Problem 8

2. Title to Personal Property Problem Problem 8 The law which has evolved in relation to ‘title to goods’ pits two (2) policy objectives against each other: protecting ownership (nemo dat quod non habet) and protecting the security of transactions. With reference to case law and the Sale of Goods Act 1898 (Qld) and the Factors Act 1892 (Qld) critically discuss the law’s success in striking a balance between these policy objectives. [Effort 25 min]

3. The Facts: • “…when goods are sold by a person who is not the owner thereof, 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 the owner’s conduct precluded from denying the seller’s authority to sell.” refer s 24 (1) Sales of Goods Act 1898 (Qld) • When a Mercantile Agent has the consent of the owner, has possession of the goods or documents of title and is acting in the ordinary course of business he/she is able to sell the goods. Refer s 3(1) Factors Act 1892 (Qld) • “For the purposes of this Act the consent of the owner shall be presumed in the absence of evidence to the contrary.” refer s 3(4) Factors Act 1892 (Qld)

4. The Legal Discussion: Farquharson Bros & Co v C King & Co[1902] AC 325 House of Lords, The court found that the title to timber that had been stolen by a dishonest employee and on-sold to the respondents, was revested, despite the evidence that the plaintiff had been careless in its procedures. HELD: Lord MacNaghten said “The right of the true owner is not prejudiced or affected by his carelessness in losing the chattel, however gross it may have been.” This is a case of protecting the ownership of property (nemo dat quod non habet), as opposed to protecting the security of transactions. The fact that Farquharson Bros & Co had been careless in their procedures was not conduct enough for their title to the timber to be extinguished.

5. The Legal Discussion: Leonard v Ielasi(1987) 46 SASR 495 Supreme Court of South Australia The Court found that the buyer of the motor vehicle had title confirmed by the court even though the vehicle had been sold illegally. This finding was arrived at because the original owner had been aware that the person, she had lent the vehicle to had registered the vehicle in their own name and the owner had made no effort to correct the registration. Here the court protected the security of the transaction as the original owner’s conduct, in failing to take action regarding the registration had precluded her from denying the seller’s authority to sell. HELD: The owner of goods of some substantial value who permits possession of those goods to remain with a person whom the owner knows to have acted dishonestly in relation to those goods will, except in special circumstances, owe a duty of care to others who might be minded to deal with that person in relation to the goods.

6. The Legal Discussion continued… Associated Midlands Corporation v Sanderson Motors Pty Ltd[1983] 3 NSWLR 395 Supreme Court of New South Wales. Mercantile agents, must not only have authority to sell and custody of the goods but also do so in the normal course of their business. Kew Star Motors Pty Ltd was found not to have acted in the normal course of their business as a mercantile agent when selling a motor vehicle Despite have sold vehicles for O’Connor and his companies before, KSM had not sold in Sydney and therefore, the court protected the security of the transaction. Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 225 English Court of Appeal Mr Caldwell had made every effort to regain possession of his vehicle from the time it had been fraudulently taken, the court deemed that he had title to the vehicle. Thus, again the court protected the ownership.

7. Conclusion It seems that the circumstances play an integral part in whether the court protects the ownership or the security of the transaction. Each of the cases above have specific features that make it possible to follow the court’s decision and agree with it. In Farquharson Bros v C King & Co, the defence was based on the fact that the plaintiff’s conduct in carelessly managing their business had precluded them from denying the seller’s authority to sell. By using this defence, they hoped the court would agree that the security of the transactions should be protected, however C King & Co were unsuccessful. The failure of the original owner of the motor vehicle to take action immediately, the vehicle was registered in another person’s name, and thus purporting to be the true owner of that vehicle was action enough to enable the court in Leonard v Lelasi to protect the security of the transaction and confirm the buyer’s title to the vehicle.

8. Conclusion continued … Associated Midland Corporation v Sanderson Motors Pty Ltd [1983] 3 NSWLR 395 Supreme Court of New South Wales Despite being a motor dealer, Kew Star Motors Pty Ltd (KSM) operated in Melbourne and their foray into the Sydney market to sell the Rolls Royce for O’Connor and Trak Investment Pty Ltd was a complete departure from their normal business practices. It was therefore unsurprising that the court, protected the security of the transaction as the mercantile agent, KSM had not acted in the normal course of their business. Car and Universal Finance Co Ltd v Caldwell[1965] 1 QB 225 English Court of Appeal Mr Caldwell acted immediately to trace his Jaguar vehicle after it had been fraudulently taken from him. He not only reported the matter to police, but also notified the AA and continued to pursue all avenues open to him to have the vehicle returned. The court dismissed the plaintiff’s appeal and protected the Caldwell’s ownership.

9. Title to Personal Property Problem 9 Problem 9 ‘A person seeking to obtain title through any one of the exceptions to the nemo dat rule must show that the person has acted honestly and without notice of the conflicting interest. It has been consistently held that with respect to dealings in goods, honesty relates to the actual state of mind of the person in question. A clear difference is said to exist between dealings in goods and dealings in land.’ [See APL: 4.85 – Note 2] Prepare an argument either supporting or contesting this statement for a non-legal audience. [Effort 40 min]

10. Answer Framework • Before answering the question it is important to define the key terms of the question so that the appropriate response can be correctly addressed. • Identify key topics for discussion: • Nemo dat rule: • Nemo dat exceptions • acted honestly. • acted without notice of the conflicting interest. • honesty relates to the actual state of mind of the person in question.

11. The Legal Issues: Problem 9: In relation to Problem 9, what I have taken from this issue is that the courts have historically considered that issues surrounding land and title to land are at a vastly higher playing field. Basically, if you are looking at purchasing land, then you must undertake extensive due diligence to extinguish any conjecture or evidence that the title to the land is in question. When I consider the purchase of land against other expensive goods, I consider that the purchase of land must be undertaken with the support of a solicitor or registered conveyancer. Of course the registration of land titles is also a major issue. This is because of the importance to get things right. A ‘she’ll be right’ attitude cannot be accepted, and thus the second limb (highlighted) to the statement:  ‘A person seeking to obtain title through any one of the exceptions to the nemo dat rule must show that the person has acted honestly and without notice of the conflicting interest’ is extremely important. As was stated in International Alpaca Management Pty Ltd v Ensor (1995) 133 ALR 561; “shutting one’s eyes to the truth was the same as being aware of the truth”.

12. The Legal Application: Problem 9: To be done – after assignment handed in

13. The Legal Issues: Problem 9: To be done – after assignment handed in

14. Answer