This paper will identify the principle Lord Denning was discussing in Bishopgate Motor Finance Corporation Limited v Transport brakes limited and clearly explain how the principle has been modified by common law and statute. The principle Lord Denning was discussing in the case stated above relates to the sale of goods and is aimed at protecting individual property. It is common to find persons selling goods to which they hold no title at all and have no consent or authority from the owners.
This occurs when either the goods being sold are stolen or have been gotten from the owner by deception. The buyer of such goods is usually innocent and may not have notice of the defective ownership held by the seller. The resulting situation is determining who has the title to the goods between the two innocent parties i. e the original owner of the goods and the innocent buyer of the said goods. This situation is properly resolved by the question of whether a person without title to the goods can pass title to anyone who buys the goods from him.
This is thus the principle that the Lord Denning was discussing in Bishopgate Motor Finance Corporation Limited v Transport brakes limited. It is an established principle that “the transferee of goods cannot get better title than that of the transferor”. The principle is a common law rule called nemo dat quod non habet. Nemo dat quod non habet is latin which means that if goods are sold by a person who does not have title to the goods then he would be unable to pass title to a subsequent purchaser since he did not have title to begin with.
The rule is supported by Section 21 (1) of the Sale of goods Act 1979 states that “Subject to this act, where goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell”. The statute above cements the fact that no one can pass title to another if he does not has it in the first place.
A thief that has stolen or a rogue that has come into possession of a property dubiously has no title to such property and thus cannot pass title to the person who purchases such property even in good faith. In the case of Rowland v Divall the claimant, a car dealer, bought a car from the defendant for ?334. He painted the car and put it in his showroom and sold it to a customer for ?400. Two months later the car was impounded by the police as it had been stolen. It was then returned to the original owner.
Both the claimant and defendant were unaware that the car had been stolen. The claimant returned the ?400 to the customer and brought a claim against the defendant under the Sale of Goods Act. It was held that the defendant did not have the right to sell the goods as he did not obtain good title from the thief. Ownership remained with the original owner. The defendant had 2 months use of the car which he did not have to pay for and the claimant was not entitled to any compensation for the work carried out on the car.
The above being the case modifications to the above principle have taken place to protect a buyer involved in a commercial transaction. The modifications have been through statutes and common law itself. Under these modifications a person having no title or a defective title to the property can pass title to the purchaser. The most obvious situation under the exceptions to the nemo dat rule is the market overt exception. This is the oldest exception under common law which has now been affirmed by section 22 (1) of the Sale of Goods Act.
It is contended that a person without title can pass title to a purchaser if the goods are sold in a market overt. The term market overt is defined by case law in Lee v Bayes as an open, public and legally constituted market open between the hours of sunrise and sunset and where goods are traded openly or publicly displayed. A place can also be a market overt by prescription that is where the place has been used as a trading place in time immemorial, for example, in Zambia, a place like Ng’ombe Ilede.
The forgoing definition includes shops where goods are displayed publicly but excludes the other parts of the shop which are not accessible to the public. In the case of Hargreaves v Spink , a thief stole some jewellery and sold them to a shop owner. The sale took place in the showroom of the store which was on top of the shop. The true owner of the jewellery sued the shop owner for the recovery of the jewellery. It was held that no title had passed to the shop owner as the purchase of the jewellery did not take place in a market overt.
The market overt exception also requires that the one to acquire title should be the one buying from the shop and not the shop owner. In the case of R v Tai Shing Jewellery the applicant was a jewelry company, who had bought some silver coins at its premises for full market value from a seller who had in fact obtained the coins in the course of a robbery. The applicant was unaware of this fact. The seller was then convicted for robbery and the applicants applied for an order that the silver coins be returned to them.
The judge opined that the legislation did not intend to afford protection for a shopkeeper who purchased goods in his own shop but rather it was designed to ensure that a member of the public who uses a shop to buy goods in the normal way gets a good title. The other exception to the nemo dat principle is the sale by Estoppel. This concentrates on the conduct of the owner of the property and not his intention. Section 21(1) of the Sale of Goods Act ends by stating that “…. unless the owner of the goods is by conduct precluded from denying the seller’s authority to sell”.
The owner of a property can be prevented from stating that the sell was unauthorized through his conduct or negligence. The owner of the property should not conduct himself such that his conduct would prohibit him from denying the seller authority to sell. If the owner acts in such a way or shows that the seller has the authority from him to make the sale then the owner cannot later turn around and claim that the seller had no authority or consent from him to make the sale. The conduct can arise either by misrepresentation or neglect. If such is the case, title passes to the purchaser.
In the case of Henderson ; Co v Williams, the original owners were induced to sell goods to a rogue. The original owners instructed the defendant, a third party, to hold the goods for the rogue. The rogue then sold the goods to the Henderson. Henderson became suspicious and made enquiries as to the goods and he was told by the defendant that they were holding the goods for the rogue, and consequently that they would hold them for the Henderson. The Court held that the original owners were estopped from denying Henderson’s right to the goods.
The other exception is the sale under a voidable title. A voidable title is mainly obtained through deception or fraud. The owner of the property is usually induced into entering into a contract whereby the property changes hands with the full consent of the owner. The owner comes to realize that he has been tricked later on and by this time the rogue would have sold the property. The title that passes to the rogue is called voidable in that if the owner acts quickly and informs the relevant authorities of the rogue’s deception then that title obtained by the rogue will become voidable.
However, if the owner fails to report the rogue before the property is sold by the rogue then the one who purchases from the rogue obtains good title as long as he was not aware of the defect in title and the purchase was in good faith. In the case of Mamujee Brothers Limited v Awadh a rogue got goods from the plaintiff on false pretences. He then sold the goods to the defendant. It was established during the trail that the defendant knew about the rogue’s defective title before purchasing the goods. It was held that the rogue was able to pass good title to the defendant but he title passed was defective because the defendant did not act in good faith. The other exception is contained in section 25 (1) of the Sale of Goods Act. This section address what is known as Disposition by Seller in Possession. This happens where a seller of goods remains in possession of the sold good and later sells then to a third party. The first buyer losses out in such a situation. The second buyer gets good title to the goods. In Pacific Motor Auction v Motor Credits the claimant had an agreement with car dealers whereby the dealers sold cars to the claimant.
The dealers were allowed to keep the sold vehicles in their showrooms. One of the dealers sold some vehicles belonging to the claimant which were in his possession to the defendant. The claimant contended that the defendant had not obtained good title. It was held that the defendant had obtained good title. Conclusion The principle or rule discussed by Lord Denning in Bishopgate Motor Finance Corporation Limited v Transport Brakes Limited is the rule of Nemo Dat Quod non habet.
Nemo dat quod non habet is latin which means that if goods are sold by a person who does not have title to the goods then he would be unable to pass title to a subsequent purchaser since he did not have title to begin with. This being the general rule, common law and statute have modified the rule to cater for the ever challenging situations in today’s life. The modifications are actually exception to the general rule and these include, inter alia, market overt rule, estoppels, dispossession by seller and by buyer.