3.3.2 Sub-questions

The basis of the VPCT-doctrine was laid down in Lysaght v Edwards, where it was held “that the moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser (...)”.1 In the interest of readability, this section will not explore the theoretical background and properties of this doctrine.2 The core of its functionality is that, as soon as there is (a) a valid sale/purchase agreement, (b) a proper consideration and (c) an asset that qualifies as ‘unique’, the purchaser of an asset acquires an equitable interest in the asset.3 ‘Unique’ means that the asset cannot be easily acquired on the current market. This equitable interest has a proprietary nature and can therefore be enforced against third parties. The most notable difference between this vacuum instrument and the previously analysed ones, is that this instrument applies to every type of asset, except for movable property (question 1). The doctrine does not apply in the context of movable property, because the transfer of movables is exclusively regulated by the Sale of Goods Act.4 Furthermore, the doctrine applies, in principle, automatically (question 2). In the context of immovable property, however, the Land Registration Act of 2002 requires registration of the equitable interest in public land records in order to achieve third-party effect.5 In the context of other types of ‘unique’ assets (e.g., shares and intellectual property rights), the doctrine applies as explained, without requiring registration. This raises the question as to how the purpose of the publicity requirement – being able to quickly assess whether or not someone has the power to dispose of an asset, in order to conduct transactions efficiently – are met.

The lack of publicity with other types of assets than immovable property is overcome by the bona fide purchaser for value doctrine. If buyer A (the first buyer) has acquired an equitable interest in the property and, before delivery took place, a second buyer (B) buys the same asset, A cannot invoke A’s equitable interest against B, on the condition that B is a bona fide purchaser and furthermore provides valuable consideration.6 One may notice, however, that the bona fide purchaser doctrine cannot be invoked by creditors or bankruptcy trustee’s. The VPCT therefore brings about a similar result as the South African Sarrahwitz-judgment: the (first) buyer acquires a proprietary interest that can be invoked against creditors, but most often not against purchasers (question 4). The doctrine is, in principle, not limited in its duration (question 3). The ‘uniqueness’ criterion deserves closer attention, because it sheds light on a different type of policy goal that can be achieved with vacuum instruments.