Plaintiff v Defendant

Supreme Court of Victoria|2010-03-16|Before: HARGRAVE J

CONTRACT - Paintings consigned for auction - Written consignment agreement - Whether agreement incorporated by reference terms contained in another document - Held: terms incorporated and formed part of the consignment agreement.

CONTRACT - Penalty - Whether penalty doctrine applies where allegedly penal provision triggered in absence of breach of contract - Provision capable of being triggered by breach - Held: penalty doctrine inapplicable - Provision enforceable - Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd ;

CONTRACT - Paintings consigned for auction - Paintings withdrawn from auction by seller - Whether withdrawal a breach of contract - Held: withdrawal not a breach.

TRADE PRACTICES - Unconscionable conduct - Paintings consigned for auction by wife - Matrimonial dispute with husband - Husband and wife both legally represented in dispute - Auctioneer knew of legal representation and of disputed ownership of the paintings - Whether auctioneer's conduct in nevertheless entering into consignment agreement with wife was unconscionable - Held: no unconscionable conduct.

1 The plaintiff, First East Auction Holdings Pty Ltd, is an auctioneer of fine art. At relevant times, it traded under the name 'Bonhams & Goodman'.

2 On 20 March 2009, the defendant, Mimi Ange, agreed to consign 22 paintings ('the paintings') to the plaintiff for sale at an auction to be held in Melbourne on 6 May 2009.

3 At the time of the consignment, Mrs Ange was separated from her husband, Con Ange, and they were negotiating the terms of a property settlement between them. They were each represented by solicitors in that negotiation.

4 Mrs Ange's solicitors informed Mr Ange's solicitors of the proposed auction. As a result, Mr Ange applied to the Family Court of Australia for an injunction restraining Mrs Ange from selling the paintings. On 5 May 2009, the day before the auction, the Family Court granted Mr Ange's application. Orders were made requiring Mrs Ange to withdraw the paintings from sale at the auction. Mrs Ange complied with the order.

5 The plaintiff contends that the consignment agreement between it and Mrs Ange incorporated its 'General Conditions of Business' ('the general conditions'), and that those general conditions include a term requiring Mrs Ange to pay it a 'withdrawal fee' if the paintings were withdrawn from sale before auction ('the withdrawal fee term'). Given the high value of the paintings, and the lateness of the withdrawal, that fee (including GST) was $731,280. The plaintiff claims that amount from Mrs Ange.

6 Alternatively, the plaintiff claims unliquidated damages for breach of the consignment agreement.

7 Mrs Ange denies that the general conditions formed part of the consignment agreement, because they were not attached to the consignment agreement form which she signed on 20 March 2009.

8 In the alternative, if the general conditions were incorporated into the consignment agreement, Mrs Ange contends that the withdrawal fee term is unenforceable against her on two grounds. First, because the term does not constitute a genuine pre-estimate of the plaintiff's loss in the event that the paintings were withdrawn from sale, and the term is accordingly void as a penalty. Second, Mrs Ange contends that the conduct of the plaintiff in imposing the withdrawal fee term as a term of the consignment agreement constituted unconscionable conduct within the meaning of ss 51AB and 51AC of the Trade Practices Act 1974 (Cth). Further or alternatively, Mrs Ange contends that the plaintiff engaged in unconscionable conduct by persisting with its intention to auction the paintings after the receipt of notice from Mr Ange that he claimed an interest in the paintings and required them to be withdrawn from sale. She contends that the plaintiff's contraventions of ss 51AB and 51AC of the Trade Practices Act form a sufficient basis for the Court to exercise its discretion under s 87 of the Act to set aside the consignment agreement as a whole, or to restrain the plaintiff from enforcing the withdrawal fee term.

9 Mrs Ange also challenges the plaintiff's alternative unliquidated damages claim. She contends that her withdrawal of the paintings did not constitute a breach of the consignment agreement and that, accordingly, no damages are payable by her. Alternatively, she challenges the plaintiff's quantification of its damages and alleges a failure by the plaintiff to take reasonable steps to mitigate its loss.

10 The plaintiff makes a further claim against Mrs Ange, in respect of legal costs incurred by it in relation to Mr Ange's claims and the Family Court proceedings. It claims those legal costs under a term of the general conditions ('the legal costs term'), or as unliquidated damages arising from the withdrawal of the paintings from sale. Mrs Ange denies that the legal costs term forms part of the consignment agreement, contends that some or all of the legal costs claimed by the plaintiff are not contemplated by that term and in any event challenges the quantum of the legal costs which have been claimed. At the commencement of the trial, with the agreement of the parties, the Court directed that issues of quantification of the claimed legal costs would await the Court's determination as to the categories of costs, if any, which were recoverable by the plaintiff under either the legal costs term or as part of its unliquidated damages claim. The quantum of any amount recoverable on this ground should be assessed by an Associate Justice if a liability is established.

11 Finally, by way of introduction to the proceeding and the parties, it is necessary to note that Mrs Ange made a counterclaim in the proceeding against the plaintiff and Mr Ange. As against the plaintiff, the counterclaim seeks declaratory relief that the withdrawal fee term constitutes an unenforceable penalty, that the plaintiff has engaged in unconscionable conduct in contravention of ss 51AB and 51AC of the Trade Practices Act, and consequential relief.

12 As against Mr Ange, Mrs Ange claimed indemnity in respect of any amount which she is adjudged liable to pay to the plaintiff. The Court directed that the counterclaim against Mr Ange would be tried separately from the other issues in the proceeding. Shortly before the commencement of the trial, Mr and Mrs Ange resolved their property dispute. The settlement agreement between them makes provision for any liability of Mrs Ange to the plaintiff, and for the disposition of Mrs Ange's claims against Mr Ange for indemnity in respect of any such liability.

13 Mr and Mrs Ange were married in 1991 They have three children. They separated in December 2007.

14 During the course of the marriage, Mr Ange conducted a successful business retailing adult products through a chain of shops. There were significant cash takings from this business. Mr Ange kept large amounts of cash in a safe located in the matrimonial home. The evidence indicated that many paintings were bought and sold by Mr and Mrs Ange using that cash. Mrs Ange gave uncontradicted evidence that Mr Ange would pay for paintings with large amounts of cash, sometimes between $50,000 and $100,000. A significant collection of valuable paintings was acquired in this way ('the art collection'). Mr Ange estimated that approximately 60 per cent of the art collection was acquired by cash payment, and the remaining 40 per cent by cheque. He freely acknowledged that the cash he used was takings from the businesses conducted by him.

15 Mr and Mrs Ange purchased paintings for very large amounts over a significant period of time. For example, Mr Ange produced three handwritten receipts, two of them undated, from an arts dealer, Ronald Coles, evidencing payments totalling $3.8 million at unspecified times for 25 paintings at prices ranging from $12,000 to $1 million.[1] Mr Ange also produced three copy cheques to Mr Coles totalling $451,000. Mr and Mrs Ange kept no formal records of the considerable art purchases from Mr Coles. Rather, they relied upon Mr Coles to maintain a running account of their dealings. The art collection was totally uninsured.

16 Although the evidence does not enable any conclusions to be drawn as to whether cash receipts of Mr Ange's businesses were not accounted for to the Australian Taxation Office, the evidence demonstrates a real case to be investigated in that regard, at least during the periods in which Mr Ange was expending large amounts of cash on art purchases which are not the subject of proper accounting records. I make no adverse finding against Mr Ange as to his taxation affairs. In particular, I have not taken the possibility that he may have understated income to taxation authorities as a ground for rejecting him as a credible witness in any respect. As appears below, there are other matters which affect Mr Ange's credibility as a witness. However, when a Court receives evidence indicating a real case to be investigated as to the avoidance of tax obligations, the Court should not turn a blind eye. In such circumstances, it is appropriate for a Court to refer the evidence to the relevant taxation authority to enable it to make such investigations and take such action (if any) as it determines. The Court will refer the relevant evidence in this case.

17 By the time they separated, Mr and Mrs Ange had a joint net worth of many millions of dollars. In addition to the matrimonial home, which Mrs Ange estimated to be worth about $3.5 million, and the art collection, they own many other real properties in Australia and have other significant assets.

18 Following the separation, Mrs Ange remained in the matrimonial home, and accordingly had possession of the art collection.

19 The Court received evidence of the history of dealings between the plaintiff and Mr and Mrs Ange prior to Mrs Ange entering into the consignment agreement on 20 March 2009. These dealings are relevant for three reasons. First, the course of conduct between the plaintiff and Mrs Ange prior to the making of the relevant consignment agreement on 20 March 2009 is relevant in determining whether the general conditions form part of the consignment agreement. Second, the dealings form the surrounding circumstances in which the consignment agreement was made. Third, the dealings are relevant to Mrs Ange's defence based on alleged unconscionable conduct by the plaintiff. Further, the dealings between the parties after Mrs Ange consigned the paintings for sale are also relied upon by Mrs Ange as supporting her unconscionable conduct defence. The relevant dealings are described below.

20 The Chairman and Chief Executive Officer of the plaintiff, Timothy Goodman, first met Mrs Ange in November 2000, when she attended at an auction conducted by the plaintiff and purchased a number of items of artworks. No documents evidencing that transaction were in evidence.

21 Mr Goodman met Mr Ange in about 2002. Shortly after that time, Mr Goodman dealt with Mr Ange in relation to a number of paintings purchased by him from auctions conducted by the plaintiff.

