19 September 2019 - Podcast
In June 2004, Ofir Scheps, an art collector and former museum curator, instructed the Packing Shop, now a Cadogan Tate company known as Fine Art Logistics, to collect his sculpture Hole & Vessel II by Anish Kapoor and to deliver it to Kapoor’s studio for restoration.
Fine Art Logistics collected the sculpture from Christie’s warehouse in Ponton Road, Vauxhall, and stored it in their warehouse, also in Ponton Road. Some weeks later, when Fine Art Logistics looked for the sculpture, they could not find it. They declared that it was lost. Mr Scheps was astonished that they could lose a sculpture measuring 95.2cm x 162.5cm x 109.2cm and weighing c. 200kg. How could they possibly lose a sculpture so large and heavy?
His astonishment turned to anger when Fine Art Logistics offered £587 in compensation. They made this offer because, they asserted, Mr Scheps was bound by their standard terms of business limiting their liability. The sum of £587 was calculated by reference to these terms. Mr Scheps wondered how he could be bound by terms of business he had never seen.
Fine Art Logistics suggested that he should make a claim under his own insurance policy. But he had not purchased insurance for the sculpture, because he had expected Fine Art Logistics to take responsibility for their loss of his property and to carry adequate insurance.
At first, Fine Art Logistics declined to provide a plausible explanation for the disappearance of the sculpture. There was no evidence that it had been stolen. They simply stated that they had lost it. Eventually, they revealed that in the summer of 2004, building works had taken place at their warehouse in Ponton Road, in the course of which old crates and packing material were dumped in a skip. They believed that the crate containing the sculpture might have been dumped in the skip by mistake.
Fine Art Logistics handed the matter over to their insurers who resisted Mr Scheps’ claim, so he sued.
At trial, the Court found that:-
- Mr Scheps was not bound by Fine Art Logistics’ standard terms of business. Accordingly, their liability for the loss of the sculpture was not limited.
- It was more likely than not that Fine Art Logistics had dumped the sculpture in a skip.
- Fine Art Logistics were liable to pay damages to Mr Scheps equal to (i) the value of the sculpture at the date of loss and (ii) the increase in value of the sculpture from the date of loss to the date of trial.
- The value at the date of loss was assessed at £132,000 and the increase in value at £219,375. Accordingly, Fine Art Logistics were ordered to pay damages of £351,375.
Withers acted for Ofir Scheps.
There are lessons to be learned from this case:-
You should not assume that shipping firms will pay a reasonable amount in compensation if they lose or damage works of art in their possession.
- In fact, specialist fine art shipping firms generally seek to limit their liability to a nominal sum in the event of loss or damage. Ask to see their standard terms of business.
- Standard terms of business are generally non-negotiable. Given the limitation of liability in such standard terms, it is imperative to buy insurance before the shipping firm takes possession.
- The shipping firm has no legal obligation to insure. Competent shipping firms will discuss insurance with the customer and verify that the art is adequately insured before undertaking the work. However, if they do not mention insurance, you should raise the issue before instructing them. If in doubt, buy your own insurance.
- You will be responsible for providing an insurance value, whether you buy your own insurance or you agree with the shipping company that they will insure. The insurance value is a crucial factor when calculating damages in the event of total loss.
- The insurance policy should cover legal costs. Insurance-related disputes can be expensive. Costs may discourage you from taking a shipping firm to Court, or you may find that you cannot afford the cost of litigation. If the policy covers legal costs, in principle the insurance company will settle them.