Nemo dat v bona fide

By skepticlawyer

Sometimes, both sides of an argument are right. Not just partly right, or right on odd numbered days, or right only under certain circumstances. They’re both right for all time, and — ceteris paribus — under all circumstances.  Some of the thorniest problems in public policy are of this type, and when they come into conflict with each other, I guarantee you that trying to split the difference — which is what legislators, lawyers, policy wonks and the rest of us have to do — is really, really difficult. 

This week, Sinclair Davidson and Anna Winter both managed to stumble on one of these policy conundrums, the sort of autonomy v duty (both things that are independently valuable, at least to this classical liberal) bust up that philosophers have been banging their heads over since, I dunno, Plato. I’ll leave you to peruse both threads in your own time, because I don’t wish to enliven the subject again. What I want to do instead is something else: to present in bald terms the impossibility of legal perfection, with the concomitant inevitability that sometimes meritorious claims have to be defeated. Over at LP, I made the following observation:

One of the most pervasive characteristics of modern legislative and political micromanagement in developed countries is its perfectionism. Everyone must be perfectly well informed is a version of this. Laws are passed and then patched and repatched in an attempt to ensure this happens, often producing all sorts of negative unintended consequences. Sometimes the outcome is worse than the situation that pertained before the laws were enacted.

It’s my view that trying to ‘fix’ the injustices that arise in situations where two sets of principles are both conflicting and correct is impossible. Sometimes it is simply better to make a rule: indeed, HLA Hart once argued that the first principle of the rule of law is not ‘treat like cases alike’ but ‘that there be rules’, for the simple reason that the alternative is too messy to contemplate.

Imagine the following scenario: you’re in the market for a good quality used car and you go scouting around looking for a decent Jaguar, Mercedes or Porsche. You finally see what you want on the forecourt of a car dealership that you trust (it’s managed, for various reasons, to work its way around Akerlof’s classic lemons v peaches information asymmetry problem) and you close out the deal. 

Two days later, a man turns up on your front lawn claiming the car is his. He’s furious. You’re worried that he’s going to start throwing punches — at you, your kids, your dog, whatever. Eventually, you get him to calm down enough to explain what happened. It turns out that last week, he put an advert in the paper (or, these days, on craigslist) offering his Jaguar in British Racing Green for sale. A man responded to the advertisement and came around to view the car. The man was an absolute dead ringer for David Tennant and — on questioning — revealed that he was indeed David Tennant. The angry man on your front lawn admits to being a huge Who fan and tells you he cheerfully accepted a cheque from the famous actor for the car.

In the meantime, ‘David Tennant’ sells the Jaguar to your favourite car dealership and disappears. The cheque he made out to the angry chap on your lawn bounces. You buy the car, paying good money for it. You had no idea of the car’s provenance.

Who gets the car?

It would seem that two people have very good claims to the car. The angry man on your lawn has a good claim. He owned the car and had good title to it. He was tricked into selling it by a bounder who did not have good title; when that bounder onsold the car to the dealership, he had nothing to sell: he did not have good title. This principle is known in the common law as the ‘nemo dat‘ rule, which is short for nemo dat quod non habet. That is, you cannot give what you do not have. The principle is an old one, and a more sophisticated (and market-friendly) version is outlined by the Roman jurist Ulpian: nemo plus iuris ad alium transferre potest, quam ipse habet (D.50.17.54). What you don’t have a legal right to alienate, you cannot purport to transfer. So far, so dandy. Both the common law and Roman law says you should return the car to its rightful owner. He was cheated, after all, by the bounder pretending to be David Tennant. In Roman law, this process was known as vindicatio, when the rightful owner could reclaim the chattel (maybe we need to start thinking in terms of used chariots here…). At common law, the rather more idiomatic term used was ‘self-help’.

But what of your rights? You purchased the car in good faith. You paid good money for it. Maybe the question turns on the integrity of the car dealer. Did he suspect the car’s provenance? Is he known around the place for doing a bit of ‘receiving’ on the side? Or did he, like you, purchase the car in good faith from a chap who seemed to have good title? Once again, both Roman law and the common law will come to your aid. You are what is known in the trade as a ‘bona fide purchaser for value without notice’. Both Roman and common lawyers (in the 1st Century AD and the 18th Century respectively) noticed that vindicatio and self-help could go badly wrong. You know, punch-ups in the local over disputed property and all that. Both societies had a vested interest in keeping the peace, but also in trying to weed out receivers and fences. Both had to split the difference between two equally meritorious claims. The solution arrived at in both cases — and completely independently of each other — was to have a presumption that operated in favour of the nemo dat rule, but to carve out large exceptions in favour of the bona fide purchaser for value without notice. Unfortunately, the Roman justification for the change in their law has been lost, but we do have Adam Smith’s discussion of the change at common law. 

