6 S.Ac.L.J.
Notes and Comments
439
CAN A THIEF PASS TITLE TO STOLEN GOODS?
Caterpillar Far East Ltd v Cel Tractors Pte Ltd1
Suppose a thief steals a chattel that belongs to O and sells it to B. B is a
bona fide purchaser for value without notice of the seller’s lack of title.
When the truth is out, the thief is sent to prison.2 He is not worth suing.
In practical terms, O’s only recourse is against B. O sues B for the recovery
of the chattel, or its money equivalent.3 Both O and B are innocent (although
one may have been more careless than the other). The question is who
between them should suffer for the wrong done by a third party, the thief.
One might be forgiven for thinking that the answer is quite clear: O should
succeed because a thief cannot pass title to the goods he has stolen.
However, when this set of facts was presented before the High Court in
the recent case of Caterpillar Far East Ltd v CEL Tractors Pte Ltd, a
contrary answer was given. There, both O and B were companies. O was
in the tractor business and B was supposedly the largest spare parts dealer
in Singapore.4 The chattels in issue were tractor spare parts. The theft and
subsequent sale to B were carried out by a gang, whose members included
two employees of O. Yong Pung How CJ held that B had acquired a good
title.
The scenario raises a conflict between two large interests. A balance has
to be struck between O’s ownership interest and B’s commercial interest.5
Both need protection: There will be little order in society if title to property
is not protected against theft; on the other hand, business can thrive only
in an environment where there is some measure of security in commercial
transactions. The starting point of the law has always been to uphold
ownership interest at the expense of commercial interest. That starting
point is embedded in the ancient maxim nemo dat quod non habet. It is
also found in section 21(1) of the Sale of Goods Act,6 which provides:
‘Subject to this Act, where goods are sold by a person who is not their
owner...the buyer acquires no better title to the goods than the seller had....’
There are exceptions to this rule. The better known exceptions7 are
1
2
3
4
5
6
7
[1994] 2 SLR 702.
Cf the power conferred by s 388, Criminal Procedure Code, Cap 68,1985 Rev Ed, on the
criminal court upon conviction of the thief.
O would normally base his claim on the tort of conversion. His argument would be that
title had never been divested from him. If it had, it is the law of restitution which tells
O whether he can or cannot recover his title.
Supra, note 1, at 705.
So said Lord Denning in Bishopgate Motor Finance Corporation v Transport Brakes
Limited [1949] 1 KB 332 at 336–7. See also R G Hammond, Person Property, Commentary
and Materials (1990), at 173–4.
Cap 393, 1994 Rev Ed.
There are others: eg, the saving clause in s 21(2)(b).
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Singapore Academy of Law Journal
(1994)
grounded in the principles of agency law8 and estoppel,9 and founded in
statutory provisions such as sections 23, 24 and 25 of the Sale of Goods Act
and sections 2, 8 and 9 of the Factors Act.10 Caterpillar was concerned with
none of them; the case was decided instead on a very much expanded
version of the ‘market overt’ exception to the nemo dat rule. For
convenience, that expanded version will hereafter be called ‘the expanded
rule’. Before turning to the expanded rule, its progenitor, the doctrine of
‘sale in market overt’, must first be examined.
I.
SALE IN MARKET OVERT
A. The nature and scope of the market overt rule
In England, the ‘market overt’ rule is currently found in section 22(1) of
the United Kingdom Sale of Goods Act 197911 (‘UK SGA’). It reads:
‘Where goods are sold in market overt, according to the usage of the
market, the buyer acquires a good title to the goods, provided he
buys them in good faith and without notice of any defect or want of
title on the part of the seller.’
The rule, although statutorily codified, is common law in origin. As a
common law rule, it has existed since (at least) the time of Sir Edward
Coke.12 Section 22(1), according to the Chief Justice in Caterpillar, represents
the ‘statutory encapsulation’ of the common law rule;13 the common law
informs the scope of section 22(1).
