High Court (England and Wales)

City of Gotha  and Federal Republic of Germany v. Sotheby's and Cobert Finance S.A.

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I.6 City of Gotha’s Claim to Possession

This issue arises only if the Federal Republic of Germany fails to establish title to the painting and it is owned by the Art Foundation. It is based upon a short passage in Professor Werner’s supplementary opinion. The Schlossmuseum in Gotha is owned and operated by the City of Gotha. The Schlossmuseum’s right to possession arises, it is said, under Paragraph 3 of the Statutes of the Art Foundation which provide that the collection should be made available for public use. A possessor has the right to demand restitution of possession from:

"the person whose possession is defective relative to him" (See Article 861 of the BGB).

The museum was assigned to the City of Gotha from 1952 (see paragraph 177 of Professor Brunner’s opinion). However, I accept Professor Brunner’s evidence that it does not follow that the art collection was in the possession of the museum. The museum was an establishment of the Art Foundation; it was not itself a separate legal entity capable of holding independent legal rights to possession. The fact that the museum was located within the City of Gotha does not establish any legal right. Nor could a right to possession in the City of Gotha be derived from the purpose of the Foundation. The purpose merely establishes obligations in the representative bodies of the Foundation, the statute does not create any independent right to possession in the City of Gotha. I conclude, in accepting Professor Brunner’s evidence on this point, that the City of Gotha has no right to possession. Even if it could be said to have had the right of possession once the museum was assigned to the City of Gotha in 1952 the painting itself had long since ceased to be in that city. For those reasons, if the Federal Republic of Germany’s claim had failed the City of Gotha’s claim would have suffered a similar fate.

Mr Layton QC on behalf of the City of Gotha contended that Professor Brunner had, in cross-examination, conceded that the city had a claim for recovery. The concession, such as it was, was made in the context of a question concerning the right to bring an action after unification and related to possession of the collection now. Professor Brunner’s answers, placed in their proper context, cannot be understood as undermining his previous opinion.

II.2 Is the German Limitation Period relevant?

I turn now to consider whether the Federal Republic of Germany’s claim is time-barred.

The plaintiffs contend that German law is irrelevant. If they are right the action is not time-barred. Now that it is accepted by Cobert that there has been no good faith purchase of the painting, under English law the claim is not time barred nor is the Federal Republic of Germany’s title treated as extinguished pursuant to Section 3 of the Limitation Act 1980. Section 4 provides a special time limit in the case of theft. No thief nor persons taking the stolen chattel from the thief, may take advantage of the limitation period provided for in Section 3. The period of limitation only starts if and when the stolen painting was purchased in good faith.

The dispute as to whether the German limitation period applies turns on a proper interpretation of the Foreign Limitation Periods Act 1984. Section 1 provides:-

"(1) Subject to the following provisions of this Act, where in any action or proceedings in a court in England and Wales the law of any other country falls (in accordance with rules of private international law applicable by any such court) to be taken into account in the determination of any matter:-


(a) the law of that other country relating to limitation shall apply in respect of that matter for the purposes of the action or proceedings; and


(b) except where that matter falls within subsection (2) below, the law of England and Wales relating to limitation shall not so apply.


(2) A matter falls within this subsection if it is a matter in the determination of which both the law of England and Wales and the law of some other country fall to be taken into account.


(3) The law of England and Wales shall determine for the purposes of any law applicable by virtue of subsection (1)((a) above whether, and the time at which, proceedings have been commenced in respect of any matter; and accordingly, section 35 of the Limitation Act 1980 (new claims in pending proceedings) shall apply in relation to time limits applicable by virtue of subsection (1)(a) above as it applies in relation to time limits under that Act.


(4) A court in England and Wales, in exercising in pursuance of subsection (1)(a) above any discretion conferred by the law of any other country, shall so far as practicable exercise that discretion in the manner in which it is exercised in comparable cases by the courts of that other country.


