It is remarkable to hear of a dealer absconding with the proceeds of numerous artists’ sales, and of victim artists bringing remedial legal action. Artists often complain they have not received in good time – sometimes not at all – their due share of payments for sold works they have consigned to their exclusive gallery dealers for first sales, but in September 2022 court proceedings were conducted by a number of artists against their same gallery dealer they jointly accused of substantial embezzlement.
Tristian Koenig is a decades-long Australian-based dealer, whose reputation, amongst artists he has represented, has been of growing private concern to them over recent years. Many have now have spoken publicly about Koenig’s repeated failures to pay them for sold works, to return their unsold works, and of his offering them flimsy excuses for not doing so – some artists say that years would pass before their due share of sales would be made or their unsold works be returned. In some cases, after repeated failed requests for return, artists have seized and taken back their unsold works from Koenig’s gallery premises. In one such recovery incident, an artist visited Koenig’s gallery to find him hiding in a ‘crawl space in the ceiling’, which was evident from Koenig’s backside being seen to ‘stick out of the manhole’.
It is unsurprising, therefore, that when six or so victim artists combined forces to instruct an art lawyer to initiate legal proceedings, Koenig disappeared from the scene (whereabouts currently unknown) and is currently the subject of an arrest warrant to bring him before a court to answer accusations of embezzlement of thousands of dollars, and appropriation of 30 or so unsold artist-consigned works. Moreover, collectors have now joined the artists’ legal action because they, too, accuse Koenig of not paying their due share of resale proceeds of works they consigned to him.
Alana Kushnir is the art lawyer representing the victim artists on a pro bono basis, and says she is ‘proud of my clients for speaking up about this matter’. According to Kushnir, ‘this is not a standalone occurrence in Australia, as in the art world globally. Most galleries here do the right thing and pay their artists. However, it is easy for bad conduct to fall through the cracks when there is a lack of industry-level accountability.’ Kushnir goes on to say that such problems arise chiefly because ‘currently there is no active, overarching industry body for commercial galleries which sets ethical standards for how they should operate. The Australian Commercial Galleries Association was disbanded a number of years ago. I’m concerned that we are seeing serious consequences of this move now playing out.’
Kushnir makes valid points: the absence of worldwide art industry self-regulation, of commonly agreed ethical standards and practices, allows art-market professionals to follow their personal bent – subject, of course, to the observation of any general legal requirements governing business transactions in the jurisdiction they are conducted. This situation is made more complex with global art business transactions – increasingly executed only online – when national and international laws of contract and agency and e-commerce are likely to apply.
Valiant attempts have been made in recent decades to avoid or mitigate or remedy the consequences of what are essentially breakdowns of trust between dealers and their client-artists. Notably, for example, in 2012 New York State’s Code for Arts and Cultural Affairs was strengthened to address perceived inadequacies of general business contract and agency laws applying to dealers representing artists in that jurisdiction. The Code is in effect a set of laws regulating ‘art merchant relationships’ between dealers and artist-consignors for first sales, key provisions of which include: dealers are deemed to be agents of the artist with respect to consigned works; such works are trust property (not the dealer’s) held by dealers for the artist’s benefit, with a fiduciary duty of trust and care of such works; proceeds of sale of such works are trust funds (not the dealer’s) for the benefit of the artist; dealers must open separate bank accounts in an artist’s name to receive proceeds of sale, if not paid to the artist immediately. Artists cannot sign away their rights or waive dealers’ duties under the Code, which also extends to heirs and successors who inherit an artist’s estate. A dealer’s violation of the Code is a criminal offence carrying a maximum penalty of one year’s jail time.
It is important to underline that New York State’s legislature was driven to enact a Code because its general business contract and agency laws were not being properly observed by some artists’ dealers based there. In the absence of any such legislative code in the UK and Australia, dealers and artist-consignors customarily rely on fidelity and trust abiding between them – even if they have signed a written ‘gallery deal’ agreement with T&Cs covering payments to their artists for sold, and return of unsold, consigned works. Unfortunately, on rare occasions, crooked dealings may occur, in which case written contractual T&Cs are unlikely to help victim-artists: witness the recent Koenig wrangle.
However, written ‘gallery deals’ between artists and their dealers sometimes adopt an ethically pragmatic approach aimed at minimising – perhaps even avoiding – the breakdown of trust in dealings between them. Typically, for example, such deals may involve the dealer agreeing that, for every (say) two new works delivered to the gallery, the artist would be paid an advance of the agreed market price of at least one (less a discount equivalent to the percentage of commission the artist would pay the dealer when that work was eventually sold).
Under such an arrangement, a fair and reasonable balance may be achieved between an artist’s and dealer’s respective and mutual interests: the artist would be paid immediately by the gallery after delivering new works (and could potentially hold back further deliveries if due payment was not received); the gallery would receive a regular delivery of new works, make advance payment and, by so doing, incentivise the artist to continue delivering.
In these ways artists could anticipate regular income generation from delivering new works, dealers could anticipate steady artist’s stock delivery for eventual exhibiting and selling, and both parties could plan respective business budgets accordingly. Given that artist’s dealers typically expect new works to be delivered sufficient for a solo selling show every two to three years, having this kind of balanced contractual framework in operation can help forward exhibition planning, and maintain potential buying interests of client-collectors.
Whether artists and their exclusive gallery dealers agree balanced contractual T&Cs, or legislative codes regulate their relationships, mutual trust is key to their success.
© Henry Lydiate 2022