What is the legal position if goods are stolen from their true owner? Can a thief pass good title (ownership) to an innocent third party? Obviously, someone who knowingly purchases stolen goods cannot obtain good title to them. Such a purchaser will have acted in bad faith and will probably be guilty of the crime of reset.
In Scotland, we often use the maxim or saying nemo dat quod non habet i.e. if you’re not the owner (or someone authorised by the owner), you cannot transact in the goods and pass ownership or title to an innocent third party.
A number of stories have appeared in the media in the last few days which have made me think about the possible application of the legal principle of nemo dat quod non habet.
The first story concerned an attempt by the Republic of Italy to have a stolen painting returned, which is believed to have been taken by the Nazis during World War II:
The Uffizi Gallery has replaced it with a copy. The exact location of the original is a mystery.
The second story concerned the theft of a Picasso painting which occurred slightly more recently:
Stolen Picasso painting found by ‘art’s Indiana Jones’ after 20 years
Clearly, an individual who knowingly purchases stolen property from the thief or retains possession of the item(s) cannot acquire good title or ownership. The passage of the years does not diminish the fact that the goods are stolen property.
An excellent example of the legal principle of nemo dat quod non habet can be seen in the following case:
Rowland v Divall  in April 1922, Divall bought an ‘Albert’ motor car from a man who had stolen it from the true owner. One month later, Divall sold the car to a dealer named Rowland for £334. Rowland repainted the car and sold it to a Colonel Railsden for £400. In September, the police seized the car from Railsden.
Held: by the English Court of Appeal that the car had to be returned to its true owner. Railsden brought a successful action to recover the price of £400 that he had paid to Rowland. Rowland, in turn, successfully sued Divall for £334.
Poor Divall, however, was not so fortunate. As he had purchased the car directly from the thief, he would need to track this person down in order to initiate an action for recovery of the purchase price. Thieves, by their very nature, tend not to hang around waiting to be caught and they have a nasty habit of vanishing into thin air.
Section 17 of the Consumer Rights Act 2015
This section of the Act provides very important protection to consumers by ensuring that a trader has the right to sell the goods which are the subject matter of the contract. In a contract of sale, this will mean that the seller must have the right to sell the goods at the time of the actual sale or, if the contract is an agreement to sell, s/he will have the right to sell the goods at the time when the property is to pass to the buyer.
Problems usually arise in this area when the consumer later discovers that the seller has supplied her with stolen goods.
In many respects, Section 17 of the Consumer Rights Act 2015 is very similar to Section 12 of the Sale of Goods Act 1979 (which previously regulated consumer contracts for the sale of goods).
Although the Consumer Rights Act applies to transactions where the trader is only a part-owner of the goods, failure by the trader to disclose to the consumer that he is only a part-owner of the goods and, that consequently, the buyer will only be entitled to a part-share in the goods would represent a breach of Section 17.
In situations where the trader can only give a consumerbuyer a limited title to the goods, she is duty bound to inform the buyer thathe only enjoys limited rights in the property and, therefore, it will beentirely the buyer’s choice if he wishes to proceed with the transaction. Fulland frank disclosure by the trader of any limitations in respect of his titleto the goods means that, at the very least, the buyer will have made aninformed choice if he proceeds with the contract – albeit under somewhatdisadvantaged circumstances.
The main protection that Section 17 gives to theconsumer buyer is that the trader (the seller) is promising that she has theright to sell the goods to the buyer. So, if the goods supplied were stolen,then the seller would be in breach of the duty imposed by this Section of theAct and the buyer would be entitled to reclaim the whole of the purchase pricefrom the seller.
The consequences of abreach of Section 17 by a trader
A breach of Section 17(1) of the Consumer Rights Act 2015 by a trader is extremely serious and this reflected in Section 19(6) of the Act as it will give the consumer the right to reject the goods.
Another important protection for consumers contained in Section 17 is that she has the right to enjoy quiet possession of the goods after the contract has been implemented. Effectively, the trader promises that no third party can dispute the consumer’s right to own the goods or possess them which would disturb his enjoyment of them. Any disturbance of the consumer’s right of quiet possession by third parties will mean that a potential claim lies against the trader.
The Sale of Goods Act 1979 applies to the following transactions:
1. Business to business sales (B2B)
2. Consumer to business sales (C2B)
3. Consumer to consumer sales (C2C)
The general rule regarding the transfer of title to corporeal moveable property (tangible, moveable property) from seller to buyer is that only the true owner of the goods (or her authorised agents) can pass ownership of the goods. A thief, for example, can almost never pass good title to a third party if the goods were stolen by him or the contract was induced by fraud (see Morrison v Robertson (1908)).
Section 12(1) of the Sale of Goods Act 1979 offers protection to a buyer who purchases corporeal moveable property in good faith from most of the negative consequences of the nemo dat quod non habet rule. It states that in a contract of sale … there is an implied condition on the part of the seller that in the case of a sale, he has a right to sell the goods and, in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass. This means that the buyer will be able to sue for the return of the price of the goods from the seller (who had no right to sell them in the first place). This applies even where the buyer has used the goods.
Furthermore, Section 21 of the Sale of Goods Act 1979 states that a buyer will not acquire good title to goods in a situation where the person selling them is not the owner and/or lacks the authority to sell them. In other words, the buyer cannot become the owner of the goods and the true owner will be able to reclaim the goods even from a person who bought the property in good faith.
Section 12(2)(b) states that the buyer has the right toenjoy quiet possession of the goods and any disturbance of this right by thirdparties will mean that a potential claim lies against the seller.
Section 12(3) addresses situations where the seller can only give the buyer a limited title to the goods. If such a situation applies to the sale of goods, the seller is duty bound to inform the buyer that he only enjoys limited rights in the property and, therefore, it will be entirely the buyer’s choice if he wishes to proceed with the sale. However, at least the buyer will have made an informed choice.
In many respects, the protection offered to a buyer purchasing corporeal, moveable property in good faith is remarkably similar to those rights found in the Consumer Rights Act 2015.
It will not always be possible, however, to return the stolen property to the true owner when the goods have been converted into other goods and cannot be retrieved e.g. when cattle have been stolen, slaughtered and eaten. In such situations, the true owner will have to be content with an award of damages based on the value of the property now lost to her forever.
Exceptions to Nemo dat quod non habet
The nemo dat quod non habet rule is only a general rule. Like most general rules in the law, however, there are a number of exceptions under both the common law and statute which might mean that someone who is not the true owner of the goods can pass good title to a third party. The practical effect of this is that the third party will often become the lawful owner of the goods despite the original owner’s protests.
Hopefully, buyers purchasing property in good faith which turns out to be stolen or having a defective title, will not fall into one of these exceptions to the general rule!
An innocent (or good faith) buyer of goods might discover, to their horror, that the property is stolen. The general rule is that a thief cannot pass good title to a third party – even if such a person is entirely honest. The rule is often expressed as nemo dat quod non habet.
Both the Sale of Goods Act 1979 and the Consumer Rights Act 2015 provide important legal protection to good faith buyers of stolen property (and more generally in situations where the seller’s title to goods is defective in some way).
The main protection that Section 12 (Sale of Goods Act 1979) and Section 17 (Consumer Rights Act 2015) gives to a buyer is that the seller is promising that s/he has the right to sell the goods to the buyer. So, if the goods were stolen, then the seller would be in breach of the duty imposed by the relevant legislation and the buyer would be entitled to reclaim the whole of the purchase price from the seller.
Copyright Seán J Crossan, 26 March 2019