Published date01 December 1994
Date01 December 1994

Caterpillar Far East Ltd v Cel Tractors Pte Ltd 1

Suppose a thief steals a chattel that belongs to O and sells it to B. B is a bona fide purchaser for value without notice of the seller’s lack of title. When the truth is out, the thief is sent to prison.2 He is not worth suing. In practical terms, O’s only recourse is against B. O sues B for the recovery of the chattel, or its money equivalent.3 Both O and B are innocent (although one may have been more careless than the other). The question is who between them should suffer for the wrong done by a third party, the thief. One might be forgiven for thinking that the answer is quite clear: O should succeed because a thief cannot pass title to the goods he has stolen. However, when this set of facts was presented before the High Court in the recent case of Caterpillar Far East Ltd v CEL Tractors Pte Ltd, a contrary answer was given. There, both O and B were companies. O was in the tractor business and B was supposedly the largest spare parts dealer in Singapore.4 The chattels in issue were tractor spare parts. The theft and subsequent sale to B were carried out by a gang, whose members included two employees of O. Yong Pung How CJ held that B had acquired a good title.

The scenario raises a conflict between two large interests. A balance has to be struck between O’s ownership interest and B’s commercial interest.5 Both need protection: There will be little order in society if title to property is not protected against theft; on the other hand, business can thrive only in an environment where there is some measure of security in commercial transactions. The starting point of the law has always been to uphold ownership interest at the expense of commercial interest. That starting point is embedded in the ancient maxim nemo dat quod non habet. It is also found in section 21(1) of the Sale of Goods Act,6 which provides: ‘Subject to this Act, where goods are sold by a person who is not their owner…the buyer acquires no better title to the goods than the seller had.…’ There are exceptions to this rule. The better known exceptions7 are

grounded in the principles of agency law8 and estoppel,9 and founded in statutory provisions such as sections 23, 24 and 25 of the Sale of Goods Act and sections 2, 8 and 9 of the Factors Act.10Caterpillar was concerned with none of them; the case was decided instead on a very much expanded version of the ‘market overt’ exception to the nemo dat rule. For convenience, that expanded version will hereafter be called ‘the expanded rule’. Before turning to the expanded rule, its progenitor, the doctrine of ‘sale in market overt’, must first be examined.

A. The nature and scope of the market overt rule

In England, the ‘market overt’ rule is currently found in section 22(1) of the United Kingdom Sale of Goods Act 197911 (‘UK SGA’). It reads:

‘Where goods are sold in market overt, according to the usage of the market, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of any defect or want of title on the part of the seller.’

The rule, although statutorily codified, is common law in origin. As a common law rule, it has existed since (at least) the time of Sir Edward Coke.12 Section 22(1), according to the Chief Justice in Caterpillar, represents the ‘statutory encapsulation’ of the common law rule;13 the common law informs the scope of section 22(1).

The market overt doctrine may be briefly described as follows: If goods are purchased in a market overt, and provided certain other conditions are satisfied, the bona fide buyer obtains a good title, although the seller had none to give. This rule was originally evolved to promote commerce.14 The word ‘market’ is used in the sense of denoting a place where trading is conducted. Only certain markets are, in law, ‘markets overt’. Every shop within the City of London is by custom a market overt.15 Outside the City,

a market overt is an “open, public, and legally constituted market”.16 To quote from the learned editor of Benjamin’s Sale of Goods: ‘To be “legally constituted” the market must be one that has been created by statute or charter, or established by long continual user.…’17 Not every sale made in a market overt gives the buyer a good title. There are requirements relating to how and in what circumstances the sale should be conducted. The sale must be conducted according to the usage of the market. To quote from the learned editor again: ‘The sale…must be made at the place of the market upon an ordinary market day and during the usual hours.18 The goods must be of a description which it is customary to find on sale in the market and must be openly exposed for sale there. The whole transaction, that is, the sale and delivery of the goods, must be begun and completed openly in the market.…’19 It is thought that publicity ‘minimises the likelihood of the goods offered for sale being stolen property.’20 The rationale, developed in ancient times when commerce was slower in pace and smaller in scale, was this: The owner could and should pursue his goods to the market where it is well known that such goods are openly sold. If he does not bother, his title deserves to be defeated; the buyer of the stolen goods can legitimately say to himself: ‘[N]o person but the owner would dare to expose them for sale here, and therefore I have a right to assume that the shop-keeper has a right to sell them.’21

