The Art Law Review: Hong Kong
Twenty-first century Hong Kong has a growing and increasingly vigorous art scene.
There are two principal concepts embraced here, which are, first, the legal environment established by the law relating to what one might describe as cultural objects being tangible, physical facts that by being of a tangible and physical nature excludes literature and music per se but can and does include their physical means of expression such as musical instruments and rare books.
The real but disembodied second concept is concerned with what might be described as 'cultural heritage' as a conceptual essence of any realised tangible or intangible asset of or appertaining to the software comprising what a person appreciates as art in his or her life as his or her surroundings and environment.
The realistic and accepted status of both of these concepts in the Hong Kong community has been a slow one to take off as will be seen but is now a strong and firmly embedded cultural reality.
Since its founding by commercially aggressive Scottish pioneers in 1841, the needs and requirements of international entrepôt trade have been the paramount focus of Hong Kong's existence.
There was an established Hong Kong museum in the 1860s but this was subsequently demolished in the late nineteenth century and was not replaced. Hong Kong became a place of fast trade, horse racing and society balls – in short, a cultural desert.
Following the end of the Second World War in 1945, Hong Kong, with a population then of some 600,000, became an attractive magnet for refugees fleeing from the turmoil demonstrated by the Civil War in China, and huge numbers of people poured into Hong Kong with scant means to support themselves other than hard work and little time for, or interest in, the softer side of life such as any form of art appreciation.
The laws that apply to art and art-related matters today were all on the statute book but only as a utility available to businessmen for court resolution of commercial disputes. It took the huge growth in the art market to find that this body of law also flexibly applies to art market issues and is respected by all participants.
In the 1950s there were no formal degree schools or programmes in any way related to art. There were very few galleries and the Hong Kong Museum of Art did not exist.
i Statute law
In Hong Kong, the following statutory enactments, although limited in application and effect, were and have been a revolutionary attempt to come towards and to address and create the cultural educational toolbox available to the growing numbers of people interested in and caring for cultural heritage as a bedrock to nurture arts appreciation.
Antiquities and Monuments Ordinance
This Law was first enacted in 1976 as a response to burgeoning cultural unrest in the increasingly multiculturally aware indigenous local ethnic Chinese community, which was a rapidly growing phenomenon of which the Hong Kong government had been entirely unperceptive.
The background to the Antiquities and Monuments Ordinance (AMO) was the government's recognition in a place basically formed of mountains and with very little flat land of a massive and growing need to address a marriage of official provision for cultural heritage awareness requiring to be acknowledged but necessarily to be balanced against the fast-growing priority requirement of practical exploitation of the built environment by way of high-rise property development for people to live and work. In the absence of new developable flat land, this need had been traditionally provided for by way of the physical destruction and redevelopment of existing built heritage into high rise. Accordingly, from the early 1970s, the Hong Kong government encouraged the demolition of the often century-old built heritage of Hong Kong of usually one-, two- or three-storey brick and granite buildings and their replacement by huge new concrete structures much better able to accommodate the growing numbers of human participators in Hong Kong life, providing new and secure environments for both commercial and residential use and with scant regard for any cultural softening in life.
However, as a legislative innovation, the AMO did introduce to Hong Kong statute law for the first time a definition of 'antiquity' to mean the carefully limited definitions of:
(a) a relic;
(b) a place, building, site or structure erected, formed, or built by human agency before the year 1800 and the ruins or remains of any such place, building, site or structure whether or not the same has been modified, added to or restored after the year 1799.
Two interesting real points emerged from these definitions, which are, first, that in a revolutionary marker for Hong Kong legislation the AMO recognises the existence of a 'relic' and second, given that Hong Kong was ceded to the United Kingdom in 1841, the AMO provides for no recognition of antiquity in the buildings of the colonial period after 1841. Accordingly, the AMO takes no position on preservation of buildings from the colonial era.
However, 'relic' is defined as:
(a) a movable object made, shaped, painted, carved, inscribed or otherwise created, manufactured, produced or modified by human agency before the year 1800, whether or not it has been modified, added to or restored after the year 1979; and
(b) fossil remains or impressions.
For the purposes of art law, 'relics' were and are covered by the AMO but with the limited effect to enact that the ownership of every relic discovered in Hong Kong after the commencement of the AMO vests in the government from the moment of discovery.
This automatic vesting in the government upon discovery of a relic in Hong Kong can be disclaimed by the Secretary for Development empowered under the AMO and, if so disclaimed, government ownership of that relic shall be extinguished and its ownership shall vest in the person who, but for the enactment of the AMO, would otherwise have been the owner thereof.
