Vol. 12 · pages 241–245

220 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES Equitable Priorities 1. An equitable right is a right in personam—operating against the owner of a legal right out of which it flows. 2. There may be two equitable rights flowing out of one legal right. Both would be rights in personam against the owner of the legal right out of which they flow. 3. An equitable right being a right in personam arising out of the legal and not out of the property which is the object of the legal right, could be defeated by transferring the legal right to a new owner. Or another equitable right may arise by this transfer which may defeat the prior equitable right. 4. The question to be considered is, in what cases can such a transfer defeat an equitable right ? 5. The subject is discussed generally under the heading of Equitable Priorities. It is so designated because the test applied for the determination of the issue is the priority in time. But the real subject matter is the possible cases where an equitable right can be defeated by transfer of a legal right out of which it arises or by the creation of another equitable right out of the same legal right ? 6. Cases to be considered fall under two classes : (i) Cases where there is a conflict between Legal Right and an Equitable Right (ii) Cases where there is a conflict between two equitable rights. 7. Under the first class of cases there are two contingencies which must be distinguished : (a) Where the Equitable Right is prior in existence to the legal right. (b) Where an equitable right arises subsequently to the legal right. Mrs. Thorndike was the beneficiary of a certain Trust Fund of which C was a trustee. In a suit by Mrs. Thorndike, the Court directed the Trustee to transfer of the fund into the Court for the purposes of the Thorndyke Trust and was held by the Administrator. It appeared that the Trustees against whom the order was made had provided themselves improperly with the means of discharging themselves from their personal liability to bring the fund into Court and that there are third persons whom

221COMMON LAW they had injured. The third party so injured filed a suit praying that the fund held in the name of Thorndyke should be transferred to them. Contention : Legal title not in Mrs. Thorndyke and therefore, her right could not prevail. Contention disallowed. Held, not necessary to acquire legal title personally. Also no notice. 8. Altogether we shall have three questions to consider which may be formulated thus : (i) Whether a person who acquires a legal right will be subject to a prior equitable right ? (ii) Whether a person who has acquired a legal right will be postponed to an equitable right arising subsequently. (iii) Where neither party has a legal right and both have only equitable rights, which of them will have priority ? (i) Whether a person who has acquired a legal right will be subject to a prior equitable right ? 1. The answer to this question is this : A purchaser obtaining a legal estate for valuable consideration and without notice of a prior equitable right will not be bound by the equitable right. 2. There are three important elements in this proposition : (1) Purchaser must have acquired a legal Estate. —There is not much to be said about this. But the following points may be noted : (a) It is not necessary that he should acquire the legal estate personally. It is enough if somebody does it on his behalf. Thorndike vs. Hunt, (1859) 3 De. G.I.563=44E.R. 1386 (b) The purchaser’s title need not be a perfect title. Illus.: If a trustee’s title to property is defective, he may never the less convey to a bona fide purchaser an interest which will be effective against the beneficiary who is the owner of a prior equitable right. Jones vs. Powles (1834) 3My & K. 581. Facts 1. John Jones Owner—Mortgaged his house to Holbrook, redeemed it, obtained acknowledgement of payment—but did not

222 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES obtain reconveyance. The legal estate remained outstanding in Holbrook. 2. On the death of Jones Meredith, his shop assistant forged a will of Jones and on its vests obtained possession of the house. 3. Meredith mortgaged it to Hall by a conveyance. 4. Meredith died leaving his wife to whom he left the equity of redemption by a will and thereafter to James Jones. 5. James Jones conveyed it to Watkins. 6. James Jones & Watkins became partners and mortgaged the property to Powles who acquired possession as mortgagee. 7. Powles died leaving his wife Sarah. 8. Sara Powles secured surrender of the estate and full ownership. 9. Sara Jones sued Sara Powles alleging that the will was a forgery and that Sara Powles had notice and that she could not defeat her right to redeem. (c) The purchaser should obtain a legal right. But this may be: (i) at the time of his purchase, or (ii) he may get it subsequently. (ii) The purchaser must have given valuable consideration for his right. A volunteer is always subject to an equitable right. The reason is that he does not suffer by being made liable to the prior equitable right not having paid any consideration. An existing debt is, however, sufficient consideration. Illus. Thorndike vs. Hunt. I had paid no consideration. His right was a sort of an existing debt against the trustee. (iii) The purchaser must have acquired the right without notice of the existence of the prior equitable right. This is the most (important)* element in the proposition and the question that arises for consideration is : (further portion not found—ed.) * Inserted—ed

223COMMON LAW What is Notice ? 1. Notice may be Direct or Imputed. Direct notice is notice to the purchaser himself. Imputed notice is notice to the agent of the purchaser. 2. Direct Notice may be actual or constructive (1) Actual notice is where the matter is within the knowledge of the purchaser or his agent. (2) Constructive notice (is)* where it would have come to his own knowledge or to the knowledge of his agent if proper inquiries had been made. Actual Notice 1. If reliance is placed upon actual notice to defeat a legal right it must be proved that : (i) It was given by a person interested in the property; (ii) it was given in the course of negotiations; (iii) it was clear and distinct. Constructive Notice 1. Constructive Notice arises where there is notice of a fact or facts from which notice of the existence of an equitable right could be presumed. It is not notice but evidence of notice. 2. There are three varieties of constructive notice : (i) Where there is actual notice of a fact which would have led to the notice of the existence of the right. Bisco vs. Earl of Banbury (1676) (6) 1 Ch. Ca. 287. The purchaser had actual notice of a specfic mortgage but did not inspect the motgage-deed which referred to other rights and incumbrances. He was held to be bound by other incumbrances for he would have discovered their existence if he had inspected the deed as any prudent man would have done Davis vs. Hutchings. 1907 1 Ch. 356.. A trustee transferred a share of the beneficiary to the Solicitor relying upon the statement made by him that it was assigned. They did not call for the assignment. The assignment was subject to a charge in favour of another. Held they had constructive notice of the charge. * Inserted—ed.

224 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES Occupation of tenant as Constructive Notice Where land is in the occupation of some one other than the vendor, the fact of the occupation gives the purchaser constructive notice of any right of the occupying tenant. It will not amount to notice of a third person’s right—9. Moo. P. C. 18. We now come to the parol evidence of notice. Upon this subject the rule is settled, that a purchaser is not bound to attend to vague rumours about purchaser—to statements by mere strangers, but that a notice in order to be binding must proceed from some person interested in the property— R. 3 Ch. App. 488 Lloyd vs. Banks Carries j—1868 If he attempts to prove knowledge of the trustee Aliunde, the difficulty which this Court always feel in attending to what are called casual conversations or in attending to any kind of intimation which will put the trustee in a less favourable position as regards his mode of action than he would have been in if he had got a distinct and clear notice from the incumbrances. At the same time I am bound to say that I do not think it would be consistent with the principles upon which this Court has always proceeded, or with the authorities which have been referred to, if I were to hold that under no circumstances could a trustee without express notice from the incumbrancer be fixed with knowledge of the incumbrance. —Illus.: 9 Moo. P. C. 18 Barnhart vs. Greenshields. Where it was held that vague reports from persons not interested in the property will not affect the purchaser’s conscience. Should notice be directly from the Incumbrancer ? A purchaser cannot safely disregard information, from whatever source it may come. It is of such a nature that a reasonable man of business would act upon that information even if it came from a news-paper report. S. R. 3 Ch. App. 488 1868 Registration The registration of any instrument or matter required or authorized to be registered by law is to be deemed to constitute