Net return price agreements scrutinised in ruling
A dispute over the sale of a Leonardo Da Vinci drawing has resulted in a High Court judgment with “serious repercussions” for art dealers operating net return price agreements.
The Lichtenstein-based Accidia Foundation hired Luxembourg Art Ltd as its sole, exclusive agents to find a buyer for the Da Vinci drawing known as Madonna and Child with St Anne and a Lamb.
Luxembourg entered into a secret agreement with the art dealers, Simon C Dickinson Ltd, under which Dickinson were allowed to keep any profit over the agreed price of US$6m.
The drawing was eventually sold for US$7m and Dickinson pocketed the US$1m secret profit.
Accidia were told the sale price was only US$6m and were given the impression that the two agent companies would simply be splitting the agreed commission of US$500,000.
The dispute reached the High Court, in Accidia Foundation v Simon C Dickinson [2010] All ER (D) 290 (Nov), [2010] EWHC 3058 (Ch). Dickinson claimed that net return price arrangements between dealers are common practice in the art world. Mr Justice Vos said Dickinson was “unwise” for not checking the ultimate seller understood the arrangement.
Vos J ordered Dickinson to account for its profit, with compound interest, but allowed Dickinson to keep US$200,000 and £2,500 for its effort and expense in achieving the sale.
Fladgate litigation partner Paul Howcroft, who advised Accidia, said: “The case lifted the lid on the murkier parts of art dealing. It makes clear that where two dealers enter into a net return price arrangement, the selling dealer must ensure that that the owner has understood and authorised the arrangement. If not, he risks having to pay his profit or commission to the seller.”