Section 11 of the AMO, without specific inclusion of built heritage or relic, provides that any person who discovers or knows of the discovery of an antiquity shall forthwith report the discovery to the Secretary for Development or to a designated person being either the officer in charge of a police station or any person specified by the Secretary for Development by notice in the Hong Kong Government Gazette.
Apart from the discovery of an antiquity, the AMO provides for the establishment of the Antiquities Advisory Board (AAB), and the AAB is charged to advise the Secretary for Development on any matters relating to antiquities or any proposed monuments and under Section 22 the Chief Executive is empowered to make regulations on a wide range of subjects that, for our purposes, regulate the conduct of excavations and searches for antiquities and provide for the management and control of antiquities. However, the remit of the AAB is essentially restricted to buildings and structures and certainly neither the visual arts or intangible cultural assets.
Environmental Impact Assessment Ordinance
The Environmental Impact Assessment (EIA) Ordinance effectively requires property developers to comply with impact assessment supported by detailed plans of potential environmental damage to be caused to a site of cultural heritage by the property development proposal. Although the requirements of the EIA Ordinance are a step in the right direction in recognising popular appreciation of heritage sites and providing a measure of safeguard against wanton property development in this most congested of cities, its direct effect upon art is small but in terms of value to the community, the results of the assessment are indirect and extremely limited.
ii Legislation as a support for growth
Section I summarises the legislated protection in Hong Kong for the ownership of any antiquity or relic, the licensing of those who search for antiquities and for the gazetting of monuments, which, in terms of action by the legislature, is an extremely limited venture into antiquity protection but has established and put firmly in place an underpinning of Hong Kong laws that have had the effect of gradual growing awareness of arts and culture recognition and protection with ever-deepening roots.
iii The growth of popular arts appreciation
The Development Bureau of the Hong Kong government set up a Commissioner for Heritage with a brief to conserve and revitalise the heritage of the city through imaginative reuse of unique heritage buildings. This office has grown into a series of specialised departments and serves as a focal point of contact both locally and overseas.
In the late 1970s, the then Governor of Hong Kong lent a responsive ear to the growing demand for arts appreciation and the government granted a limited plot of land on the Wanchai reclamation for the construction of an arts centre. A purpose drafted Ordinance, the Hong Kong Arts Centre Ordinance, was enacted and public funds were found to subvent and top up those being raised by a body of enthusiastic volunteers who had laboured hard and successfully against the hitherto unshakeable inertia borne of commercial priority.
Today the Hong Kong Arts Centre promotes contemporary performing arts, visual arts and film and video arts and is an accredited educational institute.
This scene was further well set such that by the early 1980s a much larger piece of immediately adjacent land was set aside for the establishment of the Hong Kong Academy for Performing Arts, which, at the time of inception and still today, is the leading arts academy in Asia for educating, training and graduating many of the leading figures in a whole variety of performing arts disciplines and arts supported by them.
The Hong Kong Arts Development Council Ordinance
In 1995, the government of Hong Kong was inspired in acknowledgement of the growing interest in the arts to make financial provision for the benefit of the community through enactment of the Hong Kong Arts Development Council Ordinance under which the Hong Kong Arts Development Council was established as a separate body corporate to act independently from the government to plan, promote and support the broad development of the arts, including the literary, performing, visual and film arts and to develop and improve the participation and education in, and the knowledge, practice, appreciation, accessibility and informed criticism of, the arts, with a view to improving the quality of life of the whole community extending through the fields and activities of formulation and implementation of strategy for the planning, development, promotion and support of the arts under the principle of encouraged freedom of artistic expression and of the excellence, innovation, creativity and diversity in the arts to support the creation of an environment conducive to ensuring that all persons in Hong Kong would have the opportunity to enjoy, take in and have access to the arts and for those having the ability and desire to pursue a career in the arts having the opportunity to do so and receive tuition. By this step it was clear that the arts as a reality had arrived and has gone from strength to strength ever since.
The Hong Kong Arts Development Council has received an annual subvention from the Hong Kong government over the succeeding years and has been extremely active in expenditure on the basic fields of visual arts, performing arts, literary arts and Chinese traditional Cantonese opera. Many Hong Kong visual artists and performing arts groups have benefited substantially from grants by the Hong Kong Arts Development Council and this has led, among other things, to the development of the distinct school of art represented by Hong Kong visual artists as individualists with the unique competence in the visual arts field enabling the Hong Kong visual arts community to take its place in the Asian and wider world of visual arts creation and promotion.
