BODY AND SOUL: FIDUCIARY DUTIES AND THE ART AGENT: THE APPEAL IN THE DE PURY LITIGATION: ACLBDD Holdings Ltd v. Staechelin & Others.

Author:Bowmer, Michael
 
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The law imposes on agents high standards. An agent s own personal interests come entirely second to the interest of his client. If you undertake to act for a man you must act 100%, body and soul, for him. You must act as if you are him. You must not let your own interest to get in the way without telling him. That duty should not cause an agent any problem. All he or she has to do to avoid being in breach of duty is to make full disclosure. Any agent who is doubtful about his position would do well to do just that--the mere fact that he has doubts will generally be a message from his conscience.

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With those words Jacob L.J. in the case of Imageview Management Ltd v. Jack (2) reiterated the fiduciary duty of loyalty owed by agents to their principals. That was a case involving a footballer's agent. But the legal principles apply with equal force to agents operating in today's complex art market. With sales in the secondary market, the incentive to get involved when a work becomes available is a strong one, and the way to get involved, and earn a commission, is to know someone or know someone who knows someone. Sales of art works can sometimes involve layers of dealers between buyer and seller, with the principals on the two sides of the transaction sometimes not even knowing who is on the other side of the deal.

It is topical, therefore, that the appeal in ACLBDD Holdings Ltd v. Staechelin & Others in one of the most public disputes in recent years between principal and agent about the right to commission on the sale of an art work, has recently been decided by the Court of Appeal. At the heart of the dispute was a fundamental and bitterly fought disagreement between, on the one hand, art agents Simon de Pury and his wife Michaela de Pury, and the corporate vehicles through which they carried on their agency, and, on the other, Ruedi Staechelin and his fellow trustees concerning a commission of US$10M alleged to be due following the sale of Paul Gauguin's painting Nafeafaa ipoipo to the Qatari royal family for US$210M. In rejecting all of the grounds of appeal advanced by the trustees, the Court of Appeal upheld the decision of the trial judge in favour of Mr and Mrs de Pury, and agreed that there had not been any breach of fiduciary duty disentitling Mr and Mrs de Pury to their commission.

What was reportedly said by counsel acting for Mr Staechelin and the other trustees before the trial was that there had been "a clear breach of fiduciary duty and all commission had been forfeited if any right ever existed". This was a sound-bite that neatly captured the issues which the court had to decide. As highlighted in an article published in Art Antiquity and Law last year, (3) the case attracted attention not just for the eye-catching size of commission but also the remarkable fact that there was no written agreement recording the terms agreed as to commission. Since any agreement was reached orally--direct written evidence of the existence of an agreement being limited to five words in a note of a meeting: "Commission (Simon) $10m if $210M"--the most significant issue at trial was whether a sufficiently certain concluded agreement had ever been reached.

The trustees also contended that even if an agreement had been reached it was not a legally enforceable agreement since it had not been approved by all three trustees acting unanimously. They also argued that, even if there had been an agreement, Mr and Mrs de Pury had breached their fiduciary duty towards the trustees and, as a remedy for that breach, any commission should be forfeited. Essentially, on that issue, Mr Staechelin was fixated by the notion that Mr de Pury had told him a lie about whether an earlier higher offer had been made by Guy Bennett, the director of collections and acquisitions for the Qatari Museums and agent for the Qatari royal family.

There were as a result four issues at trial:

(1) contract formation: was there ever a legally enforceable contract to pay commission of US$10M;

(2) reasonable remuneration: if there was a legally enforceable contract to pay commission, but no agreement about the amount, what commission was payable;

(3) trustee decision-making: did it matter that there was no resolution by all three trustees to pay commission;

(4) forfeiture of commission: did Mr and Mrs de Pury owe a fiduciary duty, and, if so, had they broken it and should the Court declare any commission forfeit.

In terms of the underlying facts, and in order in particular to understand the arguments on appeal on issues (3) and (4), there were lengthy discussions conducted at meetings, by email and telephone calls over a period of two years. These facts are recited at length in the first instance judgment, but very briefly summarised, they can be divided into four phases:

* August 2012 to April 2013: During this period Mr Staechelin, Mr and Mrs de Pury and Mr Bennett had meetings at a restaurant at Zurich Airport and at Mr and Mrs de Pury's home in London. After some further discussions directly between Mr de Pury and Mr Bennett, Mr de Pury reported to Mr Staechelin that Mr Bennett had a made an offer of USS230M. As it transpired, Mr Bennett later said that he had never made a 'formal' offer and this became the major bone of contention for Mr Staechelin mentioned earlier. Mr Staechelin and Mr de Pury agreed that Mr de Pury should counter-propose a sale at USS260M as a result of which, if accepted, Mr de Pury would receive US$10M in commission. Mr de Pury made that offer by telephone. Apparently, Mr Bennett reacted angrily and said the deal was off. Discussions ended at that point.

* January 2014: During this period Mr and Mrs Staechelin and Mr and Mrs de Pury had a meeting in Rome, following which Mr de Pury emailed them to say he had had a further telephone discussion with Mr Bennett. This led to a second meeting between the four of them at the Staechelins' home in Basel. Mr Staechelin asked Mr de Pury to contact Mr Bennett. Payment of commission--either a flat rate of 5 per cent or a fixed fee of US$10M or some other figure once an eventual sale price was agreed--was also mentioned at that point.

* June 2014: During this phase Mr de Pury and Mr Bennett met in Basel and Mr Bennett said the offer was now US$210M. This was said to be for two reasons: (1) the market for Impressionist works had declined; (2) the former Emir had abdicated and the new Emir was less interested in such works. That offer was put to Mr Staechelin the following day who said he...

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