In simple terms
A legal right binds the whole world. An equitable right binds everyone except a of the legal estate for value without notice. That one exception is why the purchaser is called equity's darling.
Legal and equitable interests
Because the courts once ran on two tracks, property can be owned in two ways at once. The trustee has the legal title. The has the equitable or beneficial interest. Other equitable interests include an equitable lease under Walsh v Lonsdale, an equitable mortgage, a restrictive covenant, an estate contract, and the .
Equity also recognises mere equities. These are personal rights to an equitable remedy, such as the right to have a deed rectified or a contract . They are weaker than equitable interests.
Why the difference matters
A legal right is good against anyone who acquires the property. An equitable interest is good against anyone except a bona fide purchaser for value of the legal estate without notice. Each part of that description counts.
Bona fide: the buyer must act in good faith.
Purchaser for value: he must give value. Money or money's worth counts, and so does . A person who receives a gift, called a , takes subject to equitable interests whether or not he knew of them.
Of the legal estate: he must get the legal title. A buyer who only gets an equitable interest is in a contest between equities, and the earlier one usually wins.
Without notice: he must not have actual notice, constructive notice, or imputed notice. Constructive notice covers what he would have found by the inquiries a reasonable buyer makes, such as inspecting the land and the title deeds. Imputed notice is notice his solicitor or agent had.
Pilcher v Rawlins is the leading case. A trustee mortgaged land, hid the trust, and the lender took the legal estate for value with no notice. The beneficiaries could not claim against the lender. James LJ described the purchaser's as an absolute, unqualified and unanswerable defence.
The position in Sierra Leone
The doctrine of notice is general equity, so it applies here. Registration statutes can change who must search what. In England the Land Registration Acts and the Land Charges Act have replaced the doctrine for most land. In Sierra Leone the effect of registering an instrument depends on the local Registration of Instruments Act, so a student must check how that Act deals with priority before relying only on the doctrine of notice.
Words and Latin in this note
- Marriage consideration
- The payment, in money or in kind, that moves from the man's side to the woman's family when a customary marriage is made. It marks the families' agreement. It may be waived. If the marriage ends, it is the usual accounting between them. It is not a sale of the woman. Open the note.
- Equity of redemption
- The borrower's right to get the land back on paying what is due. Equity will not allow a term that destroys that right. Open the note.
- Bona fide purchaser
- A person who buys a legal estate in good faith, for value, without notice of an earlier equitable right. That earlier right does not bind them. Open the note.
- Consideration
- The price of a promise: something of value given, or promised, in return. A bare promise to make a gift has none. Open the note.
- Beneficiary
- A person entitled to the benefit of trust property in equity, who can make the trustees carry out the trust. Open the note.
- Rescission
- Setting a voidable contract aside, so that the parties are put back, as far as possible, where they were before it. Open the note.
- Volunteer
- A person who has given no value. Equity will not help a volunteer to enforce an incomplete gift or trust. Open the note.
- Trust
- An arrangement in which a trustee holds property at law but must use it for beneficiaries, or for a charitable purpose. The beneficiaries have the equitable interest. Open the note.
Memory map
Equitable rights and equity's darling
Why the difference matters
- Bona fide
- Purchaser for value
- Of the legal estate
- Without notice
Key points
- Property can be split
- An equitable interest binds everyone except a…
- Notice can be actual, constructive or imputed…
More points
- A volunteer, someone who gives no value, takes…
Cases
- Pilcher v Rawlins
- Walsh v Lonsdale
Key terms
- Trust
- Beneficiary
- Volunteer
- Plea
Take-home points
- Property can be split: the legal title is held by one person and the equitable interest by another.
- An equitable interest binds everyone except a bona fide purchaser of the legal estate for value without notice.
- Notice can be actual, constructive or imputed through an agent.
- A volunteer, someone who gives no value, takes subject to equitable interests even if he knew nothing about them.
Cases in this topic
See also
- Walsh v Lonsdale · Lanbuk on the Law of Land · 21 Ch D 9
- Pilcher v Rawlins · Lanbuk on the Law of Equity and Trusts · (1872) LR 7 Ch App 259
Lecture notes on this subject
- Equitable Remedies: Rules, Exceptions and Case Law in the UK and Sierra LeoneEquity and trusts
- Law of Equity and Trusts: Course OutlineEquity and trusts
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