Sleepers: whose side is the law on?

Auctioneers remain potentially liable for misattributions and reserves given carelessly

In January The Art Newspaper revealed that an item catalogued by Lawrences auctioneers in Somerset as a 19th-century French claret jug, with an estimate of £100-£200, had sold at auction to an anonymous buyer for £220,000. Reports quickly followed that the purchaser believed the “jug” to be an 11th-century Fatimid ewer with a market value significantly greater than the hammer price. Specialist dealers described the find as the “Holy Grail” and possibly the biggest “sleeper” ever to appear on the Islamic art market.

Wind forward several months to the present. The ewer was sold this week to an anonymous bidder at Christie’s in London for £3,177,250, including the buyer’s premium. It has now been authenticated as a carved rock crystal ewer made for the court of the Fatimid rulers of Cairo in the late tenth or early 11th century. It follows other recent sleeper cases, such as the Cotswold Rembrandt, which had an estimate of £1,000-£1,500 but sold for £2.6m at an auction in October last year. And in December 2006, a sleeper sold at a Swedish auction for $2.37m (est £2,000) after several bidders realised it could be a lost work by Rubens, rather than by one of his followers.

The importance of the Fatimid ewer was clearly not known to the seller in January and had not been spotted by Lawrences. The Art Newspaper identifies a number of features that might have

signalled the importance of the piece to Lawrences, and which had clearly caught the eye of the buyer. However, the report also reveals that, although the ewer was widely reported as sold, the sale was subsequently “annulled”, with the ewer being returned to the original vendor. It appears that the parties have managed to avoid any dispute about the original sale. But whose side is the law on when a sleeper slips through?

At auction, a sale is normally treated as binding and complete when a bid has been accepted by the fall of the hammer. But things are not always so straightforward. The common factor where a sleeper is concerned is the seller’s, and the auctioneer’s, lack of appreciation of the true or potential value of the item for sale. How does the law react in these circumstances?

By definition, the seller of a sleeper has failed to appreciate the true value of the item he or she is putting up for auction. In limited circumstances, the law may treat a contract as void where it was made on the basis of a mistaken understanding on the part of one or more of the parties at the time the contract was made. However, a high degree of proof is required to persuade a court that a mistake should nullify the sale. The court will carefully need to consider whether there has been a mistake as to the terms of the offer, as distinguished from a mistake as to the quality of what is being offered.

The former raises problems of offer and acceptance; the latter usually does not. While in an extreme case, a mistake as to the quality of what is being offered might negate the agreement by destroying the subject matter, it will not usually prevent the formation of an agreement because it is well established that a mistaken motive of one party cannot prevent the formation of an agreement, even if realised by the other party.

A seller who is unable to persuade his buyer, or the court, to void the contract of sale may instead consider looking to the auctioneers for a remedy.

When an item is sold at auction without the auctioneers having an appreciation of the true nature of the object, it is possible that the seller will bring a claim for damages, alleging a failure on the part of the auctioneers to discharge their duties.

The relevant law on auctioneers’ duties is set out in the important Court of Appeal decision in Luxmoore-May v Messenger May Baverstock (1990). In that case two paintings carried the catalogue description: “English school. Hounds by Rocky Seashore. Panel. Pair. Oil on paper.” They were sold in 1985 through the auctioneers Messenger May Baverstock. A reserve of £40 was placed on them and, to everyone’s delight, they fetched £840. However, the seller’s pleasure turned to anger when, five months later, the paintings were sold at Sotheby’s for £88,000 as a pair of Foxhounds by George Stubbs. The seller, Mrs Luxmoore-May, sued the auctioneers for the difference between the price obtained on her sale and the subsequent sale at Sotheby’s.

The case established the principle that the duty of the auctioneers was to express a considered opinion as to the sale value of the pictures and for that purpose to take further appropriate advice. But the question arose whether all auctioneers should be treated in the same way. The court confirmed that a valid distinction should be made between those who might be described, by analogy with the medical profession, as “general practitioners” as opposed to “specialists”.

This provincial firm of auctioneers fell squarely within the general practitioner group and the court held that “there is ample scope for genuine difference of opinion and one man clearly is not negligent merely because his conclusion differs from that of other professional men”. Thus, the true test is not to see whether or not the auctioneer got his “diagnosis” wrong, but whether he has been guilty of such failure as no auctioneer of ordinary skill would be if acting with ordinary care.

There is no doubt, therefore, that auctioneers remain potentially liable for misattributions which depress the price obtained at auction and also for advice on values and reserves which is given carelessly. However, the degree of skill and care which one is entitled to from a provincial auction house is rather less than from Christie’s or Sotheby’s. In Mrs Luxmoore-May’s case, the court found that the auctioneers had done what was expected of them and they were not liable.

Where a sleeper has slipped through the net, the sale contract will not necessarily be void merely because one or both of the parties would not have made it had the true facts been realised. Each case must be carefully considered on its own facts and merits.

Philip Davis is a partner in the commercial litigation department of the law firm Davies Arnold Cooper. He advises art and antiques dealers, galleries and collectors of art on a range of legal issues arising from dealing in, collecting and owning art. Graham Ludlam is a professional support lawyer at Davies Arnold Cooper

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