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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Sotheby's v Mark Weiss Ltd & Ors  EWCA Civ 1570 (23 November 2020)
Cite as:  EWCA Civ 1570
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ON APPEAL FROM THE COMMERCIAL COURT (QBD)
MR JUSTICE ROBIN KNOWLES CBE
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE PETER JACKSON
LADY JUSTICE CARR DBE
|- and –
|(1) MARK WEISS LIMITED
(2) FAIRLIGHT ART VENTURES LLP
(3) MARK ADRIAN F. WEISS
|2nd Respondent/ 1st Defendant
Nathan Pillow QC and Emily Wood (instructed by Freshfields Bruckhaus Deringer LLP) for the First Respondent
Joe Smouha QC and Claudia Renton (instructed by Stephenson Harwood LLP) for the Second Respondent
Hearing dates: 10 & 11 November 2020
Crown Copyright ©
Lady Justice Carr DBE:
i) Fairlight to pay Sotheby's the principal sum of US$6,550,000 (being the principal amount claimed of US$10,750,000 less the Settlement Sum);
ii) Fairlight to pay MWL, the sum of US$2,100,000 (being 50% of the Settlement Sum);
iii) MWL to pay Fairlight US$3,275,000 (being 50% of the principal amount due from Fairlight to Sotheby's).
Overview of the parties' dealings
"If Louvre buys picture, we split the profits.
If Louvre/French state makes a lower offer, we do our best to negotiate, but we agree now that we are not going to fight them, unless it's ridiculous…
If exported, DK has option to buy picture for 3.9 million euros - ie giving Weiss a profit of 600,000…This would be only to keep the picture; Kowitz not free to sell it or if he does additional profit share due to Weiss
If we decide to sell it, we figure out a fair split then - ie if be just ship it to Sotheby's we probably split evenly; if sold to a private at great price maybe 60/40 in favor of Weiss, etc." (sic)
"As I said, the problem with you having option @3.9m is that, on the old deal, I would expect you to have given me an additional amount anyway if you had kept it, so I would be no better off even though I now own 50%! I am entering into this new venture on the basis that I will have the opportunity to sell this painting for a much larger profit!"
He added in a further email sent shortly thereafter that it was best not to put a definitive value on the "put option" being contemplated by Mr Kowitz, which should be based more on a "willing buyer, willing seller" basis and reflect a fair and equitable discount on the amount Mr Weiss could realistically expect to achieve for the Painting on the international market.
8.1 Nothing in this agreement shall be deemed to constitute a partnership between the parties or any of them."
The agreement was never executed ("the Unexecuted Acquisition Agreement").
"This is to confirm that I am authorizing you to sell the Hals at a price at or above $12million. As mentioned on the phone, I would like to be consulted on any decision to consign it to any third party before you make such a commitment."
"Mark Weiss Limited
Frans Hals, "Portrait of a Gentleman, half-length, wearing Black", signed with monogram lower right: FH, oil on oak panel, 13 ½ by 10 ½ in. (the "Property")
This letter agreement (the "Agreement") confirms the terms on which you grant to Sotheby's in London ("Sotheby's") the exclusive right to offer and sell the Property by private treaty to a prospective buyer identified by Sotheby's (the "Prospective Buyer") for a period of three months from the date you sign this Agreement.
1. You have instructed Sotheby's to apply on your behalf for an export licence allowing the Property to be permanently exported from the United Kingdom for sale outside the European Union (the "Licence"). …
2. The minimum sale price for the Property, which you will accept, shall be US $ 10,750,000 (ten million seven hundred and fifty thousand US dollars) (the "Reserve Price")
3. Sotheby's agrees not to charge you a seller's commission on the sale of the Property. You acknowledge that Sotheby's shall be entitled to charge the Prospective Buyer, and retain, a buyer's premium at a rate not to exceed 5% of the Reserve Price.
4. You hereby authorise Sotheby's to agree with the Prospective Buyer that payment of the total purchase price due for the Property (the "Purchase Price") may be made in three instalments (each, an "Instalment"), as follows;
- a first Instalment of US$ 500,000 shall be a payable as a "Non-Refundable Deposit" (as defined in clause 5 below) by the Prospective Buyer to Sotheby's within five (5) business days of signature by the Prospective Buyer of a private treaty purchase agreement for the Property; and
- a second Instalment of US$ 1,000,000 shall be payable by the Prospective Buyer to Sotheby's within five (5) business days of signature by the Prospective Buyer of a private treaty purchase agreement for the Property; and
- a third Instalment equal to the balance of the Purchase Price shall be payable by the Prospective Buyer to Sotheby's within 30 days of signature by the Prospective Buyer of a private treaty purchase agreement for the Property.