The market overt doctrine may be briefly described as follows: If goods
are purchased in a market overt, and provided certain other conditions are
satisfied, the bona fide buyer obtains a good title, although the seller had
none to give. This rule was originally evolved to promote commerce.14 The
word ‘market’ is used in the sense of denoting a place where trading is
conducted. Only certain markets are, in law, ‘markets overt’. Every shop
within the City of London is by custom a market overt.15 Outside the City,
8 Ss 21(1), 62(2) of the Sale of Goods Act.
9 Ss 21(1), 62(2) of the Sale of Goods Act.
10 Cap 386, 1994 Rev Ed. This statute is a revised edition of the United Kingdom Factors
Act 1889, 52 & 53 Viet, c 45, published under section 9(1) of the Application of English
Law Act, cap 7A, 1994 Rev Ed. See also: section 21(2)(a) of the Sale of Goods Act.
11 1979, c 54. This provision can be traced to the same numbered section in the United
Kingdom Sale of Goods Act 1893, 56 & 57 Vict, c 71.
12 Sir Edward Coke, The Second Part of the Institutes of the Laws of England (1662), at
713–4. Coke is generally thought to be an ‘economic liberal’: see D Little, Religion, Order
and Law (1984 reprint), chapter 6 and the materials cited in bibliographical essay B
therein.
13 Supra, note 1, at 706.
14 See supra, note 12, and W Blackstone, Commentaries on the Laws of England (1766), vol
2, at 450; Sir John Comyns, A Digest of the Laws of England (1792), vol v, at 41–44.
15 The Case of Market Overt (1596) 5 Co Rep 83 b.
6 S.Ac.L.J.
Notes and Comments
441
a market overt is an “open, public, and legally constituted market”.16 To
quote from the learned editor of Benjamin’s Sale of Goods: ‘To be “legally
constituted” the market must be one that has been created by statute or
charter, or established by long continual user....’17 Not every sale made in
a market overt gives the buyer a good title. There are requirements relating to how and in what circumstances the sale should be conducted. The
sale must be conducted according to the usage of the market. To quote
from the learned editor again: ‘The sale...must be made at the place of the
market upon an ordinary market day and during the usual hours.18 The
goods must be of a description which it is customary to find on sale in the
market and must be openly exposed for sale there. The whole transaction,
that is, the sale and delivery of the goods, must be begun and completed
openly in the market....’19 It is thought that publicity ‘minimises the likelihood of the goods offered for sale being stolen property.’20 The rationale,
developed in ancient times when commerce was slower in pace and smaller
in scale, was this: The owner could and should pursue his goods to the
market where it is well known that such goods are openly sold. If he does
not bother, his title deserves to be defeated; the buyer of the stolen goods
can legitimately say to himself: ‘[N]o person but the owner would dare to
expose them for sale here, and therefore I have a right to assume that the
shop-keeper has a right to sell them.’21
B. Does the market overt rule apply in Singapore?
On this point,22 there was, before Caterpillar, no direct reported authority.23
Prior to the passing of the Application of English Law Act24 (‘the AELA’)
in 1993, the market overt rule as codified in section 22(1) of the UK SGA
was applicable to a particular case if it was received, for the purpose of
16 Lee v Bayes (1856) 18 CB 599 at 601.
17 4th ed, at para 7-018. See also E Tyler and N Palmer (eds), Crossley Vaines’ Personal
Properly (5th ed), at 174–175.
18 Meaning between sunrise and sunset. This requirement stems from the need for publicity
to safeguard the owner’s interest. As Lord Denning said in Reid v Metropolitan Police
Commissioner [1973] 1 QB 551 at 560: ‘The goods should be openly on sale at a time
when those who stand or pass by can see them. Thus it must be in the day-time when all
can see what is for sale: and not in the night-time when no one can be sure what is going
on.’ See also the view of Scarman LJ, ibid, at 564.
19 Supra‚ note 17, at para 7–019. See also Hargreave v Spink [1892] 1 QB 25 and the
judgment of Scrutton J in Clayton v Le Roy [1911] 2 KB 1031.
20 Crossley Vaines’ Personal Property, supra, note 17, at 161. See also H Wilkinson, Personal
Property (1971), at 171.
21 Crane v The London Dock Company (1864) 5 B & S 313 at 320, per Blackburn J. See
also, ibid at 318–319, per Cockburn CJ.
