The Police Criminal Evidence Act enables them to confiscate a vehicle which they believe has been stolen. There is no need for a court order for them to do so. They should however keep you informed as to the progress of the case.

If a vehicle is stolen then it is almost impossible to obtain "good title" to the goods under UK law. The title almost always reverts to the original owner and if the vehicle is shown to be stolen it will eventually go back to them, or to the ownership of their insurance company if they have already paid out on it.

Depending on the circumstances, the person who sold you the car (if it is stolen) may have committed a criminal offence - you should certainly report it as a crime - and you will also have a civil claim against them for the recovery of the money, that is, provided you can trace them. By reporting the issue to the police, it may be that they are able to trace them so you can take forward a civil claim.

Whether the DVLA can be held responsible in any way is debatable, but if the V5 concerned came from one of the stolen series it is very unlikely that they are liable in any way, as the fact there are stolen documents around has been given a great deal of publicity.