You agree that Sotheby's shall remit to you (i) the first Instalment within two (2) business days after Sotheby's receipt of such Instalment in full in cleared funds from the Prospective Buyer, (ii) the second Instalment within two (2) business days of Sotheby's receipt of the later of (a) such Instalment in full in cleared funds from the Prospective Buyer and (b) the Property in accordance with clause 7 below; and (iii) the balance of the Reserve Price within five business days of fulfilment of the "Condition" as defined in clause 9 below. The balance of the Reserve Price will be equal to the third Instalment after deducting Sotheby's buyer's premium. In the event that the Prospective Buyer fails to pay any portion of the Purchase Price, you agree that Sotheby's has no obligation to enforce payment by the Prospective Buyer. Sotheby's will not release the Property to the Prospective Buyer until it has received payment of the Purchase Price in full in cleared funds.
5. You acknowledge and agree that Sotheby's may agree with the Prospective Buyer that the first instalment shall be treated as a non-refundable deposit in the event that the Prospective Buyer fails to pay the second and/or third instalment(s) save that the first instalment (together with the second instalment, if applicable) shall be repayable by you to Sotheby's in full within two business days of the date of Sotheby's notification to you in writing of the occurrence of any one or more of the following: (i) breach by you of any of the terms, warranties or obligations under this Agreement, including, without limitation, failure by you to deliver the Property to Sotheby's as set out in clause 7 below; (ii) any loss or damage to the Property whilst it is in your possession; (iii) any rescission of the sale of the Property to the Prospective Buyer under Sotheby's authenticity guarantee set out in the Private Treaty Terms attached hereto, or (iv) any loss or damage to the Property whilst it is in Sotheby's possession to the extent that (a) such loss or damage prevents Sotheby's from completing the sale of the Property to the Prospective Buyer and (b) such loss or damage is caused directly or indirectly or results from any of the exclusions applicable to Sotheby's assumption of liability for loss or damage to the Property as set out in the Private Treaty Terms attached hereto (the "Non-Refundable Deposit"). The private treaty purchase agreement between Sotheby's and the Prospective Buyer shall provide for the first Instalment to be a Non-Refundable Deposit on the terms set out above.
7. You agree to deliver the Property to Sotheby's premises in London no later than 11th July 2011. Sotheby's will assume liability for loss or damage to the Property at no cost to you on the terms set out in the Private Treaty Terms attached hereto, from the time of completion by Sotheby's of a condition check for the Property following the delivery of the Property to Sotheby's premises in London until the Property is either released to the Prospective Buyer at a location outside the European Union or returned to you (if the Property is unsold), as the case may be, up to a maximum amount equal to the Reserve Price.
8. You agree that following Sotheby's receipt of (i) the Licence and (ii) the Purchase Price in full as cleared funds (if later), Sotheby's shall arrange for the Property to be shipped in your name from Sotheby's premises in London to a location outside the European Union to be confirmed by the Prospective Buyer at no cost to you. …
9. You acknowledge and agree that title to the Property shall not transfer, and the Property shall not be released, to the Prospective Buyer unless and until the later of (i) receipt by Sotheby's of the Purchase Price in full as cleared funds and (ii) release of the Property to the Prospective Buyer or its agent following arrival of the Property at a location outside the European Union confirmed by the Prospective Buyer (the "Condition"). Following fulfilment of the Condition, Sotheby's will provide you with a certificate of shipment confirming the shipment of the Property outside of the European Union.
10. You hereby confirm and agree to the warranties and terms set out in the Private Treaty Terms attached hereto, which form an integral part of your agreement with Sotheby's and the Prospective Buyer."
"Guarantee: [The Seller] agree[s] that subject to the guarantee set out in the following paragraph, [the Painting] will be sold "as is", with all faults and imperfections and errors of description. Subject as above, neither [the Seller] nor Sotheby's shall be responsible for errors of description or for the genuineness or authenticity of the Painting nor make any representations or warranties with respect to the physical condition, size, quality, rarity, genuineness, authenticity, importance, provenance, exhibitions, literature or historical relevance of the Painting, and no statement anywhere, whether oral or written, shall be deemed such a representation or warranty.
Notwithstanding the generality of the preceding paragraph, Sotheby's shall guarantee to the buyer that [the Painting] is not "counterfeit" (an imitation intended to deceive). This guarantee will not be assignable and will only be applicable to the original buyer and not to any subsequent owner or owners who acquire an interest in [the Painting]. In the event Sotheby's determines that [the Painting] is "counterfeit", you agree to a rescission of the sale and will return to the buyer the purchase price received by you for [the Painting] and the buyer will return [the Painting] to you. Sotheby's reserves the right to consult independent expert advice on whether [the Painting] is "counterfeit" and will only rescind a sale if the buyer can: (i) provide, within five (5) years from the date of their agreement to purchase [the Painting], written evidence raising doubts as to the authenticity or attribution of the item; (ii) transfer good title in the item free from third party claims; and (iii) return the item to Sotheby's in the condition in which it was purchased."
