The court was asked whether a company which had a legal mortgage, had lost its priority to a subsequent equitable mortgage which had been created because the company’s manager, acting on his own account, had a duplicate key to the safe where the title deeds were kept. The Court had to decide whether the company’s carelessness should be equated to equitable fraud.
Held: ‘In the case of a person taking the legal estate, and not seeking for or obtaining the title deeds from the mortgagor [i.e. not inspecting the title], the question may arise between the legal mortgagee and either a prior or a subsequent incumbrancer or purchaser. But in such a transaction the fraud about which the Courts are most solicitous is that which is practised when a man takes the legal estate with knowledge of a prior equitable sale or incumbrance, and yet strives to place himself in a position to show that he took without notice – that kind of fraud which Lord Hardwicke explained in Le Neve v. Le Neve, when he said:- ‘The taking of a legal estate after notice of a prior right, makes a person a mala fide purchaser . . This is a species of fraud, and dolus malus itself; for he knew the first purchaser had the clear right of the estate, and after knowing that, he takes away the right of another person by getting the legal estate.’
Judges:
Fry LJ
Citations:
(1884) 26 ChD 482
Jurisdiction:
England and Wales
Cited by:
Cited – R Griggs Group Ltd and others v Evans and others (No 2) ChD 12-May-2004
A logo had been created for the claimants, by an independent sub-contractor. They sought assignment of their legal title, but, knowing of the claimant’s interest the copyright was assigned to a third party out of the jurisdiction. The claimant . .
Lists of cited by and citing cases may be incomplete.
Equity
Updated: 23 June 2022; Ref: scu.199513