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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Spencer-Churchill v Faggionato Fine Arts Ltd & Ors [2012] EWHC 2318 (Ch) (07 August 2012) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2012/2318.html Cite as: [2012] EWHC 2318 (Ch) |
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CHANCERY DIVISION
7 Rolls Building, Fetter Lane, London EC4A 1NL |
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B e f o r e :
(sitting as a deputy judge)
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LORD EDWARD ALBERT CHARLES SPENCER-CHURCHILL |
Claimant |
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- and - |
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(1) FAGGIONATO FINE ARTS LIMITED (2) GERARD FAGGIONATO (3) JOMBIHIS CORPORATION (4) ALBERTO MUGRABI |
Defendants |
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John McGhee, QC (instructed by Eversheds LLP) for the 3rd defendant
Hearing date: 1 August 2012
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Crown Copyright ©
MR ROBERT HAM, QC:
Introduction
The parties
The facts
$5 million to Lord Edward, being the balance of the $6 million after deduction of FFA's commission of $135,000 and the price of the other two artworks.
(1) There was no "Floridian collector". Mr Mugrabi made the $6 million offer to Mr Faggionato. The invoice for the sale was addressed to Jombihis and it paid the purchase money.
(2) Mr Faggionato received secret commissions from Mr Mugrabi or Jombihis in the form of a sculpture by Urs Fischer, a table by modernist designer Jean Prouvé and a payment of $125,000 to Mr Faggionato's personal bank account at Crédit Foncier de Monaco. The combined value of the sculpture and the table is said to have been $275,000, making the total value of those commissions $400,000.
(3) Mr Faggionato did not in fact make enquiries of the auction houses as requested by Lord Edward.
Those points do not appear to be challenged. The Mugrabis have candidly admitted providing the secret commissions, which they regard as normal in the art world.
I told him that next time he should contact me directly rather than going through the charade of using a 'front' (as I then suspected had been the case). Alberto did not deny the use of a front and added that he 'knew' that I 'would not sell the painting' to him. I then asked Alberto about his plans for the painting and he told me that he intended to keep it.
We are looking into sending you the export papers but as I am sure you understand they are confidential papers to do with the buyer. I do take my business very seriously and I am not sure you would not [sic] appreciate me sending information about your transaction to another party.
In response to a further request Mr Faggionato again ignored the issue and instead tried to persuade Lord Edward that he had done a very good deal. Eventually, on 23 April 2012 Mr Faggionato admitted to Lord Edward that he had shipped the painting to New York, but according to Lord Edward he implied that it was done on the instructions of Mr Chehebar.
The person at Christie's I spoke to was Brett Gorvy and at the time was not bullish on the painting I think his estimate was $4M to $6M and no possibility of a guarantee. The markets do change quickly but I still think Brett behave [sic] very unprofessionally not even asking to view the painting to give an accurate estimate. Christie's probably received a serious enquiry and thought that Museum Security would be suitable.
Lord Edward therefore contacted Mr Gorvy, and asked him to confirm what Mr Faggionato had told him. Mr Gorvy denied that he had provided any estimate for the painting in 2011: in a conference call with Christie's in-house counsel in attendance, he said that the only time he had any contact with Mr Faggionato regarding the painting was around 2007.
(1) a freezing injunction against Mr Faggionato;
(2) permission to serve the claim form and other documents in the proceedings out of the jurisdiction on Jombihis and Mr Mugrabi;
(3) an interim injunction to restrain Jombihis from dealing with the painting until final judgment or further order.
Roth J heard the applications for a freezing injunction and for permission to serve out without notice on 5 July. An injunction against Jombihis was not sought on that occasion, as Lord Edward accepted that it would not be appropriate to make that application without notice. The judge granted permission to serve out on Jombihis and Mr Mugrabi, but refused the application for a freezing order against Mr Faggionato.
Lord Edward's case against Jombihis: is there a serious question to be tried?
(1) Lord Edward says that the applicable law on this issue is English law, because that is the law applicable to the putative contract of sale. FFA's invoice includes an express choice of English law. (Para 46 of the New York complaint suggests that it is common ground that the terms of the invoice are incorporated in the contract though Jombihis says that New York law would not respect the choice of law because it was not expressly agreed.) Lord Edward suggests that applicable law would be English law anyway, since England is the place of residence of the person who was to effect the performance characteristic of the contract, namely the seller: see article 4(2) of the Rome Convention, incorporated into English law by the Contracts (Applicable Law) Act 1990.
(2) As a matter of English law, the purported sale was outside the authority of FFA in two separate respects:
(a) FFA was specifically instructed not to sell the painting to the Mugrabis.
(b) In any event, FFA had no authority to sell the painting on terms that FFA or Mr Faggionato would receive a secret commission from the buyer. This is because according to Bowstead op. cit. para 3-007 "authority to act as agent includes only authority to act for the benefit of the principal".
(3) Lack of authority in the agent means (so the argument runs) that the transaction is void, in the absence of ratification, apparent authority, or one of the exceptions to the nemo dat rule such as that embodied in section 2(1) of the Factors Act 1889. Mr Edwards who appeared for Lord Edward took me through that section and explained why Lord Edward said that it did not apply.
Balance of convenience
(1) Lord Edward frankly acknowledges that his concern is only to maximise the amount of money that he receives for the painting, yet seeks an injunction restraining Jombihis from dealing with the painting.
(2) Jombihis, on the other hand, disclaims any present intention to dispose of the painting. Mr McGhee told me that it has not decided what it wants to do. Yet despite this, Jombihis opposes the injunction sought, and is insistent that Lord Edward's cross- undertaking in damages should be fortified by security in the sum of $6 million.
During the hearing, I said that the parties seemed to be shadowboxing. But it might be more accurate to say they are manoeuvring for tactical advantage.
Moreover, such arrangements would be objectionable as being unreasonable and unlawful, unless they were concluded with the fully informed consent of the principal seller or the dealer accounted to that principal for the secret profit secured.
It seems to me that Lord Edward is entitled to protection against further possible wrongdoing.
The foreign element
(1) The case raises issues as to commissions paid to an English- resident agent acting for an English principal, to induce the purported sale of property situated in England at the time under a contract that appears to be governed by English law. At least two of the main witnesses (Lord Edward and Mr Faggionato) are resident in England. There is clearly a substantial connection with England.
(2) I think little weight is to be attached to the fact that Jombihis happened to start proceedings first. The New York proceedings are still at a very early stage, they involve only two of the five parties to the English action, and they have clearly not "developed to the stage where they have had some impact upon the dispute between the parties". In those circumstances, the fact that there are pending proceedings in New York can have little or no relevance to the question of forum conveniens.
(3) Mr McGhee submitted that there was bound to be a trial in New York because of Jombihis's claims against Lord Edward for tortious interference with contracts and slander of title. I do not agree. There is no reason why Jombihis should not counterclaim in the English proceedings, and if it can show that the events constituting those torts occurred in New York it will be able to rely on New York law under Part III of the Private International Law (Miscellaneous Provisions) Act 1995.
Conclusions