Can dealerships sell repairable write-off vehicles?

I purchased a secondhand 2009 Holden Commodore International in January 2012 from a dealer in WA. I've recently upgraded to another vehicle and on the day of changeover, the Nissan dealer advised that they were unable to give me what we had agreed on for the trade-in of my old vehicle because it is on the repairable write-off register. I had absolutely no idea this was the case and as a result had to take a $2000 loss on trade-in as I was advised they couldn't re-sell at normal price because of the repairable write-off status on the vehicle. I have since been advised I should have been made aware of the status of the Commodore at the time of purchase – is this correct? I have contacted the dealer I bought it from and they advised they had no idea of the repairable write-off status. I've also read that I need to make my insurance company aware of the status, or I may not be covered in the event of a major accident because it is classed as a high risk. Do I have a case for legal advice here? Or is it ok for dealerships to be selling repairable write-off vehicles?