Awakening of the government and people to the practical needs of arts development
In November 2006, the government took a decision to extend the Hong Kong Island north shore reclamation out into the harbour from the Central District, effectively eliminating the harbourside Queens Pier, which had been the landing place for more than 100 years of British colonial governors setting their first foot upon Hong Kong Island following their appointment. Much to the government's surprise an enormous underswell of opposition, first to the demolition of the somewhat mundane practicality of the Queens Pier structure and, second, popular clamour against its subsequent relocation, emerged to the point that young local Chinese citizens of Hong Kong sat under the bulldozers with every intention of stopping the destruction. They failed in their immediate project but the impact they made has taken root and imbued the entire population with a respect for the historical development of Hong Kong's built heritage in the way that nothing else could have done. Following this, the AMO has designated 114 monuments with the highest level of protection and listed 134 historic buildings under grade one (outstanding merits), grade two (special merits) or grade three (some merits) status.
With an even greater accent on sites and site importance in the Central District area, the former Central Hong Kong Police Station and Central Magistracy, with splendid buildings dating from the mid to third quarter of the nineteenth century, were mandated by the government to the Hong Kong Jockey Club for conservation and preservation. Following significant expenditure over a 10-year period, the result has been the conversion of the former police station and Central Magistracy building to Tai Kwun, an extremely popular art and lifestyle centre.
Now, not only do tangible items officially qualify for cultural heritage status and respect, but the Leisure and Cultural Services Department of the Hong Kong government has devised and published the Representative List of the Intangible Cultural Heritage of Hong Kong, led predominantly by both traditional and modern songs and festival celebrations.
Since the 1950s, when artists active in Hong Kong painted at night, having paid for their subsistence through a day job, independently creating works of art in their own disciplined manner, there has been a development from that foundation, which called upon inspiration that was both self-inculcated and influenced by reference to overseas artwork.
However, the generation born in Hong Kong after 1946 began to come of age in the 1970s with a growing awareness of productive creation nurtured under the umbrella that the East/West symbiosis so well reflected in Hong Kong. This fertilised the growing interest in art and art appreciation, which began to flower and has gone from strength to strength since.
Sotheby's auction house of London opened its Hong Kong office in 1974 followed by Christie's in the mid-1980s.
Until these times, law and art had no real meeting ground. However, and particularly under the influence of developments in China fathered by the practical liberation and 'opening up' under the reform-minded practical eye of Deng Xiao Ping, the art world in China moved from the Maoist tenets of restricted 'realist' art to a flowering of cross-border connection and talent that very quickly saw both China and Hong Kong develop impressive forward direction.
With the active progression of developments of identifiable artist creation of what became 'definitive art', the appreciation of what was happening began to coalesce into university interest, galleries opening and business being carried out in antique and curio shops, all combining to satisfy an incipient demand leading to many well-attended exhibitions and auction sales.
A gradual development of art appreciation occurred over the following 20 years, with the availability of art galleries as outlets for sale of original artwork growing and developing exponentially to the point of a genuine identity of Hong Kong art created and produced by Hong Kong artists whose number grows year on year and all of whom mature in striking ways to maintain an increasingly admired and patronised high intellectual and original standard in their creations.
The University of Hong Kong, the Chinese University of Hong Kong, the City University of Hong Kong, the Baptist University and the Hong Kong University of Science and Technology all actively promote fine arts in specialised departments and graduate numbers of educated arts-appreciative and arts-competent artistic minds that frequently commence dedicated artistic careers in Hong Kong, whether in the arts trade or in management. All this in an environment of widening appreciative interest where this career development is, increasingly, a practical reality.
The Hong Kong Museum of Art, the major repository of the traditional arts of China, underwent a five-year closure, emerging in 2019 with a splendid presentation of all its holdings.
On a large piece of reclaimed land from the harbour at the tip of the Kowloon Peninsula, the government has established an independent statutory body to plan, set up, build, stock and organise a modern art museum under the name 'M Plus' (M+ museum). The funding for this building and surrounding art venues has been enormous, and the museum building itself finally opened in November 2021 to enthusiastic reviewing visitors numbering thousands each day. It is composed of several thousand major works of art by, principally, artists in China, Hong Kong, South East Asia and other global territories and countries and is said to become an international landmark of art appreciation constituting a final flourish of maturity of the Hong Kong art appreciation scene.
Not only has intense interest come from Hong Kong energy and application, but the Hong Kong government has entered into an arrangement with the Palace Museum in Beijing, the site of the massive and historic former imperial palace, which is a repository of the most magnificent national collections of Chinese cultural artefacts of all periods, to develop a National Palace museum building on the tip of the West Kowloon Cultural District, which is now fully staffed and scheduled to open in 2022.
Local art galleries have enjoyed very active success over the past 20 years and mount regular exhibitions of both local and overseas artists.
Major international art galleries from the United States, Japan, the United Kingdom and Europe have established their own gallery outlets in Hong Kong and they are very well patronised by interested buyer parties from both Hong Kong and overseas.