Smith pointed out that if goods are to move freely in trade, protection must be given to the innocent purchaser, especially with the growth of credit. People need to be able to walk into a business or market of whatever sort and trust that the person selling to them is, in fact, good to sell: he must have title in his goods. If this need for trust is not assuaged, then the market will not work properly, and people will be reluctant to trade.

Of course, all this applies to what the Romans called ‘moveable property’ and what we common lawyers call ‘chattels’. Land law always operated differently, strongly favouring (as it still does) the person with the strongest title. The Romans operated a titles office system, while the common law demanded proof of a chain of title. Ultimately the Roman system proved more efficient, and when a clever South Australian called Robert Torrens came up with a modified version, it was rapidly adopted in many other countries. It is — in my view — Australia’s most significant legal innovation and export. Unfortunately, applying the same principles to chattels — while tempting and possible in some situations — is much trickier.

So we are back to you and the angry chap eyeballing each other on the front lawn. Assuming the car dealer also acquired the car honestly, who gets the car? If the car dealer was engaging in a bit of receiving, how does that change the outcome? What if the angry chap had turned up on the car dealer’s forecourt before you arrived? What if the angry chap had called the police to report a theft before ‘David Tennant’ had succeeded in passing the Jaguar to the dealership? What if a factor or agent purchased the car on behalf of the dealership without informing his boss (the principal)?

As lawyers reading this will know, I am stealing facts from a dozen different ‘car’ cases and — yes — one ‘chariot’ case (in Ulpian). The factual tweaks above matter, too: they bear on whether the court goes with nemo dat or bona fide. My point, however, is larger than just an amusing little excursus on property law. It’s to point out that someone with a good claim has to lose. Either you, or the fellow who was cheated of his green Jaguar motor car. The law cannot be perfect. Sometimes, it cannot even be just.

14 Comments

  1. Patrick
    Posted October 30, 2009 at 5:01 am | Permalink

    Since you financed the purchaser and the bank has registered its non-defective charge, the bank keeps the car. Since you are the one the bank hopes to recover its money from, you retain use of it.

    Alternatively, his bank’s charge was validly registered, and the same applies vice versa…:)

    Easy question really.

  2. Sam
    Posted October 30, 2009 at 5:14 am | Permalink

    If you are stupid enough to accept a personal cheque from a stranger for a Jaguar, then you deserve to lose. The underlying principle is the theory of natural selection.

  3. Desipis
    Posted October 30, 2009 at 8:24 am | Permalink

    Sometimes it is simply better to make a rule

    I’d be surprised if many cases can be decided with simple ideology. The basis of societies are ‘rules’.

    To look at the car analogy the whole problem is created by the rule of “property rights”. The “property rights” rule was created to resolve disputes about using of limited resources, rather than simple using the “natural law” of possession (or force). Clearly both parties cannot use the car at the same time so we use the “property rights” rule to let one person have exclusive control over the car. Obviously this rule isn’t perfect or fair as the owner may have less of a need to use the car than someone else, or may not need it at all yet still deny its use to others.

    I don’t think we should take the step of assuming that existing rules are sacred; that if these rules cannot deal with a situation that there is some sort of conundrum. We should do what has been done countless times before and come up with a new rule.

    Ideally any new rule should solve the need for a system to determine the outcome in a way that minimises the cost/harm to society. The deference to the “natural law” of might makes right (aka freedom) should of course be an option but I don’t think it should be a presumption.

  4. Jayjee
    Posted October 31, 2009 at 5:17 am | Permalink

    Hi Luvvies, yes c’est moi. Not “sockpuppeting” just having a bit of a nom de blog makeover.

    The whole information asymmetry thing is very trendy now, especially among the law and economics crowd. There’s an interesting op-ed by a Coors Chambers Westgarth corporate lawyer partner in Friday’s AFR that uses a behavioural economics experiment to show how increased consumer information, and even a professional adviser’s frank disclosure that his main interest is in screwing the client, can lead to the client/customer making even MORE suboptimal decisions.

    The whole area is fascinating, which is why I begin a combined LLB and PhD in behavioural financial econometrics in January.

    But back to abortion.

    I’ll start with full disclosure: I am not even remotely religious, but I do think that over the millennia Xianity (and no doubt other religions in their own cultural context, space, and time) have bequeathed some extremely thorough, nuanced, and wise ethical and moral insights and perspectives, or at least frameworks; when life starts, and who if anybody, and when should be able to end that life with impunity is one of Xianity’s greater bequests to the modern world. Just as with “turn the other cheek”, there really is something in “the sanctity of life/every spermis sacred” shtick, which appeals more than an “eye for an eye” and the sprint to the 72 sultanas awaiting in paradise for post-splodies.

    Frustratingly, however, while Xian thinking gives us the bricks and mortar, and at times even throws in a free conservatory – from which, as seen on the LP and Cat threads, many feel safe and justified in throwing stones at others – it still does not provide answers sufficient to satisfy a largely re-paganising post/modern 21st century world.

