Publication date: 15 December 2017
As the value of art is rising more rapidly than inflation, artworks have become an attractive means of payment. What can you do if the artworks you purchased turn out to be fake and you have been paid in counterfeits?
Three recent decisions by the Amsterdam District Court regarding the sale of a collection worth millions of Euros give more clarity.
In January 2014, the owner of an art collection sells it via a holding company for EUR 1,636,000 to All Art Initiatives B.V. (AAI) to pay off part of his debts to the group company to which AAI belongs. In January 2013, the collection was appraised at EUR 3,759,100 on behalf of the owner. AAI seems to have made a good buy with the collection including works by Piet Mondrian, Max Liebermann, Mary Cassatt, Henri Toulouse-Lautrec, August Macke, Jan Sluijters, George Hendrik Breitner, Isaac Israëls, Maximilien Luce, Edouard Vuillard, James Ensor and Constant Permeke.
When in 2015 two experts commissioned by AAI examined the art collection they concluded that a large number of the artworks were fake. Thereafter, AAI required documentation regarding the authenticity of the artworks from the original owner, such as certificates of authenticity, purchase invoices and catalogues raisonnés. The original owner only produced taxation reports that said nothing about the authenticity of the artworks, which did not satisfy AAI.
AAI then asked the court to terminate or annul the purchase agreement, because of fraud or error, or to compensate the damage because of non-conformity. As the owner should have known this, not just the holding company – which held the practically worthless collection – but also he himself is liable for the claim. As error was excluded in the agreement as a reason for termination and there was no conclusive evidence for fraud, only compensation due to non-conformity is dealt with in the proceedings.
The original owner argues that no warranty for authenticity was given and that AAI, as a professional buyer, should have performed an appraisal. The court does not go along with this. AAI could rely upon three appraisal reports the owner submitted to them prior to the purchase. In addition, the owner had guaranteed the value of the artworks.
As the opinions of the parties’ appraisers differ with regard to the value of the collection, the court decides to appoint its own expert. AAI claimed that the artworks were fakes and thus has to prove that this statement is correct. Therefore, it is not the task of the expert to determine that the artworks are authentic but to view whether it can be said with a great degree of certainty that the artworks are a fake. Due to this requirement the artworks will be considered as “authentic” more quickly.
After an examination of 127 works of art, it turned out that one third was certain to be forged and the major part of the other works had been overvalued. The collection was not worth EUR 3,759,100, but only EUR 906,700. And that is a lot less than the amount of EUR 1,636,000 the collection was bought for. The seller, the holding company, therefore has to compensate the damage AAI incurred. That amounts to EUR 755,300, which is the difference between the purchase price and the actual value of the artworks.
As the art collection was the major asset of the holding company, it will be difficult to obtain compensation. The Court does not consider it proved that the director of the holding company consciously harmed AAI and therefore only the holding company has to cover the damage and legal costs, and costs for attachment incurred.
The problems were caused because AAI had the collection thoroughly assessed after the purchase instead of before to it. This could be prevented by an upfront investigation regarding authenticity and provenance of artworks. Russell Advocaten will gladly help you finding independent experts and drafting a sales agreement that provides you with the opportunity to recover the costs in the event of forgeries. Please contact us:
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