Horror Stories & Remedies

I have received a number of calls in response to my last two articles, readers advising me of recent horror stories within our industry which have befallen them. In one case a reader informed me of an allegedly unsavoury dealer who had been receiving consignments from a number of people, purportedly in due course selling the items, and then putting a "cheque in the mail" which was never received. The documentation suggests that there may be victims on both sides of the Canada-U.S. border. The second case relates to a well known individual in local antique dealing circles who borrowed $5,000.00 from a number of people, provided each with a promissory note, and then simply failed to pay anyone, or at least two individuals of which I am aware. In a third case, a large auction house purportedly inadvertently sold a forgery to a purchaser at auction and is currently putting up all kinds of roadblocks to prevent the purchaser from recovering her money, even though the terms of the auction provide for reimbursement where forgeries are involved.

I will address each of the three examples in greater detail further along. What strikes me from reviewing these cases is that a way to avoid ongoing aggravation and obtain "justice" is to act quickly when a problem arises, failing which the likelihood of recovering your money or consigned goods diminishes rather quickly. This happens for two main reasons. Firstly, as in the case of the forgery at auction, there may be terms and conditions contained in the small print which actually forms a contract that dictates that you must take certain steps within a very brief period of time after the problem arises. If you do not do so you are probably out of luck. A court might hold you to such terms, even though you have signed nothing. Secondly, if you have been duped, either unintentionally, or deliberately (ie fraudulently), you are probably not the only one. The culprit may have stung others, and if so, eventually the walls will begin to cave in around him, resulting in bankruptcy. Usually when this happens creditors get either nothing or a small percentage of their original entitlement. On the other hand, if you act quickly (ie start that Small Claims Court proceeding as soon as the $5,000.00 comes due and you receive no response to a demand for payment), you may end up getting paid out because the rogue still might be fairly liquid (he might even be continuing to dupe others) and you may ultimately be able to recover after a court judgment has been rendered.

Let us now discuss the three cases.

1. Consider not only our victims who have each loaned $5,000.00 to this antique trader, but anyone who is owed or otherwise believes he is entitled to recover a relatively modest sum of money. In Ontario the monetary jurisdiction in Small Claims Court is limited to $6,000.00. If you claim this sum or less, then use what is available to you, that is, get in front of a Judge as quickly as you can. This Court is meant to be for "the people", and Judges are regularly accustomed to handling such matters without lawyers being present, and in fact assisting litigants to put forth their cases by guiding them through the process as it occurs.

If you do not want to spend a great deal of money hiring a lawyer (for example if you are owed $5,000.00 and are concerned about spending $1,500.00 on legal fees where the debtor may end up going bankrupt and you will be out that extra $1,500.00), then find a lawyer who recognizes such economics and will work with you for a modest fee. For between $250.00 and $300.00, I am generally prepared to meet with a client, prepare the court documents and send them to the client with a detailed explanation as to how to get the court documents served on the defendant and put before the Court, and explain how Small Claims Court proceedings work. My clients are given some comfort when the legal drafting is done for them, they are pointed in the right direction and are reassured that should questions arise during the process I am prepared to gratuitously respond to brief telephone enquiries as the anxiety of getting closer to the trial date mounts. Since this court has a cap on the legal fees that are recoverable by a successful litigant, by hiring a lawyer for limited tasks, legal fees are kept low and they can be recovered if you are successful at trial.

Do not be afraid to use the Small Claims Court system. Find a lawyer who will assist you for a reduced fee, recognizing that the lawyer will not be holding your hand at trial. If you have a lawyer you have used in the past for larger matters, I would think that he should be prepared to give you the assistance you require, for a modest fee. It makes for good continuing lawyer/client relations. The client gets good value and the lawyer will not feel like he is cutting loose one of his clients just because the matter is relatively small.

2. Consigning an antique to a dealer should be approached with caution. Know the individual with whom you intend to transact business. Ask for references. Ask your banker or lawyer to conduct a credit check. Use some type of contract, even if it means having a brief consultation with a lawyer or preparing a crude handwritten agreement by yourself. Spell out all the terms. State a length of time for the dealer to have your product so that if the item is not sold within that timeframe there will not be any misunderstanding regarding recovering your property. Think about everything else that could go wrong.

Consigning antiques means that the dealer never becomes the owner of the product, but rather uses his store or private networks to attempt to make the sale. Legal ownership remains with the consignor and passes directly to the purchaser once the sale is completed and the item has been paid for. The transaction is only complete once the purpose of the relationship has been fulfilled, that is, a third party has paid the dealer and the dealer has paid the consignor.

If you have any uneasiness about consignment, prefer outright sale to the dealer. You may end up with less in your pocket, but at least it will be more than the victims whose stories have recently come to my attention. If the dealer says he has someone interested in your collectible, perhaps propose being directed to that purchaser in exchange for which you would pay the dealer a commission or fee. If the dealer is reluctant to consider this option, you might want to wonder why. If he will not purchase outright for financial reasons, this may raise a red flag in your mind with respect to the viability of your proposed business associate. If the dealer is in a financial squeeze, there may be a temptation to keep 100% of the proceeds of the sale of your item. Legitimate economic and other business considerations may dictate why reputable dealers prefer consignment. The point is that unless you know your dealer extremely well the downside outways the advantage of using consignment as opposed to trade, sale or auction.

3. In an earlier column, I noted that auctioneers have a vested interest in maintaining their reputations and therefore their practises and procedures should generally be geared towards maintaining goodwill. The following example suggests that some auctioneers are more concerned with making a fast buck than promoting their integrity. The old adage "penny wise and pound foolish" comes to mind.

A well known auction house has in its Terms and Conditions a notation that although items are bought in "as is" condition without any guarantees or warranties, should a purchaser end up with a deliberate forgery he will be reimbursed for the entire purchase price as long as he notifies the auctioneer of the problem within ten days of the sale, returns the item, and satisfies the auctioneer of the fact of the forgery. A point to be taken from this story is the importance of reading any terms and conditions available to you with respect to the auction you are attending, since frequently strict time limits are set out. A Judge will not be sympathetic towards you if you do not play by the rules. You may be deemed to have read those terms and conditions.

This is how a recent case involving this auction house has been played out. The purchaser of a perceived forgery followed the rules by providing the appropriate notification. She then obtained an opinion from another prominent auction house confirming the forgery. The selling auction house, upon receiving notification and opinion of the forgery, promptly responded that it would provide reimbursement, but only if it received opinions from two specialists and/or institutions from a list that it deemed to be experts. All of a sudden this auction house has decided that its stated terms and conditions with respect to being satisfied that the item was a forgery are not good enough. It now requires that a more onerous standard be met...confirmation from two experts from a list that only it could provide. It gets worse. The auctioneer then retained a lawyer who has raised yet further objections to providing reimbursement.

The position adopted by the auction house is patently unreasonable and against its own long-term interests in my opinion. How can it hope to maintain or increase attendees at its auctions with this type of conduct? Would it not have been more prudent in terms of promoting goodwill to reimburse the purchaser when on the face of the objection it clearly appears to be well founded, and when the purchaser has followed the terms and conditions as set out by the auctioneer to the letter? As of the end of March, 1997, the last word from the auctioneer is that virtually everything that happened was the fault of the purchaser. How absurd and unfortunate, in particular when one considers the value of the disputed item...less than $1,500.00. Then consider how much profit the auctioneer is arguing about.

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