Most visual artists work towards an exhibition at a gallery which takes their work on consignment and tries to sell it on behalf of the artist. The work remains the property of the artist until it’s sold when the gallery takes its commission and pays the rest to the artist. This can work well unless the gallery encounters financial difficulties and goes bankrupt before the artist has been paid.
Papunya Tjupi Arts Centre is an Indigenous-owned Art Centre based in the Aboriginal community of Papunya, west of Alice Springs. Due to its remote location, most of its sales are arranged through city-based galleries which take works on consignment. One such gallery had taken a large number of works on consignment under an agreement which made it clear that the artists of Papunya Tjupi retained ownership of the paintings until they were sold. Any paintings that remained unsold for three months were to be returned, or paid for.
The relationship between Papunya Tjupi and the gallery became strained in 2011, when the gallery refused to return unsold artwork and pay amounts due in respect of sales it had made. Papunya Tjupi came to Arts Law for help. We arranged for pro bono help to be provided by lawyers at Michael Paterson & Associates in Perth (“MPA”). MPA obtained judgment against the gallery at the Perth’s Magistrate Court for debts owed to the artists of Papunya Tjupi Arts Centre of in excess of $17,000. MPA subsequently managed to negotiate the payment of a little over $13,000 of the judgment debt, but in 2013, the gallery filed for bankruptcy leaving debts owed to the artists of Papunya Tjupi, including interest and costs, of about $5,600.
Despite that money representing the proceeds to the Papunya Tjupi artists from the sale of their own property (their paintings), they and Papunya Tjupi are merely unsecured creditors facing the possibility that they may recover only a small portion of the amount owed, if anything at all. For these artists and their community art centre, reliant on the income earned from their painting, this is a devastating blow.
Unlike real estate transactions or transactions involving lawyers, galleries have no obligation to keep the artist’s funds separate from their other funds. Arts Law believes that galleries should be required to set up a trust account in which all proceeds of sales from artworks placed on consignment are held. If sales proceeds were held in trust for the artist, the gallery could not use them for any other purpose – even if it was facing bankruptcy.
Due to the lack of trust law mechanisms in artist-art gallery dealings, artists who remain unpaid by an art gallery can be left vulnerable and unprotected if their art gallery becomes bankrupt.
Another point to note is that the agreement between Papunya Tjupi Arts Centre and the gallery in this case pre-dated the commencement date of the Personal Properties Securities Act 2011 on 30 January 2012. Papunya Tjupi Arts Centre therefore came within the 2 year grace period for artwork supplied prior to 30 January 2012 and its retention of title clause was effective against the trustee in bankruptcy for artwork supplied prior to that date.
For more information, see Arts Law’s information sheets: