A bona fide purchaser for value without notice (BFPFVWN) is a good-faith buyer who has paid a stated price for a property without knowledge of existing prior claims or equitable interests. For simplicity, the term can be broken down as follows:
- Bona fide – good faith (no ill/deceptive intention)
- Purchaser – the party must have bought the property, not been a beneficiary of a gift’
- For value – the price paid must be a full and fair amount which reflects the value of the property
- Without notice – the party had no actual, constructive, or imputed knowledge of existing titles to the property
The BFPFVWN rule used to operate in Australia under the Old System of property to extinguish existing title claims in order to favour the innocent, good faith purchaser. However, with the introduction of the Torrens system, registration on the Torrens register is now the only way to ensure title to property. This is because even where a bona fide purchaser for value exists, they are usually deemed to have notice of any interest recorded on the register, as registration places purchasers on notice by default.
The BFPFVWN defence is therefore only available to those who acquire title to property without actual, constructive or imputed notice of adverse title to the goods or property, and cannot trump registration.
Businesses can struggle or fail in different ways. Consider an unprofitable transport business that hasn’t been able to put up rates in 20 years due to stiff competition. Or, consider the same type of business, where its unprofitability is caused by the inability to pay debts entered into by prior directors.
Seinfeld is famously referred to as a sitcom about ‘nothing’. Sometimes liquidations and voluntary administrations in Australia lose the plot and directors would be well served to conduct thorough due diligence before appointment and understand the dynamics at play.