Ballad of a Widening Wedge

Just because an agreement is in writing, freely signed by the parties, does not necessarily mean its words alone will bind them at law, in whole, in part, or at all.
THE FIRST CASE

Conservation Management Limited (Pursuers) versus Stephen Conroy (Defender)

The Parties
Born in 1964 at Dumbarton, Scotland, Conroy only started painting in 1981. A year later he enrolled at Glasgow School of Art, graduated in 1986 and sold his complete degree show overnight Following much Scottish art media interest in his precocious talents, the Scots art critic Clare Henry selected him to show new work in “The Vigorous Imagination’, the Edinburgh Festival’s main exhibition last year, in which she was involved. She also knew the London-based art consultants Conservation Management Ltd, to whom she introduced Conroy who, at that stage, was attracting much wider interest from the national art media and doyens of the international art market. Conservation Management dub themselves ‘Fine Art Consultants’, and are a small family-type firm chiefly run by Sally Lescher, an ex-Tate Gallery specialist picture restorer of ten years’ standing whose work with people and companies that had bought art as an investment or for their offices or homes led her into art ‘hunting’ – acting as agent for would-be collectors/investors. She brought in Isabelle Norman, a retailer specialising in Peruvian objects; Lescher’s husband, a lawyer in the City, acted as Company Secretary; other in-put was bought in from freelancers. Their principal services became ‘Buying Art’ on commission for private individuals and corporations, museums, interior designers, architects, public and commercial institutions (e.g. the V & A. Save & Prosper, Morgan Guaranty Trust Co.). This in turn led to leasing (‘there are substantial tax advantages when leasing works of art’); and, of course, ‘Caring For Art’ – their original raison d’etre – fees being earned for services such as planned conservation programmes, restoration, cataloguing and condition reporting, routine care, valuations and insurance.

The Negotiations
When the parties met in 1987, Conroy was running scared, backwards in fact, away from what he called the intense media ‘hype’ he had experienced and found distasteful, and was not what he wanted. He felt that more ‘hype’ would result from his taking any one of the numerous offers from professional galleries. He wanted management help from independent experts who would also take over the administration of his affairs with which his sister Elenour had been coping. Specifically, he wanted a ‘merits only’ solo showing at a credible public arts venue in London before he sold anything more, and then only carefully, preferably to public institutions (already among the purchasers, and wanting more) or to collectors who would not immediately re-sell at a profit (as had happened shortly after his degree show sell-out). The Company were keen as well, inviting him to London to check out potential venues, such as the Serpentine and Royal Academy Galleries. They introduced him to an accountant contact, held an invitation-only showing of some of his and their other artists’ works at a London furniture showroom (their usual practice for would-be collectors ‘where you can view contemporary works of art in a working environment’, and presented him with a five-page contract to sign. Which he did, in November 1987.

The Contract
The Company would act as Conroy’s ‘exclusive agent for all purposes connected with the promotion and sale of works of art produced by him’, including organising his accounts and tax affairs, negotiations with collectors, publicity, acquisition of materials he wanted, insurance, and organising a solo London showing within two years, and then a showing abroad. Conroy could decide which works were not for sale, but all completed works were covered. He would pay 40% (plus VAT) commission on sales (even on work the Company bought for themselves), subject to review after his first solo showing: and could receive an unspecified weekly stipend, to be recouped from sales commission – if the Company agreed after further separate negotiations. He could not, of course, sell or give away his contractual rights and obligations; the Company could. The exclusive agency would be forever, until one party gave six months’ notice of termination, whereupon the Company had the right to buy at market price all Conroy’s works completed during the agency but unsold at its termination. The written agreement was a family affair, drafted in-house by Lescher’s lawyer husband. Neither party sought outside advice or assistance from an independent lawyer, certainly not an artlaw specialist.

The Repudiation
By May this year, the contract was at an end, repudiated by Conroy because he felt he had been ‘hyped’ (the very thing he had tried to avoid) during negotiations by the ‘draconian’ terms of the deal; because of the way would-be collectors had been inappropriately handled on his behalf; and because of the Company’s efforts to hire the Warwick Arts Trust for the promised London solo showing (his expressed preference was the Serpentine, which he had understood the Company could achieve). In any event, he had not received the benefit of independent legal advice and help before signing, which, in his circumstances, the Company should have insisted upon. Those were the fundamental grievances which finally impelled him to consult specialist artlaw solicitors, Stephens Innocent, who handled the matter thereafter. Conservation Management also sought outside legal help, not from artlaw specialists, but from City solicitors Withers Crossman Block, where Sally Lescher’s husband practised. So far as they were concerned, Conroy had terminated the contract prematurely and wrongly, and they sought to exercise their right to buy 47 of the 52 works made, but unsold, to date. This was rejected.