22 See the excellent discussion by Dora Neo in ‘Application of English Law Act 1993: Sale
of Goods and Nemo Dat’[1994] SJLS 40.
23 Cf the inconclusive dictum of Lai Kew Chai J in the High Court case of Commercial &
Savings Bank of Somalia v loo Seng Company [1989] 2 MLJ 200, at 202.
24 Cap 7A, 1994 Rev Ed.
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Singapore Academy of Law Journal
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that case, under section 5 of the Civil Law Act.25 Section 5 has been repealed
by section 6(1) of the AELA. However, section 6(2) of that Act makes
clear that in respect of a proceedings instituted or a cause of action accruing
before the commencement of that Act, section 5 of the Civil Law Act will
continue to apply. Caterpillar was apparently such a case: the series of
thefts and subsequent sales were carried out in 1983 and the suit was
instituted and the cause of action in conversion arose before the
commencement of the AELA. This probably explains why the court referred
to section 22(1) of the UK SGA although, and this is surprising, both the
AELA and the Civil Law Act were not even mentioned in the judgment.
Under section 5(3)(a) of the Civil Law Act, English law is received ‘subject
to such modifications and adaptations as the circumstances of Singapore
may require.’ One would be hard put, given its technical meaning, to find
a ‘market overt’ in Singapore. Whichever of two possible interpretations
one takes of Caterpillar (which will be discussed two paragraphs away), it
is clear that the Chief Justice did not think that the market overt rule, in
its English form, is suitable for local application:26
‘...in order for a sale to constitute a sale in market overt in the City
[of London] certain conditions must be fulfilled. Equally plain is the
fact that these conditions were delineated in an era and in
circumstances far removed from a contemporary Singapore. It would
scarcely be desirable or necessary, therefore, to import wholesale
into the Singaporean context the rule of market overt as it has evolved
within the English legal system, lest we become entangled with the
specific characteristics of markets overt in England, which derive
from circumstances alien to us.’
The legislature seems to have thought likewise about the unsuitability of
the market overt rule. While the AELA makes clear that the UK SGA
1979 is to apply in Singapore, it expressly excluded, inter alia, the reception
of section 22.27 The UK SGA 1979 minus (inter alia) section 22 now appears
in our statute books as Sale of Goods Act, Cap 393, 1994 revised edition
(‘Singapore SGA’).28 (Hereafter, a reference to just ‘SGA’ is to both the
UK and the Singapore SGA.)
25 Cap 43, 1988 Rev Ed. A number of local cases have assumed that the UK SGA applies
in Singapore: eg, Harrisons & Crosfield (NZ) Ltd v Lian Aik Hang [1987] 2 MLJ 286,
Koh Teck Hee v Leow Swee Lim [1992] 1 SLR 905; Additive Circuits (S) Pte Ltd v
Wearnes Automation Pte Ltd [1992] 2 SLR 23.
26 Supra, note 1, at 706. Words in brackets added.
27 S 4(2) and 1st Schedule, Part II, Item 10, Fourth Column. This exclusion was thought to
be ‘a necessary modification’; this is apparent from the report of the Parliamentary
Debates (see speech of Professor S Jayakumar made on the second reading of the bill:
Parliamentary Debates Singapore, Official Report, Tuesday, 12th October 1993, Vol 61,
No 7, at 612) and from section 4(1) of the AELA itself.
28 The publication of the revised edition of the UK SGA 1979 is authorised by s 9(1) of the
AELA.
