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A good result says vendor – I’ll see you in court

10 May 2010Written by ATG Reporter

WHEN Shropshire auctioneers Mullock’s sold a dealer’s stock for nearly 50 per cent above estimate, they thought that the vendor’s sole reaction would be one of satisfaction. Instead, they found themselves in court and having to pay out hundreds of pounds in compensation and costs.

The county court judgment in favour of Roy Davids, a specialist in autograph documents and one-time head of Sotheby’s book and manuscript department, highlights just how clear agreements must be between auctioneers and their vendors.

The dispute arose over auctioneer Richard Westwood-Brookes’ decision to exercise his discretion and sell off a number of unsold items below the reserve at the end of the sale after he was made offers for them. He told ATG that he took the view it was better to get something for them as aftersales rather than return them and charge an unsold lot fee.

Papers submitted to Shrewsbury County Court explained that Mr Davids had decided to close his business and consign a large number of items to be offered in Mullock’s January 29, 2009 auction.

He succeeded in negotiating a discount in the vendor’s commission, which was accordingly reduced from the usual 16 to ten per cent.

An exchange of emails between Mr Davids and Mr Westwood-Brookes then discussed reserves.

“Should we use the low estimates as the reserves?” asked Mr Davids.

“I usually use the bottom end of the estimate as the reserve so if that is OK by you, that is what I’ll tell the office,” replied Mr Westwood-Brookes.

“That is what I meant – using the lower estimate as the reserve so that is fine,” agreed Mr Davids.

The sale went ahead with reserves totalling £7480, and the hammer total achieved for the sold lots was £9660.

Following the auction, Mr Davids sent an email to Mr Westwood-Brookes congratulating him on the total but querying why a number of lots had been sold below the reserves to a total shortfall of £840.

The reply from Mr Westwood-Brookes argued that some of the original reserves, based on the estimates, were “perhaps a little too over the top”, but added that he was glad Mr Davids seemed pleased with the overall result.

Mr Davids was not happy, however, and emailed back: “I don’t think you can agree reserves and then sell below them without prior understanding with the client. We were both quite clear about what was agreed and in my experience if the auctioneer does something off his own bat then it is down to him not the client.”

He added that he was prepared to ignore some of the lots sold under reserve but wanted £500 for the others and the removal of the vendor’s commission on them. He later also asked for the relevant portion of the buyer’s premium, saying that the auctioneer was not entitled to the fees on “unauthorised transactions”.

Mr Davids had also agreed for the remaining unsold lots to be consigned to Mullock’s next sale with the low estimate as the “fixed reserve on each item”. His submission to the court stated that when that sale took place in April, one of the lots was sold at ten per cent below the reserve.

Auction principal John Mullock refused to accede to Mr Davids’ demands for a refund of the relevant commission and compensation relating to the January sale. In a counterclaim relating to fees and commission, he argued that some of the reserves had been revised to “achieve a sale to Mr Davids’ advantage” after the lots had remained unsold but received post-sale offers just below the reserves.

He further argued that Mullock’s did not believe such a move was unreasonable “given Mr Davids’ original discussions where he indicated… that he was happy to leave the matter of setting estimates and reserves in Mr Westwood-Brookes’ hands”.

Mullock’s pointed to their terms and conditions, which reserved the right for the auctioneer to exercise their discretion up to ten per cent below the reserves and, in a letter to Mr Davids, Mr Mullock argued that the email exchanges concerning reserves before the January sale had been “very much on an advisory basis, and that you were seeking his [Mr Westwood-Brookes’] recommendations rather than explicitly setting the reserves yourself”.

In addition, Mullock’s submitted that “at no time during the auction on January 29, 2009 did the cumulative proceeds from Mr Davids’ sold lots fall below the cumulative value of the lower end of the estimated guide price for the same lots”.

Mr Davids’ decision to withdraw the remaining lots, following the April sale, as the dispute progressed, led Mullock’s to increase the original vendor’s commission from the agreed discounted rate of ten per cent back to 16 per cent. They also charged Mr Davids a withdrawal fee and an unsold lotting fee. They did this, saying that the discount had been agreed on the basis that the entire consignment would be sold through Mullock’s.

Mr Davids countered that no verbal or written agreement had ever been made on the basis that the discount commission rate was dependent on anything. He objected to the withdrawal fee as he considered Mullock’s had broken trust with him by selling below the reserves, leading him to remove unsold items from them.

He also pointed out that the notice in the auctioneers’ terms and conditions relating to the right of discretion on the reserves was qualified by the phrase “unless otherwise agreed”.

“I had specified [for the April sale] that the low estimate should be the reserve on each item, thereby excluding any discretion,” he submitted. And he had earlier argued that the email exchange relating to the January sale also made it clear that reserves were to be fixed at the low estimate, allowing for no discretion on the auctioneer’s part.

On February 3, 2010 at Shrewsbury County Court, Deputy District Judge Banks found for Mr Davids, ordering Mullock’s to pay him £776.60 plus £140 costs. Mullock’s counterclaim failed with respect to the increased commission and the withdrawal fee, but was successful, in the sum of £240.35, over the unsold fees.

By Ivan Macquisten

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