
Dialectics and Cartesian Circle XII
Failed The Air is Filled with an Infinite
Number of Lines
Failed Also Relieve the Heaviness of Settled
Materials – The Air is Filled with an
Infinite Number of Lines (No 3) (1989). The Direction of a Metalic Organisation (1988/89)
Keeping the Beat for Blake Barred by Limitation Act 2010 An unnamed work Barred by Limitation Act 2010
3
2
1