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Limitation periods and good faith.

Kurtha v. Marks (1)

Dr Kurtha was an art collector who collected paintings by Francis Newton Souza ('Souza'). Mr Marks was a dealer in antiques. In or before 1982 Dr Kurtha purchased two oil paintings by Souza from the artist himself named Chalice with Host and Head of a Portuguese Navigator ('the Paintings'). Dr Kurtha stated that in 1984 they were in his possession in London and after 1984 they were kept either at his home in Kew, or at Smarts' storage facility in West London and later Pickfords' storage facility at Wembley together with a large number of other pictures by Souza and by other artists. In 1975 Dr Kurtha moved to Dubai for work reasons; his family continued to occupy the house at Kew until the early 1990s when they joined him in Dubai. Following the family's departure the house was let to tenants and Dr Kurtha left about twenty paintings by Souza at the house locked in the attic.

In 2002 five paintings by Souza were included in a sale of art by Bonhams of London. Dr Kurtha claimed they were stolen from his collection. Four of the pictures were removed from the sale, and the fifth was sold. Dr Kurtha sued Bonhams, discovered the names of the consignors, a Mr Demetriou and a Mr Baxter, and joined them as defendants in his action against Bonham's. Mr Demetriou and Mr Baxter both claimed to have bought those paintings from a Mr Dobkins who claimed to have acquired them in a clearance sale which was not identified. There was no other evidence of provenance. A settlement was reached, by which Dr Kurtha paid the consignors some money and they returned to him the five unsold pictures.

By 2003 Dr Kurtha believed that further pictures had been stolen from his collection, including the Paintings. In March 2003 Dr Kurtha had visited Pickfords' storage facility and found a number of his paintings lying loose in the warehouse for everyone to see. In 2005, when he listed and photographed all of his Souza collection, he became sure that more paintings had been stolen, including the Paintings. Accordingly, Dr Kurtha registered the Paintings with the Art Loss Register ('ALR') in London. In January 2006 Mr Marks telephoned the ALR to enquire about Souza paintings in general, and the Paintings in particular. Dr Kurtha was alerted by the ALR that Mr Marks had possession of the Paintings and Dr Kurtha then brought proceedings against Mr Marks claiming their return.

Mr Marks stated that he bought the Paintings from Mr Demetriou in January 2006 for 124,000 [pounds sterling] and, once he had received the assurance from the ALR that there was no problem with title, took possession immediately. He expected to sell them on to a client for a profit. Mr Demetriou claimed that he had bought the Paintings in January 2006 from Mr Martin, another dealer in second hand furniture. Mr Martin claimed that he bought the Paintings in November 1999 from Ms Banarse. Ms Banarse claimed that she received the Paintings as a gift from her grandmother sometime before that date. Her grandmother had died in 2005 and the evidence as to the earlier provenance of the Paintings stopped there.

Mr Martin stated that after he took possession of the Paintings they were initially in his shop, although not on display or for sale, and from then on they were in his home, in an attic or a cupboard, or under his bed. It was only by coincidence that they were downstairs and visible to Mr Demetriou when Mr Demetriou came to his house in May 2005 to inspect some chairs.

All the sales Mr Marks and his witnesses claimed took place were sales for cash, and there was no independent or documentary evidence that any cash was paid by, or to, any of those in the chain of sales. There was no contemporaneous document recording the sale by Ms Banarse to Mr Martin. The only document purporting to record the sale by Mr Martin to Mr Demetriou was a single hand-written document on plain paper signed by each of them and dated 10th January 2006. The only document purporting to record the sale by Mr Demetriou to Mr Marks was a single document printed by Mr Demetriou on plain paper, dated 11th January 2006, and signed only by Mr Demetriou. There was no photograph or other document relating to the Paintings produced by Mr Marks, Mr Demetriou, Mr Martin or Ms Banarse evidencing that the Paintings were in their possession at any time before Mr Marks contacted the ALR.

The main issues in the case were whether Dr Kurtha was the owner of the Paintings and whether they had been stolen from him; and if so, whether Mr Martin bought them in good faith from Ms Banarse before 26,h February 2001 (being the date which was six years before Dr Kurtha's action had commenced and therefore the date from which the limitation period in respect of a good faith purchase would run).

Dr Kurtha submitted that the Paintings were substantial objects and were unlikely to be mislaid in the same way that smaller valuable items might be lost, such as a watch or jewellery, and then to have come into the possession of a finder without dishonesty or theft.

Dr Kurtha submitted that what happened after Mr Martin stated he bought the Paintings was relevant. Since the issue of whether and when Mr Martin bought the Paintings from Ms Banarse depended entirely on whether the Court accepted or rejected oral evidence, all the other circumstances of the case, whether earlier or later, should have been taken into account in deciding whether the alleged good faith purchase occurred. Dr Kurtha also contended that the purported sale of the Paintings to Mr Marks for 124,000 [pounds sterling] was bogus and that the true arrangement between Mr Demetriou and Mr Marks was in effect a partnership.

Mr Marks submitted that Dr Kurtha had not shown that the Paintings were ever in his collection and that if the Paintings were once in Dr Kurtha's possession, they were lost or disposed of in circumstances which Dr Kurtha did not know about, or had forgotten, and that, in any event, Dr Kurtha could not show that the Paintings were stolen from him. Mr Marks submitted that theft was a less likely explanation for Dr Kurtha's loss of the Paintings than other possible explanations. He suggested that the Paintings were lost by either Smarts' storage facility in West London or Pickfords' facility at Wembley or sold by them to recover unpaid storage charges. Alternatively, if a sale had occurred, then either Dr Kurtha never knew it had occurred, or he had forgotten.

