The Facts

Seller of painting forms contract with auction house

An art investor engaged an art expert to act as her agent. The agent's role was to locate valuable but underpriced works of art and bid on the investor's behalf at various auctions for the sale of artwork, including paintings and sculptures.

Around that time the seller engaged an auction house to advertise and subsequently sell a painting by a famous Australian artist at a public auction. In doing so the seller and the auction house entered into a contract.

By way of that contract, the seller of the painting made a number of promises to the auctioneer, including that the painting was painted by a specific famous artist, specifying the year it was painted, that the auction house was allowed to advertise the painting as having been painted by that artist and that no third party had expressed concerns about the authenticity of the painting.

Relying on the contract, the auctioneer published a catalogue, inspected by the buyer of the painting, which stated there was "no doubt" that the painting was authentic. None of the parties had any reason to suspect the painting was a forgery at the time of its sale.

The sale went ahead and the buyer purchased the artwork for the princely sum of $85,000.

Art experts cast doubt on authenticity of painting

Shortly after the auction, the auctioneer attended a meeting with a group of eminent art experts. The auctioneer was told that there were "real concerns" about the authenticity of the painting.

That information caused the auction house to hold doubts that the painting was genuine. Despite this, and having already completed the sale, the auction house remained silent regarding those doubts and did not divulge this new information to anyone.

Art investor discovers painting is forged

Ten years later, when the art investor who had bought the painting made arrangements to sell it, she discovered that the painting was a forgery.

The art investor brought legal proceedings against the auction house where she bought the painting, the company that sold the painting, that company's sole director, and her own buyer's agent, alleging that each of them was negligent.

In bringing the legal action, the art investor sought the return of the purchase price and additional damages from everyone involved in the sale.

All parties deny liability while admitting painting is forged

All defendants admitted that the painting was a forgery, which meant that at least one of them would be found liable.

However, all of them strenuously denied liability and pointed the finger of blame at one another. The main argument that took place was between the seller and the auction house, which blamed each other.

The defendants made an additional argument that the art investor's claim was statute barred, given that the sale took place more than six years before the case was brought.

CASE A

The case for the auction house

CASE B

The case for the seller of the painting
  • 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.
  • 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

Christopher Morris
Disputes and litigation
Stacks Collins Thompson

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.