The activities of an art dealer revealed to be ‘dishonest and evasive’, who created false documents to secure loans on pictures which he did not own, have been laid bare in a landmark judgment by the Royal Court.
Exceptionally, the court decided to publish a lengthy judgment in the case of a retired investment banker who had sued his former business partner, even though the case was ultimately settled out of court for undisclosed damages.
Christian Hore argued that Andrew Valmorbida owed him $15.6 million and he also claimed damages of $20 million during a seven-day trial before the Royal Court in May last year.
During the hearing, the court learned of the acquisition of a series of paintings, each worth hundreds of thousands or millions of dollars, with funds provided by Mr Hore to a company of which he had agreed to become a joint shareholder with the defendant, Andrew Valmorbida.
Paperwork was subsequently fabricated on Mr Valmorbida’s instruction to give the impression that some of these paintings were personally owned by him so that they could be used as security for a series of loans. Some of the same paintings were also used as security when Mr Hore sought repayment of the funds he had provided even though, by that time, a number had already been sold or committed to other purchasers.
When the matter came to court last year Deputy Bailiff Robert MacRae said of the defendant: ‘The extent to which his evidence was dishonest is demonstrated by the fact that Mr Valmorbida was cautioned to the effect that he need not say anything, but anything he might say may be used in evidence against him, either in Jersey or in other jurisdictions.’
Mr MacRae, who was sitting with Jurats Robert Christiansen and Elizabeth Dulake, said in a judgment last September that the court accepted that it had not been possible to identify any other previous case in which it proceeded to complete drafting and delivery of a judgment after a case had already been settled.
But the Deputy Bailiff said that it was, nevertheless, in the public interest that the judgment should be published on this occasion.
‘There can be no unfairness to Mr Valmorbida in this judgment revealing his conduct to a wider audience. It is very much in the public interest for a person with Mr Valmorbida’s profile to have his dealings exposed,’ he said.
Those dealings, which Mr Valmorbida described in court as ‘playing the game’, were differently described by the court as ‘acting deceitfully’. When he spoke of ‘a silly narrative’, he meant he was lying, the Deputy Bailiff said.
The court heard that Mr Hore met his subsequent partner at a golf club in England in June 2016 when he was told about the work of the street artist Richard Hambleton, with whom Mr Valmorbida said he had an arrangement allowing him to exploit intellectual property in his work.
Mr Hore, an experienced investor, admitted he knew little about the art world but said it seemed like a ‘potentially lucrative’ and ‘fun and interesting investment opportunity which I have not yet explored’.
Subsequently, he entered into a formal business relationship with Mr Valmorbida, although the court later ruled that the agreement between them had been voided. He was persuaded to provide the funds to allow the acquisition of a portfolio of works of art by prominent artists on the basis that the company would then sell those works for profit.
The works consisted of an untitled piece by the American Jean-Michel Basquiat bought for $3.8 million, Message from Hades by the Japanese contemporary artist Kusama which cost $750,000, a study by Francis Bacon purchased for $2.85 million, and four works by George Condo with a combined value of just under $4 million.
However, the relationship between the two partners came to an end and the partners agreed to separate their interests, at which point it was agreed that Mr Hore was owed $20.9 million. Evidence allowed the court to conclude that the security against the phased repayment of more than $15 million would consist of seven specific pieces of art worth a total of $14.8 million, according to Mr Valmorbida. In fact, a work by Basquiat and another by George Condo which appeared on the schedule had already been sold, and a third by Francis Bacon pledged to a third party lender.
Describing these sales, Mr Valmorbida later said: ‘I was told to play the game or I would be finished. I played the game.’ Subsequently, when the art dealer needed to raise further funds to purchase other works or to help raise funds to repay Mr Hore, he used some of the other paintings pledged as security to support a loan.
In his judgment, the Deputy Bailiff noted: ‘When Mr Valmorbida paid the first instalment due to Mr Hore, but still owed him approximately $15 million, the security that Mr Hore thought he had was in fact reduced to one painting, namely Untitled Subway Drawing by Keith Haring, with an agreed value of $500,000. Mr Valmorbida accepted this in evidence. Mr Valmorbida went on to accept that Mr Hore had kept his part of the bargain – transferring his shareholding in the company to Mr Valmorbida – and agreed that insofar as his obligations were concerned, the security he had offered was “completely worthless other than the Haring”.’
Mr MacRae said that the evidence against Mr Valmorbida ‘was overwhelming’.
He continued: ‘As set out in our judgment published on 30 September 2021, the court was subsequently notified that the parties had agreed terms of settlement but nonetheless, we elected to proceed and give this judgment. Notwithstanding that the case compromised after trial we were satisfied that it was in the public interest for a judgment to be delivered in this case,’ he said.