For those buying a car in Australia, have you ever considered what would happen if the car you purchased turned out to be stolen? Would you still be able to obtain possession and use of the vehicle? This article discusses this very issue.

Disputes Between Car Buyers and Theft Victims:

Private car sales are very common in Australia, with thousands of vehicles sold privately each month. Among these, some have been stolen and then pushed onto the private market after having their vehicle identification and registration numbers altered.

As a result, purchasing such vehicles carries hidden risks. When a buyer, relying on a fraudulently altered Vehicle Identification Number (VIN), obtains a Personal Property Securities Register (PPSR) certificate, the PPSR certificate will not display any adverse information — because the VIN itself has been altered.

However, if a buyer purchases the vehicle under such a misleading impression and the police later discover the vehicle, the police have the authority to impound it. At this point, the buyer may feel that, having paid for the car and obtained the PPSR certificate, they are entitled to retain possession of the vehicle, while the original owner (the theft victim) may believe that the vehicle once belonged to them and should still belong to them. This gives rise to a dispute over ownership between the two parties.

What Are the Consequences of Buying a Stolen Car?

If you purchased the vehicle without knowing it was stolen, you are unlikely to be charged with any offence.

In addition, as mentioned above, if the car you bought is stolen, the police have the authority to recover the vehicle. They also have the authority to report the matter to interested parties, such as the original owner from whom it was stolen, the insurance company that paid out to that owner, and — if the car has an outstanding car loan — the relevant financier. Once the vehicle is recovered, the insurance company may have the right to resell it and recoup the payout made to the previous owner.

If the previous owner had not paid off the car loan on the vehicle you bought, the relevant finance company may repossess the vehicle from you, leaving you to try to claim a refund from the private seller. Of course, you also need to understand that you may not recover any of your money, and you may no longer be able to contact the seller.

Who Actually Owns a Stolen Vehicle?

The ownership dispute described above can be considered through two common law principles, both of which have been effectively codified across Australian states and territories. These two common law principles are:

1. The “nemo dat quod non habet” principle

2. The “bona fide purchaser for value without notice” principle

Principle 1 (the nemo dat principle) provides that no one can give what they do not own. In other words, a person cannot transfer a greater interest than they themselves hold.

Principle 2 (the bona fide purchaser), by contrast, essentially refers to a situation where, in the absence of notice from the seller regarding ownership issues, a purchaser may acquire lawful title to property from a third party.

From the court’s perspective, however, the court will recognise that Principle 1 (the nemo dat principle) takes precedence over Principle 2 (the bona fide purchaser). Here is an example to help illustrate:

When adjudicating ownership of a stolen car that was purchased unwittingly, the court takes the position that the thief cannot acquire good title to the vehicle, and therefore any person who subsequently comes into possession of the vehicle cannot acquire or maintain ownership of it either. Accordingly, even though the buyer conducted reasonable due diligence beforehand and paid for the car, ownership of the stolen vehicle will ultimately revert to the original owner (or their insurance company).

How Can You Avoid Buying a Stolen Vehicle?

1. Conduct a PPSR Check

When you conduct a PPSR check, you can review the outstanding debt information for the vehicle and verify ownership. If the owner’s name differs from the name of the seller (who is acting as the creditor), there is a greater likelihood that the vehicle has been stolen. In addition, the PPSR check includes a section describing the vehicle’s stolen status — if the vehicle is not problematic, nothing will appear there. You should therefore carry out due diligence in advance to check whether any other lawful owner exists.

To conduct a PPSR check, you generally log in to the official website and enter the Vehicle Identification Number (VIN) of the vehicle you intend to buy. After paying a small fee, you will receive the PPSR check results by email.

2. Conduct a Vehicle History Check

A vehicle history check — including the vehicle’s VIN, number-plate details, purchase-date information, finance-related information, deregistration, stolen status, and so on — will help verify ownership. A vehicle history check is generally more intuitive than a PPSR check. For example, it may reveal that the vehicle was reported lost by its original owner or is flagged as stolen.

As a general rule, you can cross-check the car’s registration details against the title documents provided by the seller, and there is a good chance you will be able to detect whether the vehicle is stolen. That said, we cannot rule out the possibility of forged documents.

3. Go a Step Further in Your Checks

The VIN of a stolen vehicle may sometimes still be correct, and in such cases buyers are more easily misled. Buyers therefore need to examine the vehicle’s components in detail to confirm ownership — for instance, by checking whether any stolen parts, such as the engine number, are present. If the engine number shown on the PPSR check or vehicle history check does not match the number on your car, the vehicle you purchased may well be stolen.

Final Thoughts

As noted in this article’s discussion of who ultimately owns a stolen vehicle, the courts hold that ownership will ultimately revert to the original owner (or their insurance company). This clearly illustrates the serious potential risks and consequences of purchasing a vehicle through a private seller: if the vehicle turns out to have been stolen, your car may be repossessed and you may be unable to obtain a refund, resulting in significant financial loss. We recommend carrying out a thorough series of due-diligence checks before buying a car, and if you have any doubts about the purchase or any ownership disputes, we recommend seeking the assistance of a professional lawyer.