1l a l i v e avocats good faith, due diligence and acquisition of title to works of art the swiss...

1L A L I V E

Avocats

Good Faith, Due Diligence

and

Acquisition of Title to Works of Art

The Swiss Law Approach

Carolyn Olsburgh

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Good Faith and Acquisition of Title – Swiss Law

INTRODUCTION

Subsequent purchaserOriginal owner

• Purchase of a work of art from a person without title

• Conflict of interests:

• Civil law v. Common law systems

Good faith has an effect on title (e.g. possibility to acquire title on a stolen object)

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Issue: Good faith or bad faith of the purchaser?

Consequences on:

Original owner’s claim to recover the work of art

Acquisition of title by the purchaser


INTRODUCTION

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Section I

Was the purchaser in good or bad faith?


I. NOTION OF GOOD FAITH

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Knowledge about the lack of title at the time of the purchase?

Yes bad faith

No good faith

unless he should have known bad faith



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1. Relevant moment: at the time of the purchase

2. Presumption of good faith (Art. 3(1) CC)

Burden of proof that there was no good faith: former owner

3. No protection of the purchaser when:

• He was in bad faith; or

• His ignorance is due to the fact that he did not pay the required attention (Art. 3(2) CC)



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4. Degree of attention:

• Matter of appreciation

• Objective test: honest man in the shoes of the purchaser?

5. Duty to inform oneself about the title

General rule: only if « concrete reasons capable of putting the title into doubt »

Exception: businesses/trade involving goods of doubtful origin(e.g., second-hand goods, antiques, art)



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On the art market:

The purchaser must inform himself « when he should be suspicious given the circumstances »

Higher standard of care

Irrelevant factors: dealer/non-dealer; purpose of resale or not

Relevant: knowledge of the market in question



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Original Manuscript of the Marquis de Sade(Swiss Supreme Court, 28 May 1998, SJ 1999 I 1)



A (former owner)

D (intermediary renownedspecialist in manuscripts)

C (seller)

B (purchaser)

Stolenmanuscript

Claim torecovermanuscript Sale of

manuscript

France

Switzerland

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Solution for the case

- Renowned intermediary (D)

- Personal relationship between former owner (A) and seller (C)

- High purchase price (= value according to expert)

- BUT: Manuscript not delivered in a case

- HELD: Good faith of B A’s claim was dismissed.



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Section II

Consequences of the distinction

between good faith and bad faith


II. CONSEQUENCES OF GOOD/BAD FAITH

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Issue 1

Was the purchaser in good or in bad faith at the time of the purchase?

Bad faith: object may always be recovered (Art. 936(1) CC) no possibility to ever acquire title (Art. 728 CC)

Good faith: second stage of the reasoning


II. CONSEQUENCES OF GOOD/BAD FAITH

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Issue 2

Was the possession lost willingly or unwillingly?

Object ‘subject to a bailment’ (‘entrusted object’): object may never be recovered immediate acquisition of title

Stolen/lost object: object may be recovered during 1 year / 30 years acquisition of title may occur after 30 years


II.2 CONSEQUENCES OF GOOD FAITH

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a) Object ‘subject to a bailment’ (‘entrusted object’)

Art. 933

The good faith purchaser « must be protected in his acquisition, even if the transferor lacked capacity to pass title »(see also Art. 714(2) CC).

No claim is possible

Immediate acquisition of title



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b) Stolen or lost object – Claim (Art. 934 CC)

within one year after the owner becomes aware of the place where the cultural asset is located and the identity of the possessor,

but at the latest 30 years following its removal (new statute of limitations since 1st June 2005)

Against reimbursement if the object was bought at a market, at a public auction or from a dealer of objects of the same nature



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b) Stolen or lost object – Acquisition of title (Art. 728 CC)

Acquisition of title through operation of the limitation period

Peaceful and uninterrupted possession

During a period of 30 years (since 1st June 2005)



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CONCLUSION

Good faith purchaser

Entrusted object Stolen/lost object

Bad faith purchaser

Claim within 1 year / 30 years

Claim at any time

No claim

Immediate passing of title Passing of title

after 30 years

No passing of title

If market/ public auction/dealer of objects of same nature:

reimbursement of purchase price

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1. Evolution in case-law

Stricter standards of good faith more easily bad faith

1) No statute of limitations for claim to recover goods

2) No possible acquisition of title by purchaser

Security of transactions?

Security about title?


CONCLUSION

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2. Recent amendment in the Swiss Civil Code

Longer limitation periods (for good faith purchasers of stolen/lost cultural assets)

1) Extension of the absolute limitation period to 30 years

2) Extension of the period required to obtain title through operation of law: 30 years

Problem: discrepancy between relative limitation period of 1 year and statute of limitations to acquire title


CONCLUSION

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3. Further steps in the future?

Art. 4(1) of the 1995 Unidroit Convention:

Good faith

• Relevant for compensation, but not for the issue of title

• Burden of proof lies on the current possessor


CONCLUSION

1l a l i v e avocats good faith, due diligence and acquisition of title to works of art the swiss...

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