6 S.Ac.L.J.
Notes and Comments
443
The position for two categories of cases may be summarised thus: (1) For
cases which attract the application of the Singapore SGA, the buyer cannot
avail himself of a statutory market overt rule because the rule has been
omitted from that Act; (2) It is unclear if section 22(1) of the UK SGA is
applicable in cases, like Caterpillar, which are still governed by the old
section 5 of the Civil Law Act. Caterpillar can be interpreted in two possible
ways. The first is that it proceeded on the basis that section 22(1) does not
apply in Singapore, and that the decision was reached by applying a newly
evolved common law principle. If so, the common law principle it
enunciated, or on which it was decided, would have to be considered.even
in cases falling under category (1). The second possible interpretation is
that the Chief Justice did apply section 22(1) but he interpreted it to suit
local circumstances. On this interpretation, what Caterpillar decided is
obviously of no relevance in category (1) cases. It is unclear which approach
the court actually took.29
If the first interpretation is true to what the court intended, it is submitted
that the decision cannot be justified. Under section 3(1) of the AELA,
English common law, so far as it was part of Singapore law immediately
before the commencement of the AELA, shall continue to be part of
Singapore law. It may be argued that the common law market overt rule
was received under the Second Charter of Justice 1826 and therefore still
forms part of Singapore law today. There are two main arguments30 and
one incidental observation against that view. The first argument is founded
in section 3(2) of the AELA, which qualifies the earlier sub-section. It
states that English common law is received ‘so far as it is applicable to the
circumstances of Singapore and its inhabitants....’ As noted, the market
overt rule, in the English common law form, fails to pass muster. It can
perhaps be said that the court in Caterpillar was modifying English common
law to suit local conditions. However, as will be demonstrated later, the
rule applied in Caterpillar is so drastically different from the market overt
rule that to call it a modification of that rule seem somewhat euphemistic.
More importantly, it runs against the second argument that follows.
The second argument is based on the supremacy of statutory law over
common law. Section 21(1) of the SGA states a positive nemo dat rule and
that statutory rule is said to be ‘subject to the Act’. This means that (i) the
statutory nemo dat rule is qualified and (ii) the qualifications must be
29 The court held, rather vaguely, that ‘the principles underlying the rule of market overt
are germane to the circumstances of the present case’(supra, note 1, at 706) and went
on to apply the ‘rationale of the market overt rule’ (supra, note 1, at 707). Emphasis
added.
30 There is the possibility of this third argument: it is conceptually wrong to proceed as if
there were two rules of market overt — the statutory and the common law. Insofar as
s 22(1) is an encapsulation of the common law market overt rule, there is only one rule;
the common law rule is subsumed into s 22(1). They must therefore stand or fall together.
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Singapore Academy of Law Journal
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recognised by the Act. Can the common law market overt rule qualify the
statutory nemo dat principle? The answer has to be in the negative because
generally common law cannot override a statutory rule. It is true that a
statute may recognise a common law rule and in addition confer on it the
ability to override another statutory rule.31 It may therefore be argued that
the common law market overt rule is a ‘special common law...power of
sale’ under section 21(2)(b) of the SGA and that as such, it is invested by
that section with the ability to override the statutory nemo dat rule. This
argument was raised but convincingly rejected in Queensland (whose Sale
of Goods Act 1896 contained an equivalent of section 21(2)(b) of the
SGA) in the case of Sorley and Stirling v Surawski.32 Compelling reasons
were given. Macrossan CJ held that the common law did not recognise in
thieves a power to sell the goods they had stolen. The special ‘common
law...power of sale’ referred to in the Queensland’s equivalent of section
21(2)(b) of the SGA must be a lawful power of sale, such as that which a
pawnee is given at common law upon default of payment of loan.33 As
Stanley J noted, if the thief has the legal power of sale of stolen goods, his
sale is lawful, which means he cannot be sued for it. This cannot be right
for it is indisputable that the owner has a cause of action against the thief
for conversion.34
Lastly, one may also observe that if the first interpretation is correct, it is
somewhat odd, given that the legislature has now made explicit the
inapplicability of the statutory market overt rule in Singapore, for the
judiciary to move in the opposite direction by expanding its common law
equivalent.
II. THE EXPANDED RULE
A. Its scope
The scope of the expanded rule is unclear from the judgment. For that
reason, it is difficult to set out its limits and its requirements. Given this,
and the fact that the expanded rule was intended as a sort of derivative of
the English market overt rule, it is proposed instead to examine how each
of the main requirements of the English market overt rule is modified
under the expanded rule.
The first, it will be recalled, is that the sale must be made in a ‘market
overt’, a term which refers (a) to a place (b) which has acquired the legal
status of a market overt. The second is that the goods must be of a type
31 Cf section 62(2) of the SGA, which preserves the applicability of common law rules but
only so far as they are not inconsistent with the SGA.
