Competing Equitable Interests

Question 1

what interests take priority?

Answer 1

1st step: are there inconsistent/competing ‘interests’?

2nd step: if there are inconsistent/competing ‘interests’, which interest has priority?
(if one party has registered – LTA wins, if neither registered – Equity’s rule is: first in time, provided the equities are equal)

Question 2

Existence of equitable (unregistered) estates & interests in land prior to registration

Answer 2

1. The agt for S & P (agts to grant a lease; agts to grant an easement; and agts to grant a mortgage too)
2. Unregistered instruments of lease, easement and mortgage also confer an equitable interest (in that lease, easement, mortgage)
3. Certain trusts (ie Gillies v Keogh (reasonable expectations)) or estoppel where the legal owner is required by Equity to recognise the existence of another’s estate or interest in the land

Question 3

Rule for if there is more than one interest?
Rice v Rice (p326)

Answer 3

When people only have equitable interest, priority of time has the biggest interest. The onus of proof is on the second in time equitable interest.

Question 4

Emslie v Genuine Investments
Who has the better claim? Emslie’s or RS Trust?
Is the equitable interest valid?
Did RS Trust know there was an equitable interest in the land?

Answer 4

They knew they were in occupation, but were in a tenancy agrement with Genuine. They knew there was a tenancy dispute between. Court concludes that RS Trust had priority, equities were not equal. Conduct of Mrs Emslie had detrimental factor. RS Trust becomes registered owner

Question 5

Butler v Fairclough (1917) (caveating before second interest)

Answer 5

• The failure to caveat before the second interest is fatal

Question 6

AGC (dante holdings)
(Subsequent conduct)

Answer 6

• Subsequent conduct AFTER knowledge of competing interest (CFC waiting the year) is relevant

Question 7

Frazer v Walker

Answer 7

Walkers also get indefeasible title, there is no defect in the chain

Question 8

Gibbs v Messer ( PC -1891)

Answer 8

Inconsistent with Fraser v Walker but THIS is the right outcome, an exception
Supported differed indefesbilities

Question 9

laws stance now on immediate/differed indefeasibility

Answer 9

Law predominantly supports immediate indefeasibiltiy now

Question 10

Exceptions to indefeasibility

Answer 10

1. RO takes subject to prior registered interests
2. Fraud (s 52)
3. In personam claim (s 51) (Personal obligations with the land)
4. Other enactments that override or limit the RO’s title (s 51) (Gov wanting road ect)
5. Manifest injustice (s 55)

Question 11

meaning of fraud

Answer 11

Assets Co; Waimiha Sawmilling (PC) dishonest conduct by the RO/their agent in acquiring registration; designed object to cheat a person of a known existing right:
If you acquire it through fraud = not an indefeasible title

Question 12

what level of knowledge is required for LTA fraud?

Answer 12

The purchaser has to have INTENDED (equitable priority rules) that the registration would defeat the interest AND ACTUAL KNOWLEDGE / WILFUL BLINDNESS

Question 13

example of wilful blindness (meaning actual knowledge)

Answer 13

Efstratiou
Speech of transaction reflected willful blindness

Question 14

example of not guilty of LTA fraud

Answer 14

Satnam Investments
- They were entitled to take the view that Satnam was no longer pursing the issue
- When the registered they didn’t intend to deprive Satnam of the R2FR, as they thought Satnam had dropped it [21] [22]

Question 15

Satnam Investments (LTA Fraud liability)

Answer 15

They were entitled to take the view that Satnam was no longer pursing the issue

When they registered they didn’t intend to deprive Satnam of the R2FR, as they thought Satnam had dropped it [21] [22]
= not guilty of LTA fraud

Question 16

Wimmera test for dishonesty

Answer 16

whether he knew enough to make it his duty as an honest man to hold his hand and either to make farther inquiries before purchasing or to abstain from the purchase or purchase subject to the claimants rights rather than in defence of them.

Question 17

example of not being able to rely on solicitors info

Answer 17

Bunt v Hallinan, solicitors advice held to be wrong causing them to proceed with transaction.

Question 18

Relationship between LTA fraud and equity’s priority rule for competing equitable interests

Answer 18

Priority rules are stronger despite stronger equities

Question 19

In personam claim

Answer 19

• Courts would not allow the fact and consequences of registration (indefeasibility) to allow the RO to defeat personal obligations they entered into/were subject to regarding that land.
• Not an exception to the LTA, it is consistent with it

Question 20

Potts v Anderson

Answer 20

The Andersons had an obligation to fulfill. The court found that despite the land transfer to the trust (which as trustees held the title), the Andersons themselves were still personally bound to honour the agreement they made with Potts (arising from in personam claim)

Question 21

Smith v Hugh Watt Society Inc

Answer 21

It was unconscionable of them to retain the property without acknowledging the interests of the beneficiaries of the trust.= In personam claim resulting in constructive trust

Question 22

CN & NA Davies Ltd v Laughton

Answer 22

Davies conduct, varying the mortgage was improper conduct, resulting in an in personam claim.

Question 23

Dollars and Sense
second element of the inpersonam claim

Answer 23

a claim must not undermine the objectives of the act, something more than mere interest is required, need unconscionable conduct. in this case there was NO in personam claim

Question 24

overriding statutes

Answer 24

the conclusion that an Act overrides another must be a “necessary implication from the terms of the allegedly overriding statute”; the implication must be necessary to make the legislation work — a “matter of inevitable logic that Parliament must have intended” this, rather than being merely “reasonable or desirable”

Question 25

Warin

Answer 25

1. Whether the RO acquired indefeasible title
   
   2. Whether the RO could change the status of the land to MFL to general land?
      It did not override the LTA, indefeasible title still applies

Question 26

Mercury NZ Ltd v Māori Land Court [2023] NZHC 1644

Answer 26

• Court distinguished Warin on the basis of MCL, saying MCL has a MORE significant level of protection

Question 27

Can non-compliance with the Te Ture Whenua Mãori Act 1993 constitute LTA fraud?

Answer 27

R2FR not an equitable interest, because it is a statutory interest
The RO may still decide not to sell even if offered to preferred class of alienees. It doesn’t give them an equitable interest to enforce against RO

Question 28

last exception of indefeasibility

Answer 28

manifestly unjust

Question 29

application criteria for manifest injustice s 54

Answer 29

(1)(a)
‘Person A’ RO (freehold)
Void/voidable instrument (eg leading to the creation of the mortgage)
‘Person B’ new RO (freehold)

(1)(b)
‘Person A’ RO freehold
Void/voidable instrument
‘Person B’ – RO mtg

Question 30

elements of manifest injustice limitation to indefeasibility s 55

Answer 30

S 55 - Manifest injustice elements
1. Manifestly unjust for person B to remain registered owner
2. Not a matter of forgery
3. The injustice could not properly be addressed by compensation or damages

Question 31

protection of third parties in manifest injustice limitation

Answer 31

‘Person A’ RO (freehold)
Void/voidable instrument
‘Person B’ RO (freehold)
Tsf to
New RO (who acted in “good faith”)