Judgment
INTRODUCTION
1These proceedings relate to three artworks: a painting purportedly painted by Albert Tucker known as "Faun and Parrot" (the Painting); a sculpture by Bronwyn Oliver known as "Tracery" (the Sculpture); and a painting by Jeffrey Smart known as "The Stairs, Florence Station II" (the Smart).
The Painting
2The first plaintiff, Louise McBride, (to whom I will refer as "the plaintiff") claims that she owns the Painting and it is a forgery. There is an issue about the plaintiff's ownership of the Painting. However no party to the proceedings has propounded a positive case that the Painting is authentic.
3The Painting was purchased at an auction conducted by the first defendant, Christie's Australia Pty Ltd (Christie's) on 1 May 2000 at Christie's auction rooms in Melbourne. The vendor of the Painting was the second defendant, Holland Fine Art & Cars Pty Ltd (HFA). Alex Holland, the third defendant, was and is a director of HFA. The fourth defendant, Vivienne Sharpe, an art dealer, acted as the plaintiff's agent at the auction. There is an issue whether Ms Sharpe was the plaintiff's art adviser.
4The plaintiff alleges that each of Christie's, HFA and Ms Sharpe made representations regarding the the Painting that were false. It is alleged that each engaged in misleading or deceptive conduct and unconscionable conduct. It is also alleged that Mr Holland was knowingly involved in or a party to HFA's conduct. It is alleged that this conduct caused the plaintiff loss and damage.
5It is further alleged that because the Painting is a forgery, there has been total, or practically total, failure of consideration for the plaintiff's payment of the purchase price and it is unconscionable for HFA, Christie's and Ms Sharpe to retain any of the proceeds paid to them in respect of the purchase of the Painting. The plaintiff also alleges that she is entitled to repayment of the purchase price on the basis of money received under a mistake of fact.
6It is further alleged that Christie's breached a duty to disclose to the plaintiff the conclusions reached by a group of experts at a Symposium on 15 August 2000, that the provenance of the Painting was doubtful. In this regard the plaintiff relies on clause 17 of Christie's Conditions of Business, which provided that Christie's would refund the purchase price if the Painting was discovered to be a forgery within five years of the purchase. The plaintiff also brings an action in deceit against Christie's. It is claimed that Christie's knew that the provenance of the Painting was doubtful but failed to inform the plaintiff of that fact.
7The plaintiff also alleges breach of contract, breach of fiduciary duty and negligence against Ms Sharpe. It is alleged that Ms Sharpe owed the plaintiff a fiduciary duty as her agent and/or adviser and that she breached her fiduciary duty and her contract by offering to purchase the Painting for more than the reserve contrary to the plaintiff's instructions. It is also alleged that Ms Sharpe was negligent in: failing to ascertain that the provenance of the Painting was doubtful; purchasing the Painting for greater than the reserve price contrary to the plaintiff's instructions; and advising the plaintiff to purchase the Painting.
8It is alleged that finance for the purchase price of $75,000 (excluding the $10,000 Buyer's premium that was paid separately) was obtained by the plaintiff's family company, Laurentine Pty Ltd (Laurentine), entering into a leasing contract, guaranteed by the plaintiff and her husband, Greg Daniel, whereby legal title to the Painting passed to Capital Finance Australia Limited (Capital Finance). Laurentine was entitled to exercise a right to acquire the Painting for its residual value at the expiration of the Lease. It was alleged that the plaintiff made "all of the Lease instalments and paid the residual value of the Painting" resulting in a loss equal to the acquisition and holding costs of the Painting. The total loss claimed is $124,473.27 consisting of payments of commissions and lease instalments. However it was recognised during the trial that the claim that the plaintiff made all the lease payments would not be sustained.
9The financial and personal difficulties the plaintiff and her then husband experienced during the period after the auction and up to trial were exposed in the proceedings. Although they divorced in 2013 they became estranged in 2006. At the time of the trial they had not finalised a property settlement, albeit that their marital home in Whale Beach had been sold and monies distributed in accordance with a consensual arrangement.
10In about 2009 the plaintiff, who is a barrister, discussed some personal and financial difficulties she was experiencing with Ms Sharpe. It appears that by this time the plaintiff and Ms Sharpe were on very friendly terms. It was out of these discussions that a plan was made to sell the Painting, the Sculpture and the Smart at auction in March 2010. Ms Sharpe explored various options for such a sale with a number of auction houses. It was during this process in early 2010 that Ms Sharpe was alerted to the prospect that the Painting might not be authentic. The Painting was subsequently withdrawn from the March 2010 auction.
The Sculpture
11It was alleged that the plaintiff's self-managed superannuation fund, Louise McBride Investments trading as Louise McBride Investments Pty Ltd as Trustee for the LMB Family Superannuation Fund (the Fund), which is the second plaintiff, owned the Sculpture.
12The Sculpture was sold by Menzies at the March 2010 auction for $300,000. The plaintiff claimed that Ms Sharpe lowered the reserve for the Sculpture from $350,000 to $300,000 without her authorisation. Indeed the plaintiff claimed that she (on behalf of the Fund, the alleged owner of the Sculpture) had expressly instructed Ms Sharpe that the reserve was $350,000. It was further alleged that Ms Sharpe breached her contract and her fiduciary duties by failing to inform the plaintiff and the Fund that she had lowered the reserve and did not tell them that the letter of instructions she, or her agent Andrew Sharpe (Ms Sharpe's son), asked the plaintiff to sign contained the lower reserve figure.
13It was also alleged that Ms Sharpe acted in a position of conflict between her duty to the Fund to follow instructions and her interest in securing a sale for Menzies and the buyer and her interest in securing a 5% secret commission. Finally it was alleged that Ms Sharpe engaged in unconscionable conduct by not informing the plaintiff that she had lowered the reserve and amended the letter of instructions accordingly.
14On the ninth day of a ten day trial, all claims in respect of the Sculpture were abandoned (tr 824). Notwithstanding this abandonment, it is still necessary to refer to some of the evidence in respect of these claims (i) because plans for the sale of the Sculpture were intrinsically intertwined with the plans for the sale of the other artworks; and (ii) for the purpose of considering the attack made on Ms Sharpe's behalf on the plaintiff's credit and reliability in these proceedings.
The Smart
15The Smart was sold for $460,000 at the March 2010 auction conducted by Menzies. The plaintiff alleges that Ms Sharpe advised her to accept an offer made by Menzies to guarantee her a price of $320,000 for the Smart. Under this arrangement, if the Smart sold for more than $320,000 the plaintiff would also receive 40% of the difference between that guaranteed price and the purchase price (the hammer upside). If it sold for less the plaintiff would still receive $320,000. It is alleged that the plaintiff accepted this offer in reliance on Ms Sharpe's advice. It is further alleged that without the plaintiff's knowledge Ms Sharpe entered into an arrangement with Menzies, whereby, if the Smart was sold for more than the guaranteed price, Ms Sharpe would receive half of Menzies' 60% share of the hammer upside.
16It is alleged that by making this profit-sharing arrangement and/or failing to disclose it to the plaintiff, Ms Sharpe breached her fiduciary duty not to obtain an unauthorised profit. It is also alleged that Ms Sharpe breached her contract and engaged in unconscionable conduct.
The Cross-Claims
17In the First Cross-Claim HFA and Mr Holland seek an order that Christie's indemnify them for any amounts for which they are found to be liable to either or both of the plaintiffs. They also seek damages for breach of contract and in negligence as well as equitable compensation for breach of fiduciary duty. There is a further claim for declarations that Christie's engaged in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) (TPA), s 42 of the Fair Trading Act 1987 (NSW) (FTA) and/or s 11 of the Fair Trading Act 1999 (Vic) (FTA Vic) in connection with the sale of the Painting and Christie's failure to disclose to HFA and Mr Holland by 1 May 2005 that it was at least possible, if not also probable, that the Painting was a forgery.
18Christie's denies that it is liable to HFA or Mr Holland and in the alternative contends that some of the claims made against it are apportionable under s 34(1)(b) of the Civil Liability Act 2002 (NSW), the TPA, and/or the Competition and Consumer Act 2010 (Cth). It is alleged that the concurrent wrongdoers are Mr Holland, Barry O'Sullivan and Peter Gant.
19In the Second Cross-Claim, Ms Sharpe seeks indemnity from Christie's in respect of any verdict for the plaintiff against her. There is also a claim for contribution pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) in respect of any verdict for the plaintiff against Ms Sharpe. There is a further claim for equitable contribution of such proportion as the Court may determine of any verdict for the plaintiff against Ms Sharpe in relation to the Painting.
20Christie's denies that it is liable under the Second Cross-Claim and once again alleges that the claim is an apportionable claim for the purposes of the Competition and Consumer Act and the Civil Liability Act.
21There are also claims that the plaintiffs' claims and the claims in the first cross-claim are statute barred.
HEARING
22The proceedings were heard on 21 to 25 July 2014, 28 to 31 July 2014 and 1 August 2014.
23Mr FM Douglas QC leading Mr NJ Owens, of counsel, appeared for the plaintiffs. Mr EC Muston, of counsel, leading Ms N Case, of counsel, appeared for Christie's. Mr MA Friedgut, of counsel, appeared for HFA and Mr Holland. Mr PW Gray SC leading Mr M Richardson, of counsel, appeared for Ms Sharpe.
BACKGROUND
24Art forgery in the sense of propounding a work as having been painted by a particular artist when it was not has been going on for centuries. More recently in 1984 and 1999 the Australian Broadcasting Corporation (ABC) broadcast two programs about art forgery in Australia. On 10 May 1999 in the ABC's Four Corners program "Rogue's Gallery" reference was made to the "booming business of art fraud" that was putting the credibility of the industry on the line. Some people who are involved in the events that give rise to this litigation were interviewed in the that program. They include Professor Sloggett, of the Centre for Cultural Materials Conservation (CCMC) at the University of Melbourne, and Ms Lauraine Diggins, an art dealer. Another person who was interviewed was Peter Gant who also gave evidence in these proceedings and was the person who sold the Painting to HFA in late 1999.
25During her interview, Ms Diggins discussed her own "horrendous experience" of having dealt with forged paintings of Arthur Streeton and Tom Roberts. Mr Gant was interviewed in respect of some forged paintings of Russell Drysdale and Charles Blackman. In that part of the interview the presenter said "Peter Gant has handled a few fakes in his time". Mr Gant said that he had been "caught with duds" and he did not know any dealers that had not been caught with them. At the conclusion of the program the following was said (Ex PD vol 2 613-614):
The booming public interest in artworks as investment has meant a bonanza for those in the business of art. At the latest round of art sales, $16 million was spent in the space of a week. In scenes reminiscent of the 80's, some works sold for triple the expected price.
The difference now is the entrepreneurs of the 80's have been replaced by small investors, gambling their hard-earned savings on what they can only hope is a sure thing.
Like all games of chance, the odds are stacked heavily in favour of the house.
The rules protect the dealer and the seller at the buyer's expense, and the unchecked culture of confidentiality gives the fakers virtual impunity and perpetuates the cover-up of fraud. The culprits may be few in number, but the whole system is open to suspicion as long as they're allowed to thrive.
It all adds a whole new meaning to the term 'buyer beware'.
26On 2-3 December 1999 the Australian Institute of Criminology convened proceedings in Sydney entitled "Protecting Art, Protecting Artists and Protecting Consumers Conference". One of the presenters at the Conference was Professor Sloggett whose presentation included the claim that "artfraud is, as is most fraud, more often an act of opportunity than of planning, and has more to do with blindness (of the purchaser) than with cleverness (of the perpetrator)" (Ex PD vol 2 616). Other topics of discussion at that Conference included the modus operandi of art forgers and their capacity to produce false provenances for the works placed on the market (Ex PD vol 2 626-627).
27Albert Tucker died in late 1999. Ms Diggins, in her role as the proprietor of the gallery Lauraine Diggins Fine Art Pty Ltd in North Caulfield published a booklet "Albert Tucker The Endurance of the Human Spirit 1 March - 1 April 2000" in which Ms Diggins recorded that Albert Tucker's "dealers have been Australian Galleries, Sweeney Reed Galleries, Tolarno Galleries, Bonython Galleries in Adelaide and Lauraine Diggins Fine Art" (Ex PD vol 2 656).
28Between 1982 and 2004 HFA was an art dealership purchasing and selling artworks. It had its own gallery in Double Bay between 1986 and 1998. In late 1999 Mr Holland attended the Gallery Irascible - Peter Gant Fine Art in Melbourne and had a conversation with Mr Gant, who was the proprietor of the gallery. Mr Gant informed Mr Holland that he had "just got this Tucker in from a private client who has had it in his family for a very long time". Mr Gant informed Mr Holland that he was the first person to see it. Mr Holland agreed to purchase the Painting for "approximately $45,000". The Painting was delivered to HFA's office.
29In early February 2000 David Cook, who was then the manager of Christie's in Sydney and with whom Mr Holland had a long standing business relationship, attended HFA's Double Bay office. Mr Cook had a look around the office and informed Mr Holland that he wanted to take six paintings for Christie's next auction. Mr Holland's evidence was that other than advising Mr Cook of the reserve prices that he wanted for each of the six paintings, there was no discussion about any of the individual paintings. Mr Holland signed a Christie's Receipt Form for these paintings that is referred to in more detail later.
Christie's Catalogue
30The Catalogue that was produced by Christie's for the auction at which the Painting was purchased was entitled "Melbourne 1 & 2 May 2000 Christie's Australian and International Pictures, including Contemporary Australian Art" (Ex PX). It included the following entry under a coloured reproduction of the Painting (a copy of which is on the last page of this judgment) as Lot 70:
70 Painted circa 1967
Albert Lee Tucker (1914-1999)
PROVENANCE
Faun and Parrot Tolarno Gallery, Melbourne, signed 'Tucker' (lower right), oil on board 1969-1970
75.3 x 60 cm Acquired by the father of the present owner circa 1970
$55,000-75,000
31The Catalogue included the following:
Explanation of Cataloguing Practice
For paintings, prints and works of art
A work catalogued with the name(s) or recognised designation of an artist or maker, without any qualification, is, in our opinion, a work by the artist or maker. In other cases, the following words and expressions with the following meaning are used:
"Attributed to ..." in our opinion probably a work by the artist or maker in whole or in part.
"Studio of"...Workshop of..." in our opinion a work executed in the studio or workshop of the artist, possibly under his supervision.
"Circle of ..." in our opinion a work of the period of the artist or maker and showing his influence.
"Manner of..." in our opinion a work executed in the style of the artist or maker but of a later date.
"After ..." in our opinion a copy of any date of a work of the artist or maker.
"Signed"..."Sealed"..."Dated"..."Inscribed" in our opinion the work has been 'signed', 'sealed', 'dated', or 'inscribed' by the artist or maker. The addition of a question mark indicates an element of doubt.
"With signature"..."With seal"..."With date"..."With Inscription" has a signature/seal which in our opinion is not that of the artist.
32The Catalogue is analysed in more detail later for the purpose of identifying the contractual relationships between the various parties at the time the Painting was auctioned and sold.
April 2000 meeting
33By early 2000 the plaintiff and Ms Sharpe had been known to each other for some years. Ms Sharpe had by this time assisted the plaintiff's husband with the purchase of numerous artworks. The plaintiff claimed that she and her husband visited Ms Sharpe in April 2000 at her house in Clareville. The plaintiff claimed in her affidavit (sworn on 7 August 2013) that Ms Sharpe showed her some catalogues and said, "Look at this Tucker". The plaintiff recalled that she liked the Painting because of its brightness and because of the "birds" (albeit there was only one bird in the Painting) and she thought it was interesting. She claimed that Ms Sharpe said:
Tucker, like many other artists of this period is undervalued. It would be a good buy. He's not flavour of the month. Everyone is collecting modern work. Tucker is good buying.
34The plaintiff claimed that she and Ms Sharpe were flicking through two catalogues. Although at that time she thought that the catalogues were in relation to one sale, by the time her affidavit was sworn, she knew that one catalogue was for the Christie's Fine Art auction and one was for the Harold Mertz collection auction (in which her husband was interested). The plaintiff claimed that she said to Ms Sharpe that she would "like to own a Tucker as I like him as an artist, but I don't know much about him or his work".
35The plaintiff claimed that she and Ms Sharpe then discussed Albert Tucker and Australian art and that the following conversation occurred (where the initials LM and VS are used for the plaintiff and Ms Sharpe respectively):
VS: This would be a great investment. The painting is a beauty.
LM: Look, I am interested. What is the price?
VS: The estimate is $75,000 but it will go for a lot more than that. It is more likely to go for $120,000 to $150,000 because he is a famous artist even if he is not popular now, so it won't be cheap and good artists are commanding high prices.
LM: That's out of my league. Even $75,000 would be a stretch.
VS: That's what's good about auctions. You can always be lucky and you shouldn't be turned off by the price. Anything can happen.
Let me have a look at it at the viewing for you and I will do some research on it and I will give you a better idea. I am going to the viewing to look at other works, and you can never actually tell until you see something as often the catalogue doesn't do a lot for colour and size.
I need to look at its condition. You rarely ever know from the catalogue.
It's worth you getting me to check it out and if it's a good work and in good condition, and the provenance checks out, I will put in a bid for you.
LM: If it is a good work and in good condition, put in a bid for me but please don't go over the reserve. I can't afford it.
36The plaintiff claimed that the figure that she had in mind when she left Ms Sharpe was $75,000. Shortly after this conversation the plaintiff travelled to Paris and London. The plaintiff's evidence was that she did not expect to be buying the Painting because Ms Sharpe had indicated that the Painting would be going for well over the reserve.
37Ms Sharpe accepted in her affidavit (affirmed on 22 January 2014) that she did have a meeting with the plaintiff and Mr Daniel at around the time referred to by the plaintiff but thought it was a different date. Ms Sharpe's recollection was that the meeting took place at the plaintiff's and Mr Daniel's home in Whale Beach. She recalled that they discussed the upcoming auctions to be held in Melbourne including the one by Christie's on 1 and 2 May 2000. She recalled that the plaintiff and her husband had a copy of the Christie's Catalogue for the auction on 1 and 2 May 2000 and she also had a copy of the Catalogue with her.
38Ms Sharpe denied that there was any discussion at this meeting about the Mertz Collection. She recalled that the Christie's Mertz Collection catalogue was not published until around 26 May 2000. Ms Sharpe denied showing the Christie's catalogue to the plaintiff and she also denied pointing to a picture of the Painting in the Catalogue.
39Ms Sharpe denied that she advised the plaintiff that the Painting would be "good buying" or a good investment. She analysed this part of the conversation that the plaintiff had alleged and made the point that Albert Tucker was a "modern" artist. In those circumstances she claimed that she would not have had the conversation that the plaintiff propounded in which she was suggesting that Albert Tucker did not fall into the "modern" category. Ms Sharpe's recollection of the conversation was as follows (the initials GD are used for Mr Daniel):
GD: Viv. I've looked at the Christie's catalogue. There is nothing much in there for me however Lou likes the Tucker. She wants to have a word to you about it.
LM: I have always liked Tucker. And I like this one. What do you think of it?
VS: It's early and from his Faun and Parrot series - an important series. As you might know, there's a Tucker like this one hanging in the Art Gallery of NSW and another in the Gallery in Canberra. The estimate looks fair. I'm not sure how much interest there is in Tucker at the moment but I'll be going to Melbourne and will check out what kind of interest there is in it and what condition it is in if you're interested in bidding.
LM: I think I am interested but we're going to London. I will let you know. When is the auction?
VS: May 1st.
LM: I will let you know from London.
Telephone instructions from London
40Ms Sharpe's affidavit evidence was that to the best of her recollection the plaintiff telephoned her from London and the following conversation took place:
LM: I would like you to bid for me on the Tucker. What do you think it will go for?
VS: I think you might get it at the low estimate of $55,000. You never know what can happen at auction. I am going down to Melbourne for the auction. I'll try to find out what interest there is in it and let you know. Phone me on Monday after I have seen it.
Discussions with Christie's
41Ms Sharpe arranged with Mr Cook (who was described in the Catalogue under the heading "Christie's Australia Australian Art Specialists" as "Associate Director & Head of Australian Pictures") to do a Condition Report on the Painting. Ms Sharpe also made arrangements to view the Painting in Melbourne prior to the auction.
42On 1 May 2000 Ms Sharpe attended Christie's auction rooms in South Yarra in Melbourne and obtained a copy of the Condition Report for the Painting. She also arranged for the Painting to be taken off the wall so that she could look at it under ultraviolet light.
43The Condition Report dated 29 April 2000 included the following (Ex PD vol 2 667):
Christie's specialists are not trained conservators, and the report/s set out below is not a comprehensive condition report prepared by a professional restorer. While we make certain observations on the work, which we trust are helpful, we recommend that you consult your own restorer for a more complete report. We also remind you that this report is given in accordance with the conditions of business printed in the auction catalogue. It is an expression of an opinion only and must not be treated as a statement of fact.
...
LOT 70 ALBERT TUCKER
FAUN AND PARROT
The catalogue illustration is reasonably faithful to the actual picture.
There is some paint loss at the end of the parrot's tail as evident in the catalogue illustration.
Under ultra-violet light there appears to be no signs of re-touching or over-painting.
The painting is in good condition.
44Ms Sharpe then had a conversation with Fiona Hayward (who was described in the Catalogue under the heading "Christie's Australia Australian Art Specialists" as "Specialist Melbourne"). Ms Hayward informed Ms Sharpe that there had been "a bit of interest" in the Painting. Ms Sharpe then had the following conversation with Ms Hayward:
VS: Fiona, I notice this Tucker is from the Tolarno Galleries. Is this correct?
FH: Yes
VS: I suppose you can't tell me who the vendor is?
FH: Now Vivienne, you know I can't tell you that!
Bidding registration
45On 1 May 2000 Ms Sharpe signed Christie's Bidding Registration Form providing her own name, address and phone numbers under the heading "Client Details". That Form included the following:
I understand that the auction and all bidding will be subject to the contractual terms and conditions printed in the auction catalogue and that a buyer's premium of 15% of the first $50,000 of the sale price of each lot and 10% of the excess of the sale price above $50,000 applies (see conditions of business c. 15)
Further Instructions from London - the Auction 1 May 2000
46Ms Sharpe's affidavit evidence was that prior to the auction she had a telephone discussion with the plaintiff in London as follows:
VS: I'm in Melbourne. I viewed the painting today. The Tucker looks to be in good condition. It's a good image and the colours are pretty true to the reproduction in the catalogue. Fiona said there is a bit of interest in it. Are you still interested in bidding?
LM: Why don't you bid to the low estimate of $55,000.
47The plaintiff claimed that Ms Sharpe telephoned her in London and they had the following conversation:
VS: I'm at the auction. The Tucker has been passed in for $35,000(???). I was the only bidder on your behalf so I have a right to negotiate to purchase the work. (I can't now remember whether she said "$35,000" or "$33,000".)
LM: I'm surprised. That's amazing. Why so low?
VS: I do not know. The painting is in excellent condition it is a very good piece. It was one of the first up and the room was not fully warmed up every one was focused on the bigger items but there is a lot of post auction interest. I think it was passed in far too quickly. It is a really good work I think people were just not focused but there is a lot of interest now. It's a good picture. It would be a good buy.
LM: I thought it would be out of my league. Do you think Tucker is a good artist to have in our collection?
VS: Yes, he is under-valued at present and it's a good work. I have checked it out, it all stacks up I think you will get a great buy.
48The plaintiff claimed that after she spoke with her husband while Ms Sharpe was still on the phone, the following conversation occurred:
VS: Louise, the auction is still going on. I have to go. Do you want me to negotiate it for you? I think I can get it for less than the reserve you will probably get it for $40,000 and then it will be a bargain. It's a valuable work and is a really good work that is representative of Tucker, but you have to be quick as other buyers are also interested.
LM: Ok, if you think it's a good buy, but I can't go above the reserve.
VS: No sweetie, I am sure you will get it for under $40,000. I will do my best.
49The plaintiff claimed that the following day, Ms Sharpe telephoned her and the following conversation took place:
VS: I have good news you have acquired a great Tucker but there was heated post auction bidding. It was really competitive. The vendor was reluctant to part with it. It had been in the vendor's family for a long time. He would not part with it for less than the reserve. I bought it for you at $75,000.
LM: Oh that was more than we were talking.
VS: But it is still a good price as it is only the reserve.
LM: I will need to try to get finance in place.
VS: Don't be disappointed, it's still a good buy. It's a great work by a fabulous artist and as I have told you I think his work is undervalued by the market. I am sorry, I thought I would get it more cheaply for you but it is a good sign that lots of other collectors were also interested - you will do well out of it.
50During the auction Ms Sharpe observed that there was no genuine bidding for the Painting so she did not bid. Her original recollection was that the Painting was passed in at $35,000. However she later accepted that it was probably passed in at $50,000.
51Ms Sharpe's affidavit evidence was that she did not have a conversation with the plaintiff during the auction in the terms suggested by the plaintiff. She denied saying the words "it is a very good piece" or "it would be a good buy" or "yes, he is undervalued at present and it's a good work. I have checked it out, it all stacks up I think you will get a great buy". Ms Sharpe's recollection was that after the Painting had been passed in, whilst she was still at the auction rooms and the auction was still in progress, she had a conversation with the plaintiff as follows:
LM: What happened?
VS: The painting was passed in. I didn't bid. I allowed the painting to be passed in at $35,000. The auction is still going on so I can't talk now. I'll phone you back after the auction.
52Ms Sharpe's recollection in her affidavit was that at about 11.00pm Sydney time after the auction, she telephoned the plaintiff in London and the following conversation took place:
VS: There was no real bidding. McIlroy was just running up the bidding taking bids from the wall so I let him pass it in. I don't know why there wasn't any interest because Fiona said there was. But you can never tell what happens in the rooms. This way we get an opportunity to offer at a lower price. Do you want to offer $40,000? You could get it for that!
LM: Yes, why don't you try?
53Ms Sharpe claimed in her affidavit that the first offer she put to Ms Hayward was $40,000, either directly after the auction or early the next morning. Ms Hayward advised Ms Sharpe that the Painting was not available for $40,000 and that the vendors wanted the reserve of $55,000 and would not sell it for less. Ms Sharpe advised Ms Hayward that she would have to speak to her client and get instructions and come back to her. Ms Sharpe said that immediately after this conversation she telephoned the plaintiff in London and had a conversation as follows:
VS: Lou, I offered Fiona $40,000 but she said the vendors wouldn't accept any less than the reserve which is $55,000. What do you want to do? You did give me instructions to bid $55,000.
LM: OK. Do you think we will get it for $55,000?
VS: I should think so!
54Ms Sharpe then contacted Ms Hayward and made an offer of $55,000. Ms Hayward then advised Ms Sharpe that there had been "a lot of post auction interest" and that she would have to pay $75,000 "to get it now". Ms Sharpe claimed she then telephoned the plaintiff in London and had a conversation in the following terms:
VS: Lou, Fiona has just told me there has suddenly been a lot of interest in the Tucker and if you want it you now need to pay $75,000. What do you think?
LM: That's a lot more than the reserve.
VS: Yes it is. But that's what Fiona said and I don't have any reason to doubt her.
LM: Well, what do you think?
VS: Lou, given there are similar Tuckers from this series hanging in major art museums and featured in books on Tucker and it's from a good period, the 1960's, I think it's probably worth $75,000.
LM: OK. Please offer them $75,000.
Painting Purchased
55Ms Sharpe's affidavit evidence was that to the best of her recollection it was either later on 2 May 2000 or early on 3 May 2000 that she phoned Ms Hayward and made the offer of $75,000. Ms Hayward contacted Ms Sharpe again later that day and informed her that the vendor had accepted the offer. Ms Hayward said again that there was a lot of post auction interest in the Painting and offered her "congratulations". Ms Sharpe then telephoned the plaintiff in London and informed her that her offer had been accepted and claimed that the plaintiff said "Great. Thank you".
56In her affidavit in reply sworn on 17 April 2014 the plaintiff denied that many of these conversations occurred and said that only "a single telephone conversation on the night of the auction" occurred.
57Subsequently, after she analysed her telephone records, Ms Sharpe recalled that she made four telephone calls to the plaintiff on the night of the auction. Ms Sharpe affirmed an affidavit on 4 July 2014 dealing with the telephone records and made the point that as it had been over 14 years since the relevant conversations took place it was "possible" that one or more of the conversations which she recalled as having taken place on 2 May 2000 may in fact have taken place on 1 May 2000 during or after the auction.
Offer After Sale Form
58In a Christie's document entitled "Offer After Sale" with a handwritten notation "entered 1/5/00", Ms Sharpe was identified in the section headed "Name". The word "Tucker" was handwritten under the heading "Description" and "$75,000" was handwritten under the heading "Amount Excluding buyer's premium". The Form included the following:
I herewith acknowledge that this offer is subject to the conditions of sale printed in the sales catalogues. This offer is valid for one month and cannot be withdrawn within that period. The above figure is exclusive of premium. (See Conditions of Business Clause C 15).
59The initials "FH" are handwritten next to the word "Signature" under this acknowledgement. There was no evidence given by Christies in relation to this entry. It is probable that Ms Hayward wrote these initials.
Invoice for the Painting
60Christie's issued an invoice directed to Ms Sharpe dated "02/05/2000" recording "Sale Date 01/05/2000". It included the following:
1 Albert Lee Tucker (1914-1999)
Faun and Parrot
Signed 'Tucker' (lower right), oil
Total Hammer Price 75,000.00
Premium 10,000.00
Freight 60.00
Receipts
TOTAL DUE 85,060.00
Payment is due in Australian dollars within seven days from the date of sale by cash or bank cheque. Personal cheques may be accepted, however unless prior arrangements have been made, five working days must be allowed for bank clearance before purchase can be collected.
Deutcher-Menzies Auction - 3 and 4 May 2000
61On 3 May 2000 the Deutcher-Menzies "Australian Modern Masters" auction included a painting by Albert Tucker entitled Faun Attacked by Parrots 1967. The Provenance recorded in the catalogue was "Galeria de Antonio Souza, Mexico City (label attached verso) Private collection, Melbourne". The price range was listed as "$150,000 - 200,000". The entry in the catalogue included the observation (by Richard Haese) that this particular painting reflected Albert Tucker's "ambition to personify the mythic resonance of the Australian pioneering struggle to inhabit an alien and potentially hostile landscape" (Ex PD vol 2 699).
Finance for the Painting
62The plaintiff made arrangements for lease finance in respect of the Painting through the broker, Peter McAdam Finance Pty Ltd. The plaintiff's personal assistant, Helen Ezzy, provided the plaintiff's instructions to the broker and the plaintiff signed the application on 16 May 2000. One aspect of that application was a statement of assets signed by the plaintiff which included the entry of $1.5 million for "artworks" (Ex PD vol 2 712). It was controversial during the plaintiff's cross-examination because it was clearly an inaccurate figure. It seems to me that this controversy was overtaken by the joint statement of assets and liabilities that the plaintiff and her husband provided to Capital Finance (referred to below).
63On 17 May 2000 Ms Ezzy told Mr McAdam that the plaintiff had instructed her to advise that the Painting "will be purchased in Laurentine Pty Limited". The plaintiff said that Laurentine was chosen because Capital Finance had advised that it would only provide this finance to a company and not to an individual. Laurentine had been established when the plaintiff was a partner of a large law firm. It was set up by the plaintiff as trustee of the Laurentine Trust.
64On 30 May 2000 Capital Finance wrote to the Manager of Laurentine at the plaintiff's Whale Beach address enclosing the Term Purchase Agreement in duplicate, a direct debit form and a privacy form. That letter included the following (Ex D4-7):
Please have the documentation executed where indicated and return to this office together with the following:
1. Cheque made payable to Capital Finance Australia Limited for $1469.87 (including $180.00 - administration fee)
2. Certificate of Currency of insurance noting the interest of Capital Finance Australia Ltd
3. Copy of rates notice for residential property
4. Signed and dated asset & liability statement
5. Certificate of authenticity
6. Independent valuation
Upon receipt of the above items we will be in a position to settle this transaction.
65A personal statement of assets and liabilities signed by the plaintiff and her husband and dated 4 June 2000 showed total liabilities of $2.3 million and total assets of $6.3 million. The assets were divided into real property and "other assets" with the attribution of $1 million to those other assets without any reference to the detail of them. There was no mention of any artworks (Ex D4-7).
66The plaintiff wrote a cheque dated 2 June 2000 to Capital Finance for the amount requested, $1,469.87.
Statement of Authentication and Valuation
67On 2 June 2000 a Statement of Authentication and a Valuation in respect of the Painting addressed to Capital Finance were signed by Karen Woodbury of Deutscher-Menzies. These appear to have been organised by Peter McAdam in the process of arranging finance with Capital Finance. Each document identified the artist as Albert Tucker (1914-1999) and described the Painting as "Faun and Parrot c 1967 oil on board 75.3 x 60.0 cm signed lower right: Tucker". The Statement of Authentication included the following:
I have inspected the item described above and in the attached valuation and in my opinion the work is genuine and authentic.
68The stated purpose in the Valuation was "Leasing". The "Total Valuation" was recorded as $75,000 and it included the statement that "the above material takes into consideration recent prices paid for comparable material".
69There is in evidence a facsimile from Christie's addressed to Ms Sharpe dated 30 May 2000 (Ex PD vol 6 2107). There is an issue as to whether this was in fact sent to Ms Sharpe. It was in the following terms:
Re Australian Paintings Sale, 1 May 2000 (THOMAS - 1007)
Lot 70 - Albert Tucker - total amount owing $85,000.00
Dear Vivienne
Further to our phone conversation this morning, following is a copy of the amended invoice for lot 70 purchased in the above sale that has been faxed to Peter McAdam for financing the amount of $75,000.00. As you mentioned, you have the cheque for the difference being $10,000.00.
