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Articles and legal news from the Atkinson Vinden Team.

Buying a fake at auction, who is responsible?

General

We’ve all been tempted to buy at auctions – whether it be jewellery or artworks, furniture or wine. What do we need to be on our toes about? And to what extent are auction houses liable if we are sold a dud?

The December 2014 decision of McBride v Christie’s Australia Pty Limited [2014] NSWSC 1729 (McBride v Christie’s) demonstrates that auction houses will be held responsible for advertising a fake as the genuine article if they have real concerns regarding the work’s authenticity.

This case concerned the purchase of a painting represented as Faun and Parrot by Albert Tucker (the painting) from the prestigious auction house Christie’s.  The painting was a forgery.  Christie’s had been advised by experts that they had “real doubts” regarding the painting’s authenticity and it knew that the signature on the painting was a forgery, yet Christie’s failed to correct its previous representations that the painting was genuine before the buyer paid for the work.  The purchaser, Louise McBride sued for her loss of $118,788.71.

In the judgment handed down in early December 2014, the Court found several parties were responsible for the sale of the forged painting in the following proportions:

  • Christie’s was responsible for 85% of the loss;
  • Holland Fine Arts & Cars Pty Limited (the seller of the painting) was responsible for 10% of the loss; and
  • Vivienne Sharpe (the buyer’s agent at the auction) was responsible for 5% of the loss

Although the loss was apportioned between the wrongdoers, the buyer was only successful against Christie’s because of its knowledge that its representations were misleading and deceptive and its failure to correct the representations made.

Interestingly, the forgery was only discovered when the buyer was preparing to sell the painting in 2010, ten years after purchasing the piece.  Christie’s conditions of business and the buyer’s finance contract permitted claims within 5 years of purchase, however the Court allowed the claim on the basis that Ms McBride could not have reasonably discovered the forgery until 2010.  Ms McBride claimed that Christie’s contravened its obligations not to mislead or deceive consumers under the Australian Consumer Law.

Take Away Points

  • When selling goods, by auction or otherwise ensure your business describes the goods accurately in any advertisement or at the point of sale;
  • If your business, employees or agents become aware of a forgery or misrepresentation in the description of the goods for the sale, the business should take steps to correct its previous misrepresentation to potential buyers and agents;
  • Maintain appropriate due diligence systems and processes for reviewing information provided by suppliers, or sellers if working on consignment.
  • If working as an agent for buyers, disclose any “secret” commissions from the sale to the buyer.