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Nemo Dat & Its Exceptions Under Subsection 26(1.2)

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Nemo Dat & Its Exceptions Under Subsection 26(1.2) ABCD Remoteness Problems: Nemo Dat & Its Exceptions Under Subsection 26(1.2) of Saskatchewan’s The Sale of Goods Act Clayton Bangsund* I would have been out here a little bit sooner, but they gave me the wrong dressing room, and I couldn’t find any place to put my stuff. And I don’t know how you are, but I need a place to put my stuff. So that’s what I’ve been doing 2018 CanLIIDocs 365 back there—just trying to find a place for my stuff. You know how important that is. That’s the whole meaning of life, isn’t it? Trying to find a place for your stuff. George Carlin Universal Amphitheatre Los Angeles, California, 19861 * Assistant Professor, University of Saskatchewan, College of Law. I am thankful to Professors Ronald C.C. Cuming, Tamara Buckwold, Mohamed Khimji, Thomas Telfer and Roderick J. Wood, and all others in attendance at the Second Annual Commercial Law Symposium held in Saskatoon in the fall of 2017, for your insight and constructive feedback. Thanks also to Marek Coutu for your valuable research assistance. Finally, I am grateful to the Law Foundation for funding this research. 1 “Stuff”, online: Youtube <https://www.youtube.com/watch?v=4x_QkGPCL18>, archived: <https://perma.cc/7GUH-TPFH> (clip taken from 1986 Comic Relief) [Carlin, “Stuff”]. Carlin introduced this material during the live component of an album titled A Place for My Stuff (Atlantic, 1981). In his memoir, Carlin explained that the “stuff” routine “eventually became a signature piece” for his next generation of material. See George Carlin, Last Words: A Memoir (New York: Free Press, 2009) at 214 [Carlin, I. INTRODUCTION Goods come in all shapes and sizes, serve countless purposes, and are an important—in fact, inescapable—form of personal property for consumers and commercial parties alike. As a general matter, “goods” are physical objects (i.e. stuff),2 encompassing all non-negotiable tangible personal property;3 examples include automobiles, boats, agricultural implements, mining equipment, livestock, electronics, precious gems, extracted minerals, portraits, books, 2018 CanLIIDocs 365 bananas, and paperclips.4 Indeed, goods, whether animate or inanimate, range significantly in monetary value and size—from fractions of a cent for a grain of rice, to billions of dollars for an aircraft carrier. Some goods are aesthetically pleasing and hold value as items of wardrobe or décor, while others are consumed for enjoyment, sustenance, or survival. Goods serve as devices of communication, navigation, calculation, and transportation, to name only a few.5 They fulfill innumerable useful purposes in the delivery of services and the production, manufacturing, and raising of yet other goods. Simply put, goods perform prominent roles in many aspects of consumer and commercial life. Memoir]. 2 Carlin, Memoir, supra note 1 at 215: “Stuff is a funny word and bears repetition. A lot of it.” 3 See The Sale of Goods Act, RSS 1978, c S-1, s 2(1)(h), “goods” [SGA]; The Personal Property Security Act, 1993, SS 1993, c P-6.2, s 2(1)(u), “goods” [PPSA]. 4 Carlin, Memoir, supra note 1 at 282: “Sometimes I’ll be in the middle of a list—I love to rattle off twelve things in a row.” 5 This list of functions is nowhere near exhaustive. In an ode to Carlin, I name a dozen more: organization, amplification, magnification, recordation, illumination, obfuscation, extension, protection, preparation, collection, sanitation, and beautification. 2 Suppose that A sells goods to B, but, borrowing Carlin’s words, B has no place for his stuff.6 A accommodates B’s logistical dilemma by retaining possession of the goods while B arranges suitable storage. B agrees to pick up the goods from A’s premises once he has found a place for his stuff. Before that time arrives, A sells the goods to C who takes possession and on- sells them to D. Upon discovering the location of the goods, B seeks their recovery by suing D in conversion.7 This basic series of events is referred to as the “Sale Scenario.” Between B and D, the two parties asserting ownership of the goods, who has better title? On what grounds? 