70Attached to that facsimile was an invoice addressed to Capital Finance recording the "Total Hammer Price" of $75,000, the premium of $10,000; receipts of $75,000, and total due of $10,000.
71On 14 June 2000 Christie's wrote again to Ms Sharpe advising that it was "still awaiting payment of $10,000 being the premium on this purchase".
72Christie's is issued an invoice dated "14/06/2000" to Capital Finance which included the following:
1. Albert Lee Tucker (1914-1999)
Faun and Parrot
total hammer price 75,000.00
premium 10,000.00
freight
receipts 75,000.00
TOTAL DUE 10,000.00
73On 16 June 2000, HFA received approximately $70,000 from Christie's in respect of the sale of the Painting.
The Leases
74The Equipment Term Purchase Agreement (the Lease) between Capital Finance and Laurentine was dated 4 June 2000. The hirer in the Lease, Laurentine, offered to enter into the agreement with Capital Finance in the terms and conditions set out in the Schedule to the Lease. The Description of Goods was as follows:
SUPPLIER: CHRISTIE'S AUSTRALIA PTY LTD
ONE (1) X ALBERT LEE TUCKER
FAUN AND PARROT
SIGNED 'TUCKER' (LOWER RIGHT), OIL BOARD
75.3 X 60CM
PAINTED CIRCA 1967
75The term of the Lease was 48 months from the commencement date, 6 June 2000, with 48 instalments of $1,289.87 with a final instalment of $37,522.50. The cost of the goods was recorded as $75,000 with term charges at $23,916 with a total amount payable of $98,916. The Lease was guaranteed by the plaintiff and her husband. The common seal of Laurentine was affixed and the two signatures against that seal were that of Mr Daniel and the plaintiff. Underneath the plaintiff's signature were the words "Director/Secretary".
76The Terms and Conditions included the following:
3. Hirer's Option to Purchase During Term
Hirer may at any time during the Term, provided it is not in default, purchase the Goods by paying Capital the Early Termination Amount, whereupon the hiring will end.
...
7. Capital's Title to the Goods
7.1 Apart from the right of property or interest accruing to Hirer by operation of clause 3, Hirer acknowledges that the Goods remain Capital's property at all times, that Hirer's rights hereunder are personal and as bailee only, and that it has no authority to deal with, and agrees not to purport to deal with, or share or transfer possession of, the Goods. Capital may at any time affix identifying marks on the Goods and Hirer must provide Capital access to the Goods to enable this to be done.
7.2 Hirer must do everything necessary to protect Capital's title to the Goods ...
77On 22 June 2000 Peter McAdam Finance Pty Ltd wrote to the plaintiff/ Laurentine at the Whale Beach address. That letter included the following:
We are pleased to advise you that your ASSET PURC transaction for ONE PAINTING BY ALBERT TUCKER has settled on 06/06/00. The financier is CAPITAL FINANCE AUSTRALIA LTD - MELB and the agreement is for 48 months with a $37,500.00 balloon/residual value.
78On 29 July 2004 at the conclusion of the 48 month Lease, Laurentine did not elect to purchase the Painting from Capital Finance. Rather it entered into a further Equipment Term Purchase Agreement with Capital Finance (the Second Lease) pursuant to which it agreed to a further 36 months of instalments with a total amount payable, after adjustments of $44,051.40.
79Although it was originally claimed that the plaintiff made the payments under the Leases, it was accepted that the payments under the Second Lease were made by Laurentine. However the plaintiff contends that Laurentine was making those payments on her behalf. This raises the issue of whether the plaintiff owns the Painting. Laurentine is not a party to the proceedings.
Christie's expresses concern - mid 2000
80In "the middle of 2000" Ms Hayward telephoned Ms Diggins. In her first affidavit (sworn 15 August 2013) Ms Diggins gave evidence that Ms Hayward said:
There are a number of paintings that appear to have come from the same source that we are concerned about.
...
I have a letter from Mr Barry O'Sullivan confirming the provenance of the painting sold by Christie's in May.
81In that affidavit Ms Diggins said that she requested a copy of the letter and that Ms Hayward provided it to her.
82In her second affidavit (sworn 23 April 2014) Ms Diggins gave the following version of the conversation with Ms Hayward (where LD is Ms Diggins and FH is Ms Hayward):
FH: We are concerned about three paintings that have all come from the same questionable source.
...
I have a document from a Mr Barry O'Sullivan saying that his father bought the painting 30 years before he died.
LD: I've never heard of him. Where did he say he bought them?
FH: From Dominion Galleries.
83Although the affidavit recorded that this conversation took place after the Symposium (referred to below), Ms Diggins confirmed in cross-examination (on Ms Sharpe's behalf) that it took place before that meeting (tr 349).
84In cross-examination (on Ms Sharpe's behalf) Ms Diggins gave the following evidence (tr 349-350):
Q. So when Fiona Hayward contacted you at about that time, let's say roughly late July or early August, she said she had received a letter from Mr O'Sullivan?
A. Well, when she contacted me, it was - she didn't contact me as a result of a letter from Mr O'Sullivan. She contacted me before that.
Q. She contacted you before what?
A. Before she received the letter from Mr O'Sullivan.
Q. Well, not according to your account in paragraph 18. There you say she contacted you and in that conversation when she contacted you, she told you she had the letter from Barry O'Sullivan?
A. Yes, but that's not the - that's not initiating her contact. She had already contacted me previous to that about this.
Q. Where do you say that?
A. So she may - you know, how many phone calls there were before Fiona and myself, I don't recall.
...
Q. So the first time you spoke to Ms Hayward was some time prior to the conversation that you set out in paragraph 18 is that right?
A. Yes, that's correct.
85In re-examination Ms Diggins gave the following evidence as to the timing of Ms Hayward's first expression of concern (tr 423):
Q. Does that assist you in any way to put a time on when you first had a discussion with Ms Hayward?
A. I have always thought the discussion with Fiona Hayward was on the earlier side of mid 2000, but what I am not sure about is if it was before the May auction or immediately after, or closely after that.
Q. You have referred to the fact that you had a conversation with Fiona?
A. Yes.
Q. If you look at the next sentence it says:
"Shortly after that I was visiting Deutcher-Menzies and they showed me a work that they had catalogued for their current exhibition and they asked my opinion of it?
A. Yes.
Q. Could I take you to page 792, you will see that is Deutcher-Menzies May catalogue, is that the painting being referred to?
A. Yes, it is.
Q. Does that assist you in any way to date when you actually first had the conversation with Ms Hayward?
A. I really can't remember whether it was before the May sale or, just after, I just can't remember.
86Ms Hayward did not give evidence. I am satisfied that Ms Hayward contacted Ms Diggins in May 2000, at a time after the auction at which the Painting was sold, and expressed her concern about the Painting. I am also satisfied that the concern must have been significant for such contact to have been made in circumstances where Ms Hayward had not only confirmed as "correct" the Tolarno Gallery provenance with Ms Sharpe but had also personally negotiated the sale of the Painting with her. I am satisfied that as at May 2000 Christie's entertained a doubt about the authenticity of the Painting. I am also satisfied that there were discussions in July and/or August 2000 between Ms Hayward and Ms Diggins about the O'Sullivan letter.
A second 'Tucker' Painting
87On 21 June 2000 a painting entitled "Faun being attacked by Parrots" was consigned to Christie's by HFA. Mr Holland agreed that he consigned it to Christie's for its auction in August 2000 (tr 564). He claimed that he purchased this painting from Mr Gant. However Mr Gant claimed that he was only aware of one Tucker that he sold to Mr Holland (tr 595).
88Christie's catalogue entitled "Australian and International Paintings Melbourne 22 August 2000" included Lot 76 described as follows:
76
Albert Lee Tucker (1914-1999)
Faun being attacked by Parrots
signed and dated 'Tucker 70' (lower right)
and inscribed with title
and further dated on the reverse, oil on board
55x70cm
$55,000 - 75,000
Contact with Mr O'Sullivan
89On 14 August 2000 Ms Diggins telephoned Mr O'Sullivan. Ms Diggins' affidavit evidence was that the following conversation occurred (where LD is Ms Diggins and BO'S is Mr O'Sullivan):
LD: I'm ringing on behalf of the Tucker Estate. I represent Albert Tucker's widow and I am making enquiries about a number of paintings which I understand you owned and have been auctioned recently.
BO'S: My father died about twenty years ago and he had some paintings which he acquired approximately thirty years ago from a Sydney gallery.
LD: Do you know anything more about the works?
BO'S: I sold these works too cheaply to a dealer who lied to me about the value of the works.
LD: I'm worried about the source of these works. Is there any information that you could help me with.
BO'S: My father died in 1980 and that (sic) me and my brother knew about these paintings.
LD: Do you have any photographs or anything in the house to show the existence of the paintings or any insurance policies?
BO'S: No, my father didn't have the paintings insured.
LD: Are you able to give me any further information?
BO'S: No.
LD: Do you know where the paintings were bought from?
BO'S: No, I have no idea. My dad bought them about thirty years ago.
The Symposium - 15 August 2000
90On 15 August 2000 a meeting was held at the Ian Potter Art Conservation Centre (referred to in the proceedings as "the Symposium"). Present at that meeting were Ms Diggins, Albert Tucker's widow (Barbara Tucker), Richard Crichton, Warwick Reeder from the Heide Museum and Sally Carew-Reid who was the painting conservator at the University of Melbourne. The proceedings at the meeting were tape recorded and it was noted that the transcript and the information provided at the meeting was to be expressly used for the establishment and development of a database of materials and techniques employed by Albert Tucker.
91During this meeting Ms Diggins reported that she and Mrs Tucker had looked at the Painting prior to the Christie's auction in April 2000 and that they "had some degree of not actually at that stage concern about the picture being right, but some degree of dis-ease about the quality of the painting just didn't seem to be what we would have expected". Ms Diggins then referred to another painting that was auctioned by Deutscher-Menzies at around the same time. She reported that both she and Mrs Tucker were quite sure that this painting was "correct". Ms Diggins then reported (Ex H):
Following that I'd had some time later a discussion with Fiona Hayward from Christie's when Fiona had brought to my attention a number of paintings of very very similar subject matter coming through the one source and it was a source that she had problems with in regard to that particular dealer handling at times ambiguous work. Shortly after that I was visiting Deutscher-Menzies and they showed me a work that they'd had catalogued for their current exhibition and they asked my opinion of it and when I saw the painting I was very alarmed by it. It exhibited the same type of characteristics that the other Christie's picture had had and then seeing the two of them together there were a lot of characteristics that seemed to me to be out of character with Bert's work.
...
In regard to the first work through Christie's and the two works through Deutscher-Menzies they all come originally from the one source and that man's name is Barry O'Sullivan. I spoke to Barry O'Sullivan yesterday. I do not know how old he is but he has told me that his father was a great fan of Albert Tucker's and that they have four works of Albert Tucker's all of which were bought in the very very early 1970s. He, in my discussion with him, was quite aggressive, quite angry. The line that he was taking was that he had sold these works too cheaply to a dealer who'd misrepresented the value of the works and was not really co-operative to start with. As I slowly persuaded him that his works may have been caught up with some works through other sources that perhaps were not correct and they had actually been sold through the same dealers. We needed his support and his help so we can unravel the situation. He told me that his father died in 1980, that as kids he and his brother always knew about these pictures in the household. There are no, from questioning him, there are no photographs showing the paintings in the house and there are no insurance policies because his father didn't have the paintings insured. So I'm not able to get out of him anything that totally gives a provenance that is unquestionable and all we have is his word as to the situation. He didn't know where the pictures were bought from.
92Mrs Tucker said that Ms Diggins had not mentioned that at one stage Ms Diggins had been informed that the paintings were "bought directly from Bert". Ms Diggins then said: (Ex H):
Yes, the provenancing of the three paintings has been very very confusing and very mixed. As far as I'm able to clear is that Barry O'Sullivan has sold them through a dealer that he will not name, that they have gone to Alex Holland who is a dealer in Sydney and then to John Playford. Playford was the vendor of the Mexican picture to Deutscher-Menzies and also to the current painting that is in Deutscher-Menzies. The one that was in Christie's the vendor was Alex Holland. And in trying to unravel the provenance no-one has been really clear. There is suggestion that Peter Gant is somewhere involved and John Playford most definitely is and so is Alex Holland and we do not know who the first dealer is and there is this back and forward.
Christie's alerted - August 2000
93After the Symposium, Ms Diggins telephoned Ms Hayward and said:
Fiona, the Group has met and we have real concerns, not only about Lot 70 which sold in May, but lot 76 for the August auction which we believe should be withdrawn from sale. I could not support either of these paintings as works by Tucker in light of what we have seen. You will need to make some further investigations.
The second painting is sold
94Notwithstanding Ms Diggins' communication with Ms Hayward, Lot 76 "Faun being attacked by Parrots" was put up for auction at Christie's on 22 August 2000 as a work by Albert Tucker and it was sold to the Australian Club in Sydney for $69,165 (hammer price of $58,000 plus premium and GST) (Ex PD vol 5 page 1811). Years later the Australian Club became aware that this painting was possibly a forgery and after protracted negotiations, Christie's agreed in December 2012 to reimburse the Club by way of credit in the amount of $96,070 ($69,165 "increased to take account of inflation") to be spent at any Christie's saleroom worldwide (Ex PD vol 5 page 1859). Although the evidence (referred to later) discloses that HFA consigned this painting to Christie's, Mr Holland did not give any evidence in relation to the return of the painting or any demand by Christie's on HFA for reimbursement, nor was he cross-examined about this.
95During the protracted negotiations Christie's advised the Australian Club that when it closed its saleroom operation in Australia in 2006 its paper work was then housed in an archive in Melbourne. Christie's also advised that it had reviewed the records and files that it still had in its possession and that they "did not reveal any information relating to the provenance" of "Faun being attacked by Parrots" (Ex PD vol 5 page 1828). Christie's further advised that (Ex PD vol 5 page 1830):
The catalogue description is on the Christie's LotFinder database and there is no provenance listed there, and this was borne out by the lack of any provenance documents in the file in Melbourne. As a general rule, if there is a document or note on provenance, in the sale file, it will be printed in the catalogue.
Provenance documents
96There are two documents in evidence relating to the provenance of the Painting. The first is an undated, unsigned document on a plain sheet of paper without any letterhead or other feature identifying the author or the sender (the Holland letter) (Ex PD vol 4 page 1515). It is in the following terms:
Attention: Alex Holland
Fax No: 02 9327 8587
Provenance on Albert Tucker
FAUN & PARROT 1967
Oil on Board
76 x 62cm
SLR
This painting was purchased from Tolarno Gallery, St Kilda in 1969-70. It has been in the collection of Mr. B. O'Sullivan since 1980 - he acquired it from his father.
The painting is a study for Faun being attacked by Parrots 1967, which was exhibited in Mexico City in the late 1960s.
97In its Defence to the Amended Statement of Claim Christie's admitted that "at a time presently unknown" it was provided with the Holland Letter.
98The other document, also undated, is on the letterhead of Southern Bearings Pty Ltd purportedly signed by Barry O'Sullivan (the O'Sullivan letter) (Ex PD vol 4 page 1511). It is in the following terms:
Christie's Australia
Fiona Haywood
Re: Albert Tucker "Fawn being attacked by a Parrot."
This painting comes from the collection of my late father John O'Sullivan. It along with several others, have been in our family for 25 years or so. I believe that they were originally purchased through a gallery in Sydney called "Dominion".
Yours Sincerely
Barry O'Sullivan
99In its Defence to the Amended Statement of Claim Christie's admitted that "at a time presently unknown" it was provided with the O'Sullivan Letter.
100The plaintiff's former personal assistant gave evidence that she received the O'Sullivan letter attached to a with compliments slip from Fiona Hayward at Christie's. There was no date on the with compliments slip, nor was there any note accompanying it. The personal assistant thought that the O'Sullivan letter was received at about the time that finance was being arranged for the purchase of the Painting through Peter McAdam. However there was no copy of the O'Sullivan letter in the Peter McAdam file or in Capital Finance file.
101I am satisfied the O'Sullivan letter was probably received by Christie's at about the time of the consignment of the second painting. The title at the top of the letter is more apt to the second painting than the Painting. However there was no reference to the provenance in the O'Sullivan letter in Christie's Catalogue for the August auction. It is clear that the O'Sullivan letter was placed on Christie's file in relation to the Painting and it appears a copy was not placed on any file relating to the second painting.
102The fact that Christie's connected the O'Sullivan letter to the Painting assists the plaintiff's case. Obviously if Christie's had two letters relating to provenance that were inconsistent, it should have been alerted to the prospect that the authenticity of the Painting might be in question. If Christie's had made the mistake of placing the O'Sullivan letter on the file relating to the Painting rather than the second painting, this needed to be explained. The Australian Club was able to question the provenance relating to the second painting because there was no provenance in the Catalogue. The catalogue suggested there was no doubt about the second painting being signed by Albert Tucker (and thus an authentic Tucker) because once again there was no question mark next to the word "signed". Christie's was in a difficult position. However it called no evidence to explain these peculiarities.
The problem is exposed - February 2010
103In December 2009 or early January 2010, Ms Sharpe met with the plaintiff on several occasions. The plaintiff explained to Ms Sharpe that she was in financial need. The discussions included the prospect of selling the Painting, the Sculpture and the Smart. After these discussions Ms Sharpe did some research and had discussions with various auction houses. One of the people with whom Ms Sharpe had discussions was Geoffrey Smith, the Vice Chairman and National Head of Art at Sotheby's in Melbourne. Mr Smith (GS) and Ms Sharpe (VS) had the following conversation:
GS: I've looked up the Tucker and I have to tell you I think this painting is problematic.
VS: Geoffrey, what do you mean?
GS: As you know I am now the Tucker expert and I have done a lot of research with Barbara (Tucker) and we can't find the documentation or provenance for this painting. There have been a few like this that appeared on the market after Bert died in 1999 that we have problems finding provenance for. I am pretty sure this is one of them.
104Ms Sharpe also had a discussion with Ronan Sulich, Christie's Australian Representative, who said that he would check the records and get back to her. Mr Sulich advised Ms Sharpe that the computer records only went back to June 2000 and it would have to be a "paper chase in the storage archive".
105Ms Sharpe then discussed the prospect of selling the Painting, the Sculpture and the Smart with Rod Menzies of Menzies Art Brands Pty Ltd. She did not mention the possibility that the Painting was "problematic" at that time because she was still awaiting a response from Christie's.
106On 20 January 2010 Ms Sharpe received information that it appeared that the vendor was Alex Holland and that she should speak with David Cook. Ms Sharpe had spoken to Mr Smith about the possibility of speaking with Mr Cook who was by then working with Sotheby's but Mr Smith suggested that she should not do so.
107On the same day Ms Sharpe telephoned Mr Sulich to inform him that she had discovered that Alex Holland consigned the Painting to the May 2000 auction. It was suggested that Ivan Holland must have owned it and Ms Sharpe asked Mr Sulich to get in touch with Alex and Ivan to confirm the position. Ms Sharpe also asked for purchase records or insurance records so that she might satisfy Geoffrey Smith.
108On 29 January 2010 Ms Sharpe phoned David Cook at Sotheby's. The following conversation took place:
VS: David. As you may recollect, I purchased a Tucker from Christie's May 1 2000 sale-lot 70. You worked at Christie's then. Geoffrey Smith has now proclaimed it "problematic" and I'm trying to trace the provenance to satisfy Geoffrey so he can include it in the Tucker catalogue raisonne. I'm not sure if Geoffrey has told you anything about it but it's very upsetting. I have been in touch with Ronan but he says the record for this sale are in the archives stored some place in Melbourne and he can't get to them right now. Can you help me?
DC: Vivienne, I'm afraid I can't help you. You will have to speak to Geoffrey.
VS: I already have and can't understand why you can't talk to me about it. And by the way, I offered some paintings to Geoffrey for auction, one of them was this Tucker but I haven't had a proposal or heard anything back from Geoffrey. Do you know anything about this?
DC: No. Can I speak to Geoffrey about the proposal?
VS: Yes, please do.
109On the same day Ms Sharpe received a telephone call from Mr Smith. Ms Sharpe expressed her concern that Mr Smith could be condemning the Painting without seeing it. After further discussion Mr Smith said he would forward a proposal to Ms Sharpe. In a further discussion with Mr Smith later that day, Mr Smith advised Ms Sharpe that he thought that she would find that the Painting was "linked to Peter Gant". Mr Smith also said he was willing to inspect the Painting.
110On 2 February 2010 Mr Sulich sent an email to Ms Sharpe whilst she was overseas advising that he had spoken to Alex Holland about the Painting and that he had said that the provenance in the Christie's catalogue was supplied to him by the collector in Melbourne from whom he had purchased the Painting. Ms Sharpe asked Mr Sulich who owned the work at the time it was auctioned and whether it was Alex Holland. Mr Sulich had a further email communication with Ms Sharpe on that day indicating that the impression that Mr Holland had tried to give him "was that the provenance in the catalogue was the provenance of the painting before he had it".
111Mr Smith inspected the Painting on 16 February 2010. Once again Mr Smith suggested that Ms Sharpe would probably find that the Painting came from Mr Gant. He said that unless Ms Sharpe "can prove definite provenance back to the 1960's" he was afraid he could not include it in his Tucker catalogue raisonne.
112On 17 February 2010 Ms Sharpe met with the plaintiff at a restaurant in Potts Point in Sydney. At this meeting Ms Sharpe informed the plaintiff that she had "some bad news". She then advised the plaintiff of Mr Smith's concerns over the Painting's provenance. After further detailed discussion the plaintiff said that she could not believe it and that Mr Smith must be wrong. She queried how "everyone else" could be wrong and made the observation that she had the Painting for ten years and no one had ever said anything about it.
113The Painting was withdrawn from the proposed auction of the plaintiff's artworks in March 2010. The Sculpture and the Smart were sold at the auction for the prices referred to earlier.
114In late November 2012 the plaintiff had a conversation with Mr Holland in which they discussed the Painting. There is very little issue between the plaintiff and Mr Holland as to what was said in that conversation. The plaintiff was seeking assistance from Mr Holland, particularly in relation to any documents that he may have retained in respect of the transaction. They each gave evidence that there was a discussion about the auction and the price at which the plaintiff purchased the Painting. They each gave evidence that Mr Holland had expressed the view that the purchase price sounded "very strange" observing that it was $25,000 above the reserve. He said that even if he had stuck to his reserve, plus the buyer's premium, it would only have taken it to $65,000.
115Mr Holland was unable to find any documents other than a deposit book recording the payment made to HFA by Christie's in respect of the sale of the Painting. On 10 December 2012, in response to an email request from the plaintiff, Mr Holland wrote to her advising that he had gone through the files and had found nothing. He also advised that he would look through the storage shed which was located on the Central Coast north of Sydney and that he was more than happy to provide the plaintiff with "the info if found". He advised that he did "tend to get rid of files as soon as the date allows".
116The plaintiff's response on the same day included the following (Ex PD vol 4 page 1273):
Thank you for your reply I do appreciate your efforts on my behalf.
Given our telephone conversation and the fact that you and your father were dealers in the Art world for such a long time and were known for your meticulous record keeping and archives I am surprised you now feel you may not have retained the files. I would be very grateful if you would check what you have in storage on the central coast.
I would be grateful for your prompt response to my request for a copy of the totality of your banking and accounting records relating to this sale and any further records you hold in relation to this work. This has become particularly relevant as I now have evidence that the painting was passed in and expert advice that in the circumstances it would be "impossible" for the painting in post auction negotiations to achieve a price that was $25,000 above the reserve of $55,000.
As you are aware I am currently preparing the matter for court so I would be very grateful for any assistance you are able to provide on an informal basis. If you are unable to find any records I will be left with no option but to subpoena you to produce all of your banking and taxation records as well as the relevant sales documentation from Christie's. I will also require you to appear in the Court proceedings to give evidence.
As legal proceedings are about to commence you should take all steps necessary to ensure that any potentially relevant documents are identified and safely preserved.
117On 13 December 2012 Mr Holland wrote to the plaintiff advising that he had found no records from Christie's but he had found the deposit book showing deposits on 16 June 2000. That email included the following:
You mentioned I had consigned a few works for that sale.
I have sales of Tucker, Cooke and Boyd.
The nett amount for the Tucker is $70,500.
Hope that helps.
118On the same day the plaintiff wrote again to Mr Holland advising that it was "not sufficient information" and that he had left her with no option but to issue subpoenas. The plaintiff advised that she had a receipt from Christie's that appeared to be inconsistent with what Mr Holland had advised. The plaintiff apologised for involving Mr Holland in her court case and once again asked him to retain all his records.
119The proceedings were commenced in February 2013.
THE CONTRACTUAL FRAMEWORK
120Before considering the various issues and causes of action it is appropriate to refer to the Terms and Conditions of Business on which Christie's auctioned and sold the Painting.
The Conditions of Business
121The Conditions of Business in the Catalogue included the following:
The conditions set out below are the terms on which we contract, as auctioneers, with sellers and, as agent acting on behalf of sellers, with buyers. Buyers and sellers should read the conditions carefully, together with the explanation of cataloguing practice set out at the beginning of the catalogue. Buyers' attention is drawn in particular to clause 16 which limits our liability. For ease of reference, the conditions are divided into sections: Section A gives a background to some of the terms that are used in the Conditions generally; Section B is of particular relevance to sellers; Section C to buyers; and Section D to both sellers and buyers.
A. Background to Terms
122Section A of the Conditions of Business entitled "Background to Terms used in these Conditions" included the following:
1.In the conditions set out below, some terms are used regularly that need explanation. They are as follows:
(a) 'the Buyer' means the person with the highest bid accepted by the auctioneer;
(b) 'the Lot' means any item deposited with us for sale at auction and, in particular, the item or items described against any lot number in any catalogue;
(c) 'the Hammer Price' means the amount of the highest bid accepted by the auctioneer in relation to a Lot;
(d) 'the Buyer's premium' means the charge payable by the Buyer as a percentage of the Hammer Price, at the rates set out in clause 15(a) in Section C;
(e) 'the Reserve' means the amount below which we agree with the Seller that the Lot cannot be sold;
(f) 'Forgery' means a Lot constituting an imitation originally conceived and executed as a whole with a fraudulent intention to deceive as to authorship, origin, age, period, culture or source where the correct description as to such matters is not reflected by the description in the catalogue and which at the date of the auction had a value materially less than it would have had if it had been in accordance with the description in the catalogue. Accordingly, no Lot shall be capable of being a Forgery by reason of any damage and/or restoration work of any kind (including repainting).
B. The Seller
123Under section B of the Conditions of Business headed "The Seller" in the Catalogue were the words "Refer to Christie's". Those Conditions (clauses 2 to 11) (Ex D 2/3-1) are printed on the back of the Receipt signed by HFA when it consigned the Painting to Christie's. Those Conditions included the following:
2. Christie's Role As Agent
Our sales at public auction are undertaken as agent, on behalf of the Seller. The contract for the sale of the Lot will be between the Seller and the Buyer.
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6. The Seller's Undertakings regarding the Lot
This clause sets out the basis on which we shall handle the Lot and which will govern the Seller's relationship with the Buyer. If that basis proves incorrect in any way, either we or the Buyer may take legal action against the Seller.
We shall handle the Lot, and the Buyer will purchase, on the basis of the Seller's undertakings that:
(a) the Seller is the sole owner of the Lot with an unrestricted right to transfer title to the Buyer free from all third party rights or claims (including copyright claims);
(b) the Seller has complied with all requirements, legal or otherwise, relating to any export or import of the Lot and has notified us in writing of any failure by third parties to comply with such requirements in the past; and
(c) the Seller has notified us in writing of any material alterations to the Lot of which the Seller is aware and of any concerns expressed by third parties in relation to the ownership, condition or attribution of the Lot;
If any of (a), (b) and (c) above is incorrect, the Seller will indemnify us and/or the Buyer in full on demand against all claims, costs or expenses incurred by us or the Buyer as a result, whether arising in relation to the Lot or the proceeds of sale.
7. Sale Arrangements
(a) We shall have complete discretion as to the way the Lot is described and illustrated in the catalogue or any condition report; the place and manner of sale; the decision as to which persons should be admitted to the auction, and as to which bids should be accepted; whether expert advice should be sought: and the combination or division of goods for sale.
(b) Any estimate given, orally or in writing, is a matter of opinion only and is not an assurance in relation to the price the Lot will eventually fetch.
(c) The Seller may not withdraw the Lot from sale without our consent. However, we reserve the right to withdraw the Lot from sale at any time if (i) we have any doubt as to its attribution or authenticity or as to the accuracy of the statements made in clause 6(a) ... above or (ii) there is any breach of these Conditions of Business or (iii) we believe it would be improper to include the Lot in the sale.
(d) If either we or the Seller withdraw the Lot, we shall charge the Seller a fee equal to 10% of the Insured Value plus an amount equal to our commission if the Lot had been sold at the Insured Value, together with insurance and other expenses.
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9 After the Sale
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(c) Forgeries
If within five years of the date of the auction the Buyer satisfies us that the Lot is a Forgery (as defined in Clause 1 of these Conditions of Business), then (i) if the Buyer at that time has not yet paid the full amount due, we shall have the right to cancel the sale and/or (ii) if we have at that time paid the Seller the whole or part of the full amount due to the Seller, then the Seller must refund to us, on demand, the total amount paid. If in the latter case we shall exercise a lien over any property of the Seller under our control as security for the amount due.
C. Buyers
124Section C of the Conditions of Business entitled "Buyers" were recorded in the Catalogue and included the following:
12. Christie's as agent
As auctioneers, we act as agent for the seller. Unless otherwise agreed, sales of goods at our auctions result in contracts made between the Seller, through our agency, with the Buyer.
13. Before the Sale
(a) Examination of goods
Prospective buyers are strongly advised to examine personally any goods in which they are interested, before the auction takes place. Condition reports are usually available on request. We provide no guarantee to the Buyer other than in relation to Forgeries, as explained in clause 1 of these Conditions of Business.
(b) Catalogue descriptions
Our cataloguing practice is explained in the pages preceding the catalogue entries. Statements by us in the catalogue or condition report, or made orally or in writing elsewhere, regarding the authorship, origin, date, age, size, medium, attribution, genuineness, provenance, condition or estimated selling price of any Lot are merely statements of opinion, and are not to be relied on as statements of definitive fact. Catalogue illustrations are for guidance only, and should not be relied on either to determine the tone or colour of any item or to reveal imperfections. Estimates of the selling price should not be relied on as a statement that this price is either the price at which the Lot will sell or its value for any other purpose.
Many items are of an age or nature which precludes their being in perfect condition and some descriptions in the catalogue or given by way of condition report make reference to damage and/or restoration. We provide this information for guidance only and the absence of such a reference does not imply that an item is free from defects or restoration nor does a reference to particular defects imply the absence of any others.
(c) Buyers' Responsibility
Buyers are responsible for satisfying themselves concerning the condition of the goods and the matters referred to in the catalogue description.
14. At the Sale
(a) Refusal of admission
Our sales take place on our own premises or premises over which we have control for the sale, and we have the right, exercisable at our complete discretion, to refuse admission to the premises or attendance at an auction.
(b) Registration before bidding
Every prospective buyer must complete and sign a registration form and provide identification before making a bid at auction. Prospective buyers should be aware that we usually require buyers to undergo a credit check.
(c) Bidding as Principal
When making a bid, prospective buyers will be accepting personal liability, unless it has been agreed in writing, at the time of registration, that a bidder is acting as agent on behalf of a third party acceptable to us.
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(h) The auctioneer's discretion
The auctioneer has the right at his absolute discretion to refuse any bid, to advance the bidding in such manner as he may decide, to withdraw or divide any Lot, to combine any two or more Lots and, in the case of error or dispute, to put an item up for bidding again.
(i) Successful bid
Subject to the auctioneer's discretion, the striking of his hammer marks the acceptance of the highest bid and the conclusion of a contract for sale between the Seller and the Buyer.
15. After the Sale
(a) Buyer's Premium
In addition to the Hammer Price, the Buyer must pay us the Buyer's premium at a rate of 15% of the first $50,000 of the Hammer Price plus 10% of any sum in excess of $50,000.
(b) Payment
Before the sale, the Buyer must provide us with his or her name and permanent address and, if so requested, details of the bank from which payment will be made and then pay the full amount due (comprising the Hammer Price, the Buyer's premium and any other applicable fees or charges within seven days after the date of the sale. This applies even if the Buyer wishes to export the Lot and an export licence is (or may be) required.
The Buyer will not acquire title to the Lot until all amounts due to us have been paid to us, even in circumstances where we have released the Lot to the Buyer.
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16. Extent of Our Liability
We have an obligation to refund the Buyer in the circumstances set out in clause 17. However, neither the Seller nor we, nor any of our employees or agents, are responsible for the correctness of any statement as to the authorship, origin, date, age, attribution, genuineness or provenance of any Lot nor for any other errors of description or for any faults or defects in any Lot. Neither the Seller, ourselves, our employees or agents, give any guarantee in respect of any Lot. Any warranty of any kind whatsoever is excluded by this clause.