The year in review
Covid-19 has wrought enormous changes in all walks of life, and the art market both in Hong Kong and everywhere else is no exception.
Building on the enormously successful development in 2020 of the auction market and of artwork exhibitions by way of internet outreach to the public, 2021 has seen the remarkable growth in the sale (often with, but sometimes without, express additional copyright transfer) of digital tokenised representations of artworks, which, in the case of reproductions of existing artworks, are entirely separate from their copied originals. However, artworks that are purely digital constructs are, in themselves, not fungible because they cannot be sold on to any third parties without the consent of the digitally registered owner.
The hottest topic in the Hong Kong art market in 2020 was the almost total and successful turning of both the auction market and often huge artwork exhibitions to the internet.
For many years and up to 2019, the major auction houses in Hong Kong of Christie's and Sotheby's, together with Bonhams and the fast-growing China mainland auction house of China Guardian, habitually held their twice yearly specialist sales of Chinese antiquities, modern and traditional Chinese paintings, jewellery and wine by taking huge spaces in the Hong Kong Convention Centre, for the benefit of a huge international live market.
Hong Kong, in common with many – if not most – jurisdictions worldwide, suffered an initial January 2020 outbreak of covid-19 and suffers further resurgent outbreaks and, in common with all governments worldwide, has imposed increasingly strict regulation of social distancing for physical activity out of doors and in relation to places of entertainment and food consumption.
The standard forms of restriction, requiring the wearing of face mask coverings on public transport and in shopping centres, and the banning of more than four persons per restaurant table, with social distancing of at least two metres between each table, and their dampening – not to say liquidating – effect on the previously bubbling and active art market would have been extreme, but the art market – in common with many other markets – has been saved by the internet.
Accordingly, all auction houses are able to choose either to have the traditional physical viewing period of up to one week followed by personal live auction sales in the Hong Kong Convention Centre or in their own spacious premises or to hold their auctions online. The skilful arrangement and organisation of online auctions has become a state of the art practice in Hong Kong and indeed worldwide and not only for the sale of art but also for the holding of exhibitions of all manner of related subjects given that all public museums, galleries and art spaces were closed during the lockdowns.
The world famous Art Basel Fair held three times a year in Hong Kong, Miami and Basel, was very quick off the mark regarding the fixed dates for its five-day March 2020 Hong Kong fair. The physical fair was cancelled but Art Basel organised a very clever and very participatory structure whereby all participating galleries were connected online to all worldwide Art Basel Hong Kong subscribers, and the news was that substantial art business was done in this way. Moving on from this, and with an admirable determination, the Fair organised a physical visual arts presentation in the Hong Kong Convention and Exhibition Centre in May 2021, which was greeted with relief and enthusiasm by the usual high number of attendees, both those exhibiting in dedicated gallery spaces and those visiting from all levels and walks of life in Hong Kong.
And despite a combination of two rapid-succession Level 8 typhoons, heavy rains and covid-19, the Fine Art Asia 2021 Fair held in October 2021 was visited by 11,000 people.
Having seen the successful online organisation of art exhibitions by Art Basel and others, local Hong Kong art galleries are now well attuned to holding online exhibitions in tandem with physical exhibitions in their galleries in Hong Kong.
The communication on the internet of all these explorations into art and art appreciation has begun to generate intellectual property issues with particular reference to copyright, broadcast controls, defamation issues, personal data privacy issues and possibly other avenues that the common law has historic ability to generate.
Although the market is generally agreed that there is no substitute for the physical viewing and handling of a work of art to assist the purchasing decision, the very real and very popular online option is now a fact of life and looks set to continue, although hopefully not to the exclusion of the physical arrangement of fairs in the future.
In terms of the art being dealt with, and in addition to the activities in Hong Kong of the major international auction houses, there are many international fine art dealers who have established offices and galleries in Hong Kong to cater for an increasingly large and growing art consumer market in both Hong Kong and the region. The result is that the Hong Kong venue has been a popular attraction for visitors from all over Asia. Of course, physical air travel and quarantine restrictions have at times brought this up-close-and-personal actual acquaintanceship to a close. These closures have been temporary, but, as mentioned above, the online outreach of all these galleries is strong and growing.
The government's Leisure and Culture Services Department has closely communicated with arts groups and artists during the covid-19 pandemic in the hope of offering flexibility for their performances.
It is accordingly clear that from a position of almost no interest in or support for the arts some 40 to 50 years ago, the Hong Kong government is now an active supporter and funder of the maintenance and continued growth of the lively Hong Kong arts scene.