2018 CanLIIDocs 365 Now imagine, under an alternate set of facts—the “Secured Transaction Scenario”— instead of selling the goods to B (as in the Sale Scenario), A grants B a non-possessory security interest in the goods to secure repayment of a debt. Otherwise, the facts remain the same; A subsequently sells the goods to C who takes possession and on-sells them to D. In this instance, B pursues the goods in D’s hands on the basis that D holds them subject to B’s security interest. All other things being equal, does this factual twist—imagining B as a non-possessory secured party (as in the Secured Transaction Scenario), not a buyer/owner out of possession (as in the Sale Scenario)—alter the outcome of the dispute between B and D? Should it? My questions are not rhetorical. Given the ubiquity of goods in our society, and the pervasiveness of transactions involving their disposition, it is important that the law of property furnish straightforward, sensible answers to these questions. Enter The Sale of Goods Act8 and 6 Carlin, “Stuff”, supra note 1. 7 B would also be able to sue A for breach of the sale contract pursuant to s. 50 of the SGA (supra note 3). In this article I focus solely on the competing proprietary entitlements of B, C, and D. See Ronald CC Cuming, Catherine Walsh & Roderick J Wood, Personal Property Security Law, 2nd ed (Toronto: Irwin Law, 2012) at 250. 8 SGA, supra note 3. 3 The Personal Property Security Act, 1993,9 which share (along with several other provincial statutes10 including, notably, The Factors Act)11 legislative scope and modern electronic Personal Property Registry (“PPR”) regulatory infrastructure.12 Both statutes are enacted under the exclusive jurisdiction of the provincial legislatures to make laws in relation to matters of property and civil rights.13 Each contains provisions that apply to determine priority entitlements to goods in certain defined circumstances, including those described above in the Sale Scenario and Secured Transaction Scenario. The statutes were enacted in different eras, and are founded 2018 CanLIIDocs 365 on distinctive underlying philosophies, yet in the modern age they generally work in conjunction with each other and the PPR to facilitate transactions involving goods, and produce clear, consistent, and coherent priority outcomes when disputes arise. In this paper, I highlight circumstances, derived from the two basic ABCD scenarios 9 PPSA, supra note 3. 10 Other statutes that operate under the Personal Property Registry infrastructure include: The Commercial Liens Act, SS 2001, c C-15.1; The Enforcement of Money Judgments Act, SS 2010, c E-9.22; The Factors Act, RSS 1978, c F-1 [Factors Act]; The Summary Offences Procedure Act, 1990, SS 1990-91, c S-63.1; The Seizure of Criminal Property Act, 2009, SS 2009, c S-46.002. 11 Factors Act, supra note 10. The Factors Act contains provisions that are, for all intents and purposes, identical to the SGA provisions discussed in this paper. Specifically, ss. 9(1), (2) and (3) of the Factors Act substantively replicate SGA ss. 26(1), (1.1) and (1.2), respectively. To streamline and simplify discussion, and to make the paper more comprehensible for the reader, I primarily discuss SGA subsections in the main body, and identify, in the footnotes, concordant provisions of the Factors Act. Other authors have employed the opposite strategy (see e.g. Ewan McKendrick, ed, Goode on Commercial Law, 4th ed (London: Penguin Books, 2010) at 465). 12 The Personal Property Security Regulations, RRS, c P-6.2, Reg 1 [Regulations]. 13 Constitution Act, 1867 (UK), 30 & 31 Vict, c 3, reprinted in RSC 1985, Appendix II, No 5, s 92(13). 4 introduced above, in which Saskatchewan’s SGA and PPSA produce inconsistent outcomes. I argue this inconsistency is undesirable and it ought to be eliminated, to the extent possible, via legislative reform. In my view, the SGA should be brought more closely in line with the PPSA to promote greater harmony and coherency in the comprehensive statutory framework governing priority entitlements to goods. Reforming the SGA would create greater predictability, simplicity, and uniformity in Canadian law. In short, I believe that s. 26(1.2)14 of the SGA should be repealed, and careful consideration should be given to the possibility of amending ss. 26(1)15 and 2018 CanLIIDocs 365 (1.1).16 In this paper, I make the case for the first aspect of proposed reform, namely, repealing s. 26(1.2). While I briefly touch upon other aspects of potential reform, any argument for amending ss. 26(1) and (1.1) must wait for another day, and another paper. II. DESCRIPTION A. EVOLUTION The Latin maxim “nemo dat quod non habet”—translation: “no one can give what he does not have,” or, stated alternatively, “one cannot give better title than he has”—carries considerable importance in property law. The maxim provides that a transferor can only confer her limited title to a transferee, and, as a corollary, a transferee takes subject to any prior interests in the property. With reference to the Sale Scenario, B prevails over D according to a strict application of nemo dat.17 Since B is the owner of the goods, A is unable to pass title to C. C is similarly 14 Factors Act, supra note 10, s 9(3). 15 Ibid, s 9(1). 16 Ibid, s 9(2).
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