17. Refund in the case of Forgery
A sale will be cancelled, and the amount paid refunded to the Buyer if a Lot sold by us proves to have been a Forgery. We shall not however be obliged to refund any amounts if either (a) the catalogue description or saleroom notice at the auction date corresponded to the generally accepted opinion of scholars or experts at that time, or fairly indicated that there was a conflict of opinions; or (b) it can be demonstrated that the Lot is a Forgery only by means of either a scientific process not generally accepted for use until after publication of the catalogue or a process which at the date of the auction was unreasonably expensive or impracticable or likely to have caused damage to the Lot. Furthermore, the Buyer should note that this refund can be obtained only if the following conditions are met:
(i) the Buyer must notify us in writing, within five years of the auction date, that in his view the Lot concerned is a forgery;
(ii) the Buyer must then return the item to us within fourteen days, in the same condition as at the auction date; and
(iii) as soon as possible following return of the Lot, the Buyer must produce evidence satisfactory to us that the Lot is a Forgery and that he is able to transfer good title to us, free from any third party claims.
In no circumstances shall we be required to pay the Buyer any more than the amount paid by him for the Lot concerned and the Buyer shall have no claim for interest.
The benefit of this guarantee is not capable of being transferred, and is solely for the benefit of the person to whom the original invoice was made out by us in respect of the Lot when sold and who, since the sale, has remained the owner of the Lot without disposing of any interest in it to any third party.
We shall be entitled to rely on any scientific or other process to establish that the Lot is not a Forgery, whether or not such process was used or in use at the date of the auction.
This condition does not apply to coins, medals or jewellery.
The contracts
125The absence of the section dealing with "the Seller" in the Catalogue means that if a Buyer wishes to review the Conditions of Business in respect of the Seller, Christie's needs to be approached to obtain a copy of those conditions. The only place that these Conditions are found in the evidence is on the reverse of the Receipt signed by HFA when the Painting was consigned to Christie's for auction. Clause B2 records that the sales at public auction are undertaken by Christie's "as agent" on behalf of the Seller. It provides that the contract for the sale of the Lot "will be" between the Seller and the Buyer. Clause C12 provides that Christie's acts as agent for the Seller as "auctioneers". It also provides that unless otherwise agreed the sale of goods at Christie's auctions "result in contracts made between the Seller, through our agency, with the Buyer".
126Clause B6 "governs the Seller's relationship with the Buyer". It provides that the Buyer purchases the Lot on a particular basis including the Seller's undertaking that it has notified Christie's of "any concerns expressed by third parties" in relation to the "attribution" of the Lot.
127In Marsh & McLennan Pty Ltd v Stanyers Transport Pty Ltd [1994] 2 VR 232 Marks J, with whom Fullagar and Gobbo JJ agreed, said at 241:
There is some confusion in this area of the law. It arises from the failure to bear in mind the clear distinction between the non-disclose of the name of a principal and the non-disclosure of the fact that there is one, that is, non-disclosure of the fact of agency.
The distinction is discussed by Professor Reynolds, Reader in Law, University of Oxford, in "Practical Problems of the Undisclosed Principal Doctrine" (1983) Current Legal Problems 119. The mere fact that an agent does not identify the principal for whom he acts does not make the agent personally liable, unless on the proper interpretation of the contract he has contracted as a party to the contract, not as agent. In other words, an agent is not personally liable, even when acting for an undisclosed principal, unless on the proper interpretation of the contract he is a party to it as though he were a principal. The question is one of interpretation of the contract: Scott v Geoghegan & Sons Pty Ltd (1969) ALJR 243, per Taylor J at 245.
The law was conveniently summarised by Professor Reynolds at p. 120.
"... the situation may be analysed as one where the principal is not undisclosed but rather unnamed or unidentified, i.e. his existence and connection with the transaction must be deemed to have been in some measure contemplated from the outset by the third party, though his name was not known. For such a situation recent case-law indicates that the prima facie rule is that the contract is between the third party and the principal (N. & J. Vlassapulos Ltd v Ney Shipping Ltd (The Santa Carina) [1977] 1 Lloyd's Rep. 478). The agent may sometimes additionally be liable and even entitled; but his is not the primary responsibility, and such a result seems to require some special feature, such as the use of a written contract upon the wording of which the agent appears to undertake liability, (e.g. Tudor Marine Ltd v Tradax Export S.A (The Virgo) [1976] 2 Lloyds Rep 135) or the proof of a trade custom that the agent undertakes additional liability (e.g. Fleet v Murton (1871) LR 7 Q.B. 126) or other indications displacing the normal rule (e.g. Franklin v Lamond (1847) 4 C.B. 637 (auctioneer).
This last set of rules relating to the unnamed principal, it should be noted, is considerably different from those governing the true undisclosed principal situation; and this makes it important to know whether on any set of facts the principal, if there is one, should be treated as truly undisclosed or merely as unnamed, though many old authorities do not make the distinction, (e.g. Scrutton, Charterparties (1st ed 1886), Art. 14 (referring to a signature 'as agents for merchants' as an example of an undisclosed principal case))."
128In the present case Christie's was acting as agent for an unnamed or unidentified principal, the Seller, HFA, rather than an undisclosed principal. Christie's also entered into a contract, not as agent for the unnamed principal but as a principal itself in respect of the Buyer's obligation to pay it the Buyers' Premium.
129It is apparent that Christie's had a practice of not disclosing the identity of the Seller, even after the sale, notwithstanding the requirement in the Conditions of Business that any contract for the sale of any Lot at its auctions is to be between the Buyer and the Seller. Such a condition would entitle a Buyer to know the identity of the party with whom they are contracting (the Seller).
130It would appear that the industry (including both Buyers and Sellers) has operated on the basis that the identity of the Seller is not known to the Buyer. In an industry where provenance of artworks is so important, keeping secret the identity of the person or entity who is selling the artwork and with whom the Buyer is contracting to purchase it may have the tendency of protecting rather than exposing forgeries by preventing Buyers from having access to all of the relevant information about the background to the artwork.
131A condition that requires a contract to be entered into between the Seller and the Buyer of the artwork is not consistent with keeping secret the identity of one of the contracting parties. If auction houses wish to keep secret the identity of their principals then some adjustment might be required to their general Conditions of Business. It is understandable that auctioneers may wish to keep the identity of their Sellers secret to protect their commercial operations. The auction house, as agent, may "not wish the third party on the next transaction to bypass" it and "go direct to the principal": Bowstead & Reynolds On Agency, (20th ed 2014, Thomson Reuters) at 429 [8-071]. If they require Buyers to enter into contracts with Sellers "through our agency" as opposed to contracting with the auction house "as agent" (for the undisclosed Seller) then the Buyer is entitled to know the identity of the party with whom it is contracting.
132At the time of the auction on 1 May 2000 when Christie's accepted the offer of $75,000 from Ms Sharpe as the plaintiff's agent, it was the plaintiff who was the Buyer. Christie's invoice for the hammer price ($75,000) and the Buyer's Premium ($10,000) was issued on 2 May 2000 to the Buyer's agent, Ms Sharpe. Christie's knew from the discussions between Ms Sharpe and Ms Hayward on the evening of the auction that Ms Sharpe was only acting as agent. It may have been at that time that the plaintiff was an unidentified principal. However Christie's was aware of her identity by no later than the receipt of the plaintiff's personal cheque for the Buyer's Premium.
133There was a contract between HFA and Christie's pursuant to which Christies agreed to act as HFA's agent as auctioneers in selling the Painting. There was a contract between the plaintiff, as Buyer, and HFA, as Seller of the Painting. There was a contract between the plaintiff and Christie's in respect of the payment of the Buyer's Premium. There was also a contract between Ms Sharpe and the plaintiff.
134The evidence does not disclose with clarity how the plaintiff's contractual rights and/or obligations to HFA terminated or were novated to Capital Finance. On 30 May 2000, some weeks after the plaintiff became the Buyer, the plaintiff's personal assistant notified the finance broker, Mr McAdam, that the Painting was to "be purchased" by Laurentine. However there is no evidence as to how the change in identity of the Buyer was arranged with HFA.
135Christie's was identified as the "Supplier" of the Painting in the first Lease, which was executed by Capital Finance and Laurentine on 6 June 2000. It appears that Christie's was paid $75,000 by Capital Finance, probably on about 6 June 2000. However Capital Finance did not pay the $10,000 Buyer's Premium. That obligation remained with the plaintiff pursuant to her contract with Christie's pursuant to clause C15(a) of the Conditions of Business. That remained outstanding until some date after 14 June 2000 (having regard to the fact that on 14 June 2000 Christie's advised Ms Sharpe that it was still awaiting payment of the Buyer's Premium). The Conditions of Business provide that title does not pass to the Buyer until "all amounts due to" Christie's have been paid to it (Clause C15(b)). The Buyer's Premium of $10,000 was paid by the plaintiff by personal cheque, in which circumstance Christie's required (as noted on its invoices) that "five working days must be allowed for bank clearance".
136Capital Finance became the Buyer of the Painting in June 2000. The contract was then between Capital Finance and HFA. Title in the Painting passed to it probably in late June 2000 after the plaintiff's personal cheque for the $10,000 Buyer's Premium cleared through Christie's account.
CREDIT ISSUES
137There are factual issues in respect of the various causes of action in relation to the Painting and the Smart that require determination. In some instances this requires a decision as to whether to accept the plaintiff's evidence generally or whether to prefer her evidence over that of Ms Sharpe. At this juncture it is appropriate to deal with the attack made on Ms Sharpe's behalf on the plaintiff's credit and reliability as a witness.
138The plaintiff's curriculum vitae refers to "over 25 years' experience in commercial law specialising in taxation". It also refers to the plaintiff's diverse financial and legal skills having been a partner in a major law firm, a partner in a major accounting firm, a director of a boutique merchant bank and a trustee of the Commonwealth of Australia's Superannuation Schemes.
139The plaintiff was a solicitor at Freehill Hollingdale & Page between 1984 and 1987. She then worked as a research assistant at the University of Sydney in 1988. She was a senior associate of the law firm Mallesons Stephen Jaques from 1989 to 1992. She was a partner of the law firm, Clayton Utz, between 1992 and 1998. She then joined Deloitte Touche Tohmatsu as a partner in the International Tax Group in 1998 where she remained until 2004. The plaintiff was then appointed as a director of Grant Samuel in 2005 in which role she remained until 2006. She was called to the Bar in October 2006.
140There are many instances of the plaintiff denying the proposition put to her by the cross-examiner and later resiling from the denial or changing her position. Mr Gray's description of the plaintiff's evidence as "chaotic" (tr 615) is apt. Much of the evidence in this regard related to the Sculpture. The plaintiff had sworn four affidavits at the time that she entered the witness box upon which reliance was placed in the trial. The first affidavit of 7 August 2013 put forward a version of events that was unchanged by the second and third affidavits of 17 April 2014 and 26 May 2014. It included the following:
In late 2008, the plaintiff began to consider selling the Sculpture [39].
The plaintiff asked Damian Hackett of Deutscher and Hackett whether she could set the reserve for the Sculpture at $350,000 "and buy it in my super fund if it doesn't reach that price" [41].
On 14 November 2008 Martin Browne, an art dealer, advised the plaintiff that she could of "of course" purchase the Sculpture in her super fund "as long as you have it properly valued by a dealer and it is a commercial valuation" [44].
On 4 November 2008 Amanda Love, another art dealer, made a suggestion to the plaintiff "why don't you buy it in your super fund?" to which the plaintiff responded, "I can't. It's a related party asset" [43].
In about March 2009 the plaintiff decided that she would do better long-term by holding on to the Sculpture rather than her share portfolio so she took steps with Westpac to sell down the BT Wrap Account her superannuation fund then held [47].
In around April 2009 the Fund purchased the Sculpture for $350,000 [47].
Shortly after 4 January 2010 the plaintiff informed Ms Sharpe that she could not sell the Sculpture and said "I don't own it, it's in my super fund". When Ms Sharpe told her that the top price would be $300,000; the plaintiff said "I only bought it last year and I can't sell it for less than I bought it for as the super fund bought it from me". The plaintiff also said "I know everyone wants it. That is why I put it in my super fund to stop me selling it cheaply" [48].
In mid-January 2010 Ms Sharpe informed the plaintiff that Stephen Johns was interested in the Sculpture. The plaintiff informed Ms Sharpe that she was still "not sure I can sell it though as my accountants are away" [51].
Ms Sharpe informed the plaintiff that Stephen Johns wanted to know "what the super fund did about GST" when it bought the Sculpture as he did not want to have to pay GST on it. The plaintiff said that she could not remember and "I don't even think my super fund is registered for GST". She informed Ms Sharpe that it didn't make that much money and she would have to ask her accountant at WHK Horwath Wealth Management (WHK) [52].
A few days later Ms Sharpe asked the plaintiff whether she would take $325,000 for the Sculpture. The plaintiff responded "you know I can't. I don't own it, my super fund does. I can't make a loss in my fund". Ms Sharpe suggested that a lot of people had made losses in their funds. The plaintiff responded, "yes, but I bought it from myself. I can't have a problem with the ATO. I am a tax lawyer. I have to do it properly. I only bought it a year ago". The plaintiff also claimed that she said "anyway, having bought it essentially from myself at $350,000 I can hardly accept $325,000. The ATO will say it wasn't a proper sale. I can't do it". She also claimed that she said "I know, but I can't. The tax problem isn't worth it" [53].
On 18 January 2010 in an email to Ms Sharpe the plaintiff "suggested that it might be a good idea" if they used the Sculpture as "an encouragement to achieve a good price for my main artworks, the paintings by Tucker and Smart" [55].
On 29 January 2010 the plaintiff met with Ms Sharpe and her son Andrew Sharpe at Fratelli Coffee Shop. After being informed that Rob Menzies and his assistant were very impressed with the Sculpture and the figure of $500,000 was mentioned the plaintiff said "well maybe I have to think about getting it out of my super fund. I have not discussed it in any detail with WHK yet as I really don't want to part with it, but if you really think it's more than $500,000 I guess I had better". [59].
Until this meeting the plaintiff did not have any intention of including the Sculpture in the sale of her artwork by Menzies [60].
On 5 February 2010 in a conversation with Tia McCarthy and Andrew Harding the plaintiff said that she was going to take WHK's advice to put another piece of work of similar value back into the fund and that it was "probably Ok to do a swap". The plaintiff claimed that Mr Harding said that this sounded okay [69].
On 5 February 2010 at a meeting at the Golden Sheaf Hotel in Double Bay the plaintiff informed Andrew Sharpe that she was not moving on the proposal in respect of the Sculpture and said "it is not for sale unless I get the $350,000. You know I can't do it. I have just spoken to my bank" [70].
In a conversation with Amanda Love on 19 February 2010 when asked what the reserve of the Sculpture was, the plaintiff said "your valuation - $350,000. That is what I sold it to my super fund for, but they tell me it will go for a lot more" [81].
141On 24 June 2014 Ms Sharpe's Amended Defence was filed containing a new paragraph (52A) which pleaded that the acquisition of the Sculpture by the Fund was in contravention of s 66 of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act). On 25 June 2014 the report of Anna Carrabs dated 23 June 2014 was served on the other parties by Ms Sharpe's legal representatives. That report expressed the view that the sale to the Fund contravened s 66 of the SIS Act and that the plaintiff had failed to disclose a capital gain.
142Written submissions dated 15 July 2014 were filed with the Court on the plaintiff's behalf in which there appeared the following paragraph:
72. In April 2009, Ms McBride sold the sculpture to the Superannuation Fund for $350,000 (see First McBride Affidavit at [47]).
143However on 17 July 2014 the plaintiff swore her fourth affidavit. It was in this affidavit that for the first time the plaintiff claimed that the Fund did not buy or acquire the Sculpture from her at all. She claimed that she received advice from her accountants that the Fund could not purchase art from her as a member of the Fund, but that there could, in effect, be a transaction where art was sold to a broker and the broker could sell the art to the Fund.
144The plaintiff gave evidence in this affidavit that she was "not attracted" to that idea, but she considered that she could transfer the Sculpture to Mr Daniel under the roll over provision in s 126.5 of the Income Tax Assessment Act 1997 (Cth) (ITA Act). The plaintiff also gave an explanation that although there would be a prohibition in relation to a "spouse" in respect of the related party transaction, she was of the view that because there was no definition of spouse in the ITA Act, one had to have regard to the provisions of the common law, and she considered the ordinary meaning of the expression "spouse" to be the person with whom one cohabits. The plaintiff claimed that at the time of the transaction she and her husband were not cohabitating.
145In this affidavit the plaintiff referred back to paragraph [47] of her affidavit of 7 August 2013 referred to in her counsels' submissions dated 15 July 2014 and gave the following evidence (paragraph [38]):
In that paragraph, I have simplified the account, which I have given in the above paragraphs. At the time, one very simple way of doing what Greg and I were seeking to do in order to enable him to pay his debts would have been for us to sell the sculpture to a third party purchaser. This would have released the funds and they would have been available to enable him to pay his debts. However, I wished to keep the sculpture. And it was for this reason, that I wished the LMB Superannuation Fund to acquire the sculpture. That is why the transaction was structured in the way I have set out above. In paragraph 47 of my first affidavit I refer to the Superannuation Fund actually acquiring the Oliver from me. This is not accurate for the reasons, which are set out above. However, at the time I swore that affidavit, I did not realise that it would be necessary, in these proceedings, to set out all the relevant details in respect of the transaction, and I was conscious of Greg's financial position, and his reputation, and I did not want to set out those details in a document which would ultimately become public.
146In cross-examination the plaintiff denied that in late 2008 she started to think about selling the Sculpture (tr 131). When taken to her affidavit in which she said that she began to consider selling it in late 2008 she was asked whether that was true and she said "Yes. All right, yes." (tr 131). She was pressed further (tr 132):
Q. Did you begin to consider selling it in late 2000?
A. Yes.
Q. Why did you answer "no" when I asked you that a few minutes ago?
A. Because I was considering what I was going to do with the sculpture because it was - yes, I was considering selling the sculpture.
Q. Why did you answer "No" when I asked you that very question a few minutes ago?
A. Because it was as part of discussions with my husband about obtaining a greater amount of money for the sculpture.
Q. That's your answer?
A. That is correct.
147The plaintiff was then cross-examined in respect of an email in which she had written that if she needed cash she would sell the Sculpture "into my super fund". It was suggested to her that this was her own idea. She denied this (tr 137). She then gave the following evidence (tr 137 - 138):
Q. Whose was it?
A. Well, I thought it was a discussion I had with Martin.
Q. But evidently not. So, who else if not Martin?
A. Possibly my accountant.
Q. Which one?
A. Simon Paterson.
Q. You think Simon Paterson proposed to you the idea of selling the Oliver into your super fund?
A. I don't recall.
Q. You don't actually suggest that at all really, do you, when you think about it?
A. No, that's not correct.
Q. In fact, the position is apropos your affidavit, I will come to this later. You are suggesting to them, including Mr Paterson the idea of selling the Oliver into your super fund and they were counselling you that you might have some problems with that, is that correct?
A. Yes, subsequently as indicated.
Q. But the idea of doing so initiated from you, does it?
A. I don't recall.
Q. You don't deny it?
A. I don't recall.
148The plaintiff was cross-examined about paragraph 72 of the written submissions (extracted above) as follows (tr 144-145):
Q. I would like you to have a look at paragraph 72 please. Do you see that your counsel there say in April 2009 Ms McBride sold the sculpture to the superannuation funds for $350,000?
A. Yes.
Q. "See first McBride affidavit at 47"?
A. Yes.
Q. They were your instructions to your lawyers up to and including 15 July, weren't they?
A. No.
Q. Why did you not correct them when you read these before they were served?
A. I should have corrected them, but I didn't.
Q. You see, up until 15 July, Tuesday of last week, I suggest to you, your consistent position had been, including to your own lawyers last week that what's stated in paragraph 72 was the truth?
A. Well, no, that's not right.
Q. They have just made some awful mistake, did they?
A. I don't think it was anything, something anybody was actually focused on particularly.
Q. It just slipped through as one of those things?
A. I think it was around the time we were doing our mediation, was it not?
Q. No it wasn't?
A. Well.
Q. Anything to offer?
A. No.
149During her cross-examination concerning the Sculpture and the supposed "transfer" to the Fund, the plaintiff made a number of assertions. She claimed that the idea of putting the Sculpture into the Fund was not her own idea but was one suggested to her possibly by Ms Amanda Love (tr 138); by Mr Martin Browne (tr 136-137; 149) and by Mr Simon Paterson, her accountant (tr 137). She claimed that the idea of achieving that result by means of interposing a broker, or dealer, so as to get around the related party problem was not her own idea but one recommended to her by Ms Love (tr 149), Mr Browne (tr 149-150) and Mr Paterson (tr 150).
150It was suggested to the plaintiff in cross-examination that her accountant, Mr Paterson, was plainly assuming (from the content of an email) that the plaintiff was going to have the Fund purchase the Sculpture from a broker. The plaintiff denied this (tr 180) and gave the following further evidence in cross-examination (tr 180-181; 187):
Q. That's what you had several times said you intended to do, wasn't it?
A. That is one of the things I was thinking of doing, yes.
Q. It is clear from that email and from another email from Mr Fitzgerald to Mr Paterson, which I will show you if you don't remember it, that Mr Fitzgerald's view was that the artwork in question, the Oliver, would have to be actually sold to the broker or agent if the section 66 related party issue was to be avoided, do you agree?
A. That was the advice, yes.
Q. The advice was that the fund, sorry the Oliver would have to be sold to a broker so that the broker could then sell to the fund which were then not be purchasing from a related party?
A. The advice was actually to do a round robin of cheques.
Q. Is the way I just put it to you also accurate?
A. No. A round robin of cheques means nothing's ever banked.
Q. I wasn't talking about banking?
A. Round robin of cheques is very different from actually selling anything. It is a book entry.
Q. Physically selling you are talking about?
A. Maybe I misunderstood your question. Would you repeat your question.
Q. What your accountants were going to do to avoid the 66 problem was that the sequence of events would be you sell to a broker, the broker sell to the fund.
A. The sequence of events would be that the broker would write out a cheque to me which I would never bank. And the fund would - the broker would then, the fund would then write another cheque to the broker which would never be banked. This is consistent with Martin Browne's advice.
Q. Putting aside Mr Martin Browne for the moment.
A. And my accountants' advice.
Q. The effect of that would be, would it, to give the impression that there has been a sale from you to a broker and a sale from the broker to the fund?
A. That's correct.
Q. Even though it was not a true impression because it was just a round robin as you put it?
A. That's right.
...
Q. So you are there suggesting in paragraph 33, aren't you, that the idea of selling it to the broker came from your accountant but that you weren't attracted to it?
A. I had already had previous advice about selling it to a broker. I just didn't have any other email correspondence in relation to it that I could find.
Q. In paragraph 33 you are plainly suggesting that the advice you are referring to is advice from Simon Paterson, aren't you?
A. Yes, in paragraph 33 I am referring to Simon.
Q. You are saying in effect in paragraph 33 that Simon Paterson had advised you that the fund couldn't purchase art from you as a member but there could be a sale of art to the broker and the broker sell to the fund?
A. That's true, yes.
Q. You are putting that forward in 33 as though that was Mr Paterson's idea rather than yours, aren't you?
A. Well, if that's the --
Q. Aren't you?
A. Yes.
151Ms Love did not give evidence. However Mr Browne gave the following evidence-in-chief (tr 441-442):
Q. Now, Mr Browne, Ms McBride has given evidence that, in about 2008 or 2009, you gave advice or recommendations to her on the topic of putting her Oliver sculpture into her super fund. Did you ever give her any such advice or recommendations?
A. No, I did not.
Q. In particular, Ms McBride has said - this is transcript 149 - that you suggested to her that what she might do would be to sell the Oliver to a broker or a dealer and then have the broker or dealer sell to the fund in order to avoid a related party problem. Did you say anything to that effect ever to her?
A. To the best of my recollection, I didn't. And I - I doubt that I would have because I don't give advice on superannuation. It is such a complex issue that if anybody ever asks me about artwork and superannuation, I always say to talk to their - their accountant, because everybody's situation is different.
Q. And then even more particularly, Ms McBride later said, this was at transcript 181 - that she received advice from her accountants, and if you would just try and follow this as I go through it - she said she received advice from her accountants that what she should do was have a round-robin of cheques, one from the broker to her, one from the fund to the broker, neither of which would be banked, so as to give the impression, not a true impression, that there had been an actual sale from her to the broker and an actual sale from the broker to the fund and she then said that all of that was consistent with your advice. Now, did you ever have any discussion with her about anything of the kind?
A. To the best of my recollection, no. And I can't see how that - that plan would work anyway because surely they're not real sales.
152Mr Browne's evidence in this regard was not challenged in cross-examination.
153Mr Paterson was called in the plaintiffs' case. He is a chartered accountant by profession and he swore an affidavit on 17 July 2014. There was no mention in that affidavit of any round-robin of cheques. Of course that evidence was first raised by the plaintiff during her cross-examination. Mr Paterson gave the following evidence in cross-examination (505-510):
Q. Yes. Did Ms McBride suggest to you at about this time or tell you or ask you for your advice on the possibility of selling down shares in her superannuation fund to buy some of her art?
A. She did.
Q. That was a suggestion on which she sought your advice?
A. Correct.
...
Q. Yes. Doing the best you can then, is it the best of your recollection that when Ms McBride said those things in that paragraph of the email that she was putting forward a proposal [of interposing a broker/dealer] that she had for your information, she was conveying an idea of hers to you?
A. Yes.
...
Q. Did you communicate to her that Mr Fitzgerald's view (one of his partners) was that unless the artwork was actually sold to the agent there would be a section 66 issue?
A. I did communicate to Louise McBride there would be an issue, I don't believe I used the section 66 in that correspondence.
Q. Did you communicate to her then that unless the artwork was actually sold to an agent there would be an issue of some kind?
A. I did.
Q. Did you communicate to her that the issue would be some kind of problem with related party provisions?
A. I believe I indicated that the issue would be a breach of the SIS Act.
...
Q. I'll try to it again. Mr Paterson, as you read that email now it seems to indicate that Mr Fitzgerald as at 27 January 2010 was under the impression that Ms McBride had indeed gone ahead with the proposal described in the 2009 emails, namely, to sell the artwork to her super fund via a dealer?
A. Yes.
Q. Mr Fitzgerald was saying that that being so the auditor would need to see the tax invoice for the purchase from the art dealer, agreed?
A. Agreed.
Q. That was your view too, wasn't it?
A. It was.
Q. Did you ever give advice to Ms McBride that what she should do in relation to a transfer involving a dealer or a broker was to do a round robin of cheques, which would never actually be banked?
A. I did not.
Q. Did you ever give her advice that what she should do was to have the broker write out a cheque to her, which she would never bank; and that the funds (sic) should then write another cheque to the broker, which would also never be banked?
A. Not to my recollection I didn't.
Q. Is that the sort of advice that you would remember giving, if you had given it?
A. I would.
Q. It's pretty unlikely that you would have advised any such thing, would you agree?
A. I agree.
Q. If you had known that she was considering any such thing you would have advised her against it, I take it?
A. I would have.
154Another aspect of the plaintiff's evidence was a conversation she claimed to have had with Roslyn Mary Oxley, an art dealer who carries on business at Roslyn Oxley9Gallery which was established by Ms Oxley in 1982.
155The plaintiff claimed that she had a conversation with Ms Oxley in February or early March 2014 in relation to the Sculpture. She claimed that Ms Oxley said that the Sculpture was a bigger work and more complex than Ms Oliver's other works in the Botanic Gardens and that without doubt her Sculpture was one of the best. The plaintiff claimed that Ms Oxley said that $800,000 (the asking price by the present owner) for the Sculpture seemed like "a fair price". She also claimed that Ms Oxley said that the plaintiff should never have put the Sculpture to auction.
156Ms Oxley, who was a most impressive witness, was given the opportunity to respond to these allegations both in her evidence-in-chief and in cross-examination. Ms Oxley denied that she had said these things to the plaintiff (tr 662; 665 - 669).
157On the ninth day of the trial when the claims in respect of the Sculpture were abandoned, the plaintiff tendered a written undertaking to the Court. The document became an exhibit (Ex K). It is signed by the plaintiff and is in the following terms:
I undertake to this Honourable court:
(a)within 35 days of this undertaking to obtain an opinion from Senior Counsel who specializes in revenue and superannuation law as to the consequences under the Superannuation Industry (Supervision) Act 1993 and the Income Tax Assessment Acts 1936 and 1997 of the matters disclosed in evidence in these proceedings and in particular concerning the acquisition and disposal of the sculpture known as Tracery created by Bronwyn Oliver;
(b)for that purpose to furnish to Senior Counsel all the material both before the court and in my working papers concerning the acquisition and disposal of the sculpture, including all documents relevant to the Family Court proceedings;
(c)within 14 days of receipt of Senior Counsel's opinion to seek a private ruling from the Commissioner of Taxation under Division 359 of Schedule 1 to the Taxation Administration Act 1953 as to those consequences and for that purpose to make all disclosures to the Commissioner as advised by Senior Counsel, including the material furnished to Senior Counsel and Senior Counsel's opinion;
(d)within 21 days of this undertaking to notify the NSW Bar Association of these undertakings and of the matters disclosed in evidence concerning the acquisition and disposal of the sculpture;
(e)within 7 days of receipt of Senior Counsel's opinion to furnish to the NSW Bar Association a copy of that opinion, and
(f)within 7 days of receipt from the Commissioner of Taxation of his response to the application for a private ruling to provide to the NSW Bar Association a copy of that response.
158Although there was no evidence given as to why the undertaking was tendered, it is clear that after the plaintiff was subjected to Mr Gray's withering cross-examination about the transaction relating to the Sculpture it was thought to be necessary.
159Counsel for Ms Sharpe submitted that from an analysis of the evidence the plaintiff has been shown to have given deliberately and demonstrably false evidence. It was submitted that when one untruth was uncovered, the plaintiff resorted to another untruth (tr 898; written submissions 1 August 2014 [5]).
160In response to these submissions the plaintiff's senior counsel submitted that although at times her evidence was confused and somewhat unreliable, the plaintiff was an honest witness (tr 938). It was also submitted that the plaintiff's credit is not relevant to the remaining issues in the proceedings. Unfortunately this last submission cannot be accepted. There is no doubt that some of the issues have fallen away by reason of the abandonment of the claims relating to the Sculpture. However there are factual matters for determination where the plaintiff's credit is relevant, for instance, in respect of the ownership of the Painting; the plaintiff's claim that Ms Sharpe exceeded her authority in purchasing the Painting for $75,000; whether Ms Sharpe gave certain advice to the plaintiff about the Painting; and the plaintiff's claims as to what she would have done had she been advised of the arrangement Ms Sharpe made to share in Menzies' hammer upside on the sale of the Smart (the secret commission).
161An attack was also made on Ms Sharpe's credibility and reliability as a witness. This attack included focus on the fact that the secret commission had been organised with Menzies in respect of the sale of the Smart. Ms Sharpe claimed that the non-disclosure was unintended. Indeed an offer was made in open Court (it having been made previously inter partes) for the money to be paid to the plaintiff. It was submitted on the plaintiff's behalf that the Court should not accept Ms Sharpe's evidence that the non-disclosure was not intentional (tr 822).
162Ms Sharpe was cross-examined about a number of matters including her conversations with the plaintiff during the evening of the auction. It was suggested to her that it was not unlikely that either during the auction or at some stage she said to the plaintiff "it's a very good piece" or "it would be a good buy" or "its under-valued at present and it is a good work". Ms Sharpe said that she did not recall saying "those things" (tr 731). She was then cross-examined further as follows (tr 731-732):
Q. I just want to deal with your first affidavit for the time being, if you don't mind. Now, I had put to you that it is not unlikely you had said those things. Do you recall that?
A. I didn't say that and I didn't have time to say them.
Q. And I want to suggest to you that you are not prepared to acknowledge that you said those things because you are concerned that if you are found to have said those things, that might in some way affect you in these proceedings?
A. I didn't say that at that time, no.
Q. You didn't say anything to her by way of recommendation of the work, is that your evidence?
A. I was negotiating the price of the Tucker with her. I did not have time to go into detail at that level.
163Although Ms Sharpe denied saying these things "at that time", this evidence is not consistent with her affidavit evidence. In paragraph 163 of her first affidavit Ms Sharpe gave evidence that at the time she spoke to the plaintiff on the telephone in London and informed her that if she wanted the Painting she would need to pay $75,000, the plaintiff asked her what she thought and she informed her that there were "similar Tuckers from this series hanging in major art museums and featured in books on Tucker and it's from a good period, the 1960's". She also said "I think it's probably worth $75,000". This inconsistency was not drawn to Ms Sharpe's attention in cross-examination. It may be that she would readily have accepted once being reminded of it that she did indeed have time to discuss this aspect of the Painting and to suggest to the plaintiff that it was "probably worth $75,000".
164I am very conscious that the events and the conversations about which the plaintiff and Ms Sharpe were being asked occurred fourteen years ago and I must take that fact into account in assessing the credit and reliability of each of the plaintiff and Ms Sharpe.
165The plaintiff was clearly unsettled when confronted with the reality of the inaccuracy of her claims and in particular her vulnerability in respect of possible breaches of the very legislation in respect of which she holds herself out as an expert. The approach the plaintiff adopted of making suggestions that had never been made before and then resiling from them is all the more inexplicable when one considers the fact that as a barrister, she should be exquisitely aware of the need for care in giving evidence on oath and making claims that are verified by affidavit. In all the circumstances it is very difficult to feel any sense of confidence in the accuracy of the plaintiff's evidence unless there is no issue about it or there is other corroborative evidence.
