TRANSFER OF TITLE

Title basically means ownership. Sec 27 requires that for a seller to be able to transfer good title to the buyer, he must first have title over the said goods - If a buyer bought some goods from a seller who is not the owner nor have any authority to sell them - the buyer does not acquire any tittle even if he has paid value in good faith. This is the English Rule of nemo dat quod non habet (no one can give a better title than he has himself). Rationale - to protect the right of ownership

LIM CHU LAI v ZENO LTD [1964] 30 MLJ 314

Zeno Ltd entered into an agreement with a contractor named Ahmad who had contracts with the Petaling Jaya Authority for construction of culverts. Under the contract between Zeno ltd and Ahmad, the former was to provide with all the materials for the constructions of the culverts. They bought the materials for the projects and delivered them to the construction site. Ahmad’s contract with the PJ authority were cancelled whereupon Zeno Ltd informed them that the materials on site belonged to them. When Zeno Ltd attempted to sell the material, they discovered that the materials had been sold by Ahmad to the Appellant. Action was commenced in conversion.

Held – (Federal Court) Ahmad was merely a bailee and not the owner of the goods at the time he sold them to the appellant because Ahmad had no title to the goods or authority to sell them, it follow he could not pass any title to the appellant.

NG NGAT SIANG v ARAB M’SIAN FINANCE [1988] 3 MLJ 319

The plaintiff bought a car from the second defendant. To effect the transfer of ownership of the car into the plaintiff’s name, the second defendant had to pay off MUI Finance from whom he had earlier obtained a hire- purchase facility. For this purpose , the second defendant retained the registration card. After obtaining the cancellation of indorsement of MUI’s ownership, the second defendant sold the car to B whose purchase was financed by the first defendant. The first defendant indorsed its ownership claim on the registration card. The plaintiff applied to the court for a determination as to whether he or the first defendant had a better title to the car.

Held – Allowing the application. After a full payment was made by the defendant to MUI Finance and MUI had relinquished all rights to ownership over the car, the plaintiffs had acquired ownership to the car and the second defendant’s further dealings on the car with the first defendant therefore are illegal. To that end, the first defendant acquired no title or interest over the car when they purchased it and their only remedy, if any, is against second defendant personally for the return of the purchase price but as against the plaintiff they cannot claim any right of ownership over the car.

However, there are several exception to the rule as provided by Sec 27 to Sec 30 of SoGA.

1. Estoppel

Arises when the owner of the goods is by his conduct precluded from denying the seller’s authority to sell. Estoppel can be by record, by deed or by conduct.

2. Sale by Merchantile Agent.

Mercantile agent is defined under sec 2

Basic rule of agency is that an agent may pass a good title in selling goods belonging to the principal provided he is acting under the scope of his actual or apparent authority.

Requirements to satisfy the provision:

- the agent is in possession of the goods at the time of sale.

- the possession is with consent of the owner.

- the sale was made when acting in the ordinary course of business of a merchantile agent.

- buyer must act in good faith and have no notice of the agent's lack of authority at the time of the sale.

3. Sale by one of Joint Owner.

• Goods may be owned by one or more persons.

• Sale by one of the joint owner is valid notwithstanding the absence of the other’s consent (sec.28)

• Two conditions have to be satisfied:

- the seller have sole possession of the goods with consent from the others.

- the buyer acts on good faith and have no notice of the lack of authority at the time of the sale.

4. Sale under a Voidable Title.

When the seller acquires possession under a voidable contract and the contract has not been rescinded at the time of the sale, the buyer gets a good title provide he is a Bona Fide Purchaser For Value Without Notice of the seller’s defect of title (sec 29)

A contract is voidable under sec 19 & 20 of contracts Act1950 when consent of the original owner is caused by coercion, fraud, misrepresentation or undue influence

5. Sale by a Seller in Possession after Sale.

Where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent

acting for him, of the goods or documents of title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same. Sec 30(1)

If a seller resells to a second buyer the goods sold by him previously to the first buyer, the second buyer then gets a good title over the first one but the latter take legal action against the seller.

6. Sale by a Buyer in Possession.

Where a person, having bought or agreed to buy goods, obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the goods or documents of title under any sale, pledge, or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have effect as if such lien or right did not exist.

If a buyer, having bought or agree to buy goods, obtained possession of the goods or the title document with the consent of the seller, he can pass good title to a subsequent buyer of good faith for value without notice.

NEWTONS OF WEMBLEY LTD v WILLIAMS [1965] 1 Q.B 560

The plaintiff sold a car to A who paid by cheque. Although he was given possession, it was agreed that the property would not pass until the cheque was honoured. The cheque was dishonoured but A had resold the car to B who bought it without knowledge of the position. B resold it to the defendant. The plaintiffs tried to recover the car from him.

Held – A, the original buyer, was in possession with the consent of the owner. Hence, he could pass a good title to B, who in turn transferred it to the defendant. The defendant was, therefore. entitled to keep the car.