Three sets of rules:
•    Competing legal interests
•    Competing equitable interests
•    Legal v equitable interests

Summary of priorities

1.    Legal v Legal
•    First in time
o    Second interest can’t be legal if inconsistent with the first

2.    Equitable v Equitable
•    Look to merits
•    First in time unless postponing conduct and no notice
o    Ie look for postponing conduct.
o    If there is, look to see if later interest had notice

3.    Prior Equitable v Later Legal
•    Later legal interest prevails IF
•    Legal holder is:
    -    Bona fide purchaser (volunteer?)
    -    For Value
    -    Without notice

4.    Prior Legal v Later Equitable
•    Prior legal interest prevails UNLESS
o    Postponing conduct by legal interest holder
    -    Fraud
    -    Gross Negligence
    -    Estoppel
o    AND Later equitable interest holder has No notice?

Competing Legal Interests: First in Time wins

•    When two or more legal interests in the one parcel of land are inconsistent with each other
•    Note:
o    Must use a deep to set up a legal interest (S23B Conveyancing Act)
    -    Exception where a legal leasehold interest may be created by parol if and only if it is: (Section 23D)
•    at the best rent that can reasonably obtained without taking a fine
o    look at benefits other than money, such as provision of services by tenant
•    taking effect in possession
o    cannot be lease commencing at future date
•    for a term (including option to renew) not exceeding three years

Priority depends on date which the instruments creating the interests came into operation
o    Date of execution
o    In case of deed, when the deed is delivered
•    Rule is nemo dat quod non habet
o    A person cannot convey an interest which he or she does not have
•    Example:
o    If Owner (O) conveys fee simple to A and a week later to B
    -    B doesn’t get fee simple, as O conveyed his legal interest to A and has no legal interest left in order to convey it to B
o    If owner gives legal lease to T and also conveys fee simple to B
    -    B’s rights are subject to the lease to T
    -    Ie T’s rights defeat Bs
o    If O sells to B and then leases to L
    -    B’s rights prevail
 
Competing Equitable Interest: First in Time has stronger claim
•    Where competing equitable interest in same parcel of land

Earlier interest has stronger claim than later: ‘qui prior est temper potior est jure’
•    First in time maxim is a maxim of last resort rather than first resort
o    Equity considers all the circumstances of the case to determine merits of parties
    -    Including nature of competing interest
    -    Matter of acquisition
    -    Conduct of parties
o    First in time rule used only when the merits are in all respects equal, and no other sufficient ground exists for one interest over the other
•    Rice v Rice
•    Example:
o    Owner gives equitable mortgage to T and then sells to P
    -    Mortgage to T prevails

No purchaser without notice doctrine for competing equitable interests
•    Fact that later acquired equitable interest was purchased for value without notice of an earlier does not give later priority
•    It is simply one of the circumstances to be taken into account

Exception where holder of earlier equitable interest was guilty of some act or omission which induced a belief in the later holder, at the time of acquiring later interest, that the earlier interest no longer existed
•    Lapin v Abigail

A Beneficiary’s equitable interest under a trust is not postponed to a later equitable interest created by the trustees in breach of trust
•   
Shropshire Union v Railways and Canal Co v The Queen

This is because: Beneficiary is entitled to assume that trustees will not abuse their position to create interests inconsistent with that of the beneficiary
•    Cory v Eyre

Beneficiary’s assumption is justified only where the trustees have possession on the title deeds
o    If trustees neglect to obtain title deeds, and as a result equitable interests are created in favour of a third party, the beneficiary’s rights under the trust are no better than those of the trustee’s
    -    If the trustees legal estate is subject to the third party’s equitable interest, so too is the beneficiary’s equitable interest
•    Walker v Linom

Competition between a mere equity and a later equitable interest:
o    Equitable interest prevails if (and only if) acquired for value without notice of the mere equity
•    Latec Investments Ltd v Hotel Terrigal Pty Ltd
o    Ie competition between equitable interest arising from right to have transaction set aside and later normal equitable interest
    -    Later prevails through plea of purchaser of value

Principles regarding tacking of mortgages
•    See mortgages section
•    Rule against further advances
o    Linked to mortgages – covered in that section
•    Tabula doctrine –‘tabula in naufragio’
o    Legal interest normally prevails over an equitable one
o    If legal owner grants a legal mortgage and two equitable mortgages to others
    -    Suppose value of property will not cover the cost of the mortgages
•    Usual order of repayments:
o    Legal mortgagee, then first equitable mortgagee, then second equitable mortgagee
•    Second equitable mortgagee can gain priority if they ‘tack’ their interest onto the legal mortgagee
o    Done by buying (ie paying off) the legal mortgagee

o    Equitable limitation on this practice
    -    You cannot prevail over an equitable interest that you knew at the time had precedence over yours
•    Bailey v Barnes
    -    If the second equitable mortgagee knew of the existence of the rights of the first equitable mortgage at the time of tacking, their purported tacking is invalid

Earlier equitable vs Later Legal Interest
o    Legal interest will prevail as long as acquired:
    for value (reasonable price)
•    more than nominal, but not necessarily full value
    in good faith
    without notice of the earlier equitable interest
o    Ie New legal owner will take possession without that obligation
•    Pilcher v Rawlins

SEE SECTION ON STATUTORY REGIMES FOR DISCUSSION OF THESE ELEMENTS

Onus on proving elements is on party claiming priority for the legal estate
•    Re Nisbet and Pott Contract

Notice of equitable interest will vitiate legal interest’s dominance

The rule in Wiles v Spooner:
The priority enjoyed by a bona fide purchaser of the legal estate for value without notice extends to persons claiming through that purchaser, even persons who take with notice of the earlier equitable interest, or are mere volunteers.
•    The rule in Wilkes v Spooner [1911] 2 KB 473
o    Rationale
    -    ‘in justice to the owner of the land who had no notice when he acquired the land, it would not be right to hamper his power of dealing with his own land, because certain persons, who possibly would be the only customers for the land likely to pay the best price, have such notice’
o    FACTS
    -    A sells property to P for value without notice of B’s earlier equitable interest
    -    P sells to D who has notice of B’s interest
    -    B seeks to have interest given priority
o    HELD
    -    D takes property free of Bs earlier equitable interest

Exception: where purchaser seeking the shelter is a trustee re-acquiring the property which he or she has disposed of in breach of trust to a purchaser without notice of trust, or is otherwise endeavouring to take advantage of his or her own fraud by reacquiring the property from someone to whom he or she sold it for value and without notice
•    Re Stapleford Colliery Co
 
Three Kinds of Notice

1. Actual Notice
o    Actual knowledge of the earlier equitable interest
o    Notice is not actual unless its source is someone with an interest in the property
    -    A purchaser is not put on actual notice by rumours or statements from persons with no interest in the property
•    Barnhart v Greenshields

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