Equity and Notice Flashcards
The Use
What is a Use?
A use: a mechanism used by landholders to avoid feudal duties or circumvent inconvenient common law rules.
o In a use, a landowner transferred land to someone (the feoffee) “to the use of” another (the cestui que use).
o Clear intention of the transferor was for the feoffee to hold the land for the benefit of the cestui.
o Common law refused to place any obligation on the feoffee recognising him as the owner of the land.
Equity, however, wasn’t so formalistic with the use + tried to give effect to the intention of the grantor
o Equity recognised the feoffee was the owner of the land in CL, the cestui was the owner in equity.
o It then split the ownership between legal rights (held by feoffee) and equitable rights (held by cestui).
o It intervened to protect rights of the cestui in ETs + began to impose uses where ‘justice of case’ req
The Statute of Uses (Ireland) 1634
What was the impetus and effect of the Statute?
Feudal lords were v unhappy with the success of the use as it resulted in a substantial loss of income.
o Statute of Uses 1534 (implemented in Ireland in Statute of Uses (Ireland) 1634): uses were ‘executed’ i.e. the Statute would take the legal ownership from the feoffee and vest it in the cestui so the feoffee was left with nothing and the cestui was left with both the legal and equitable ownership of the property.
o If a use was leasehold, feoffee and cestui were the same or the feoffee was a corporation, not executed.
o LCLRA 2009 repealed the Statute of Uses and thus the trust takes centre stage in Ireland.
The Development of the Trust
Explain the development of the Trust
o People unhappy w Statute of Uses: couldn’t split ownership bw a legal owner and an equitable owner
o Attempts were made to try circumvent the Statute: most successful was the ‘double use’. Orig position:
Jane Tyrell’s Case [1557]
- Held the first use would be executed, the second was deemed void
Sambach v Dalston [1635]
- Courts reversed JT: held instead that the first use would be executed pursuant to the Statute of Uses but the second would be allowed run unfettered by the operation of the Statute.
o The split of ownership between a legal and equitable interest holder through a double use in which the first use has been executed and the second runs unfettered by the Statute is known as a trust.
o Trusts are now common in property: Legal owner is trustee, equitable owner is beneficiary
The Bona Fide Purchaser For Value Without Notice (Equity’s Darling)
Background and requirements?
Late 1400s: The Chancellor decided that all those who acquired property that was the subject of a use would be bound to respect the rights of the cestui i.e. the use was binding on successor in title. Only one exception: the bona fide purchaser for value without notice i.e. “equity’s darling”.
(a) Bona fide: the successor-in-title of the trustee must be acting in good faith in relation to the transaction
(b) Purchaser: Purchaser here is someone who’s acquired the property by means of a legal transaction.
(c) For Value: The law only privileges those purchasers who give value for property. It need not be money (it can be money’s worth) but it must be something more than natural love and affection.
(d) Without Notice: Purchaser must prove he didn’t have notice of the equitable interests he’s trying to avoid. So he must show ue didn’t know of the 3rd-party interest-holders nor that he ought to have known re them
o If they fulfil these four, they can take the property free of the interests of the beneficiaries of the trust.
o He can then sell the prop on + the buyer also free of them unless knew at the time of the first transaction
The Doctrine of Notice
What section of LCLRA 2009 set out the doctrine and what are the two types?
S.86 LCLRA 2009 sets out the doctrine of notice:
(a) Actual Notice: This arises where someone actually knows that another (i.e. not the vendor) has an interest over the property. The purchaser need not have acquired this knowledge from the vendor or even in the
course of the transaction. It just must not be acquired by gossip/rumour.
(b) Constructive Notice
o This arises when someone is treated as if they know something that they would have found out had they made enquiries appropriate to the conveyance at issue.
o So there’s an expectation certain processes will be engaged in + certain Qs asked during a transaction
The Doctrine of Notice
Northern Bank v Henry [1981]
- H+W lived in house bought by W’s father. They decided to sell the house to buy a family home (bought in
H’s name). Split up, W claimed equitable interest in the house. Held purchaser may have constructive
notice of the rights of a tenant in occupation of land that was sold or of a spouses right to an equitable interest in the family home by a contribution to the purch price. No def of ‘no time to make enquiries’
The Doctrine of Notice
Bank of Ireland Finance v Rockfield [1979
It does not apply to purely commercial conveyances.
The Doctrine of Notice
What restriction is placed by s.86?
puts a restriction on the doctrine of CN: “a purchaser is not affected prejudicially by notice unless (a) it’s within his own knowledge or would’ve come to it if such inquiries + inspections were made as
ought reasonably to have been by the purchaser and (b) the same applies for his agent”.
The Doctrine of Notice - Imputed Notice
Explain the doctrine?
o Where one’s agent in the transaction has either actual or constructive notice of 3rd party interests. This knowledge is then imputed on to the principal (buyer) whether agent communicates it/not
o Although the systems of land registration have greatly reduced the impact of notice, it’s important to be aware of the implications for two reasons:
(i) It requires a lot of documentary inspection by the purchaser to ensure the vendor has good title to transact. This is usually done by investigations of title.
(ii) It can require the physical inspection of the land: if there’s a physical manifestation of 3rd party interests over the prop, then a buyer can be said to have notice of them: thus should inspect!
Hunt v Luck [1902]: Purchasers are bound by the rights of property occupants unless, when asked, they
didn’t reveal their rights in relation to the property.
Implications of Notice
What are the implications of notice?
If a purchaser has notice of an interest, then his transaction stands but he’s required to respect the interests by which he is bound.
o Importantly, this doesn’t only arise in the context of beneficial interests under a trust, but rather in the context of all third-party interests over land.
o The benefit of doing adequate inspections in the course of the conveyance is that a practitioner can add a
third option for the purchaser: decide not to acquire the property due to the 3rd party interests over it.
As already noted, the doctrine of notice is somewhat limited in significance in property transactions because of the operation of the two primary systems of land registration:
o The Registry of Deeds (unregistered land) and (2) The Land Registry (registered land).
o But it continues to be of significance in some scenarios e.g. the Family Home Protection Act 1976.