22 In March 2005, Mr Ange consigned a valuable painting to the plaintiff for sale.

23 In May 2005, Mrs Ange attended an auction conducted by the plaintiff and purchased a significant quantity of furniture. Mr Goodman also recalled discussions with Mrs Ange concerning jewellery auctions conducted by the plaintiff, but could not recall whether Mrs Ange was the successful bidder at any of these auctions.

24 Given their obvious wealth and interest in fine art, furniture and jewellery, Mr Goodman maintained contact with both Mr and Mrs Ange, who he saw as potential buyers or sellers at auctions conducted by the plaintiff. On occasions, Mr Goodman would contact Mr Ange and draw specific artworks which the plaintiff was offering for sale to his attention.

25 At an unidentified time, Mr Ange invested in a company conducted by Mr Goodman. That company no longer trades and Mr Ange lost his investment.

26 In October 2006, the plaintiff employed Geoffrey Smith as its National Head of Art. Mr Smith had previously been employed by the National Gallery of Victoria in an number of capacities, and was its Curator of Australian Art when he left that employment shortly before commencing employment with the plaintiff.

27 In the period following his employment by the plaintiff, Mr Smith was taken by Mr Goodman to meet a number of substantial clients and to view their art collections. In January 2007, Mr Goodman and Mr Smith attended at the home of Mr and Mrs Ange and viewed the art collection.

28 On 26 June 2007, Mr Goodman and Mr Smith again attended at Mr and Mrs Ange's home. The meeting was pre-arranged, following a discussion between Mr Goodman and Mr Ange, in which Mr Ange indicated that some paintings may be placed with the plaintiff for sale.

29 In their witness statements, Mr Goodman and Mr Smith indicated that this was the first time that Mr Smith had attended at the home, that he was introduced to Mr and Mrs Ange for the first time and that Mr and Mrs Ange then showed the art collection to him. However, when a document evidencing the January 2007 visit was put to Mr Goodman and Mr Smith, they readily acknowledged that they were mistaken and that they had attended at that earlier time. Mr Smith also acknowledged that, given this, it was possible that he has 'merged' in his mind some of the events which he described in his evidence as having occurred on 26 June 2007, in particular concerning the matters leading up to the business at hand on 26 June 2007, with the events which took place during his visit in January 2007. Taking the evidence concerning the conversations and dealings between those present on 26 June 2007 as a whole, I do not accept that anything of significance turns upon the initial failure to recall the January 2007 visit or the possible merging of events in Mr Smith's mind as to the preliminary parts of the two visits. I am satisfied that his recollection of the relevant business dealings and related discussions on that day was not affected by any merging in his mind of the two occasions.

30 There is no dispute that it was initially proposed that Mrs Ange would consign two paintings for sale at the plaintiff's forthcoming auction: 'The Cloud' by Sir Arthur Streeton (at a reserve price of $400,000) and 'Seaside Pastoral', also by Streeton (for a reserve price of $240,000). Nor is it in dispute that, after the relevant consignment agreement form was prepared by Mr Smith, but before it was signed, a decision was made to remove 'Seaside Pastoral' from the consignment. Further, following negotiation, it was agreed that the plaintiff would not charge any seller's commission or its standard insurance charge of 1.5 per cent.

31 The dispute concerning the conversations on 26 June 2007 concerns the role of Mrs Ange in the negotiations and an alleged statement by Mr Ange that Mrs Ange was the owner of the art collection.

32 Mr Goodman and Mr Smith gave consistent evidence. They recalled that, at the conclusion of the tour of the home and the viewing of the art collection, Mr Goodman asked a question to the effect 'Would you like to go ahead and sell any of the paintings?' (Mr Goodman's recollection); or 'Are you interested in consigning something to our next sale?' (Mr Smith's recollection). In response, they said that Mr Ange replied with words to the effect 'It's not up to me, they are Mimi's paintings. It's her decision' (Mr Goodman's recollection); or 'That is entirely Mimi's decision because it is Mimi's collection. The art belongs to her' (Mr Smith's recollection). They then gave consistent evidence that Mrs Ange nominated 'The Cloud' and 'Seaside Pastoral' as being paintings she was interested in selling, and there was discussion with her about the likely selling prices. Following this discussion, Mrs Ange decided to consign both paintings for sale at the plaintiff's forthcoming auction in Melbourne. There was then discussion with Mrs Ange concerning commission and fees, and it was agreed that the plaintiff would not charge any seller's commission or insurance fees. Mr Smith prepared the consignment agreement. However, once the consignment agreement form had been completed by Mr Smith, Mrs Ange said that she had changed her mind, and only wanted to sell 'The Cloud'. Following deletion of the reference to 'Seaside Pastoral', Mrs Ange signed the consignment agreement form.

33 Mr and Mrs Ange gave consistent evidence as to the role of Mrs Ange in the negotiations on 26 June 2007. They said that Mr Ange conducted all the relevant negotiations as to price and commissions. Mrs Ange offered no explanation as to why she was the nominated seller who signed the agreement. Mr Ange said it was his decision to put the agreement in Mrs Ange's name because:

I just thought as part of husband and wife, keep my wife happy, give her a cheque for [$400,000]. Let her put in her account, she'd be happy. Nothing more to it than that.

34 I turn to consider the disputed statement by Mr Ange. In his witness statement, which was filed after he had had an opportunity to consider the plaintiff's witness statements, Mr Ange recalled only that his response to Mr Goodman's question was to the effect: 'Mimi and I will discuss it and let you know'.

35 In his oral evidence, Mr Ange gave different and more expansive evidence. He said that he directed Mrs Ange to sign the consignment agreement in respect of 'The Cloud' in the following circumstances. He said that Mr Smith was 'struck' by 'The Cloud' during the course of the viewing of the art collection, and said to Mr Ange that he had a client who would pay $400,000 for that painting. In that context, Mr Ange said that:

I told Mr Goodman, "I don't have a problem selling that painting. It's her painting too, you need to talk to her."[2]

36 On a more general level, as to whether Mr and Mrs Ange wished to place any paintings for sale in the next fine art auction to be conducted by the plaintiff, Mr Ange said:

There was a discussion on putting entries into the next art auction, but I made it clear that she needs to have an input into it. It's her collection too. It was always my understanding with Mr Goodman, it's my collection, but for the sake of marriage I said it's her collection too, you need to talk to her.[3]

37 Next, Mr Ange recalled that he told Mr Smith that Mrs Ange 'can pick the paintings that she wants to sell'; and that Mrs Ange then spoke with Mr Smith in that regard. Following that discussion, Mr Ange initially said that Mrs Ange told Mr Smith that she wanted to sell two paintings, 'The Cloud' and 'Seaside Pastoral' and that he disagreed with that course. When Mrs Ange said that she wanted to sell the two paintings, Mr Ange said:

I pulled her aside and said we're not going to sell two, we're going to sell one and the reason is the last time Mr Goodman took two of our paintings to put into his auction they were both returned with the highest bid being well under the reserve. I said I can't trust him to take two, let's give him one ...[4]

38 Later, Mr Ange said that it was in this conversation that he told Mrs Ange that 'Seaside Pastoral' was not to be sold.

39 Later again in his cross-examination, Mr Ange gave a different version of events. He said that Mr Smith took Mrs Ange aside and they had a discussion about which paintings she wanted to sell. He saw Mr Smith then commence filling out a consignment agreement and, at that time, he said that Mrs Ange came and spoke with him. He gave the following evidence:

He took her aside and he started filling in the consignment note. She came to talk to me. I told her, "We're not selling the 'Seaside Pastoral' at any cost. Go and get it struck off. She went over, she struck it off, she signed off and she got the receipt. I said, "Keep the receipt, you'll get the cheque"...Exactly what happened.[5]

40 Mr Ange confirmed this second version of events, in the following terms:

Jeffrey Smith and her were doing the selecting. I was talking to Tim Goodman continuously about other things because we had a relationship outside of art as well. She agreed to sell those two. He started to sign them up. He came over to me and said, "Do the consignment note" I said, "No no put it in her name" and she comes over to me and says, "I'm selling two" I said, "Which ones?". I've agreed on [The Cloud] because I agreed on [The Cloud] because he promised me 400. I said, "What's the other one you're selling?" she goes, "I'm selling that one" [a reference to 'Seaside Pastoral']. I said, "No we're not selling that. Go and get it struck off".

41 There is a difference between the two versions of events given by Mr Ange. In the first version, Mr Ange said that he 'pulled' Mrs Ange aside when he heard that she wanted to sell 'Seaside Pastoral'. He also referred to some prior dealings with the plaintiff as being the principal reason for not wanting to sell two paintings; only later saying that he did not want to sell 'Seaside Pastoral'. In the second version, Mr Ange said that Mrs Ange spoke privately with Mr Smith about the paintings to be sold and then 'came to talk' to Mr Ange and told him that she had decided to sell both 'The Cloud' and 'Seaside Pastoral'. It was at that time that he told her that 'Seaside Pastoral' would not be sold 'at any cost'. In the second version, Mr Ange made no reference to the reason which he first gave to Mrs Ange for not wanting to sell both paintings, based on prior dealings with Mr Goodman when two paintings were returned with the highest bids being well under the reserve.

42 The inconsistency in Mr Ange's evidence causes me to doubt the accuracy of his recollection concerning the events at the 26 June meeting, including as to the disputed statement. Further, as appears below, there are other reasons for rejecting his evidence concerning the disputed statement.