(5) In this section "law", in relation to any country, shall not include rules of private international law applicable by the courts of that country or, in the case of England and Wales, this Act. Section 4 provides:-

"(1) Subject to subsection 3 below, references in this Act to the law of any country (including England and Wales) relating to limitation shall, in relation to any matter, be construed as references to so much of the relevant law of the country as (in any manner) makes provision with respect to a limitation period applicable to the bringing of proceedings in respect of that matter in the courts of that country and shall include:-

(a) references to so much of that law as relates to, and to the effect of, the application, extension, reduction of interruption of that period; and


(b) a reference, where under that law there is no limitation period which is so applicable, to the rule that such proceedings may be brought within an indefinite period.
  (2) In subsection (1) above "relevant law", in relation to any country, means the procedural and substantive law applicable, apart from any rules of private international law, by the courts of that country." It is plain from Section 1 and Section 4 of the 1984 Act that the Act has no application unless German law falls, in accordance with the rules of English private international law, to be taken into account:-

"in the determination of any matter." Mr Layton QC, on behalf of the plaintiffs, contends that German law is irrelevant to the plaintiffs’ claim for wrongful interference in England with goods acquired in England. There is no connecting factor to link the claim with Germany. The rules of English international law are rules which apply to foreign law if:-

"The issue before the court affects some fact, event or transaction that is sufficiently closely connected to a foreign system of law to necessitate recourse to that system ..." (Cheshire & North Private International Law (12th Edition) page 5). The tort has been committed in England by a Panamanian company which acquired the painting in England.

I cannot accept this submission, attractive though its simplicity be. The claim under Section (2)(1) of the Torts (Interference With Goods) Act [1977] is classified in Goff & Jones The Law of Restitution (4th Edition) (pages 75 to 76) as a restitutionary proprietary claim. It is a claim to protect and enforce rights deriving from the plaintiffs’ ownership of the painting. Assertion of those rights depends upon the plaintiffs’ assertion of title which, it is accepted, must be determined under German law.

But Mr Layton QC ‘s proposition that the 1984 Act has no application relies upon a more subtle submission. That submission requires a distinction to be made between the issues relating to title and limitation. German limitation law has no relevance to the issue whether the Federal Republic of Germany can trace its title by establishing the painting was expropriated or that title passed on dissolution of the Art Foundation. Once it has successfully traced its title to the painting, title is no longer in issue and German law is no longer relevant. The sole issue remaining is one of English law relating to the conversion of a painting in England. German law applies to the question of title because English conflict rules apply the lex situs, but it has no application in relation to limitation.

Mr Layton QC supports that contention by consideration of how the issue would have been resolved before the 1984 Act. German limitation law would not have been relevant because if it had been applicable it would have been regarded as procedural; it did not extinguish title. English limitation law would have governed the claim.

At the core of the 1984 Act lies the principle that the period of limitation applicable under the lex causae should be applied. (see The Law Commission’s Report Classification of Limitation in Private International Law 1982 No.114 paragraphs 4.3 and 4.11). The principles of international law are permeated with that which in earlier days was the lingua franca of international law jurists. But the Latin does not illuminate. The lex causae is the law governing the question (see Dicey & Morris page 30). But what is the question? In the language of Section 1 (1) and Section 4(1), of the 1984 Act: what’s the matter?

The problem arises because Section 1(1) appears to suggest that any law which is to be applied on any substantive issue should also apply to limitation, thus giving rise to many cases where Section 1(2) would apply. Several laws would be applicable to various aspects of a dispute. In his article on time limitation in English law (1985 LMCLQ 497) P.A. Stone amply demonstrates how this approach is contrary to the purposes of the Act particularly in relation to breach of contract. It is clear that the Act intended limitation to be governed by the proper law of the contract (see Law Commission Report 3.9, 4.4 and 4.6). That is likely to have been the law chosen by the parties. Yet if Section 1 means that any law applied in relation to any substantive issue should also apply to limitation that principle cannot be followed. There are many cases where the issue of validity or capacity may have to be considered and where those laws differ from the proper law of the contract. Mr Stone’s solution is to apply the limitation rules applicable to the proper law of the contract; he does not elucidate the process of statutory construction which permits so sensible a conclusion.

I was referred by both parties to passages in Chapter III of Dicey & Morris dealing with the "incidental or preliminary question". The chapter opens with the dispiriting observation that:-

"It is a technical problem of considerable difficulty which was first noticed by academic writers on the Continent." The authors of Dicey & Morris suggest a flexible approach taking into account policy considerations. (see page 55). I can well understand such an approach in relation to the problems identified by P.A. Stone in relation to contract. It provides an uncertain guide in the instant case.

