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Milton Silverman, senior commercial dispute resolution partner at Streathers Solicitors LLP.

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When you’ve placed the highest bid at an auction, the hammer falls in your favour and you’ve paid the full purchase price and fees, you may reasonably think that the work now unequivocally belongs to you.

Not so in the case of Philippe Dupont, a Luxembourger who filed a lawsuit against Christie’s in New York this April. The case concerned a painting by David Hammons, for which Dupont had bid in a post-war and contemporary sale at Christie’s New York on March 3, 2017.

The Hammons bodyprint had an estimate of $300,000-500,000 and over the phone Dupont placed the highest bid on the day of $390,000.

After the sale, he received an email from Christie’s congratulating him on the purchase, with the words (according to Dupont’s application for an injunction to freeze the painting) “Congratulations on your new acquisition!”.

Four days later he transferred $475,500 to the auction house, representing the sale price plus premium, which cleared Dupont’s bank account on 10 March. At this stage he was probably congratulating himself on his purchase and waiting for the work to be delivered to him in Luxembourg.

We can only imagine his surprise when just a week later, Dupont received a call from Christie’s telling him that they wished to cancel the sale and re-auction the work in May. According to the New York pleading, Christie’s advised that they had made “an unspecified mistake” during the auction.

Christie’s has not re-auctioned the work, nor delivered it to Dupont, as it awaits the outcome of the case.

Dupont’s complaint highlights a clause in Christie’s (NY) terms and conditions, which states that:

“The auctioneer can at his or her sole option… in the case of error or dispute and whether during or after the auction, to continue the bidding, determine the successful bidder, cancel the sale of the lot or reoffer and resell any lot.”

And most importantly…

“If any dispute relating to bidding arises during or after the auction, the auctioneer’s decision in exercise of this option is final.”

A key question in the Dupont case is whether these conditions apply where the legal title of the work has already been transferred to the buyer.

Auctioneer discretion

An auctioneer will often exercise his discretion in this way in the auction room. Imagine, for example, the hammer falling on a lot, and another bidder in the room suddenly jumps up saying ‘but I was bidding on that…!’. The auctioneer makes the decision to reopen the bidding, the price climbs and the lot is eventually sold for a much higher price – much to the chagrin of the original buyer who thought he had the lot in the bag.

Most people working in the auction world will have seen this happen at some point, perhaps accompanied by an amusing anecdote: the potential buyer snoozing in the corner, or engrossed in their mobile phone or gossiping with a friend rather than attending to the important activity of placing their bid.

Up for scrutiny

Although surprisingly few cases of this type have made it to the English courts, the interpretation of auctioneer terms and conditions does come up for scrutiny quite frequently.

A case which went to trial was Richards v Phillips (1969). It was taken all the way to the Court of Appeal.

The Lyric Theatre in Hammersmith was put up for auction in 1965. The issue was whether the facts – a bidder was unsuccessful because he suddenly woke up to bid after the hammer had fallen – came within the definition of the term “dispute”, mentioned in the terms and conditions of the auction house (the plaintiff).

If so, then the auctioneer was entitled to determine the “dispute” as it wished, and cancel the sale; if not, then it couldn’t cancel the sale.

The court found for the auction house, although as an aside Lord Justice Harman commented that:

“…the conduct of this auction throws no credit at all on either of the auctioneers involved in it” and that “this dispute, serious enough between the parties is a comedy of errors of a remarkable kind”.

In the current auction world, bids are frequently placed over the phone or internet, a weak mobile signal or faltering internet connection might mean that potential bidders are cut off or unable to bid at the crucial moment. One cannot criticise auction houses for wishing to exercise their discretion or ‘option’ to reopen bidding in such circumstances.

But how far – and up to exactly when – should this discretion extend?

The outcome of the New York case, which has gone to arbitration, should go some way to answering this question.

Milton Silverman is Senior Commercial Dispute Resolution partner at Streathers Solicitors LLP, London.