("Authenticity Guarantee A")
"EPC Nevada LLC
Frans Hals, "Portrait of a Gentleman, half-length, wearing Black", signed with monogram lower right: FH, oil on oak panel, 13 ½ by 10 ½ in. (the "Property")
This letter agreement (the "Agreement") confirms the terms under which the seller and Sotheby's in London ("Sotheby's") as the seller's agent, will sell the Property to you subject in all respects to receipt by Sotheby's of a licence or licences allowing the permanent export of the Property from the United Kingdom to the U.S.A. (the "Licence").
1. You agree to pay to Sotheby's a purchase price of US$ 11,287,500 (eleven million two hundred and eighty seven thousand and five hundred US dollars) for the Property (inclusive of Sotheby's buyer's premium) (the "Purchase Price") in US dollars, by wire transfer to the following account: … Account Name Sotheby's, in three instalments (each, an "Instalment") as follows:
- a first Instalment of US$ 500,000 shall be payable by you to Sotheby's within five (5) business days of signature of this Agreement by you; and
- a second Instalment of US$ 1,000,000 shall be payable by you to Sotheby's within five (5) business days of signature of this Agreement by you; and
- a third Instalment equal to the balance of the Purchase Price shall be payable by you to Sotheby's within 30 days of signature of this Agreement by you.
You agree that in the event that you should default on payment of an Instalment, in addition to any other legal remedies that may be available to Sotheby's, Sotheby's will be entitled to exercise one or more of the following remedies, at Sotheby's discretion: (a) charge you default interest at 6% per annum above HSBC Bank plc's base rate on the amount due from the date on which the Purchase Price is payable to the date Sotheby's receives payment of the amount due in full; (b) demand immediate payment of the Purchase Price in full; and (c) cancel the sale of the Property retaining the right to damages for your breach of contract.
You hereby acknowledge and agree that in the event that you default on payment of the second Instalment and/or third Instalment, the seller will retain the first Instalment in full as liquidated damages and title to the Property will remain vested in the seller.
2. As soon as reasonably practicable following receipt by Sotheby's of (i) the Property; (ii) the Licence; (iii) the Purchase Price in full in cleared funds and (iv) written confirmation from you of the location in Seattle, Washington, U.S.A. at which you would like the Property to be delivered (the "Delivery Location") Sotheby's shall arrange for the Property to be shipped from London to the Delivery Location at no cost or risk to you. You hereby agree to pay any taxes or duties due in connection with the shipment and your purchase of the Property under this Agreement. Upon arrival of the Property at the Delivery Location, the condition of the Property shall be inspected by Sotheby's.
3. You acknowledge and agree that title to and risk in the Property shall not transfer, and the Property shall not be released, to you until the later of (i) receipt by Sotheby's of payment of the Purchase Price in full as cleared funds and (ii) arrival of the Property at the Delivery Location and completion of a condition inspection by Sotheby's. …
4. You agree that subject to the guarantee set out in the following paragraph, the Property will be sold "as is", with all faults and imperfections and errors of description. Subject as above, neither the owner nor Sotheby's shall be responsible for errors of description or for the genuineness or authenticity of the Property nor does either make any representations or warranties with respect to the physical condition, size, quality, rarity, genuineness, authenticity, importance, provenance, exhibitions, literature or historical relevance of the Property, and no statement anywhere, whether oral or written, shall be deemed such a representation or warranty.
Notwithstanding the generality of the preceding paragraph, in the event that Sotheby's determines that the Property is "counterfeit" (an imitation intended to deceive), as your sole remedy Sotheby's will rescind the sale and the owner will return the purchase price for the Property to you. This offer to rescind is only available on condition that you: (i) provide Sotheby's, within five (5) years from the date of this Agreement, written evidence raising doubts as to the authenticity or attribution of the Property, (ii) are able to transfer good title in the Property free from third party claims; and (iii) can return the item of Property to Sotheby's in the condition in which it was purchased. This offer to rescind does not apply if, at the date of this Agreement, the Property description in this Agreement accords with generally accepted views of scholars and experts or indicates that there is a divergence of such views, or if the only method of establishing that the Property is "counterfeit" relies on a process which is either not in general use at the date of this Agreement or likely in Sotheby's opinion to risk damage to the Property. This offer to rescind is only made to you personally and may not be transferred or assigned in any way by you.
5. This Agreement shall be governed by and construed and enforced in accordance with English law. In the event of a dispute hereunder, you agree to submit to the jurisdiction of the English courts in favour of Sotheby's. … This Agreement represents the entire agreement between you and Sotheby's concerning the sale of the Property and neither party may amend or supplement any provision other than in writing signed by each party.