Unless it is possible to say the "matter" is only the claim for wrongful interference with the painting and not the issue of title, Section 1(2) governs this action and both German and English limitation law applies. It is agreed that if Section 1(2) applies, the effective limitation period is which ever is the shorter (see e.g. Dicey & Morris page 187). Section 1(2) was directed to the double actionability rule relating to tort, (pursuant to which there are two leges causae). The Law Commission Report No. 114 said:-

"... the general rule requires the court to take into account both the lex loci delicti and our law. Normally, therefore, there are in effect two leges causae governing such cases, one of which will always be English law; in regard to limitation the effective period will be the one described by either the relevant foreign law or by its English equivalent, whichever should be the shorter.


4.15 We recommend ... that the rules of limitation in force in England and Wales should not be excluded in cases where both the foreign and the law of England and Wales are to be taken into account under the rules of private international law in the determination of any issue by the court;" It seems clear that but for the dual actionability rule Section 1(2) would not have been enacted. It derogates from the principle that where foreign law falls to be applied, that country’s law of limitation should also be applied. Such a rule resolves the difficulties which had arisen from the need to distinguish between procedural and substantive law. The long title makes it clear that the Act sought to remove the need to consider whether a foreign limitation law was merely procedural or was a matter of substance:-

"An Act to provide for any law relating to the limitation of actions to be treated, for the purposes of cases in which effect is given to foreign law or to determinations by foreign courts, as a matter of substance rather than as a matter of procedure." Thus, it seems to me, consistent with the statutory principles contained in the 1984 Act, a court should strive to identify one law as governing the issue to be determined rather than two. The plaintiffs’ submissions have the merit of achieving that objective by restricting Section 1(2) to cases where the double actionability rule applies. No significance is to be attached to the continuing existence of Section 1(2); the double actionability rule was abolished by Section 10 of the Private International Law (Miscellaneous Provisions) Act 1995 but that rule still applies in relation to the determination of issues arising in any defamation claim (Section 13).

It is tempting to follow the approach contended for by Mr Layton QC and to regard the issues relating to title as distinct from the action for conversion in order to fulfil the purpose of the 1984 Act and to isolate one law as governing the issue. By that means Section 1(2) is confined merely to the one remaining tort where the double actionability rule survives. There is, however, in my judgment an insuperable difficulty to this approach. There seems no particular difficulty in adopting that approach in a case such as this, where the German law of limitation is merely procedural and does not affect the plaintiffs’ title to the painting. In such circumstances, adopting the flexible approach suggested by Dicey & Morris, there seems no good reason why the German law of limitation should affect a tort committed in this country in relation to a painting in this country. But, in my judgment, there would be far greater difficulty if the foreign law of limitation was substantive, in other words if the foreign law extinguished property rights. In such a case it would be difficult to say that there were not two laws governing the matter in issue. That was the conclusion of Waterhouse J in The Cintas Foundation Incorporated v. Sotheby’s Unlimited and Fondarm International Establishment (Unreported) 11 February 1995. In that case questions arose as to two paintings by a Spanish impressionist. Under Cuban law, after the expiry of the limitation period, title was extinguished. Waterhouse J concluded that there were two leges causae and accordingly section 1(2) applied. (see page 63). The Judge’s reasoning was not set out in full because, in the light of his decision on other issues, it was obiter. That decision exposes the difficulty in adopting the approach advanced by Mr Layton QC. If, as he was disposed to suggest, there may be two leges causae where the foreign limitation law is substantive then it becomes necessary for a court in this country to consider whether the foreign law is procedural or substantive. To do so seems to me to run counter to one of the fundamental purposes of the 1984 Act which is to avoid the necessity for making such decisions. Whilst I accept that it is desirable, consistently with the purpose of the 1984 Act, to identify one lex causae, in my judgment that consideration is outweighed by the importance of avoiding the need to distinguish between foreign substantive and foreign procedural laws. The arguments relating to the policy of the Act do not permit me to ignore the plain words of section 1(2). In my judgment the laws of both Germany and England govern the matter before the court; they both fall to be taken into account in the determination of a matter which involves issues as to title as well as to the protection of the rights which flow from that title. Accordingly Section 1(2) of the 1984 Act applies. Thus German limitation law applies.