43 In her witness statement, Mrs Ange said that all of the discussions concerning which paintings were to be sold were between Mr Ange and Mr Smith, that she listened to that part of the conversation, and that she denied the evidence of Mr Smith and Mr Goodman. In her oral evidence, Mrs Ange said that she could not remember what her husband said in answer to Mr Goodman's enquiry as to whether Mr and Mrs Ange wished to consign any paintings for sale and that she was not present during all of the discussions. Further, she said that Mr Ange decided what paintings would be sold, a reference to both 'The Cloud' and 'Seaside Pastoral', and that Mr Ange asked if she agreed with that course, which she did. She then signed the consignment agreement form at Mr Ange's direction.

44 Initially, Mrs Ange said that she could not recall if 'Seaside Pastoral' was crossed out on the form before or after she signed. Later, she said that both paintings appeared on the form at the time she signed it, at the direction of Mr Ange, and that it was later that he changed his mind and 'Seaside Pastoral' was crossed out.

45 The inconsistency in Mrs Ange's evidence concerning important aspects of the events which took place on 26 June 2007 causes me to doubt her recollections.

46 In contrast to Mr and Mrs Ange, Mr Smith and Mr Goodman gave consistent evidence, as summarised above. They presented as more reliable witnesses, and I prefer their evidence to that of Mr and Mrs Ange. Furthermore, as to the disputed statement, that Mr Ange told Mr Goodman and Mr Smith that the art collection belonged to Mrs Ange, the plaintiff's version of events is the more probable. The following matters support this conclusion.

47 First, the plaintiff's version was clearly articulated in witness statements which were served on the representatives of Mr and Mrs Ange before they were required to serve their witness statements. Notwithstanding this, as noted above, Mr Ange did not include his version of his response to Mr Goodman's question in his witness statement. Instead, he gave a different version: 'Mimi and I will discuss it and let you know'. Mrs Ange did not say in her witness statement that she did not hear or remember what was said; to the contrary, she said that she listened to the relevant conversations with her husband and denied the evidence of Mr Goodman and Mr Smith.

48 Second, until the trial of the proceeding, Mrs Ange maintained at all relevant times that it was understood between her and Mr Ange that she was the owner of the whole of the art collection. For example, in an affidavit sworn by Mrs Ange on 5 May 2009, in opposition to Mr Ange's application in the Family Court for an injunction restraining her from selling the paintings, Mrs Ange disputed Mr Ange's evidence that he had 'personally chosen' the paintings. She swore that most of the art collection was selected by her and that:

[Mr Ange] then normally paid cash for the artwork which I had selected. [Mr Ange] kept large amounts of cash at home and I saw him use the cash to pay Ronald Coles. On occasion I would count the money. Sometimes the amount was $50,000 sometimes it was up to $100,000. Throughout the period that we collected art, [Mr Ange] described the art as "Mimi's art" or [Mr Ange] would describe the works to me as "your art". [Mr Ange] had no particular interest in the artwork and his main areas of interest were collecting high value motor vehicles, rare coins and stamps and bloodstock and gambling. Upon our separation, [Mr Ange] took these items with him.[6]

This evidence by Mrs Ange is consistent with the plaintiff's version of Mr Ange's response to Mr Goodman's question.

49 Further, on 6 April 2009, in correspondence with Mr Ange's previous solicitor after the paintings had been consigned for sale and Mr Ange had challenged her entitlement to do so, Mrs Ange's solicitor contended that the art collection belonged to Mrs Ange and that she was entitled to sell it:

The consignment of the artwork was undertaken by our client after considered thought and in the disturbing situation where school fees were unpaid and further wherein your client indicated he was not minded to attend to the payment of same. We are instructed that your client is well aware that the paintings have always been regarded by our respective clients as our client's property and your client has made representations to this effect not only to our client but to Mr Tim Goodman, the chairman of Bonhams and Goodman.[7]

50 As appears below, the emphasised portion of this letter was based on Mr Goodman's recollection of Mr Ange's statement on 26 June 2007, which he conveyed to Mrs Ange's solicitor on 6 April 2009, that Mrs Ange owned the art collection and that it was her decision as to what paintings should be sold. Accordingly, in April 2009, Mrs Ange, through her solicitor, accepted the truth of Mr Goodman's recollection; and adopted that recollection in her family law negotiations. Her evidence that she does not remember what was said involves a change of that position. Mrs Ange's solicitor at the time, Amanda Alidenes, was not called to give evidence. I infer that her evidence on this issue would not have assisted Mrs Ange's case.

51 Third, Mrs Ange's change of position follows the settlement of the property dispute between Mr and Mrs Ange. On Friday 5 February 2010, Mr and Mrs Ange signed consent orders which have since been made by the Family Court and which record the terms of their settlement. An extract of those consent orders was placed in evidence as a confidential exhibit. In general terms, the extract reveals that Mr Ange has agreed to indemnify Mrs Ange in respect of any liability she may incur to the plaintiff in this proceeding and to be responsible for her costs of this proceeding. In return, Mrs Ange has agreed with Mr Ange to give evidence in this proceeding and to use her best endeavours to defend the claims against her in this proceeding. The trial of this proceeding commenced on the next working day following the making of the consent orders, Monday 8 February 2010.

52 Further, in the absence of the Family Court orders, Mr and Mrs Ange in any event had a common interest in defending the plaintiff's claims against Mrs Ange, whether or not their property dispute continued.

53 Fourth, there are a number of factors affecting the credibility of Mr and Mrs Ange as witnesses. As to Mr Ange, he readily admitted instructing his solicitors to write false correspondence to Mrs Ange's solicitors in connection with the property dispute. His only justification for this was a desire to keep three identified artworks for himself 'at any price'. This matter is referred to in more detail below.

54 Further, I found the whole of Mr Ange's evidence concerning his dealings with the art dealer, Ronald Coles, evasive and unconvincing. For example, Mr Ange said that he had a long standing association with Mr Coles over many years and that the vast majority of the art collection was acquired from Mr Coles, but the last time that he bought a painting from Mr Coles was in about October 2008, shortly before Mr Coles 'disappeared' in December 2008. Mr Ange gave inconsistent evidence about whether he had any contact with Mr Coles, by any means, after October 2008. In the first instance, Mr Ange said that he did not recall whether he had any contact with Mr Coles from that time. However, when the extent of his relationship with Mr Coles was revealed, and he was pressed in cross-examination, Mr Ange said that he was 'quite sure' that he had not been in contact with Mr Coles, directly or indirectly, since his disappearance. Notwithstanding this evidence, Mr Ange volunteered the following non-responsive evidence when he was pressed in cross-examination about the lie which he instructed his previous solicitor to put in correspondence to Mrs Ange's solicitors in connection with the property dispute:

The intention [was] to keep the paintings whether I sold them to myself or sold them to a friend of mine to keep till a settlement was done, I wanted those paintings in my possession.

Who was the friend of yours ---? --- Ron Coles was at the time.[8]

55 'The time' of the false correspondence was 12 March 2009. When Mr Ange was asked how he could have dealt with Mr Coles at that time, 15 months after he had 'disappeared', Mr Ange gave most unsatisfactory evidence. It was in this context that he changed his position from not recalling whether he had dealt with Mr Coles since his disappearance, to a denial that he had done so. He said that he had formed the intention to gain possession of the three paintings before Mr Coles had disappeared, and that he had an understanding with Mr Coles that he would enter into a fictitious sale of the three paintings to him, so that Mr Coles could hold the paintings on his behalf until after he had concluded a property settlement with his wife. Further, he said that his previous solicitor knew about this and knew that his correspondence in March 2009 was false. Taking the evidence on this issue as a whole, I accept Mr Ange's evidence that he intended to place the three paintings with Mr Coles for safe-keeping until after he had resolved his property dispute with Mrs Ange. Accordingly, the probabilities favour a finding that Mr Ange gave false evidence when he said that he could not recall, and when he later denied, that he had been in contact with Mr Coles since his disappearance.

56 As to Mrs Ange, I found her to be an unimpressive witness. She was born in China and came to Australia in 1986. At that time, she spoke no English. However, she acknowledged that she now understands spoken English reasonably well, and that she conversed with her husband in English throughout the duration of their marriage from January 1991 until December 2007. She said that she could read documents written in English, but that her understanding of them was more limited than her understanding of the spoken word. Taking her demeanour as a witness as a whole, I am satisfied that she understood the questions put to her and the documents she was asked to read while she was in the witness box. Further, when pressed about critical matters, Mrs Ange answered questions quickly and articulately. Her broken English improved markedly and she spoke fluently and with confidence. She was well able to protect herself.

57 Further, Mrs Ange demonstrated a good understanding of the issues in the case, and often became evasive or argumentative when it suited her cause.

58 Mrs Ange was particularly evasive when it came to questions concerning instructions given by her to her previous solicitor. Taking the evidence as a whole, I am satisfied that the correspondence written by Mrs Ange's solicitor was written with her knowledge and upon her instructions.

59 Like Mr Ange, Mrs Ange was evasive in answering all questions concerning Ronald Coles, and hid in generalities and lack of recollection as to the circumstances in which the art collection was obtained.

