Transfer of Title [Defences to nemo dat]
nemo dat quod non habet
"no one can transfer a better title than he himself possesses‟ If A has an existing property right, he can still have a good claim against buyer. preserve the proprietary interest of the true owner.
Where can s25 not apply?
- Buyer is not acting in course of business; business hours. - buyer does not have consent of seller to be in possession [no thiefs!] - Buyer has possession through an agreement, which is not an agreement to sell, [such as a HPA or bailee]
Conclusion about nemo dat defences?
1. Atiyah: the law is in a complex and confused state. They are complicated, and lack an underlying and unifying rationale. Not based on equity or justice. But fine technicalities. 2. Why do they overlap? Should we have a single coherent principle? The US for example has such. 3. UK law takes an "all or nothing" approach. - Ingram v Little dissent Lord Devlin dissent: when attempting to do justice, the relevant question is not whether title was void/voidable, but that the two innocent parties should share the loss between them in proportions to what is just in the circumstances. [this is not a good idea and not very practical when property has passed hands a number of times] 4. consider, that if original owner is insured, there is good reason that bona fide purchaser w/notice should get a good defence.
Why have these defences to nemo dat emerged?
1. Need to protect bona fide purchasers. Nemo dat is a clear rule, but not always fair. No way a buyer can effectively investigate title to chattels, nor should buyers have to everytime they purchase. 2. Buyers need assurance that they will not be deprived of goods they honestly bought in an open market, by an unknown owner. Do not want purchasers to be deterred from buying goods/services. 3. Want goods to move quickly, freely and efficiently in a market, and ensure buyers are confident in their purchasers. 4. But these defences are limited, and only minor exceptions to the fundamental rule: Lord Goff in National Employers' Mutual General Insurance v Jones. 5. The Sale of Goods Act 1979 codifies a number of exceptions to the nemo dat ruled whose origin lies in the common law.
Folkes v King
A gives B, a mercantile agent, authority to sell A's car for £575 or more. [in possession; consent; factor] B sells to X for £340, and disappears. X is UNAWARE OF LIMIT placed on B. Made in good faith; ordinary course of business; no notice. Purchaser receives good title.
seller in possession after sale; DEFENCE 5
S24 SGA s8 FA - good faith can be determined at agreement, [obviously otherwise B2 would have to give up goods to B1 everytime] S agrees to sell to B1, but does not deliver. S agrees to sell the same goods to B2 and does deliver. If B2 is acting in good faith without notice of other sale to B1, he will have a good defence. [aiming to protect 3rd party buyer against risk created by separating possession and title. Seller does not need to be a MA.] NOTE section does not say B2 needs to pay for goods]
Limits to s24
B2 will only have a defence to nemo dat if S delivers the goods to them, or documents of title. The requirement for goods to be delivered is because this is the last act a seller does before contract is performed. B will only be worthy of protection if seller has executed contract of sale. If defence operates, B1 will only have a claim against S for breach of contract.
SGA s21
Buyer acquires no better title to the goods than the seller had, unless owner of goods is by conduct precluded from denying seller's authority to sell.
What is transfer of title about?
Seller must have absolute title for buyer to receive property free from existing titles.
Astley Industrial Trust v Miller
Chapman J statutory power depends on agent having possession in his capacity as a mercantile agent, and on true owner having consented to him having possession in that capacity.
Farquharson Bros v King
Clerk of company launched fraudulent scheme and sold timber to 3rd party, King. when FB found out they sued King, arguing they had a property right in timber, and Clerk had no authority to sell. King argued he was innocent. Lord Lindley: title is not improved by innocent circumstances. He is not better/worse off because of how carelessly people look after property. D were not misled by plaintiffs, so FB had better title. The company had not made any kind of representation to the buyers; company never held out that clerk had a right to sell.
FACTORS, mercantile agent defence 4
Factors Act 1889 s2 Buyer acquires goods from seller, where seller is in physical control of the goods. Seller is a mercantile agent, and is acting with A's consent S has A's consent S is in physical possession S is a factor (mercantile agent) [protecting against apparent authority.] Mercantile Agent is defined in s1(1): in customary course of business, agent has authority to sell goods.
burden of proof in s23
For s23, the burden of proof of whether the purchaser acts in good faith is on the ORIGINAL OWNER. Is this onerous for them? - for the other exceptions, burden of goof faith lies with the purchaser.
DEFENCES
Found in SGA, Hire Purchase Act, and Factors Act. Originated at common law. [1. consent] - SGA s21 2. Estoppel - SGA s21 3. voidable title - SGA s23 4. sale under - s2 Factors Act 5. Seller in Possession - s24 SGA, s8 FA 6. Buyer in possession - s25 SGA, s9 FA 7. Private purchase of car held on hire purchase - s27 HPA
Hire Purchase DEFENCE 7
Hire Purchase Act 1964 s27 Financer gives possession to person hiring car, but remains owner. Hirer then sells car to a private purchaser who is innocent without notice. Purchaser has good defence against financer. NARROW BECAUSE: 1. only applies to motor vehicles. 2. MUST BE A PRIVATE PURCHASER, not car dealership
National employers MG Insurance v Jones
Hopkins car was stolen by thief who sold it on to Jones, who acquired it innocently. Could Jones raise s25 defence? No: thief cannot be a 'buyer' who has been given CONSENT by the seller, since this is unlawful possession. Owner must have "entrusted" the buyer with goods. The buyer must have lawfully received possession of goods from the original owner in ordinary course of business. [However, when he resold it to another who sold it to the innocent third party, the last transaction was protected. This shows the limitation on the general rule and how such an exception can be used.]