II.3 Limitation Under German Law.

I have had evidence on this issue from Professor Siehr on behalf of the plaintiffs and from Professor Brunner on behalf of Cobert. The following propositions of German law are not in dispute:-

i. The right to recovery is statute barred after a period of thirty years (Article 195 of the "BGB").

ii. No title is transferred to the person in possession by the expiry of the limitation period of thirty years.


iii. The limitation period begins when the claim arises ( Article 198 BGB ).

iv. The thirty year period continued to apply even when the painting was outside Germany within the Soviet Union.

 v. Time runs irrespective of whether the claimant is aware of the existence of the claim or the identity of his opponent.

vi. A new claim for recovery arises against each new possessor. It follows from that proposition that a new thirty year limitation period began to run each time the picture changed hands. But a succeeding possessor can take advantage of the period of time which elapsed while his predecessor was in possession pursuant to Article 221.

The legal dispute depends upon the effect of paragraph 221 BGB which provides:-

"If a thing, with regard to which a claim in rem exists, comes by succession (Rechtsnachfolge) into the possession of a third party, the time of prescription which elapsed during the time of possession by the predecessor in title is reckoned in favour of (translated before me as benefits) the successor in title." (Articles 195, 198 and 221 of the BGB refer to "Verjährung". This has been translated as "prescription" but has been called "limitation" in evidence before me to distinguish it from prescription in the sense of usucaption.)

If Article 221 applies, the last acquirer of possession benefits from all periods of the limitation period which have expired in the hands of his predecessors (see e.g. von Feldmann 1993 Marginal Note 2). Thus all the periods of possession which have elapsed during the period of previous possessors can be credited to Mrs Breslav (see Professor Brunner paragraph 117).

Under German law there is a basic distinction between an original acquisition of possession and a derivative acquisition of possession. Derivative possession arises where possession is obtained from a previous possessor.

Professor Siehr says that the 30 year period of limitation provided by German law has not expired for two reasons:-

(1) Article 221 has no application to a transfer from the person who may loosely be described as a bailor to a bailee. The person who in English law would be described as a bailee is regarded, under German law, as being in direct possession. The bailor is in indirect possession. When possession of the painting was handed to Mrs Dikeni by Fürst, Fürst became the indirect possessor and Mrs Dikeni the direct possessor. Article 221 has no application to that transfer.


(2) Even if, contrary to that proposition, Article 221 does have effect, it has no effect where a direct possessor misappropriates the asset. In such a case the direct possessor cannot take the benefit of any previous limitation period and cannot pass that benefit on to any successor. Thus when Mrs Dikeni, in breach of her obligation to Fürst, misappropriated the painting when she transferred it to Rohde, the art dealer in Berlin, or alternatively Rohde himself misappropriated it, time will only have started to run from the date of that misappropriation.

The Application of Article 221 to a Transfer from Bailor to Bailee

Professor Siehr’s proposition is that there is no ‘Rechtsnachfolge’ between a bailee, i.e. someone in direct possession, and a bailor (who, after transfer, is in indirect possession). This was a proposition only raised fully in a supplemental opinion delivered after the trial started. There may have been some indirect reference to the proposition in his earlier report at paragraphs 24 to 26 but his opinion previously concentrated upon the effect of a misappropriation. Professor Brunner’s view is that the distinction between possession as bailee and proprietary possession has no bearing upon the applicability of Article 221(see paragraph 108 of his report). His view is that the decisive consideration is how direct possession has been established. If direct possession was obtained by voluntary transfer then Article 221 applies (see paragraph 109). Although in cross-examination he appeared to suggest that a bailee could not rely upon Article 221, looking at his evidence as a whole and particularly his replies in re-examination I became satisfied that he had not changed his view and did not agree with Professor Siehr.