Please would you sign both originals of this Agreement where marked below, to confirm your agreement with its terms and return one copy to Sotheby's."
The proceedings, hearing and judgment below
i) For Sotheby's: Dr Ashok Roy (former Director of Collections at the National Gallery);
ii) For Fairlight: Mr Timothy Warner-Johnson (director of Warner-Johnson Art Advisory Ltd).
It was common ground that as at June 2011 there were three leading scholars on the work of Frans Hals: Professor Seymour Slive ("Professor Slive"), Professor Grimm and Dr Peter Biesboer ("Dr Biesboer"). Professor Grimm's view was that the Painting was not by Frans Hals; Dr Biesboer's view was that it was by Frans Hals; Professor Slive had stated that it "could very well be by Frans Hals".
i) In finding that there was privity of contract between Fairlight and Sotheby's in Contract A such that Fairlight was liable under it, the Judge relied on the evidence at trial demonstrating that Mr Weiss asked Mr Kowitz for Fairlight's consent to enter into the sale of the Painting. Mr Kowitz accepted in cross-examination that he gave his agreement on behalf of Fairlight to Mr Weiss to deal on the basis of consigning the Painting to Sotheby's for sale to a Sotheby's client at US$10,750,000. The Judge was "fully satisfied" that this episode gave MWL authority from Fairlight to enter into Contract A on their joint behalf. Taking into account the evidence of Mr Kowitz and Mr Weiss, the engagement of Sotheby's and the structure of the relationship between MWL, Fairlight and Sotheby's, Fairlight's "construct" that Fairlight was simply giving MWL authority to enter into an agreement between MWL and Sotheby's was "unrealistically narrow". In his judgment, the authorities cited on sub-agency were not engaged. The facts did not support the idea that Sotheby's was a sub-agent to which MWL delegated functions within its agency with Fairlight. It was by Contract A that the owners of the Painting (ie MWL and Fairlight) bound themselves as principals to the sale. An internal Sotheby's email referring to an agreement to sell the Painting privately "for Mark Weiss" (with no mention of Fairlight) was not persuasive on the issue. Nor did it matter that Mr Kowitz did not ask to see the text of Contract A at an early point. Nor did the words under Mr Weiss' signature advance Fairlight's position very far, since it was common ground that MWL was acting as agent for Fairlight and on its own behalf;
ii) Had a conclusion on the question been necessary, the Judge would have found that the essential relationship between MWL and Fairlight was one of partnership. The interest in the Painting was indivisible. The written and oral evidence showed a broad agreement or an understanding to divide profit 50/50, albeit with the possibility for some adjustment. The Judge bore in mind that s. 2 of the Partnership Act 1890 provides that joint property does not of itself create a partnership. He laid little weight on the fact that Fairlight used its interest in the Painting to provide security. Nor did a draft agreement prepared by Mr Kowitz's solicitors in 2010 contra-indicate a partnership, not least since it had not been executed (and the evidence at trial did not make good any suggestion that its terms had been agreed). Mr Weiss and Mr Kowitz had used the language of "partner"; he accepted Mr Weiss' evidence as to his understanding that MWL and Fairlight would purchase as partners, deduct any expenses and split the remaining profit, something which they had agreed "at the outset";
iii) Nevada had provided "written evidence raising doubts as to the authenticity or attribution of [the Painting]" as required by Authenticity Guarantee B;
iv) Sotheby's had not acted unreasonably, irrationally, arbitrarily, capriciously and without good faith in making the Determination;
v) The offer to Nevada to rescind under Authenticity Guarantee B did apply. At the date of Contract B, the Painting description in the contract did not accord with "generally accepted views of scholars and experts". Those words were to be given their ordinary meaning in context. They did not set a headcount or a majority, or a weighting between one scholar or another or between a scholar and an expert. On what was a question of opinion the words required that a generally accepted opinion had been reached. The views that were material were views that were considered and which resulted from the application by scholars and experts of their scholarship and expertise. He considered the evidence available, including the expert evidence. He concluded that, as at 27 June 2011, there was no "generally accepted view of scholars and experts" "over the authenticity of the Painting". The Painting had not long been discovered. No scholar or expert by that date had submitted the Painting to tests; only one document (a catalogue commissioned by Mr Weiss) had been published on the Painting;
vi) Authenticity Guarantee B was available to Nevada in 2016 as "the original buyer". Nevada was not a "subsequent owner". Nor had Authenticity Guarantee B been transferred or assigned. It was made to Nevada and remained with Nevada;
vii) There was no breach of duty on the part of Sotheby's in failing to indicate in Contract B that there was a divergence of views among scholars and experts about the Painting;
viii) There was no breach of fiduciary duty by Sotheby's, nor could it be said that any loss suffered was of Sotheby's own making. Sotheby's had simply dealt with the matter in accordance with the contractual framework between the various parties. It was fully entitled, legally and professionally, to inform Nevada of concerns over the Painting.
