Nemo dat one cannot transfer a better legal title than they own at the time of transfer unless an equitable estoppel leads to the result Implicit limitations



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Common Law Priority Rules



Common Law Priority Rules Outside PPSA World
NEMO DAT

One cannot transfer a better legal title than they own at the time of transfer unless an equitable estoppel leads to the result



Implicit limitations:

(1) A legal interest trumps an equitable interest;

(2) Possibility of equitable estoppel

FIRST LEGAL VS SECOND LEGAL



  • Nemo dat resolves dispute

  • Exception for goods sold in a “market overt”

  • Estoppel may be raised if first interest holder acts in bad faith (e.g. gross negligence)

  • BMO v Innovation Credit Union at para 51: “BMO could only take its interest subject to [Credit Union’s] prior interest.”

FIRST EQUITABLE VS SECOND EQUITABLE

  • Nemo dat generally resolves disputes

  • Court has a discretion which may result in second equitable interest being granted priority

  • Priority of first interest does not extend to a “mere equity”

    • Mere equity = A right affecting property that is less significant than an equitable right or a legal right; it does not affect anyone except the parties to the transaction in which it is contained.

IRST LEGAL VS SECOND EQUITABLE

  • Nemo dat will normally resolve dispute; regardless, a legal interest normally trumps an equitable interest

  • Court has discretion which can grant second equitable interest holder priority

FIRST EQUITABLE VS SECOND LEGAL

  • Exception to nemo dat

  • To claim priority, subsequent legal interest holder MUST be a BFPFVWN

    • Bona fide

    • Purchaser  either an owner or a security interest holder

    • Value  cannot be a gift; low consideration relative to value can relate to a lack of good faith

    • Without notice  actual knowledge; imputed knowledge (through agent); constructive notice at common law (prudent person making normal inquiries would have discovered the existence of prior equitable interest, which can be altered by statute)

Exceptions:

Negotiability  relates to status of goods, money a great example



Purchaser can receive better title than transferee had; “holder” may acquire good title from a thief

Market Overt  relates to environment where goods purchased
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