32 [1953] QSR 110. See K C T Sutton, Safes and Consumer Law in Australia and New
Zealand (3rd ed), at 355–359.
33 Supra, note 32, at 114.
34 Supra, note 32, at 117.
6 S.Ac.L.J.
Notes and Comments
445
normally sold in that market. Under the expanded rule, it would appear
that it suffices if there is, loosely speaking, a ‘regular and open market’ for
the goods in question. The term ‘market’ is used to denote not a specific
locality but, it seems, a commercial state of affairs, namely, the existence
of supply and demand. In Caterpillar, a member (called PW8’ in the
judgment) of the gang of thieves had apparently some experience in the
sale and disposal of spare parts. He found the defendant company listed
in the Yellow Pages and contacted their sales director. He represented
himself as a director of ‘Unibone Enterprises’, a company about which the
judgment tells us very little. The negotiations were conducted on the
telephone and at the defendants’ office. The goods were delivered by PW8
to the defendants’ premises. Although the sales were not made in any sort
of market-place, it was held that there existed in Singapore ‘a regular and
open market’ for the goods. This conclusion was apparently drawn from
the fact that it was well known in the trade that the spare parts in issue
were frequently bought in Singapore from independent suppliers (both in
and out of Singapore). The market (in the conceptual sense of supply and
demand) was open and regular, it seems, because most in the trade knew
of the existence of and traded with such independent suppliers. It is unclear
how seriously the requirement of a ‘regular and open market’ was intended
as an obstacle to a buyer’s acquisition of title; the looser it is interpreted,
the easier it will be for the buyer to obtain a good title.35
The third broad requirement of the market overt rule is that the sale must
be conducted in a certain manner and at a certain time. As we saw, this
requirement, in its odd way, provides some justification for depriving the
owner of his title. The judgment does not say if there is any such requirement
under the expanded rule. The sales were said to be ‘open’ not in the sense
of visibility but by reason mainly of the lack of reason for suspicion on the
buyer’s part. It is doubtful if this observation meets more than the next
requirement.
The fourth requirement of the market overt rule is that the buyer must be
a bona fide purchaser without notice of the defect or lack of title on the
part of the seller. This is also required under the expanded rule. In Caterpillar, it was held that the defendants were bona fide purchasers. The bona
fide requirement appears to assume a central role in the expanded rule.
However, this requirement is the common denominator of almost all the
other recognised exceptions to the nemo dat rule; it has never and cannot
be sufficient in itself to defeat that rule. Hence what distinguishes the
35 The Chief Justice took judicial notice of the fact that Singapore is a thriving ‘freeport and
busy trading centre for all kinds of goods within the region.’ (Supra, note 1, at 707.) Does
this mean that it is not difficult to establish a ‘regular and open market’ for most goods?
There is no reason to think that the concept of ‘a regular and open market’ is inherently
restricted to new goods. Some second-hand goods, like cars, are often and openly sold;
and some goods, like antiques, are almost by definition second-hand.
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Singapore Academy of Law Journal
(1994)
expanded rule from the other exceptions and forms the core of the expanded rule is the idea of a ‘regular and open market’. Considering the
significance of its role, the judgment, with respect, ought to have given a
clearer explanation of that concept. If it is given a wide meaning, the
expanded rule may come near to swallowing up all the other nemo dat
exceptions.