Fairlight's challenge on appeal
Ground 1: Sub-agency and privity
i) The fact that the sub-agent has power (by virtue of a delegation from the agent) to bind the principal vis-a-vis third parties does not mean that the principal and the sub-agent are in direct contractual relations with each other;
ii) That remains the position even if the principal has authorised the sub-delegation. In order to create direct relations between the sub-agent and principal, the principal must have authorised not merely the delegation, but also the creation of direct contractual relations between principal and sub-agent;
iii) Any party claiming that direct contractual relations have been brought into being between the principal and sub-agent must adduce "precise proof" to displace the general rule that no privity exists between principal and sub-agent. What is required is cogent evidence to the effect that it was the intention of all three parties to effect a direct contractual relationship between principal and sub-agent. The absence of any reference to the principal in a contractual document signed by the agent and sub-agent is a strong indicator negativing any such intention.
i) Sotheby's was Fairlight's sub-agent;
ii) No privity of contract existed between Fairlight and Sotheby's merely because MWL delegated authority to sell the Painting to Sotheby's as consignee;
iii) Sotheby's was under a persuasive burden to adduce precise proof to establish, as an exception to the general rule, that Sotheby's (as sub-agent) and Fairlight (as principal) had entered into direct contractual relations with each other under Contract A. On the evidence it had failed to discharge this burden.
Ground 2: Partnership
i) The history of the relationship between Fairlight and MWL;
ii) Whether the manner in which decisions were taken was consistent with carrying on a business in common or with a particular venture in which MWL acted as agent for reward;
iii) The manner in which the Painting was held, including the fact that the parties appear to have felt free to deal with their respective shares in it;
iv) The uncertainty as to the terms on which any profit and expenses would be shared;
v) The extent to which the parties owed mutual fiduciary obligations;
vi) The relevance of the Unexecuted Acquisition Agreement;
vii) How the parties described themselves. (In this regard, it is said that there was in any event a need for caution when relying on the words used. It was the substance of the relationship that mattered (see Mann v D'Arcy  1 WLR 893 at 899; Protectacoat Firthglow Ltd v Szilagyi  IRLR 365 at ).
Ground 3: The GAV Proviso
i) Who are the scholars and experts?
ii) What are their views?
iii) Are those views generally in agreement such that they can be considered "generally accepted"? If so, this majority can then be described as "generally accepted views of scholars and experts".
i) Dr Buvelot: there was no rational basis on which to find that he was not persuaded on the evidence that Dr Buvelot had seen the Painting before 27 June 2011. Mr Weiss' unchallenged evidence was that Dr Buvelot had told him directly that Dr Buvelot had first seen the Painting in person at the Louvre in 2010;
ii) Professor Grimm and Dr Liedtke: it is said that the Judge's reasoning was contradictory and flawed: he held that Professor Grimm (who made a negative attribution) had provided a "considered" view on the Painting (from a "jpeg"), yet he found that Dr Liedtke (who made a positive attribution) had only seen a "jpeg" and could not be said to have provided a "considered" view;
iii) Professor Slive: Professor Slive was acknowledged as the world's leading scholar on the works of Frans Hals. There was cogent evidence that Professor Slive, having seen a photograph of the Painting, "enthusiastically" accepted it as a work by Frans Hals. Professor Slive expressly attributed the Painting to Frans Hals in the second edition (published posthumously) of his monograph on the artist. The Judge's finding that there was insufficient evidence that Professor Slive ever provided a considered view on the Painting was perverse;
iv) Dr Roelofs: the Judge made no mention of Dr Roelofs. Mr Weiss' unchallenged evidence was to the effect that Dr Roelofs had seen a photographic image of the Painting in January 2011 and was "very complimentary".
