The
general rule is that a seller of goods cannot obtain a better title to such
goods than that of the person from whom they were bought.
The
Sale of Goods Act (SOGA) says, in section 24 Sale by person not the owner
“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.”
There are some notable exceptions to this rule;
Estoppel
“Where the owner of goods
is by their conduct precluded from denying the seller’s authority to sell”, the
buyer obtains good title.
An
owner may be precluded from denying a seller’s authority by reason of their
(deceitful, negligent, fraudulent) conduct which, expressly or impliedly,
constitutes an unambiguous representation to the buyer that the seller has his
authority to make the sale.
Sale
under a voidable title
Where
the seller of goods has a voidable title, for example a title gained through
fraud, but the title has not been avoided at the time of the sale, the buyer
acquires a good title to the goods provided they’re bought in good faith and
without notice of the seller’s defect of title.
A
person who obtains goods by way of fraud can pass good title because their
title is voidable, not void. Therefore a person who obtains goods by way of
fraud can pass a title to a bona fide recipient who acts in good faith and presents
value for the property. The original
owner then only has rights against the fraudster and not the new “owner”.
Sale
by a buyer in possession:
The
bona fide purchaser of goods from a buyer who obtained possession of the goods
with the consent of the original seller obtains a good title to them
The
original seller must have been lawfully entitled to sell the goods.
A
purchaser from a buyer in possession only acquires a good title under the
statutory provision where the purchaser receives the goods in good faith and
without notice of the rights of the original seller of the goods.
o
The
onus of proving such is on the purchaser.
o
Notice
may be actual or constructive.
o
It
is insufficient for the original seller to contend that by making further
inquiries the purchaser could have discovered that the buyer in possession of
the goods who sold them had no right to do so, unless of course there was
something obviously suspicious such as to put the purchaser on inquiry.
Where the
goods being sold are a motor vehicle subject to a security interest, the legal
position of the bona fide purchaser will depend on whether the security
interest has been registered in the national Personal Property Securities
Register established under the Personal
Properties Securities Act 2009 (Cth).
For more information contact
our office on 1300 334 566