B. Is the expanded rule sound?
The expanded rule, in making it easier for commercial interest to prevail
over ownership interest, brings into question the orthodox priority given to
the latter over the former. The robust approach of the court was grounded
in this set of policy considerations:
‘...the relative facility of transfer of property in goods may in various
instances make a ‘loser’ of the original owner of goods which are
converted, but such an ‘evil’ (if indeed one can even call it that) is
counterbalanced by the general practical virtues of a system that
facilitates the passing of property in goods. It should also be pointed
out that in the majority of cases, the original owner of the goods is
covered by insurance, whereas it may be difficult for the innocent
purchaser to enforce his remedy (and even if he is able to do so, it
will be expensive)36....The other point which should be made is that,
in more cases than not, goods are stolen at least partly as a result of
the carelessness of the owner or his servants, or at any rate their
failure to take proper precautions to safeguard property. That this
was so in the present case is manifest from the evidence led.’37
These statements would no doubt enthral believers in the economic analysis
of the law. In a very superficial form (my failing as an economist will be
obvious), the issue may be formulated thus: Is a legal rule (the nemo dat
principle) which imposes a general obligation to enquire into the seller’s
title more efficient than one (the expanded rule) which imposes a general
obligation to protect one’s property from theft? The cost and benefit of
each rule would have to be weighed; the rule to prefer is that which, in the
totality of cases, is likely to produce a greater net gain. In the absence of
empirical evidence, it is doubtful that this balancing exercise is possible of
performance other than intuitively.38 In any event, we have to be conscious
36 Supra, note 1, at 707.
37 Supra, note 1, at 708.
38 It is not denied that law making, whether judicial or legislative, will always, as Hart and
McNaghten say, be based on experience and reflection rather than on some absolute
truths. (‘Evidence and Inference in the Law’ in D Lerner ed, Evidence and Inference
(1959), at 70). My point is that the soundness of a judgment must depend on how much
we know and that on the policy issue at hand, little relevant data is available. Consider
this assumption by the Chief Justice, supra, note 1, at 707: ‘It is clear that great public
inconvenience and confusion would result if the rationale of the market overt rule could
not operate.’ With respect, it is not obvious that the obscure market overt rule has ever
contributed so much to stabilising commerce.
6 S.Ac.L.J.
Notes and Comments
447
that tilting the balance in favour of the bona fide purchaser of stolen goods
is likely to incur costs (a) in the form of increased insurance premiums39
and (b) as a result of making thieves ‘more confident of finding purchasers’.40
Such externalities will affect the efficiency of the expanded rule.
There is a perhaps more fundamental point. The formulation of any legal
rule must be done with an awareness of its impact on other legal rules.
Legal rules must be consistent. The expanded rule does not fit with what
the law is commonly understood to be. Three inconsistencies may be noted.
The Chief Justice found in the case before him that the owners did not
take sufficient precautions to safeguard their goods. It is not clear what
legal significance was attached to that finding for the court conceded that
there is ‘no legal duty in general to prevent theft of one’s property.’ The
relativity of fault may be the principle underlying some of the nemo dot
exceptions but it has never been a rule as such.41 Lord Macnaghten stated
settled law in Farquharson Bros v C King & Co:42
‘The right of the true owner is not prejudiced or affected by his
carelessness in losing the chattel, however gross it may have been....If
a person leaves a watch or a ring on a seat in the park or on a table
at a cafe and it ultimately gets into the hands of a bona fide purchaser,
it is no answer to the true owner to say that it was his carelessness
and nothing else that enabled the finder to pass it off as his own.’
This view is not contradicted by the expanded rule; the latter will not allow
the bona fide buyer to get a good title to the watch and the ring unless he
bought it in a ‘regular and open market’. However, the easier we make
proof of a ‘regular and open market’, the easier it is for a bona fide purchaser
to deprive the owner of his title. If the expanded rule is to remain law and
if the security of ownership which Lord Macnaghten spoke of is to be
taken seriously, we cannot afford to let the concept of ‘regular and open
market’ remain woolly.
There is a second inconsistency: Theft is as bad as, if not worse than,
obtaining goods fraudulently. There is no reason why a thief should be
more capable of passing title than a fraudster. In the well-known case of
Cundy v Lindsay,43 F deceived O into thinking that F was ordering cambric
handkerchiefs on behalf of a reputable business firm. On the basis of that
39 P S Atiyah, ‘Law Reform Committee: Twelfth Report’ (1966) 29 MLR 541, at 542.
40 Words of Lord Donovan quoted in H Wilkinson, Personal Property (1971), at 172, footnote
46.
41 P S Atiyah, The Sale of Goods (8th ed), at 353, footnote 41.
42 [1902] AC 325 at 335–6. It is true that Lord Macnaghten excluded from this statement
of law a sale made in a market overt. However, it has to be stressed that the market overt
rule he had in mind is very much narrower that the expanded rule.