Ground 4: Nevada as a "subsequent owner"
Ground 1: Sub-agency and privity
i) Fairlight and MWL were co-owners of the Painting. MWL was not a mere agent for Fairlight, nor by Contract A was it an agent sub-contracting or delegating mere authority (along the lines identified in the sub-agency cases). It was entering into detailed contractual arrangements for the owners of the Painting including as to risk, delivery, inspection and authenticity;
ii) The terms of Contract A included reciprocal commitments between Sotheby's and the owner (or "Seller") of the Painting (including for example as to liability for loss or damage to the Painting (as set out in the Private Treaty Terms)). Clauses 3, 4, 5 and 7 of Contract A make no sense if both owners of the Painting are not privy to them;
iii) Sotheby's was not acting as agent (let alone a sub-agent under a delegation by MWL of agency duties owed by MWL to Fairlight) in giving Authenticity Guarantee A. The Judge's unchallenged finding was that in giving the guarantee Sotheby's was acting "in its own right, committing its own balance sheet", "with financial and reputational consequences attached";
iv) Authenticity Guarantee A was a promise being given to the owners of the Painting; the seller's obligation to rescind was Sotheby's contractual protection: it would be meaningless if it bound only a part-owner;
v) Contract A and Contract B were part of a package designed to achieve the sale of the Painting by Sotheby's to a third party at a particular price. Fairlight now accepts, contrary to its pleaded case and its case as advanced at trial (for which Mr Collins was not responsible), that it was party to Contract B. (This was a position that Fairlight was forced to adopt in order to explain how otherwise title in the Painting had ever passed to Nevada). It is wholly counter-intuitive (and artificial) for Fairlight to be privy to Contract B, a contract which neither owner of the Painting signed or even saw at the time, but not privy to Contract A. It would either be party to both or none, or at least if it was party to any, that contract would be Contract A. As it was put, however, Fairlight seeks to "have their cake and eat it".
Ground 2: Partnership
"Partnership is the relation which subsists between persons carrying on a business in common with a view of profit."
i) that joint property does not of itself create a partnership;
ii) the sharing of gross returns does not of itself create a partnership;
iii) the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business but such receipt does not of itself make him a partner in the business.
The Law applied
"In the circumstances, it is to be inferred as a matter of fact and law that in agreeing to the purchase of the [Painting], MWL and Fairlight agreed between themselves to carry on the business of purchasing and dealing with the [Painting] in common with a view to profit as partners in that business".
i) The shortage of evidence noted by the Judge indicated that there was no partnership. The burden to establish the partnership lay at all times on Sotheby's to prove its existence;
ii) The meaning of the Judge's comment that the interest of MWL and Fairlight in the Painting was "indivisible" is unclear. If it means that neither could deal with its own interest, there was no basis for such a finding (and in fact Mr Kowitz gave evidence that Fairlight did charge its interest in the Painting). It was wrong to assume an incident of partnership and then rely on it in order to conclude whether there was a partnership;
iii) The Judge impermissibly relied (or placed far too much weight) on the (limited) references to the word "partner" in the documents. When read properly in their context, they could not reasonably be read as suggesting that a statutory partnership existed. In fact, properly analysed, the relationship was one of art dealer and client. As for the Judge's reference to Mr Weiss' evidence that his understanding was that "…in line with our previous practice, we would purchase the Painting as partners, deduct any expenses and split the remaining profit", that was a highly selective quotation and, again when read in full context, not a reference to a statutory partnership.
i) As to the first requirement, it was not clear what the business is said to have been and the Judge's reasoning was inadequate. MWL and Fairlight were not carrying on a business;
ii) As to the second requirement, if they were, it was not in common. Each was acting on its own account with different interests;
iii) As to the third requirement, MWL and Fairlight had separate views as to profit.
i) The Judge did not set out ss. 1 or all of 2 of the 1890 Act in terms (though he did refer expressly to and quote part of s. 2), or any related authorities or textbooks, but it is not in any way apparent that he was unaware of the statutory test and what are well-established principles. He referred to Fairlight's contention that "MWL were carrying on a separate business independently" which suggests that he was so aware. The law was put before him extensively in the parties' submissions;
ii) The Judge was entitled to find that (and adequately reasoned why) Fairlight and MWL were acting in common intending to make a profit and in business. As is common in partnerships, each made a different contribution of value to the relationship: MWL brought its fine art expertise and Fairlight brought its financial assets;
iii) S. 32(b) of the 1890 Act makes it clear that a partnership can exist in relation to a "single adventure or undertaking" (in which case, absent agreement to the contrary, it will dissolve on the termination of that "adventure or undertaking"). The fact that at various stages Mr Kowitz was considering buying out MWL's interest in the Painting was in no way inconsistent with the existence of a partnership;
iv) The partnership arrangement was "very informal". The Reconciliation was an accounting exercise. The sharing of profit was "prima facie evidence" of a partnership (see s. 2(3) of the 1890 Act);
v) The Judge was entitled to rely on Mr Weiss' evidence, adduced by Fairlight, that Fairlight and MWL "would purchase the Painting as partners, deduct any expenses and split the remaining profit";
vi) The Judge was right to dismiss the relevance of the Unexecuted Acquisition Agreement, nor did the fact that the Painting may have been the subject of a charge by Fairlight assist (since the charge in question pre-dated Fairlight's purchase of the Painting);
vii) The fact that the source of repayment of Mr Kowitz's loan to Mr Weiss (carrying interest at 7% per annum) was to be the sale proceeds from the Painting made it inherently likely that the parties were acting in partnership;
viii) A proper consideration of the factors identified in Lindley & Banks at 5-08 distinguishing between co-ownership and partnership leads to the conclusion that there was here a partnership.
