Citation: Jiao Chen v SellYourCarFast Pty Ltd [2016] NSWDC 28
Court: District Court of New South Wales
Date: 18 March 2016
Judge: Hatzistergos DCJ
Background
The plaintiff purchased a BMW X5 new in 2013 for $124,500. In early 2014 she decided to sell it, advertising the vehicle on carsales.com.au through a friend for $120,000. Two men responded, offered $121,000, and arranged to meet the plaintiff at an RMS branch, where she exchanged her personalised plates for standard plates and received $1,000 cash as a deposit.
On 20 March 2014, the two men attended the plaintiff's parents' home and handed over an ANZ bank cheque for $121,000. The plaintiff returned the $1,000 deposit, handed over the ignition key, and directed the men to the registration certificate and spare keys in the car. The men drove away, ostensibly for a test drive, and never returned. The cheque was fraudulent and dishonoured.
Later that same day, someone contacted the defendant, a vehicle buying business, seeking to sell the BMW. The defendant arranged an independent inspection, conducted a Personal Property Securities Register search, and ultimately purchased the vehicle through an associated wholesale network. The plaintiff subsequently sought a court order for delivery of the vehicle, the keys, and the logbook.
Legal Issues
- Whether the contract between the plaintiff and the fraudsters was void (as if it never existed) or merely voidable (valid unless and until set aside), which determines whether the plaintiff retained title to the vehicle
- Whether the rogue buyers were "buyers in possession after a sale" under s 28(2) of the Sale of Goods Act 1923 (NSW), capable of passing good title to a third party
- Whether the defendant qualified as a bona fide purchaser for value without notice, meaning it took the vehicle free of the plaintiff's claim
- Whether any estoppel or representation by the plaintiff precluded her from asserting title against the defendant
Decision
The central question was whether the original transaction was void or voidable. A void contract has no legal effect from the outset, meaning the seller retains title and can recover the goods from anyone. A voidable contract, by contrast, is valid until rescinded, and if a third party acquires the goods in good faith before rescission occurs, that third party's title is protected.
Hatzistergos DCJ found that the contract between the plaintiff and the fraudsters was voidable, not void. The plaintiff intended to sell to the person physically present before her, even though that person deceived her about his identity and means of payment. The fraud went to the quality of the transaction rather than the very existence of consent. This placed the case outside the narrow "identity" exception, which would render a contract void only where the seller intends to deal with a specific, identifiable third party and is mistaken about who is actually present.
The court then considered s 28(2) of the Sale of Goods Act 1923 (NSW), which deals with a "buyer in possession after sale." Because the contract was voidable rather than void, the fraudsters obtained possession of the vehicle under a sale agreement. Where a buyer in possession delivers goods to a third party who receives them in good faith and without notice of the original seller's rights, that third party acquires good title. The court found the defendant had conducted reasonable due diligence, including a PPSR search and an independent vehicle inspection. It accepted the defendant's evidence that it purchased the vehicle without knowledge of the fraud, and held it qualified as a bona fide purchaser for value without notice.
The court also considered whether the plaintiff was estopped from asserting title, given that she handed over the keys, registration certificate, and transfer documents. Although this finding was somewhat secondary to the statutory analysis, the court noted the plaintiff's conduct facilitated the fraud and contributed to the defendant's reasonable reliance on the apparent legitimacy of the transaction.
Orders Made
- Verdict for the defendant
- The plaintiff is to pay the defendant's costs
- Exhibits to be retained for 28 days
Key Takeaways
- The District Court confirmed that the void/voidable distinction is critical in vehicle fraud cases: a contract induced by fraud as to the quality of payment (rather than the fundamental identity of the contracting party) is voidable, not void, and can pass possessory rights capable of supporting a subsequent bona fide sale.
- Where a buyer in possession has obtained goods under a voidable contract and on-sells them, s 28(2) of the Sale of Goods Act 1923 (NSW) can protect a third-party purchaser who takes in good faith and without notice of the original seller's title.
- A bona fide purchaser need not conduct an exhaustive investigation into a vendor's title; conducting a PPSR search and arranging an independent inspection can be sufficient to establish good faith in a commercial context.
- The plaintiff's handing over of the keys, registration papers, and transfer documents, before receiving cleared funds, was a relevant factual circumstance in assessing both the statutory defence and the estoppel argument.
- Fraud allegations require proof on the civil standard but with the added scrutiny recognised in Briginshaw v Briginshaw: the more serious the allegation, the more persuasive the evidence must be before a court is satisfied on the balance of probabilities.
Legislation and Cases Referenced
Legislation:
- Civil Procedure Act 2005 (NSW) s 93(1)(a)
- Sale of Goods Act 1923 (NSW) ss 22, 26(1), 28(2)
- Factors (Mercantile Agents) Act 1923 (NSW) s 5
- Evidence Act 1995 (NSW) s 140(2)(c)
Cases:
- Associated Midland Corp v Sanderson Motors Pty Ltd [1983] 3 NSWLR 395
- Briginshaw v Briginshaw (1938) 60 CLR 336
- Davey v Robinson's Motors Pty Ltd (1958) 75 WN (NSW) 56
- Detective Senior Constable Wilkes v Abou-Yaghi [2012] NSWDC 6
- Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236
- Godfrey v Sevenoaks (1958) 75 WN (NSW) 487
- Heap v Motorists' Advisory Agency Ltd [1923] 1 KB 577
- Ingram v Little [1961] 1 QB 31
- Kingaroy Mall Pty Ltd v E & N Collins Enterprise Pty Ltd & Ors [2008] QSC 66
- McEntire and Maconchy v Crossley Brothers Ltd (1895) AC 457
- Moorgate Mercantile Co Limited v Twitchings [1977] AC 890
- Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449
- Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452
- Vassallo v Haddad Import and Export Pty Ltd (2004) DCLR (NSW) 123