The concept of indirect possession is explained in Article 868 BGB:-

By virtue of Article 986 the direct possessor may rely upon any rights the indirect possessor has to refuse delivery as against the owner. Article 986 (1) provides:-

"The possessor can refuse the delivery of the thing, if he, or the indirect possessor from whom his right of possession derives, is entitled to the possession as against the owner. If the indirect possessor does not have the authority as against the owner to hand over the property to the possessor, the owner may demand the delivery of the thing to the indirect possessor or, if the latter cannot or will not accept the possession again, to himself." The proposition that a bailee cannot take advantage of Article 221 because there is no ‘Rechtsnachfolge’ between indirect and direct possessor finds support in a number of commentaries. Coing states:-

"In respect of the cases of Article 868 it will have to be taken into account that the (direct) possession obtained with the consent of the predecessor on the basis of one of the legal relationships set out in Article 868 does not exclude simultaneous (indirect possession) of the predecessor, i.e. the limitation period continues to run against the claim against the indirect possessor and that, if the indirect possessor is entitled to possession against the owner on the basis of the completion of any limitation period in his favour, also the direct possessor (the tenant, borrower, bailee etc.) may refuse the return of the object on the basis of 986 subsection (1). The application of section 221 is therefore excluded in the cases of letting agreements (Miete), leases (Pacht), loans, bailments etc." (Marginal Note 5). (My emphasis). Further support can be found in Dilcher at paragraph 7(c) and Walter (paragraph 4) who says:-

"There is no succession into possession between the direct and the indirect possessor. Pursuant to Article 868 the indirect possession exists in parallel. However the time of possession of the indirect possessor must be taken into account for the benefit of the direct possessor insofar as the direct possessor can refuse the return of the object pursuant to Article 986 sub-paragraph (1) where the limitation period against the indirect possessor has expired." Johanssen in his commentary on Article 221 at Marginal Number 3 may support that proposition although I have difficulty in understanding it due to problems with the translation (rechtsbeständige was originally translated as "in a valid manner" then subsequently as "non-dependent" but it is difficult to understand what is meant by "whereby proprietary possession is not necessary"). (Nobody explained to me how there could be a non-derivative possession which was not proprietary).

There are commentaries on Article 221 which take the contrary view. Peters states at Marginal Note 7:-

"The provision is applicable to the succession in relation to direct possession as well as in relation to indirect possession. If the previous direct possessor creates indirect possession by handing the object over to a third party, the previously running limitation period continues to run against him (i.e. against the previous direct and now indirect possessor), and Article 221 is applicable for the benefit of the direct possessor with the consequence that he can rely upon the period which has expired during the possession of the previous possessor, who is now the indirect possessor even if this period was itself not yet sufficient to create a limitation of the action. Article 221 remains applicable where the direct possessor creates proprietary possession (possession as an owner - Eigenbesitz)." Heinrichs states:-

"Article 221 provides that in the case of derivative change of possession the time which has expired during the possession of the predecessor benefits the successor. In the case of multiple transfers of possession the time which has expired during the possession of all predecessors benefits the last possessor (prevailing opinion)". Von Feldmann supports that view. Some reliance was placed upon Bund and Joost in their commentaries on Article 869 but the translations are so opaque that it is difficult to understand the relevance of what they are saying to this issue.

There is no decision in a German court on this issue. A German court would not be bound by the fact that the majority of commentators took a particular view or by the most recent statement of opinions. Where, as here, the reputation of the authors cannot be impugned it would look at the quality of the arguments. I must adopt a similar approach, guided by the evidence of Professors Siehr and Brunner.

The difficulty with Professor Siehr’s views are that they were elucidated so late in the day. That is not designed as a criticism but it has led to a conflict which appears to me to be more a matter of legal theory and has little practical effect in this case. The proposition that Article 221 has no application in relation to a derivative possession is too broadly stated. Coing, on whom the plaintiffs rely states:-

"In the sense of Article 221 one will be able to speak about a "succession" where the new possessor’s possession (an amendment to the translation) is based upon a consensus with the previous possessor; this is true even in cases where the right to possession is derived from an unauthorised person, insofar as the provisions of the German civil code provide that rights can be derived from an unauthorised party." (Marginal Note 5). Walter states:-

