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News / April 18, 2019

Auction House Loses, Museums Win in Federal Court Appeal

The Federal Court of Appeal finds that judge in a previous ruling didn’t grant CCPERB the deference it deserved in Caillebotte art-export decision
Canada's Federal Court offices in Ottawa are inside this building at 90 Sparks Street, and home to key decisions on laws affecting art and museums in Canada. Photo: Google. Canada's Federal Court offices in Ottawa are inside this building at 90 Sparks Street, and home to key decisions on laws affecting art and museums in Canada. Photo: Google.
Canada's Federal Court offices in Ottawa are inside this building at 90 Sparks Street, and home to key decisions on laws affecting art and museums in Canada. Photo: Google. Canada's Federal Court offices in Ottawa are inside this building at 90 Sparks Street, and home to key decisions on laws affecting art and museums in Canada. Photo: Google.

Laws surrounding art and cultural property in Canada can be quite complicated.

But a few things are clear coming out of a ruling released Tuesday by the Federal Court of Appeal—namely, an auction house has lost, and museums have won.

The new ruling overturns a Federal Court judgment from June 2018. That earlier 2018 decision had implied that the Canadian Cultural Property Export and Review Board made an error in deciding that a Gustave Caillebotte painting sold by Heffel auction house to a UK buyer should stay in the country. It was the first time in more than 40 years that a Canadian Cultural Property Export and Review Board export permit ruling had been successfully challenged in a court of law.

In turn, other implications snowballed. The June 2018 ruling narrowed interpretations of national importance for CCPERB’s evaluation of export permits and tax-credit certifications—the latter stalling millions of dollars in art donations to museums across Canada.

“We are extremely happy the appeal was successful,” the president of the Canadian Art Museum Directors Organization said.

The Crown quickly filed an appeal, and museums and galleries also spoke out publicly against the June 2018 ruling. In late summer, a public letter by eight Canadian museum leaders told the Heritage Minister that “Urgent action is required [on the appeal]: Already, donations that were in progress—even from recognized Canadian collections—have been frozen, preventing our institutions from acquiring major works.” Later in 2018, 10 Canadian museums became official interveners in the appeal. This included the Musée des beaux-arts de Montréal, the Art Gallery of Ontario, the Vancouver Art Gallery and the Remai Modern.

So Tuesday’s decision, which reasserts Cultural Property Export and Review Board’s authority to interpret its home statute as it sees fit, is a welcome one for many museums and galleries in Canada.

“We are extremely happy the Appeal was successful,” says Robin Metcalfe, president of the Canadian Art Museum Directors Organization and director/curator of Saint Mary’s University Art Gallery in Halifax, via email. “We thank the directors and staff of art museums and galleries across Canada, whose knowledge and experience made it possible for our legal team to prepare a strong and convincing Intervention.”

But it was a loss for Heffel and other commercial dealers who have long felt that Canada’s export-permit controls for certain artworks have stalled sales to international buyers—and in turn, growth of the Canadian art market in general.

“We are disappointed by the decision and the lack of clarity it gives for how works are professionally assessed under the Cultural Property Export and Import Act,” said an emailed statement from Heffel. “In particular, the Board could continue to interpret the ‘national importance’ criterion very broadly such that almost any work can be considered to be of national importance.”

Why Appeal Judges Overturned the Original Ruling

The decision by Federal Court of Appeal Judges Boivin, Gleason and Rivoalen proves an interesting read for those who have been following the case.

At several points in the 24-page decision, the panel critiques arguments made by Federal Judge Manson in his previous June 2018 decision against CCPERB.

First, the appeal panel criticized Manson’s attempt to determine whether the original CCPERB export-permit judgment on Caillebotte was “correct.” The panel said a standard of “reasonableness”—of CCPERB having made one of several possible reasonable interpretations of its own statute—should have prevailed over Manson’s approach of reaching a determination of “correctness.”

The appeal judges underlined CPERB’s authority: “The Board, as the administrative decision maker, holds the ‘upper hand’ with regard to interpretation of its home statute,” they stated.

Second, the panel of appeal-court judges decided to use CCPERB’s guidelines on evaluating cultural property for “national importance” value—and unanimously found that Heffel’s proposed export of Caillebotte’s Iris bleus would indeed constitute a diminishment of national heritage under those standards. By contrast, Manson had come to a different understanding of national importance based on his own readings of the origins of the Cultural Property Export and Import Act, as well as definitions of “national” and “heritage” that he sourced from a particular dictionary.

“Under the reasonableness standard, we do not develop our own view of the matter and then apply it to the administrator’s decision, finding any inconsistency to be unreasonable,” said the panel’s decision, citing the 2015 Delios v. Canada case as precedent. “In other words, as reviewing judges, we do not make our own yardstick and then use that yardstick to measure what the administrator did, finding any inconsistency to be unreasonable.”