166There was no element of chaos in Ms Sharpe's evidence. She presented as a very savvy business woman. However I intend to take into account the abovementioned inconsistency and the fact that she accepted the arrangements for a secret commission in the circumstances outlined later, in weighing up her evidence where it conflicts with that of the plaintiff.
WHO OWNS THE PAINTING?
167An issue arose during the trial as to whether the plaintiff has standing to bring the various claims in relation to the Painting.
168As with other aspects of her claims and her evidence, the plaintiff's claim in respect of the ownership of the Painting changed over time. In her Statement of Claim filed on 14 February 2013 the plaintiff claimed that the purchase price of the Painting was paid as to $10,000 by her personal cheque in favour of Christie's and as to the balance by Capital Finance. The claim in respect of loss and damage included a claim for the purchase price of $85,000, commission of $2,000 and finance costs paid to Capital Finance of $23,916.
169On 11 April 2013 Christie's filed its Defence in which it claimed that the Painting was purchased by Capital Finance and that it paid $75,000 to Christie's.
170A year later on 13 March 2014 the plaintiff filed her Amended Statement of Claim. In this pleading the plaintiff amended her claim as to loss. It was alleged that Laurentine entered into a leasing contract pursuant to which it had an entitlement to exercise a right to acquire the Painting for its residual value at the expiration of the lease. The plaintiff claimed that she "made all of the Lease instalments and paid the residual value of the painting" resulting in a loss equal to the acquisition and holding costs. In this claim the plaintiff brought to account all of the lease payments in respect of the first lease and the second lease as well as Ms Sharpe's commission and the Buyer's Premium, totalling $124,473.27. Christie's filed its Defence to the Amended Statement of Claim on 5 May 2014 in which it alleged that Capital Finance paid the purchase price for the Painting and "ultimately" purchased it.
171In her Reply to Christie's Defence filed on 22 May 2014, the plaintiff alleged that she "made all of the lease instalments and paid the residual value of the painting from her own monies". It was contended that "Laurentine held its rights under the Lease and the right to acquire the Painting for its residual value on constructive or resulting trust" for the plaintiff. The plaintiff went further and particularised this claim. It was alleged that the initial payment was a personal cheque from her account and the forty-eight instalments on the first Lease were made by direct debit out of the plaintiff's personal account with the National Australia Bank (NAB). It was also alleged that the plaintiff paid the establishment fee for the second Lease and the thirty-nine monthly payments under it by deduction from her personal bank account with the NAB. She also alleged that on 22 August 2007 "the final payment was made and the lease expired" upon which the Painting "vested in Laurentine as constructive trustee" for the plaintiff.
172The plaintiff alleged that by reason of these matters she was "entitled to any economic benefit or liable to suffer any economic detriment" that flowed from the contract or the leasing agreement entered into for the purposes of financing the purchase of the Painting.
173The plaintiff's oral evidence-in-chief included an explanation that the Whale Beach property was in Mr Daniel's name and on settlement of the sale in 2007 the proceeds went into his account (tr 45). The plaintiff claimed that Mr Daniel made various payments on her behalf during 2007. The plaintiff had taken the Painting with her when she left the family home in March 2006. The plaintiff claimed that the Lease had not expired at this time and Mr Daniel "was continuing to make payments" (tr 46). She gave the following evidence-in-chief (without objection) (tr 48-49):
Q. Do you recall having a discussion or do you recall any discussion with Greg at that time as to whether he would make the payments or you would make the payments? This is after you had given up work with Deloittes.
A. He was going to make the payments, because I had no income, until I either resumed, you know, like I would either repay him or resume work and take over the payments.
Q. Can you recall a discussion about that, that is what I am trying to get out of you?
A. Yeah, well - no. I am sure we had discussions. But I can't recall exactly what was said in those discussions.
174In her affidavit of 17 July 2014 the plaintiff explained that until the bank statements had been produced in the proceedings on 25 June 2014 she had recollected that at least in 2006 and 2007 her husband had paid the amounts under the Leases. When the plaintiff reviewed the bank statements she had a discussion with Mr Daniel in late June 2014. The plaintiff gave affidavit evidence (once again without objection) that Mr Daniel advised her that he had found some "bills" that he had paid on the plaintiff's behalf which he had kept to show her how he had "adjusted the settlement sum for the house". In that affidavit the plaintiff claimed that Mr Daniel said (at paragraph [24]):
I have found another note...that says the account the payments came out of was Laurentine's account so I am not sure which account the payments were made from, it's a bit confusing but I deducted $45,500 from the balance of the money I owed you from the proceeds of the sale of the house. ... All I can remember is I never liked that painting and I hated making the payments for you because I always thought you should have got rid of it years ago so I was going to make sure you paid for it out of your share of the money from Whale Beach.
175The plaintiff claimed that she and Mr Daniel had discussions about the settlement of accounts between them and that she suggested that they needed a reconciliation because Mr Daniel owed her a substantial sum of money. Mr Daniel responded by suggesting that although he realised he owed money to the plaintiff it was "nothing like" what the plaintiff thought it was. He claimed that he had made a number of payments on the plaintiff's behalf including in respect of "the Tucker".
176The plaintiff's evidence in cross-examination on this topic exposed a number of deficiencies. She accepted that since April 2013 her understanding was that Mr Daniel had made payments from 2006 onwards (tr 68). She then gave the following rather extraordinary evidence (tr 68-71):
Q. And the change that's come about in June of 2014 is that it has come to your attention that it wasn't Greg who was making the payments but instead it was Laurentine?
A. And that he had made more payments than I thought.
Q. But it was always your understanding that he had made payments from 2006 onwards or from a date in 2006 onwards is that correct?
A. Yes.
Q. For at least as long as you had known about the second finance agreement you were of that understanding. Is that correct?
A. Yes.
Q. You've never believed that you made every single payment in respect of the second finance agreement, have you?
A. Well, it came out of what I was getting from the house so I did, in effect.
Q. Well, Ms McBride, I want to come back to paragraph 30 of your first affidavit where you swore to be true that you paid all of the instalments on the finance agreement which you say, by reference to what's in the affidavit, included the second finance agreement?
A. Yes.
Q. That statement was to your knowledge untrue, wasn't it?
A. You can constructively make payments and if somebody is going to deduct it from what they owe you, I don't see why that isn't a payment, Mr Muston.
...
Q. At the time that you swore that you had made all payments in relation to the second finance agreement you understood that from at least a date in 2006 payments had been made by Greg, didn't you?
A. Yes.
Q. And do you say to her Honour that the way that you reconcile that position with what's contained in the affidavit is your belief that anything paid by him was paid to your account?
A. That's correct.
Q. So you were seeking to wrap up in that paragraph the statement that payments were made by you and other people on your behalf in relation to the finance agreements?
A. Yes.
Q. That's not what you said though, Ms McBride, is it?
A. No.
Q. And in fact I want to suggest that that was not your state of mind when you came to swear that paragraph of the affidavit to be true at all?
A. No, that's not correct.
Q. Ms McBride, you were provided with a reply to the defence of the first defendant by your solicitors in these proceedings, weren't you?
A. Yes.
Q. You read it?
A. Yes.
Q. You swore it to be true?
A. Yes.
Q. That is, you verified the pleadings to the extent that it made allegations of fact they were true. That was your affidavit verifying the reply, wasn't it?
A. Yes.
Q. (Copy of reply to defence of first defendant shown). Could I ask you to turn to page 4 of that document, in fact commencing at page 3, paragraph 4.
A. Uh-huh.
Q. You see in paragraph 4 toward the foot of page 3, "McBride says the painting was ultimately purchased by Capital Finance but said that the purchase took place in the following circumstances".
A. Uh-huh.
Q. I ask you to turn the page over to page 4. You see in the particulars given at (v) to subparagraph (c) "an establishment payment of $1,507.03 was paid by McBride on 29 July 2004. Thereafter 39 monthly payments of $1,232.83 were deducted from the personal bank account of McBride held with the National Australia Bank".
A. That's correct.
Q. That is all of the payments referrable to the second agreement, isn't it?
A. Yes.
Q. And that is entirely inconsistent with any suggestion that the payments you were referring to in your first affidavit were payments made by you or by someone else on your behalf, isn't it?
A. No.
Q. Well, Ms McBride a payment made by Greg on your behalf could not have been deducted from the personal bank account which Ms McBride held with the National Australia Bank, could it?
A. At one stage we had a joint account but I can't find any information about it.
Q. Do you now say that payments made by Greg on your behalf to which you've referred may have been made out of a joint account that you both held?
A. No.
Q. You say, as I understand your evidence, that from at least some date in 2006 payments were made by Greg for your behalf, correct?
A. That's true.
Q. And those payments would have been made out of his account, would have been your expectation?
A. Yes.
Q. And as we know they were in fact made out of the account of Laurentine, at least as to some of them?
A. Yes.
Q. And no way could that circumstance be characterised as payments being deducted from the personal bank account of McBride, could they?
A. That's true.
Q. I want to suggest to you that the statement in particular (v) to subparagraph (c) is consistent with the instructions that you had given to your lawyers as at the date that the reply was prepared in May 2014. That's correct, isn't it?
A. Yes.
Q. And having given them those instructions you could not have been of the belief in August of 2013 that a reference you made in paragraph 30 to payments being made by you was in fact a rolled up reference to payments someone else had made, would it?
A. Well, by this stage I had separated from Greg and taken the painting with me, so yes, you're right, but --
Q. By August 2013 when you swore your affidavit you had separated from Greg, hadn't you?
A. I had separated from Greg in 2006.
Q. Yes, and at the time that you came to reflect on the situation in August 2013 and swear your affidavit you knew that payments had not been made from your personal bank account in respect of the finance agreement, didn't you?
A. That all the payments hadn't been made from my account.
Q. That some of the payments in relation to the second finance agreement had not been made by you?
A. That's true.
Q. What I wish to suggest is that in swearing to the truth of paragraph 30 of your first affidavit you were wishing to convey that they had been made by you personally, weren't you?
A. Yes.
177The plaintiff was then taken to the Amended Statement of Claim that was filed on 13 March 2014 in which she had claimed in the particulars to the alleged loss that she had paid all the Lease instalments. She gave the following evidence (tr 72-73):
Q. Once again making the allegation that all of the lease instalments were paid by you. You accept now that that's incorrect?
A. Yes.
Q. I want to suggest that at the time that you verified that document you were, on your evidence, aware of the fact that the payments had not been made by you. Do you accept that?
A. No. This is on 13 March 2014.
Q. As I understand the evidence you've given it is some time after you were aware that the payments had been made by Greg from at least some date in 2006?
A. That's true.
Q. So you accept that at the time that you verified this pleading you were aware that the allegations made at least in that paragraph were not correct?
A. Yes.
178Mr Daniel swore two affidavits in the proceedings, one on 7 August 2013 and the other on 16 April 2014. The only relevant evidence on this topic in those affidavits was in the first affidavit as follows:
32. I can also recall that Louise had to organise leasing through Peter, who was the financier that we had previously used for the financing the paintings. This was due to the fact that the price of the painting had exceeded Louise's cash budget. Although I cannot recall the figure now, I recall thinking at that time that Louise had paid too much for the painting.
33. The Tucker painting was always considered as Louise's painting. Although we were married and shared our assets, at the time of our separation, Louise retained the Tucker which we considered to be hers, the Oliver sculpture that she had negotiated and arranged through Vivienne, the Smart paintings, the Boyd and maybe some others.
179Prior to Mr Daniel being called to give evidence an outline of anticipated evidence in addition to that in his affidavits was served on the defendants. That outline dealt with the topic of the payments between Laurentine and Capital Finance. It did not become an exhibit. In his evidence-in-chief, Mr Daniel claimed that the plaintiff resigned as a director of Laurentine in 2003 and he gave the following evidence-in-chief (tr 157 - 158):
Q. From 2003 how did you run Laurentine?
A. Well, Laurentine was me in effect. I acted as a consultant, post 2003 when I had ceased being Chief Executive of a company that I had a five year contract with. I acted as a consultant to a number of companies and I was the, and I invoiced those companies for a time as Laurentine Pty Ltd. It really was, turned out to be more of a complication than a benefit, and after some years I ceased to do that and just invoiced under my own name.
Q. So it used to receive income from various consultancies which you carried out?
A. That's correct.
Q. Effectively in its name?
A. That's correct.
Q. What happened to the monies which it received?
A. Well, the monies were treated by me as an income and the company had very few overheads, apart from statutory requirement and registrations, et cetera. So the money was simply used by me as income and part of it obviously proportion for tax.
Q. If in fact it met expenses for you did you have a loan account with the company?
A. I had a loan account with the company, yes, it was adjusted in the books by Simon Paterson.
Q. There has been tendered in these proceedings a copy of bank statements of Laurentine. I can show them to you if you wish by they effectively show monthly an amount of $1,232.83 was paid out to Capital Finance?
A. Yes.
Q. I think it is not disputed that was in respect of a Tucker painting?
A. That is the fake Tucker, that's correct.
...
Q. How as a director of the company did you treat them?
A. Well, they were, adjustments were made on the loan account to take those payments into consideration. I mean, they were as far as I was concerned payments made by me via my income on Louise's behalf.
180Mr Daniel gave evidence that the second Lease expired in March or April 2007. He said that the Painting was never brought to account in the books of Laurentine. It was never treated as an asset of Laurentine and there was no tax deduction ever claimed for the Painting. He said that it was always regarded as the plaintiff's property. Laurentine itself owned a number of paintings and it kept a register of paintings. However Mr Daniel claimed that to his knowledge the Painting was never in Laurentine's register of paintings. Laurentine is in liquidation. Although there is a report from the liquidator in evidence raising questions about the location of some of Laurentine's artwork, there is no mention of the Painting.
181Mr Daniel produced a note of payments that he made in relation to the Painting totalling $17,246 (Ex C). He kept that note so that he could deal with it in the final reconciliation with the plaintiff in respect of their property settlement. He explained that this amount represented the payments after the time that he and the plaintiff separated in 2006 up to the end of the second Lease.
182Christie's submitted there is no reason to presume that the payments made by the plaintiff on Laurentine's behalf were not always intended to be treated by the plaintiff and Laurentine as a loan. Christie's also submitted that there is a fundamental problem for the plaintiff because at the time the second Lease was entered into in July 2004, Laurentine acknowledged that Capital Finance was the owner of the Painting (cl 7.1). It was submitted that this acknowledgement is totally inconsistent with the plaintiff's asserted beneficial interest in the Painting.
183The plaintiff's evidence referred to above in relation to the arrangement that she made with Mr Daniel pursuant to which he would pay the instalments on her behalf through Laurentine to Capital Finance was that this occurred in 2006. This of course was two years after Laurentine became liable to Capital Finance in respect of the second lease. It seems on one view of the evidence that the plaintiff may have been confused about the date upon which she reached such an arrangement with Mr Daniel. However Christie's contends that no such arrangement was ever in place. It was submitted that this is evidenced by a document in the form of draft Minutes of Order in the Family Court prepared in 2006 in anticipation of the plaintiff's property settlement with Mr Daniel. There was no mention in that document of an adjustment for Mr Daniel making payments in respect of the Painting on the plaintiff's behalf.
184The draft Minute of Order sets out the arrangements that the plaintiff and Mr Daniel had proposed in respect of the sale of the Whale Beach property and many other aspects of the separation of their assets and combined lives. The draft Minute identified the "wife's contents and art" as those contained in Annexure C to the Minute. The Painting was listed in Annexure C with a value of $90,000. It would appear that in 2006 the parties certainly intended that the Painting belonged to the plaintiff. However at this stage the Painting was still subject to the second Lease and it was not until 2007 that Capital Finance was paid out. The draft Minute also recorded that Laurentine had assets in its own right as well as acting as trustee of the Laurentine Trust.
185Mr Daniel claimed that he was making payments through Laurentine to Capital Finance and that those payments were booked in Laurentine's accounts to his personal loan account. There is no document to support this claim. Laurentine is in liquidation and no books or records, other than the trust deed and a liquidator's report have been made available to the parties. Mr Daniel could not recall whether he gave instructions to his accountant (Mr Paterson) to treat any payments made by Laurentine as payments by him on the plaintiff's behalf or by Laurentine on the plaintiff's behalf. It is apparent that Mr Paterson did not receive any instructions in respect of the claimed arrangement.
186Christie's submitted that even if such an arrangement existed, it would not give rise to a resulting trust in favour of the plaintiff. It was submitted that at best it could be characterised as a loan arrangement between Mr Daniel and the plaintiff.
187I accept that the only reason Laurentine was involved in the transaction for the purchase of the Painting was to enable the plaintiff to obtain finance for the Painting. Notwithstanding that Capital Finance paid Christie's, and that legal title would pass to Laurentine at the conclusion of either the First Lease or the Second Lease when Capital Finance was paid out, I am satisfied that it was always intended that the plaintiff would be responsible for the payments and would ultimately own the Painting.
188At the time that the second Lease was entered into by Laurentine, I am satisfied that agreement was reached between the plaintiff and Mr Daniel that he would make the payments and that the plaintiff would repay him when she returned to work (tr 156). At this time in 2004 the plaintiff had ceased work for a period and she and Mr Daniel were still living together in the family home at Whale Beach. Mr Daniel then arranged for the payments to be made by Laurentine and I accept that he did so on the basis that these payments were booked to his loan account (tr 158). The amounts paid by Mr Daniel, through Laurentine, have either been repaid by the plaintiff or will be brought to account in the final reconciliation between the plaintiff and Mr Daniel.
189The plaintiff claimed in her evidence that Laurentine was a bare trustee of the Painting. In Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 Gummow J said at 281:
Today the usually accepted meaning of "bare" trust is a trust under which the trustee or trustees hold property without any interest therein, other than that existing by reason of the office and the legal title as trustee, and without any duty or further duty to perform, except to convey it upon demand to the beneficiary or beneficiaries or as directed by them, for example, on sale to a third party. ... Also, the term "bare trust" may be used fairly to describe the position occupied by a person holding the title to property under a resulting trust flowing from the provision by the beneficiary of the purchase money for the property.
190Christie's submitted that the plaintiff did not provide the purchase money for the Painting and accordingly the Painting remained the property of either Capital Finance or Laurentine. It is true that the evidence is wanting in respect of the actual steps that were taken at the conclusion of the second Lease. The second Lease expired in 2007, approximately 12 months after the plaintiff and her husband had separated. Laurentine's bank records (Ex B) record the monthly payments made to Capital Finance in respect of the Painting under the second Lease. There is no record of the residual payment at the expiration of the Lease. However the irresistible inference is that the Lease was paid out by either Laurentine at Mr Daniel's direction or by Mr Daniel.
191Christie's submitted that the plaintiff did not provide the purchase price in the sense contemplated in Calverley v Green (1984) 155 CLR 242. I am satisfied that the plaintiff paid such price or was liable to repay the purchase price that was paid by Mr Daniel through Laurentine on the plaintiff's behalf.
192Christie's also submitted that the payments made by the plaintiff and/or by Mr Daniel on the plaintiff's behalf through Laurentine were but mere rental payments and there could be no presumption of a resulting trust in the circumstances. In this regard Christie's relied upon Savage v Dunningham [1974] Ch 181. That was a case in which two flatmates contributed to the rental of an apartment the tenancy of which had been granted to the third flatmate. When the third flatmate took steps to "sell" the lease of apartment the other flatmates sought a declaration that he held the apartment on trust for them. Plowman J observed that he saw no reason in principle why a resulting trust should not arise where others have contributed to a premium but that there was no authority for the proposition that the expression "purchase-money" in the context of a resulting trust could include rent. Plowman J also said at 184-185:
Rent, unlike purchase-money, is not paid for the acquisition of a capital asset, but for the use of a property during the term. In my judgment, therefore, the fact that the plaintiffs and the defendant shared the rent does not establish a resulting trust in favour of the plaintiffs.
193In the present case the "purchase-money" was paid by Capital Finance to Christie's (except for the Buyer's premium that was paid directly by the plaintiff). The finance was provided pursuant to the Equipment Lease which provided that Laurentine could "at any time during the Term" purchase the Painting by paying Capital Finance the Early Termination amount (cl 3). In addition, although Laurentine accepted that it was a bailee of the Painting during the term of the Lease, the title vested in Laurentine on payment of all monies under the Lease (cl 8). That is a very different situation to that with which Plowman J was dealing in Savage v Dunningham. In that case there was no basis upon the payment of all rental accounts under the lease could result in the legal title of the apartment vesting in the tenant.
194It is clear that the personal and financial arrangements between the plaintiff and her husband in the period during which their marriage was breaking down and indeed thereafter were somewhat untidy. Mr Daniel's business interests were affected by the global financial crisis in 2008. Both the plaintiff and Mr Daniel were displaced from their regular living arrangements; the plaintiff staying with friends and/or living in rented properties; and Mr Daniel moving his residence and staying in hotels from time to time.
195There is no express written declaration of trust in respect of the Painting. However on balance I am satisfied that it was always intended that Laurentine would be a bare trustee holding the legal title as trustee with a duty to convey the Painting upon demand by the plaintiff. The Painting remained in the Whale Beach premises until 2006 when Laurentine, through Mr Daniel, permitted the plaintiff to take possession of the Painting, although at this time it was still the subject of the second Lease. However as I have found above, Laurentine paid out Capital Finance and it then held the legal title in the Painting. Laurentine conveyed the Painting to the plaintiff at this time albeit that it had already allowed the plaintiff to take possession of it. The financial reconciliation of the loan account between Mr Daniel and Laurentine is a matter between them and does not affect the plaintiff's position vis-à-vis the Painting.
196I am satisfied that the plaintiff owns the Painting. The plaintiff is entitled to bring the proceedings in respect of the Painting.
IS THE PAINTING A FORGERY?
197The plaintiff alleges that the Painting is a forgery. She also claims that the Painting "is of doubtful provenance and it is worthless as an investment because it cannot be sold as a painting by Albert Tucker". Christie's and Ms Sharpe did not admit these allegations. Mr Holland and HFA claimed that they did not know and could not admit the allegations.
198Professor Robyn Joyce Sloggett is a Professor at the Centre for Cultural Materials Conservation (CCMC) at the University of Melbourne. From 1999 to 2004 Professor Sloggett was the Deputy Director and Grimwade Chief Conservator at the Ian Potter Museum of Art. The CMCC programs include attribution and authentication assessments of artwork where there is doubt about the authenticity or provenance of the work. The Painting was delivered to the CMCC for staff to provide an assessment of its "fit" within the oeuvre (the total artistic output) of Albert Tucker.
199Professor Sloggett examined the Painting commencing on 7 December 2010 and produced a report entitled "Report on the Technical Examination of a Painting on Board" on 14 September 2012. Professor Sloggett described the Painting as portraying "an abstract figure (Faun) with a parrot perched on its head" within an abstract landscape.
200The works by Albert Tucker in State collections featuring the Faun and/or parrot motif include Seated faun (1956) National Gallery of Australia; Explorer and parrot (1960) National Gallery of Victoria; Explorer attacked by parrots (1960) National Gallery of Victoria; Faun attacked by a parrot 3 (1968) Art Gallery of New South Wales; and Armoured faun attacked by parrots (1969) National Gallery of Australia.
201Professor Sloggett's report included the following:
While the imagery of this painting fits within the subject matter and the overall appearance (motifs and support) of works by Tucker that depict parrots and "Fauns", there are a number of points of identification that do not align with evidence that we would expect for a work of this subject produced by Albert Tucker in 1969. An assessment of the provenance and art historical information to determine whether a work of this subject, size and appearance was listed in any exhibition catalogue or mentioned in any reviews, did not indicate a match for this work, however images for the exhibitions in Mexico were not available. These catalogues do not list a work title 'Faun and Parrot' and this work does not match those with the titles 'Faun Attacked by Parrot'. The work in question does not appear to be of similar dimensions to those in the image of Tucker and works in the parrot series taken at the Chelsea Hotel in 1969 (NLA).
202Professor Sloggett concluded that there were anomalies in relation to the material used in the construction of the Painting. Although the Painting exhibited some indications of age, "the condition and solubility of the paint layer does not show any clear evidence of age". Professor Sloggett concluded that in the absence of secure provenance and in the light of a number of inconsistencies in the materials used, the Painting "cannot" in the circumstances "be attributed to Albert Tucker".
203Professor Sloggett also analysed the stylistic aspects of the Painting and found further anomalies. The Professor concluded that the Painting had stylistic, construction and application methods that were "very different" to the securely provenanced works of Albert Tucker in particular in comparison to the 1978 painting "Attacking Parrots" (the closest in format to the Painting). The delineation between the landscape and the sky is very abrupt in the Painting, whereas the land merges into the sky in hazy, blended colours in the securely provenanced works. Professor Sloggett also observed that there were no trees receding into the distance in the Painting which are apparent in the securely provenanced works. Another aspect was the blending of the colours of the sky in the Painting which was less complex than in the securely provenanced works. Those works contained skies made from blue/pink/yellow layers of paint, worked "wet-in-wet into one another" whereas the Painting had only a simple wash of blue and yellow.
204Professor Sloggett also observed that the securely provenanced works of Albert Tucker demonstrated that he worked up his backgrounds carefully with evidence of a layered sequencing incorporating a "ground up" approach (working from the first layer and adding sequentially to build the image). In the Painting the application of the paint is structured horizontally down the picture plane, commencing with the wash at the top to the very different application in the lower half of the plane. Professor Sloggett said that the ambiguous infilling of the space inside or through the body of the Faun was not indicative of the working method in the securely provenanced works. The application of the background was also very unlike any found in those works, particularly in the lower half of the plane.
205Professor Sloggett also highlighted the paint application of the feathers of the parrot being "quite different" from the securely provenanced works. In the Painting the feathers are painted in short diagonal strokes, whereas the securely provenanced works have the feathers constructed of longer sweeps of paint or, where they are highly impastoed, applied much more loosely and in blocks of colour.
206Professor Sloggett also identified aspects of the composition that were at odds with the securely provenanced works including the shape of the Faun's mouth and the angle of the shoulders. In addition the paint application of the parrot's eyes in the Painting was very simple; a black dot on white background. In the securely provenanced works there is "more tonal modelling and colour variation in the eyes of the parrots". The application of the paint on the parrot's head in the Painting is also very different to those of the securely provenanced works. In the Painting the circle form of the head is delineated with a single black circular line. In the securely provenanced works there are variously coloured brush strokes that form the circle. In the securely provenanced works the modelling in the lips of the Faun have highlights and lowlights to render depth and indicate special gradation. Whereas in the Painting there is only a dark layer covered with an even layer of purple creating a flat, one-dimensional appearance. Additionally the two horizontal lines below the Faun's eyes are not represented in any of the other securely provenanced works. The method of application of the blue paint on the throat of the parrot in the Painting is also unique to the Painting and not in any of the other securely provenanced works. Professor Sloggett said that this appeared anomalous with Albert Tucker's working methods.
207Professor Sloggett conceded that the Painting has some of the format of the 1969 work Armoured Faun attacked by parrots. Notwithstanding that concession Professor Sloggett said the paint application is different and the stance of the faun in the Painting appears to be the reverse image of the 1969 work. She concluded that there were many anomalies evident in the Painting and that by comparison with the securely provenanced works of Albert Tucker the Painting "is not a fit within the oeuvre of Albert Tucker" and "cannot be ascribed to the oeuvre of Albert Tucker".
208Ms Minchin is the current director of Tolarno Galleries and previously worked with the Galleries' founder, Georges Mora. Ms Minchen retrieved the Tolarno Galleries exhibition records from storage and although they are incomplete, they referred to exhibitions by Albert Tucker in 1978, 1982, 1985 and 1990. Ms Minchin became aware from her dealings with Albert Tucker that he had a long standing and close relationships with Georges Mora when Mr Mora was the owner of Tolarno Galleries. There is no record in the documents that Ms Minchen retrieved of the Painting being included in any of the exhibitions from 1978 to 1990. Mr Browne and Mr Gant, to whom I will refer a little later and indeed Ms Sharpe, considered that notwithstanding that Australian Galleries represented Albert Tucker at the relevant time, it was possible that he sold paintings to Georges Mora, who is a friend of his, or swapped them to settle bills at Mr Mora's Melbourne restaurant, Balzac.
209These views seem to me to amount to speculation whereas Professor Sloggett's opinion is complemented by that of a handwriting expert, Neil Holland. Mr Holland, a director of Scientific Document Services Pty Ltd, conducted tests on the signature on the Painting. In his very detailed report Mr Holland identified stroke sequences in the signature on the Painting that were not common to the signatures on the securely provenanced works of Albert Tucker. He identified numerous dissimilarities and concluded that it is "highly probable" that the Painting was not signed by the same person who signed a number of securely provenanced Albert Tucker works.
210Although Mr Smith's affidavit evidence was not relied upon for the purposes of him expressing an expert opinion, it is relevant to include consideration of his views as expressed to Ms Sharpe after he had examined the Painting in February 2010 and having regard to his claimed expertise in respect of Albert Tucker's works. Mr Smith observed that the Painting appeared to have been created in relevantly recent times and did not bear the hallmarks of a work created in the late 1960's. He also expressed the view that the technique was dissimilar to that of Albert Tucker. He said it was "unemotional" and that the composition was a hybrid of several known paintings of Albert Tucker. His view was that the Painting did not tell an "authentic story" and there was no "essence of the creator". He also expressed the view that the "whole sway" of the Painting was wrong.
211Lesley Harding, a curator of the Heide Museum of Art in Bulleen, Victoria, since 2005 gave affidavit evidence in respect of the Albert Tucker Archive which was donated to the Museum in 2011 by Albert Tucker's widow. That Archive includes books previously owned by Albert Tucker, catalogues of his work and that of other artists, tape recordings, interview transcripts, newspaper clippings, original artworks and sketchbooks, typescripts of talks, lectures and articles by the artist, diaries, photographs of paintings, personal photographs and other material relating to Albert Tucker's life and career. Ms Harding said that she had searched the Albert Tucker Archive and had not been able to find a photograph of the Painting. She also searched the Australian Galleries photographic archive of Tucker paintings which is housed at the Museum comprising mostly 1960's works. That Archive does not contain a photograph of the Painting.
212Peter Gant, from whom HFA purchased the Painting, has owned a number of art galleries and dealt in art over the years since 1978. However he is presently an undischarged bankrupt. Mr Gant's evidence, referred to below in respect of the plaintiff's case against HFA and Mr Holland, included a claim that he was "satisfied as to the authenticity" of the Painting. It also included an explanation of the basis upon which he satisfied himself of the authenticity of the Painting. Notwithstanding his evidence that his usual practice was to undertake due diligence on artwork by physically inspecting it, checking the provenance and researching any documented history of the artwork, he departed from this practice in respect of the Painting. He concluded that the Painting was authentic based on his "examination of the actual painting". Mr Gant recognised that he is "probably the only person that is totally convinced it is not a fake" (tr 601). There was no explanation as to why Mr Gant had departed from his usual practice in this instance.
213Mr Gant's satisfaction as to the authenticity of the Painting does not take into account the detailed analysis of the painting by Professor Sloggett and by Mr Neil Holland. Rather it is based on being "familiar" with Albert Tucker's work over the years. Being familiar with the works of an artist and being convinced that a painting is the authentic work of an artist are two quite different concepts. The former can come from dealing with the artist's work over the years and/or studying the artist's work. The latter involves deeper analysis of the artwork and comparison with works that have been authenticated. In this instance the Painting purported to be part of a particular series of works by Albert Tucker involving a faun and parrots in various modes. Familiarity with the works in a series may, on one view, if a painting is a skilful forgery, lessen the sensitivity to perceived differences in the work.
214I prefer the detailed analysis of Professor Sloggett in combination with that of Mr Neil Holland over Mr Gant's claims.
215The Statement of Authenticity and Valuation made by Karen Woodbury do not contain any close analysis of the attributes of the Painting. It has to be viewed in the light of the evidence referred to above and also the views reached at the Symposium in August 2000.
216In all the circumstances I am satisfied on the balance of probabilities that the Painting is a forgery.
ARE THE CLAIMS STATUTE BARRED?
217The defendants contended that any loss was suffered immediately upon purchase of the Painting in 2000 and accordingly the plaintiff's claims are statute-barred. The defendants claimed that the alleged defects in the Painting were not latent.
218The plaintiff submitted that her causes of action in negligence and under statute for misleading and deceptive conduct and unconscionable conduct only accrued in 2010 when she suffered the loss and damage upon which she sues. In this regard it was submitted that it is important to appreciate that the loss for which the plaintiff sues is economic loss. It was submitted that it follows that the only loss that could have been sustained by the plaintiff was the "economic loss which would be involved if and when the defect was actually discovered or became manifest, in the sense of being discoverable by reasonable diligence, with the consequence that the damage was then sustained by the then owner": Hawkins v Clayton (1988) 164 CLR 539 at 588; Cyril Smith & Associates Pty Ltd v The Owners - Strata Plan No 64970 [2011] NSWCA 181 at [8]-[14]; Scarcella v Lettice (2000) 51 NSWLR 302 at [13]-[24].
219The plaintiff submitted that the economic loss upon which she sues was consequent upon the emergence of the fact of the forgery and that is what brought the plaintiff's causes of action into existence.