The demand for Chinese art at auction remains extremely strong. The strongest fields are early Ming dynasty blue and white ceramics, Song dynasty ceramics, archaic jade, modern Chinese ink paintings and modern Chinese works in the Western idiom. Good results are maintained for leading South East Asian – particularly Balinese – artists, and Japanese modern artists are extremely popular. Hong Kong artists are themselves becoming a very successful niche focus in the market. Many of them are well established and growing in popularity.
Hong Kong has developed annual arts turnover in the hundreds of millions of US dollars and has become the third world centre for arts sales, along with London and New York.
i Title in art
The standard two entry routes into the art market for sellers and buyers in Hong Kong are auctions, for both antique and modern art works, and the commercial trade, particularly for the antique section of the market where the basic rule of market overt is the yardstick of market safety.
The same rules apply whether a work of art is sold by auction or in the commercial trade. Given the considerable publicity attracted to the mega-auction Hong Kong sale transactions in the public eye, there is an amazing lack of dispute in the market and there are no recent cases of substance.
ii Limitation periods
The standard and only limitation in contract established by the Limitations Ordinance is a six-year period that runs from the date the cause of action arose. This period is non-extendable.
iii Alternative dispute resolution
Under the rules of court, the parties are required by the court master at the interlocutory stage of case management of every legal action to confirm whether they have, but unsuccessfully, resorted to alternative dispute resolution. Without this confirmation, the trial cannot proceed.
Separately from the requirement of the rules of court, alternative dispute resolution by mediation is gaining in popularity largely due to its informality and the privacy of the forum in which all the dirty linen can be exchanged between the parties out of the public eye and leading to an enforceable agreement through a mediated result.
There is a large and increasing body of professionally skilled mediators and the basic disadvantage is that the parties to mediation must hire the mediation premises and hire the mediators, whereas in court proceedings the court premises are provided free of charge together with the services of the judge.
Currently, there are no specialised alternative dispute resolution organisations for mediation of disputes in art matters. However, whether in court or in private mediation, independent art experts can be called as witnesses.
iv Hong Kong sales of imported antiquities
The Hong Kong art and antiques markets have extensive local and international ramifications and there are well-known cases of important artefacts from countries such as India and Cambodia appearing on the Hong Kong market and being sold for export from Hong Kong on the order of the buyer in overseas territories.
Sometimes such items come to the notice of relevant authorities in Cambodia or India that protest, but without proper direction of such protest and its legal support there is often no available legal action of recovery.
That said, it is known for responsible museum owners to simply return the object concerned to the rightful overseas claimant, usually writing-off the loss as part of the curatorial function of the museum concerned.
Fakes, forgeries and authentication
To pass off a fake, forgery or inauthentic piece as genuine is a fraudulent act under the Crimes Ordinance.
In terms of theft, the Theft Ordinance not surprisingly defines theft as the dishonest appropriation of property belonging to another with the intention of permanently depriving the other of it.
However, regardless of theft, under the Crimes Ordinance Hong Kong law provides for criminal liability for forgery. This is defined as where a person makes a false instrument (document) intending that the maker or any third party shall use it to induce another person to accept it as genuine and by such acceptance does or does not carry out some act that in either case prejudices that other person or a third party.
Conviction carries a maximum sentence of 14 years' imprisonment.
The Crimes Ordinance also provides for the offence of counterfeiting, which is restricted to currency notes or coins resembling the genuine article and reasonably capable of passing for the genuine article. This offence also extends to include the genuine article that has been altered to become capable of passing for a currency note or coin of another description.
Forgery and commission of forgery by way of or with intent to defraud is rare in Hong Kong although there are actual cases of counterfeiting currency. Notably, the HK$1,000 bank note issued by HSBC was the subject of very skilful counterfeiting some years ago with the result that HSBC has withdrawn as many as possible of the notes in circulation.
Expert witnesses can be called for either the buyer or the seller in a court case to give their opinion as to authenticity or otherwise of any particular piece.
i Common law and the market
In relation to what has become an extremely active art and antiquities market in Hong Kong, the real and fundamental impact of law is found in the statutory support of market overt and in the common law applications of management and control.
ii Transfer of title and market overt
The common law doctrine of market overt was enacted into the Sale of Goods Act in the United Kingdom. It has recently been dropped from the Sale of Goods Act in the UK but the Sale of Goods Ordinance in Hong Kong, which was substantially modelled on the UK Sale of Goods Act, continues to maintain two principal provisions on transfer of title.
The first provision on transfer of title is that where goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires the same title as the seller (i.e., no title to goods the title of which has in fact never left the real owner unless, of course, the real owner is by his or her conduct precluded from denying the seller's authority to sell).
Accordingly, the crime of theft does not create an ownership in stolen goods with the thief and the transfer of title by sale provision of the Sale of Goods Ordinance acts to negative any legitimacy of title transfer by the thief.
