520i touring rear seat belt problem

Hi,
I've got a 2000 520i (E39) touring. I've got a weird problem with the
centre rear seat belt. Can anyone help please?
A while ago when I tried to lift the backrest back up after having had
it lowered, I found that the seat belt was locked and wouldn't pay out
the belt. This needs to happen as the back is lifted due to the
geometry, so I couldn't lift it. I ended up having to cut the belt,
thinking that the reel had become faulty.
I bought a secondhand belt complete with new reel and have just fitted
it. Same problem! I now have looked at both units and have found that
when the back is locked in position, the latch pulls a cable that
unlocks the ratchet and allows the belt to operate normally. IWhen the
latch is opened, the ratchet allows the belt to retract but won't let
it come out again. I guess this is a safety feature to stop you using
the belt if the latch isn't locked.
However if the seat isn't vertical, the ratchet refuses to allow the
seat belt to come out again, even if I operate the lock by hand.
Putting the back into position is the only way to release the ratchet.
So on the face of it, it can't work! But it used to. Any idea what's
wrong?
Thanks,
AT