In this respect, the appeal judges also affirmed that CCPERB’s original interpretation of “national heritage” as encompassing something more than art made in Canada or by Canadians remains reasonable. “In this particular case, the Caillebotte—a work by a French artist painted in France—could still have ‘national importance’ in Canada, a country Caillebotte never visited, and frankly probably never contemplated,” wrote Alex Herman of the UK’s Institute of Art and Law regarding the appeal decision.

Third, the appeal panel underlined that judiciary needs to defer to expert boards in this and similar circumstances. “The Federal Court was…required to abide by the well-established governing principle in its application: deference,” says the ruling. The appeal panel cited seven prior cases as precedents. “To put it another way, the Board, as the administrative decision maker, holds the ‘upper hand’ with regard to interpretation of its home statute.”

Fourth, the appeal court decided that Justice Manson’s decision had been made with an incomplete understanding of the intentions of the Cultural Property Export and Import Act. “The Federal Court repeatedly asserted Parliament’s intention in enacting the Act was to avoid interfering with property rights,” said the appeal ruling. “In doing so, the Federal Court overlooked other provisions in the Act aimed at establishing a careful balance between property rights and the preservation of cultural heritage for future generations.”

These particular findings were also welcomed by art museum representatives. “This is the outcome we were hoping for and is a major victory for art museums and galleries across Canada,” says Moira McCaffrey, executive director at CAMDO-ODMAC. “The judgment provides support for the interpretation of criteria used in CCPERB applications for both tax credits and exports. In addition, it confirms the important role played by the experts who sit on the CCPERB Board.”

Heffel Expresses Hope for Future Change in the Legislation

In Tuesday’s decision, the three judges on the appeal summarized some of the arguments presented by Heffel’s lawyers in favour of providing an export permit for the Caillebotte—and also found them wanting. “The Board was more nuanced than the respondent contends,” says the appeal judges’ decision. The statement again reasserted the expert board’s authority.

It remains to be seen how the Federal Court of Appeal Court decision will affect Heffel’s attempts to attract more international buyers and sellers for its auctions, or sell more works by international artists.

Heffel hopes the laws governing art export in Canada will eventually be amended to “promote the growth of Canadian culture both domestically and internationally.”

Heffel is currently advertising a Matisse painting, for instance, on the cover of its May 29 Canadian, Impressionist and Modern Art auction catalogue. That Matisse, estimated at $5.8 million, is from overseas and has not been in Canada long, so no special export-permit flags will be raised. But a small, late Renoir painting featured inside the catalogue has been in Canada for more than 50 years, and would likely require an export-permit process if sold to a foreign buyer. It is valued at $100,000 to $150,000.

(Also on the international sales front, Heffel’s post-war and contemporary art auction this spring also features works by American artist Larry Poons, Danish artist Asger Jorn and Dutch artist Karel Appel.)

But while museums and auction houses were pitted against each other in this particular decision, they still share many interests. This spring, including at the Canadian, Impressionist and Modern Art auction on May 29, Heffel is selling off 17 A.Y. Jackson works deaccessioned from the Art Gallery of Ontario. The AGO was one of the museums that acted as an intervenor in the recent appeal decision, but it also is relying on the auction house’s reach to maximize returns on these deaccessioned works.

Also, there may still be some issues with the Cultural Property Export and Import Act. While this particular Federal Court appeal has focused on a $600,000 Caillebotte that had never been in a public collection, Canada’s art-export laws and procedures permitted a $6-to-$9-million Chagall that had been in a public collection for 50-plus years to be exported in 2018. (The Chagall was later returned to the National Gallery of Canada collection after significant public outcry and outlay—not through any CPERB-related regulation.)

An emailed statement from Heffel this week noted that some aspects of cultural property law were changed in the recent 2019 federal budget—and that it’s hoping for more. Heffel also suggested that the entire art sector may benefit from changes to Canada’s cultural property law in future.

“We are encouraged that the government has recently responded in the 2019 budget by separating donations from export, with regards to the national importance criteria, and is showing its willingness to improve and enhance legislation,” said Heffel in its emailed statement. “Heffel, along with others in the fine arts community, looks forward to working with the Department of Canadian Heritage to continue to amend the Act and promote the growth of Canadian culture both domestically and internationally.”

Leah Sandals

Leah Sandals is a writer and editor of white settler Canadian (Irish and Ashkenazi) descent. She is also news and special sections editor at Canadian Art and has written for the Toronto Star, National Post and Globe and Mail, among other publications. Sandals welcomes tips, corrections and comments anytime at leah@canadianart.ca.