However, the second principal provision on sale in the Sale of Goods Ordinance is that which establishes the passing of goods title in market overt.
Where goods are openly sold in a shop or market in Hong Kong, in the ordinary course of the business of such shop or market, the buyer acquires a good title to the goods provided always that he or she buys them in good faith and without notice of any defect or want of title on the part of the seller.
As is well known but not covered in detail in this chapter, the People's Republic of China has established an extensive body of statute law in its civil law jurisdiction with express application to any transactional dealing in China in cultural property, including antiques.
However, under a clear provision of the China-enacted Basic Law for Hong Kong, the law of China does not apply in Hong Kong.
Accordingly, it is a well-established fact that artefacts of Chinese antiquity are freely and openly tradeable in Hong Kong shops or markets and when there is no reason for the buyer to have any notice of any defect or want of title in the goods concerned, then good title is passed to the buyer.
As a measure of control introduced into the United Kingdom in part to address a growing trade in cultural objects from the basic world treasuries of cultural objects, such as those from Greece, Egypt, Central America and China, the United Kingdom enacted the Dealing in Cultural Objects (Offences) Act in 2003.
This Act creates a definition of 'tainted cultural objects' as meaning an object of historical, architectural or archaeological interest that is tainted if a person removes it from a building or structure of archaeological interest or its removal or excavation in its place of origin constitutes an offence.
In this chapter we go no further into the effect of that Act in the UK but it has no equivalent in Hong Kong legislation and so there is no impediment created by any such Act upon the free dealing in Hong Kong on the open market in cultural objects that, accordingly, has continued and will continue without any such controls.
As is further well known, the territory of Hong Kong is a freeport. This means that the only customs controls on movement into and out of Hong Kong are upon alcoholic spirits (not wine), cosmetics and hydrocarbon oils. All other goods are free of customs control on import into or export out of Hong Kong.
iii Warranties on sale
The Sale of Goods Ordinance provides for implied warranties that are defined in the Ordinance to be subject to the sale contract but collateral to its main purpose. The breach of such a warranty gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.
The Sale of Goods Ordinance provides for implied conditions that, on the part of the seller in the case of sale, he or she has the right to sell the goods and an implied warranty that the goods are free and will remain free until the time when the property is to pass from any charge or encumbrance not disclosed or known to the buyer before the contract is made and that the buyer will enjoy quiet possession of the goods except so far as it may be disturbed by the owner or other person entitled to the benefit of any charge or encumbrance so disclosed or known.
If the contract of sale enables an inference of intention that the seller should transfer only such title as he, she or a third person may have, there is an implied warranty that all charges or encumbrances known to the seller and not known to the buyer have been disclosed to the buyer before the contract is made.
There is a further implied warranty that neither the seller nor in a case where the seller should transfer only such title as a third person may have, that person nor any one claiming through or under the seller or that third person will disturb the buyer's quiet possession of the goods.
There is an implied condition where goods are sold by description that they shall correspond to the description.
Note that any implied warranty can be negatived or varied by express agreement or by the course of dealings between the parties or by usage if the usage is such as to bind both parties to the contract.
An express condition or warranty does not negative a condition or warranty implied by the Sale of Goods Ordinance unless inconsistent therewith.
From the above it can be seen that a wise seller will provide for exclusion of implied warranties under the Sale of Goods Ordinance from any transaction of sale of an art piece to the buyer.
i Auction sales
The Sale of Goods Ordinance provides for auction sale. In the case of a sale by auction each lot is prima facie deemed to be the subject of a separate contract of sale and the sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his or her bid.
To avoid the rigging of auction sale results, where a sale by auction is not notified to be subject to a right to bid on behalf of the seller, it is not lawful for the seller to bid himself or herself or to employ any person to bid at such sale or for the auctioneer knowingly to take any bid from the seller or any such person.
Any sale contravening this rule may be treated as fraudulent by the buyer.
However, a sale by auction may be notified to be subject to a reserve or upset price and a right to bid may also be reserved expressly by or on behalf of the seller.
Finally, where a right to bid is expressly reserved, but not otherwise, the seller, or any one person on his or her behalf, may bid at the auction.
Note, however, that sales by auction are through a middleman who is the auctioneer and his or her role is made abundantly clear in extensive auction conditions that traditionally exclude the implied warranties under the Sale of Goods Ordinance.
Although auction sales and their results of major Chinese works of art in overseas territories such as France have been the result of very substantial misrepresentation or disagreement, there is no recent similar case in Hong Kong.
ii Private sales
In another well-known case finalised in 2019, an established Hong Kong collector of Chinese porcelain had been persuaded by a fraudulent conspiracy to invest in gold in the Hong Kong unofficial board of the London gold market with repeated reports of substantial losses that the collector was only able to finance through the sale of valuable pieces from his Chinese porcelain collection. In the High Court action brought by the collector against the alleged fraudsters, the Court was persuaded to prohibit any dealing by any of the alleged fraudsters with any of the items in the collector's collection and the case continues.
