On Monday (26 November), the Court ordered Sotheby’s to allow inspection of its correspondence with experts, in a case concerning a painting described as by Frans Hals, but which experts later determined was a counterfeit.
Sotheby’s had withheld inspection on the grounds that the correspondence was privileged, but the Court disagreed, holding that Sotheby’s could not show that the dominant purpose of the correspondence was its use in contemplated litigation.
The decision was made in the ongoing case concerning a painting described as “Frans Hals, ‘Portrait of a Gentleman, half length, wearing Black’, signed with monogram lower right: FH, oil on oak panel, 13 ½ by 10 ½ in,” which Mark Weiss Ltd acquired in June 2010.
According to the judgment, in June 2011 Mark Weiss Ltd appointed Sotheby’s as exclusive agent, for a period of three months, to sell the painting by private treaty, for a minimum price of US$10.75m. Sotheby’s did so in June 2011, but in the contract, Sotheby’s offered to rescind the sale and return the purchase price, if the buyer provided written evidence raising doubts as to the authenticity or attribution of the painting, and Sotheby’s determined that the painting was counterfeit. The buyer did so on 27 May 2016, having obtained a report from an expert, Mr Martin.
On 11 July 2016 Sotheby’s, having commissioned another expert, Mr Twilley, to conduct a peer review of Mr Martin’s report, determined that the painting was a counterfeit, rescinded the sale and, on 14 July, paid US$11,287,500 to the buyer.
In the ongoing Court proceedings, Sotheby’s are seeking rescission of its contract with Mark Weiss Ltd and repayment of the purchase price. Mark Weiss Ltd denies that there is a right to rescission, relying upon a term referred to as the “generally accepted views” proviso in the agreement between Sotheby’s and the buyer. Mark Weiss Limited also alleges that Sotheby’s actions were a breach of fiduciary duty.
Following the Court’s decision this week, Sotheby’s will now have to allow inspection of its correspondence with the two experts, Mr Martin and Mr Twilley, from April to July 2016, which is said to have followed the determination by the experts that the painting was a counterfeit.
In determining whether or not the correspondence was privileged, the Court found that the correspondence with both Mr Martin and Mr Twilley was created for two purposes:
- to enable Sotheby’s to decide whether the painting was a counterfeit and, if so, to rescind the sale of the painting, and
- to enable Sotheby’s to defeat the arguments of Mark Weiss Ltd in the anticipated litigation.
The Court held that Sotheby’s own decision as to the authenticity of the painting and whether to rescind the sale was an important decision for Sotheby’s, but that recovering the sale price from Mark Weiss Ltd in the anticipated litigation was also important to Sotheby’s. The Court held that Sotheby’s was unable to show that the latter was the dominant purpose of the correspondence and that therefore the correspondence was not protected by litigation privilege. On that basis, inspection of the correspondence was ordered.
The full judgment is available here and the case continues.