43 (1878) 3 App Cas 459.
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Singapore Academy of Law Journal
(1994)
deception, O delivered the goods to F on credit. F sold the goods to B. B
was a bona fide purchaser. When O uncovered the true facts upon F’s
failure to pay for the goods, O sued B for conversion. O succeeded. The
House of Lords reasoned that since O was mistaken as to the identity of
the other contracting party, no contract was formed between F and O; as
such, F did not obtain any title to the goods to pass to B. If F had been
less sophisticated and had resorted to theft instead of fraud, surely he
should not thereby acquire a better ability to pass title. If there had been
a ‘regular and open market’ (in the Caterpillar sense) in cambric
handkerchiefs, a possibility which the reported facts do not rule out,44
would the expanded rule not have achieved an opposite result in Cundy v
Lindsay?
The third inconsistency is this: Traditionally, lawyers do not take kindly to
the idea of a thief being able to pass title to stolen goods. The anachronistic
market overt rule was barely tolerated even though, having an obscure
status in the law of sale of goods, that idea came to life only in a minor
way. The tenacity of the traditional belief is well illustrated by the way the
courts have interpreted section 25(1) of the UK SGA, which appears as
section 25 of the Singapore SGA, and the similarly45 worded section 9 of
our (as well as the UK) Factors Act (more popularly known as ‘the buyer
in possession’ exception to the nemo dat rule). Section 25(1) states:
‘Where a person [B1] having bought or agreed to buy goods obtains,
with the consent of the seller [S], possession of the goods..., the
delivery or transfer by that person [B1]...of the goods...under any
sale...to any person [B2] receiving the same in good faith and without
notice of any...right of the original seller [S] in respect of the goods,
has the same effect as if the person [B1] making the delivery or transfer
were a mercantile agent in possession of the goods...with the consent
of the owner [O].’ [Emphasis and words in square brackets added.]
The effect of treating B1 as a mercantile agent in possession of the goods
with the consent of the owner is that section 2(1) of the Factors Act would
then apply. If section 2(1) applies, the sale by B1 to B2, if it was made by
Bl ‘when acting in the ordinary course of business of a mercantile agent,
shall...be as valid as if he [B1] were expressly authorised by the owner of
the goods to make the same; provided that the person taking under the
disposition [B2] acts in good faith, and has not at the time of the disposition
notice that the person making the disposition has not authority to make
the same.’ If B1 is treated as having been expressly authorised by the
owner to sell the goods, the sale, under the law of agency, would be binding
on the latter.
44 The facts, however, do rule out the applicability of the English market overt rule because,
to begin with, the sale was not conducted in a market overt in the sense of an open,
public and legally constituted market.
45 The difference is not relevant to the present discussion.
6 S.Ac.L.J.
Notes and Comments
449
Paradoxically, despite the efforts to create an intricate web to protect
ownership, there is an apparent loophole which may allow a thief to deprive
the owner of his title. If a thief (S) sells a stolen chattel to B1 and B1 sells
it to B2, section 25(1) may well defeat the owner’s (O’s) title to the chattel
by this argument: Since i) B1 was a buyer in possession of goods, ii) which
possession was obtained with the consent of the seller, S (ie, the thief), and
iii) B1 delivered the chattel to B2, iv) who acted bona fide and without
notice, Bl is deemed to be a mercantile agent in possession of the chattel
with the consent of O. In that capacity, B1 is able to pass a good title to
B2 under section 2(1) of the Factors Act, thus defeating O’s title.
This factual configuration (but with an added number of sub-buyers) was
before the House of Lords in National Employers’ Insurance v Jones.46 The
House was clearly disturbed by the prospect that a thief could pass a good
title if section 25(1) of the UK SGA and section 9 of the UK Factors Act
are read literally. It therefore chose to interpret the provisions in accordance
more with their spirit than their letters. It essentially construed the word
‘owner’ appearing in those provisions to mean ‘seller’. This means that the
consent which B1 is deemed to have is that of the person (S) who had
entrusted the goods to him. If, as was the case in National Employers’
Insurance, S happens not to be the owner of the goods, section 2(1) of the
Factors Act would not be triggered off to defeat the owner’s title.
