Sotheby's v Mark Weiss Ltd
| Jurisdiction | England & Wales |
| Judge | Henderson LJ,Lady Justice Carr DBE,Peter Jackson LJ |
| Judgment Date | 23 November 2020 |
| Neutral Citation | [2020] EWCA Civ 1570 |
| Date | 23 November 2020 |
| Docket Number | Case No: A4/2020/0176 |
| Court | Court of Appeal (Civil Division) |
[2020] EWCA Civ 1570
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COMMERCIAL COURT (QBD)
MR JUSTICE ROBIN KNOWLES CBE
CL-2017-000071
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Henderson
Lord Justice Peter Jackson
and
Lady Justice Carr DBE
Case No: A4/2020/0176
James Collins QC and Philip Jones (instructed by Mackrell. Solicitors) for the Appellant
Nathan Pillow QC and Emily Wood (instructed by Freshfields Bruckhaus Deringer LLP) for the First Respondent
Joe Smouha QC and Claudia Renton (instructed by Stephenson Harwood LLP) for the Second Respondent
Hearing dates: 10 & 11 November 2020
Approved Judgment
Introduction
This is an appeal by the Appellant, Fairlight Art Ventures LLP (“Fairlight”), against the judgment and order of Robin Knowles J CBE (“the Judge”) dated 11 December 2019 following an eight-day trial in April 2019. It relates to a painting entitled “Portrait of a Gentleman” (oil on oak panel 13 1/2 by 10 1/2 inches) (“the Painting”), considered by some (at least formerly) to be the work of Frans Hals, the famous Dutch Golden Age painter (1582/3–1666). Whilst the correctness of that attribution is now very much under scrutiny, that is not an issue that arises for consideration on this appeal.
All the parties are involved in the fine art world. The First Respondent, Sotheby's, is an international auction house. The Second Respondent, Mark Weiss Limited (“MWL”), is a fine art dealership. The Third Defendant, Mr Mark Weiss (“Mr Weiss”), is a director and the sole shareholder of MWL. Fairlight is the special purpose vehicle of Mr David Kowitz (“Mr Kowitz”), who is its designated member and ultimate beneficial owner. He is an investor in fine art.
In 2010 the Painting was purchased by Fairlight on behalf of itself and MWL. In 2011 the co-owners agreed to sell the Painting onwards. Sotheby's, pursuant to a consignment agreement, was involved in its sale in June 2011 by private treaty for US$10,750,000 to EPC Nevada LLC (“Nevada”), controlled and beneficially owned by Mr Richard Hedreen, also a fine art collector and investor. The sale contract was subject to provisions allowing for rescission and return of the Painting and the purchase price. In 2016 Nevada sought to rescind the sale contract following expert opinion on the authenticity of the Painting. Sotheby's returned the purchase price to Nevada and Nevada returned the Painting.
The parties disagreed on the question of whether MWL, Fairlight and Mr Weiss were obliged to reimburse Sotheby's for the returned purchase price.
MWL and Mr Weiss compromised their differences with Sotheby's in a settlement deed dated 18 March 2019 (“the Settlement Deed”). Under the Settlement Deed, MWL and Mr Weiss agreed to pay Sotheby's US$4,200,000 (“the Settlement Sum”) and Sotheby's agreed to indemnify MWL in respect of claims against MWL and Mr Weiss by Fairlight up to a cap of US$2,500,000.
Upon his judgment, the Judge ordered:
i) Fairlight to pay Sotheby's the principal sum of US$6,550,000 (being the principal amount claimed of US$10,750,000 less the Settlement Sum);
ii) Fairlight to pay MWL, the sum of US$2,100,000 (being 50% of the Settlement Sum);
iii) MWL to pay Fairlight US$3,275,000 (being 50% of the principal amount due from Fairlight to Sotheby's).
After adjustment by way of set-off, the net principal sum due from Fairlight to Sotheby's was US$5,375,000 and MWL was under no further liability to contribute towards the principal sum of US$10,750,000. The Judge also made consequential orders relating to interest, the delivery up of the Painting and costs.
Fairlight has been granted permission to pursue four grounds of appeal relating to the Judge's findings: i) on sub-agency and privity; ii) on partnership; iii) on the construction of a clause relating to the views of scholars and experts (and the Judge's findings on the substance of the expert evidence itself); and iv) on whether or not Nevada was entitled to rescind. Fairlight argues that the Judge made substantive errors of law; repeatedly failed to give adequate reasons for his conclusions; and reached perverse conclusions on the facts or failed properly to weigh relevant evidence.
The appeal is resisted by Sotheby's. MWL is party to the appeal since, if Fairlight succeeds, Fairlight seeks consequential orders (in the event that it succeeds on the third and/or fourth grounds of appeal) quashing all provisions directing it to make contributions to MWL in respect of the sums ordered to be paid by MWL to Sotheby's. MWL supports Sotheby's position. Mr Weiss is not a party to the appeal.
Overview of the parties' dealings
As at 2010 Mr Kowitz was a long-standing and important client of MWL and friend of Mr Weiss. Mr Kowitz had bought his first Old Master from MWL in 1997.
Mr Weiss first viewed the Painting in Paris in April 2010. Two years earlier, in 2008, the French government had declared the Painting a “trésor national” and refused it an export licence until 2011.