60 On the other hand, the evidence of Mr Goodman and Mr Smith was generally consistent and convincing. In particular, I found Mr Goodman's evidence that he was surprised at Mr Ange's statement that the art collection was owned by Mrs Ange, and that he 'will never forget' that statement, convincing and objectively credible. Mr Smith's denial of Mr Ange's evidence, that he said that the paintings were Mrs Ange's 'too', was also convincing. He said that he would have asked for joint signatures to the consignment form signed on that day if that was said. As appears above, and below, their evidence accords more with the probabilities and has some documentary support.

61 'The Cloud' did not reach its reserve of $400,000 at auction. Mr and Mrs Ange were uncontactable on the day. Mr Goodman made an executive decision to sell for the highest bid of $370,000. Mr Goodman initially contacted Mr Ange about the issue. Ultimately, he spoke with Mrs Ange and she refused to take anything less than the full reserve price, which the plaintiff then paid. Mrs Ange said that Mr Ange directed her to insist on the full amount. However, even if that be so, the fact remains that, from the plaintiff's viewpoint, it was Mrs Ange who consigned the painting, Mrs Ange who insisted on payment of the full reserve price and Mrs Ange who received the full payment.

62 Following their separation in December 2007, Mr Ange initially provided financial support to Mrs Ange. However, from July 2008, the level of financial support decreased and it stopped completely in January 2009. Accordingly, by late 2008, Mrs Ange was becoming concerned about her ability to pay mounting debts, including overdue and ongoing school fees for the three children, legal costs and living expenses. In this context, Mrs Ange turned her mind towards selling some or all of the art collection.

63 In the first instance, Mrs Ange asked Mr Smith to value the art collection. An arrangement was made for Mr Smith to attend at the matrimonial home. In company with his Sydney associate, Marika Clenow, Mr Smith attended on 22 December 2008. Although there were some differences between the recollections of Mrs Ange and Mr Smith as to their discussions on that day, it is clear that the purpose of the valuation was to inform Mrs Ange of the likely prices achievable if the art collection was sold. Mrs Ange's own evidence was that she informed Mr Smith that Mr Ange had ceased providing her with money and that she said to him:

I may have to sell the artwork later on. Will you value it for me?

64 Further, Mr Smith and Mrs Ange agreed that, during the course of the conversations on 22 December 2008 while Mr Smith and his assistant were photographing and cataloguing the art collection for the purposes of the valuation, Mrs Ange told Mr Smith that she had separated from Mr Ange, that he was not paying her enough maintenance and that she was in financial difficulties and may need to sell some or all of the art collection quickly to raise funds. Mr Smith listened sympathetically and said that he understood Mrs Ange's position, as he had himself encountered difficulties following separation from a partner.

65 The valuation was posted to Mrs Ange on 20 January 2009. It is a detailed valuation of each painting in the art collection, including photographs and estimated selling ranges. As appears below, the low estimates were adopted as the reserve prices when Mrs Ange consigned the paintings to auction.

66 Mr Ange recalled having lunch with Mr Goodman in late February or early March 2009 at 'Bistro Moncur' in Woollahra. Mr Goodman could not recall the lunch and believed it did not occur. Mr Goodman's diary indicated a lunch appointment with Mr Ange on 22 January 2009, which neither man recalled at that time. Having regard to the coffee meeting on 12 March 2009 acknowledged by Mr Goodman, which is referred to below, it is unnecessary to resolve the conflict of evidence as to whether and when they had lunch. This is because Mr Goodman's account of the 12 March meeting roughly accords with Mr Ange's recollection of the lunch conversation. Mr Goodman acknowledged that, at this time, Mr Ange informed him that he claimed an interest in the art collection and did not want it sold; at least until he had resolved his property dispute with Mrs Ange.

67 Following receipt of the valuation, Mrs Ange considered her position. She did so with the benefit of legal advice. Negotiations were continuing between the solicitors for Mr and Mrs Ange with a view to reaching a settlement of their property dispute. Mrs Ange informed Mr Smith that these negotiations were proceeding. Mr Smith asked if Mrs Ange wanted him to send a copy of the valuation to Mr Ange. At some stage, Mrs Ange authorised Mr Smith to send a copy of the valuation to Mr Ange, and he did so.

68 On 30 January 2009, Mr Smith visited Mrs Ange to discuss the contents of the valuation. During this visit, Mrs Ange said that she asked Mr Smith whether she could sell a particular painting if Mr Ange did not agree to the sale. She said that Mr Smith did not respond. According to Mrs Ange, Mr Smith came to her home again one or two weeks later. Mr Smith denied that this was so. He said that he was overseas in the first half of February 2009. Mrs Ange said that Mr Smith told her during this visit that she could sell the paintings, even if Mr Ange did not agree to their sale. I do not accept Mrs Ange's evidence concerning this. However, as appears below, Mr Smith acknowledges that Mrs Ange later expressed to him some uncertainty about her ability to sell the paintings, if Mr Ange opposed that course. He denies giving Mrs Ange any advice in that regard, other than to suggest that she obtain legal advice from her lawyers. For the reasons given below, I accept Mr Smith's evidence on this issue.

69 Mr Smith was overseas in the first half of February 2009. On his return, he received a telephone call from Mrs Ange in which she asked him whether the plaintiff would store the art collection for her. It is unnecessary to consider the circumstances in which this request was made. Mr Smith agreed and, hoping to secure Mrs Ange's agreement to the consignment of some or all of the art collection to auction, agreed that the plaintiff would store the art collection at no cost to Mrs Ange, except for the transport costs.

70 On 24 February 2009, a representative of the plaintiff attended at the matrimonial home to collect the art collection for storage. A few days later, Mrs Ange received in the post a consignment agreement form prepared by the plaintiff, endorsed with the words 'For Storage Purposes'. The form had been signed on behalf of the plaintiff and was stamped 'Please Sign & Return'. It was dated 24 February 2009. For convenience, I will refer to it as 'the 24 February consignment agreement form'. However, it should be noted that no consignment agreement had been reached between the plaintiff and Mrs Ange at this stage.

71 There are a number of features of the 24 February consignment agreement form which must be noted:

(1) The 24 February consignment agreement form was the current version of the standard form used by the plaintiff to record consignment agreements reached between it and sellers engaged by it to auction items, including fine art. There are three copies of the first page of the form, printed on self-carbonising paper. The third copy attachs a three page document titled 'General Conditions of Business As at 19 June 2008'.

(2) There are three further pages of the 24 February consignment agreement form, each headed 'Annexure'. As there is insufficient space on the first page to list all of the paintings in the art collection, the subsequent pages list the remainder of the collection. Each of these subsequent pages is also in triplicate and printed on self-carbonising paper.

(3) The 24 February consignment agreement form was obviously prepared by the plaintiff with a view to some of all of the art collection being consigned to it for auction at some future time. Each painting is given a detailed description and estimated selling range, in accordance with the descriptions and selling ranges contained in the valuation prepared by Mr Smith.

(4) The first and subsequent pages describe Mrs Ange as 'the seller' and provide for her to sign underneath the following printed words ('the signature clause'):

It is agreed by the parties to this Consignment Agreement, that the goods listed above and/or on the attached schedule have been consigned to Bonhams & Goodman and will be disposed of, or assessed for disposal or for any other purpose, subject to the General Conditions of Business of Bonhams & Goodman attached. The Seller acknowledges that they have read these General Conditions of Business and that they accept them prior to signing the space provided below. Any changes to the Agreed Reserves or Estimates referred to above or determined in the future, or any other variation to these instructions provided to Bonhams & Goodman by the Seller may result in the Seller incurring additional costs.

72 Mrs Ange did not sign the 24 February consignment agreement form. She kept it in her records, together with the envelope in which it was received and the stamped self-addressed envelope forwarded to her by the plaintiff for the purpose of her returning it once signed. Mrs Ange denied that she read the signature clause quoted above, or the general conditions attached. She treated the form as a receipt for the goods which she had entrusted to the plaintiff for storage, and said that she only read the form to confirm that it listed all of the paintings which had been collected by the plaintiff. I accept that evidence.

73 The closing date for the consignment of items to be included in the plaintiff's auction catalogue for its May auction of fine art ('the May auction') was Friday 20 March 2009. This was known to Mrs Ange. In the period between receipt by her of the 24 February consignment agreement form and her agreement on 20 March 2009 to consign the paintings for sale, there were a number of conversations between Mr Smith and Mrs Ange. During these conversations, Mrs Ange told Mr Smith that she was in regular contact with her lawyer.

74 Mr Smith said that he spoke with Mrs Ange on approximately six occasions by telephone. There may have been some emails. In general terms, he described Mrs Ange's conduct as 'toing and froing' as to whether she would consign paintings for sale at the May auction. In his witness statement, Mr Smith stated:

...I do not recall the precise details of each [telephone] call. I know that in these calls she often asked for confirmation of the closing date. In those several conversations, she asked me several times what would happen if she did not make a decision by 20 March to include the paintings in the May sale. I told her if she did not make her decision by 20 March, the items could not be included in the auction, and the next scheduled auction after that was in August 2009. She said that she needed funds sooner than 2009.
In these conversations I told her that she had to be clear what she wanted to do. I said if she had any doubts about selling the paintings she should talk to her lawyer. I told her that once the works were consigned, there would be a commitment on her part at that time to the plaintiff and if she then changed her mind, it would cost her money. I said to her that she would have to pay the plaintiff substantial withdrawal fees as were detailed in the Terms on the Consignment Agreement.
In the same series of conversations she also asked me what would happen if Con objected to her selling the paintings. I said to her in reply that she should speak to her lawyer. I told her if she made a decision to list the paintings for auction, that she would have to pay substantial withdrawal fees if she changed her mind. I told her she should not list the paintings for auction if she had any reservations about selling them.
We also spoke several times about the costs of the auction. She said words to the effect of 'Geoffrey, you must look after me. I need the money.' We spoke specifically about seller's commission. I told her that if she was prepared to offer the paintings for sale at the May 2009 sale, we would offer a discounted seller's commission. She then negotiated a 0 % seller's commission and for a 0 % insurance levy. She said that she had been previously given these terms in other dealings with the plaintiff.

