Expert Rudi Klein has advice about protecting yourself from criminals

Industry insight

Watch out, there are criminals about

What is your position if you’ve purchased goods and materials from a party which, unbeknown to you, has obtained them illegally? Our expert is here to help keep you on the straight and narrow…

AS we all know, it’s very easy to register a company and provide false identities for the directors. For example, one company was recently registered with the name of a director being Adolf Tooth Fairy Hitler!

The Westminster Government is currently considering legislation to tighten up the company registration process, which is particularly timely given the case of Nobleread Ltd.

Nobleread had very little by way of assets and operated two businesses – NB Construction and NB Wholesale – which only dealt in cash.

The company created fake directors and at the beginning of 2021 went on a mass purchasing spree from suppliers of construction materials and equipment, such as lighting, insulation, combi boilers, etc. Unbelievably, the two businesses were able to obtain favourable credit terms from suppliers.

As the goods were being delivered, both NB Construction and NB Wholesale were phoning around and WhatsApping potential customers. Plumbers, electricians and builders were offered discounted prices in return for cash and representatives from the two businesses visited sites to collect the loot – their cash. “UNBELIEVABLY, Then, at the end of THE TWO 2021, both businesses shut BUSINESSES WERE ABLE TO OBTAIN FAVOURABLE CREDIT down and their websites disappeared from view. Nobleread’s trading practices were, of course, fraudulent, i.e. it was committing theft since TERMS FROM it had no intention of SUPPLIERS” ever paying its suppliers. The company was shut down by the High Court in London and a government official, the Official Receiver, was appointed to put it through the process of liquidation. PROFESSOR So what were the implications for RUDI KLEIN all those construction businesses who Barrister & bought the equipment? And what would SELECT Consultant happen if you did something similar? Well, let’s get the criminal side of things out of the way first. If you knew or were willfully blind as to the provenance of the goods in question, i.e. that they were obtained by fraud, you could be prosecuted for the crime of reset.

With that out of the way, let’s quickly move on to the civil side of things.

There is a general principle of law which is usually expressed as a Latin phrase – nemo dat non quod habet – which means that you cannot pass on a better title to that held by your seller.

Thanks to this principle, which is enshrined in the 1979 Sale of Goods Act, it means that if your seller was a thief they cannot pass this title on to you and it remains with the owner. However, there is a key exception in the act, which applies where you have bought goods in good faith without knowledge of the seller’s lack of title. In this situation, the act enables you to obtain title provided your seller was in possession of the goods with the owner’s consent and they were being sold in the course of a business transaction.

Something to remember also is that once goods and materials are incorporated in a building or structure they belong to the building owner.

So if you happened to have purchased items from Nobleread you may be able to rely on the above statutory exception to the nemo dat non quod habet rule.

WATCH ONLINE

Rudi has made a series of exclusive SELECT TV videos on topics including design liability, reading the small print, material price increases and other essential contract advice. Watch them at bit.ly/SELECT-TV

KEY TAKEAWAYS

• Do due diligence on your suppliers, especially those you haven’t dealt with before. • It is implied in contracts with your suppliers that they have a right to sell the goods, as set out in s.12 Supply of Goods and Services Act 1979 “THERE IS A KEY EXCEPTION IN THE ACT, WHICH APPLIES WHERE YOU HAVE BOUGHT GOODS IN GOOD FAITH WITHOUT KNOWLEDGE OF THE SELLER’S LACK OF TITLE”

THANK YOU!

This is my final regular column for cabletalk but I will reappear in future issues if any legal matters arise. Thank you for all your comments and queries and I hope you’ve found my advice useful. Have a very successful 2023!