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Peter M Polak
Polak & Partner Rechtsanwälte, Vienna
p.polak@fplp.at

Carl Dominik Niedersüß
Polak & Partner Rechtsanwälte, Vienna
d.niedersuess@fplp.at

Philipp Felbermair
Polak & Partner Rechtsanwälte, Vienna
p.felbermair@fplp.at

Introduction

Franz West (1947–2012) was one of the most important contemporary visual artists in Austria. He lived and worked in Vienna, and made a name for himself in the fields of three-dimensional design, sculpture, environments and room installations, and how not to organise an artist’s estate.

Despite the fact that his untimely passing recently had its eighth anniversary, his estate – one of the most valuable artist’s estates in Europe – is still disputed, much to the delight of the international yellow press.

On 20 July 2012, five days before his death, West established a private trust, the Franz West Privatstiftung, which, among other tasks, aimed to preserve and administer his artistic works. At the same time West took steps to transfer a large part of his body of works to the trust.

The disputes surrounding his estate are mainly based on these legal acts, in particular whether West had transferred the rights to his works to the trust in a legally valid manner.

Two decisions by the Austrian Supreme Court on this issue provide a clear answer: no, the transfer of rights to the trust was invalid because there were several formal errors.

The facts behind the rulings

It is said that West intended to settle his estate due to his poor health. He wished, on the one hand, to provide for his wife and two children, and to donate assets to relatives and friends, and, on the other, to preserve and administer his works of art. For this purpose, he planned to make a will and establish a private trust. His wife and children should be beneficiaries of the private trust and, as such, should also ‘participate in the proceeds of his art or art business’. West’s lawyers prepared the corresponding deeds.

After his health rapidly deteriorated, West was admitted to a hospital on 18 July 2012. The next day a notary public was called in to discuss the next steps with the artist and the presumptive executive board members of the private trust: West’s lawyer and two others.

The next day, the same people met again in the artist’s hospital room. West signed the private trust deed and the supplementary deed. The next step was to transfer his works into the trust. The notary had prepared a corresponding notarial deed and an assistant had brought a folder of some hundred pages in which the works to be transferred were listed and illustrated. However, a document with a declaration of transferral was missing. The lawyer and notary therefore dictated the following declaration of transferral to the assistant: ‘I [...] hereby transfer the works of art listed and illustrated in the enclosure, together with the corresponding exclusive rights, to Franz West private trust.’

With the assistant, West quickly flipped through the folder, the contents of which indicated which works were involved and where they were located. The notary then read the handwritten declaration of transferral to the artist and asked him to sign it. He again pointed out that he would no longer be the legal owner of the works listed in the folder and inquired whether this was in accordance with his will. The artist affirmed this and signed the declaration of transferral. The notary then took the folder and attached its contents to the declaration of transferral to be prepared as a notarial deed.

In the deed, the notary stated that he had examined and signed the private deed within the meaning of section 54 of the Notaries Act, and attached it to this notarial deed as an integral part thereof. However, it is not stated that the notary had also checked and signed the enclosure with the catalogue of works in accordance with section 54. Being a vast folder, the enclosure had not been read out by the notary.

All the members of the executive board of the private trust were present at the signing. None of them expressly declared that they accepted the transferral of the works listed in the catalogue. Neither they nor the artist even thought that it might be necessary to accept the transferral. Neither did the members of the executive board realise that they were already able to make legally effective declarations on behalf of the private trust.

A few hours later the artist himself was transferred to the intensive care unit, where he unfortunately passed away five days later.

The cases

Transferral of rights into a private trust needs to be accepted by the trust^[1]

The plaintiff party of the proceedings, the Franz West Archive, was entered into the register of associations on 26 January 2000. Its establishment was based on the artist’s intention to ensure the documentation of his works. However, the purpose of the association, as stated in its statutes, also provides for the ‘administration of the exclusive rights transferred by the artist’. West concluded an agreement on the exclusive rights to his works with the aforementioned association in 2011, which was to come into force on the day of the artist’s death. This agreement includes furniture, as well as the right to photographs of all works of art created by the artist.

