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Stories covered by ATG relating issues of authenticity.

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Each of the pictures had been sold at auction or in a deal brokered by an auction house.

But what implications did these sales have for the auction houses in question, and when will an auction house be liable to a buyer when a fake picture passes through its hands?

Authenticity disputes

To recap, the first article described the ongoing litigation relating to a picture which was sold as an Old Master (Frans Hals) for $10m, in a private sale brokered by a major auction house (ATG No 2279). The picture’s authenticity has subsequently been disputed.

The sale of the second picture, at a regional auction house, was rescinded when scientific discoveries raised doubts about the attribution (ATG No 2279).

When the third picture was auctioned, it was catalogued as being ‘after’ LS Lowry. This work was discussed because it had been painted by a notorious forger, Shaun Greenhalgh, now a ‘legitimate’ artist in his own right.

‘False representation’

Let’s look at the legal implications for auctioneers. If an auction house or its employees are complicit in the sale of a forged work of art, then they may be found guilty of the offence of ‘Fraud by false representation’ under section 2 of the Fraud Act 2006.

This offence requires the following elements: a person makes a false representation (usually an oral or written statement), dishonestly and knowing the representation is or might be false, intending to make a gain for himself/another or to cause someone else a loss or risk of loss.

Perhaps the most difficult element to prove here will be that of dishonesty.

If dishonesty can’t be proved against the person implicated then they will not be guilty under this section of the Act, even if all the other elements of the offence are present.

Where an artwork is being offered at an auction, the auction house’s liability will, to a certain extent, depend on how the work is described in the sale catalogue.

Chrisitie’s terms and conditions, for example, state that if the catalogue description is all in the upper case, then the Christie’s five-year “limited warranty” as to authenticity is triggered.

The terms of Christie’s authenticity warranty state as follows: “(a) It will be honoured for a period of five years from the date of the auction. After such time, we will not be obligated to honour the authenticity warranty. (b) It is given only for information shown in UPPERCASE type in the first line of the catalogue description (the Heading)…”

If the Limited Warranty is triggered then “if within five years of the auction, you satisfy us that your lot is not authentic… we will refund the purchase price”.

Buyer refunded

This is what happened in the case of Avrora Fine Arts Investment Ltd v Christie, Manson & Woods Ltd (2012).

The buyer, Avrora, purchased a picture from Christie’s described in the catalogue in upper case as by the Russian Artist Boris Mikhailovich Kustodiev. However, the attribution was then brought into question and Avrora decided that it no longer wanted the picture.

Avrora took Christie’s to court seeking cancellation of the purchase and also brought claims for negligence and misrepresentation. The judge in that case advised that evidence relating to authenticity was to be placed under three headings: ‘Connoisseurship’, ‘Historical issues’; and ‘Technical matters’.

After the examination of detailed evidence it was held that, on balance, the picture was not by Kustodiev and Avrora was entitled to a full refund under the limited warranty.

So what is the position where the first line of the catalogue description is not in upper case type? The terms and conditions explain: “(c) The authenticity warranty does not apply to any Heading or part of a Heading which is qualified.”

But what is a ‘qualified heading’? Christie’s provides a list of terms which many readers will be familiar with: “After”, “Attributed to”, “Studio of…/Workshop of…”.

Such descriptions are further defined, for example: “After…” “In Christie’s qualified opinion a copy (of any date) of a work of the artist” or “Manner of…” or “In Christie’s qualified opinion a work executed in the artist’s style but of a later date”.

Where the appropriate qualified term is selected, there is comfortable room for manoeuvre in terms of attribution.

The Limited Warranty will not be available to works catalogued under qualified headings. So will it ever be worth pursuing a grievance in relation to ‘lesser’ qualified works?

Could an auction house be liable in a dispute relating to the authenticity of a work with a ‘qualified heading’ when the catalogue does not identify a particular artist in the first place?

When auctioneers are not legally obliged

Time period or artistic association may be relevant here. For example, if an auction house catalogues a grand history painting as ‘Studio of Rubens’ and the painting is subsequently shown to have been painted in 2015 rather than 1615, the painting is going to be worth less as it lacks the direct association with a revered old master.

In these circumstances the auction house will not be legally obliged under a limited warranty, but perhaps it could be argued that their employees have been negligent or misrepresented the position when cataloguing the picture.

The way round it could be for the auction house to catalogue such a painting as “in the manner of” – which may be just as possible in 2015 as 1615, although then, of course, the painting may not attract as much interest as if catalogued “in the studio of”. Such cataloguing decisions are a fine balance.

Clearly it is in an auction house’s interest to carry out the necessary research and due diligence even when cataloguing ‘qualified’ works. Doing so may further limit their potential liability but also because this is the territory of the ‘sleeper’.

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Milton Silverman is Senior Commercial Dispute Resolution partner at Streathers Solicitors LLP, 44 Baker Street, London

streathers.co.uk