19 March 2019 - Article
The London High Court warns art dealers who “pay[s] in large amounts of cash, keep[s] no records and ask[s] no questions as to provenance of [their] supplier” that they expose themselves, and those who buy from them, to considerable risks. The case heard last February involved two paintings by Francis Newton Souza, the Indian artist, worth approximately £300,000. The paintings were claimed by Dr Kurtha, a collector, from Michael Marks, a dealer. Dr Kurtha claimed that the paintings had been stolen from him and he wanted them back. Mr Marks claimed that he had acquired the paintings for value in good faith and he wanted to keep them. The Court was asked to decide who had a better claim to ownership.
Applying general principles of English law, the Court stated that if Dr Kurtha could prove that the paintings were stolen from him and he owned them prior to the theft, his claim would succeed unless Mr Marks could prove that someone purchased the paintings in good faith not less than six years before the action was commenced. The six-year period is the normal period within which an action for the recovery of property must be brought in England. In the case of theft, the six-year period does not start to run in favour of a thief, nor does it run in favour of anyone whose possession of the property is related to the theft. The six-year period begins to run when someone purchases the property in good faith. The burden of proof lies on the defendant who must show that the property was purchased in good faith six years or more before the action was commenced.
The Court considered the evidence in detail and found that Dr Kurtha had acquired ownership of the paintings directly from the artist, and that the paintings had been stolen from him.
The burden of proof then fell on Mr Marks to prove that six years or more had passed since the paintings were acquired in good faith. He had purchased the paintings recently, allegedly days after his own seller had purchased them. Even if the Court had found that he and his seller had bought in good faith (the Court did not find that they had), this would not have given Mr Marks a good defence to Dr Kurtha's claim because the six-year limitation period had not expired. However, as the Court pointed out, if someone earlier in the chain of possession acquired the paintings in good faith and that acquisition occurred six years or longer before the action was commenced, then Mr Marks would have a defence.
It was alleged that a Mr Martin had bought the paintings from a Ms Banarse in November 1999. Mr Martin was the seller to Mr Marks' own seller. The challenge for Mr Marks was to show that Mr Martin had bought the paintings in good faith at that time. The Court was not persuaded. There were no written records at the time of the transaction, and the Court was not satisfied that on the balance of probabilities, (a) the paintings sold at the time were the paintings subject to the dispute and (b) that the transaction did occur in November 1999 as was claimed. For those reasons, the Court could not find that there had been a good faith purchase, and Dr Kurtha succeeded in his claim.
The Court was unimpressed by Mr Marks' assertion that dealers do not ask one another where they buy property. This case highlights the tension between, on the one hand, the natural reticence amongst dealers to divulge their source, and on the other, the increasing pressure to establish provenance and exercise due diligence. Whilst it is commercially understandable that dealers should seek to protect their source, due diligence and confidentiality are not mutually exclusive. When buying from a dealer, you can exercise due diligence without imposing on the dealer to name his source. You should be allowed to consult available documentation recording the chain of possession and other relevant facts, and if necessary details of the seller's source may be withheld. It is no longer acceptable for sellers (not just dealers) to use confidentiality as an excuse not to provide any background information. Interestingly, the Court observed that “it cannot be assumed by a dealer that simply checking with the ALR (Art Loss Register) will be considered sufficient to exonerate him from all responsibility”. The point is that having confirmed with the Art Loss Register that the property you propose to acquire is not registered on their database, if you suspect that the property may have been stolen, you should not assume that the ALR search will, in itself, shelve you from the consequences of acquiring stolen property. If you suspect that the property may have been stolen, further enquiries are warranted.