75 Mrs Ange did not dispute that she knew of the closing date for including paintings in the May auction. Nor did she dispute that she told Mr Smith that she may need funds earlier than August 2009. It was also common ground that, during the course of the telephone conversations, Mrs Ange and Mr Smith discussed which of the paintings in the art collection should be offered for sale in the event that Mrs Ange decided to consign any paintings for the May auction. After some 'toing and froing', Mrs Ange accepted Mr Smith's advice in this regard, and the discussions thereafter related to the 22 paintings which were in fact consigned.

76 It was also common ground that Mrs Ange knew that, if she decided to consign the paintings for sale, the plaintiff would incur costs in advertising and preparing the paintings for sale; for example, by preparing the auction brochure and catalogue. Indeed, Mrs Ange said that she was disappointed that the most valuable painting she consigned for sale, Frederick McCubbin's 'Midsummer's Eve', was not pictured on the front page of the main auction catalogue, as she understood it would be from discussions with Mr Smith.

77 Further, Mrs Ange acknowledged in her evidence that she knew that the only money which the plaintiff stood to earn from a consignment of the paintings was by charging a buyer's premium of 20 per cent in respect of sales. In these circumstances, Mrs Ange said that she believed that there would be no charge to her if she withdrew the paintings from sale.

78 Mrs Ange disputed, however, the other aspects of Mr Smith's account of their telephone conversations in this period.

79 First, Mrs Ange disputed that she had any discussions with Mr Smith at this time concerning the possibility, or the desirability, of her obtaining legal advice as to her position if she was in any doubt. She maintained that she had previously asked Mr Smith whether she could sell the paintings, notwithstanding her belief that Mr Ange was unlikely to agree to a sale, and that Mr Smith replied with words to the effect: 'they are your paintings, of course you can sell them.' Mr Smith denied having any conversation with Mrs Ange to this effect.

80 Second, Mrs Ange disputed that Mr Smith made any mention of a withdrawal fee.

81 Third, Mrs Ange disputed that she negotiated an agreement with Mr Smith for no seller's commission or insurance charges. She said that Mr Smith offered these terms, in response to her saying to Mr Smith: 'You have to look after me. I need the money.'

82 It was put to Mr Smith in cross-examination that his evidence concerning this telephone conversations with Mrs Ange was false where it differs from her evidence. He did not make any concessions. On the other hand, Mrs Ange's evidence on these issues was less than satisfactory. In particular, she appeared very uncomfortable when denying that Mr Smith had told her that she should consult her lawyer if she had doubts about her ability to sell the paintings. She fidgeted in the witness box, raised her eyes and looked away. Furthermore, Mr Smith's account of this aspect of the conversations has a ring of truth to it. He was faced with a woman who was having difficulty in making a decision. It must have been apparent to him that she was trying to delay making a decision until as late as possible, hoping that she could reach a settlement with her husband and thus avoid the need to auction the paintings. In these circumstances, it is natural that Mr Smith would wish to ensure that Mrs Ange understood the consequences of her actions if she did commit to consigning paintings for sale. I accept his evidence.

83 In the period leading up to 20 March 2009, correspondence continued to pass between the solicitors acting for Mr and Mrs Ange respectively. Further, Mr and Mrs Ange were themselves engaging in negotiations with the assistance of a friend.

84 On 12 March 2009, Mr Goodman and Mr Ange met for coffee. By this time, Mr Ange had received a copy of the valuation of the art collection. Mr Goodman acknowledged in his evidence in chief that Mr Ange contended at this meeting that the art collection was not owned by Mrs Ange, but was owned by him or by them jointly. Further, Mr Goodman acknowledged in his evidence in chief that Mr Ange told him that he objected to any sale of the art collection. In cross-examination, Mr Goodman acknowledged also that Mr Ange told him at this meeting that the art collection could not be sold until the matrimonial dispute between Mr and Mrs Ange had been settled. In reply, Mr Goodman said that he told Mr Ange that Mrs Ange was his client and that Mr Ange should seek legal advice, or words to that effect.

85 Mr Goodman acknowledged that he was 'concerned' about Mr Ange's claims in this conversation. He told Mr Smith about the conversation, and left it to him to deal with Mrs Ange. Later, when Mr Ange's solicitors threatened legal proceedings to restrain the May auction, Mr Goodman became involved in correspondence with the solicitors for Mr and Mrs Ange. However, he left it to Mr Smith to continue dealing with Mrs Ange directly. He had no dealings with her.

86 According to Mr Goodman, his conversation with Mr Smith following the 12 March coffee meeting with Mr Ange was to the following effect:

I think I may have said something like, 'I believe you should convey this to our client.' I think that he said something like, 'Mrs Ange is well aware of Mr Ange's claims.'

87 Mr Smith recalled Mr Goodman informing him about the coffee conversation with Mr Ange. He took no action to inform Mrs Ange about it. In his view, he was dealing with Mrs Ange who was treating the art collection as hers to sell. In these circumstances, he viewed the dispute between Mr and Mrs Ange as to her entitlement to sell the paintings as a matter to be dealt with between them and their respective lawyers. He said that he did not see it as his role to interfere with their discussions. When it was put to him that he should have taken steps to warn Mrs Ange of Mr Ange's claims, he replied:

I'm not sure what I should have done in that instance. I knew that Mr and Mrs Ange were speaking - their lawyers were constantly talking to each other, and I'm sure that the content of Mr Goodman's conversations with Mr Ange would have been expressed to Mrs Ange already through their lawyers.

88 At this time, Mr Smith was dealing with Mrs Ange on the basis that she was the owner of the art collection. He based his understanding on the dealings in June 2007 concerning the consignment of 'The Cloud' for sale by the plaintiff and the payment of the sale proceeds to Mrs Ange following its sale. Although he couldn't recall an express statement to him by Mrs Ange that she was the owner of the art collection, I am satisfied that he was justified in dealing with Mrs Ange on this basis. This finding is reinforced by the fact that, also on 12 March 2009, Mrs Ange attended at the plaintiff's offices and produced 10 or 12 receipts from Mr Coles for the acquisition of paintings in the art collection. There can have been no other purpose for this conduct than a desire by Mrs Ange to establish that she was entitled to sell the paintings. Mr Smith had doubts about the authenticity of the receipts, and said that he gave them back to Mrs Ange without keeping copies of them.

89 Also, on 12 March 2009, Mrs Ange's solicitors wrote to Mr Ange's solicitor and noted an offer which had been put by Mr Ange to Mrs Ange and sought detailed information to enable assessment of that offer. On 17 March, in response to that letter, Mr Ange's solicitors, on instructions, put forward what Mr Ange knew was a deliberate lie, stating that Mr Ange needed to retain three specified paintings in any property settlement, in order to discharge large debts to the Taxation Commissioner and the State Debt Recovery Office. In cross-examination, Mr Ange acknowledged that this was a lie, and said that he wanted to keep the three paintings 'at any price'. The three paintings were 'Mantilla' and 'Magnolia Summer' by Norman Lindsay, and 'Midsummer Eve' by Frederick McCubbin. Each of them was included in the consignment agreement signed by Mrs Ange.

90 On 19 March 2009, Mr Smith telephoned Mrs Ange and reminded her that the following day was the last day to consign paintings for the May auction. Mrs Ange remained non-committal and asked Mr Smith to call her back the next day.

91 At about 10:00 am on 20 March 2009, Mr Smith telephoned Mrs Ange. She said that she was still undecided, and asked Mr Smith to ring back later. Mrs Ange then had a conversation with the solicitor acting for her at the time, Amanda Alidenes. In a non-responsive answer, Mrs Ange gave the following evidence as to this conversation:

my lawyer called me. She has [been] talking to the barrister. Then she couldn't find [the] barrister, she told me. Then I say it wasn't happening if I can't want to sell. Then she say that she can't answer the question but I say I really need the permission [by] five o'clock.

92 Mrs Ange was not asked to elaborate on this evidence. Read as a whole, it would appear that Mrs Ange recalls that Ms Alidenes said she could not advise Mrs Ange as to whether or not she could sell the paintings, because she had been unable to contact the barrister she had briefed to advise on this issue. If that is what transpired in the conversation, it would appear that Mrs Ange determined that she would take the risk as to her entitlement to sell the paintings, because she agreed to consign them for sale when Mr Smith telephoned her shortly afterwards.

93 Mrs Ange's conduct in consigning the paintings for sale immediately after speaking with her solicitor, causes me to doubt her recollection of the conversation with her solicitor. Mrs Ange is clearly no fool. She is unlikely to have consigned the paintings for sale if she was waiting on legal advice as to her entitlement to sell. There are other matters which cause me to doubt Mrs Ange's recollection of the conversation with Ms Alidenes:

(1) As noted elsewhere in these reasons, Ms Alidenes was not called to give evidence. I infer that her evidence would not have assisted Mrs Ange's case.

