Section 53 – Acquisition in good faith from seller acting in ordinary course of business
242.Sections 53 to 55 provide for circumstances in which a person who acquires corporeal property in good faith will acquire the property unencumbered by the statutory pledge, despite the consent mentioned in section 51(2) of the Act not having been obtained.
243.It is not likely to be efficient to grant a statutory pledge over stock-in-trade given that the secured creditor must expressly consent under section 51 of the Act to each intended transfer unless they want the security to be extinguished under section 52. Even so, encumbered property may become part of the inventory of a business. For example, Alistair might grant a statutory pledge over his piano to a bank, and then subsequently sell the instrument to a music shop. The effect of subsection (1) is that a good faith purchaser from the shop will be protected.
244.Encumbered property transferred without the consent of the secured creditor will be acquired unencumbered by a statutory pledge if two requirements are met—
First, the transferor must have been acting in the ordinary course of that person’s business. For example, a motor dealer which only sells vehicles would not on the face of it be acting in the ordinary course of business if it sold its office furniture.
Second, the acquirer must be in good faith at the time of the acquisition. The acquirer will not be protected if they know that the property is subject to a statutory pledge.
245.Subsection (2) makes it clear that the acquirer is not to be deemed to have constructive knowledge of a statutory pledge for the purposes of this section merely because it is registered.
246.Where the requirements of this section are not met (for example, because the property is acquired from a business acting other than in the usual course of its business), the person who acquires the property may benefit from other measures, in particular if it is acquired in good faith for personal or related purposes (see section 54 of the Act), or the property is a motor vehicle (see section 55 of the Act).