The Initial Writ
In the Sheriffdom of North Strathclyde at Dumbarton, later in May, a writ was issued against Conroy (still living there) by the Company, claiming damages for breach of contract

The Interim Interdict
On May 25, the Sheriff Court issued an injunction (interdict in Scotland) preventing Conroy ‘by himself, or through others acting on his behalf, from selling or otherwise dealing in or disposing of his paintings: an interim court order, pending trial and judgement, probably 18 months away.

THE SECOND CASE

Stephen Conroy (Plaintiff) versus Conservation Management Limited (Defendants)

The Parties
As in the first case.

The Second Writ
In the High Court of Justice, London, in mid-July, a writ was served on Conservation Management by Conroy, claiming damages for breach of contract and damage to works of art, as well as his right to repudiate.

The Consolidation of the First Case
In the Sheriff Court at Dumbarton, the day after serving the London writ, Conroy’s lawyers successfully applied for the trial of the Scottish case to be heard with his own in London; the facts and issues were common, and the High Court in the Strand was a more convenient location – just a stroll from the offices of the Company, their lawyers and his own, he being content to shuttle. The interim interdict, however, continued to trial. (At going to press, no date had been set.)

WIDENING DIMENSIONS: Legal
Artlaw issues bound from this case. Just because an agreement is in writing, freely signed by the parties, does not necessarily mean its words alone will bind them at law, in whole, in part, or at all. A contract of this kind can be made by word of mouth, behaviour and conduct, correspondence, jointly signing a document, or by any combination of such methods. This particular document contained a standard clause stating that it encapsulated the entire agreement between the parties, and that any changes must also be put into writing jointly signed by the parties. Nevertheless, one of the issues of fact and law to be dealt with, before or at court, is whether that statement is correct. Conroy, for example, states that negotiations, up to and including the drafting and signing, involved the Company leading him to believe they could achieve for him a show at the Serpentine – a matter crucial to his signing, but not embodied in the document itself; or that they were genuinely and fundamentally mistaken as to what they were saying to each other through words drafted by someone else, when neither of them was experienced in the customs and trade practices of professional dealerships or artists’ agencies (it was the first time for each). Should the Company have insisted that Conroy take independent legal advice, the more so since the agreement was drafted in-house by the Company Secretary and husband of the chief negotiation Director, herself naive of such matters? In British music law there are many legal precedents requiring this to be done when recording/managing/publishing companies sign deals with young, inexperienced musicians/composers. Elton John, Gilbert O’Sullivan and Frankie Goes To Hollywood, are cases in point, famous now but not at the time of signing. Was the company’s right to purchase all Conroy’s unsold works at market price, after termination, a term in itself too ‘draconian’ to be allowed to stand, the more so since they guaranteed no specific annual stipendiary salary for the artist’s livelihood and no annual buy-in of specific numbers of completed works at agreed prices – both fairly standard arrangements in traditional exclusive gallery dealerships or artists’ agencies? Were the 47 unsold works caught by the agreement actually completed, or does Conroy have the sole right, even now, to dictate when they are completed -as is the traditional practice and custom of artists the world over, a practice given legal force in other European States and in Canada? If the case goes to full trial and judgement, many British artlaw precedents could be set which would, perversely, benefit us all, albeit for a price paid by someone else.