B. Does the market overt rule apply in Singapore?

On this point,22 there was, before Caterpillar, no direct reported authority.23 Prior to the passing of the Application of English Law Act24 (‘the AELA’) in 1993, the market overt rule as codified in section 22(1) of the UK SGA was applicable to a particular case if it was received, for the purpose of

that case, under section 5 of the Civil Law Act.25 Section 5 has been repealed by section 6(1) of the AELA. However, section 6(2) of that Act makes clear that in respect of a proceedings instituted or a cause of action accruing before the commencement of that Act, section 5 of the Civil Law Act will continue to apply. Caterpillar was apparently such a case: the series of thefts and subsequent sales were carried out in 1983 and the suit was instituted and the cause of action in conversion arose before the commencement of the AELA. This probably explains why the court referred to section 22(1) of the UK SGA although, and this is surprising, both the AELA and the Civil Law Act were not even mentioned in the judgment.

Under section 5(3)(a) of the Civil Law Act, English law is received ‘subject to such modifications and adaptations as the circumstances of Singapore may require.’ One would be hard put, given its technical meaning, to find a ‘market overt’ in Singapore. Whichever of two possible interpretations one takes of Caterpillar (which will be discussed two paragraphs away), it is clear that the Chief Justice did not think that the market overt rule, in its English form, is suitable for local application:26

‘…in order for a sale to constitute a sale in market overt in the City [of London] certain conditions must be fulfilled. Equally plain is the fact that these conditions were delineated in an era and in circumstances far removed from a contemporary Singapore. It would scarcely be desirable or necessary, therefore, to import wholesale into the Singaporean context the rule of market overt as it has evolved within the English legal system, lest we become entangled with the specific characteristics of markets overt in England, which derive from circumstances alien to us.’

The legislature seems to have thought likewise about the unsuitability of the market overt rule. While the AELA makes clear that the UK SGA 1979 is to apply in Singapore, it expressly excluded, inter alia, the reception of section 22.27 The UK SGA 1979 minus (inter alia) section 22 now appears in our statute books as Sale of Goods Act, Cap 393, 1994 revised edition (‘Singapore SGA’).28 (Hereafter, a reference to just ‘SGA’ is to both the UK and the Singapore SGA.)

The position for two categories of cases may be summarised thus: (1) For cases which attract the application of the Singapore SGA, the buyer cannot avail himself of a statutory market overt rule because the rule has been omitted from that Act; (2) It is unclear if section 22(1) of the UK SGA is applicable in cases, like Caterpillar, which are still governed by the old section 5 of the Civil Law Act. Caterpillar can be interpreted in two possible ways. The first is that it proceeded on the basis that section 22(1) does not apply in Singapore, and that the decision was reached by applying a newly evolved common law principle. If so, the common law principle it enunciated, or on which it was decided, would have to be considered. even in cases falling under category (1). The second possible interpretation is that the Chief Justice did apply section 22(1) but he interpreted it to suit local circumstances. On this interpretation, what Caterpillar decided is obviously of no relevance in category (1) cases. It is unclear which approach the court actually took.29

If the first interpretation is true to what the court intended, it is submitted that the decision cannot be justified. Under section 3(1) of the AELA, English common law, so far as it was part of Singapore law immediately before the commencement of the AELA, shall continue to be part of Singapore law. It may be argued that the common law market overt rule was received under the Second Charter of Justice 1826 and therefore still forms part of Singapore law today. There are two main arguments30 and one incidental observation against that view. The first argument is founded in section 3(2) of the AELA, which qualifies the earlier sub-section. It states that English common law is received ‘so far as it is applicable to the circumstances of Singapore and its inhabitants.…’ As noted...

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