It is not unknown for buyers from China bidding successfully for works of art at Hong Kong auctions and failing to pay, but whether this is through principle, change of mind or impecuniosity is not always clear. This usually leads to legal action in Hong Kong by the auction house pursuant to its conditions of sale.
The main difficulty arising out of such occurrences is that the mainland Chinese buyer usually has a residential address in China and not in Hong Kong and there are enormous complexities that arise when a legal action is commenced in Hong Kong with a defendant whose entire locus is in China, commencing with a difficulty of arranging service of the proceedings and continuing thereafter into the fair and appropriate service of interlocutory stages of the action and eventually realising on the amount of any successful judgment.
iii Art loans
In tandem with the healthy growth of consuming public interest in the visual arts in Hong Kong, a very healthy programme of art lending has developed in both the public and private sectors.
Hong Kong museums are in regular contact with major overseas museums for loan exhibitions. The British Museum and the Victoria and Albert Museum in London have both lent stunning works of special exhibition art from their collections for exhibit in Hong Kong museums. Major Chinese and US museums have also made substantial loans to Hong Kong museums for public exhibitions.
An exhibition of major works by the famous Renaissance artist Sandro Botticelli and his contemporaries, on loan from the Uffizi Gallery in Florence, ran at the Hong Kong Museum of Art from November 2020 to February 2021.
Hong Kong museums are fortunate in being able to draw upon local private collections, principally of Chinese art and archaeology, for very effective catalogued display in public and university museums.
iv Art theft
Surprisingly, given the enormous market value of works of art traded, collected and housed in Hong Kong, from authentic Chinese works of art from many millennia ago to non-Chinese art works in many different media, art theft is not common in Hong Kong. Most collectors and others concerned in the trade have excellent photographic records of the assets.
However, in September 2020, a theft of massive pecuniary value was committed by a small group. Among the principal targets stolen by the thieves were a large calligraphy scroll written personally by Chairman Mao Tse-Tung, whose calligraphy is extremely famous, and a number of exceedingly rare 1960s-issue Chinese Cultural Revolution postage stamps.
v Cross-border transactions
The principal international cross-border restriction on 'illicit import, export and transfer of ownership of cultural property' is provided for in the UNESCO 1970 Convention as an international treaty signed on 14 November 1970. It came into effect on 24 April 1972 and was ratified by China on 25 September 1989.
The accession to this Convention by China – as in every other country and territory to which it has been extended – sets a date prior to which any trade in a cultural object is prohibited. The Convention does not apply to any trade after 1970 and what it has given rise to is a fascinating body of practice relating to the provenance or licit origin of the first marketing of a work of art.
China has subsequently published a report on the 1970 Convention declaring that in its new Law of the People's Republic of China on the Protection of Cultural Relics, amended in 2002, the definition of 'cultural property' is broader in scope than the definition in the 1970 Convention because it is expanded to include not only movable objects but also sites and monuments. That report was the first in a series setting out the extensive framework and ramifications of China's activities in the entire cultural property field.
However, China has not extended the 1970 Convention to Hong Kong. Effectively, therefore, and given that Hong Kong has been an integral part of the People's Republic of China since the 1997 handover from the United Kingdom to the PRC, the common law system of Hong Kong continues as a separate system from the civil law system in China and the law of China does not extend to or apply in Hong Kong.
The result of this is, and has for many years been, an active traffic in cultural objects from China in the Hong Kong markets although the position taken by major auction houses in Hong Kong is that they will not sell any objects that are considered by them to have been exported from China after the 1970 Convention.
vi Anti-Money Laundering under the Organized and Serious Crimes Ordinance
Where a person knows or has reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person's proceeds of an indictable offence and he or she deals with that property, he or she commits an offence liable to a fine of HK$5 million and imprisonment for 14 years.
vii Endangered species
China has a very large and distinguished history of carving elephant ivory, extending back over 2,000 years. Under the Endangered Species Ordinance, the import, re-export and local possession of elephant ivory is permissible if the ivory can meet the global requirements of the antique ivory exception requiring it to meet removal from the wild before 1 July 1925, is significantly altered from its natural state and was acquired by a person after this alteration, requiring no further work to effect this purpose. In recent years, Hong Kong has seen significant trafficking of animal parts and these principles are deliberately established to exempt trade in antique ivory from its modern counterpart trade, which has been so damaging to elephants and other exotic species such as tigers and pangolins, whose parts are believed, in China, to have extensive curative properties.
