Case

Which case won?

casea
The case for the auction house
  • We entered into a contract with the seller and one of the terms included a confirmation that the painting was authentic.
  • We relied on the information and guarantees provided by the seller.
  • It is the seller of the artwork who holds the obligation to verify a painting’s authenticity. As the auctioneer we merely facilitate the sale.
  • Despite this, we relied on our own experts, who believed the artwork was genuine. We did nothing wrong at the time the painting was sold.
  • In any case, the painting was sold more than ten years ago and the time limit for this type of claim is six years. Therefore the claim is statute barred.
caseb
The case for the seller of the painting
  • We had no reason to believe the painting was a forgery until these proceedings were commenced.
  • Our contract with the auction house contains a clause that we will provide a refund if a painting we sell is later determined to be a forgery within five years of the sale.
  • Shortly after the sale, the auction house learned that the painting might be a forgery. However, it chose not inform us or the art investor who had bought the painting.
  • The auctioneer’s silence after learning that the painting might be a forgery amounts to misleading and deceptive conduct by omission.
  • At the time of learning that the painting might be a forgery, the auction house could have sought a refund in accordance with the contract. However, it chose not to do so.

So, which case won?

Cast your judgment below to find out
Case A Case B

Case B won. You were right!

How people voted
case a30%
case b70%

Expert commentary on the court's decision

“If you are involved in the sale of goods of any kind and later suspect those might not be authentic, you had better inform the other parties lest you end up footing the bill.”
Court finds auction house largely to blame

In the proceeding McBride v Christie’s Australia Pty Limited [2014] NSWSC 1729, Chief Justice Bergin found the auction house, Christie’s Australia Pty Limited, to be primarily liable to Louise McBride, the art investor who bought the painting by the Australian artist Albert Tucker. However, the seller and the plaintiff’s agent were also found partly liable.

The court divided liability proportionally amongst the various defendants. The auctioneer, Christie’s, was found to be 85% liable. The seller of the painting, Holland Fine Arts and Cars Pty Limited (HFA) was found to be 10% liable. The buyer’s agent, Vivienne Sharpe, was found to be 5% liable.

The director of HFA was found not to be personally liable, as he had not personally engaged in any misleading or deceptive conduct.

Auctioneer expanded information received from painting’s seller

Despite its protests, the court found that Christie’s was no “mere conduit” for the information provided to it by HFA. To the contrary, it made its own representations in its catalogue.

In particular, it expanded the information it had received from HFA by declaring there was “no doubt” that the painting was signed by its purported artist, Albert Tucker.

Misleading and deceptive conduct by omission

The court also found that Christie’s engaged in misleading and deceptive conduct. The court noted the importance of one of Christie’s terms and conditions, that the buyer could seek a refund if a painting was discovered to be a forgery within five years of purchase.

Christie’s learned, within that five year period, of serious doubts as to the painting’s authenticity. In remaining silent about those doubts, Christie’s misled Ms McBride by omission and deprived her of the opportunity to seek a refund under the contract.

Christie’s also argued that its catalogue merely offered an “opinion” as to the authenticity of the painting and that Ms McBride ought to have relied on her own enquiries before making the purchase.

However, the court favoured Ms McBride’s counter position, which was that even if Christie’s merely offered an opinion, its expression carried with it the following representations:

  • the opinion was based on reasonable grounds
  • the opinion was the product of the exercise of due care and skill
  • the opinion was safe to be relied upon
Seller also partly liable for sale of forged painting

The court found the painting’s seller, HFA, wasn’t blameless either and listed its actions which contributed to the sale of the forgery.

HFA confirmed to Christie’s that its representation that the painting was by Albert Tucker was “correct”. HFA requested that Christie’s offer the painting for sale and identify it as being painted by Albert Tucker.

Finally, HFA gave an undertaking that no third party had expressed concerns about the attribution of the painting.

Regarding HFA’s actions, the court concluded:

At the time HFA consigned the painting to Christie’s its representation that the painting was by Albert Tucker was made with the intention that such representation would be passed on to others at the auction. The plaintiff was induced by this representation to purchase the painting. This representation was a cause of the plaintiff’s loss and HFA is accordingly liable for that loss.

Buyer’s agent found liable for secret commission

In another twist, the court found that Ms McBride’s own agent, Ms Sharpe, had accepted a secret commission relating to the sale of a separate painting by Australian artist Jeffrey Smart. Ms Sharpe did not disclose to Ms McBride that she was paid a commission by the seller.

Ms McBride bought the Jeffrey Smart painting in the belief that Ms Sharpe was acting purely for Ms McBride’s benefit. The court ordered Ms Sharpe to repay to Ms McBride the amount of the commission she received for the Jeffrey Smart painting.

In relation to the sale of the Tucker painting, the court found that Ms Sharpe made her own representations to Ms McBride that the painting was authentic and that it would be a good investment. Those representations were misleading and deceptive and contributed to Ms McBride’s loss.

Art investor’s claim not statute barred

The court found that the fraudulent nature of the painting was not discovered until March 2010, ten years after its purchase by Ms McBride.

The date the statute of limitations runs from is the date the fraud is discovered, not the date of the sale of the painting. Consequently Ms McBride’s claim was not statute barred and she was entitled to bring the proceedings.

Selling inauthentic goods can be misleading and deceptive conduct

This case is a reminder to those engaged in selling goods that you have several obligations, one of which is to ensure that they are authentic.

Representing to your customers that goods are authentic when they are not can amount to misleading and deceptive conduct, even if you were not aware of that at the time.

It is also possible to engage in misleading and deceptive conduct by omission if you learn after a sale that the goods you sold were inauthentic and fail to advise the buyer.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.

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