What was stolen in National Employers’ Insurance was a car. It was sold
to the last buyer by a car dealer (himself an innocent purchaser). There
seems as much reason to say that there was a regular and open market for
cars in that case47 as to say that there was a regular and open market for
vehicle spare parts in Caterpillar. An application of the expanded rule to
the facts in National Employers’ Insurance would most likely lead to a
result opposite to the outcome of that case.48 We find, instead, the Law
Lords straining against statutory language to prevent a thief from passing
title to stolen goods. Judges in New Zealand49 and Canada50 have done
likewise. Our High Court, on the other hand, is expanding (depending on
which interpretation one takes) either a common law rule or the scope of
section 22(1) of the UK SGA to allow a thief to do exactly that. From a
nationalistic view-point, these observations are of no consequence; we ought
to have the courage and conviction to do what we think is right. It is
certainly true that purely from the policy perspective, although primacy of
46 [1988] 2 WLR 952. The issue which this case decided had caused much academic debate:
Cornish (1964) 27 MLR 472, at 477-8; Atiyah, The Sale of Goods (6th ed), at 255–6;
Battersby and Preston (1975) 38 MLR 77. Cf Powles, (1974) 37 MLR 213.
47 And arguable also in Lim Kim Cheong v Lee Johnson [1993] 1 SLR 313.
48 Cf the position had the sale been made by a hirer instead: see Halsbury’s Laws of
England, 4th ed, Vol 22, para 268.
49 Elwin v O’Regan and Maxwell [1971] NZLR 1124.
50 Brandon v Leckie (1972) 29 DLR (3d) 633.
450
Singapore Academy of Law Journal
(1994)
the nemo dat rule is entrenched in Anglo-American legal systems,51 no one
can say that it is indisputably sound. Indeed, the French have taken a
different (but not completely opposite) starting point from the AngloAmerican,52 and in 1966, the English Law Reform Committee had proposed
(albeit it did not result in legislation) a reform which resembles, to some
extent, the law as enunciated in Caterpillar.53
However, courage to innovate must be tempered with caution. There is a
limit to the extent to which the statutory nemo dat rule can be judicially,
as opposed to legislatively, eroded. Each person, looking behind the mystery
of the latin, will have his or her own view on its desirability and fairness,
but whether we like it or not, the nemo dat rule is deeply ingrained in our
law. It forms the basis of so many of our judicial and statutory rules. These
rules interconnect like threads weaving a pattern; if a string is too vigorously
tugged, the pattern goes awry. May we look to the Court of Appeal for a
clearer picture?
HO HOCK LAI*
51 Under the American Uniform Commercial Code, the thief would also be unable to pass
any title to a purchaser even though he may have bought the goods in good faith. This
is because the thief has a void title and section 2–403(1) only allows a person with a
voidable title to pass a good title to a good faith purchaser for value. See: J White and
R Summers, Uniform Commercial Code (3rd ed), at 173.
52 Article 2279 of their Civil Code states: ‘En fait de meibles la possession vaul title’; ‘In
matters of personalty, possession is equivalent to title.’ This is however qualified thus:
‘Nevertheless, one...from whom was stolen a thing...may claim it during three years,
counting from the day of the loss or theft, against the one in whose hands he finds it,
saving to that one his recourse against him from whom he holds it.’ Article 2280 goes on
to state: ‘If the present possessor of a thing stolen or lost bought it at a fair or at a
market...the orginal owner may have it returned to him only by reimbursing the possessor
for the price which it cost him.’ (The French Civil Code, translated with an Introduction
by John H Crabb (1977), at 408.)
53 See the commentaries of A Diamond (1966) 29 MLR 413 and P Atiyah, ibid, at 415 on
the Twelfth Report of the UK Law Reform Committee on The Transfer of Title to
Chattels, Cmnd 2958.
* LLB (NUS); BCL (Oxon); Advocate and Solicitor (Singapore); Lecturer, Faculty of
Law, National University of Singapore. I am very much indebted to Barry Crown, Peter
English, and Dora Neo for their comments on the draft of this note; they are of course
to be exonerated from responsibility for any error in the views that I have expressed.