Dealer denies he is left with £10m painting after bout of auction fever

Sotheby's had seen nothing like it in years. A Canadian millionaire and a Mayfair art dealer, head-to-head over one of the finest British paintings to come up for sale in living memory. Up went the bids – £2m, £4m, £7m and on, until, with commission, the price reached a staggering £10,343,500.

When it was all over, the winner, the dealer Guy Morrison, clearly shaken, admitted he had bid at a level higher than that authorised by his client. "I do not have a buyer at this level," he said. It was, the art world agreed, auction fever on a grand scale. Or was it?

The bidding war took place in November between Mr Morrison and the Canadian businessman David Graham over Sir Joshua Reynolds' portrait of Omai, the "noble savage" brought to England aboard the HMS Adventure by Captain James Cook in 1774.

The published auctioneer's estimate put its value at between £6m and £8m, but the bids went far higher. At one point, Mr Graham, abandoning the privacy afforded by telephone bidding from the back of the room, leapt to his feet and conducted his own bids as the price – and the temperature – rose higher. At £9.4m, he was gently persuaded by his wife to end his challenge, leaving Mr Morrison with a painting worth eight figures ... but no buyer.

Yesterday, with Sotheby's still holding the painting, Mr Morrison, who has offices in St James's, spoke at length for the first time about that breathless day and the future of what most Reynolds aficionados consider to be his best work.

"I would like to set the record straight for the people who thought I may have gone mad, got carried away with auction fever and was left holding the baby," he said. "The simple truth is that, yes, I was bidding for a client at first, but that client was prepared to go only to the estimate of between £6m and £8m. After that, I was bidding for myself. I was bidding deliberately and there was no question of any error on my part.

"When it was all over, I was surrounded by the press and I said: 'I do not have a buyer at this level,' which was true. I may have looked a little shaken, but so would you if you had just spent £10m. But that was misconstrued to mean I had exceeded myself and was left with a painting I couldn't pay for."

He said he had arrangements in place to pay for the painting if necessary, but insisted that he now has three potential buyers anyway. "My financiers are prepared to take any length of term view that I recommend, short or long," he said. "There are three buyers who may be interested but I am not conducting a private auction. There are some people who prefer to consider buying without the pressure of an auction.

"In the meantime, yes, the painting is still at Sotheby's – it wouldn't fit into my office anyway. I preferred to leave it there, particularly over the Christmas period."

Sotheby's said it never regarded Mr Morrison as having been left in a difficult position after the second highest British acquisition in history, the first being The Lock by John Constable, which fetched £10.7m at Sotheby's in 1990.

"It is not unusual for us to be still holding a painting weeks after its sale," a spokeswoman said yesterday. "We are perfectly happy with Mr Morrison and perfectly happy with the arrangements he has put in place."

The dealer said he does not know when he will conclude the sale of the painting, or whether it will stay in the UK (one of the potential buyers is from abroad). But he admits he will never forget the day he bought it.

"It was very dramatic and, although I have never met Mr Graham before or since, it became a very personal duel," he recalled. "When it reached the higher levels, he appeared, and then he stood by the lady taking his telephone bids, speaking into her ear, and she just dropped the phone. Then we were staring each other in the eye as it went higher.

"It was incredibly exciting and remarkable when I realised I had won the bidding. I can't imagine anything quite so exciting happening again."