Mr Weiss viewed it together with Mr Kowitz in May 2010. They agreed to buy the Painting for €3,300,000 on a 50/50 basis, each contributing €1,650,000. For this purpose Mr Kowitz (personally) agreed to lend Mr Weiss/MWL €1,150,000. Mr Kowitz stated in an email to Mr Weiss dated 31 May 2010:
“If Louvre buys picture, we split the profits.
If Louvre/French state makes a lower offer, we do our best to negotiate, but we agree now that we are not going to fight them, unless it's ridiculous…
If exported, DK has option to buy picture for 3.9 million euros — ie giving Weiss a profit of 600,000…This would be only to keep the picture; Kowitz not free to sell it or if he does additional profit share due to Weiss
If we decide to sell it, we figure out a fair split then — ie if be just ship it to Sotheby's we probably split evenly; if sold to a private at great price maybe 60/40 in favor of Weiss, etc.” (sic)
Mr Weiss responded on the same day:
“As I said, the problem with you having option @3.9m is that, on the old deal, I would expect you to have given me an additional amount anyway if you had kept it, so I would be no better off even though I now own 50%! I am entering into this new venture on the basis that I will have the opportunity to sell this painting for a much larger profit!”
He added in a further email sent shortly thereafter that it was best not to put a definitive value on the “put option” being contemplated by Mr Kowitz, which should be based more on a “willing buyer, willing seller” basis and reflect a fair and equitable discount on the amount Mr Weiss could realistically expect to achieve for the Painting on the international market.
On 7 June 2010 Fairlight (acting on behalf of itself and MWL) duly purchased the Painting (from a Mr Giuliano Ruffini (“Mr Ruffini”)) for €3,000,000. The contract was reviewed by Fairlight's lawyers who liaised with both Mr Weiss and Mr Kowitz on its terms.
On 8 July 2010 Fairlight's lawyers emailed Mr Weiss stating that Mr Kowitz had asked them to prepare a draft agreement covering “both the ownership/profit share and the loan” in respect of the Painting. A draft agreement was attached. It showed the parties as Fairlight, Mr Kowitz, Mr Weiss and (possibly) MWL. It recorded that Fairlight held the Painting on behalf of MWL and itself jointly with each party having a 50% interest, and that any profits were to be shared equally. At paragraph 8 it stated:
“ NO PARTNERSHIP
8.1 Nothing in this agreement shall be deemed to constitute a partnership between the parties or any of them.”
The agreement was never executed (“the Unexecuted Acquisition Agreement”).
According to Mr Weiss (in his first witness statement which Fairlight relied on at trial by way of hearsay notice), he and Mr Kowitz agreed to meet on 13 May 2011 to make a decision on whether Mr Kowitz would decide to keep the Painting (and buy Mr Weiss out) or they would agree to offer the Painting to the market. They failed to reach an agreement as to value at that meeting in what Mr Weiss said was a “difficult conversation”. Further discussions took place in the following days in the course of which Mr Kowitz agreed that Mr Weiss could try and sell the Painting at a price at or above US$12million.
On 17 May 2011 Mr Kowitz accordingly emailed Mr Weiss as follows:
“This is to confirm that I am authorizing you to sell the Hals at a price at or above $12million. As mentioned on the phone, I would like to be consulted on any decision to consign it to any third party before you make such a commitment.”
Mr Weiss states that following this email, Mr Kowitz indicated he wanted, after all, to consider keeping the Painting and asked for more time, to which Mr Weiss agreed. Mr Weiss also engaged with a prospective private buyer in the meantime. By 24 May 2011 Mr Kowitz was again willing for the Painting to be sold. Mr Weiss pursued various potential avenues to sell.
As at June 2011, Mr James Macdonald (“Mr Macdonald”), head of Old Master Paintings Private Sales Worldwide and a senior director of Sotheby's, and who had visited the Painting in MWL's gallery in May 2011, was keen to broker a sale. On 9 June 2011 he indicated to Mr Weiss that he had a private client very interested in the Painting. The Painting was delivered to Sotheby's on 17 June 2011 for viewing by Sotheby's client on 20 June 2011.
...To continue reading
Request your trial
-
BCM Cayman LP and Another v R & C Commissioners
...documents (although this will be an important part of the exercise). Carr LJ stated as follows in Sotheby's v Mark Weiss Ltd [2020] EWCA Civ 1570 at [84]: The formation of a partnership creates strict and important rights and obligations between the partners (see for example s. 20 (restrict......
-
BCM Cayman LP and Bluecrest Capital Management Cayman Limited v The Commissioners for HM Revenue and Customs [2022] UKUT 00198 (TCC)
...documents (although this will be an important part of the exercise). Carr LJ stated as follows in Sotheby’s v Mark Weiss Ltd [2020] EWCA Civ 1570 at “The formation of a partnership creates strict and important rights and obligations between the partners (see for example s. 20 (restrictions ......
-
BCM Cayman LP v The Commissioners for HM Revenue and Customs
...to substance and reality and not solely by reference to the contractual documents, citing Carr LJ in Sotheby's v Mark Weiss Ltd [2020] EWCA Civ 1570 at [84]: “… In determining whether or not a statutory partnership exists, it is important to look at the substance of the relationship, not t......
-
The Fine Art of Acquiring Authentic Artworks.
...a work which is made of a particular material, if the lot is described in UPPERCASE type as being made of that material (). (53) [2020] EWCA Civ. 1570. (54) For example, DeBalkany v. Christie Manson & Woods Ltd [1995] 1 WLUK 276, Avrora above, note (55) See discussion of the Sale of Goo......