    Having said that, I am 100% pro-abortion if that is the choice of a woman. I think abortion should be totally legal and subsidized. I do not think abortion is murder – killing legally proscribed by social custom. If somebody can invent technology capable of transferring speckles of protoplasm or fetuses which are still extensions of a woman body –the umbilical chord connecting the fetus and the woman’s placenta-feeding uterus. Nevertheless, I do empathasise with the perspective that abortion is still killing, of a “human”. But even from that perspective, my position is that it is socially and legally sanctified killing.

    OTOH, I have experienced the torment and anxiety that female friends and acquaintances have endured as they have wrestled with news of an unplanned and/or extremely inconvenient pregnancy. As a male of the species, I have enough humility to go along fully the line “it ain’t my body, dude”. OTOH, I recall those female acquaintances from my twenties and early thirties who used abortion as a form of contraception, and could not help my self being extremely judgmental and contemptuous on hearing of a couple of women whose abortion tally reached double figures.

    To those blogosphere state fascists (none necessarily here) who demand medicos are servants of the state, and should therefore practice medicine as if ticking off legislative boxes, let them be reminded that it is the relevant colleges – surgeon, physician, GP, obstetrics, etc. – which overwhelmingly run the ethical, practice, treatment requirements, protocols, and guidelines to which doctors are subject; not the legislature. If they want Wilson Tuckey and Tony Abbott in charge of dictating how doctors should think, they are free to get the very next cab to the airport.

    Every single doctor in this country would have objections to – and deny provision of – certain treatments and procedures, for any of one or more of a million reasons – ethical, moral, aesthetic, ill-informed, dictatorial, right-before-his/her-time. For example, there are now many medical practices that will not prescribe benzodiazepines (Valium, Xanax, etc), despite these medicines being totally legal and a tremendously significant and globally-acknowledged source of palliative care for a great many maladies. Similarly, the psychiatric colleges are split on ECT. Many see modern ECT treatments as a godsend for certain mood disorders, while others see ECT as evil as the most rabid anti-abortionist sees abortion, and thus will not perform them.

    Just as it should not be the university’s job to fix up atrocious schooling by admitting imbeciles, I see no reason why an anti-abortion GP should be obliged to do anything more than say “m’am, you have come to the wrong place, I am not an abortionist, and just as you do not require a GP’s referral for Botox, or admission to the ER, you do not need one for an abortion. Good day to you”.

  5. ken nielsen
    Posted October 31, 2009 at 9:42 am | Permalink

    Nice, thoughtful and stimulating post.
    I can’t add anything except to say, yes, tis difficult.

  6. Posted October 31, 2009 at 7:49 pm | Permalink

    The other thing, of course, is to remember that titles documents belong in the titles’ office, not in some drawer at the bank, or in your kids’ hands, or at a mate’s place so you can avoid stamp duty. Then you get the benefit of the registration system 😉

    JG: I’ve let that comment through, because it is interesting and (tangentially) relevant, but you are still in moderation on this blog and will remain so for the foreseeable.

  7. Andrew 3
    Posted November 1, 2009 at 7:58 am | Permalink

    Just my 2 Cents worth from a non lawyer type.

    I thought that in most states a licensed motor dealer had to guarantee clear title to the vehicle and even if he has taken all reasonable steps to guarantee title he still holds the can.
    The original owner gets his car back, the new owner gets his money back and David Tenant keeps his head down.

    That’s how I see it but then again I am not a Lawyer.

    Clearly this only works for vehicles not chesterfield lounge suites although I find it hard to picture 2 guys standing in a driveway fighting over a Chesterfield

    Cheers Andrew

  8. Jacques Chester
    Posted November 4, 2009 at 1:44 pm | Permalink

    Jayjee/JG – spam filter ate your comment

    Probably because he mentioned prescription medicines of the kind spammers try to advertise on this and other sites through comments.

  9. Jayjee
    Posted November 4, 2009 at 6:31 pm | Permalink

    JC

    If that is the case, please believe me when I tell you I am not a BigPharma marketing exec! 🙂

  10. Posted November 5, 2009 at 2:38 pm | Permalink

    It strikes me that your whole dilemma disappears if we remove the assumption that David Tennant is untraceable. He is, obviously, the party who has committed the wrong here (fraud/breach of contract/misrepresentation).

    In any event, is there any UK/Australian common law principle which would ever allow a plaintiff to follow property into the hands of a bona fide purchaser without notice (genuine, not rhetorical, question)? Particularly if the plaintiff’s claim is civil, not criminal? I would be interested to read a case on the topic if so.

  11. Posted November 5, 2009 at 2:39 pm | Permalink

    Edit: and when I say “property” I mean “chattels” not “real property”.

  12. Posted November 5, 2009 at 4:11 pm | Permalink

    Paul, I presume you’re talking about tracing. I’ve got confused recollections about the rule in Barnes v Addy, but I’ll wait for until LE (who is a bona fide trusts expert) to put in an appearance on your question.

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