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Law Notes Property, Equity and Trusts 1 Notes

Priorities Between Competing Legal Interests Notes

Updated Priorities Between Competing Legal Interests Notes

Property, Equity and Trusts 1 Notes

Property, Equity and Trusts 1

Approximately 320 pages

The old Property, Equity & Trusts subject at UNSW. Dealt primarily with old system. Contents include detailed case notes (and super summaries ideal for use in an open book exam) and article summaries on the following classes:
Class 1&2 – The Concept of Property
Class 3&4 - Goods
Class 5&6 - Possession of Land
Class 7 - Limitation of Actions
Class 8 - The Doctrine of Tenure and Estates; Determinable and Conditional and Future Interests, The Doctrine of Waste, Fragmentation of legal/beneficial...

The following is a more accessible plain text extract of the PDF sample above, taken from our Property, Equity and Trusts 1 Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Priorities between competing legal interests

  • 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:

Northern Counties of England Fire Insurance Company v Whipp (1884) 26 Ch D 482

Facts: The legal mortgage holder (P) was challenged by a later equitable mortgage holder (D). The mortgagor (Crabtree – C) gave title documents to P when the mortgage was created but when he was the manager of the company he retained the key to the safe where it was kept. C later obtained a loan from the defendant and to secure it he removed the title documents and deposited them with D – hence this created a mortgage over the land in equity in favour of the defendant. The defendant was unaware of the earlier loan/mortgage to P. In an action for foreclosure by the liquidator of the P company against C’s trustee in bankruptcy and D, D filed a defence claiming a declaration that the company’s mortgage was fraudulent and void against her and for the mortgage to be postponed to the security.

Fry LJ:

  • The plaintiffs, as owners over the legal estate, are prima facie entitled to priority over the defendant.

But the defendant seeks postponement- what conduct in relation to the title deeds of a mortgagee with a legal estate is sufficient to postpone it in favour of the equitable mortgagee without notice?:

  • (1) A court twill postpone the prior legal estate to a subsequent equitable estate:

  1. Where the owner of the legal estate has assisted in or connived at the fraud which has led to the creation of a subsequent legal estate without notice of the prior legal estate;

    1. Of which assistance or connivance, the omission to use ordinary care in inquiry after o keeping title deeds may be, and in some cases has been, held to be sufficient evidence, where such conduct cannot otherwise be complained

    2. Where the owner of the legal estates has constituted the mortgager his agent with authority to raise money, and the...

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