Nemo dat quod non habet essay PDF

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Introduction (main 2017) The statement suggests 2 claims.Firstly, there is no coherent scheme of such protection for a bona fide purchaser, but rather a haphazard number of provisions spanned across various sources (the courts’ interpretation of SOGA 1979, Factors Act 1889, Hire Purchase Act 1964​)....

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Introduction (main 2017) The statement suggests 2 claims. Firstly, there is no coherent scheme of such protection for a bona fide purchaser, but rather a haphazard number of provisions spanned across various sources (the courts’ interpretation of SOGA 1979, Factors Act 1889, Hire Purchase Act 1964). Secondly, the relevant statutes designed to protect the bona fide purchaser doesn’t really serve to uphold their interests as it was designed in a technical manner to defeat such interests. This question requires an analysis of the applications by the courts in relation to the Nemo dat rule and its exceptions offered by the relevant statutes mentioned above in order to come to a conclusion. The Nemo dat quod non habet rule The Latin maxim ‘Nemo dat quod non-habet’ translates as ‘no one gives who possesses not’. When a non-owner sells goods without consent/authority from the true owner, he can pass no better title in the goods than he had (S.21(1) SOGA 1979). For a very long time, this notion has prevailed and the law must serve to protect the interests of an owner and his rights towards the possession and enjoyment of his goods. Any attempts from individuals who sell goods without owning the title would risk being sued for a total failure in consideration from the bonafide purchaser per S.12 SOGA 1979 as demonstrated in Rowland v Divall and Karflex v Poole. As such, it could be observed that the law has attached great significance to the Nemo dat rule. Nonetheless, the court has developed some exceptions to the general Nemo dat rule in efforts of protecting the interests of bona fide purchasers for value. Lord Denning in Bishopsgate Motor Finance v Transport Brakes stated that 2 principles are striving for mastery. First, the right of a property owner and second, the right of a bona fide 3rd party purchaser to claim a good title. His lordship stated that the 1st principle has held sway (dominated) for a long time

but has been modified to meet the needs of our time (favouring the bonafide 3rd party purchaser). Lord Denning’s statement seems to contrast from the Crowther  Committee’s statement that the exceptions are not drafted based on justice but rather on fine technicalities (favouring the true owner). The latter’s statement suggests that the ‘technicalities’ in the relevant provisions have often sacrificed the interests of the bonafide purchaser. In this context, it seems to reflect on Lord Goff’s statement in National Employers Mutual General Insurance Association v Jones where his lordship stated ‘...the succeeding sections enacts what appears to be minor exceptions to the long-standing rule’. There are contrasting views on the exceptions to the Nemo dat rule in relation to its ability to protect the interests of bona fide 3rd party purchasers. As such, an analysis of the exceptions to the general rule in S.21(1) SOGA 1979 will be required in reaching a conclusion. Exceptions to the Nemo dat rule (S.21(1) SOGA 1979). 2nd limb of S.21(1) - Estoppel In order for a claim in estoppel per S.21(1) to succeed, the true owner must have made a representation, intentionally or negligently, which has misled the bonafide purchaser who has gone on to buy the goods. Situations where innocent purchasers have estopped the original owner from reclaiming the title are few and far between. The court has taken a strict interpretation and held in a number of cases that the representation made by the true owner must lead the bonafide purchaser to believe that the vendor owns the goods (Farquarson Bros v King). As seen in Mercantile Bank of India v Central Bank of India, the scope of estoppel is extremely limited. A railway receipt was simply an authority to take delivery of the goods and therefore the possession of the receipts did not amount to any representation that the receipt holder had any authority to dispose of the goods. The possession of these receipts merely amounted to the actual possession of the goods themselves. Per S.21(1), such possession does not imply a right on the receipt holder to transfer the title to the goods. Additionally, Lord Wright also commented that very few cases that involved a plea of estoppel by representation have succeeded. Furthermore, the ratio decidendi of Mercantile Credit Co v Hamblin further supports Lord Wright’s opinion, making it more evident that bonafide buyers must normally look for other exceptions to uphold their interests. The interest of the true owner was given such importance, the court viewed that even if the true owner was extremely careless with his own property, he would not be precluded from recovery (Moorgate Mercantile v Twitching).