220It was submitted that this analysis is consistent with the statement of principle in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 that a plaintiff cannot be compelled to commence proceedings "before the existence of his or her loss is ascertained or ascertainable" (at 527). Whether the loss will ever eventuate and its extent will depend upon the defect being exposed. In this regard the plaintiff relied upon the following passage of Sackville J's judgment in Karedis Enterprises Pty Ltd & Greenfriars Pty Ltd v Antoniou (1995) 59 FCR 35 at 47:
In proceedings under s 52 and s 82 of the Trade Practices Act it is often the case that a purchaser acquires an asset on the faith of a false representation and that asset is shown, by subsequent evidence, to have been worth less at the time of the purchase than the price paid. It is also often the case that the purchaser, at the date of acquisition, neither knows nor has the means of knowing that the representations are false, nor that the business is worth less than the price paid. To use the language of the majority in Wardley, it would seem unjust to compel such a purchaser to institute proceedings before the existence of his or her loss is ascertained or ascertainable by that person.
221The plaintiff submitted that in this case the open market sale of the Painting demonstrated its market value. There was a contingent risk that the fraudulent character of the Painting would be discovered in the future. It was when that risk came to pass that the loss was suffered.
222The question is whether reasonable diligence by the plaintiff could have discovered the fact of the forgery at an earlier time. It was submitted that the fact that the defendants could and should have discovered the forgery prior to the sale, or at least the time of substitution of Capital Finance, does not mean that the plaintiff could have done so. It was further submitted that the defendants ought to have discovered the forgery in accordance with the reasonable practice of persons in their position in relation to the transaction. A reasonable person in the position of the plaintiff would not so have discovered it. In this regard the plaintiff relied by way of analogy on Christopoulous v Angelos (1996) 41 NSWLR 700 (the purchase of a property without knowledge of the existence of a right-of-way) and Registrar-General v Cleaver (1996) 41 NSWLR 713 (the omission from the Register of a restrictive covenant over a neighbouring property).
223The plaintiff submitted that her reasonable diligence could not have discovered the fact of the forgery before she was informed of the problems with the Painting in 2010.
224It would appear that prior to the auction numerous people were duped into believing that the Painting was painted by Albert Tucker. This included not only a respected auction house but also respectable art experts. Although there was a sense of unease in Ms Diggins and the artist's widow at the time of the auction, nothing was said or done until mid-2000 when Christie's (Ms Hayward) became concerned about the fact that it had a number of paintings from the same source.
225In my view the plaintiff did as much as could reasonably be expected in the circumstances to check the authenticity of the Painting. Even in 2010 when Mr Smith of Sotheby's alerted Ms Sharpe to the prospect that the Painting had a dubious provenance, it still took some weeks with very experienced experts analysing the background and provenance and inspecting the Painting for it to be withdrawn from the March 2010 auction.
226The fact that the plaintiff's personal assistant received the O'Sullivan letter without notation would not have alerted the plaintiff to the fact of forgery. To this day the Painting has not been declared to be a forgery. That may have been driven by commercial imperatives. However those with far more expertise than the plaintiff were duped for years. The defendants' claims that the plaintiff should have been able to identify the Painting as a forgery at an earlier time is not sustainable.
227The plaintiff was not made party to Christie's concerns. Nor was she made aware of the expressions of opinion at the August 2000 Symposium. The plaintiff was blissfully ignorant of the defect in the Painting until Mr Smith viewed the Painting and discussed the difficult provenance with Ms Sharpe in early 2010. I am satisfied that reasonable diligence by the plaintiff could not have disclosed the fact of the forgery at an earlier time.
228The plaintiff suffered loss when the defect in the Painting was discovered and it was withdrawn from the March 2010 auction. I am satisfied that the plaintiff's claims in respect of the Painting are not statute barred.
CLAIMS AGAINST HFA
229It is alleged that HFA made false representations that were misleading or deceptive in contravention of s 52 and 53(a) and (eb) of the TPA; s 42 and 44(a) and (i) of the FTA and/or s 12 of the FTA Vic. It is alleged that such contraventions "caused" the plaintiff loss and damage.
230It is alleged that Alex Holland, acting on behalf of HFA, represented to Christie's at the time that the Painting was placed with Christie's for auction that:
(a)The Painting was a painting by Albert Tucker;
(b)The Painting was the unencumbered property of HFA;
(c)The Painting had been painted by Albert Tucker in 1967;
(d)The Painting had been purchased from Tolarno Gallery, St Kilda, in Victoria, in 1969-70;
(e)The Painting had been in the collection of a Mr B O'Sullivan since 1980;
(f)Mr B O'Sullivan acquired the Painting from his father;
(g)The Painting was a study for a painting entitled "Faun being attacked by Parrots 1967";
(h)A painting by Albert Tucker entitled "Faun being attacked by Parrots 1967" was exhibited in Mexico City in the late 1960s; and
(i)There was no doubt about the provenance of the Painting.
231HFA contends that any representations found to have been made, were made by HFA and not by Mr Holland. It admitted that it made representation (a) and denied that it made the representations (b) to (i).
Representations made in the Receipt
232It is alleged that the representations (a) and (b) were made in writing in a document entitled "Christie's Receipt Form" dated 11 February 2000 signed by Alex Holland on behalf of HFA and David Cook on behalf of Christie's (the Receipt).
233The Receipt signed by Mr Holland on behalf HFA included a description of the Painting as "Albert Tucker Faun + Parrot". The Receipt noted that it was seen by "DC". There is no issue that this was a reference to Mr Cook. It included the reserve at $55,000 and a "Provisional Estimate" of "55,000-75,000". The proposed sale date was noted as May 1 & 2 2000. The Receipt included the following:
I confirm that the above information is correct and I request you to offer these goods for sale in accordance with your published conditions of business. My attention has been drawn in particular to the conditions overleaf, and I confirm that the item(s) offered for sale is/are my own unencumbered property.
234The signature on the Receipt confirming that the "above information" was correct, confirmed that the Painting was correctly described as Faun & Parrot by Albert Tucker. The confirmation that the Painting was HFA's own unencumbered property was also signed by Mr Holland. I am satisfied that representations (a) and (b) were made by HFA to Christie's.
Representations made in the Holland letter
235It is alleged that representations (c) to (h) were made in the Holland letter. It is alleged that representation (i) was expressed in or is to be inferred from what was said in the Receipt and the Holland letter.
236Mr Holland gave evidence-in-chief about the Holland letter (which is the document referred to at page 1515 of Ex PD). It was as follows (tr 530):
Q. Do you have any recollection of having received the document, which is at page 1515?
A. No, I do not.
Q. At the top of the page it has the words "attention Alex Holland" and a fax number, do you recognise that fax number?
A. Yes, it is the office fax number.
HER HONOUR
Q. Of Holland Fine Art, or the --
A. Well, yes.
237In cross-examination Mr Holland gave the following evidence (tr 551-552, 562-569):
Q. You have got no reason to believe, Mr Holland, that you didn't receive that fax?
A. That's correct.
...
Q. If you assume that this document is located within the records of Christie's in relation to the Tucker painting, you have got no reason to believe that you or someone on your behalf did not provide it to Christie's at some time prior to that May 2000 auction?
A. That's correct.
...
Q. It is inconceivable, isn't it, that you did not have this in your possession at some stage prior to the auction on 1 May 2000 because it has your name and your fax number on it?
A. No, I said that.
...
Q. It is inconceivable that you didn't provide it to Christie's?
A. No, I probably did. I haven't denied it.
Q. And in it you didn't provide details of the sale from Mr O'Sullivan to Mr Gant's Irascible Galleries, and from Mr Gant's Irascible Galleries to you, to Holland Fine Arts?
A. Christie's would have known that it came from me because I consigned the work.
Q. But they could have thought you were a dealer handling it on behalf of Mr O'Sullivan, that's one possibility?
A. I doubt that.
Q. Why do you doubt that?
A. Because as a dealer if I would have handled something that came from a private customer I probably ask for a commission.
Q. What I want to suggest to you is that you deliberately did not include in this document the provenance details of the sale from Mr O'Sullivan to Irascible Galleries and from Irascible Galleries to Holland Fine Arts?
A. I did not delete anything, I handed a piece of paper that supposedly I received back in 2000.
Q. Who did you get it from?
A. I can not recall.
Q. It must have been Mr Gant, mustn't it?
A. I can't take assumption, it came to my office.
Q. Why can't we make that assumption, you say you didn't know Mr O'Sullivan?
A. That's correct.
Q. So who else could it have come from?
A. It could have come from Mr Gant, it could have come from anyone in his office. I don't know where it came from. There is no receiving; there is no heading; there's no with compliments slip; there is no thanks, here what you need. Nothing says where it came from. It arrived to my fax number in our offices, and I would have passed it on.
Q. To Christie's?
A. Yes.
Q. You are suggesting to this Court that all came as a big surprise to you that it came to your offices?
A. I never said it was a surprise. I said when - I do not recall receiving it but because I had received it or because it is addressed to me that I must have passed it on to Christie's.
Q. And I would suggest to you that it is also indubitably the fact that you asked for that document of provenance from Mr Gant?
A. I do not recall that and I don't believe that.
Q. What, so he just sent it to you voluntarily without request, is that what you are seeking to suggest to the Court?
A. I don't know where it came from so I can't suggest it was from Mr Gant or I requested it.
Q. I have tried to eliminate the possibility that you didn't know Mr O'Sullivan, so it is unlikely it came from Mr O'Sullivan, isn't it?
A. That's correct.
Q. You have, I think, accepted that it could have come from Mr Gant or one of his employees?
A. It may have come from their office, yes.
Q. That is about the universe isn't it? There is no-one else? You would agree with that?
A. Yes.
...
Q. And I want to suggest to you that you forwarded the provenance document which I put to you at page 1515 of the bundle to Christie's, deliberately excluding any reference to Mr Peter Gant or his Irascible Gallery?
A. I answered that previously. I did not hide any information deliberately. If this paper which is a provenance came to my desk because it is addressed to me I would have handed it on as it is. I did not put my name to it. I did not include myself as a provenance because it was consigned from me. I would not add my own name to it.
...
Q. Why did you provide that to them?
A. Because it must have come to my desk.
Q. Why did you provide it, because if it came to your desk it is not your habit as I understand it, to provide information unless asked for, why did you provide it to them?
A. I do not recall the circumstances. As I say, I did not recall receiving it, but if it had come to my desk it would have been passed on, it must have.
Q. Why would you pass it on if it was not (sic) your practice not to provide information unless you were asked for it?
A. It's a long time ago.
Q. Would you not agree with me that if you gave that document to them, as I think I have agreed, you should have provided them with the details of the transaction with Mr Gant?
A. As stated, it's not common practice to divulge where you buy work from as they may go to the source and cut you out as a dealer.
Q. I want to suggest to you that failing to provide Mr Gant's name as the dealer from whom you acquired the work as part of this provenance information was likely to mislead Christie's as to the provenance and nature of the work?
A. I was not misleading in any respect.
238HFA's confirmation in the Receipt included the representation that the Painting was a painting by Albert Tucker. The Holland letter purportedly traced a thirty-three year history of the Painting with specificity as to the date the artist painted it, the Gallery from which it was purchased, the identity of the purchasers and the date of those purchases. There was also the additional description of the work as a "study" for another painting painted by the artist in the same year together with the statement that the other painting was exhibited in Mexico.
239I am satisfied that representations (c) to (h) were made in the Holland letter.
240Representation (i) that "there was no doubt about the provenance of the Painting" is said to have been expressed in, or made by inference from what was said in the Receipt and the Holland letter. The Receipt confirmed as "correct" the representation that the Painting was painted by Albert Tucker. It also confirmed that the Painting was the unencumbered property of HFA. However the provenance that was listed in the Holland letter was a description of what purported to be the historical transactions relating to the Painting. It is true that representations (a) to (h) would give the recipient good reason to believe that the Painting was painted by Albert Tucker. However to suggest that the content of the Holland letter and the Receipt put beyond any doubt the provenance of the Painting is in my view not reasonable in the circumstances. I am not satisfied that representation (i) was made by HFA.
Were the representations misleading?
241It was not necessary for the plaintiff to prove that HFA knew that the representations made in the Receipt and the Holland letter were false. As Gibbs CJ stated in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 197 the liability imposed by s. 52, in conjunction with ss. 80 and 82, is "quite unrelated to fault"; see also Blackman v Gant [2010] VSC 229; (2010) 29 VR 29 at [122] and [131]; Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [10]; and Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 55 ALR 25 at 30.
242Representation (a) was false. It is not a painting by Albert Tucker.
243The evidence establishes that there is real doubt that the Painting was painted in the late 1960's. Although the evidence suggests that the Painting was painted in more recent times, the Holland letter represented that it had been in Mr O'Sullivan's collection since 1980. It is difficult to accept that it was painted as early as the time claimed in the Holland letter. It is probable it was painted later than the 1960's and 1970's. Representations (c) and (d) were false.
244The Painting was a forgery from the time it was painted. Representations (e) and (f) might be true. If so it appears that Mr O'Sullivan was misled if he was informed that the Painting was painted by Albert Tucker. If HFA wished to propound the truth of the representations it could have called evidence from Mr O'Sullivan, had he been available to give evidence. HFA did not call any evidence to suggest that Mr O'Sullivan was not available to give evidence.
245Representation (g) is false to the extent that it suggested it was painted by Albert Tucker. Representation (h) is true.
246It is not in issue that the representations were made in trade or commerce. Representations (a) to (d) and (g) were false. They were misleading and likely to mislead in contravention of s 52 and 53(c) of the TPA, s 42 of the FTA and s 12 of the FTA Vic.
Did the contraventions cause the plaintiff's loss?
247The plaintiff's Amended Statement of Claim alleges that HFA's contraventions "caused" the plaintiff's loss and damage because the Painting is worthless. This picks up the language of the relevant legislation of loss and damage suffered "by conduct" of another person (s 82 TPA; s 68 FTA) and "because of a contravention of a provision" of the Act (s 159 FTA (Vic)).
248It was submitted that HFA was a small trader simply passing on information where there is no allegation that there was any reliance upon it. In this regard HFA relied upon Butcher v Laughlin Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592. HFA also relied upon The Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525 in support of this submission. That was a case in which Mr Flannery, who owned The Saints Gallery, sold forged paintings to Mr Plummer. Mr Plummer was a professional art valuer and dealer who had valued and authenticated works for The Saints Gallery in the past. He was more experienced than Mr Flannery in dealing with art works and was also more familiar with the works of the artists the subject of the forgeries. In the course of negotiations over the paintings, Mr Flannery passed on information about the provenance of the paintings of which he had been informed by the vendor. The trial judge held that the representations in relation to provenance were misleading or deceptive under s 52 of the TPA. This decision was overturned on appeal. The Full Court said at 531:
In the particular circumstances of the case, we think it should have been held that nothing said or done on behalf of the appellant should have been taken by Mr Plummer to convey more than that the paintings' owner had represented them to have a certain origin and history; the appellant claimed no more knowledge of the matter than that. It stood in the position of an intermediary between Mr Kehoe, the source of information and the then owner of the paintings, and Mr Plummer, who, like the appellant, did not check Mr Kehoe's assertions and assumed them to be true.
249HFA made a number of submissions characterising its conduct as doing no more than "possibly" passing on to Christie's without comment information that had been provided to it by Mr Gant. These submissions cannot be accepted.
250HFA was not a mere conduit. It agreed to be a party to a contract with the Buyer of the Painting. It took the additional and important step of signing the Receipt confirming as "correct" the representation that the Painting was painted by Albert Tucker. It requested Christie's to offer "these goods" - the Painting by Albert Tucker - "for sale in accordance with [Christie's] published conditions of business". It also confirmed that the Painting was its own property and that it was unencumbered. HFA recorded in that Receipt that the "conditions overleaf" had been drawn to its attention. Those conditions included that HFA will enter into a contract with the Buyer of the Painting.
251HFA submitted that there was no reliance by the plaintiff on any representations made by HFA because the plaintiff did not know who the Seller was, nor did she know what representations were made by the Seller (HFA) to Christie's.
252HFA authorised Christie's to sell the Painting as one that had been painted by Albert Tucker. It authorised Christie's to act to bind it contractually to the Buyer in circumstances where it knew that Christie's had an entitlement to exercise its discretion in relation to the contents of the Catalogue. It understood that this was an aspect of the contractual arrangement between HFA and Christie's. HFA relied upon Mr Holland's evidence that once the Painting was consigned it was out of his hands and he could not do anything about it (tr 543) to submit that the representations were made by Christie's and could not be characterised as HFA's representations.
253It is not correct to say that once the Painting was consigned to Christie's, HFA could not do anything about it. Although HFA agreed that it would not withdraw the Painting from the auction without Christie's consent (cl 7(c)), it clearly had the capacity to approach Christie's to discuss the description of the Painting and/or the removal of the Painting from the auction. HFA took further steps after the consignment of the Painting. It forwarded the Holland letter to Christie's and I am satisfied it did so with the intention that the representations contained therein would be published in the Catalogue.
254HFA submitted that no undertaking was sought from it in relation to provenance, authenticity or attribution of the Painting. This submission cannot be accepted. When HFA completed the Receipt it responded to Christie's request to confirm as "correct" the information within it, which included the attribution of the Painting as having been painted by Albert Tucker. I am also satisfied that Christie's sought the provenance information document that was supplied by HFA in the form of the Holland letter.
255Although HFA was only identified as 'the Seller", it is clear from the Conditions of Business that HFA understood that Christie's would auction the Painting as having been painted by Albert Tucker. HFA gave undertakings in clause 6 of the Conditions of Business including that it had notified Christie's of any concerns expressed by third parties in respect of the attribution of the Painting. The Buyer was made aware of this undertaking. This undertaking combined with the representation that the Painting was painted by Albert Tucker gave further legitimacy to the Painting.
256I am satisfied that at the time HFA consigned the Painting to Christie's the representation in the Receipt that the it was painted by Albert Tucker was made with the intention that such representation would be passed onto others at the auction: Azzi v Volvo Cars Australia Pty Ltd [2007] NSWSC 319 at [82]; Johnson Controls Australia Pty Ltd v Webb Australia Group (NSW) Pty Ltd [2013] NSWSC 1511; (2013) 96 ACSR 640. That intention was effected by the "attribution" of the Lot in the Catalogue that the Painting was painted by Albert Tucker together with HFA's undertakings in clause 6(c) of the Conditions of Business.
257The plaintiff became the owner of the Painting in 2007 at the conclusion of Laurentine's second Lease. The plaintiff, as Buyer before Capital Finance became the Buyer, had been induced by the representation that the Painting was painted by Albert Tucker. The representation made by HFA was a cause of the plaintiff's loss and in those circumstances HFA is liable to the plaintiff for the loss that she suffered.
258In his submissions in reply (and as I understood it in the alternative) Mr Douglas embraced the indirect causation theory said to be found in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; (2008) 73 NSWLR 653 (Ingot) and in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 309 ALR 445 (ABN AMRO).
259In Ingot Hodgson JA referred to Digi-Tech (Aust) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184. His Honour was "inclined to think" that investors may be able to claim damages on the basis of misleading conduct where ( at [80]):
(1) Because of misleading conduct that misleads people involved in putting together an investment opportunity, an investment opportunity is made available to investors which would not have been made available at all but for the misleading conduct;
(2) Investors invest in it; and
(3) The investors lose money because the investments are, by reason of matters concealed by the misleading conduct, worth less than the investors paid for them.
260His Honour said at [82]:
To require investors to prove also that they actually relied on the misleading conduct, or even that if they had known the truth they would not have invested, seems to me possibly superfluous. But for the misleading conduct, there would have been nothing to invest in; and in my opinion it is plainly foreseeable by the persons responsible for the misleading conduct that, if the misleading conduct results in the offering of investments that are worth less than their price by reason of the matters concealed by the misleading conduct, people not knowing the truth may invest in them and suffer loss by reason of the matters concealed by the misleading conduct. On that basis, it does seem to me arguable that loss of that kind would be loss suffered "by" the misleading conduct, at least so long as the investors did not know the truth.
261Hodgson JA did not express a final view on that question or on whether such an approach was consistent with Digi-Tech.
262In ABN AMRO, an investment bank ABN AMRO created structured financial products known as CPDOs and named "Rembrandt notes". Standard and Poor's (S&P) rated those instruments at ABN AMRO's request. Local Government Financial Services Pty Ltd (LGFS) purchased Notes from ABN AMRO and various local Councils purchased the Notes from LGFS. S&P rated the Notes as AAA, (the highest possible rating) and this was widely publicised by both ABN AMRO in the course of marketing the Rembrandt Notes and by S&P's rating descriptors on its website. It was ultimately conceded by S&P that the rating was flawed. It knew that the only purpose of its rating was to facilitate the marketing of the product. The Councils sued each of LGFS, ABN AMRO and S&P.
263The primary judge concluded that S&P conveyed representations to a class including LGFS that it held the opinion that the obligor's capacity to meet the financial commitment was "extremely strong" and that this opinion was held on reasonable grounds and formed by the exercise of reasonable skill. The primary judge concluded that those representations were not true and known not to be true by S&P. The primary judge also concluded that ABN AMRO was knowingly involved in S&P's misleading and deceptive conduct. There was also a finding that LGFS made negligent misrepresentations and engaged in misleading or deceptive conduct when dealing with the Councils in relation to the Notes.
264These conclusions were upheld on appeal. On appeal the Full Court said at 727:
[1376] Next, the entitlement to recover loss or damage in a case of misleading and deceptive conduct is not confined to persons who relied on the conduct: Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526; 109 ALR 638 (Janssen-Cilag). Indeed, a plaintiff need not establish that the plaintiff directly received and relied upon the misrepresentation made by a defendant: see, by way of example, Hampic Pty Ltd v Adams (2000) ATPR 41-737; [1999] NSWCA 455. The causation inquiry required to be undertaken for the purposes of s 82(1) of the TPA (and for s 5D of the Civil Liability Act) entails a determination of whether the loss or damage is the "real or direct or effective cause of the applicant's loss"; "it must have been 'brought about by virtue of' the conduct which is in contravention of s 52": Janssen-Cilag at FCR 530; ALR 642. The inquiry is whether the plaintiff suffered loss or damage by reason of, or as a result of, the contravention: Janssen-Cilag at FCR 531; ALR 644.
[1377] The PA councils are entitled to rely upon ABN Amro's conduct in disseminating and promoting the rating to LGFS as a step in the chain of causation that led to their losses. Part of that chain of causation was the PA councils' reliance upon the AAA rating, which they would never have received had it not been provided by ABN Amro to LGFS, which would not have happened if LGFS had not relied upon the ABN representations: see [923] and the following above. Here, unlike the position in Ingot Capital Investments, there was no suggestion that the PA councils actually knew that the AAA rating was not based on reasonable grounds and was not the product of the exercise of reasonable care and skill or that they were indifferent to the rating.
265Both Hodgson JA in Ingot and the Full Court in ABN Amro focused on misleading representations that were not made directly to the person who ultimately suffered loss. Similarly in Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488 the Full Court of the Federal Court concluded the relevant entity would not have completed a transaction and the syndicate would not have proceeded if a misleading valuation had not been produced in the first place.
266Having regard to the conclusions I have reached above it is not necessary to deal with the matter on this alternative approach. However if it were necessary, the analogous finding would be that part of the chain of causation was that the plaintiff relied upon the representation in the Catalogue that the Painting was painted by Albert Tucker, which she would never have received had it not been made by HFA to Christie's on consignment of the Painting with the request that it be offered for sale as a painting painted by Albert Tucker.
267HFA is liable to the plaintiff because its contravention of the provisions of the TPA, the FTA and the FTA (Vic) was the conduct "by" which the plaintiff suffered loss (s 82 TPA; s 68 FTA) and "because of" which the plaintiff suffered loss (s 159 FTA (Vic)).
Loss Suffered
268The loss suffered by the plaintiff includes the $2,000 commission and the $10,000 buyers' premium. The evidence establishes that in respect of the both Leases the plaintiff paid $63,574.64: and Laurentine and/or Mr Daniel paid $43,214.07, some of which the plaintiff has repaid and the balance for which the plaintiff is liable. Accordingly the plaintiff has suffered loss in the amount of $118,788.71.
CLAIMS AGAINST MR HOLLAND
269The plaintiff claims that Mr Holland was knowingly concerned in HFA's misleading or deceptive conduct. It was submitted that he signed the Receipt and also caused the Holland letter to be forwarded to Christie's. It was submitted that he knew all the background circumstances of the purchase of the Painting and that he made the decision not to inform Christie's of the identification of the person from whom HFA purchased the Painting. There is no separate cause of action brought by the plaintiff against HFA that it represented that it had purchased the Painting from Mr O'Sullivan. If that representation had been made it would have been false and it would have been false to the knowledge of HFA.
270The causes of action in respect of which it is claimed Mr Holland was knowingly concerned were the false representations which were misleading or deceptive in contravention of the TPA, the FTA and the FTA (Vic). It is necessary to prove that Mr Holland knew were false or that he knew of the facts that made them false to establish that he was knowingly concerned in HFA's conduct: Yorke v Lucas (1985) 158 CLR 661; Showtime Touring Group Pty Ltd v Mosley Touring Inc [2013] NSWCA 53; (2013) 296 ALR 597 at [18] per Bathurst CJ; Crocodile Marketing Ltd v Griffith Vintners Pty Ltd (1989) 28 NSWLR 539.
271Mr Holland was cross-examined in relation to his knowledge of Mr Gant's reputation. He was resistant to agreeing to knowledge of concerns in the art industry about Mr Gant's reputation. He gave the following evidence in cross-examination (tr 533-536):
Q. Did you have an awareness at 2000 that Mr Gant had been involved in a dispute over a bunch of Blackmans which the painter Charles Blackman said he didn't make?
A. There could have been those allegations, yes.
Q. You were aware of them as at 2000, weren't you Mr Holland?
A. I suppose so.
Q. You were aware at 2000, Mr Holland, that the name Peter Gant was poison within the art market, weren't you?
A. That may be other people's ideas.
Q. You were aware in 2000 that other people had that idea, weren't you?
A. It may have been other people's idea.
Q. You were aware in 2000 that that was a commonly prevailing idea within the art market, weren't you?
A. Other people may have had those ideas, I do not believe so.
...
Q. Mr Holland you were aware in 2000 at least other people within the Australian art market considered the name Peter Gant to be poison, weren't you?
A. I had heard allegations.
Q. You were aware that those allegations would cast serious doubt over any work to which his name might have attached as at 2000, weren't you?
...
Q. Any artwork?
A. Any artwork? People have said different things and if that's their belief, that's their belief.
...
Q. You were aware in early 2000 that Mr Gant's reputation was such that if his name was in any way associated with an artwork it would raise very, very grave questions as to its authenticity, weren't you?
A. No.
Q. You were aware, Mr Holland, that at least other people within the art market would have been seriously concerned had the name Peter Gant been associated with a work which was presented to them, weren't you?
A. That's their decision.
Q. Mr Holland, you were aware in early 2000 that other participants within the Australian art market would have been gravely concerned had someone presented a work of art to them which had the name Peter Gant associated with it in any way, weren't you?
A. Other people may have been.
Q. I am going to press you on this; you were aware that other people, not only may have been but were of that view in early 2000, weren't you?
A. I thought I answered that.
Q. So, you accept, do you, that as at early 2000 you were aware that there were, that other participants within the Australian art market would have been very gravely concerned with any work which had been presented to them where the name Peter Gant was associated with it in any way?
A. No, in the long around about way I didn't accept that, but I said other people may believe that.
Q. You knew other people believed that in 2000, didn't you, in early 2000, Mr Holland?
A. I can not speak for everyone else.
...
Q. You were aware in early 2000 that other participants within the art market would have had very grave concerns about any work presented to them had the name Peter Gant been in any way associated with it, weren't you, whether or not you shared those views.
A. Whether or not I shared those views other people had views. There may have been some concern. I was less involved in the art world in the year 2000 than I had ever been before. I was not living in Sydney.
Q. You were aware in early 2000, Mr Holland, weren't you, that other people held those concerns, yes or no?
A. Other people may have had those concerns.
Q. You were aware of that, may we take that answer to mean, in early 2000.
A. I believe other people probably, may have had some concern.
272Mr Holland's evidence was that he had purchased more than ten paintings from Mr Gant prior to 2000 and it had never been suggested by anyone that any of the paintings that were purchased were forgeries (tr 571). Mr Holland was also cross-examined about the lack of documentary material relating to the transaction in 1999 when he purchased the Painting from Mr Gant. Mr Holland denied ever receiving the O'Sullivan letter. However he said he recalled receiving the Holland letter, albeit that he did not request it. It came to his office where he conducted a property development business as HFA did not trade at that time. He gave the following evidence (tr 555; 557-558):
Q. I just wonder if you could answer my question, isn't the information which is contained in this document at least some of the information you would have wished to have before you yourself acquired the painting?
A. Provenances were not a major part of my buying process.
Q. I just want to suggest to you that the answer you have just given to me is false.
A. I disagree.
...
Q. Let me just go back and I will ask you another question. You have given evidence that Holland Fine Arts paid approximately $45,000 for this painting?
A. Approximately, yes.
Q. And you say that you are no longer in the possession, custody or control of the documents and records of Holland Fine Arts?
A. Nothing prior to - whatever year we are now - probably 2008.
Q. You were, up until - that is Holland Fine Art was - up until 1998, an art dealership purchasing and selling artworks?
A. That's correct.
Q. And it was important for the purposes of that business for it to maintain records as to what it had paid for artworks and sold artworks for, would you not agree with me?
A. Once the work is sold, it has left the - the file and it's of no - no further use.
Q. And it was important, not least in order to establish provenance, in other words you had a record of where you obtained the painting from and where it had gone?
A. All my files and until today, once a work or once an item that we have in stock or at home or wherever the work may be, once the work is sold, it goes to files for destruction after the six year period. The only files and records that I have are of works currently held.
Q. And what I want to suggest to you is that practice which you describe is inconsistent with what a prudent art gallery in the position of your art gallery should do, having regard to the need to retain records of provenance and purchase and sale figures?
A. I shut down in 1998. These records were of no longer use to me. The only records that I kept are of any item that we may have in today's holdings. Whatever was sold - and we had a very big, or my father had a very big one owner sale through Mossgreen in 2008, which was a great time to work on clearing items. We sold items. Whatever was no longer in our care went to a file to be destroyed whenever the six year period was up.
273I agree with the submissions made on behalf of HFA and Mr Holland that there is no basis upon which it could be suggested that Mr Holland on his own behalf or on behalf of HFA inappropriately destroyed documents in respect of the Painting.
274It was suggested by the plaintiff that Mr Holland kept secret the fact that the Painting was purchased from Mr Gant; in particular in the conversation between the plaintiff and Mr Holland in November 2012. Mr Holland gave the following evidence in cross-examination (tr 550):
Q. If you hadn't had concerns about Mr Gant's reputation, you would have told her straight away, "I got it from Peter Gant"?
A. If she would have asked the question, I would have answered any question she would have asked.
Q. So you tell her Honour, do you, that the only reason you didn't mention Peter Gant during that conversation was because she did not say to you or ask you directly, "where did you get the painting from?"?
A. The - she didn't ask that question and the questions I were given were as to how the price could have been achieved if it was passed in.
---
Q. And you understood that the reference to provenance was raised because she was seeking information as to the provenance, didn't you?
A. No, she was seeking information as to, in general, how the painting was sold and if I had a recollection of the painting being sold.
Q. You knew, and had known since at least early 2010, that doubts had been expressed as to the provenance and authenticity of the work didn't you?
A. It was a question by Ronan which I answered in 2010 quite simply that I bought it - prior to buying it from Mr Gant, it came from a private owner in Melbourne.
Q. I understand you say that. I suggest to you that in 2010, you did not mention the name Peter Gant in any conversation you had with anyone about the Tucker painting; I take it you disagree with that?
A. I disagree with that.
Q. And for the very same reason you made no mention - the very same reason, namely Mr Gant's reputation, you made no mention at all of Mr Gant in your conversation with Ms McBride in November 2012?
A. When Ronan asked me the question, I answered it. When Ms McBride did not ask that specific question, I answered the questions in accordance with her questions about what happened in the sale.
275Mr Holland did not advise the plaintiff that he had purchased the Painting from Mr Gant notwithstanding that he had advised Christie's in 2010 that he had purchased it from him. According to his emails referred to earlier, he was willing to assist the plaintiff with her search for records in relation to the transaction. If Mr Holland had no sensitivity about mentioning to Christie's that he had purchased the Painting from Mr Gant, there was no reason for reticence in dealing with the plaintiff. There was no need to wait to see if the plaintiff asked him directly from whom he purchased the Painting. His proclaimed reason for not informing Christie's in 2000 of the identity of the person from whom he purchased the Painting - the protection of his source of business - certainly did not apply in his conversation with the plaintiff. Mr Holland suggested to the plaintiff that he had searched HFA's records and could not help her further, knowing full well that part of the relevant background was the fact that he had purchased the Painting from Mr Gant.
276By this time, the Australian Club had already raised the problems in relation to the second painting and Christie's had agreed to provide it with a credit. However it was not suggested to Mr Holland in cross-examination that this matter was known to him and/or was on his mind at the time of his discussions and communications with the plaintiff. Mr Holland was not asked whether Christie's had pursued HFA for reimbursement. In any event, I am satisfied that it would have been obvious that the plaintiff was searching for as much information as possible about the transaction and the irresistible conclusion is that Mr Holland intentionally withheld from the plaintiff the fact that he had purchased the Painting from Mr Gant.
277Peter Stanley Gant swore two affidavits in the proceedings, the first on 29 October 2013 and the second on 28 July 2014. Prior to his bankruptcy Mr Gant had been an art dealer trading as Gallery Irascible - Peter Gant Fine Art since 1993. Prior to that he was a founder/director of Niagra Galleries in 1978 and the director and principal of Peter Gant Fine Art in 1987. His evidence was that he has been curating and purchasing art work, including paintings, for approximately 40 years. He holds an honours degree in art history from the University of Melbourne conferred in 2006.
