Letters between Sotheby’s and two art experts concerning the authenticity of an Old Master painting sold for over $11m are not covered by litigation privilege, the High Court has ruled.
Mr Justice Teare said the letters were written both to enable Sotheby’s to decide whether the painting was a fake and to be used in any litigation that followed.
He said the two purposes could not “in a realistic and commercial sense be regarded as one and the same”.
Teare J said the purposes were connected in the sense that if Sotheby’s determined that the painting was a fake and rescinded the contract of sale, “it was likely, perhaps inevitable” that litigation would follow, but that did not mean they were “one and the same”.
He said Sotheby’s was “unable to establish that the dominant purpose of the correspondence” with the first expert, Mr Martin, was its use in contemplated litigation.
“That was a purpose of the correspondence. But it was not the dominant purpose.”
Teare J said the work carried out Mr Twilley, the second expert, also had a “dual purpose”, namely “to ensure that Sotheby’s had a proper basis for rescinding the sale and, two, to ensure that Sotheby’s position in the contemplated litigation was robust”.
Teare J went on: “That being so it is clear, in my judgment, that use in litigation cannot be said to be the dominant purpose of Mr Twilley’s work for Sotheby’s. Just as with Mr Martin, such use was one of two purposes.”
The High Court heard in Sotheby’s v Mark Weiss and another  EWHC 3179 (Comm)  that the painting of an unknown man was described as being by the Dutch painter Frans Hals.
It was acquired by art dealer Mark Weiss and Fairlight Art Ventures in June 2010 and sold the following summer by Sotheby’s to a private buyer.
The contract of sale contained an offer by Sotheby’s to rescind the sale and return the purchase price if the buyer provided written evidence raising doubts about the painting’s authenticity.
They buyer obtained a report from Mr Martin in May 2016, determining that the painting was a counterfeit. Sotheby’s commissioned another art expert, Mr Tilley, to conduct a peer review of Mr Martin’s report.
Sotheby’s agreed that the painting was a counterfeit in July 2016, rescinded the sale and returned the purchase price of $11.23m to the buyer. In the present proceedings, it sought rescission of its contract with Mark Weiss Ltd and repayment of the purchase price.
Mark Weiss denied the right to rescission, relying on the “generally accepted views” proviso in the agreement between Sotheby’s and the buyer, and alleging that Sotheby’s actions were a breach of fiduciary duty.
Teare J said the application by Mark Weiss sought inspection of letters between Sotheby’s and the two experts. The documents had been disclosed by Sotheby’s but withheld from inspection on the grounds of litigation privilege.
“The position, assessed objectively, as it has to be, appears to me to be that that correspondence took place for two purposes. The first was that Sotheby’s had a contractual decision to make as to whether the painting was counterfeit and whether the sale would be rescinded.
“The second was that Mr Martin’s report would doubtless be used by Sotheby’s in the contemplated litigation with Mark Weiss Ltd.
“Indeed, the letter dated 5 May 2016 from Sotheby’s to Mr Martin stated in terms that ‘all correspondence between you and Sotheby’s relating to this matter is in the context of that anticipated litigation, to enable Sotheby’s to understand the strengths and weaknesses of its position and to make the right legal and commercial decisions in anticipation of that potential litigation’. That neatly identifies the two purposes.”
He concluded: “Sotheby’s own decision as to the authenticity of the painting and whether to rescind the sale was an important decision for Sotheby’s.
“Recovering the sale price from Mark Weiss Ltd in the anticipated litigation was also important to Sotheby’s. But Sotheby’s is unable to show that the latter was the dominant purpose of the correspondence.
“It must follow that the correspondence is not protected by litigation privilege. Inspection is therefore ordered.”