"Article 221 stipulates an exception from this rule for a derivative obtaining of possession by allowing the possessor to benefit from the periods of a limitation period which have expired during the possession of his predecessor. Since the successor is to take over the legal position of his predecessor this provision does not only apply to the possession of the direct predecessor." (Marginal Note 1). As a matter of machinery it may well be that a direct possessor does not obtain the benefit of periods of limitation which have elapsed during the possession of his predecessor by virtue of Article 221 but rather by virtue of Article 986(1). The essential point is that indirect possession exists "in parallel" to direct possession. As Coing comments, the limitation period continues to run in favour of the indirect possessor (see also Peters q.v. supra). It is the indirect possessor who obtains the benefit of lapse of time by virtue of Article 221 whereas the direct possessor obtains that benefit by virtue of Article 986(1). It does not seem to me that the machinery matters. Subject to Professor Siehr’s second point in relation to Unterschlagung, whilst Mrs Dikeni was in possession as a direct possessor time continued to run in favour of her predecessor the indirect possessor Fürst. Fürst obtained the benefit of previous lapses of time through Article 221 and Mrs Dikeni by virtue of 986(1). Similarly, when the painting was transferred to Rohde subject to the effect of any misappropriation by either Mrs Dikeni or Rohde. In cross-examination (day 6 page 31 to 32 and 33 to 34 ) Professor Siehr appeared to me to accept that that was the case. He accepted that if after a thirty year period a bailment occurred, both bailee and bailor would be able to rely upon the thirty year period and that the one in direct possession could raise the same objections to a claim by the owner as the bailor; it was, as he accepted, the bailor’s limitation period which the bailee could rely upon. Professor Siehr’s first point does not assist the plaintiffs.

Subsequent Misappropriation ("Unterschlagung") by the succeeding Possessor.

Professor Siehr is of the opinion that if a succeeding possessor, who has taken possession with the consent of his predecessor, subsequently misappropriates the object, Article 221 is not applicable. Professor Brunner takes the view that the key to the application of Article 221 is voluntary transfer of possession and subsequent misappropriation is irrelevant. Both experts agree that Article 221 is excluded where possession is acquired by unlawful interference with direct possession (Verbotene Eigenmacht) (see paragraph 100 of Professor Brunner’s report)). By paragraph 858 BGB:-

"(1) The person who against the will of the possessor deprives him of possession or interferes with his possession, acts unlawfully ...

(2) Possession obtained by unlawful interference is protected. The successor in possession must admit the defect against himself ..." Both agree that theft (Diebstahl) is an example of "Verbotene Eigenmacht". The dispute centres on whether Article 221 is inapplicable where the succeeding possessor obtains possession with the consent of the preceding possessor but subsequently misappropriates the asset. The effect of a subsequent misappropriation is the subject of dispute not only between the experts but also in the commentaries on Article 221. Coing, accepted by both Professors to be of particular eminence states in his commentary to the 1957 edition of Staudinger:-

"Article 221 is not applicable where there is an original acquisition of possession by the succeeding possessor e.g. in the case of prescription, occupation, robbery or theft (Diebstahl). Pursuant to the purpose of the provision its application is also excluded where the possession of the succeeding possessor may have come about with the consent of the preceding possessor but its continuation is based upon a tort (misappropriation (Unterschlagung)) of the succeeding possessor" (Marginal Note 5). Succeeding commentators have either omitted to deal with the question or have disagreed. Dilcher in his commentary in 1980 in the 12th edition of Staudinger says:-

"There is no possessory succession where the possession is acquired unlawfully; otherwise the tortious act would be benefited by the possessory succession pursuant to Article 221". Peters in the 13th edition makes no specific reference to this point but relies upon Article 858 in support of the proposition that Article 221 has no application where the obtaining of possession is without the consent of the previous possessor. The last sentence of Marginal Note 7 (q.v. supra) seems to favour Professor Brunner’s view.

Walter confirms that Article 221 is not applicable where the original acquisition was unlawful (Verbotene Eigenmacht) and records Coing’s commentary which I have already cited. He makes no comment upon Coing (no weight can be placed upon his use of the word "however" which precedes his reference to Coing; it is unlikely to have been an accurate translation).