(2) In the family law settlement orders, Mrs Ange has assigned any claims she has against Ms Alidenes to Mr Ange.

(3) As appears below, Mr Smith recalls Mrs Ange telling him that her lawyer had advised her that she could sell the paintings.

In all the circumstances, I find that Mrs Ange either received legal advice that she could, or should as a tactical matter, consign the paintings for sale at the May auction.

94 Mr Smith telephoned Mrs Ange at about 12 noon. In this telephone conversation, Mrs Ange agreed to consign the paintings for sale at the May auction and Mr Smith said that he would 'send someone' with a contract for Mrs Ange to sign. Mr Smith said that the conversation went further than this. He said in his witness statement:

On 20 March 2009 I had another telephone conversation with Mimi. She told me that she had checked with her lawyer. She told me that her lawyer said the paintings were hers to sell, and that she wanted to have them included in the May 2009 auction. She asked me to make those arrangements.

95 Mrs Ange denied this conversation. For the reasons given above, I accept Mr Smith's evidence as to the more probable. Further, it is unlikely that Mrs Ange would have offered no explanation for making a decision to sell the paintings since the 10:00 am conversation and, for the reasons stated elsewhere, I generally prefer the evidence of Mr Smith to that of Mrs Ange where there is a conflict. However, even if there was no discussion on 20 March 2009 to the effect recalled by Mr Smith, the fact remains that Mr Smith well knew that Mrs Ange was represented by a lawyer and, for the reasons given above, I accept his evidence that he told Mrs Ange that she should get legal advice if she had any doubt as to her position.

96 Following Mrs Ange's oral agreement to consign the paintings for sale, the plaintiff prepared a document to record that agreement. Given the lateness of Mrs Ange's decision, which would have made it difficult to prepare a new consignment agreement form listing the 22 paintings, the plaintiff prepared the following documents and dispatched a junior employee, Alex Clark, to attend on Mrs Ange and obtain her signature to them.

97 First, it appears that the plaintiff had retained a photocopy of the first copy of each of the four pages comprising the 24 February consignment agreement form. The plaintiff altered the first page of its copy to record the oral agreement with Mrs Ange that the plaintiff would not charge any seller's commission, insurance or other fees.

98 Second, following these alterations, the plaintiff made a second photocopy of the four pages. On one photocopy, that retained by the plaintiff, the words 'For Storage Purposes' have been struck out by drawing a line through them.

99 Third, the plaintiff used a yellow highlighter on each photocopy to indicate the 22 paintings which were to be auctioned.

100 Fourth, the plaintiff prepared a separate list of those 22 paintings, including the estimated selling range and the agreed reserve prices.

101 Mr Clark took these documents to Mrs Ange and asked her to sign them. There is no dispute that she signed nine times, by affixing her signature to each page of the two photocopies of the 24 February consignment agreement form and to the first page of the separate list of the 22 paintings to be auctioned. For convenience, the references below to Mrs Ange signing 'the consignment agreement', refer to these nine signatures.

102 As the above description of the documents demonstrates, the general conditions were not attached to any document signed by Mrs Ange. However, she has signed her name on eight occasions underneath the signature clause set out above.

103 After Mrs Ange signed the consignment agreement, her solicitors wrote to Mr Ange's solicitors on the next working day, in the following terms:

RE: ANGE & ANGE

FAMILY LAW MATTER

We refer to the above matter and to previous correspondence.

We are instructed that our client has executed an Agreement with Bonham & Goodman in respect of the artwork.

Our client has instructed us that she has listed the collection to be offered for sale at an auction to take place on 6 May 2009.

104 The fact and timing of this letter further evidences the role of Mrs Ange's solicitor in the decision to consign the paintings for sale.

105 I infer that Mrs Ange's decision to consign the paintings for sale was a tactic used by her, with her solicitor's knowledge, to pressure Mr Ange to settle their property dispute. This became apparent when Mrs Ange was cross-examined as to why she did not withdraw the paintings from sale after Mr Ange's solicitors threatened an injunction to restrain the sale. Mrs Ange said that she decided to proceed with the sale because she needed the money, in circumstances where her husband had sold properties, sold his business and had borrowed money to increase the indebtedness secured on the matrimonial home. In these circumstances, notwithstanding his claims, she determined to proceed with the sale. Mrs Ange said that she was also influenced by the fact that she did not perceive there was any risk in consigning the paintings for auction, because she would get back the paintings which did not sell.

106 On 24 March 2009, Mr Ange telephoned Mr Goodman. In his witness statement, Mr Ange recounted the conversation in the following terms:

[Mr Ange] Tim I don't want my paintings going to auction. You know that they are my paintings and I've got all the receipts. It's in the hands of lawyers, nothing can be sold until it's worked out who gets what. You can't do this without me agreeing. I want you to withdraw the paintings from the auction.

[Mr Goodman] Con you will have to go and get legal advice.[9]

Mr Goodman agreed that this was the effect of the conversation. Following the conversation, he sent an email to Mr Ange in conciliatory terms, trying to encourage Mr Ange to allow the paintings to go to auction and to then argue with Mrs Ange over the proceeds of sale.

107 Mr Smith said that Mr Goodman informed him of this conversation with Mr Ange. However, given that the paintings had already been consigned for sale, he left it to Mr Goodman to deal with. At this time, Mr Smith was fully occupied in preparations for the May 2009 auction. Further, as far as he was concerned, Mr and Mrs Ange were represented by lawyers and it was a matter for them to work out. I accept Mr Smith's evidence.

108 Mr Goodman then became involved in dealings with the solicitors acting for Mr and Mrs Ange. He approached those dealings on the basis that he believed Mrs Ange was entitled to sell the paintings, because Mr Ange had said in June 2007 that the art collection belonged to her and, as a result, it was Mrs Ange who had sold 'The Cloud', Mrs Ange who had negotiated the terms of that sale and Mrs Ange had received the full reserve price following sale of that painting. In these circumstances, he treated Mr Ange's claim as just that: a claim in the context of a matrimonial dispute.

109 Mr Goodman did not, however, simply dismiss Mr Ange's claims. He said that they increased his level of concern and that, accordingly, he gave consideration as to whether the plaintiff should exercise its power to withdraw the paintings from the May 2009 auction. He decided that the paintings should not be withdrawn. He said that he was concerned that Mrs Ange might sue the plaintiff for damages if the paintings were withdrawn without her instructions, given that she claimed to have serious financial problems.

110 There is no evidence that Mrs Ange ever sought to withdraw the paintings from sale in light of Mr Ange's claims. To the contrary, as appears below, when Mr Ange's solicitors demanded that the paintings be withdrawn from sale, and threatened injunctive relief if they were not, Mrs Ange's solicitors adopted Mr Goodman's recollection of the statement made by Mr Ange in June 2007 that the art collection belonged to Mrs Ange, and refused to withdraw the paintings from sale.

111 On the next day, 25 March 2009, Mr Goodman sent an email to Mrs Ange's solicitor. In that email, Mr Goodman made no mention of his conversation with Mr Ange the previous day, in particular Mr Ange's request that the paintings be withdrawn from auction. Notwithstanding this, I am satisfied that Mrs Ange and her solicitor knew that Mr Ange had objected, or would object, to the sale of any of the paintings unless that sale formed part of an agreed property settlement.

112 With that knowledge, Mrs Ange's solicitor wrote to Mr Ange's solicitors on 1 April 2009. In that letter, her solicitor sought to justify the decision to consign the paintings for sale and gave Mr Ange notice of Mrs Ange's intentions as to the disbursement of the proceeds of sale of the paintings.

113 On 3 April 2009, Mr Ange's new solicitor, Julie Singleton, wrote directly to Mr Goodman. She alleged that the art collection was jointly owned by Mr and Mrs Ange and informed Mr Goodman that she had been instructed to seek an urgent injunction to prevent the sale of the paintings. This letter caused Mr Goodman to email Ms Alidenes. He referred to the letter from Mr Ange's solicitor as 'rather alarming' and asked that Ms Alidenes contact him urgently to arrange a conference on the following Monday. Further, Mr Goodman stated in the email:

You will be aware of the withdrawal provisions in our General Conditions of Business. If the pictures are withdrawn it will be very unfortunate for Bonhams & Goodman and for Mrs Ange. The pictures have been catalogued, announced to the media and advertised. The catalogue has been printed.

114 In response, Ms Alidenes emailed Mr Goodman in the following terms:

I have forwarded Ms Singleton's correspondence to our Counsel and Senior Counsel.

As soon as I have spoken to Counsel, which will be over the weekend, I will contact you in order to arrange a telephone conference.

115 A few days passed. In that period, I infer that Ms Alidenes obtained advice from senior and junior counsel and instructions from Mrs Ange.

116 Further, on 6 April 2009 Mr Goodman spoke with Ms Alidenes on the telephone. He described the conversation in the following terms:

Your Honour I phoned Ms Alidenes several times, she was I think from memory away, but not on the day that I initially started contacting her. I spoke to her father over the weekend, who happened to be I believe a lawyer in the office. Finally I think one day - or approximately one day later I finally contacted the lawyer and she asked me at the outset had I given Mr Ange any undertaking or any reason to believe that we considered that he had title to the pictures, and I said no. Then I said to her does Mrs Ange have the right to sell the paintings, and to which she responded, "Yes, she does", because I gather she had sought some advice from - she'd sought some advice I think from memory, and then I went on further to discuss the various communications I'd had with Mr Ange. I got the impression, although I don't recall the detail, but I got the impression that Ms Alidenes was far more briefed on Mr Ange's claim than I was.[10]

Later Mr Goodman said that he could not remember whether Ms Alidenes said she had obtained advice or was going to get advice.

