LEADING UK fine art auctioneers Dreweatts have established a separate company governed by independent directors to handle clients’ money.
They believe the initiative, to be duplicated by new partners Bloomsbury in the coming months, will be even safer than using separate client accounts.
As adherents to the RICS code of practice, Dreweatts have long operated separate client accounts to ensure there is no mingling with company monies, but chairman Stephan Ludwig believes the new initiative to be safer still, primarily because the [different] directors of this company have no responsibilities to the auction business.
Under a different name the company, Dreweatts 1759 Ltd, had previously been used to conduct Dreweatts’ private treaty transactions but will now receive all client money from October 1.
Rupert Powell, managing director of Bloomsbury Auctions, who recently entered into a strategic alliance with Dreweatts, confirmed they will follow suit. “We are extremely impressed by Dreweatts’ client account arrangements and are already putting in process the structure to do the same for our vendors which I anticipate to roll out before the end of the year”.
The problems that can arise when an auctioneer conducts business without a client account to keep buyers’ and sellers’ money separate from general business accounts have been made plain in recent weeks. Recently Sotheby’s broke with Canadian partners Ritchies after it emerged the Toronto auctioneers had failed to meet payment deadlines to vendors while – closer to home – only last week it emerged Perth auctioneer Loves had ceased trading leaving vendors unpaid.
In an interview last week in The Daily Telegraph, Bonhams chairman Robert Brooks again took the opportunity to promote the use of the trust accounts that his company have used since 2004. He points out that neither Sotheby’s nor Christie’s operate client accounts.
“It is important that we focus on the dangers out there,” Brooks says.
“When times are tight, sale proceeds become a significant part of many businesses’ cashflow. In any other industry, that money would be protected, but not in our market. That really is bizarre, it’s 19th century stuff.”