Author: Mark Yum, Partner | Date first published: 31 July 2014
Madison Marcus Law Firm and the MTA have identified a recurring problem in the motor trade industry where stolen or
re-birthed vehicles are being sold to wholesalers or car dealers, on sold to consumers and later repossessed by the police.
After the vehicle is repossessed, the dealer is typically faced with a disgruntled consumer seeking a refund for the vehicle.
Essentially, all parties in the chain of sales of the vehicle have been affected by a fraud of the original person who stole
or re-birthed the vehicle.
Who is the rightful owner of the stolen or re-birthed vehicle? Is it the original owner from whom the vehicle was stolen,
or is it one of the many people in the chain of sales?
The â€œnemo datâ€ rule
There is a longstanding legal principle known by its Latin term of â€œnemo dat quod non habetâ€. The literal meaning of that Latin
saying is that â€œno one gives what he does not have.â€ Therefore, prima facie (on the face of it) the purchaser will not receive title.
The starting point for determining ownership is therefore, a vehicle sold by a person who is not the rightful owner of the vehicle
results in the purchaser not getting proper title to the vehicle. This has a flow-on effect, that is, if the person sells the vehicle
to another person, the next purchaser will not obtain proper title in the vehicle.
Exceptions to the â€œnemo datâ€ rule
The nemo dat rule does not apply in certain circumstances, one of which is where a purchaser is a bona fide purchaser for value,
without notice. This exception is enlivened where a purchaser of a vehicle does the following:
Acts in good faith and honestly in purchasing the vehicle
Good faith requires the purchaser to have a genuine intention to deal fairly and without intentionally defrauding others. The relevant
time for determining the â€œintentionâ€ is at the time of purchasing the vehicle.
Pays proper consideration for the vehicle
Consideration is something of value given up by both parties who enter into a contract. Accordingly, the purchaser would have to pay
the market price for a vehicle in the same condition.
Has no knowledge that the vehicle is stolen or re-birthed
This may be actual or constructive knowledge of the purchaser. Constructive knowledge is what the purchaser (licensed dealer, wholesaler or consumer)
should have known if they had carried out all the enquiries that an ordinary person would have made under the same circumstances. This may include failure
to check the Personal Property Security Register (PPSR) or doing any other searches such as a police vehicle history check (see below for more detail).
The onus of proving the nemo dat rule does not apply is on the purchaser. If the purchaser is unable to prove the elements to establish that the exception
to the nemo dat rule, the purchaser may not have any legal ownership rights to the vehicle.
Consumer guarantees – Australian Consumer Law
Generally, the sale of a vehicle by a dealer to a consumer is governed by the Australian Consumer Law. Accordingly, there are a number of compulsory
guarantees that dealers must give to consumers in relation to the vehicle, including (but not limited to):
Guarantee as to title â€“ s51
A supplier must give a â€œguarantee as to titleâ€ to the consumer. This means that the supplier must do all things to ensure the consumer has a right
to dispose of the vehicle when that property passes to the consumer. In the event a consumer unknowingly purchases a stolen vehicle from a supplier
the consumer will not be subject to claims made against the vehicle when the supplier did not have authority to sell the vehicle.
A dealer could give to a consumer a guarantee as to a stolen/rebirthed vehicle if it was a bona fide purchaser for value, as the consumer would then
have proper title to the vehicle and would be able to on-sell the vehicle.
Guarantee as to undisturbed possession â€“ s52
A dealer guarantees a consumer â€œundisturbed possessionâ€ meaning that no one will try to repossess the vehicle except in circumstances where the dealer
has disclosed to the consumer of any persons who are entitled to the benefit of any security, charge or encumbrance.
Theoretically, a dealer would contravene its guarantee as to undisturbed possession if the vehicle was repossessed by police. However, whilst this has
not been tested in the Courts, it is likely that the dealer would have several defences available to it.
All dealers and wholesalers of vehicles ought to be undertaking all investigations of vehicles before acquisition. Failure to undertake proper due diligence
could lead to a significant financial and reputational loss if the vehicle is stolen or re-birthed. The person to whom the vehicle is returned after police
repossession will be determined by the steps taken by each of the persons in the chain of ownership.
Madison Marcus Law Firm are proud business partners of the MTA and have been affiliated with the MTA for over 5 years. We have lawyers with specialist
knowledge of the motor trade industry. Madison Marcus are a full service law firm who are pioneers in fixed fee billing. Please call Madison Marcus on
131 LAW (529) for a free telephone consultation.
Madison Marcus Law Firm produced this article. It is intended to provide general information in summary form on legal topics, current at the time
of first publication. The contents do not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters.