Avrora Fine Arts Investment Ltd v Christie, Manson & Woods Ltd

A contractual authenticity warranty given by an auctioneer may coexist with an implied representation that the auctioneer had reasonable grounds for its stated opinion. A warranty does not, by itself, prevent such a representation arising.

Contractual terms which disclaim responsibility may prevent a duty of care arising, but they are subject to the Unfair Contract Terms Act 1977 where they retrospectively alter the character of what occurred or part company with reality. Reasonableness depends on the circumstances, including the availability of an effective contractual warranty, the parties’ bargaining positions, their knowledge of the terms and the practical alternatives available.

Avrora bought a painting at auction which Christie’s had warranted and catalogued as the work of Kustodiev. Avrora later obtained expert opinions that the painting was not authentic and sought cancellation under Christie’s’ limited warranty, together with damages for negligence and under the Misrepresentation Act 1967.

The warranty claim raised whether Avrora had remained owner of the painting and whether it was painted by Kustodiev. The other claims concerned whether Christie’s owed a duty of care, whether it had impliedly represented that it had reasonable grounds for its attribution, and whether contractual disclaimers satisfied the reasonableness requirement under the Unfair Contract Terms Act 1977.

1. Warranty. Avrora had remained the owner of the painting and therefore satisfied the relevant condition of the limited warranty.
2. The court assessed authenticity on the balance of probabilities. Expert connoisseurship evidence was of central importance. A judge must not assume an expert eye which the judge does not possess, although expert conclusions may be rejected where their reasoning is illogical or irrational. The connoisseurship evidence, reinforced by the absence of archival references, established that the painting was probably not by Kustodiev. The contrary Voinov/Notgaft material was insufficient to alter that conclusion.
3. Avrora was therefore entitled to cancel the purchase and recover the money paid under the limited warranty.
4. Negligence. The Conditions were drafted to exclude responsibility outside the limited warranty. Applying the reasoning in Hedley Byrne & Co Ltd v Heller & Partners Ltd and McCullagh v Lane Fox & Partners Ltd, they would ordinarily have prevented an assumption of responsibility and hence prevented a duty of care arising.
5. However, under Smith v Eric S. Bush, contractual wording cannot avoid the operation of the Unfair Contract Terms Act 1977 merely by preventing a duty arising. A term which retrospectively alters the character of what occurred, or parts company with reality, is subject to the statutory reasonableness requirement. Christie’s had in reality taken responsibility for the attribution by expressing an unqualified opinion, giving a warranty and charging a substantial premium.
6. The relevant terms nevertheless satisfied the requirement of reasonableness. Avrora had an effective warranty remedy without proving fault; it was commercially able to decline the transaction; it had, or could reasonably have obtained, knowledge of the terms; and the exclusion avoided exposing Christie’s to liability where the attribution was probably correct.
7. Misrepresentation. Christie’s’ catalogue stated both that the painting was its opinion to be by Kustodiev and that it warranted that attribution. In those circumstances, the warranty did not preclude an implied representation that Christie’s had reasonable grounds for its opinion. The relevant exclusions were reasonable, however, and barred the statutory claim. The claims would also have failed on the evidence even if the exclusions had been ineffective.

The warranty claim succeeded. The negligence and Misrepresentation Act 1967 claims failed.