Download General information—Agency Relationships [RTF 85KB]

CULTURAL GIFTS PROGRAM
When does an Agency relationship arise?
*Please note that this is general advice and does not constitute legal advice.
DEFINITION
An ‘Agent’ is a person who is authorised to act for another (the agent’s principal)
through employment, by contract or apparent authority. The importance is that the
agent can bind the principal by contract or create liability if he/she causes injury while
in the scope of the agency.
To be precluded from undertaking a valuation there has to be some act that
establishes an ‘agency’ type of relationship between the parties such that a conflict or
a perceived conflict of interest arises.
WHAT IS A CONFLICT OF INTEREST?
Generally it would be said that a conflict of interest would arise where a reasonable
person looking at all the relevant facts and circumstances of the particular case
would think that there was a ‘real sensible possibility of a conflict’.
We have presented some typical scenarios below:
NOT AN AGENT
A gallery owner sells an artwork to a purchaser but has no relationship with the
creator of the artwork other than to have the artwork in the gallery for sale,
presumably to get a commission. There is nothing to preclude the gallery
owner/valuer from later valuing a work that was sold by the gallery.
CONSIDERED TO BE AN AGENT
Gallery representing Artist
A gallery owner exclusively represents an artist and the only way to buy a work by
that artist is to deal with that gallery. There is a legal relationship created between
the artist and the gallery owner under which the artist agrees to supply exclusively to
that gallery and the gallery agrees to sell, that artist’s works. In this situation the
gallery owner/valuer could not later carry out a valuation on a work which he or she
had sold as there would be a clear conflict of interest.
Valuer acting as bidder at auction for purchaser/donor
Acting as a bidder at auctions could constitute an agency type relationship and
potentially give rise to a perceived conflict of interest in preparing valuations
particularly where the bidder has given the purchaser advice about the amount to bid
for the artwork. This is because a valuer has an obligation to ensure that valuations
are completely independent and are based purely on the GST market value of the
item at the time of the valuation.
In this situation, where an item was purchased at auction for a substantial sum at
some time in the past, but where the market for that type of work has subsequently
fallen, it is important for the valuer to be able to value the item at a much lesser sum,
based on the current market value and the other supporting evidence of like sales. It
would be very important that a valuation not be open to any perception that a valuer
may have felt under pressure to take into account in coming to the valuation figure,
the fact that as a bidder for an item on behalf of a donor he/she might have advised
the buyer/donor of an appropriate amount to spend at that time, but is now valuing the
item at a lot less. A perceived conflict of interest could equally exist where the valuer
values the item for a lot more.
Providing advice to a purchaser
This depends on the relationship between the parties at the time that the advice is
given. If the person/valuer is acting in a capacity where the purchaser will rely on
that advice, for example, the advisor says the work is worth $100,000 and the
purchaser pays that amount, there would at least be a perception of a conflict of
interest if the person/valuer were to later value that work. The reasoning for this is
similar to that for the bidder at the auction and rests on the perception of the
independence being applied to the valuation.