Notwithstanding the ratio in Hamblin, there were occasions where the court has allowed a plea of estoppel by representation. The case of Henderson v Williams has illustrated that so long there was a representation by words or conduct from the true owner, the bonafide purchaser can successfully rely on estoppel (the owner’s late notice about the fraud was irrelevant). Lord Salmon’s dissenting judgement in Moorgate Mercantile v Twitching also mentioned that the true owner’s carelessness (not registering the car under the HPI registry) would fall well within the ‘neighbour’ principle per Donoghue v Stevenson. If such carelessness was held to not be fundamental to a duty of care arising, the purpose of having the HPI in the 1st place would arguably be defeated. It’s clear that the 2nd limb of S.21(1) SOGA 1979 was drafted by Parliament to protect the rights of the true owner. Unless there was a clear representation by words or conduct from the true owner, the courts will not hesitate to strike out such pleas of estoppel. As such, the statement by the Crowther Committee is accurate for this exception. S.23 SOGA 1979 - Sale under a voidable title S.23 provides that from a sale under a voidable title, the bonafide buyer will acquire the good title to the goods provided the title has not been avoided at the time of the sale. A significant portion of this exception lies in the distinction between void and voidable contracts. Generally, face to face contracts are voidable from a mistake of attributes (Lewis v Avery). Whereas non-face to face transactions would be void ab initio from a mistake of identity (Cundy v Lindsay). However, the later case of Ingram v Little has caused uncertainty in this area of law by holding a face to face contract void from a mistake of identity. Additionally, the case of Shogun Finance v Hudson has held that there was no face to face contract even though the impostor was dealing directly with the seller. Lord Nicholls’s dissenting judgement in Shogun Finance stated that the law on this area is unsatisfactory and the few cases available cannot be reconciled. His lordship opined that the distinction between face to face and non-face to face transactions are immaterial. Following his lordship’s example of a fraudulent credit/debit card transaction, whether the card was used in person or over the telephone/email was, in essence, the same - owner of the goods agreeing to part with his goods on the basis of a fraudulent misrepresentation made by the fraud in relation to his identity. Since the essence of the transaction was the same in each case, the law should apply the same principle in each case, irrespective of the mode of communication for offer and acceptance. With the decision in Shogun Finance being the latest decision for such cases, there seems to be no proper guidance as to the application of S.23. What is clear from the decision in Ingram v Little is that the courts are leaning heavily towards protecting the true owner’s rights to the goods.

Once a contract was found to be voidable, the owner has a duty to rescind the contract before the sale to the 3rd party bona fide purchaser takes place (Car & Universal Finance v Caldwell). With that, it clearly makes it easier for the owner to satisfy this requirement as he does not need to track down the person who might have absconded. The true owner only needs to take all reasonable steps open by him (reporting to the police and etc.) before the subsale takes place for him to successfully retain the title to the goods per S.23. As such, the applicability of S.23 SOGA 1979 is in line with the Crowther Commission’s statement. S.9 FA 1889 via S.25 SOGA 1979 - Buyer in possession exception For this exception, the bonafide purchaser has to satisfy 5 criteria, namely: 1. The buyer must have bought/agree to buy the goods, When the bonafide purchaser fails to rely on S.23 SOGA 1979, he would likely raise the buyer in possession exception per S.25 SOGA 1979 as seen in Newton of Wembly v Williams. However, by virtue of the HPA  1964, hire purchase agreements don’t fall within this exception due to the requirement of ‘bought/agreed to buy’ as seen in Helby v Mathews. 2. The goods must be in possession of the buyer in possession, As discussed above, mere possession of the goods is easy to satisfy. Additionally, there is no requirement of actual delivery and delivery of goods may be constructive (Four Point Garage v Carter; Michael Gerson v Wilkinson). This would essentially reduce the burden on the bonafide purchaser when raising this exception. 3. The true owner must consent to the buyer in possession to possess the goods, The court has taken a wide interpretation for this requirement and allowed consent to be obtained by fraudulent means to qualify for this requirement (Car & Universal Finance v Caldwell; Newton of Wembley v Williams). As such, the bonafide 3rd party purchaser can easily satisfy this requirement. 4. The disposition must take effect as if a mercantile agent acting in the ordinary course of his business, and Here, there is no requirement for the seller to be a mercantile agent. The disposition only has to take effect as if a mercantile agent acting in the ordinary course of his business. As such, all it requires is for the 3rd party purchaser to prove that the sale was in the ordinary course of business of a mercantile agent. In Newtons of Wembly, by merely selling the goods in a famous market place (Warren Street) this requirement could be easily satisfied. 5. The sub-buyer must be bona fide for value without notice