278In his first affidavit Mr Gant said that in about 1999 Mr Barry O'Sullivan, an existing client of Gallery Irascible, contacted him to sell some of his late father's paintings. He recalled that one of these was the Painting. Mr Gant said that he was familiar with the Painting because he was familiar with the works of Albert Tucker, having purchased and sold many of those works over the years through his galleries. Mr Gant claimed that Mr O'Sullivan informed him that the Painting had been hanging in his father's house as long as he could remember. Mr Gant claimed that Mr O'Sullivan thought that his father said that he bought it in the late 1960's or earlier 1970's. He also informed Mr Gant that he understood that his father bought the Painting along with other paintings from either the Tolarno Gallery in Melbourne or the Dominion Gallery in Sydney.
279Mr Gant gave affidavit evidence that it was his standard practice to undertake due diligence in relation to any artwork prior to purchasing it. He did this by physically inspecting it, checking the provenance and researching whether there was any documented history of the art work. However his affidavit evidence in respect of the Painting was as follows (at [7]):
In relation to the painting by Albert Tucker known as "Faun & Parrot", I was satisfied as to the authenticity of the painting based on my examination of the actual painting. It showed all the characteristics one would expect from a painting by Albert Tucker circa 1967 both in a visual and narrative sense. It was also consistent physically with a painting bearing an age of 40 plus years. Mr O'Sullivan's recollection of it having been acquired either through Tolarno Gallery Melbourne or the Dominion Gallery Sydney was also consistent with the types of venues selling such paintings in the 1960's and 1970's.
280Mr Gant claimed that he purchased the Painting from Mr O'Sullivan for $30,000. He also gave evidence that he sold the Painting to Mr Holland on behalf of HFA for an amount of "approximately $35,000 - $40,000".
281Mr Gant swore a second affidavit on 28 July 2014, the day that he gave evidence in the proceedings. In this affidavit he referred to Mr Martin Browne's evidence in the trial (referred to later for other reasons) that if a reputable auction house had been told that the Painting had emanated from Peter Gant in the year 2000 they would have "run a mile". Mr Gant also referred to a question posed to Mr Holland that in early 2000 participants in the art market would have had "very grave concerns" about any work presented to them associated with the name Peter Gant. Mr Gant's affidavit evidence was that during the period early 2000 to 2006 (when Christie's ceased doing business in Australia) he continued to do business directly with Christie's as well as with other reputable auction houses, including Sotheby's and Deutscher-Menzies, by way of placing paintings with those auction houses for sale, including on consignment. Mr Gant remains an undischarged bankrupt and the trustee may have further records but he produced a number of documents evidencing these dealings with these auction houses.
282In cross-examination Mr Gant was asked about the Holland letter. He said that he was provided with a copy of that document by the solicitors for Mr Holland in 2013 (tr 594). He gave the following evidence (tr 597-598):
Q. So you say that the provenance document which is at 1515, which is faxed to the attention of Mr Holland on some date not known, is not a document which you have ever seen before?
A. No, I'm not saying that. I am saying it was shown to me last year by Alex Holland's solicitor and I don't recall it. It's - but if it relates to this picture that was sold 13 years ago, it could well have come out of my office. I just don't recall it. I don't know.
Q. How would it have come out of your office?
A. If we were asked, or if there, my assistant was asked for some information about the picture, or she might even have taken it upon herself to send some information, or if Alex had a conversation with me at the time where's it from, which I don't know, I don't recall anything. I'm just saying that when I saw this thing last year, I don't recall ever writing it, but I wouldn't swear to the fact that it didn't come from us.
283In the latter part of his cross-examination Mr Gant gave the following evidence in respect of the Holland letter (tr 606-607):
Q: (Page 1515 shown) I asked you some questions about this before the luncheon adjournment, I think you have accepted that it either came from you or someone in your office, is that misquoting you?
A. It's not, it's misquoting me a little bit. I said it could well have come from my office but I don't remember it.
Q. You don't remember it?
A. No.
Q. If it had come from your office it would normally have a letterhead, would it not?
A. I would have thought so, yeah.
...
Q. Would you agree with the suggestion I make to you that the document appears to have had the letterhead obscured when it was photocopied?
A. I've absolutely no idea, I can't see that. My eyes aren't that great anymore.
Q. It would be unusual, would it not, for either Peter Gant Fine Art or Galleries Irascible to send out a document of this nature without a letterhead on it?
A. It would be unusual yes.
...
Q. And it is hard to imagine why it wouldn't have had a letterhead?
A. It's not that hard, it might be just whoever is doing it has a piece of paper they use for the typewriter and have done it, I don't know.
Q. If it doesn't have a letterhead it is entirely unattributed, isn't it?
A. That is what I would have thought, yeah.
Q. Is this the situation; did you and Mr Holland have some discussions as to whether it should have a letterhead or not?
A. I don't think we could have because I don't recall it at all, and we have never had any discussions in that sort of vein ever, so, I would have to say no.
Q. Is there another possibility that it had a letterhead when it left your office but was subsequently removed in the photocopier?
A. That is conjecture, I don't know.
284It was suggested to Mr Gant that he falsely recorded Mr O'Sullivan and his father as the previous owners of the Painting knowing that they had never had anything to do with it. He denied this suggestion (tr 605-606). Mr O'Sullivan did not give evidence in the proceedings.
285Mr Gant was cross-examined about his involvement in the circumstances surrounding proceedings that were brought by the artists Charles Blackman and Robert Dickerson against him in which it was alleged that he engaged in misleading or deceptive conduct in providing valuations for purported works by those artists; Blackman v Gant [2010] VSC 229; (2010) 29 VR 29. In that case Vickery J found that Mr Gant had engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive in breach of s 9 of the FTA (Vic). Although Vickery J found that Mr Gant had engaged in conduct in breach of the FTA (Vic) no finding was made against Mr Gant that he knew that the works in question were not authentic or that he acted other than innocently (at [131]).
286The conduct that Mr Gant engaged in was the provision of valuations in October 1999, December 2004 and February 2006. Mr Gant had not only valued the artworks but had also supplied the artworks to the gallery from which they were sold. The purchasers of the artworks were reimbursed and the artworks were returned. The gallery that sold the artworks apparently arranged for Mr Gant to take possession of the artworks. The circumstances of that arrangement were unknown because Mr Gant did not give or call any evidence in the proceedings before Vickery J.
287There was an issue in those proceedings that forgeries would adversely affect the value of the plaintiffs' (the artists') works generally. Vickery J was satisfied that there was no case to answer on the question of damages alleged to have been caused to the plaintiffs by Mr Gant's conduct (at [46]). However his Honour was not satisfied that the granting of an injunction would be as effective as an order for the delivery up of the artworks and an order for their destruction.
288One of the reasons that Vickery J decided that the only way security could be provided to the plaintiffs/artists and to the members of the public by was by making an order for delivery up and destruction was that Mr Gant had on return of the disputed artworks, entered them in his stock list for the purpose of identifying them as either items sold or being offered for sale (at [193]). Vickery J concluded that the disputed artworks were of no value and they were delivered up for destruction.
289It is clear from Mr Gant's evidence that auction houses, including Christie's, continued to deal with him over the years after the broadcast of the Four Corners program "Rogues Gallery". The evidence in this case does not support a finding that Mr Gant arranged and/or had knowledge that the Painting was a forgery. However the secrecy about his involvement with the Painting, and the difficulties in relation to the second painting sold to the Australian Club that Mr Holland claimed he purchased from Mr Gant, justify at the very least concerns about the reliability of his evidence.
290Mr Holland said that he bought paintings on the look and the feel of the artwork and that he did not look at provenances when he purchased paintings (tr 566-567). He said that he did not advise Christie's that he had purchased the Painting from Mr Gant because he was not asked from whom he purchased it. He also gave evidence that it was not common practice to give such information because the auction house "may go to the source and cut you out as a dealer" (tr 569). However he said that if he had been asked he would have advised Christie's that he purchased it from Mr Gant. The fact that he provided the Holland letter to Christie's clearly suggests that he was asked to provide the provenance of the Painting. However no mention was made of Mr Gant.
291I am satisfied that Mr Holland made the conscious decision not to disclose that HFA purchased the Painting from Gallery Irascible or Peter Gant. Irrespective of whether the motivation to keep secret the last step in the provenance chain was to protect the source of business or to keep Mr Gant's name out of the transaction because of recent attacks on his reputation in the art market, I am satisfied that on a reasonable reading, (notwithstanding the letter is to the attention of Mr Holland) the recipient of the Holland letter would be led to believe that HFA had purchased the Painting from Mr O'Sullivan. Although the plaintiff claimed in submissions that Mr Holland's concealment of Mr Gant's involvement was misleading and deceptive conduct, there is no pleaded case that HFA falsely represented that the Painting was purchased from Mr O'Sullivan. Rather the finding that he concealed Mr Gant's involvement supports the submission that Mr Holland's evidence should be treated with some reservations.
292I am satisfied that, contrary to his denials, at the time he signed the Christie's Receipt and at the time he forwarded the Holland letter to Christie's, Mr Holland knew that there were at the very least issues about Mr Gant's reputation in the art market. He knew of allegations that Mr Gant had been involved with art forgeries. I am also satisfied that such knowledge was the reason any connection between the Painting and Gallery Irascible or Peter Gant was withheld from Christie's.
293That is not to say that I am satisfied that the plaintiff has proved that Mr Holland knew that the Painting was a forgery or that he knew of facts demonstrating the falsity of the representations.
294The Holland letter is a most peculiar document. If, when it was received by Mr Holland, it was in the form in which it was presented to Christie's with no letterhead and no attribution of the author or the sender, it is reasonable to expect that Mr Holland would have questioned why it was in such a form. Mr Holland's evidence, extracted earlier, established that in 2000 he had heard of allegations that other people in the art market considered Mr Gant's reputation to be poison, albeit that he sought to qualify this evidence after reflection over the weekend (tr 538). He said he did not see the Four Corners programme "Rogue's Gallery". Although he emphasised that he could not speak for everyone else, he accepted that he had heard the allegations about Mr Gant's involvement with the fake Charles Blackman paintings. In any event, once he received the Holland letter in that form, alarm bells should have been ringing.
295It is not clear who was responsible for the production of the Holland letter without letterhead or attribution of the author or the sender. The likelihood is that it came from Mr Gant. Mr Holland denied that he deleted anything from it. However he accepted that he probably sent the letter to Christie's. Mr Gant's evidence about it (extracted above) was difficult to accept. He suggested that someone in his office may have taken a piece of paper - without letterhead - and fed it into a "typewriter". Even if one were willing to contemplate the likelihood that in the year 2000 an employee in his organisation was required to use a typewriter rather than a computer to generate provenance documents, it might explain the lack of letterhead but it does not explain the absence of any mention of the author or the sender. This is a very different case to that of Mr Flannery passing on the information from the vendor to Mr Plummer in The Saints Gallery Pty Ltd v Plummer.
296Mr Holland agreed that he probably sent the Holland letter to Christie's. Although I have said that alarm bells should have been ringing when he saw that the Holland letter was unattributed, that does not prove that he knew that the representations were false. Although he did not take a great deal of care with the transaction there is no evidence upon which I could be satisfied that Mr Holland knew that the Painting was a forgery or that any of the representations pleaded against HFA that were made were false.
297The plaintiff's claims against Mr Holland are dismissed.
CLAIMS AGAINST CHRISTIE'S
298The plaintiff makes claims against Christie's under the TPA and FTA for misleading or deceptive conduct and unconscionable conduct. There are also claims in deceit and for money had and received.
Misleading and deceptive conduct
299The plaintiff alleges that Christie's made the following representations in its Catalogue:
(a)The Painting was a painting by Albert Tucker;
(b)There was no doubt the signature "Tucker" in the lower right hand corner of the Painting was the signature of Albert Tucker;
(c)The Painting had been painted by Albert Tucker circa 1967;
(d)The Painting had been purchased from Tolarno Gallery, St Kilda, in Victoria, in 1969-70;
(e)The Painting had been acquired by the father of the present owner circa 1970; and
(f)There was no doubt about the provenance of the Painting.
300It is alleged that the representations (a) and (c) to (e) were made expressly in writing in the Catalogue. It is alleged that representation (b) was partly express from the words "signed 'Tucker' (lower right)" in the Catalogue together with the explanation in the Catalogue that the addition of a question mark after the word "signed" indicates "an element of doubt". It is alleged that representation (b) is partly implied from the absence of a question mark and thus the absence of doubt.
301It is further alleged that representation (f) was expressed or is to be implied from what was said in the Catalogue under the heading "PROVENANCE" in relation to Lot 70. It is also alleged that representations (a) to (f) inclusive were made by Christie's by its silence in failing to correct the contents of the Catalogue in relation to Lot 70 upon any material date.
302There was no real issue that representations (a) to (e) were made. Christie's put the plaintiff to proof on representation (f).
303Christie's admitted that it "expressed the opinion" in representation (a). It claimed that the opinion was honestly and reasonably held on the basis of rational grounds and was the product of the exercise of due care and skill. Christie's otherwise denied the allegation in relation to representation (a). It admitted that it expressed the opinion that there was no doubt that the "word" (as opposed to the "signature" of) "Tucker" appeared in the lower right hand corner of the Painting. It claimed that this was an opinion honestly and reasonably held on the basis of rational grounds and was the product of the exercise of due care and skill. It otherwise denied the allegation.
304Christie's admitted that it "expressed the opinion" in representation (c) that the Painting had been painted by Albert Tucker in or about 1967. It claimed that the opinion was honestly and reasonably held and otherwise denied the allegation.
305Christie's admitted that the Catalogue contained the statement in representation (d) to the effect that the Painting had been purchased from Tolarno Gallery, St Kilda, in Victoria, in 1969-70. It claimed that it was doing no more than passing on information supplied by Alex Holland and/or HFA and that it did not thereby adopt the representation or make any representation as to its truth or falsity. It claimed that if it expressed an opinion it was honestly and reasonably held. It otherwise denied the allegation.
306Christie's admitted that the Catalogue contained the statement in representation (e) to the effect that the Painting had been acquired by the father of the present owner in around 1970. It claimed that it was doing no more than passing on the information and did not adopt the representation or make any representation as to its truth or falsity. Alternatively it claimed that if it did express an opinion it was honestly and reasonably held and otherwise denied the allegation.
307Christie's did not admit representation (f).
308Christie's submitted that it was merely passing on information provided by the Holland interests and was acting as a mere intermediary. The plaintiff submitted that this contention must founder having regard to the provisions of clause B7(a) of the Conditions of Business. That clause provided Christie's with "complete discretion" as to how it described the Painting in the Catalogue.
309The plaintiff submitted that it is clear that Christie's exercised its discretion in a number of respects when describing the Painting in the Catalogue. It was contended that if Christie's were a mere intermediary and simply passing on the vendor's information it would not have adjusted the description of the Painting that was provided by HFA. However changes were made to the information supplied in the Holland letter.
310The Holland letter records the name of the Painting and the year 1967. The Catalogue records that it was "Painted circa 1967". The Holland letter records that the Painting was purchased from Tolarno Gallery in 1969-70. Whereas the Catalogue, independently of any reference to a sale, records simply "Tolarno Gallery, Melbourne 1969-70". The Holland letter records that the Painting was purchased from Tolarno Gallery in "1969-70". Whereas the Catalogue records that the Painting was "Acquired by the father of the present owner circa 1970". The Holland letter records that the Painting was purchased from "Tolarno Gallery St Kilda". The Catalogue simply records "Tolarno Gallery, Melbourne". The Holland letter records the artist's name as Albert Tucker. Whereas the Catalogue records the artist's name as Albert Lee Tucker. The Holland letter makes no reference to the year of Albert Tucker's birth or death. The Catalogue records "1914-1999". The Holland letter does not record that the Painting is "signed Tucker". However the Catalogue records "signed 'Tucker' (lower right)". The Holland Letter records that the Painting is "76x62cm". Whereas the Catalogue records "75.3 x 60 cm".
311The plaintiff claimed that Christie's clearly changed the information that was provided in the Holland Letter and made judgments about what it would put in the Catalogue description of the Painting.
312The plaintiff relied upon the combination of the description of the Painting in the Catalogue and the explanation of Cataloguing Practice. It was submitted that this combination makes clear that Christie's was in fact making its own representations in relation to the matters contained within the Catalogue.
313Christie's represented in the Catalogue that the Painting had been "acquired by the father of the present owner". This was notwithstanding that the present owner was known by Christie's to be a company, HFA, which had certified in the Receipt that the Painting was its unencumbered property. Christie's also knew that the Holland Letter recorded that the Painting had been acquired by the father of Mr B O'Sullivan.
314The Catalogue conveyed that the Painting had been "signed" by Albert Tucker without the addition of a question mark to indicate any element of doubt.
315Christie's Conditions of Business provide that its "sales at public auction are undertaken as agent, on behalf of the Seller". The plaintiff submitted that pursuant to conditions B6 and B7(c) of its Conditions of Business, Christie's assumed its own responsibility for the decision to offer the Painting for sale expressed to be based on its own views about matters including authenticity and the overall propriety of the sale. It was submitted that the disclaimers in clauses C13 and 1C6 in the Conditions of Business must be viewed in this context.
316Clause C13(b) records that Christie's statements regarding authorship, attribution, genuineness, provenance and condition are "merely statements of opinion, and are not to be relied on as statements of definitive fact". However that must be read in light of the Cataloguing Practice, explained in the Catalogue, the choices that were available to Christie's and the attributions it adopted.
317Christie's could have been silent in respect of the signature or the fact that the Painting was signed. It set its own rules that if it used the word "Signed" it was representing that in its opinion, a considered expert opinion, the work had been signed by the artist. It gave itself the option of including a question mark so that there was an indication to the readers of the Catalogue that there was an element of doubt about whether the work had been signed by the artist. However by not including that question mark, Christie's represented that there was no element of doubt. In other words it was certain that the Painting was signed by Albert Lee Tucker. Notwithstanding that clause 13 of the Conditions of Business provided that Christie's opinions should not be taken as definitive facts, once Christie's chose to use the word "signed" without including a question mark it indicated that it was certain - there was no doubt - that the artist had signed the Painting.
318Clause C16 of the Conditions of Business purports to exclude liability in respect of Christie's and HFA for any "errors of description" in respect of the Painting. This clause gave notice to the prospective purchasers at the auction that there were descriptions made by both Christie's and the vendor, HFA. The statements that neither the vendor nor Christie's gave any guarantee in respect of the Painting and that any warranty of any kind was excluded need to be considered in the light of the way in which Christie's chose to apply its Cataloguing Practice in this instance.
319I am satisfied that Christie's was no "mere conduit" for the information provided to it by the vendors: Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at [605]-[609]: ABN AMRO Bank NV v Bathurst Regional Council at [885]-[903]. It made its own representations in respect of the Painting in particular, that there was no doubt that the signature on the Painting was Albert Tucker's signature.
320Christie's submitted that it merely offered an opinion and made representation as to fact. Even if that is correct the plaintiff submitted that the expression of an opinion carries with it representations that: (a) the opinion was based on reasonable grounds; (b) that the opinion was the product of the exercise of due care and skill; and (c) that the opinion was safe to be relied upon: MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 at 356-357.
321It was not in issue in the proceedings that Albert Tucker did not exhibit any paintings at Tolarno Galleries in the period from 1967 to 1970. The plaintiff submitted that a reasonable auction house, and one of the calibre of Christie's, ought to have known, or was capable of finding out, that Albert Tucker did not exhibit any paintings at Tolarno Galleries in that period. It was submitted that it follows that the only way that the Painting could have been sold by Tolarno Galleries in 1969-1970 is if the original dealing in the Painting had been a private sale by Albert Tucker, a gift or a barter transaction. It is true that no witness has been able to identify a single painting of Albert Tucker that had such an original provenance. The plaintiff submitted that in the absence of Christie's calling any evidence, it must be presumed that Christie's knew these matters or could have discovered them with reasonable diligence.
322The plaintiff submitted that having regard to the lack of any evidence from Christie's in respect of the opinions it expressed, it is to be presumed that it could not have called any evidence that would assist its case: Jones v Dunkel (1959) 101 CLR 298; Kuhl v Zurich Financial Services Australia Limited (2011) 243 CLR 361. In those circumstances it was submitted that the Court could not find that Christie's exercised reasonable care and skill, or that it had a reasonable basis for its opinion.
323It was submitted that it should have been apparent to Christie's that there was a missing link in the chain of provenance. The Holland letter was a facsimile from an unidentified person or company to Mr Holland. It was submitted that a reasonable reader of the Holland letter would not infer that the document was sent by Mr B O'Sullivan, if for no other reason than it spoke of him in the third person. It was submitted that the obvious inference is that the Holland letter was provided to Mr Holland by the person (being a person other than Mr O'Sullivan) from whom Mr Holland had acquired the Painting. There is of course the alternative that the reader may conclude that HFA purchased the Painting from Mr O'Sullivan.
324In any event there was no reasonable basis for claiming in the Catalogue that the Painting was acquired by the father of the "present owner". Christie's well knew by the declaration made by HFA that the present owner was not Mr B O'Sullivan, referred to in the Holland letter, but rather HFA. The Painting had been acquired by the present owner (HFA) from someone other than the person whose father was said to have acquired it in about 1969-70. Of course Christie's did not know who that "other" person was because Mr Holland did not provide this information. In any event the representation that the Painting was acquired by the father of the present owner was without foundation.
325The Catalogue conveyed representations (a) to (e). Those representations were false. I am satisfied that the conversation that Ms Hayward had with Ms Sharpe, as the plaintiff's agent included representation (f). All of the representations were misleading or deceptive.
326It is probable that in June 2000 Christie's came into possession of the O'Sullivan letter. That letter recorded Mr O'Sullivan's claim that the painting the subject of that letter had come from his late father's collection. Mr O'Sullivan claimed that it had been in his family for "twenty five years or so". He expressed the view that it was originally purchased through a Gallery in Sydney called "Dominion".
327Although I have expressed the view earlier that the O'Sullivan letter related to the second painting, Christie's included it in its file relating to the Painting and appears to have assumed it related to the Painting. The differences between the O'Sullivan letter and the Holland letter should have alerted Christie's to a serious problem of provenance. In the Holland letter it was suggested that the Painting had been in Mr O'Sullivan's collection since 1980 when he acquired it from his father. Yet in the O'Sullivan letter it was claimed that the Painting had been in the family for "twenty five years or so". Although there is no date on the O'Sullivan letter, if it was written in 2000 that would mean the Painting had been in the family's collection since 1975 or so. There was certainly no basis to suggest that the Painting had been acquired and in the family since 1970. In the Holland letter it was suggested that the Painting was acquired from Tolarno Gallery in St Kilda. Yet in the O'Sullivan letter it is claimed that it was originally acquired from or through a gallery in Sydney called Dominion. It is little wonder that in those circumstances Ms Hayward raised her concerns with Ms Diggins.
328At the time that the first Lease was entered into, it must have been apparent to Christie's that Capital Finance was an entity from whom the plaintiff was obtaining finance for the purchase of the Painting and that she would then be likely to incur obligations to Capital Finance in respect of the purchase of the Painting.
329Christie's was no doubt aware of clause 17 of its Conditions of Business which permitted a refund on purchases on certain conditions in cases of forgery discovered within the stated five year period. In those circumstances it would have been misleading or deceptive for Christie's to remain silent and allow the plaintiff (or her agent or trustee), to incur new liabilities in relation to the provision of finance and to deprive the plaintiff and/or Capital Finance of information necessary to enable the plaintiff and/or Capital Finance to take the benefit of clause 17: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 per Black CJ at 32.
330The fact that Christie's sent the O'Sullivan letter to the plaintiff's personal assistant does not detract from this position. There was no covering letter suggesting that the content of this letter suggested a different provenance to that which had been in the Catalogue. It was submitted that it was incumbent upon Christie's to advise the plaintiff that it had material that was different from what it had previously presented and to explain the potential significance of that difference.
331Christie's held real concerns about the authenticity of the Painting very soon after the auction. Ms Hayward's expression of concern to Ms Diggins probably occurred prior to the time that Christie's invoiced Capital Finance for the Hammer Price of $75,000. Christie's chose to remain silent and not alert HFA, Capital Finance, Ms Sharpe or the plaintiff to the possibility that the Painting was a forgery or at the very least that there were real difficulties with its provenance. This was particularly disgraceful in circumstances where Christie's, by its expert, Ms Hayward, had advised the plaintiff, through Ms Sharpe, that the Tolarno Gallery provenance was "correct".
332I am satisfied that the plaintiff both by herself and through her agent Ms Sharpe relied upon the representations in making the decision to purchase the Painting and then entering into the leases to finance the purchase. I am also satisfied that the plaintiff thereby suffered loss and damage.
333The loss suffered by the plaintiff is $118,788.71 as calculated in paragraphs 268 above.
Deceit
334The same facts are relied upon by the plaintiff in support of her claim in deceit against Christie's.
335The five elements to the tort of deceit are: (1) that the defendant made a false representation; (2) that the representation was made with the knowledge that it was false or that the person making the representation was reckless or careless as to whether it was false or not; (3) that the representation was made with the intention that it be relied upon; (4) that there was reliance on the false representation and (5) damage was suffered because of the reliance on the false representation: Magill v Magill [2006] HCA 51; (2006) 226 CLR 551.
336The plaintiff submitted that Christie's having elected to call no witnesses deprived the Court of any positive evidence as to whether it knew any of the representations were false. Although the plaintiff accepts that this is a legitimate tactical decision, it was submitted that Christie's cannot complain if the Court draws from the facts which have been disclosed the reasonable inference that it knew that any of the representations were false and intentionally did not disclose that fact to the plaintiff: British Railways Board v Herrington [1972] AC 877 at 930. The plaintiff submitted that in the circumstances where Christie's was the only party that could give direct evidence of the matter and chose not to call evidence, the Court "is entitled to be bold": The Insurance Commissioner v Joyce (1948) 77 CLR 39 at 49.
337The plaintiff relies upon the circumstances of the sale of the second painting to the Australian Club; the failure to inform the plaintiff that the Painting had been the subject of serious concerns raised both within Christie's and by the experts at the Symposium in 2000; and the failure to draw the plaintiff's attention to the existence of an inconsistent provenance to submit that Christie's was recklessly indifferent to the truth or falsity of the representations it made. The plaintiff also relied upon Christie's conduct in selling the second painting to the Australian Club after it had been advised of the serious problems and that it should be withdrawn from the August 2000 auction as evidence of its reckless and careless conduct.
338The plaintiff relied upon the following passage from Prepaid Services Pty Ltd v Atradius Credit Insurance NV [2013] NSWCA 252 at [40]; (2013) 302 ALR 732 at 743-743 (without citations):
As Lord Herschell observed at 374, the formulation in Derry v Peek covers the whole ground because someone who knowingly represents what is false obviously has no honest belief, and someone who is indifferent to whether a representation is true or false can have no honest belief as to its truth. Being reckless or indifferent as to the truth of something describes a state of mind or consciousness. The fact that indifference is the basis for the conclusion as to the absence of any real belief, which is a finding as to the relevant person's state of mind.
339In Robertson & Moffat v Belson [1905] VLR 555 it was said at 561-2 "that if a person makes a representation and thereby induces a contract by another person, and though he believed it was true at the time he discovered afterwards that it was false, he is under a legal obligation to tell the other contracting party, who is still acting in an executory transaction on the faith of it, that he has discovered that it is false". It was submitted that at the time Christie's became aware of the inconsistent provenance documents, the plaintiff had a continuing right under clause C17 to return the Painting and obtain a refund on the production of evidence (satisfactory to Christie's) that it was a forgery.
340It was submitted that Christie's failure to disclose to the plaintiff the fact that the Painting had been the subject of concern and the existence of inconsistent provenance documents points to it not having an honest belief in the representations it made about the Painting in the Catalogue. Irrespective of the existence of the O'Sullivan letter there is ample evidence that by mid-2000 Christie's was aware that there were serious questions about the provenance of the Painting.
341I am satisfied that by late May 2000 when Ms Hayward spoke to Ms Diggins on the first occasion to raise Christie's concerns, Christie's was then doubtful about whether the Painting had in fact been signed by Albert Tucker. Christie's was then armed with knowledge that led inevitably to the conclusion that its representation that there was no doubt that the Painting had been signed by Albert Tucker was false. It knew that for the period of 5 years from May 2000 Capital Finance was entitled to reimbursement if the Painting was proved to be a forgery. It also knew that the plaintiff had yet to pay the $10,000 Buyer's Premium.
342On 14 June 2000 Christie's wrote to Ms Sharpe seeking payment of $10,000 "premium on this purchase". Although the plaintiff's personal cheque for $10,000 payable to Christie's was dated 25 May 2000, it appears that Ms Sharpe had not forwarded it to Christie's by 14 June 2000. It is probable that the plaintiff's personal cheque had not cleared through Christie's account until late June 2000 and thus the "transaction" had not been completed. I am satisfied that Christie's knew before this time that representation (b) was false.
343The question is whether in the circumstances Christie's had a "duty to speak"; Clerk & Lindsell on Torts (21st ed 2014, Thomson Reuters) at 1316 [18-09]. Capital Finance had continuing rights under clause C17 of the Conditions of Business for a period of 5 years. Christie's failure to correct the representation that had been rendered false after it was made prevented Capital Finance from being made aware of circumstances relevant to its right under clause 17 of the Conditions of Business.
344It is not clear on the evidence by whom at Christie's the decision was made not to correct the representation or to advise Capital Finance (or the plaintiff/Ms Sharpe) that there was now an element of doubt about whether Albert Tucker had signed the Painting and consequently whether the Painting was authentic. In the absence of any evidence from Christie's, there is no rational or reasonable explanation for this conduct. It was commercially reprehensible conduct and I am satisfied that Christie's knew the representation was false and decided not to correct it. Christie's had an obligation to correct the representation: Spice Girls Ltd v Aprilia World Service BV [2002] EWCA Civ 15 at [51]; [2002] EMLR 27 at [51].
345The falsity of the representation was known to Christie's before the transaction was completed in particular prior to the time that the plaintiff paid the $10,000 Buyer's Premium to Christie's.
346I am satisfied that Christie's is guilty of the tort of deceit. If the plaintiff is limited to the recovery of the actual loss directly flowing from the deceit it may be that her damages are limited to $10,000; Clark & Ors v Urquhart [1930] AC 28 per Lord Atkin at 67-68. If not then she is entitled to the loss as calculated in paragraph 268.
Unconscionable conduct
347The plaintiff also alleged that Christie's conduct in: making the misleading and deceptive representations in relation to the Painting and in failing to inform the plaintiff, Capital Finance, or Laurentine of its concerns and those of the experts at the Symposium in August 2000 was unconscionable conduct within the meaning of s 51AA, s 51AB, or s 51AC of the TPA, s 43 of the FTA and s 7 and 8 of the FTA (Vic).
348For the reasons outlined above in respect of the claim in deceit, Christie's conduct was commercially reprehensible and unconscionable in the circumstances.
Money had and received
349The plaintiff submitted that it was obvious that she was acting under a mistake when she agreed to purchase the Painting. There is no claim made by the plaintiff to rescind the contract that required her to pay the $10,000 Buyers' Premium. In Leason Pty Ltd v Princes Farm Pty Ltd [1983] 2 NSWLR 381, the plaintiff had attended the 1982 Summer Yearling Sale conducted by William Inglis & Son Pty Ltd in which a filly was described as being sired by Grand Chaudiere. In fact, as discovered later, the filly was sired by Hale to Success and not Grand Chaudiere. The auctioneer and the defendant were unwilling to take back the filly and the plaintiff commenced proceedings seeking an order to enable to return the filly to the defendant.
350Helsham CJ in Eq said at 383:
Neither the defendant or the auctioneer were aware that the breeding particulars inserted in the catalogue were wrong. The assertion that the plaintiff would not have purchased the horse had its correct breeding been indicated at the time of the sale, is not challenged.
...
There is no doubt that the plaintiff was induced to enter into this contract because of a misrepresentation ass to a material fact. That would, in general terms, attract the equitable remedy of rescission.
...
The basis of the remedy for rescission for misrepresentation is that the contract was entered into as a result of a false inducement; equity will set it aside because of this. I do not think the terms of the contract itself have anything to do with the equitable doctrine or remedy.
351There has been controversy in respect of whether a party may rescind an executed contract of sale of a chattel: Vimig Pty Ltd v Contract Tooling Pty Ltd & Ors (1986) 9 NSWLR 731 (Wood J refused to follow Leason Pty Ltd v Princes Farm Pty Ltd). See also Leaf v International Galleries (A Firm) [1950] 2 KB 86 in which the defendants sold a painting that they misrepresented as having been painted by J Constable.
352It was submitted that by reason of the greater knowledge of Christie's, the framework through which the legal consequences of that mistake are to be analysed is Taylor v Johnson (1983) 151 CLR 422. In that case Mason ACJ, Murphy and Deane JJ in referring to the proposition of law to dispose of the case said at 432:
It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension.
353However in this case at least between the date of the auction and some date later in May 2000 Christie's was not aware that the plaintiff entered the contract under some serious mistake. Christie's doubts arose in late May at a time when the contractual rights between the plaintiff and HFA were apparently being informally novated so that the contractual rights arose between HFA and Capital Finance. However Christie's contractual relationship with the plaintiff in respect of the Buyers' Premium remained on foot and Christie's became aware of the falsity of the representation in respect of there being no doubt that the Painting was signed by Albert Tucker.