Ground 3: The GAV Proviso and the expert evidence
"This offer to rescind does not apply if, at the date of this Agreement, the Property description in this Agreement accords with generally accepted views of scholars and experts or indicates that there is a divergence of such views …."
i) Dr Buvelot: the Judge was entitled to find that he was not persuaded on the evidence that Dr Buvelot had seen the Painting in person. The only evidence to that effect was Mr Weiss' written statement; there was no contemporaneous evidence of any such inspection and no reference in any of the parties' pre-action correspondence to a positive attribution (or inspection) by Dr Buvelot;
ii) Professor Grimm and Dr Liedtke: there was no irrational inconsistency in the Judge's approach to the reliability of opinions expressed by reference to photographs only. As the Judge explained from the evidence, a negative attribution made by reference to a photograph alone (such as that of Professor Grimm) could be relied upon safely, whilst a positive one (suggested to have been made by Dr Liedtke) cannot. Further and in any event, Dr Liedtke had only provided a "short answer" in an email sent to Mr Kowitz whilst on a train and by reference to apparently poor "jpegs". He described the Painting as "very good not great". It is not clear to what extent, if at all, he was being asked to consider or was commenting on authenticity;
iii) Professor Slive: the Judge's approach to the evidence of Professor Slive cannot be impugned. Professor Slive never saw the Painting in person; it was his modus operandi not to confirm attribution without physical inspection. All that could firmly be proved was that Professor Slive had written (in a private letter in 2008 and based on a black and white photograph) that the Painting "could very well be by Frans Hals". The Judge was entitled to conclude that the fact that the Painting appeared in a second edition of a catalogue, the first edition of which was prepared by Professor Slive in 1974, did not advance matters (in circumstances where the second edition was published after Professor Slive's death and in the absence of any evidence as to the basis for the Painting's inclusion). The Judge was also entitled not to place weight on an email from Mr Naumann in May 2011 referring to Professor Slive accepting the attribution of the Painting to Frans Hals (as indirect and lacking in detail);
iv) The suggestion that the Judge erred in failing to draw an adverse inference from the fact that Sotheby's did not call Mr Naumann to give evidence is hopeless. The evidential "rule" relating to adverse inferences is a narrow one; the drawing of an adverse inference is only ever likely to be appropriate in limited and precise circumstances following the approach identified helpfully in Magdeev v Tsvetkov  EWHC 887 (Comm) at . There was no adverse inference to be drawn here, not least since Mr Naumann's evidence (as to what Professor Slive had said in May 2011) would not have been material (going only to a second-hand report of a privately expressed opinion by an expert who had still not seen the Painting in person);
v) No criticism can be made of the Judge's failure to mention Dr Roelofs, a curator at the Rijksmuseum who had not made any positive statement of attribution.
Ground 4: Nevada as subsequent purchaser
"This guarantee will not be assignable and will only be applicable to the original buyer and not to any subsequent owner or owners who acquire an interest in [the Painting]."
"This offer to rescind is only made to you personally and may not be transferred or assigned in any way by you."
Ground 5: Impact on MWL's contribution claim against Fairlight
Peter Jackson LJ:
"Private Treaty Terms
You warrant to Sotheby's and to the buyer that at all relevant times (including but not limited to the time of the consignment of the Property and the time of the sale):
(a) You are the true owner of the Property, or are properly authorised to sell the Property by the true owner;
(b) You are able to and shall transfer possession to the buyer and good and marketable title to the Property free from any third party rights or claims or potential claims including, without limitation, any claims which may be made by governments or governmental agencies;
(c) You have provided Sotheby's with all information concerning the provenance of the Property and have notified Sotheby's in writing of any concerns expressed by third parties in relation to the ownership, condition, authenticity, attribution, or export or import of the Property;
(d) You are unaware of any matter or allegation which would render any description given by Sotheby's in relation to the Property inaccurate or misleading;
(e) Where the Property has been moved to the European Union from a country that is not a member of the European Union, the Property has been lawfully imported into the European Union: the Property has been lawfully and permanently exported as required by the laws of any country in which it was located; required declarations upon the export and import of the Property have been properly made and any duties and taxes on the export and import of the Property have been paid;
(f) You have or will pay any and all taxes and/or duties that may be due on the net sale proceeds of the Property;
(g) Unless you advise Sotheby's in writing, there are no restrictions, copyright or otherwise, relating to the Property (other than those imposed by law) and no restrictions on Sotheby's rights to reproduce photographs or other images of the Property: and
(h) Unless you advise Sotheby's otherwise in writing, any electrical or mechanical goods (or any electrical or mechanical parts of Property being offered for sale) are in a safe operating condition if reasonably used for the purpose for which they were designed and are free from any defect not obvious on external inspection which could prove dangerous to human life or health. You agree to indemnify Sotheby's and any Sotheby's affiliated company, their respective servants, directors, officers and employees and the buyer against any loss or damage resulting from any breach or alleged breach of any of the above representations or warranties. Your representations, undertakings and indemnity will survive completion of the sale of the Property.
