The Nemo Dat Rule (Vic)
‘Nemo dat quod non habet’ means ‘no one can give what they do not have’. This is commonly referred to as the Nemo Dat Rule. Nemo Dat is the legal principle that a person who does not have adequate ownership of property or goods does not have the ability to transfer the ownership of that property or goods to another person.
Section 27 of the Goods Act 1958 codifies the Nemo Dat Rule as follows:
Subject to the provisions of this Part and of any express enactment where 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 his conduct precluded from denying the seller’s authority to sell.
The courts have recognised that Section 27 of the Goods Act 1958 embodies the provisions and enshrines the key components and exceptions to the Nemo Dat Rule in various recent decisions. Notably in the matter of Kino v Prestige Philately & Ors (‘Kino’) in 2014, Vickery J upheld the provisions of Nemo Dat and noted that the Nemo Dat Rule is based upon the concept that one is not able to give better title to a good to another person than the interest one holds. In this decision it was also held that that ‘a true owner does not lose his or her title to goods simply because of the wrongful act of a thief who transfers possession of those goods to an innocent third party who acted in good faith in paying money to the thief’ for those goods.
Similarly in the matter of Johnson Matthey (Aust) Ltd v Dascorp Pty Ltd, the court made it clear that it is not an obligation of a true owner of goods to act in a manner where they are required to ‘protect’ their title to those goods, rather that they must not act in a manner that jeopardises that title to the extent that it gives rise to a valid exception.
Exceptions to the Nemo Dat Rule
The law considers that ‘a purchaser in good faith, for value and without notice should be able to defend an action brought by any other person in relation to ownership of the goods’ (Bishopsgate Motor Finance Corporation Ltd v Transport Brakes Ltd, 1949).
Accordingly, there are a number of exceptions to the Nemo Dat Rule. These exceptions act to benefit a purchaser who acquires goods in good faith (pursuant to section 3(2) of the Goods Act 1958), and without knowledge of or notice of the rights of the original owner.
This includes the following situations:
Where sale has occurred under a voidable title
This is where the seller has a voidable title that has not been voided at the time that the buyer acquires the goods. Pursuant to section 29 of the Goods Act 1958, this exception enables a buyer in this situation to acquire good title over the goods, provided that they were purchased in good faith and without notice of the seller’s defect in titles. In this instance, the buyer must have taken all reasonable steps (in keeping with Car and Universal Finance Co Ltd v Caldwell (1965)) to ensure that there is no question as to the ‘good title’ of the goods.
Estoppel (including estoppel by negligence and estoppel by representation)
This occurs when the owner of the goods has acted in a manner that by their own conduct precludes the seller of the goods authority to sell (in keeping with the matter of Kino).
In the matter of Johnson, Redlich J held that, in seeking to rely on the exception to the nemo dat rule relating to estoppel, the person seeking to displace the Nemo Dat Rule bears the burden of establishing the existence of the estoppel.
Read More: What is Estoppel?
To be successful, a party is required to satisfy the court of the following;
- That the true owner owed a duty of care to the buyer;
- That the true owner’s conduct was negligent to the extent that they breached their duty of care; and
- That the breach of the duty of care has or has had a real cause impact on the buyer being induced into purchasing the goods.
Dispositions by sellers in possession
Occurring when goods (sold without questionable title) remain in custody of seller beyond sale pursuant to section 30 of the Goods Act 1958 and the matter of Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd (1965).
Buyer continuing in possession of goods bought
In this instance, the goods may be ‘bought or agreed to buy in keeping with the provisions of section 31 and 6(3) of the Goods Act 1958.
An exception exists in respect of dispositions by mercantile agents in possession or continuing possession pursuant to section 26A of the Goods Act 1958.
Bona fide purchaser
A purchaser of a goods subject to an argument involving the principles of Nemo Dat may also argue that they are a bona fide purchaser. An exception applies where:
- A seller conveys to a purchaser that they are the owner of an item, and
- The purchaser makes all relevant investigation and has no reason to believe otherwise, and
- The purchaser makes payment for that item, and
- The purchaser has, at all times, acted in good faith and with honesty
A person seeking to rely upon the bona fide purchaser exception will bear the onus of proof that they have at all times acted in good faith and free of suspicion that there was any issue with the sale and that they did not have notice of defective title from the seller.