Mr Marks also submitted that what the law required was that Mr Martin should have purchased the Paintings in good faith. If he had done that, but subsequently had done something else which was not in good faith (for example, if the sale to Mr Demetriou was not in good faith) then that would not deprive Mr Marks of his defence.

Held: application granted.

Per Tugendhat J:

The normal period within which an action for the recovery of property, or for damages, must be brought in England is six years. Save in cases of theft, if the claim is not brought within that time, a claimant's title to the property of which he had lost possession is extinguished. In cases of theft, a claim by a person from whom a chattel has been stolen is not subject to the six-year time limit from the date of the theft. In a case of theft the six-year period does not run in favour of a thief, nor does it run against anyone whose possession of the property is related to the theft. The six-year period does not begin to run unless and until someone purchases the chattel in good faith. Any conversion subsequent to the theft is presumed to be related to the theft: the burden was therefore on the purchaser to show that the purchase of the goods was in good faith. (2)

Dr Kurtha acquired title to the Paintings. Although Dr Kurtha was unable to say when, between 1984 and 2005, the Paintings were allegedly stolen, or whether they were stolen from his home or from one of the storage facility warehouses, Dr Kurtha had photographic evidence, together with an inventory of all of his paintings that he had made in 1984 which included the Paintings, and had therefore provided evidence which satisfied the Court that he owned the Paintings in 1984.

Theft was not an improbable explanation for Dr Kurtha's loss of possession of the Paintings. Theft was, on the balance of probabilities, what occurred. It was not possible to make any findings as to where that loss might have occurred. However, there was evidence that by 2003 there were a considerable number of paintings at Pickfords' storage facility which were loose, and not in their crate. There was no evidence of how that state of affairs came about, or when. But that made theft a probable explanation of the loss at or shortly before that time. All the other suggested possible explanations were improbable.

Mr Demetriou's choice of cash for the large payments he made was not explicable for the reasons he gave. The urgency in January 2006 for Mr Marks to contact the ALR was most probably explained by the need that Mr Demetriou saw to try to establish a sale of the Paintings, if possible, at a time before they became devalued by the claim that Dr Kurtha was making. The conduct of Mr Marks, Mr Demetriou and Mr Martin was consistent with them at least suspecting that the Paintings were stolen, and was not explained otherwise.

It was unbelievable that it was by pure luck that Mr Demetriou saw the Paintings on a visit to Mr Martin's home to inspect chairs. Mr Martin's account of why he kept the Paintings concealed in his home for six years (without there being any record of when or from whom he acquired them) which was the crucial period of time for the purposes of a defence of limitation was also unbelievable. If the Paintings were not for sale, as Mr Martin stated they were not, until December 2007, this was probably because Mr Martin believed or suspected that they were stolen, and that, at least until that time Mr Marks and Mr Demetriou did not think it safe to try to sell them.

If the Court was to have considered the date when the pictures were sold by Ms Banarse to Mr Martin in isolation, solely on the evidence of Mr Martin and Ms Banarse the Court would have reached the following conclusions:

The Court would not have been satisfied on the balance of probabilities that the sale of pictures by Ms Banarse to Mr Martin occurred before 21st February 2001. The evidence as to the year was too vague and it would not have been possible to make any finding as to the date. Mr Marks' defence would have failed on this point alone.

The Court would not have been satisfied on the balance of probabilities that the pictures which Ms Banarse sold to Mr Martin were the Paintings. Mr Marks would have failed at this point also, independently of his own evidence and that of Mr Demetriou.

It was not necessary to consider whether Mr Martin was in good faith when he acquired the Paintings. Since it was not possible to make a finding either as to the date on which, or as to the person from whom, he acquired the Paintings, a finding could not be made that he acquired them in good faith. Therefore Mr Marks's defence failed at this further point.

The evidence of Mr Demetriou and Mr Marks was incapable of belief as to what passed between them during 2005 and what happened in January 2006. It was not possible to find that there was a genuine sale by Mr Demetriou to Mr Marks in January 2006. They were acting together. It was not necessary to make any finding as to what the agreement between them really was; however, it was found that they were not telling the truth and they were acting at least partly in pursuance of a common design, before doing whatever they were going to do next, to get information from the ALR as to whether there was a claim registered that the Paintings were stolen.

The impossibility of proving a purchase in good faith necessary to establish a limitation defence was not the only risk facing a dealer. A dealer in valuable works of art who paid in large amounts of cash, kept no records, and asked no questions as to provenance of his supplier, exposed himself, and those who bought from him, to other very serious risks. These risks included that the dealer would have been unable to answer queries relevant to tax from HMRC. But they also included the risks that he could have faced a prosecution under the Proceeds of Crime Act 2002 sections 327 to 332, and that, whether or not there was a prosecution, he may have been made subject to a civil recovery order under Part 5 of that Act.

* Independent Legal Analyst, B.A. (Hons), LL.B., University of Sydney.

(1) [2008] EWHC 336 (Q.B.), 27lh February 2008. Mr J. McCaughran QC with Mr L. Emmett (instructed by Michael Reason LLP) for the claimant; Mr M. Warwick with Mr N. Trompeter (instructed by Streathers) for the defendant. Before: Tugendhat J.

(2) Limitation Act, 1980 ss. 2-4.
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Author:Mason, Katharine
Publication:Art Antiquity & Law
Date:Apr 1, 2014
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