#7577 - Competing Legal Interests - Property, Equity and Trusts 1

• More than one person can claim proprietary interest to an object; often there is no issue but sometimes conflicts can arise where one does not agree to take title subject to existing interests

• Sometimes this occurs due to fraud or mistake – e.g.

  • A conveys a fee simple to B but C is the true owner- in this case nemo dat quod non habet applies

  • Person creates several interests wholly or partially inconsistent with each other, concealing the existence of the earlier one – here the court must resolve the conflict by ranking the interests

    • Sometimes both may continue to exist – e.g. A mortgages property to B and later C – C’s interest may be worthless if the value of the land can’t cover B’s mortgage or it may have some worth if it does not

• Since the Judicature Act’s the only issue as to proprietary interests being equitable and legal is the issue of their enforceability

  • Where enforceability is prescribed for statute, the question is generally irrelevant

  • But under general law the principles of law and equity apply

• Legal and equitable remedies differ substantially in character

  • At CLAW remedies are generally awarded as of right (e.g. compensatory damages for restitution in integrum) – not always the case (e.g. return of goods from detinue not always; but damages always)

  • At equity remedies are given on the discretion of the court; the award is often based on the maxims of equity which have crystallized into principles

    • “equitable discretions are exercised by taking into account all relevant matters which tend towards the justice or injustice of granting the remedy which is sought” (Spry)

    • Remedies include – specific performance, rectification/cancellation of documents, holding someone to account, appointment of a receiver to let one acquire possession of property, a declaration etc.

• It is often said the ‘court of equity acts in personam’; Spry says this reflects three fundamental equitable principles:

  • It emphasises that the origin of an equitable right is based on the unconscionability of the exercise by a particular defendant of his rights at law

  • It refers to the fact that every equitable decree involves a direction to a particular defendant and a requirement that he exercise his legal rights as the court directs

    • This has exceptions – decrees of a declaratory nature made; but these can be explained because they just indicate that certain equitable rights in personam don’t arise against particular persons

  • It directs attention to the manner of enforcement of equitable decrees, based on the application of constraints on the defendant until he should exercise his rights at law in the manner required

• Spry’s conception doesn't necessarily exhaust the meaning of the maxim

  • Maitland argues that equitable interests are personal and not proprietary in character – the former being jura in personam (rights enforceable against a particular person) and the latter jura in rem (rights enforceable against the world)

    • Equitable interests, since not enforceable against a BFPOVWN were classified as jura in personam

  • Jackson argues that this isn’t the indication of a proprietary right saying that the test is whether the interest is enforceable against those other than the grantor of the interest contending that Maitland’s approach is narrow and emphasises the ability of the owner to recover the object which she has an interest

• Generally a prior legal interest prevails over those subsequently created, that is, to the extent of any in consistency the principle of nemo dat quod non habet

  • Sometimes competing interests can stand together – e.g. A conveys a Blackacre to B for 10 years and to C in fee simple without telling him of B’s interest

    • Cs fee simple is subject to B’s legal leasehold and can’t obtain possession for 10 years; but is entitled to rent payable under the lease

• There are exceptions to the rule that legal interests are good against all the world:

In relation to limb (1)(a)(b) of Fry’s test:

• Perry-Herrick v Attwood – two prior joint mortgagees gave mortgagor posession of title deeds to give propriety to a particular charge – the mortgagor gave a different charge. They were postponed

• Brocklesby v Temperance Permanent BS – holder of legal estate gave deeds to his son to raise a sum of money, son exceeded authority and raised more. Father was postponed.

• Walker v Linom

  • By marriage settlement, W conveyed real property to trustees. Under the terms of settlement W had an equitable life interest which would determine if he alienated the property. The same solicitors acted for both parties, holding a bundle of title deeds to the property. Both the solicitors and trustees were unaware that after the settlement W retained the deed by which the real estate was conveyed to him – later he mortgaged the property handing over the conveyance to the mortgagee who sold the real estate to L. Neither the mortgagee nor L had notice – the court held that all the parties acted honestly

  • Held: Conduct of a holder of a legal estate wrt deeds, which makes it inequitable for him to rely on his legal estate against a prior equitable estate of which he had no notice, is sufficient to postpone him to a subsequent equitable estate, the creation of which was only possible by possession of feeds, which,, but for such conduct would have passed into the possession of the legal estate

    • The ‘conduct’ referred to in this case is the gross negligence on the part of the legal estate holders in failing to obtain possession of the title deeds

    • Hence here a later equitable interest was given precedence