Commercial
This dimension has lessons for all. The contemporary market place has two distinct and commercially opposed constituencies; artists and collectors. They may or may not share a liking for each other, or the work. It matters not. They engage in healthy commercial conflict: on the one hand, artists desire the best investment in their work; on the other, collectors seek the best value for their investment That negotiation is the market; the finally agreed sale figure, the market price. Traditionally, other professionals make a decent living as artists’ advocates or agents, taking a commission from artists as a percentage of the sale price achieved for them. Sometimes they are called dealers, with or without ‘gallery’ premises, or label, to boot traditionally, collectors know what they like or will make a good investment, or both, and negotiate for themselves directly with artists, their agents or dealers, or buy at public auction. However, since the improved economic situation here in recent years, and increased understanding that contemporary art can be a good investment (with a bonus if the work is liked), a new breed of collectors’ advocates or agents appears to have grown up. Sometimes called art consultants, brokers, ‘hunters’, societies, clubs or groups – even using mail-order catalogues at times – they have brought increased numbers of new would-be collectors into the market place, with new funds as well: private individuals, corporations, museums, interior designers, architects, public and commercial institutions, and pension funds. And so, today’s lesson is this. No-one sits on both sides of the fence. One cannot properly advocate one side’s case for a market price, and negotiate with oneself as an advocate for the other side. That would be as impossible, say, as Conroy’s lawyer, Mark Stephens, also trying to act for Conservation Management; or, indeed, as when a trustee of Mark Rothko’s Estate sold or consigned the deceased artist’s unsold paintings (798 all told) to the gallery of which he, the trustee of the Estate, was also a salaried director and secretary/treasurer. In that case, a New York court found the trustee-cum-gallery director to have had a conflict of interest: on the one hand, as trustee, duty bound to get the best terms for the Estate in its dealings with the gallery; on the other as gallery director (with whom Rothko had had an exclusive agency contract), duty bound to bargain for the gallery in direct opposition to the Estate to achieve a fair market price. His improvidence and negligence cost him dearly, and was exacerbated by his having bought the paintings for prices 6 to 10 times less than those for which the gallery shortly afterwards re-sold them; the very danger such a conflict portends. He was ordered to pay the current market value of 140 paintings already re-sold, including $9 million (in 1975) for appreciation; plus the Estate’s legal costs of taking him to court. In Conroy’s case, it is not being suggested that the Company or its directors conducted themselves in such a wicked fashion – naively, perhaps, just as Conroy appears to have done. Neither party had previous experience of exclusive agencies or dealerships or had recourse to expert advice and help from others experienced in the field, nor had they received the benefit of education and training on such matters, sufficient at least to sound warnings. In any event, such information, education, advice and help can be very costly, and specialists are few in number (certainly since the demise of Artlaw Services in 1984, when all these things were available to everyone – collector, artist, agent, public/private administrator – free of charge, with no conflicting interests).

Advisory
Catch 22. The naive, ill-informed and ignorant are always most in need of independent advice, preferably from experts, on appropriate ways of dealing with the arcanenesses of any specialised market place; and it is usually they who, by the same token, are the last to think about doing so and, even if they did, the least able to afford an expert’s fees. One facet of this case bears witness. Both parties appear to have had a genuine desire to do the best for each other at the outset, but at the same time, each sensibly wished to guard against potential abuse. The artist wanted to avoid genuinely perceived threats of ‘hype’. The agents, likewise, tried to protect their investment, but constructed a contract unplanted with concepts borrowed from standard commercial dealings, not from the tried and tested field of art law and business. The Company evidently saw the need for a right to ‘foreclose’ on the artist’s property should he fail to make his ‘mortgage repayments’ through commission paid on sales achieved for him by them; and apparently foresaw no difficulty in their continuing to act also as agents for would-be collectors – in much the same way, perhaps, as City stock-brokers buy and sell stock on behalf of clients for a commission. Most experienced artists’ agents, gallery dealers and artlawyers should have readily counselled against both, had they been consulted. Yes, of course, there’s no such thing as free advice, not any worth taking. But the price of investing in such independent consultations is minimal, compared to the unavoidable costs of major legal surgery almost inevitably resulting from failure to do so.

Advocacy
Who Dares Wins. Sadly, it is an appropriate epigram in such circumstances. Civil legal proceedings are a classic and costly gamble, for both sides. Only lawyers are guaranteed to emerge with financial gain. Conroy could avail himself of Civil Aid, in which case the tax-payer-baked Legal Aid Fund would pay his legal fees in any event, and have first call on any award of damages in his favour, should he win, to recoup its outlay. Conservation Management, however, as a company, cannot do so, and therefore risk everything: their own legal costs in any event, hardly ever recoupable from the Legal Aid Fund if they win; if they lose, they would also have to pay the costs of the Fund’s outlay for Conroy in addition to any award of damages to him. The parties are, of course, free to negotiate an out of court settlement between themselves so as to avoid such financial risks. Indeed, the rules of court are designed to encourage them to do so. Most commercial wrangles are settled this way, each party usually agreeing to pay their own legal costs.

© Henry Lydiate 1988

NOTE (added November 2009): Conroy and Conservation Management settled this case out of court: Conroy was released from the exclusive agency contract, and regained his seized works. He subsequently contracted with the Marlborough Gallery, the international dealership, who remain his exclusive agents (as at 2009).

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.