Did you know? A purchaser may not automatically gain ownership if the seller obtained the property unlawfully.
This principle is rooted in the legal maxim “nemo dat quod non habet”, commonly known as the Nemo Dat Rule, which means “no one can give what they do not have”. Simply put, if a person does not have rightful ownership of goods or property, they cannot legally transfer that ownership to someone else. The rule aims to protect those whose property rights have been wrongly taken and prevent bad faith actors from profiting from dishonest dealings.
The Nemo Dat Rule has been incorporated into legislation, including section 27 of the Goods Act 1958 (VIC) and section 26 of the Sale of Goods Act 1923 (NSW); however, like any legal principle, there are exceptions.
The Innocent Purchaser Exception
One common exception to the Nemo Dat Rule is the case of an innocent purchaser. In brief, if someone unknowingly buys property that was improperly acquired and does so in good faith after conducting all reasonable inquiries and having paid a fair amount, the buyer may be entitled to ownership. Whether a buyer acted in good faith, however, often depends on the circumstances.
For example, in Cheliah v NSW Police [2018] NSWSC 557, Cheliah bought a stolen Lamborghini from a dubious seller. He claimed that, under section 27 of the Sale of Goods Act 1923 (NSW), the innocent purchaser exception granted him ownership of the vehicle. The Court found, however, that Cheliah did not act in good faith. As an experienced car buyer, he failed to conduct reasonable checks, such as searching the Personal Property Securities Registry (PPSR) or requesting documents to confirm legitimate ownership.
So, if you’re ever in doubt about whether someone truly owns property they’ve purchased, remember the Nemo Dat Rule and consider whether the innocent purchaser exception might apply!
The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.
