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TRANSFER OF TITLE“Nemo Dat Quod Non Habet”

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As a general rule, when a person takes goods (e.g buyer), he or she gets only the same rights to the goods as the person from whom he or she took them (e.g seller).

This rule is expressed in the latin maxim nemo dat quad non habet.

This rule is set out in section 27 of SOGA 1957

Introduction

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Sale by person not the owner “subject to this Act and any other law for

the time being in force, where the 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 sller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell:

Sec.27 SOGA 1957

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Provided that where a merchantile agent is, with the consent of the owner, in possession of the goods or of the document of title the goods, any sale made by him when in the ordinarycourse of business of amercantile agent shall be as valid as if he were expressly authorized by the owner of the goods to make the same; provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell.

…cont’

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if goods are brought from a person who is not the owner, and who does not sell them under the owners’ authority, the buyer does not acquire any title.

The rationale of this section is to protect the right of ownership. If this rule is not present, then the interest of the true owner would be jeopardized.

SEC. 27 SOGA

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The chairman of Resp. co.’s BOD entered into an agreement in Jan 1961 with a contractornamed Ahmad, who had secured contracts from PJ authority for construction of culverts, under which the Resp were to provide Ahmad with all materials for his culverts and also to finance the carrying out of the contracts. Resp then bought materials for the project and delivered them to the construction site.

In June 1961, resp came to know that PJ Authority after having some problems withAhmad, had cancelled his contract. Resp informed th PJ authority that materials on the site belonged to them and also made attempts to sell them.

Lim Chui Lai v. Zeno Ltd (1964) 30 MLJ 314

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In sept 1061, the resps discovered that the materials had been sold by Ahmad to the App for RM14,000 of which had received RM7,000as part payment.

The resp then commenced this action forconversion. The trial judge gave judgement for resp for the sumof RM25,080.52 andc costs

…cont’

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On appeal by the App, it was contended that:1. as the resp caused the chattels to be delivered to Ahmad, he became the owner of the chattels and as such could pass a title in the chattels to the App; and2. the chattels were the property of a partnership between the Resp and ahmad as such had the power to dispose of the goods under sec. 28 of SOGA 1957

…cont’

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It was held that Ahmad was merely the bailee and not the owner of the chattels at the time he sold them to the App. As he has no title to the chattels or authority to sell them, he could not give the App. any title.

…cont’

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The Plf bought a car fr the 2nd Def. to effect the transfer of ownership of the car into the Plf’s name, 2nd Def had to pay MUI Finance from whom he had earlier obtained a hire-purchase facility. For this purpose, 2nd Def retained registration card. After obtaining the cancellation of indorsement of MU’s ownership. 2nd def sold the car to B whose purchase was finance by 1st Def. 1st def indorsed its ownership claim on the registration card. The Plf applied to the court for a determination as to whether he or the 1st Def had a better title to the car.

Ng Ngat Siang v. Arab Malaysian Finance Bhd & Anor 91988) 3 MLJ 319

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held: allowing the application. After a full payment was made by the 2nd Def to

MUI Finance and MUI Finance had relinguised all rights to ownership over the car, the Plf had acquired ownership to the car and the 2nd def’s further dealings on the car with the 1st def are therefor illegal. To that end, the 1st def acquired no title or interest over the car when they purchased it and their only remedy, if any, is against the 2nd def personally for the return of the purchase price but against the Plf they cannot claim any right of ownership over the car.

…cont’

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Commercial & Savings Bank of Somalia v. Joo Seng Company (1989) 2 MLJ 200

Syarikat Batu Sinar Sdn Bhd. & Ors v. UMBC Finance Bhd & Ors (1990) 3 MLJ 468

Other cases.

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Estoppel‘where owner is precluded by his conduct makes it appear to the buyer that the person who sells the goods has his authority to do so and then buyer relies on that conduct, the buyer obtains a good title because the owner is precluded by his conduct from denying the seller’s authority to sell;

Case: Eastern Distributers v. Goldring (1957) 2 QB 600

exceptions

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A mercantile agent is a person whose ordinarily business is to sell goods, or consign them for sale, or to by goods, or to raise money on the security of goods. A simple example is a motor dealer to whom the owner of a vehicle delivers the vehicles with the authority to sell it.

Sale by Mercantile agent (proviso under sec 27)

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Where a mercantile agent is a person is, with the consent of the owner, in possession of the goods of a document of title to the goods, any sale by him when acting in the ordinary course of business of a mercantile agent shall be as a valid as if he were expressly authorized by the owner of the goods to make the same. However, the buyer must have acted in good faith and, at time of the contract of sale, had not received notice that the seller has no authority to sell.

Case: Folkes v. King (1923) 1 KB 282

..cont’

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Goods may be owned by one or more than one person.

Sec. 28 provides that if one of several joint owner of goods has the sole possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them from such joint owner, in good faith and has not at the time of the contract of sale, notice that the seller has no authority to sell.

Sale by One of Joint Owner

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Sec. 29, SOGA 1957 provides that where the seller of goods has obtained possession thereof under a contract voidable under sec. 19/20 of the Contract Act 1950, but the contract has not been recinded at the time of the sale, the buyer acquires a good title to the goods provided he buys them in good faith and without notice of the seller’s defect of title.

Sale under a voidable Title

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Sec. 30(1), SOGA 1957 provides that if a seller continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or document of title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effects as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same.

Sale by a seller in possession after Sale

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The effect of sec 30(1) is that if a seller resells to a second buyer the goods sold by him prevoiusly to the first buyer, the 2nd buyer will obtain good title to the goods if he has received the goods in good faith and without notice of the previous sale. The 1st buyer will lose the title but he can take legal action against the seller.

Case: Pacific Motor Auctions Pty ltd v. Motor Credit (Hire Finance) Ltd (1965) 112 CLR 192.

…cont’

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A car dealerentered into a display agreementwith Motor credits. Under the agreement, cars bought by the dealer were sold to the finance com. For 90% of the purchase price. The car dealer retained possession for display purposes.

When the dealer got into financial difficulty, the finance co. cancelled its agreement with him. The same day as its authority was withdrawn, the dealer sold all his stock to Pacific Motor Auctions. Pacific Motor Auctions was unaware of the withdrawal of the car dealer’s authority and the car dealer signed a ceclaration stating that all of its stock was unencumbered ans was its sole property.

…cont’

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The issue was whether the finance co. can successfully sue Pacific Motor Auctions for the return of the cars.

It was held that Pacific Motor Auction had title to the cars as they had bought them in good faith and without notice of the sale from a seller who had continued in possession of the goods after the sale.

…cont’

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Sec.30(2) of SOGA 1957 provides that if a buyer, having bought or agreed to buy goods, obtains with the consent of the seller possesion of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the goods or the documents of title under any sale, pledge or disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have effect as if such lien or right did not exist.

Sale by a buyer in possession

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In other words, if a buyer, having bought or agreed to buy goods, obtains possession of the goods or the document of title with the consent of the seller, he can pass a good title to a subsequent buyer acting in good faith,even if under the 1st transaction he has not obtained a good title.

Case: Newtons of Wembley Ltd v. Williams (1965)

…cont’