Consent defence 1
If owner consents to A selling the goods, B gets good title.
Bishopgate Motor Finance
Lord Denning: In the DEVELOPMENT of our law, two principles have STRIVEN FOR MASTERY. [Balancing interests of two innocent parties] (1) First: protection of property: no one can give a better title than he himself possesses. (2) Second: protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title. The first principle has held SWAY for a long time, but it has been MODIFIED by the COMMON LAW and STATUTE so as to meet the needs of modern transactions.
Car & Universal Finance v Caldwell
Mr Caldwell [O] sold his car to a rogue [A], who paid £10 cash deposit and left another cheaper car as security and gave a cheque for £965. Next working day went to bank, and reported immediately to police, and wanted to rescind contract. Rogue subsequently sold car to B. Rouge acquired voidable title to the car when reported to police. Mr Caldwell had successfully rescinded the contract. He had 'DONE ALL HE CAN DO' to demonstrate that he no longer wished to be bound by the contract. B did not have defence under s23. Not necessary to notify the rogue, had notified 3rd party (police)
Section 24 and 25 aims
protecting parties [third parties] who rely on the appearance of possession.
Cundy v Lindsay [identity]
rogue ordered a quantity of handkerchiefs from claimant claiming to be a reputable buyer. Sold them on to a buyer acting in good faith in course of trade. contract between O and A was void as identity of important. title in the goods did not pass to the rogue so he would have no title to pass onto the defendants. Ownership of the goods would remain with the owner.
Sale under voidable title: DEFENCE 3
s 23 "When the seller of goods has a voidable title but his title has not been avoided at the time of the sale, the buyer acquires a good title, provided he buys them in good faith and w/o notice of the seller's defect of title." [if title is transferred to a rogue under a voidable contract, and the rogue sells the goods on before the owner 'avoids'/rescinds the contract, the buyer will acquire good title.] Is it harsh on third parties? Is it arbitrary? Innocent third party's claim depends on how quickly the original owner avoids the contract, and speed taken by rogue in reselling goods. NOTE. not a full defence: only a limit on A's power to rescind.
common law estoppel DEFENCE 2
s21(2) 'unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell'. where agent had apparent authority, and buyer acted in good faith, real owner is estopped from denying seller's authority to pass property. It is COMMON LAW estoppel [so real title] not equitable title by representation.
Newtons of Wembley
sale of car between X and a rogue [B] under a contract with true owner A, but contract was concluded under fraudulent misrepresentation. A wanted to rescind the contract, so got property back. 3rd party buyer tried to raise s25 defence. For s25 to apply, B has to be acting as if were a mercantile agent selling in course of business. the sale from the rogue took place on Warren street - where there was a practice to sell second-hand cars for cash, during 'ordinary business hours'. S25 did apply: buyer got good title.
buyer in possession after sale: defence 6
section 25 SGA/ s9 Factors Act A agrees to sell goods to B, and gives B possession before property has passed. B makes a sale/pledge/disposition of goods to X, delivers goods to X, and X receives goods in good faith without notice. has same effect as if B were a mercantile agent in possession of goods with A's consent. Gives X a good defence against A.
Pacific Motor Auctions
the way seller retains possession is not crucial for defence in s24 SGA. Not about capacity, but about possession. Can be in possession as bailee.
When will the contract between Owner and A be void?
where the person's identity is fundamental to the contract DISTINCTION IS ARBITRARY - Dissent by Nicholls and Millett in Shogun Finance. Face-to-Face dealings. Should get rid of it, so all contracts are voidable. When balancing interests between two innocent parties, the person who risked giving another possession of goods without receiving payment should bear the loss. Distinction is arbitrary and unfair. Means BF purchaser w/notice bears the loss. Original owner has far better means to uncover rogue's fraud.
Lewis v Avery
There was a face to face interaction, where the law presumes contract. However, was fraud and impersonation by the rogue, meaning rogue acquired voidable title. Rogue sold car to innocent party. Lewis only rescinded after third party acquired rights. Contract could not be set aside. Lewis (owner) could not assert property and innocent buyer had a good defence.
Eastern Distributors
Where the owner of the goods represents to the buyer that the person selling is the owner or is acting as an agent with authority to sell, the true owner is estopped from denying that authority to sell and the buyer acquires good title Devlin J: buyer acquired real title, not just title by estoppel. courts of common law allowed a good title to a buyer who bought in good faith [he questions whether this really is estoppel if it is providing real title.]
s12
a seller who fails to inform a buyer he only has a such title to the goods will be in breach
Cundy v Lindsay
buyer takes chattel subject to any "certain infirmities" which exist in the title - bona fide purchaser is not a defence,
Michael Gerson Leasing
can be actual delivery or constructive delivery - Constructive delivery: seller having sold goods to B, 'recognises' buyer is entitled to possession, but seller remains in possession of goods as bailee. Constructive delivery will suffice.
Criticism of s25
criticised this requirement of "as if a mercantile agent" which requires selling in ordinary course of business. Was said to be obscure. Is the reference to mercantile agent really necessary? It is a limit on the application of s25. B must be acting in course of business and in business hours etc. for X to get a defence.