Liability for loss or damage: If Sotheby's takes delivery of the Property, and unless otherwise agreed. Sotheby's will be liable for loss or damage to the Property from the time Sotheby's receives the Property until the property ceases to be in Sotheby's care and control, on the terms set out in this Agreement.
Sotheby's will not be liable for any loss or damage caused to frames or to glass covering prints, paintings or other work, for damage occurring in the course of any process undertaken by independent contractors employed with your consent (including restoration, framing or cleaning), or for damage which is caused directly or indirectly or results from (i) changes in humidity or temperature; (ii) normal wear and tear, gradual deterioration or inherent vice or defect (including woodworm); (iii) errors in processing ; or (iv) war, nuclear fission or radioactive contamination, chemical, bio-chemical or electro-magnetic weapons, or any acts or acts of terrorism (as defined and applied by Sotheby's insurers).
Photographs and illustrations: You agree that Sotheby's shall have the absolute right (on a non-exclusive basis) to photograph, illustrate or otherwise produce images of the Property. Sotheby's shall retain copyright in all images created by Sotheby's of the Property and shall have the right to use such images in whatever way Sotheby's deem appropriate, both before and after the sale.
Guarantee: You agree that subject to the guarantee set out in the following paragraph, the Property will be sold "as is", with all faults and imperfections and errors of description. Subject as above, neither you nor Sotheby's shall be responsible for errors of description or for the genuineness or authenticity of the Property nor make any representations or warranties with respect to the physical condition, size, quality, rarity, genuineness, authenticity, importance, provenance, exhibitions, literature or historical relevance of the Property, and no statement anywhere, whether oral or written, shall be deemed such a representation or warranty.
Notwithstanding the generality of the preceding paragraph, Sotheby's shall guarantee to the buyer that the Property is not "counterfeit" (an imitation intended to deceive). This guarantee will not be assignable and will only be applicable to the original buyer and not to any subsequent owner or owners who acquire an interest in the Property. In the event Sotheby's determines that the Property is "counterfeit", you agree to a rescission of the sale and will return to the buyer the purchase price received by you for the Property and the buyer will return the Property to you. Sotheby's reserves the right to consult independent expert advice on whether the Property is "counterfeit" and will only rescind a sale if the buyer can: (i) provide, within five (5) years from the date of their agreement to purchase the Property, written evidence raising doubts as to the authenticity or attribution if the item; (ii) transfer good title in the item free from third party claims; and (iii) return the item to Sotheby's in the condition in which it was purchased.
In order to fulfil the services you have requested, Sotheby's may disclose information to third parties (e.g. shippers). Some countries do not offer equivalent legal protection of personal information to that offered within the EU. It is Sotheby's policy to require that any such third parties respect the privacy and confidentiality of our clients' information and provide the same level of protection for clients' information as provided within the EU, whether or not they are located in a country that offers equivalent legal protection of personal information. By signing this Agreement, you agree to such disclosure. Clients can prevent the use of their personal information for marketing purposes by ticking the box or by contacting us at ….
This agreement shall be governed by and construed and enforced in accordance with English Law. In the event of a dispute hereunder, you agree to submit to the jurisdiction of the English courts in favour of Sotheby's. This Agreement shall be binding upon you and your heirs, executors, beneficiaries, successors and assigns. Neither you nor Sotheby's may assign this Agreement without the prior written consent of the other party hereto, except that Sotheby's may assign this Agreement to any of its related or affiliated entities without your prior consent. Neither you nor Sotheby's may amend or supplement any provision of this Agreement other than in writing and signed by each of the parties hereto. This Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereby and supersedes all prior agreements or understandings, written or oral with respect hereto.
You hereby acknowledge that you are aware of the relative advantages of consigning property for sale by public auction and via private sale, and having taken those considerations into account, wish to sell the Property via private sale with Sotheby's as your exclusive agent pursuant to the terms of this Agreement. In addition, Sotheby's reserves the right to remunerate any employee of the organisation out of the commission it earns on this transaction.
Please sign both copies of this Agreement where marked below and initial the Private Treaty Terms attached hereto, to confirm your agreement with its terms and return one copy to Sotheby's. "
Note 1 Set out in full in the Appendix to this judgment [Back]
Note 1 Set out in full in the Appendix to this judgment [Back]