354It was contended that at the very least there existed a common mistake, but more likely a unilateral mistake by the plaintiff because Christie's must have at the very least realised that the plaintiff and/or Capital Finance were labouring under a possibly false impression as to the provenance and authenticity of the Painting.
355It was submitted that Christie's was unjustly enriched and the plaintiff was correspondingly impoverished. In those circumstances it was submitted that the plaintiff is entitled to restitution.
356Christie's submitted that as this is a purely contractual remedy and the plaintiff was not a party to the contract for hire, albeit that Laurentine held the Painting on trust for her as a bare trustee.
357The contract negotiated between the plaintiff, through Ms Sharpe, and Christie's for HFA was for the plaintiff to purchase the Painting. However although the particular communications between Christie's and the finance broker and/or Capital Finance are not in evidence, the parties to the contract for the purchase of the Painting were Capital Finance and HFA. Thereafter Capital Finance leased the Painting to Laurentine in which company the Painting vested at the conclusion of the second Lease.
358The plaintiff entered into a contract with Christie's pursuant to clause 15(a) of the Conditions of Business to pay it the Buyers' Premium. That contract is amenable to be set aside by reason of the common mistake at the time it was made that the Painting was painted by Albert Tucker; or at the very least on the basis of the plaintiff's mistake. The plaintiff would be entitled to have the contract with Christie's in respect of the Buyers' Premium set aside and if such an order had been sought she would be entitled to restitution of $10,000.
CLAIMS AGAINST MS SHARPE
359The plaintiff sues Ms Sharpe for misleading and deceptive conduct in respect of the purchase of the Painting. The plaintiff also brings claims for breach of contract, breach of fiduciary duty, unconscionable conduct and in negligence against Ms Sharpe in respect of the purchase of the Painting.
360The plaintiff also brings claims against Ms Sharpe for breach of contract, breach of fiduciary duty and unconscionable conduct in obtaining a secret commission on the sale of the Smart.
Breach of contract and breach of fiduciary duty
361Although there is an issue as to the location of the meeting, the plaintiff gave affidavit evidence that Ms Sharpe invited her to look at the Tucker in the Catalogue during the meeting in April 2000. The plaintiff claimed that Ms Sharpe introduced the subject by saying "look at this Tucker". She claimed that after a discussion about price Ms Sharpe said she would do some research and look at the Painting's condition. She also claimed that Ms Sharpe then said "if it's a good work and in good condition, and the provenance checks out, I will put in a bid for you". The plaintiff also claimed that Ms Sharpe referred to the Tucker as a "good buy" and a "great investment".
362The plaintiff's suggestion that it was Ms Sharpe who introduced the topic of the "Tucker" to her cannot be accepted. During her cross-examination the plaintiff admitted that she said to Ms Sharpe "I would like to own a Tucker as I like him as an artist" (tr 272). The plaintiff agreed that (in line with what Ms Sharpe had claimed in her evidence) Mr Daniel said in the course of discussing the Christie's Catalogue that he had looked at the Catalogue and there was nothing much in it for him and said "Lou likes the Tucker. She wants to have a word with you about it" (tr 273). Clearly at this time the plaintiff relied upon the representation in the Catalogue that the Painting was painted by Albert Tucker.
363The plaintiff gave evidence that she and Ms Sharpe then had a conversation about the Painting whilst looking at the Catalogue (tr 273). The plaintiff's evidence included the following (tr 274-275):
Q. Now, the reserve, of course, is not stated on the catalogue, is it?
A. No.
Q. And that is, as you knew, perfectly normal?
A. Yes.
Q. You wouldn't expect to see the reserve, would you?
A. No.
Q. Because the reserve, speaking generally, is not made known to bidders or would-be purchasers?
A. That's correct.
Q. It is known to the auction house and to the vendor, but not otherwise?
A. That's right.
Q. So at this point, obviously enough, neither you nor Ms Sharpe knew what the reserve was?
A. That's correct.
Q. But given that the range of estimates from Christie's was $55,000 to $75,000 did you presume that the reserve must have been either $55,000 or something less than that?
A. No I did not.
Q. What did you presume, if anything?
A. I presume - we had a - I presumed the reserve was $75,000.
Q. Even though the estimate was 55?
A. Yes.
Q. Why?
A. Because the conversation we had at Vivienne's house was that prices that were put in the catalogue were usually lower than what people expected and what the reserve would be to attract bidders and that they thought this would be a more - a painting that would be more likely to reach $150,000 and that would be a more realistic price.
Q. So you say now, do you that Vivienne Sharpe told you that the reserve was probably less than $55,000?
A. No.
Q. Is that what you are saying?
A. No. I am not saying that.
364The plaintiff also gave the following evidence in cross-examination (tr 282-286):
Q. Could you answer the question? Did you ever authorise her to bid 55,000?
A. Yes.
Q. When?
A. When she told me she thought she could acquire it for less than $40,000 because it had been passed in.
Q. So you say she told you she thought she could get it for less than 40 and in response to that, you authorised her to bid to 55?
A. I didn't give her a figure.
Q. Well, I have just asked you whether you authorised her to bid to 55 and you said "yes", so I will ask you again. Did you authorise her to bid to 55, ever?
A. Yes.
Q. When?
A. When she said she believed - the day after she rang - the day of the auction when she rang me to tell me the painting had been passed in, she thought she could buy it for $40,000.
Q. Yes, and?
A. I told her she couldn't buy it for more than the reserve.
Q. Did you say a figure for what the reserve was?
A. I don't remember.
Q. According to your evidence ten minutes ago you thought the reserve was 75,000?
A. That's correct.
Q. Well, according to you she told you the reserve was 75,000?
A. That's correct.
....
Q. I am trying to capture what I understand you to be saying this afternoon. You certainly said, more than once, that according to you in the April conversation, Ms Sharpe told you the reserve was 75?
A. That's correct.
Q. You say that in the conversation on the night of auction, you authorised her to bid to the reserve?
A. That's correct.
...
Q. You have said this afternoon, among other things, that on the April conversation, Ms Sharpe told you that the reserve was 75.
A. Yes.
Q. You have said this afternoon, among other things, that on the night of the auction you authorised her to bid to the reserve, haven't you?
A. Yes.
...
HER HONOUR
Q. What was put to you was that you told me that Miss Sharpe told you that the reserve was $75,000?
A. That's correct.
Q. And then you gave evidence that you told her that she could bid to the reserve. Do you remember giving that evidence?
A. That's correct.
Q. What Mr Gray is putting to you is, did you understand then that you were authorising her to bid to 75, the reserve?
A. Yes, that's correct.
365Mr Douglas conceded that this evidence was "somewhat confused" (tr 817). I am of the view that in light of this evidence it is rather extraordinary that the plaintiff maintained her claim that Ms Sharpe exceeded her authority or acted inconsistently with her instructions. The plaintiff's claim in this regard for breach of contract and breach of fiduciary duty will be dismissed.
Misleading or Deceptive Conduct
366It is alleged that on or about 1 May 2000 and from 2 May 2000 to 2010 Ms Sharpe made the following representations to the plaintiff:
(a)The Painting was a painting by Albert Tucker;
(b)The Painting had been painted by Albert Tucker circa 1967;
(c)The Painting had been purchased from Tolarno Gallery, St Kilda in Victoria in 1969-70;
(d)The Painting had been acquired by the father of the present owner circa 1970;
(e)Ms Sharpe had made independent enquiries in relation to the provenance of the Painting;
(f)There was no doubt about the provenance of the Painting;
(g)The Painting would be a sound investment.
367It is alleged that representations (a) to (g) were made by Ms Sharpe expressly or are to be inferred from what was said by Ms Sharpe to the plaintiff in London by telephone on or about 1 and 2 May 2000. It is also alleged that the representations are to be inferred from the failure of Ms Sharpe to correct what was said by her during the telephone conversations at any time until 2010.
368Ms Sharpe denied that she acted as the plaintiff's fine arts consultant and advisor in May 2000. In the circumstances nothing much turns on this. However I am satisfied there were clearly elements of an advisory role taken on by Ms Sharpe in some aspects of her relationship with the plaintiff. Ms Sharpe claimed that when she discussed the Catalogue with the plaintiff and her husband in about April 2000 she did so honestly and reasonably believing the statements contained within it with respect to the Painting to be accurate and authoritative. She otherwise denied the allegations in respect of the representations.
369The plaintiff claims that Ms Sharpe made the representations including that the Painting was a good investment. Ms Sharpe's own evidence establishes that this claim has force.
370Ms Sharpe claimed in her affidavit (paragraph [163]) that she said to the plaintiff in a conversation on the telephone whilst the plaintiff was in London that there were "similar Tuckers from this series hanging in major art museums and featured in books on Tucker". Ms Sharpe also informed the plaintiff that the Painting was "from a good period, the 1960's". Ms Sharpe also advised the plaintiff that the Painting was "probably worth $75,000". Ironically the plaintiff denied that this conversation occurred. However other aspects of the conversations she claimed did occur referred to earlier conveyed the same or similar representations. On balance I am satisfied that the conversation between the plaintiff and Ms Sharpe included the statements that Ms Sharpe claimed she made to the plaintiff.
371From that conversation it is clear that Ms Sharpe represented that the Painting was painted by Albert Tucker. The suggestion made to the plaintiff that there were similar works by Albert Tucker hanging in major art museums conveyed the representation that this was a good investment. So too did the expression that it was from "a good period". I am satisfied that Ms Sharpe represented that the Painting was a painting of Albert Tucker and that it would be a good investment. Those representations were false and in contravention of the TPA and the FTA.
372I am satisfied that the plaintiff relied on the representations to instruct Ms Sharpe to purchase the Painting on her behalf for $75,000. I am satisfied that Ms Sharpe's contraventions were a cause of the plaintiff's loss.
373The loss suffered by the plaintiff is $118,788.71 as calculated in paragraph 268 above.
Negligence claim
374It is alleged that Ms Sharpe was negligent in making the representation to the plaintiff that the Painting was a good investment and probably worth $75,000 and in failing to investigate the authenticity of the Painting. In support of this claim the plaintiff relied upon the evidence of Ms Diggins. Ms Diggins' opinions were based in part upon assumptions that had been provided to her by the plaintiff's solicitors in a letter dated 8 November 2012. Ms Diggins made the following relevant assumptions for the purpose of expressing her opinion in answer to the questions posed by the plaintiff's solicitors:
(a) That the Painting was listed in the Christie's catalogue with an estimate of between $55,000 to $75,000 (with a reserve of $55,000).
(b) Vivienne Sharpe attended the auction on behalf of Louise McBride who was in London at the time.
(c) Following the auction, Louise McBride was told by Vivienne Sharpe that the Painting was passed in at $50,000 but there was a post-auction interest in the Painting.
(d) Further, it was explained to Louise McBride by Vivienne Sharpe that it was important and a good piece, and that it would work well in Ms McBride's collection.
(e) I am not aware of how the bidding reached $50,000, that is, how many bids were made and the number of people bidding on the Painting.
(f) The Painting was passed in at Auction.
(g) That subsequently Vivienne Sharpe purchased the Painting on behalf of Louise McBride for $75,000 plus a premium of $10,000 plus Vivienne Sharpe's commission of $2,000.
375Ms Diggins was asked two questions. The first was in what circumstances would a reasonably competent and diligent art consultant/agent in the position of Ms Sharpe have made a post-auction offer to purchase the Painting for $75,000 plus Buyer's Premium?
376In her affidavit of 15 August 2013 Ms Diggins expressed the following opinion (at [31]):
It is reasonable to assume that there was no other bidder as the lot was passed in and not referred to an under bidder, as is the practise of any auction house, if there is a genuine bid close to the reserve. Had there been no other bidder, then a bid of $55,000 would have acquired the work and I would expect the adviser to have exercised their instructions to place the appropriate bid/bids.
377Ms Diggins was cross-examined in relation to this opinion as follows (tr 387-393):
Q. Do you agree with this; that is tantamount to saying that even if there was no interest in the auction room Ms Sharpe should have just paid the $55,000 reserve?
A. No. Actually what I am trying to say is that there was an opportunity at that point in time to have paid 55,000 and bought picture, and as it then progressed she lost that opportunity.
Q. As things turned out?
A. Yes, she lost that opportunity.
HER HONOUR
Q. Do you say the $55,000 would have had to have been accepted by the auction house because they had 55 to 75 in the catalogue?
A. No. What the catalogue shows is the estimate that the auction house is saying it should go between. The picture was run to 50,000.
Q. When you say "it was run to 50,000"?
A. The auctioneer took bids to 50,000. If the reserve had been 50,000 --
Q. No, sorry, we are at odds. You told me that had there been no other bidder a 55,000 bid would have acquired it?
A. Yes.
Q. Why is that so?
A. Because the auctioneer, at 50,000 when he stopped the bidding there was no bid. Had he gone, therefore you know that that was not the reserve. The reserve was 55,000. So if there had been one bid and it was 55,000 he would have had to have hammered the picture.
Q. How do you know 55 was the reserve?
A. Because he can't put a reserve in above that and had he had a reserve of 50,000 he would not have run the picture, he would not have taken the bid at 50,000 without a buyer.
Q. But couldn't it have been 58,000?
A. No. The auction houses work in bid lots. So whatever the reserve will be will be on a bid lot. So, they either run at two and a half thousand or five thousand, to get to that reserve figure.
Q. How do you know it was at the 55, the reserve?
A. Because - how do I know that?
Q. Yes?
A. I know for two reasons; one because Fiona Hayward ended up saying that.
Q. I see?
A. Secondly, and more importantly, if it had been 50,000 Roger McElroy would not have taken it to 50,000, he would have taken it to a figure below that.
Q. But it could have been 60,000?
A. No.
Q. Why not?
A. Well, that's not the practice of the auction house and the estimate is 55 to 75 and they are not, the auction has not put up a reserve that is higher than their estimate.
Q. Higher than the lower end of the estimate?
A. Higher than the lower end of the estimate they do not put a reserve higher than that.
...
GRAY
Q. So, that is one possibility, you think that if 55,000 had been bid in the room then on the theory you are advancing the auctioneer might have had to take it?
A. He would have had to have taken it.
Q. But another possibility is isn't it - I think you refer to this somewhere, I think I am going to come to it soon - that if there was actually no real genuine interest in the painting in the room and the dealer sensed that, and sensed that even the bid of 50,000, if that is what it was, was not a real bid, then a competent dealer might proceed on the footing that there was an opportunity here to get it for less than 55, indeed less than 50?
A. That's correct.
HER HONOUR
Q. By negotiating after the auction?
A. Yes.
...
GRAY
Q. I will try to condense what I was endeavouring to ask you Ms Diggins. If Ms Sharpe was told either on the night of the auction or in the following day or days by Ms Hayward in the context of the negotiations that there was a lot of post auction interest in the painting that was a factor which she had to deal with, among others, wasn't it?
A. Yes it was.
Q. And if she was told that, namely that there was post auction interest meaning other interested potential buyers, then that would have an impact on the way in which any competent dealer would approach how to go about trying to acquire this painting or indeed whether to try and acquire it?
A. It would.
Q. And a competent dealer in that situation, you'd agree I suppose, would need to convey that information to the client that, the potential actual buyer, acquaint them with that information and ask the client what the client wanted to do?
A. Yes.
Q. And then having done that if the client made a decision to bid to any given amount and instructed the agent to do that then that's what the agent should do.
A. To make an offer rather than to bid, to make an offer.
Q. Quite right. With that correction, do you agree with what I've put?
A. Yes, I do.
...
Q. Suppose that Ms Hayward of Christie's first of all told Miss Sharpe that $40,000 was not accepted, make that assumption?
A. Correct.
Q. These are assumptions I am asking you to make?
A. Yes.
Q. Secondly assume that Miss Sharpe offered $55,000 and was told that was not accepted.
A. Yes.
Q. Thirdly, Miss Sharpe was told by Miss Hayward that there was a lot of post auction interest and to get the picture she would have to pay $75,000?
A. Yes.
Q. Suppose that Miss Sharpe reported that to her client or her friend Ms McBride and McBride said "yes please bid $75,000"?
A. Yes.
Q. Is there any problem with Miss Sharpe going ahead and doing that?
A. There's no problem in as you set out at all.
378The second question posed by the plaintiff's solicitors for Ms Diggins was to offer her opinion as to what steps a reasonably competent and diligent art consultant/agent in the position of Ms Sharpe would have taken to ascertain the provenance of the Painting and whether the Painting was in fact signed by Albert Tucker.
379In this regard Ms Diggins gave affidavit evidence that in her opinion the steps relevant to the particular circumstances of this case that a reasonably diligent and competent art consultant/agent should have taken were: (1) to ask the auction house or independent conservator for a condition report; (2) to never accept the provenance provided by the auction house at face value and to always query it and test the provenance against direct personal knowledge or by further enquiry; and (3) to undertake specific research on exhibitions from which the Painting may have been previously purchased.
380Ms Diggins' affidavit evidence was that the provenance listed in the Catalogue could have been easily checked. She said that it would be reasonable to expect an agent/dealer working in the area of Australian art to have some appreciation of when artists, particularly those within the area of their interest, were aligned with galleries that represented them. Ms Diggins said that Ms Sharpe should have checked the citation that the provenance was Tolarno Gallery 1969-1970. She said that beside research on the internet, the National Gallery of Victoria held a Tucker Retrospective exhibition in 1990 for which a catalogue was published and was readily available. Ms Diggins referred to the rear of that catalogue (page 118) dedicated to Tucker's one man exhibitions. She noted that there was no exhibition at Tolarno Gallery until 1978 which was when Tolarno began to represent Albert Tucker. Prior to that date Albert Tucker exhibited in Victoria with his son at Sweeney Reed Gallery and prior to that at Australian Galleries.
381Ms Diggins said that this establishes that Tolarno Galleries did not represent Albert Tucker in 1969-1970. She also claimed that Tolarno Galleries was not known as a "secondary market gallery". "Secondary market" is an expression that covers a wide variety of sales methods. It can be an auction or it can be purchased from the artists directly or in some instances it can be obtained in a barter arrangement (for instance in exchange for a meal at a restaurant).
382Ms Diggins also expressed an opinion that Ms Sharpe should have questioned Christie's in relation to the provenance and that had she done so she may have become aware of the O'Sullivan letter. It is not possible on the evidence to conclude that the O'Sullivan letter was in Christie's possession as at 1 May 2000. The opinions that Ms Diggins expressed about the prospect of Ms Sharpe reviewing the O'Sullivan letter against the Holland letter are therefore not apt. The same can be said in respect of her opinions about what Ms Sharpe should have done in researching the existence of the Dominion Gallery.
383The fact of the matter is that Ms Sharpe did raise the provenance with Ms Hayward in respect of the entry in the Catalogue and was informed by Ms Hayward that it was correct.
384Ms Diggins' affidavit evidence included the following (paragraph 34(g)):
I would also expect an agent/dealer to look in-depth at the Painting, the handling of the work, the actual imagery, how the figure work, both the Faun and the parrots has been painted, its relationship to the background, the purpose of the background, as well as the colours and to compare these aspects with other works by Tucker of a similar subject and date. This examination should have created doubts in the mind of a careful agent/dealer, as to how genuine the Painting could be and it is difficult to understand why these issues would not have been noticed and discussed with Ms McBride before a purchase.
385Ms Diggins' affidavit of 15 August 2013 preceded Ms Sharpe's affidavit sworn on 22 January 2014. Ms Diggins swore a second affidavit on 23 April 2014 and addressed some of the matters referred to by Ms Sharpe in her affidavit. Ms Sharpe's affidavit dealt with the steps that she took in respect of viewing the Painting. In particular she referred to her usual practice of checking whether there was any notice placed in the sale room prior to the auction advising whether there were any changes in the information in the Catalogue about the auction items. Ms Sharpe said there was no sale room notice advising of any changes to the catalogue or provenance of the Painting. In paragraph 145 of her affidavit Ms Sharpe said that she understood that Ms Diggins and Mrs Tucker inspected the Painting prior to the auction and that no one had raised any concerns with her or publicly about the Painting prior to, during or after the auction.
386In dealing with this aspect of Ms Sharpe's affidavit Ms Diggins gave the following evidence in her later affidavit (at [12]):
During Albert's lifetime, it was my usual practice to look at any of Albert's work that came up for auction at the viewing preceding the auction. I discussed these works with Albert. After his death, I continued to do so and I usually discussed the works with his widow, Barbara Tucker (Mrs Tucker), as a matter of interest. Sometime in the last week of April 2000, I attended the viewing of the artworks included in Christie's forthcoming auction, of which the Painting was also on display. I looked at the Painting during that viewing. At that time I did not look at the Painting as I would from the point of view of having an interest in purchasing it, but rather from general interest in Albert Tucker's work. To my recollection, I did not like the Painting. I could not explain the reasons for this at the time, but I recall that there was something odd about the Painting and intuitively, the look of the Painting did not sit well with me.
387In her cross-examination Ms Diggins accepted that Ms Sharpe had obtained a condition report and gave the following evidence (tr 394-395):
Q. You know now, don't you, that Ms Sharpe in fact did check with Christie's as to whether the Tolarno Gallery provenance was correct?
A. I know she checked that.
Q. You know?
A. Yes, I understand she checked that.
Q. So she didn't simply accept it at face value, she checked with them, do you agree?
A. Yes, I do agree. I wouldn't have expected them to say it's not correct.
Q. Step 1 would be to ask them?
A. Yes.
Q. And the next thing you say should be done is to test the provenance against direct personal knowledge?
A. Yes.
Q. And you know from her affidavit that she did that?
A. How did she do that?
Q. You've read her affidavit?
A. Yes. She checked it against what Christie's said.
Q. She sets out in some length in some paragraphs that you may or may not remember what her personal knowledge was and how the Tolarno Gallery's provenance meshed with that. Do you remember that?
A. Yes, I do remember that.
Q. You make some criticisms of that. You say that her knowledge and expertise about Tolarno Gallery wasn't good enough, I am summarising but you?
A. That's correct.
Q. You agree she tested it against her own personal knowledge?
A. Yes.
Q. And you say that she needed to do that, "test the provenance either against direct personal knowledge or by further enquiry"?
A. Yes.
Q. She had direct personal knowledge. You may question how good it was but she had direct personal knowledge and she tested the Christie's stated provenance against that knowledge, didn't she?
A. Yes.
Q. And then...you say you would have undertaken specific research on exhibitions from which the painting may have been previously purchased?
A. Yes.
Q. How could one do that? How would one know which exhibitions to check?
A. Albert Tucker's dealer in the 60's was Australian Galleries.
Q. That's when they were first for sale, the first time they were offered for sale that's who he used?
A. Yes. Australian Galleries was his representative dealer, and so if this picture was being sold in the secondary market as being suggested then it would have been sold by a primary dealer beforehand and his primary dealer was Australian Galleries so if one was to ring Australian Galleries and asked had this picture been in their care exhibited for sale one would have found out that it wasn't.
Q. One would have needed to know that Australian Galleries was Albert Tucker's dealer in 1967 to 1970?
A. Well, if one had done some research it was obvious.
Q. It might have been obvious if one had done that research, but if one's understanding rightly or wrongly was that Tolarno Gallery was a gallery that exhibited Albert Tucker and one didn't register that there was some chronological disconnect, there would be no research prompted would there?
A. No, I disagree with that entirely.
Q. Why?
A. Well, because Tolarno was not the primary source of Albert Tucker's work in 1969-1970.
388Ms Diggins was then cross-examined about the night of the auction in the light of her claim that Ms Sharpe should have conducted the further research. She gave the following evidence (tr 396-397):
Q. You were there Miss Diggins on the night of the auction, weren't you?
A. I was.
Q. You knew all these things that you've just been saying were no secret and were very obvious, didn't you?
A. Yes.
Q. Why didn't you say something?
A. As I've said before I wanted to make sure that we had information that could not be refuted and in fact I did say to Christie's, I told Christie's the situation.
Q. Afterward --
A. -- after the sale which gave Christie's the opportunity --
Q. I'm not asking you that. Please Miss Diggins. I'm talking about at the auction. Before lunch you said that you weren't sure when you first realised that the Tolarno Gallery's provenance in the catalogue was a problem. You said it might have been at the time of the auction but it might have been not until later. Do you remember saying that?
A. That's correct. I did say that.
Q. So that being so, even to someone as obviously expert as you who you say knew exactly when Tucker exhibited at Tolarno and when he exhibited somewhere else, you didn't register on the night that a Tolarno Gallery's provenance was necessarily a problem did you?
A. I didn't do anything about it.
Q. You didn't even register it on the night in your own mind?
A. I don't know that you can say that.
Q. Well I'm asking you?
A. You are asking me to remember something then that I can't remember. I don't know but I know --
Q. Is that your answer you can't remember?
A. I can't remember on that day.
Q. So you may not have realised up to and including 1 May that the Tolarno --
A. That's quite possible.
Q. Please let me finish the question. You may not have realised up to and including 1 May that a Tolarno Gallery's provenance as any kind of problem?
A. I may not have.
Q. And you, more than anyone in Australia, were best placed to know whether it did, weren't you, at that time?
A. I'd be one of the people who would be able to do that.
Q. And you didn't or may not have?
A. No, not at that day.
Q. But you say Miss Sharpe should have?
A. Miss Sharpe was wanting to buy the picture and I would have expected Miss Sharpe to have undertaken the research necessary. I wasn't at that stage wanting to buy the picture, wanting to research it but become aware that it was a problematic picture and I dealt with it as soon as I could as I told --
...
Q. You're aware, aren't you, that Miss Sharpe also enquired, when I say you're aware because you've read her affidavit, you are aware that Miss Sharpe enquired of Fiona Hayward as to the identity of the owner and Miss Hayward declined to provide the vendor's name?
A. I'm aware of that.
Q. And there was nothing else that Miss Sharpe could do to find out the vendor's name if the vendor and the auction house weren't telling her, was there?
A. No. Vendor's name was not really relevant.
Q. Well, the identity of the vendor. Not the name, but the identity of the vendor if it had been provided to Miss Sharpe, which as you know it wasn't, might have been a piece of information that she could have used for example to go and talk to that person and ask them about the provenance, correct?
A. That is correct.
Q. But Christie's declined to do that, didn't they?
A. They did.
389Ms Diggins said that what Ms Sharpe should have done was to look in depth at the Painting, the handling, the imagery and the actual technique and appearance of the Painting. She said that this should have created doubts in the mind of a careful agent/dealer as to how genuine the Painting was. She also said that it was difficult to understand why these issues would not have been noticed and discussed. She was cross-examined as follows in respect of these opinions (tr 400):
Q. But you, as the undoubted expert that you were, didn't respond or react with anything more than some vague, and I don't say that critically, vague impression that you didn't like it much and something didn't sit well with you?
A. That's correct.
Q. According to you at paragraph 34(g) Miss Sharpe should have noticed all these things about the handling of the work, the imagery, how the figure work had been painted, its relationship to the background, the purpose of the background, the colours compare that. But you didn't do any of that, did you?
A. Well yes, I did.
Q. Not on the night up to and including 1 May?
A. I told you --
Q. Did you?
A. Well, I'm sorry that's wrong. I did. I was very concerned about the picture as I said. It didn't sit well. I said that.
Q. You said to be precise that to your recollection you didn't like the painting, is the first thing you said?
A. That's correct.
Q. You said "I could not explain the reasons for this at the time"?
A. Yes.
Q. Well that rather suggests that you didn't do this detailed analytical exercise that's referred to in paragraph 34g?
A. I don't think it suggests that at all.
Q. The fact that you couldn't explain the reasons?
A. No.
Q. And all you do is recall that there was something odd about it?
A. That's what I said.
390Ms Diggins accepted in her cross-examination that Ms Sharpe did examine the Painting and physically looked at it; that she satisfied herself that she had read the Catalogue and that the colours in the Catalogue image were pretty true; that she obtained a condition report; that she looked at the Painting under ultraviolet light; that she checked with Christie's whether the Tolarno Gallery's provenance was accurate; that she asked for the identity of the owner and was told that she could not have it; that she asked about the level of interest and was told there was a bit of interest; and on the night of the auction, she checked that there were no last minute sale room notices (tr 400-401).
391Ms Diggins was then asked about her opinion expressed in her affidavit that the Painting was a "rather crude take on the only work in the Mexican catalogue" (tr 401-402). She gave the following further evidence in cross-examination (402-403):
Q. ...Do you see there you say that in your view the painting is a cruder work than other Albert Tucker works that you'd been talking about?
A. Yes.
Q. To have that level of familiarity with Albert Tucker's oeuvre, one would need to be very well informed about Albert Tucker's career and technique and stylistic methods, wouldn't one?
A. If you are looking at Albert Tucker you are looking at paintings of that period, it's my view that some of those things were quite obvious.
Q. I'll ask you again. If they were so obvious why not say something as at 1 May? Why not say something rather than let a painting that you say you had these reservations about, which you say stylistically and by way of technique was obviously doubtful, why let it go forward to be sold?
A. Well, I have tried to answer that and --
Q. Have another try, please. As at the 1 May auction day?
A. Well, as at the 1st of May. I didn't have enough information to go to Christie's and convince Christie's that it was not a picture that should be in the exhibition - in the sale.
392It appears that prior to giving her evidence during the trial Ms Diggins was not aware of the Statement of Authentication and Valuation provided by Karen Woodbury of Deutscher-Menzies. Ms Diggins said in her evidence in cross-examination that Ms Woodbury was "definitely" a person of "good repute in the art world" (tr 406). She said that she is "very respected" and is a contemporary dealer and not known for her experience in any other field but contemporary art (tr 406). Ms Diggins was cross-examined as follows (tr 406-407):
Q. And assuming what she says in this statement of authentication is correct, namely that she has inspected the item, then do you say that all of the criticisms that you make of Ms Sharpe would also apply to her?
A. Yes I do.
Q. So it would appear then, according to you, that Karen Woodbury, on 2 June, missed something that was terribly obvious as well?
A. I think she hasn't perhaps done her homework and she has accepted the picture with the Christie's provenance.
Q. Well that is not what she says, is it? She says:
"I have inspected the item described above and in my opinion the work is genuine and authentic".
A. I understand what she said.
Q. Well assuming for the sake of discussion that that is her genuine professional opinion, or was in June 2000, she just got it horribly, horribly wrong?
A. I think so.
Q. Even though she was a respected dealer and someone respected, among other things, for her capacity to authenticate Australian pictures, albeit with the reservation you mention about her specialty being contemporary works?
A. Yes.
Q. So would it be fair to say that for someone, either Ms Sharpe or for that matter Ms Woodbury, who didn't know that there was a weakness or potential problem with the provenance of the picture, it was not a straightforward thing to see this picture physically and realise that it was or might be a fake?
A. That's probably true. Um --
393Ms Diggins accepted in cross-examination by counsel for HFA and Mr Holland that she had a special concern about the integrity of the Tucker name (tr 411). She also agreed that in 2000 she was particularly sensitive about the question of art fraud (tr 411). She agreed that she had sold two works by two leading Australian impressionist painters, "neither major works" which were forgeries. One was a forged Streeton and one was a forged Roberts (tr 411). She was cross-examined as follows (tr 411-412):
Q. And therefore - this had happened not too long before - when it came to the auction in 2000, you were particular sensitive about the question of art fraud; not so?
A. It's true, I was.
Q. And, therefore, if you believed that there was a question as to whether this painting was a forgery, you as a Tucker expert who had been the exclusive dealer for the late Albert Tucker from late 1980's until his death in 1999 and the executor of his estate, you would of drawn your concern to the attention of Christie's; not so?
A. I did, but not at that point in time.
...
Q. And in fact, notwithstanding the fact that you attended the pre-auction viewing and the auction and had looked at the painting in the catalogue, you made no representations in May to Christie's whatsoever, did you?
A. Not then.
Q. And I suggest, Miss Diggins, that if you believed that there was any real question in May about this painting, you would have believed it to be wrong to sit idly by and not to raise it with Christie's; not so?
A. I raised it with Christie's when I knew that I had enough information for them and for them to then be able to rectify the problem.
Q. I suggest to you, Miss Diggins, that the reason that you made no representations to Christie's that you had a concern or question about this painting is because in fact, in May 2000, you didn't have any question or any concern whatsoever about this painting?
A. Not so.
394Notwithstanding the Statement of Authentication by Ms Woodbury, Ms Diggins said that it did not shake her in the slightest and that she was absolutely comfortable that the Painting is a fake. She gave the following evidence in this regard (tr 427):
Q. And is there some feature to it that convinces you of that more than others?
A. One particular feature I really don't like, the provenance is just simply wrong and is just inaccurate. The painting is crude. The colours in it are not really the colours of Tucker and it's very hard to talk about the semantics and the subtleties in artwork. The other thing in all of this group of pictures is a background. It's made to look like a landscape but Bert didn't approach those pictures like that in any way. It looks in some of them as if there's been a screen put on them. The parrots, the beak of the parrots are wrong.
Q. There's only one parrot in this one?
A. In this particular picture I'm sorry I was talking about the group of pictures that sort of came all of a sudden. They're just not painted like Bert would paint them. The colours, as I said, are wrong. The landscape background is wrong. The way the paint is put across the board is wrong. When you compare them to the really top level pictures there, they just don't compare. The other thing this painting has a date on it of '69 which is really hard to see, terribly hard to see. Bert is very clear about his painting.
