RIGHTS OF THE ORIGINAL OWNER

Although disputes over the ownership of property can arise for many reasons in most cases such disputes arise where an innocent person has acquired goods previously stolen or obtained by fraud. The scenario often encountered is that of an “original owner” who has his goods stolen or fraudulently taken from him by a “rouge” who then goes on to sell the goods to an innocent purchaser. Obviously the original owner has a technical right to sue the rouge but in the usual case the rouge will either prove to be impecunious or simply impossible to find. Thus the best option for the original owner is to sue the innocent buyer to recover the goods on the basis the rouge had no right to sell the goods and therefore could not transfer ownership (title) to the goods to the innocent purchaser.

The right of the original owner to recover goods

The general rule governing the disputes over ownership of goods is known as the nemo dat rule and is set out out in Sale of Goods Act 1979, s.21(1) which states:

“Subject to this Act, where the 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.”

In essence a dispute over ownership of goods is an argument by the original owner that the rogue had no right to sell the goods and thereby could not transfer ownership of the goods to the innocent buyer.

Exceptions to the nemo dat rule There are nine ways in which goods bought from a person who is not the owner can nevertheless be acquired with good title.

• Where the original owner of the goods is stopped from denying the rogue’s right to sell.
• Sale under a order of court.
• Sale under a common law or statutory power.
• Sale with the original owner’s consent.
• Disposition by a mercantile agent.
• Sale under a voidable title.
• Disposition by a seller in possession.
• Disposition by a buyer in possession.
• Disposition of a motor vehicle under Part III of the Hire-Purchase Act 1964.

The right of the innocent purchaser

Where an innocent buyer finds that good title has not been acquired because of the operation of the nemo dat rule then

• if the rogue can be found and
• is not impecunious,

it will be important to determine the innocent buyer’s rights.

Sale of Goods Act 1979, s.12(1) (as amended by the Sale and Supply of Goods Act 1994) provides that

• in a contract of sale there is an implied condition that the seller has a right to sell; and
• in an agreement to sell there is an implied condition that the seller will have a right to sell when the property is to pass.

s.12(2) further provides that there are implied warranties that

• the goods are free, and will remain free until the time when the property is to pass, from any charge or encumbrance not disclosed or known to the buyer before the contact is made, and
• the buyer will enjoy quiet possession of the goods except so far as it may be disturbed by the owner or other person entitled to the benefit of the charge or encumbrance so disclosed or known.

The practical effect of Sale of Goods Act 1979, s.12 is that the innocent buyer can cliam the full price of the goods no matter how long the goods may have been used as there has been a total failure of consideration. Furthermore if the innocent buyer has expended monies on the goods, eg., repairs then this may also be recovered from the rogue.

OTHER CONTRACTS Not all contracts which involve the transfer of the ownership of goods come under the Sale of Goods Act 1979, however similar provisions as to good title are made under various Acts .

HIRE PURCHASE CONTRACTS Under Supply of Goods (Implied Terms) Act 1973 a condition of good title is implied into contracts of sale sold by hire-purchase. Thus if the owner (eg., finance company) does not have the right to sell at the time of delivery to the hirer, then the hirer can recover the whole of of payments made and there is no set-off for use.

CONTRACTS FOR WORK AND MATERIALS The obligations as to the right to sell, quiet possession and freedom from encumbrances are similar to those implied for sale of goods (Supply of Goods and Services Act 1982, s.2).

CONTRACTS OF HIRE As a contract of hire does not involve the transfer of ownership at all there is only an implied condition that there is a right to transfer possession and an implied warranty for quiet possession.

IMPROVEMENTS AND REPAIRS
Where an innocent purchaser has expended cost in improving goods which under the nemo dat principle do not rightfully belong to the innocent purchaser then upon a claim by the true owner of the goods the innocent purchaser is entitled to full credit for all improvements. (see Munro v. Willmott [1949] 1 K.B. 295, Greenwood v. Bennet [1973] 1 Q.B. 195, and Torts (interference with Goods) Act 1977, s.6(1).