viii Tax considerations in the Hong Kong jurisdiction
There is no applicable Hong Kong taxation legislation related to cultural objects acquired in Hong Kong or internationally and brought into Hong Kong after such acquisition.
ix Art finance
Art loans are available through internet offers from both reputable overseas financing houses and financing houses in Hong Kong. Generally, the making of such loans and the transactional history of performing the loans is not a matter of public view and it is fair to say that the Hong Kong courts do not have a frequent history of adjudicating issues arising out of art loans.
i Copyright Ordinance
Copyright protects copyright ownership as an exclusive right in respect of, inter alia, literary, musical and artistic, graphic and photographic works for a period of 50 years from the end of the calendar year in which the author dies, and the right is an exclusive right to copy the work, issue copies of the work to the public and carry out other acts as particularised in the Ordinance.
Copyright ownership can either be with the original creator of the artistic work or any validly transferred assignee.
There are a limited number of fair dealing exceptions for educational, library and public administration use.
There is no system for registration of copyright and a copyright claim is best supported by enfacing the first publication of a relevant work with the date of its creation together with the symbol ©.
Moral rights provide that the author of a copyright literary, dramatic, musical or artistic work, and the director of a copyright film, has the right to be identified as the author or director but no third party shall have infringed this right unless the right has been asserted either generally or in relation to any specified act or description of act whether by reference to assignment or in relation to public exhibition of an artistic work.
However, the right to be identified as author or director is not applicable in relation to a computer program, the design of a type face or any computer-generated work nor in respect of a bundle of further exceptions to the right being basically where the author has consented to publication under any of these exceptions.
The Copyright Ordinance further provides for a right of an author or director to object to derogatory treatment of his or her work as specifically provided for in the Ordinance.
ii Registered Designs Ordinance
The Registered Designs Ordinance provides that a person who creates a design or, if there are two or more such persons, each of those persons, may, when a design is new, apply as the owner to register it in respect of any article or set of articles specified in the application. Computer programs and protected layout designs (topographies) are not registrable under this Ordinance.
Note that for the purposes of this Ordinance, 'design' means features of shape, configuration, pattern or ornament applied to an article by any industrial process, being features in which the finished article appeals to and are judged by the eye but expressly does not include a method or principle of construction or any feature of the shape or configuration of an article that is dictated solely by the function that the article has to perform or is dependent upon the appearance of another article of which the article is intended by the designer to form an integral part.
'Designer', in the case of a computer-aided design of a layout design (topography) means the person who made the arrangements for the creation of the layout design (topography).
Where a design is created in pursuance of a commission for money, the person commissioning the design shall, subject to any contrary agreement between the parties, be treated as the original owner of the design and where the design is created by an employee in the course of his or her employment, the employer shall, subject to any contrary agreement between the parties, be treated as the original owner of the design.
Registration of a registered design gives the exclusive right to the registered owner to make in or import into Hong Kong for sale or hire or for use for the purposes of trade or business or to sell, hire or offer or expose for sale or hire in Hong Kong, any article in respect of which the design is registered.
The period of registration of a design shall be for an initial period of five years, extendable for additional periods of five years, up to a maximum of 25 years and six months in the aggregate.
iii Resale rights
Hong Kong law does not provide for any droit de suite or resale rights and the Copyright Ordinance expressly provides that moral rights are not assignable.
Trusts, foundations and estates
It is possible for a collector to settle all or part of his or her collection:
- inter vivos to trustees establishing a trust for them to hold the settled collection assets on trust for designated beneficiaries; or
- by will, effectively creating the executors of the estate as the trustees for designated beneficiaries either for a life interest or as an absolute gift.
The Trustee Ordinance was amended to exclude the former rule against perpetuities and, accordingly, the effective life of a trust is unlimited.
Very often in establishing a trust it is common practice for the collector or settlor to leave either with the trustees of an inter vivos trust or with the executors of a will trust a letter of wishes that is expressed to be not binding on the trustees or executors but nonetheless expresses guidance to the wishes that the collector settlor or testator wishes to put into effect.
There is no current Hong Kong case law on the effective establishment of either inter vivos trusts or will trusts of art assets that are accordingly effective and binding.
Outlook and conclusions
The use of the internet for online auctions – either exclusively or as an optional alternative to physically bidding in the room or telephone bidding – is fast becoming a staple mode of audience response to an e-invitation from auction houses.
Quite apart from auction houses, art galleries are making available full details of available works of art for purchase, and art fairs are providing individual links to separate dealers to provide the purchasing public with direct access to each dealer's listed artworks, and this appears to be a use of the internet that is well supported, efficient and accordingly likely to grow exponentially.
1 Angus Forsyth is a sole practitioner at Angus Forsyth & Co.