117 Mr Goodman could not recall any other relevant aspects of his conversation with Ms Alidenes. However, as appears below, I infer that he informed her of his recollection of the conversation on 26 June 2007, when Mr Ange said that the art collection was owned by Mrs Ange. This is obvious from the terms of Ms Alidenes' letter of 6 April 2009 to Mr Ange's solicitor, and from Mr Goodman's email to Ms Alidenes on 7 April confirming this aspect of their conversation.

118 As noted elsewhere in these reasons, Ms Alidenes was not called as a witness and no explanation was given for her absence.

119 On 6 April 2009, Ms Alidenes responded to Ms Singleton's letter. In that letter, Ms Alidenes contended that the art collection was owned by Mrs Ange and that she was entitled to sell it:

The consignment of the artwork was undertaken by our client after considered thought and in the disturbing situation where school fees were unpaid and further wherein your client indicated he was not minded to attend to the payment of same. We are instructed that your client is well aware that the paintings have always been regarded by our respective clients as our client's property and your client has made representations to this effect not only to our client but to Mr Tim Goodman, the chairman of Bonhams & Goodman.

Ms Alidenes then referred to the conduct of Mr Ange in unilaterally disposing of matrimonial assets, and continued:

In the circumstances, our client does not consent to the withdrawal of the consignment.

We note that the damages suffered by the parties if the sale were to be aborted would be very substantial and in the order of $500,000 being 25% of the lower estimate. Should you be instructed to seek any order for injunctions notwithstanding the contents of this letter we have instructions to appear in order to oppose those injunctions.[11]

120 Mrs Ange was cross-examined about this letter. She sought to disown it. In the end, she said that she could not remember her solicitor giving her any advice at that time about a possible withdrawal fee of $500,000.

121 On 7 April 2009, Mr Goodman wrote to Ms Alidenes. He referred to the telephone conversation on the previous day, 6 April 2009, and, with reference to that telephone conversation, said that he wished to 'confirm', amongst other things, the following matters:

1 We understood that Mrs Ange owned the Art collection as:

1.1 On 26 June 2007 Geoffrey Smith, National Head of Art and a Director of Bonhams & Goodman and I attended the Anges' North Sydney residence to discuss the sale of pictures. At that meeting we valued several pictures for auction purposes. At the conclusion of the discussions I said to both Mr and Mrs Ange, "well, would you like to go ahead and sell any of the pictures?" Mr Ange replied, "it is not up to me as they are Mimi's pictures and it is her decision." Geoffrey Smith then asked Mrs Ange, "Mimi would you like to sell any of the pictures?" Mrs Ange then responded with, "I would like to think about it. If I was to sell the Streeton [The Cloud 1936] I would want $400,000 for the other Streeton [Seaside Pastoral] I would want $240,000 for it". Mrs Ange consigned in her own name the painting 'The Cloud' by Arthur Streeton which was subsequently sold at auction and the proceeds were paid to Mrs Ange.

1.2 Mrs Ange has acquired items at auction on a number of occasions in her own name. I do not recall ever seeing Mr Ange at an auction.

If the pictures are withdrawn there are withdrawal provisions in the Consignment Agreement which will be very costly.

122 In my view, the emphasised statement in the letter from Ms Alidenes to Ms Singleton on 6 April 2009, to the effect that Mr and Mrs Ange always regarded the art collection as Mrs Ange's property, is likely to have been based upon Mr Goodman's recollection of the conversations on 26 June 2007, as set out in Mr Goodman's email confirming his conversation with Ms Alidenes. As appears above, this statement forms part of my reasons for accepting the evidence of Mr Goodman and Mr Smith on this issue.

123 Ms Singleton replied on behalf of Mr Ange on the same day. She said that Mr Ange denied making any representations to Mrs Ange or Mr Goodman that he regarded the art collection as Mrs Ange's property. She confirmed her instructions that the art collection was 'jointly owned by the parties'. She again threatened an application for an urgent injunction.

124 There was then a delay, due to Mr Ange becoming suddenly ill and requiring hospitalisation. As a result, it was not possible for Mr Ange to make an urgent application for an injunction.

125 Mr Ange's injunction application was not heard until the afternoon of 5 May 2009, the day before the scheduled auction. The Family Court of Australia granted the injunction sought. Mr Ange gave an undertaking as to damages. Mrs Ange was required to withdraw the paintings from sale. Mrs Ange then withdrew the paintings from sale.

126 During the hearing in the Family Court, Mrs Ange contended that the art collection was owned by her. The relevant portion of her affidavit is set out above.

Were the general conditions incorporated into the consignment agreement?

127 As appears above, it is common ground that the consignment agreement form signed by Mrs Ange did not have the general conditions annexed to it. In these circumstances, it is necessary to consider whether the general conditions were nevertheless incorporated as terms of the consignment agreement.

128 There is no issue that Mrs Ange, by signing the consignment agreement, intended to enter into contractual relations with the plaintiff.

129 In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors,[12] the High Court considered a case where a letter of quotation to perform carriage services stated that the services were to be subject to the conditions on the reverse side of an attached consignment note. No consignment note was in fact attached to the letter. The letter also requested the customer to complete and sign a credit application form. The credit application form was provided to the customer at a later time and was then completed and signed. The signature was placed immediately underneath the words:

Please read 'Conditions of Contract' (overleaf) prior to signing.

130 The relevant conditions of contract were in fact 'overleaf', and it was held that those conditions bound the customer in the contracts of carriage entered into between the parties after that time. In these circumstances, it was unnecessary for the High Court to consider whether the conditions on the reverse side of the consignment note, which had not been attached to the letter of quotation, formed part of the contracts of carriage. Notwithstanding this, the case is relevant, as it confirms the objective theory of contract and the importance which the law attaches to the act of signing a document intended to create legal relations. The case also confirms the test to be applied in determining whether terms and conditions which are not included in a signed contract have nevertheless been incorporated as terms of the contract. Relevantly, for the purposes of this case, the High Court made the following statements.

131 First, the High Court stated that trial judges should avoid the uncritical reception of inadmissible evidence of subjective intent in contract cases because such evidence:

tends to distract attention from the real issues, give rise to pointless cross-examination and cause problems on appeal where it may be difficult to know the extent to which the inadmissible material influenced the judgment at first instance.[13]

132 In this case, the Court received some evidence of Mrs Ange's subjective intention which was inadmissible on contractual issues, but, perhaps, admissible in relation to the unconscionable conduct claims made by her. That evidence has formed no part of my reasoning process in reaching a conclusion as to whether the general conditions formed part of the consignment agreement. Nor has it influenced my reasoning as to the interpretation of the consignment agreement or the determination of Mrs Ange's contention that the withdrawal fee term constitutes an unenforceable penalty. Those issues must be determined objectively.

133 Second, the High Court restated the settled principle that a person who signs a document, intending thereby to enter into legal relations, is bound by the terms of that document irrespective of whether the person reads the document before signing. In particular, the High Court rejected the proposition 'that a person who signs a contractual document without reading it is bound by its terms only if the other party has done what is reasonably sufficient to give notice of those terms.'[14]

134 The High Court rejected this proposition because it confuses cases where a person signs a document including terms and conditions in that document with 'cases, such as ticket cases, in which one party has endeavoured to incorporate in a contract terms and conditions appearing in a notice or an unsigned document.'[15] The High Court concluded that:

where a person has signed a document, which is intended to affect legal relations, and there is no question of misrepresentation, duress, mistake, or any other vitiating element, the fact that the person has signed the document without reading it does not put the other party in the position of having to show that due notice was given of its terms.[16]

135 Third, the High Court reaffirmed the statement of Scrutton LJ in L'Estrange v Graucob that:

In cases in which the contract is contained in a railway ticket or other unsigned document, it is necessary to prove that an alleged party was aware, or ought to have been aware, of its terms and conditions. [17]

136 Further to that statement, there is a substantial body of law concerning the incorporation of terms by reference in the document which is signed to the terms contained in another document. It is question of fact in each case, to be judged objectively, as to whether reasonably sufficient steps have been taken to give notice of terms contained in the other document.[18]

137 It was submitted on behalf of Mrs Ange that the plaintiff's general conditions do not constitute terms of the consignment agreement for the following reasons. First, because the general conditions were not attached to any document signed by Mrs Ange. Second, because the plaintiff did not do that which was reasonably sufficient to give notice of the general conditions to Mrs Ange. Third, even if the plaintiff took reasonably sufficient steps to bring the general conditions to the notice of Mrs Ange, the withdrawal fee condition is so exceptional, unusual or unexpected that the plaintiff was bound to take reasonably sufficient steps to bring that particular term to Mrs Ange's attention, and it did not do so.

138 I do not accept the submissions made on behalf of Mrs Ange. In my view, the plaintiff's general conditions constituted terms of the consignment agreement. My reasons follow.