It is von Feldmann’s Munich commentary (3rd Edn. 1993) which provides the strongest support for Professor Brunner’s view:-

"On the other hand the expiry of the limitation period is not affected where the succeeding possessor, who has obtained possession in accordance with the will of his predecessor, subsequently misappropriates (unterschlägt) the object or continues his possession based upon another tort, regardless of the fact that a different provision would be extremely unpracticable due to the practical difficulty of determining the exact point in time (of the intentions of the misappropriating party) and it would also not be justifiable to restart the limitation period merely upon a change of possession based upon consensus." There is no preponderance of reasoned views which contradict those expressed by Coing. My conclusion must be based on my judgment of the cogency of the arguments advanced by the experts and the commentaries upon which they rely.

Despite the need for judicial comity the justification of von Feldmann (a judge) for the view that subsequent misappropriation has no effect on the application of Article 221 seems to me unpersuasive. He speaks of the practical difficulty of determining the exact point in time when one in possession forms the intention to misappropriate. That change of intention is, in law, decisive (see Professor Brunner paragraph 105). If during the course of a bailment a bailee intends to keep the object for himself he becomes a proprietary possessor. Whilst that may be the position in law, as a matter of evidence that change of intention will not be manifest until the bailee does an act inconsistent with the terms of the bailment. In other words, whilst legally the nature of the possession changes at the moment the intention is changed, in reality that change of intention can only be identified when there is some outward manifestation of the change. Professor Brunner agreed that some manifestation would be needed in order to be able to say there had been a misappropriation (day 6 page 48). It does not seem to me that there is any practical difficulty in determining the time of misappropriation when absent some observable act of misappropriation, a change of mind will never be revealed.

Professor Brunner relied upon the importance of a third party being able to rely upon the outward appearance of legality. The justification for the rule that Article 221 applies despite a misappropriation is said to be protection of an innocent third party who should be able to rely upon the outward appearance of the lawful nature of the transaction. I did not find this a persuasive rationale for the distinction between theft and misappropriation. An innocent third party is just as likely to be duped by one who has misappropriated property as by the thief. Neither are likely to reveal their dishonesty. A third party is no more likely to be able to discover a misappropriation than a theft.

Dilcher’s justification for the rule that there is no possessory succession where the possession is acquired unlawfully namely that a tortious act should not have the benefit of Article 221 applies, it seems to me, with equal force to misappropriation. (see Professor’s Siehr’s Supplemental Opinion paragraph 3(b)).

Mr Brindle QC relies upon the very concept of unlawful interference (Verbotene Eigenmacht) as providing the key to the problem. One who has obtained possession by consent cannot commit an unlawful interference in relation to the indirect possessor (Professor Brunner paragraph 109). Professor Brunner’s view relies upon the commentaries to which I have already referred (paragraphs 113 to 116). In my judgment none of the commentaries provide a convincing rebuttal of Coing’s views. Once misappropriation has occurred the nature of possession changes; it is a proprietary possession. In such circumstances it does not seem to me rational that a direct possessor who changes the nature of his possession by misappropriation should be able to pass to a transferee the benefit of the limitation period which elapsed during the time he was a direct but not a proprietary possessor. It seems to me logical that the chain of non-proprietary possession has been broken. Accordingly, on this point, I accept Professor Siehr’s view based upon the commentary of Coing. That is not to say that no benefit of lapse of time will pass to the transferee. The transferee will obtain, by virtue of Article 221, the benefit of such time which has elapsed whilst the object was in the possession of the transferor who was guilty of misappropriation (see Professor Siehr day 6 page 10). The transferee will not obtain the benefit of any lapse of time prior to the misappropriation.

In those circumstances I conclude that the German limitation period had not expired at the time proceedings were commenced by the Federal Republic of Germany in 1997 or the City of Gotha in 1993. The period started to run either when Mrs Dikeni misappropriated the painting in 1987 or when, in that year, it was misappropriated by Rohde. The plaintiffs’ claim does not fail by reason of the operation of the thirty year German limitation period.

Notes (GD)
J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch, Berlin. Quotations relate to the commentary on § 221 BGB by Coing (10th ed. 1957), Dilcher (12th ed. 1980) and Peters (13th ed.).
Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. I, 3rd ed. München 1993.
Palandt, Bürgerliches Gesetzbuch, München (edition and year not specified, presumably 57th ed. München 1998).

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