The plaintiff association requested the defendant, Franz West Privatstiftung, to grant licences to certain exclusive rights in its favour. The court of first instance granted the claim, then the court of appeal dismissed the claim. The Supreme Court restored the decision of the court of first instance.

The decision

The Supreme Court holds that the agreement on the exclusive rights with the plaintiff association only came into force on the day of the artist’s death. For the works in question, the artist’s copyright already existed and the plaintiff’s rights to exploit the works were only to come into existence with the death of West. It does not follow from the contract that the artist was not entitled to exploit his works until his death. If, however, he had the exclusive right, he could, in principle, establish the right to exploit his works for the benefit of the defendant private trust, since a right to exploit the work effectively granted before his death did not yet exist.

However, in the case of a private trust, the allocation of assets in the course of its establishment must be distinguished from the subsequent allocation of assets by the artist after its establishment (subsequent transferral); subsequent asset allocations by the artist outside of the private trust deed; and the supplementary private trust deed (subsequent transferral; here: rights to exploit works) are a form of transferral that requires acceptance by the private trust (see also Supreme Court decisions: OGH 6 Ob 189/01i and OGH 10 Ob 22/13b).

The minimum assets of the private trust (€70,000), required under section 4 of the Private Trust Act, were transferred by the artist to the defendant when the private trust deed was established. A further transferral of assets for the purpose of establishing the private trust was therefore not required. The further asset transferral, which contained the exclusive rights in dispute here, expressly referred to the already established private trust, which is why – according to the Supreme Court – one cannot surmise a uniform act of establishment, but rather a subsequent transferral in need of acceptance by the private trust.

However, no declaration of acceptance was given by the private trust’s executive board. Even if the private trust only came into existence as a legal entity upon its entry into the corporate register (after the artist’s death), a legally capable pre-private trust existed until its entry into the corporate register, to which assets can also be allocated and for which the private trust’s executive board can act (OGH 6 Ob 189/01i).

Since the agreements on the exclusive rights with the plaintiff became effective upon the death of the artist and the transferral of the rights to exploit the works to the defendant failed due to the lack of the latter’s consent or that of its legal predecessor, the claim proved to be justified.

Invalid notarial deed^[2]

The plaintiff is the estate of Franz West and the defendant is the private trust established by him on 20 July 2012. The plaintiff requested the restitution of the works of art and (in summary) accounting for the exploitation of works by the artist and payment of the resulting proceeds.

The court of first instance granted the request for restitution with partial judgment. With this decision, the court of first instance followed the Supreme Court’s ruling on 4 Ob 18/16z already discussed. The Court of Appeal and the Supreme Court confirmed this decision.

The decision

According to the Supreme Court, it does not need to be established whether the transferral of the works of art must be defined as a subsequent transferral requiring acceptance by the private trust or – because of the ‘uniformity’ of the procedure – can still be understood as part of the establishment of the private trust. For in both cases, the declaration of the artist had to be made by notarial deed.

However, a formally valid notarial deed was not present in the case in question. According to section 68(1)(e) and (f) of the Notaries Act, a notarial deed must contain in particular the following or lose the force of a public deed:

‘(e) the content of the transaction, with reference to any powers of attorney or other enclosures, if these are not attached,

(f) at the end, the statement that the act had been read to the parties…’

If these conditions are not fulfilled, the notarial deed is invalid (see also the decision of the Supreme Administrative Court: VwGH 92/16/010).

In the present case, under section 54 of the Notaries Act the reference to the list of works of art contained in the private document was part of the notarial deed and as such had to be read out. The list of works itself, though it was in fact linked to the notarial deed as a ‘supplement’, had not been examined, signed and read out by the notary within the meaning of section 54 of the Notaries Act. Thus, the requirements of section 68(1)(e) and (f) of the Notaries Act were not fulfilled.

In the absence of a formally valid notarial deed, there was no legal basis for the transfer of the works of art to the defendant private trust. The claim was therefore justified.

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