This requirement is not an obstacle for the bonafide purchaser. From the above discussion, it’s submitted that the buyer in possession exception by virtue of S.25 SOGA 1979 favours the interests of the bonafide 3rd party purchaser and is not in line with the Crowther Committee’s statement. S.24 SOGA 1979 - Seller in possession after-sale exception Lord Pearson in Pacific  Motor Auctions v Motor Credit Care stated that the aim of this exception was to protect an innocent purchaser who was deceived by the vendor’s physical possession of goods/documents while being unaware of the seller’s right to dispose of the goods. At first glance, S.24 serves to protect the interests of the bonafide purchaser. A similar overlapping provision could also be found in S.8 FA 1889. To successfully rely on this exception, the bonafide purchaser needs to satisfy 4 criteria. Namely: 1. There must be a 1st sale of goods to a buyer, This is easy to prove. 2. The seller must remain in continuous physical possession of the goods, Also held in Pacific Motor Auctions, the capacity in which the seller holds onto continuous possession of the goods is irrelevant. The bonafide purchaser only needs to satisfy that the chain of physical possession remains unbroken at the time of the sale. There is no requirement for the seller to remain the possession of the goods with the consent of the buyer. The applicability of this provision significantly depends on whether the 1st buyer has taken the risk of a second sale by the seller by leaving the goods with the seller after purchasing it. 3. There is a delivery of the goods to the 2nd buyer, and Per Michael Gerson v Wilkinson, there is no requirement for actual delivery of the goods to the 2nd buyer (bona fide purchaser). A notion of constructive delivery is also accepted.

4. The 2nd buyer (M) must be a bona fide buyer for value without notice. This would usually be the case and as such, it’s not an obstacle for the bona fide purchaser. From the above discussion, it appears the seller in possession after sale exception leans towards protecting the bonafide 3rd party purchaser’s rights. As such, it’s not in line with the Crowther Committee’s statement. S.2 FA 1889 via S.21(2)(a) SOGA 1979 - The sale by mercantile agent exception

