Nemo Dat

Competing property rights concerns the rules used to resolve disputes between 2 or more people
who have independently acquired competing property rights to the same thing.

The starting point is considering the basic rules for unregistered property rights. We look first at the
nemo dat quod habet principle (no one can give what he or she does not have), or nemo dat for
short.

According to Northern Counties of England Fire Insurance Co v Whipp...

Facts: Manager of NCEFICo mortgages his land to the company. Manager then approaches Mrs
Whipp for a loan giving her all the title documents but not the mortgage, giving Mrs Whipp an
equitable mortgage of the land. She was unaware of the legal mortgage to the company. Company
begins an action to foreclose the mortgage, defendant postpones this.

Held: Company wins action to foreclose mortgage.

Ratio: The court will not postpone the prior legal estate to the subsequent equitable estate on the
ground of any mere carelessness or want of prudence on the part of the legal owner. It will only do
so where the owner of the legal estate has assisted in or connived at the fraud which has led to the
creation of a subsequent equitable estate without notice of the prior legal estate or where the
owner of the legal estate has constituted his agent with authority to raise money, and the estate
thus created has by fraud or misconduct of the agent been represented as being the first estate. As
the company dealt with their securities carelessly but with no collusion to lend money or motive to
create the subsequent interest there was no fraud. Further, there was no agency or authority to
create the equitable interest (giving manager key did not give him that authority). The legal interest
was preferred.

Significance: When an owner is careless with their property and that property is stolen and sold to
an innocent buyer, the buyer should bear the loss.

According to Bishopsgate Motor Finance Corp Ltd v Transport Breaks Ltd Denning mentions how the
principle of protection of property (no one can give a better title than he himself possesses) and the
principle of the protection of commercial transactions (the person who takes in good faith and for
value without notice should get good title) have struggled for ‘mastery’. He acknowledges that the
first has held sway for a long time because of nemo dat, but mentions how it has been modified by
statute and common law to meet our present needs and the prevalence of protection of property is
indeed by no means black and white. There are numerous exceptions to nemo dat which enable
buyers in good faith to obtain good title even though the seller does not have good title.

One of these is outlined in Miller v Race...

Facts: Mr Race was a clerk at the Bank of England who refused to pay on demand when Miller
presented the Bank’s note. Miller was an innkeeper who had unknowingly taken the note as
payment from a lodger who had stolen the note from the mails.

Held: The original owner (Mr Finney, who’s note it was that was stolen from the mail and given to
Miller) did not have sufficient property in the note to entitle him to recover in the present action.

Ratio: For money to work efficiently it should change hands dozens of times or more, and bank
notes (and by extension other negotiable instruments) should be treated as such (money, wouldn’t
be efficient if evidence of title was required). As it is to change hands so many times, invoking
contract defences and putting the present possessor of the money’s title at risk would be
irresponsible and unfair.

Significance: This case established perhaps the most important exception to nemo dat, money used
as currency enables buyers in good faith to obtain good title even though the seller doesn’t have
good title.

Another important exception to nemo dat is clear in Farquharson Brothers & Co v King & Co...

Facts: Timber merchants who store imported imported timber in commercial docks gave authority
to Mr Capon to sign delivery orders for the firm, authorizing him to accept all transfer or delivery
orders which should be signed on the merchants behalf by Mr Capon whose signature should be
subjoined. Capon began a series of frauds, including selling to King & Co (respondents who were
acting in good faith) under a false name/address and appropriating the proceeds. First court gives in
favour of plaintiffs, Court of Appeal gives in favour of defendants, plaintiffs appeal.

Held: Judge allows appeal, giving in favour of original plaintiffs.

Ratio: The timber merchants were allowed to deny their agents authority to sell because if a servant
steals his masters goods the people who receive those goods innocently should not be able to set up
a title against the master as a thief can give no title whatever. No representation sufficient to found
an estoppel could be found

Significance: Re: Agency... The general rule of nemo dat applies unless the non owner (agent) “sells
with the authority or with the consent of the owner”. Re: Estoppel... The general rule of nemo dat
applies unless “the owner of goods is by his conduct (Could include estoppel by representation or
estoppel by negligence) precluded from denying the seller’s authority to sell”. For estoppels to
succeed, see significance bit of Moorgate case note.

The case Moorgate Mercantile Co Ltd v Twitchings outlines when an owner should be estopped from
asserting their title.

Facts: Moorgate let a car on hire-purchase to McL. Because of the continual risk that a person who
obtains possession of a vehicle in pursuance of a hire-purchase agreement will wrongfully sell the
vehicle, the finance companies and car dealers set up a self-help organisation called HPI. Moorgate
would normally have registered the agreement with HPI but didn’t. In breach of the agreement, McL
sold the vehicle to Twitchings who took the precaution of checking the HPI as to whether the vehicle
was subject to a hire-purchase agreement. Moorgate claimed damages for conversion, Twitchings
argued that they were estopped from asserting their ownership because they didn’t register the
agreement with HPI.

Held: Moorgate won.

Ratio: Since it was HPI that made the representation to Twitchings, he would have to show that HPI
had made a clear representation that the car was not subject of a hire purchase agreement and that
HPI had done so as an agent of Moorgate. HPI was not an agent of Moorgate and there was no clear
representation that vehicle wasn’t subject to HP agreement, just that it wasn’t registered.

Significance: That there was no duty to register with Hire Purchase Info Ltd it is clear that, in relation
to estoppels by negligence, there is no general duty of care on the owner of goods to protect his
own interest in those goods or to protect the possible interest of third parties. An owner can only be
estopped from asserting their title when there is a clear representation made by the owner or by an
agent of the owner (acting within their remit) that is untrue. The scope of this exception depends in
part on the scope put on the dictum of Ashurst J in Lickbarrow v Mason that ‘wherever one of two
innocent persons must suffer by the acts of a third, he who has enabled such third party to occasion
the loss must sustain it’.

Note: There were dissenting judgements.

The Sale of Goods Act contains the principle of nemo dat and its main exceptions. (see statute book).