139 First, although the consignment agreement signed by Mrs Ange did not contain the general conditions, the signature clause immediately above Mrs Ange's signature states that the consignment agreement is subject to the general conditions and contains an acknowledgment by Mrs Ange that she has read those conditions and accepts them. These aspects of the signature clause are partly obscured by the stamp 'Please sign & return' on the first page of the consignment agreement. However, even on that page, the fact that the consignment agreement is subject to general conditions is unobscured. On the three subsequent pages, the stamp does not obscure the relevant aspects of the signature clause in any way.

140 The fact that Mrs Ange did not read the signature clause before she affixed her signature immediately underneath it on eight occasions, is not to the point. Had she read it, she would have well known that she was signing a consignment agreement which was subject to 'the General Conditions of Business of Bonhams & Goodman' and that she was acknowledging that she had read those conditions, and accepted them, prior to signing the agreement. Of course, had she read the document, she would have appreciated that there were no general conditions 'attached'. In these circumstances, and in the absence of a plea of estoppel based upon the acknowledgment by Mrs Ange that she had read the general conditions and accepted them, the question remains as to whether the plaintiff took reasonably sufficient steps to bring the general conditions to her notice.

141 Second, at the time Mrs Ange signed the consignment agreement, the 24 February consignment agreement form, including the attached general conditions, had been in her possession for approximately three weeks. This was known to her and the plaintiff.

142 Third, Mrs Ange and the plaintiff knew that the consignment agreement presented to Mrs Ange for signature on 20 March 2009 comprised a photocopy of the 24 February consignment agreement form, with alterations on the first page to reflect the oral agreement between Mrs Ange and Mr Smith that the plaintiff would charge no commission, insurance or other fees. In these circumstances, had Mrs Ange read what she signed, she would have appreciated that the reference to the plaintiff's general conditions being 'attached' was a reference to the conditions which were in fact attached to the 24 February consignment agreement form in her possession.

143 Fourth, Mrs Ange and the plaintiff well knew that she had delayed her decision to consign any of the paintings until the last hours before the deadline for inclusion of any paintings in the plaintiff's May auction. This left little time for the plaintiff to prepare a fresh consignment agreement form, which in any event would have been almost identical to the 24 February consignment agreement form.

144 Fifth, this was not the first occasion on which Mrs Ange had consigned a painting to the plaintiff for auction. She did so in 2007, in the circumstances described above concerning the auction of 'The Cloud' by Sir Arthur Streeton. That single dealing nearly two years earlier is not, by itself, a sufficient basis to establish a course of dealing justifying a conclusion that the general conditions were incorporated into the consignment agreement. For that to be the case, there would need to have been a series of transactions over time.[19] However, although an isolated dealing, it remains a relevant factor to be taken into account in determining whether the plaintiff took reasonable steps to bring the general conditions to the attention of Mrs Ange in connection with the consignment agreement.

145 The combination of the above five factors provides a sufficient basis to conclude that the plaintiff took reasonably sufficient steps to bring the general conditions to the notice of Mrs Ange before she signed the consignment agreement. However, the matter does not rest there. As appears above, Mr Smith gave evidence that, prior to Mrs Ange signing the consignment agreement on 20 March 2009, he told her that substantial withdrawal fees would be payable if she consigned the paintings for auction and then changed her mind and withdrew them. For the reasons given above, I accept that evidence. It reinforces the conclusion I would otherwise have reached on the basis of the five stated factors.

146 It was submitted on behalf of Mrs Ange that the 24 February consignment agreement form is irrelevant to a consideration on this issue. It was contended that this form related to an entirely separate transaction, limited to storage only, and that it constituted no more than a receipt for the art collection. Attention was drawn to the fact that the 24 February consignment agreement form was never signed by Mrs Ange, and that it was not provided to her until it was sent to her in the post after the art collection had been collected and stored by the plaintiff.

147 I do not accept that the 24 February consignment agreement form was thereby rendered irrelevant. The Court's task in ascertaining the terms of a contract is to be performed objectively, in light of the surrounding circumstances.[20] In this case, the surrounding circumstances known to the parties included the fact that the plaintiff had sent the 24 February consignment agreement form to Mrs Ange and that it had been in her possession for approximately three weeks when the consignment agreement was made. Further, the dealings between Mr Smith and Mrs Ange from December 2008, when Mrs Ange asked for a valuation with a view to a possible sale of some or all of the art collection, objectively established that Mrs Ange's request to have the collection stored by the plaintiff was a step towards a possible decision by Mrs Ange to consign some paintings with the plaintiff for auction. The fact that the plaintiff included the high and low estimated sale prices of each painting on the 24 February consignment agreement form supports this finding.

148 It was further submitted on behalf of Mrs Ange that the High Court's decision in Toll v Alphapharm establishes a strict approach to the ascertainment of the terms of a contract recorded in a signed document. It was submitted that, just as a person signing a contractual document is bound by its terms whether or not he or she reads the document, a person submitting a contractual document for signature is bound by the document which is put forward: if the person putting the document forward makes a mistake, and by oversight fails to attach another document which it is intended to incorporate, the law should take a similarly strict approach and limit the terms of the contract to those actually contained in or attached to the document which is signed. It was submitted that such an approach was 'sauce for the goose'; if a person signing a contract proffered for signature is bound by its contents, whether or not he or she reads the contract, the person proffering the contract should be similarly bound by the terms actually contained in the document. I reject that submission. It ignores the legal principles discussed above as to the incorporation of terms by reference or by notice.

149 I reject also the submission made on behalf of Mrs Ange that the withdrawal fee term was so exceptional, unusual and unexpected that, for that term to be incorporated into the consignment agreement, the plaintiff needed to establish that it took reasonably sufficient steps to give notice of the term to Mrs Ange. The law does not require that the plaintiff separately establish that it brought the withdrawal fee term to Mrs Ange's attention. In Toll v Alphapharm, the High Court noted that there may be cases where the inclusion of an exceptional, unusual or unexpected term in a contract, without drawing the other party's attention to that term, involves a misrepresentation.[21] No such case was advanced in Mrs Ange's defence or during final submissions. Further, as appears above, I accept Mr Smith's evidence that he informed Mrs Ange that there would be financial consequences if she consigned any paintings for auction and then changed her mind and withdrew them.

Is the withdrawal fee term an unenforceable penalty?

11.1 A seller may only withdraw a Lot from sale by written notice signed by the Seller.

11.2 If a Seller withdraws a Lot from sale either at any time after 30 days have elapsed after signing the Consignment Agreement Form or after the Company has photographed the Lot and/or allocated a Lot Number to the Lot (whichever is the earlier) but before the Lot has been advertised and/or catalogued for auction, the Seller shall pay to the Company the Expenses plus a withdrawal fee equal to 15% plus GST of the higher of:

(a) the average of the Estimated Selling Range high and low estimates; and

(b) the Agreed Reserve.

11.3 If a Seller withdraws a Lot from sale after the Company has advertised and/or catalogued the Lot for auction but before the Lot has been put on view, the Seller shall pay to the Company the Expenses plus a withdrawal fee equal to 25% plus GST of the higher of:

(a) the average of the Estimated Selling Range high and low estimates; and

(b) the Agreed Reserve.

11.4 If a Seller withdraws a Lot from sale after the Lot has been put on view at the sale venue or in the Company's premises up to and including 28 days after the Sale, the Seller shall pay to the Company the Expenses plus a withdrawal fee equal to 30% plus GST of the higher of:

(a) the average of the Estimated Selling Range high and low estimates; and

(b) the Agreed Reserve.

11.5 If a Seller purports to change the Agreed Reserve at any time without the consent of the Company, the Seller shall be deemed to have withdrawn the Lot from sale.

11.6 If the Company or the Seller is restrained by order of any Court or other competent authority from selling a Lot or if the Company has reasonable cause for believing that either:

(a) the Company or the Seller is so restrained or other not legally entitled to sell the Lot;

(b) the Seller is in breach of any one or more of the warranties of the Seller, or

(c) the description of the Lot given to the Company by the Seller is inaccurate or misleading in any material respect,

then the Company may by notice in writing to the Seller decline to sell the Lot in question and the Seller shall be deemed to have withdrawn the Lot from sale.

11.7 If a Lot is withdrawn from sale or deemed to have been withdrawn then the Seller shall arrange for collection and removal of the Lot at the Seller's expense within 2 business days after the date of withdrawal provided that the Seller has paid the Expenses and the applicable withdrawal fee.[22]

151 The jurisdiction to set aside a term imposing a penalty applies only to terms requiring payment in the event of a breach of the relevant contract. In Export Credits Guarantee Department v Universal Oil Products Co,[23] the House of Lords decided that a term of a contract imposing an obligation on a party to pay money on the occurrence of a specified event, which is not a breach of the contract, is not a penalty; because the question as to whether the amount payable is a genuine pre-estimate of the loss likely to arise from a breach of contract does not arise.[24] This is because it is not the role of a court to relieve a party from a bad bargain.[25] This principle was accepted by the High Court in AMEV-UDC Finance Ltd v Austin.[26]

152 In this case, the consignment agreement does not provide that withdrawal of an item from auction constitutes a breach. To the contrary, on its proper construction the consignment agreement recognises the right of a seller, such as Mrs Ange, to withdraw a lot from sale by written notice. Clause 11.1 of the general conditions provides that:

A Seller may only withdraw a Lot from sale by written notice signed by the Seller.

At a glance

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Source

Judgment (310 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (12)