Sotheby's v Mark Weiss Ltd & Ors

A co-owner who authorises an agent to consign jointly owned property for sale may become contractually bound with the selling intermediary as principal. Authorities concerning sub-agency do not apply where the evidence shows that the owners themselves contracted with the intermediary.

A contractual authenticity determination must be rational, in good faith, and free from capricious or perverse conduct. The phrase “generally accepted views of scholars and experts” requires a generally accepted opinion, not a headcount or majority.

Contractual terms governing authenticity, rescission and allocation of risk will generally displace elaborate implied terms and fiduciary-duty arguments where the intermediary acts within the agreed framework.

Sotheby’s sought reimbursement from Fairlight Art Ventures Ltd for half of the purchase price returned after the rescission of a private treaty sale of a painting. The painting had been jointly acquired by Fairlight and Mark Weiss Ltd, which arranged its sale through Sotheby’s.

Fairlight disputed liability on grounds including lack of privity, failure to satisfy the contractual authenticity guarantee, irrationality and bad faith in Sotheby’s determination that the painting was counterfeit, the existence of generally accepted scholarly views, transfer of the painting to another owner, breach of duty and champerty.

The court also addressed contribution between Fairlight and Mark Weiss Ltd.

1. Disposition. Fairlight was liable to Sotheby’s for failing to return the purchase price under Contract A. The contractual framework entitled Sotheby’s to seek repayment following a valid rescission. The precise terms of the order were left for agreement or further discussion.
2. Privity and authority. Fairlight had authorised Mark Weiss Ltd to enter into Contract A on behalf of both owners. The owners thereby bound themselves as principals to the sale. The sub-agency authorities relied upon by Fairlight did not apply because Sotheby’s was not merely a sub-agent within an agency between Fairlight and Mark Weiss Ltd.
3. Authenticity determination. It was common ground that Sotheby’s determination had to be rational, made in good faith, and not capricious or perverse. The court rejected the need to decide whether the painting was in fact by Frans Hals. The determination was supported by scientific testing, peer review, expert evidence and the French court-appointed expert’s opinion, and satisfied the applicable standard.
4. Generally accepted views. The contractual phrase required a generally accepted opinion reached through considered application of scholarship and expertise. It did not prescribe a numerical majority, weighting exercise or headcount. As at 27 June 2011 no such generally accepted view existed.
5. Construction and duties. Nevada remained the original buyer despite an intermediate transfer of the painting. The offer to rescind had not been assigned. The express contractual arrangements made the elaborate implied term advanced by Fairlight unnecessary. Sotheby’s owed no fiduciary duty requiring it to promote Fairlight’s interests when making a determination which also protected the buyer and exposed Sotheby’s own balance sheet and reputation.
6. Contribution and champerty. Fairlight and Mark Weiss Ltd were liable in equal shares. There was no blameworthy conduct justifying a different allocation. Sotheby’s had a genuine commercial interest in the transaction as a whole, so the contribution arrangement was not champertous.

First-instance judgment in the High Court (Commercial Court). No appellate history was stated.