There are 5 criteria that the bonafide purchaser has to satisfy in order to successfully rely on this exception. These are namely: 1. There must be a mercantile agent, The definition of a mercantile agent is laid down in S.26 SOGA 1979. Nonetheless, the court in Lowther v Harris has taken a broad interpretation to S.26 by allowing individuals who are not mercantile agents by professions to also qualify S.26 so long he had the authority on the particular occasion to act on behalf of another. Additionally, there is also no requirement for the mercantile agent under S.26 to deal with multiple principals at once. For that, it can be observed that the court has taken steps to reduce the harshness of this exception toward bonafide purchasers by removing the requirement for the seller to be a mercantile agent by profession. 2. Goods in possession of the mercantile agent with the consent from the true owner, The cases of Pearson v Rose & Young and Stadium Finance v Robbins have illustrated that in the sale of a motor vehicle, the true owner’s consent to the mercantile agent in taking possession of the vehicle is insufficient. The true owner must have also consented the mercantile agent to possess the documents to the title. This requirement is where many bonafide purchasers fail as the seller without consent to possess the documents to the title would most often forge it while making the sale. If such a scenario arises, the bonafide purchaser will have no remedy under this exception. 3. True owner must consent to the possession of goods in the mercantile agent’s capacity, Lord Denning in Pearson  v Rose & Young stated that for this requirement, there is no need for the true owner to consent to the sale of goods. A mere consent from the true owner to obtain offers for sale or to put the goods on display is sufficient. 4. The sale must be in the ordinary course of business of the mercantile agent, and The sale only has to take place at the mercantile agent’s usual place of business during standard working hours (Oppenheimer v Attenborough). As such, wouldn’t be as much of an obstacle to the bonafide purchaser to prove this. 5. The buyer must be bona fide for value without notice. As discussed above, this isn’t an obstacle for the bonafide purchaser. At first glance, this exception appears to balance the interests between the true owner and the bonafide purchaser. However, how would a bonafide purchaser with the impression that the seller is a mercantile agent be expected to foresee whether the agent possesses the goods and the documents of title with the true owner’s consent?

Additionally, since there is no requirement for the seller to be a mercantile agent by profession, the vehicle could be sent by the true owner for service and repairs purposes and not for the purpose of sale. In this regard, the issue of having consent to possess the vehicle at the mercantile agent’s capacity would then arise and would be tough for the bonafide purchaser to prove. From the above discussion, it’s clear that the mercantile agent exception has posed hurdles to the bonafide purchaser and makes it somewhat impossible for him to successfully rely on this exception. Therefore, this exception is in line with the Crowther Committee’s statement. S.27 HPA 1964 - Purchasers of motor vehicles This provision protects the innocent purchaser when they buy from someone who doesn’t own the car and was simply hiring it under a hire purchase agreement. Should the requirements of S.27 HPA 1964 be satisfied, the bonafide purchaser will be able to defeat the claim of the finance company. As outlined in S.29(2)  HPA  1964, the bonafide purchaser must be a private purchaser and not carry on any such businesses mentioned in the provision. As such, a bonafide car dealer will not be protected under this provision, even if he’s buying a car for his own private purposes (Stevenson). As such, it could be argued that this exception prima facie leans toward protecting the interests of the true owner. Nonetheless, the decision in GE Capital Bank Ltd has demonstrated how S.27(3) HPA 1964 can protect the rights of the 1st private purchaser (true owner (under an HPA) - the motor dealer - 1st private purchaser). So long the 1st private purchaser is bonafide and has no notice about the relevant hire purchase agreement, the title would be vested to him and the true owner will have no remedy under this exception. Although the applicability of this exception is limited to hire purchase agreements and/or conditional sale agreements, it seems to offer adequate protection towards the bonafide purchaser. Thus, it is not in line with the Crowther Committee’s statement. Conclusion From the above discussion, it’s submitted that the Crowther Committee’s first claim is accurate. There is indeed no coherent scheme of protection for the bonafide purchaser as the exceptions to the Nemo dat rule could be found in various provisions including the SOGA 1979, FA 1886, and the HPA 1964. In relation to the Crowther Committee’s second claim, there is no doubt that the Nemo dat rule is generally harsh on the bonafide purchaser due to the technicalities involved.

As Stephen Hawking once said, one of the basic rules of the universe is that nothing is perfect. Perfection simply doesn’t exist...without imperfection, neither you nor I would exist. Similarly, no law is perfect. Although it could be argued that the true owner should retain the title in most situations, it’s also necessary to appreciate the unfairness it could result in. The academic Attiyah suggested that there is insufficient attention being paid to the likelihood of the true owner being protected by insurance. In such cases, greater protection should be given to the bonafide purchaser than it is currently. As such, the more preferable approach may be to abolish the Nemo dat rule and its exceptions by replacing it with an overarching principle of fairness that’s supported by statutory guidelines (Crowther Committee). Although doing so could result in floodgates of litigation, something must be done....