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Italy's cultural heritage authorities tried several times to trace the missing works but never dreamt of looking as far as New Zealand, where the paintings were prize exhibits in a city art gallery.

Their reappearance triggered a protracted legal battle between two Tuscan businessmen, sons and heirs of the collection owner, and the citizens of Dunedin, one of the southernmost cities in New Zealand.

The works, Woman Rocking a Baby by Odoardo Borrani and The Baker's Shop at Settignano by Telemaco Signorini, belonged to Cino Vitta, a law professor and head of the Jewish Community in Florence. After Mussolini issued the Race Laws deporting Jews to concentration camps Mr Vitta bricked up his cherished collection in a farm cottage in Chianti, sent his son abroad and fled with his wife to a mental asylum in Siena, where they hid till the end of the war.

In 1946, they found the paintings had vanished. Mr Vitta denounced the theft to the Committee for the Recovery of Stolen Italian Art, but the art hunters were busier trying to find the "more important" masterpieces from churches, museums and private homes pillaged by the Nazis. Then, out of the blue, in 1997, Cino Vitta's grandson, Johanan, was telephoned by Italian Customs officers, saying five of the missing Macchiaiolis had turned up in a consignment from New Zealand.

His shock was matched by the embarrassment of the gallery curator accompanying them. The paintings belonged to the Public Art Gallery of Dunedin, the university town at the foot of South Island. The gallery curators had been honoured to lend its five prized pieces for an important retrospective in Florence, after an invitation from Italy's foremost expert on the Macchiaioli group.

The Macchiaioli were artists in the 1850s who broke from academic art to move in a naturalistic direction. Their name came from the "macchia", which means spot or speck of colour, and they were seen as a poor relation of the French Impressionists.

The Dunedin paintings would probably have been unpacked, hung, admired and returned, but for a stroke of fate. An employee in the Customs art clearance department had once worked on compiling the definitive List of Stolen Italian Art Works. When she saw the documentation, a bell rang.

She went back to the list and found the descriptions of Cino Vitta's stolen works perfectly matched the paintings she had in front of her, although there were no photos. Slowly, the mysterious trail of stolen goods began to unravel. While Cino Vitta was still hiding in the Siena mental hospital, Allied troops were inching their way up the peninsula. Among them was Private Arthur Harris Fraser, serving in the 5th New Zealand Field Ambulance.

Pte Fraser, a reserved, cultured man, and an amateur painter, noticed the Macchiaioli paintings at a market in Siena in 1944. He was attracted by their style and size - all are small and easily transportable - bargained, paid and eventually took them home by ship when he was returning for demob.

After he died in 1964, the paintings passed to his sister Dorothy, now in her nineties. In 1994 she sold them to the Dunedin Art Gallery for a symbolic sum. Thus, the gallery argued, they had been acquired legally. A fierce legal battle began while the five paintings duly went on display in the Florence retrospective. The Vitta grandsons, Johanan, a hotelier and amateur painter, and Nathaniel, an antiques dealer, lodged a civil action to reclaim the family treasures.

That was thrown out by a Florence court, then readmitted. Public prosecutors in Rome filed criminal charges against the Dunedin gallery and as soon as the exhibition finished police impounded the Macchiaiolis. The New Zealanders were in a tricky position. They agreed the Vittas had lost the works because of the Nazi invasion, but they felt their reputation for fair play was at stake.

The gallery had acquired them in good faith and the residents of Dunedin had become fond of the pictures. But the gallery executives strongly suspected their ratepayers would not be fond enough to finance a long and costly trip through Italy's judicial labyrinth. It looked as if the good burghers of Dunedin would have to live without the Italian paintings.

But a breakthrough came last April. A Florentine judge, Isabella Mariani, proposed a compromise - the works would be valued and split 50-50, or as close as possible, between the heirs and the gallery. After two years under Italian police guard three Macchiaiolis were finally escorted back to Dunedin in September, to a reception normally reserved for returning rugby champions.

The heirs say their sale of Woman (25cm by 38cm and valued at pounds 80,000) and The Baker (27cm by 18.6cm and pounds 43,000), has been forced, not for financial reasons, but because the brothers are in love with the same painting, the Woman.

Some art experts feel they should have left their dispute to Judge Mariani. She could have allowed them to take turns, year about, rather than sell the heirlooms they fought so hard to regain.

[For a fuller account of this story, see the extract from Art Thieves, Fakers and Fraudsters: The New Zealand story by Penelope Jackson, http://www.versopolis.com/panorama/283/antipodean-art-thieves]