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Dealer Michael Marks had to return the two disputed works by Indian painter Francis Newton Souza (1924-2002) to collector Aziz Kurtha after failing to persuade the High Court that a chain of transactions gave him legal title to them.

Mr Justice Tugendhat questioned the credibility of what little paperwork there was and stressed the importance of keeping detailed and accurate records of transactions.

He further warned Mr Marks that the lack of a detailed and contemporaneous audit trail, setting out the transactions and provenance, could have exposed him and others to “very serious risks” including that of criminal prosecution.

How the paintings and other works came to disappear from storage, where Dr Kurtha had consigned them in the 1980s, has never emerged. He became aware of the problem after seeing five paintings he thought were in storage on offer at Bonhams in 2002.

He started to negotiate their return, later registering the remaining missing Souzas, including the two subsequently found to be in Mr Marks’ possession, with the Art Loss Register.

Mr Marks told the court that he had bought the two paintings in good faith from another dealer in January 2006. He intended to sell them to a client for a £125,000 profit. The dealer he had acquired them from in turn said he had bought them from a third dealer for £25,000.

The works themselves, Still Life with Chalice with Host from 1953 and Head of a Portuguese Navigator from 1961, disappeared from storage sometime after 1984 along with a number of other works by Souza.

It was only when Mr Marks telephoned the Art Loss Register in January 2006 to enquire about these paintings that it became apparent he had them in his possession.

Mr Marks paid a search fee to the ALR in order to check their title and was told there was no problem. But the High Court revealed that the ALR knew the works to be the subject of a claim by Dr Kurtha and deliberately misled Mr Marks.

ALR chairman Julian Radcliffe explained to ATG that this was part of a ruse to keep lines of communication open with Mr Marks. The judgment stated that Mr Radcliffe went as far as telling Mr Marks that he had a client who would be interested in buying the paintings from him. Mr Radcliffe further explained that this was all part of bid to recover the works by persuading Mr Marks to bring them into the ALR offices.

Dr Kurtha eventually launched his civil action against Mr Marks and, at the end of last month, the High Court found in favour of the collector in the ownership dispute.

The judge ruled that because Mr Marks had not been able to prove the works had been purchased in good faith by any party before February 2001, any claim he might make to good title under the statute of limitations would fail.

As for the remaining unrecovered Souzas from Dr Kurtha’s collection, one is currently subject to litigation in the US, whilst two remain at large.