395Ms Sharpe relied upon the evidence of Martin Douglas Browne an art dealer carrying on business at Martin Browne Contemporary (previously known as Martin Browne Fine Art) an art gallery that he established in 1991. Mr Browne holds a Bachelor of Arts from the University of Auckland and a Master of Arts, first class honours, from the University of Auckland in 1985. He has worked in the art industry since 1981 with a short sojourn into the world of diplomacy and futures broking in 1986 and 1987.
396Mr Browne characterised the auction section of the art market as a "pyramid of credibility". At the lower level are the general auction houses who specialise in clearance sales of deceased estates, surplus stock and the like and the itinerant auctioneers who put together auctions, particularly art auctions and hold them in various venues. Mr Browne expressed the opinion that when buying from one of these auction houses a reasonably competent and diligent art dealer "should take nothing for granted about any given artwork, or about any claims that the auction house is making regarding condition, provenance or authenticity".
397At the middle level of the pyramid are those specialist auction houses that produce regular auctions focused on particular areas, for example, Australian painting and sculpture and decorative arts. These auction houses pride themselves on having a level of expertise that clients can reasonably depend upon. Indeed according to Mr Browne their reputation and on-going viability as businesses are significantly dependent upon retaining their credibility in this respect. Notwithstanding this level of specialist expertise, Mr Browne expressed the opinion that a reasonably competent and diligent art dealer "still needs to exercise care and caution" when buying from one of these middle level auction houses.
398Finally at the top of the pyramid are the major international auction houses, the two most important of which according to Mr Browne are Christie's and Sotheby's. Mr Browne said that both of these auction houses have built their pre-eminent positions based on reputations for being able to offer the rarest, most important and most desirable items to a worldwide audience from whom they aim to draw the highest prices on behalf of their vendors. Mr Browne expressed the view that these auction houses can only retain their positions and reputations through being studious in their scholarship and research so as to ensure that what they claim they are selling, including the item's authenticity, provenance and exhibition history, is in fact correctly described. These auction houses employ people who are already experts in their field and have the resources and connections where necessary to obtain information that they need.
399Mr Browne's affidavit evidence included the following (at [21]):
To maintain a reputation that is as pristine as possible is a central tenet of both these auction houses' business models. It is the underlying principle which supports them being able to ask the world's wealthiest individuals to part with their money on trust that when Christie's or Sotheby's say that an item is authentic and its history is correct as catalogued, that can be relied upon. While there is an occasional situation where a work is found not to have been authentic - either through miss-attribution or as the result of a deliberate and sophisticated attempt to deceive the auction house by an unscrupulous vendor - the overwhelming majority of works handled by these houses are authentic as described. If the situation were anything but thus, these businesses would cease to exist in an instant. Long term success in the art market is built on trust and reputation.
400Mr Browne expressed the opinion that when considering the purchase of an artwork from Christie's or Sotheby's, a reasonably competent and diligent art dealer "is entitled to do so on the clear understanding that, unless otherwise stated in the catalogue, the auction house stands behind and guarantees any artwork it is selling as an authentic and unquestioned work by the named artist".
401After reference to Christie's cataloguing practice and the absence of any question mark after the word "Signed" in the description of the Painting, Mr Browne's affidavit evidence included the following:
24. Therefore I consider it entirely reasonable for a reasonably competent and diligent art dealer to assume that an auction house such as Christie's or Sotheby's with Conditions of Business to this effect has investigated and satisfied any queries or questions raised about the authenticity and condition of any work they offer, and that they have verified for themselves to the best of their ability, any information provided by the vendor, including the claimed provenance, exhibition history and any other relevant information about the work that they have catalogues under their auspices.
25. That said, in considering an artwork being offered for sale by one of these two top auction houses, a reasonable competent and diligent art dealer should still always review the information provided in a catalogue in light of his or her own knowledge and, to the extent reasonably possible, conduct his or her own investigations to verify it. In particular, a reasonably competent and diligent art dealer should always ask for a written condition report and, where possible, inspect the condition of the work using an ultra-violet light and close examination by eye and compare those findings with the condition report that had been provided.
26. With respect to verifying questions of ownership and provenance of an artwork being sold by one of these two top auction houses, again one is limited to the extent to which that information is already publicly available or to which the auction house wishes to divulge that information. However, as in the earlier situation with the mid-tier auction houses, a reasonably competent and diligent and experienced art dealer would recognise that some of this information is 'commercial-in-confidence' and would not expect it to be revealed in the normal course of events.
27. In summary, the extent to which a reasonably competent and diligent art dealer can reasonably rely on the cataloguing provided by the top auction houses like Christie's and Sotheby's to be accurate and to have been fully verified, is higher than it is in any other art market situation. I cannot over-emphasize how important to their business models is the absolute need for these auction houses to ensure their reputation for reliability in issues of authenticity, condition, ownership, provenance and associated catalogue information. It determines their ability both to attract material for sale and convince their buyers to pay top prices.
402In respect of the steps that Ms Sharpe took with regard to ascertaining the physical condition of the Painting Mr Browne expressed the opinion that it was "entirely reasonable" for her to be satisfied that the physical condition of the work was as represented by Christie's in the condition report and to recommend it to her client. Mr Browne also expressed the view that there was nothing further that he would have expected a reasonably competent and diligent art dealer in Ms Sharpe's position to do in relation to ascertaining the physical condition of the Painting.
403Mr Browne expressed disagreement with Ms Diggins' conclusion that Ms Sharpe should have had doubts as to how genuine the Painting could be. The reasons given in support of this disagreement included the fact that a number of the Christie's art specialists were present at the auction viewing and subsequent auction and none of them raised any concern or queries about the authenticity of the artwork publicly at these times. Mr Browne referred to the absence of any sale room notices. He also referred to the fact that "most significantly" Ms Diggins herself was also present at the viewing and that she made no mention of having expressed her supposed concerns about the Painting to any of Christie's staff either during the viewing or prior to, during or immediately after the auction.
404Mr Browne expressed the opinion that if Ms Diggins was not sufficiently concerned to raise any misgivings at these times he could see no justification for her view that anyone else, such as Ms Sharpe, should reasonably have been expected to voice suspicions about the Painting.
405Mr Browne disagreed with Ms Diggins claims that the Painting was rather crude and should have raised questions. He said that having looked at hundreds of paintings by Albert Tucker over 27 years at hundreds of auctions (in his former capacity as an Art Expert at Sotheby's Australia) the Painting "on its face" contains nothing that would have raised any question in his mind about its authenticity.
406Mr Browne expressed the opinion that the steps that Ms Sharpe took in relation to the Painting were "entirely commensurate" with what he would expect to be the actions of a reasonably competent and diligent art dealer.
407As to the provenance of the Painting Mr Browne expressed the opinion that Ms Sharpe could not reasonably have been expected to have obtained access to the identity of the vendor, let alone the Holland letter. Mr Browne expressed the view that Ms Diggins' opinion that the published provenance of Tolarno Gallery 1969-1970 should have raised a query as to whether the date was plausible was not as clear cut as portrayed by Ms Diggins. The Christie's Catalogue entry did not state that the Painting was actually exhibited in 1969-1970, leaving open the possibility that the Painting could have simply been acquired through Tolarno Gallery as a sale from the Gallery's stockroom.
408Mr Browne agreed that Tolarno Gallery was not known as a secondary market gallery. It was primarily dedicated to the exhibition of new artworks by the artists it represented, known as a primary market gallery. However Mr Browne said that many primary galleries, then and now, handle works by artists they do not officially represent on resale on behalf of gallery clients and even the occasional work on behalf of artists who are not themselves in the gallery's "represented stable".
409Mr Browne expressed the opinion that the Tolarno Gallery's provenance in the Christie's Catalogue is not one that should automatically have concerned Ms Sharpe, particularly in the light of the fact that it had been verbally confirmed by Ms Hayward. Mr Browne also expressed the following opinion (at [55]-[56]):
Furthermore, it appears that the published provenance did not trouble Ms Diggins herself when she initially looked at the painting at the Christie's auction viewing even though she asserts that she felt that there was 'something odd' about the painting. So if it did not trouble Ms Diggins, I cannot see how Ms Diggins can reasonably assert that it should have troubled Ms Sharpe.
...
It is my view that Ms Sharpe had a perfectly reasonable and legitimate expectation that she could rely on the authority of [Christie's] catalogues and the confirmations of the truthfulness of that information when given by their staff. I certainly would have done so in the same circumstances.
410Mr Browne expressed the opinion that Ms Sharpe acted in conformity with the obligations of a reasonably competent and diligent art dealer in satisfying herself about the condition of the artwork, and investigating and verifying its authenticity and provenance to the extent that she was able to do so with the available information. He expressed the same opinion in respect of her conduct in reconfirming with Christie's representative that the information provided in the Catalogue was correct and ascertaining that there was no further available information about the identity of the vendor. Once Ms Sharpe satisfied herself that there were no relevant sale room notices, there was nothing further that a reasonably competent and diligent art dealer was required to do.
411Mr Browne disagreed with Ms Diggins' opinion that it was difficult to understand why Ms Sharpe did not place a bid for the Painting during the auction. He expressed the view that one of the "key things" for a reasonably competent and diligent art dealer to do was to study the auction room to gauge the extent of real and genuine bidding. If it becomes apparent that there are no real bidders it is common sense not to enter the bidding but instead wait until after the auction has finished and then enter negotiations.
412Mr Browne also referred to Ms Diggins' opinion that had there been no other bidder a bid at $55,000 would have acquired the Painting. Ms Diggins said that she expected Ms Sharpe to have exercised her instructions to place the appropriate bid or bids. Mr Browne disagreed with that expectation and said that he thought it was tantamount to saying that irrespective of whether or not there was any apparent interest in the auction room, Ms Sharpe should have just paid $55,000 without any consideration of instead waiting to see if she could negotiate a better, cheaper price on behalf of her client in post-auction negotiations.
413Mr Browne said that he thought it was ironic that in this particular case, given the post-auction turn of events, it would in fact have been better if Ms Sharpe had purchased the work in the room. However he said that in his experience these events would prove to be almost unprecedented. He said that much more usually it is possible to bargain after the auction on a work that has been passed in and so acquire it for a lower price. Mr Browne said he could find no fault in Ms Sharpe's decision not to bid in the auction room. The fact that the Painting was passed in would seem to support Ms Sharpe's sense that there was no other genuine bidder in the auction room and justify her decision to hold off bidding with a view to trying to negotiate a lower price after the auction.
414Mr Browne said that based on his experience, the post-auction sequence of events that transpired in this case was unusual. The fact that another party other than Ms Sharpe requested and obtained a Condition Report for the Painting indicates that there was at least one other party interested in the possibility of purchasing the Painting.
415Mr Browne accepted that the failure of the Painting at auction, with the implicit suggestion that it was not desirable, would in normal circumstances be reason to give pause to consider the next step. However it seems there was apparently an almost immediate post-auction flurry of interest with Ms Sharpe's offers being rejected. Mr Browne expressed the opinion that this information would have quite understandably altered the psychological perception of any buyer or buyer's agent about the Painting. It had apparently gone from an undesirable work to a highly desirable one within, at most, 24 hours.
416Mr Browne expressed the view that Ms Diggins' opinion that Ms Sharpe did not act in the best interests of the plaintiff in the post-auction negotiations failed to take into account the specific and changing circumstances of those negotiations. Although he accepted that the circumstances were unusual, he expressed the opinion that given the way the negotiations unfolded and the statements made by Ms Hayward to Ms Sharpe, her conduct was in conformity with the conduct of a reasonably diligent and competent art dealer in her position. In cross-examination Mr Browne resisted the suggestion that Ms Sharpe should have telephoned Tolarno Galleries to check on the provenance of the Painting after she read the contents of the Catalogue. Mr Browne was firm in his evidence that this would not be something that a reasonably competent and diligent art dealer would do in circumstances where the auction house had expressly confirmed the provenance. Mr Browne expressed the view that the pre-requisite to the making of such a telephone call would be some suspicion about the provenance. He also said that, although a gallery may represent an artist at a particular time, it is not unknown, indeed he said it often occurs, that artists may exchange a painting to pay for their meal at a restaurant. In this regard Mr Browne referred to Georges Mora having two roles as the owner of Tolarno Galleries and the owner of Balzac, a popular restaurant in Melbourne. It is the secondary market, where exchanges of artwork may occur to pay restaurant bills or to obtain funds if an artist is short of cash that Mr Browne said could not be ruled out. These possibilities were raised not to suggest that the Painting was the work of Albert Tucker, but rather to remove the suggestion that Ms Sharpe should have been suspicious about the provenance recorded in the Catalogue.
417Mr Browne said that the circumstances of the post-auction interest and the sale of this Painting at $75,000 were very unusual and that he had not ever known of such circumstances (tr 476). He said in re-examination (tr 482):
Given that there was no question about the work from the physical aspect of it and it was being sold through Christie's, a reputable auction house, that there was a provenance that did not seem questionable because of the possibilities that notwithstanding that Tolarno didn't represent Tucker but they could have had that work to hand, I don't see any particular reason why she should have pushed it any further than she did, making inquiries of the auction house to confirm the provenance that was listed.
418Ms Diggins' evidence in relation to Ms Sharpe's conduct in making a $75,000 post auction offer was relevant when the plaintiff had claimed that Ms Sharpe exceeded her authority. The plaintiff's own evidence in cross-examination establishes that she instructed Ms Sharpe to make an offer of $75,000. However Ms Diggins' evidence in relation to her opinion regarding that question is instructive. Her concessions in relation to Ms Sharpe's conduct in cross-examination in my view mean that there could be no criticism of Ms Sharpe in this regard.
419Even if Ms Sharpe had made a telephone call to the Tolarno Gallery between late April and 1 May 2000 when the Painting was purchased, there would have been no relevant information available at that time. Mr Mora died in 1992 and Ms Minchen purchased the Gallery and the Exhibition records. She did not acquire the business or sales records.
420In any event I accept the force of Mr Browne's evidence that Ms Sharpe's conduct, or that of a reasonable and competent art dealer or advisor, needs to be viewed in light of the express confirmation of the provenance of the Painting by Christie's expert, Ms Hayward.
421I am satisfied that Ms Sharpe took the steps that a reasonably competent and diligent art dealer would be expected to take in the circumstances of this case.
422The plaintiff's claim against Ms Sharpe in negligence will be dismissed.
Claims in respect of the Smart
423One of the options offered by auction houses to vendors of artworks is the provision of a guaranteed price for the artwork with what has been described in the evidence as a percentage of the "hammer upside". One reason why a vendor may wish to obtain a guarantee is the use to which it may be put in seeking finance from a bank or other financial institution. A guaranteed price means that the vendor receives that price for the artwork irrespective of whether the artwork sells for less than the guaranteed price. The "upside" is the difference between the guaranteed price and the hammer price, if it is greater than the guaranteed price. The percentage of the upside that the vendor may obtain is negotiated with the auction house.
424Ms Sharpe was overseas from 31 January 2010 to 12 February 2010. In her absence, Mr Sharpe took instructions from the plaintiff and dealt with Menzies in respect of the proposals for the March 2010 auction. Mr Sharpe informed the plaintiff that Menzies had offered a $300,000 guarantee with a 40% upside. The plaintiff advised Mr Sharpe that she wanted a guarantee of $350,000 and 60% of the upside. She also wanted a settlement less than the 90 days as requested by Menzies. Mr Sharpe advised the plaintiff that this was "not how a guarantee works". He informed the plaintiff that in his experience a 60% upside did not give Menzies enough value to defray the risk if the work did not sell. He reminded the plaintiff that even if the Smart were to be passed in at auction on the day of the auction, she would still receive the guaranteed price. He advised her that the longer settlement period was needed to entice buyers. In response the plaintiff asked Mr Sharpe to try to get $350,000 as a guaranteed price and at least 50% of the upside.
425After further negotiations Mr Sharpe advised the plaintiff that Menzies had increased the guarantee to $320,000 and was not willing to move on the 40% upside and that he thought "that's it on the Smart".
426On 10 February 2010 Menzies wrote to Ms Sharpe (who was still overseas) in respect of the Smart in terms that included the following:
I have much pleasure in offering you a Menzies Art Brands guarantee of $320,000, plus hammer upside, for the above mentioned picture in return for its immediate consignment to our March 25th auction.
This exclusive Menzies Art Brands (MAB) guarantee provide settlement of the base guarantee of $320,000, plus hammer price upside as follows:
Every dollar by which the hammer price on March 25th 2010 exceeds $320,000, the seller will receive 40% of any such upside in addition to the guarantee amount.
427Also on 10 February 2010 Menzies wrote a separate letter to Ms Sharpe in the following terms (the side letter):
Re: 50/50 share in vendor commission on the hammer price of your clients works in our March 2010 Fine Art Auction plus equal share in MAB's upside for Jeffrey Smart's The Stairs, Florence II
I have much pleasure in confirming our offer of 50/50 share in vendor commission (inclusive of any applicable GST) of the actual knockdown hammer price for your client's works in our March 2010 Fine Art Auction.
Please refer to individual contracts of sale for full commission structures and please note introductory commission is payable 35 days after sale on consigned works and 90 days after sale for guaranteed lots.
We thank you for your enormous efforts in securing this major collection and look forward to achieving a successful outcome for all parties concerned.
428The topic of such an arrangement (although not the fact that it would be in a side letter) was discussed with Ms Sharpe by Mr Menzies prior to her departure for overseas on 31 January 2010. There is no issue that the side letter was not shown to the plaintiff nor was she made aware of the arrangement prior to the auction. Mr Sharpe said that because his mother had the primary relationship with the plaintiff it was up to her to disclose it (tr 639).
429Ms Sharpe gave evidence that she did not make the "arrangement" with Menzies. She said that she did not request the letter, rather it was sent to her. She said (tr 762):
I never requested this letter or a separate letter. It was mentioned to me at our meeting with Rod Menzies on the 28th of January with his first proposal. At the time I didn't think a lot of it and I was really focusing on getting the best deal for Louise and I also was of the opinion that Louise knew that I was in receipt of remuneration for transactions - in the art transactions that I did for her, so that she would know that I was getting some kind of payment for the work that I have done because we had had a long 17 years association buying and selling art for them.
430Ms Sharpe was cross-examined as follows (tr 764):
Q. See, I want to suggest to you that you did not wish Ms McBride to know about this arrangement?
A. No, I had no reason to deceive Louise at all. None at all.
Q. Because you were planning on taking a very substantial commission for her at a time when you were suggesting to her that you were looking after her best interests?
A. That's not true.
431In re-examination, to which there was no objection Ms Sharpe gave the following evidence (tr 777-778):
Q. Did you in your mind think of the arrangement with Menzies concerning the hammer upside as something to be kept secret?
A. No, I didn't.
Q. Did you have any intention of doing anything behind Ms McBride's back?
A. No, definitely not.
Q. If whatever you said to her, if anything, on this arrangement did not make the position clear to her what is your feeling about that now?
A. Well, I regret that if it wasn't made clear to her that it hadn't been made clearer to her, I felt that she was aware that I would be receiving some commissions as we had, as I had in the past. And I regret that now and offer her the money that Menzies still has in their trust fund, because you know, it's not worth the risk, the breakdown of a long term friendship. So I am happy to pass it on to her. And I have, you know.
Q. You have made that offer?
A. Yes.
Q. Was it ever your intention somehow to profit at her expense?
A. No.
432It was submitted that this arrangement placed Ms Sharpe's interests in conflict with those of the plaintiff. It was contended that it was in the plaintiff's interest that the guaranteed price would be as high as possible; whereas it was in Ms Sharpe's interest that the guaranteed price be as low as possible; it was in the plaintiff's interest that she receive as much of the "upside" as possible; whereas it was in Ms Sharpe's interest that Menzies receive as much as the upside as possible. It was also submitted that by taking a significant portion of Menzies' share of the upside, Ms Sharpe made it more difficult for the plaintiff to obtain a better deal from Menzies.
433It was submitted that the fact that there was a side letter has not been explained by Ms Sharpe. I do not believe that Ms Sharpe requested the side letter. It appears that this may be a practice in the industry. It must be remembered that at the time that this arrangement was documented by Menzies, Ms Sharpe was overseas and Mr Andrew Sharpe was handling the negotiations. The plaintiff does not accept that the failure to provide the copy of the side letter to her or to disclose the arrangements was mere inadvertence. The plaintiff submitted that this was not an ordinary commission. It was a particular deal offered by the only participant in the auction market prepared to give guarantees to the plaintiff.
434It is claimed that the plaintiff is not limited in her entitlement to recovery to the amount of the commission. Rather, it was submitted, she is entitled to be put in the position she would have been but for the breach by Ms Sharpe of her fiduciary duties. In this regard, the plaintiff relied upon the following passage of Brickenden v London Loan and Savings Co [1934] 3 DLR 465 at 469 where it was said:
When a party, holding a fiduciary relationship, commits a breach of his duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, he cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the constituent's action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged. Once the Court has determined that the non-disclosed facts were material, speculation as to what course the constituent on disclosure would have taken is not relevant.
435There is no doubt that Ms Sharpe was trying to assist the plaintiff in exquisitely difficult circumstances. The plaintiff had taken Ms Sharpe into her confidence in relation to her very difficult personal and financial circumstances with a clear need to obtain some financial facility to enable her to purchase a residence. The proposals that Ms Sharpe negotiated with the various auction houses included the forged Painting. This of course impacted not only on those negotiations but also on the relationship between the plaintiff and Ms Sharpe in this already difficult situation.
436Ms Sharpe was dealing with Mr Smith and others at the very time that the side letter was sent to her. The discussions with the plaintiff in relation to the problems with the Painting occurred at around the same time. I have no doubt that these discussions were very intense and caused both Ms Sharpe and the plaintiff serious anxiety.
437Auction houses must be free to negotiate the best commercial deal possible to support the profitable operation of their businesses. The same may be said for private art dealers. However when a person or a company takes on a fiduciary role as agent for and/or adviser to a vendor (or indeed a purchaser) the deals that they strike are constrained, in that they are not permitted to make a profit by use of that fiduciary position. If an agent negotiates a share in the percentage of the hammer upside due to the auction house when the principal herself seeks a greater percentage of that upside, the agent profits from the fiduciary position and must account to the principal.
438This should not be seen as any criticism of agents and auction houses agreeing to a share of the upside in a guaranteed price arrangement. The criticism is that in this instance the arrangement was kept secret from the principal, the plaintiff. The principal was entitled to know that the agent had negotiated for herself the very share of the upside that the principal had wanted. Had the agent obtained informed consent from the principal there could be no criticism.
439The plaintiff claimed that had she been made aware of the true circumstances of the arrangements into which Ms Sharpe entered with Menzies, she would not have proceeded with the guaranteed price for the Smart. It was submitted on Ms Sharpe's behalf that the plaintiff's evidence in this regard should not be accepted. It was submitted that the plaintiff needed the guarantee so that she could advise any prospective financial institution from whom she was going to obtain finance to purchase a residence that she had such a guarantee.
440I am very conscious of the unreliability of the plaintiff's evidence. I do not accept the plaintiff's evidence in this regard. Rather the plaintiff's evidence in cross-examination leads me to the conclusion that it was imperative that she obtain the guaranteed price and she would have proceeded with it in any event. That evidence was as follows (tr 243):
Q. Now, just in terms of the words that you attribute to Tia McCarthy, she is telling you, according to you, that even with a guaranteed price for the Smart, the bank will only lend you money after the works have been sold, is that right?
A. That's correct.
Q. That was something, that is a guaranteed price for the Smart, which up to that meeting you had been putting forward to the bank was a point in your favour if they were considering lending you money?
A. For an apartment.
Q. Yes. That is so, isn't it?
A. That's correct.
Q. And here they were telling you on the morning of 5 February that even with a guaranteed price for the Smart, the bank would only lend you money after the works had been sold?
A. That's correct.
441It is possible that had the plaintiff been asked by Ms Sharpe whether she would consent to Ms Sharpe having 50% of Menzies' 60% upside, the plaintiff and Ms Sharpe would have negotiated for the plaintiff to obtain what she originally wanted, being 60% of the upside. Thus the plaintiff would have 60% of the upside, Menzies would have 30% of the upside (that to which it agreed with Ms Sharpe in any event) and Ms Sharpe 10% of the upside.
442However I am of the view that if Ms Sharpe had turned her mind properly to the position in the absence of the excoriating events relating to the forged Painting she would have offered her share of the hammer upside to the plaintiff.
443Recently the United Kingdom Supreme Court held that a principal whose agent had received a secret commission from a third party could claim to be the proprietary owner of the commission: FHR European Ventures LLP & Ors v Cedar Capital Partners LLC [2014] UKSC 45.
444I am satisfied that Ms Sharpe must account to the plaintiff for the profit made by reason of the breach of her fiduciary obligations to her. Payment of the amount in trust should be made to the plaintiff.
PROPORTIONATE LIABILITY
445There is no issue between the parties that the misleading or deceptive conduct under the FTA and the TPA are apportionable claims under Part VIA of the TPA and/or the Competition and Consumer Act and Part 4 of the Civil Liability Act 2002. A concurrent wrongdoer is a person who is one of two or more persons whose acts or omissions caused, independently of each other or jointly, the damage or loss the subject of the claim.
446Section 35 of the Civil Liability Act provides relevantly:
Proportionate liability for apportionable claims
(1) In any proceedings involving an apportionable claim:
(a) the liability of a defendant who is a concurrent wrong doer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the Court considers just having regard to the extent of the defendant's responsibility for the damage or loss,
(b) the court may give judgment against the defendant for not more than that amount.
447Christie's contends that the plaintiff's claim in respect of the Painting against it is an apportionable claim and its liability is limited to an amount reflecting the proportion of the loss suffered that the Court considers to be just, having regard to Christie's responsibility for that damage or loss. Christie's submitted that this determination must be made having regard to the conduct of Ms Sharpe, Mr Holland and/or HFA and on a comparative examination of the whole conduct of each of the identified parties. The "value judgments" involved in determining the extent of each defendant's responsibility "differ from, and are more extensive than, those which inform the question of causation": Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10 at [57]; (2013) 247 CLR 613 at [57].
448Christie's submitted that it was merely the auctioneer and was acting as agent for the true vendor and receiving a commission for performing that service. It claimed that it was not the source of the false information. It was contended that at the highest it might be said that it should not have trusted Mr Holland/HFA and instead should have taken independent steps to confirm that what was being said was true. Christie's also contends that it was not paid for the Painting. It was HFA who received the payment for the Painting. The only payment received by Christie's from the plaintiff was the $10,000 Buyers' Premium. In those circumstances it was submitted that it is difficult to see how Christie's share of the responsibility for any losses proved by the plaintiff should exceed the overall proportion of the price paid which the $10,000 reflects.
449HFA submitted that the representations were made by Christie's in the Catalogue and that HFA (and Mr Holland) had no control over them. It was submitted that HFA was in a position of vulnerability relative to Christie's because Christie's had exclusive control over what went in to the Catalogue. It was entirely responsible for designing the Catalogue content and did not consult with HFA. It was also submitted that this position of vulnerability remained for a period of five years by reason of the provisions of clause 17 of the Conditions of Business.
450Ms Sharpe submitted that her responsibility for the plaintiff's loss is extremely low in relation to the other defendants. By way of comparison it was submitted that HFA's conduct in failing to inform Christie's of the complete provenance of the Painting and Christie's incorrect reference in the Catalogue to the provenance of the Painting were serious matters that led to the plaintiff's loss. It was submitted that the plaintiff's loss could have been avoided by Christie's disclosing to the plaintiff in mid-2000 the problems and concerns that have arisen in relation to the Painting.
451Ms Sharpe highlighted the fact that there is no evidence from Christie's of the checks, if any, they performed nor of the reasons for the incorrectness of the entry in the Catalogue. It was also submitted that it would seem most unfair for Christie's to offload responsibility for its role to Ms Sharpe. Ms Sharpe relied on the representations in the Christie's Catalogue and on the further confirmatory representation by Ms Hayward as to the reliability of the Tolarno provenance.
452Another factor to be considered is that Ms Sharpe did not have either the Holland letter or the O'Sullivan letter. Although it was suggested to Ms Sharpe that she did have the O'Sullivan letter I am not satisfied that she receive it. HFA had the Holland letter and also the information (undisclosed) that the Painting was purchased from Gallery Irascible /Mr Gant. Christie's had both the provenance letters.
453Although there may be some suggestion that responsibility could be apportioned to a greater amount than 100% (for instance making two parties each responsible for 100%) (Tomasetti v Brailey [2012] NSWCA 399 at [154]; but see Hadglias Holdings Pty Ltd v Seirlis [2014] QCA 177 at [18]) it seems that the better view is that in a case such as this the apportionment should equate to no more than 100% of the damage: Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd at [7].
454Christie's submissions on this aspect of the matter bear little resemblance to the reality of the situation. Christie's called no evidence and yet sought to shift the blame to HFA by the suggestion in cross-examination of Mr Holland that people in the art market (presumably including respectable auction houses) would have nothing to do with a transaction that involved Mr Gant because his "name was poison" (tr 534). This suggestion was made notwithstanding the reality that Christie's continued to do business with Mr Gant, evidenced by the numerous invoices from Christie's to Mr Gant in 2005 that Mr Gant brought to Court when he was called to give evidence (annexed to his affidavit sworn 28 July 2014). This was a most unedifying outcome for Christie's.
455Christie's had doubts about the Painting in May 2000 before Capital Finance and/or the plaintiff made their respective payments in relation to the Painting. In August 2000 Christie's knew that there was real concern in the art industry about the authenticity of this Painting. Although it may have been placed on the file by mistake, Christie's clearly associated the O'Sullivan letter with the Painting and accordingly had conflicting provenances. Even if that probable mistake had been rectified and the O'Sullivan letter provenance had been applied to the second painting, Christie's had not only its own concerns, expressed by Ms Hayward, but those of an eminent group of experts in the art world. Had those matters been raised with HFA, Capital Finance, Ms Sharpe or the plaintiff, it is probable that the loss could have been avoided.
456I am satisfied that having regard to the extent of Christie's responsibility for the plaintiff's loss, it is just to limit its liability to 85% of such loss.
457HFA's conduct requesting Christie's to sell the Painting as an Albert Tucker painting and in arming Christie's with an unattributed provenance document was a cause of the plaintiff's loss. Although HFA's failure to advise Christie's of the involvement of Mr Gant in the transaction may be seen as unsatisfactory for the reasons stated earlier, having regard to Christie's continued dealings with Mr Gant, the disclosure of his involvement would probably have made no difference to Christie's conduct. Indeed it appears from the transcript of the discussion at the Symposium that as early as August 2000 there was "a suggestion that Peter Gant is somewhere involved".
458HFA was not aware of its agent's (Christie's) concerns about the Painting. Nor was it made aware of the eminent experts' concerns about the Painting as communicated to Christie's in August 2000. Christie's kept HFA in the dark in particular at the time it paid HFA approximately $70,000 on 14 June 2000 when it harboured doubts about the authenticity of the Painting. HFA was given no proper opportunity to prevent the transaction from being completed.
459I am satisfied that having regard to the extent of HFA's responsibility for the plaintiff's loss, it is just to limit its liability to 10% of such loss.
460The steps that Ms Sharpe took described earlier were in all the circumstances the steps of a reasonable art dealer and agent. Ms Sharpe was duped by the forgery and recommended to the plaintiff that the Painting was probably worth $75,000. However she relied upon Christie's as a reputable auction house with a reputation for reliability. She too was kept in the dark in relation to any of the concerns harboured by Christie's about the Painting. At the very time that she forwarded the plaintiff's payment of the Buyer's Premium, Christie's knew that the representation that there was no doubt that it was Albert Tucker's signature on the Painting was false.
461I am satisfied that having regard to the extent of Ms Sharpe's responsibility for the plaintiff's loss, it is just to limit her liability to 5% of such loss.
CROSS-CLAIMS
462Ms Sharpe's claim for indemnity or contribution from Christie's falls away by reason of the findings in respect of proportionate liability. Section 36 of the Civil Liability Act provides as follows:
36 Contribution not recoverable from defendant
A defendant against whom judgment is given under this Part as a concurrent wrongdoer in relation to an apportionable claim:
(a) cannot be required to contribute to any damages or contribution recovered from another concurrent wrongdoer in respect of the apportionable claim (whether or not the damages or contribution are recovered in the same proceedings in which judgment is given against the defendant), and
(b) cannot be required to indemnify any such wrongdoer.
463Accordingly Ms Sharpe's cross-claim will be dismissed.
464HFAs claims in its cross-claim for similar relief will be dismissed.
465HFA also brings other claims in its cross-claim against Christie's. In this regard HFA submitted that Christie's, who admits owing HFA a fiduciary duty in respect of the sale of the Painting, breached its obligations in failing to inform HFA of the fact that it had received information relevant to the provenance of the Painting after the Symposium in August 2000. In failing to advise HFA Christie's caused it to lose the opportunity to offer to purchase the Painting from the purchaser for the price which the purchaser paid for the Painting.
466The submissions on the Cross Claim were relatively sparse. However Christie's owed a fiduciary duty to HFA. In circumstances where Christie's knew that there was a doubt as to whether Albert Tucker had signed the Painting and thus a doubt about the authenticity of the Painting before the transaction was completed by payment of the Buyer's Premium, it had an obligation to advise HFA of these matters. However having regard to the findings in respect of proportionate liability HFA is better off than it would have been than if it had to return the amount paid to it by Christie's if the contract had been cancelled. It has also had the benefit of the $70,000 for the last 14 years.
467HFA's Cross Claim is dismissed.
468Mr Holland's cross-claim was defensive and as the claims against him are to be dismissed, his cross-claim will be dismissed.