Equitable Priorities Under Registered Land

PAPER NO.
5/2017
JANUARY 2017
Equitable Priorities under Registered Land

Astron Douglas
Further information about the University of Cambridge Faculty of Law Legal Studies
Research Paper Series can be found at http://www.law.cam.ac.uk/ssrn/
Electronic copy available at: https://ssrn.com/abstract=2859753

Astron Douglas, Wolfson College, Cambridge Draft Paper, 25 Oct 2016
Equitable priorities under registered land

Uncertainty is the sworn enemy of land registration, and few doctrines are perceived to be more
uncertain than the rules of equitable priorities. When the Law Commission issued its final report
on Land Registration Act 2002, it asserted confidently that henceforth “[n]o question arises as to
whether ‘the equities are equal’”1 when determining the priority of interests in registered land. It
was a declaration of victory; the old, flexible and uncertain rules of equitable priorities had been
vanquished. This was to be effected by section 28 of the Land Registration Act, which provides
what Gray and Gray called “a new, surprisingly stark (and somewhat inelegantly expressed) ‘basic
rule’ … to arrange priority … simply as a matter of temporal order of creation.”2 The result of this
was supposed to be that the determination of the priorities of competing interests in land was
entirely statutory.3
However, in the recent decision of Wishart v Credit and Mercantile plc,4 the Court of Appeal
postponed a prior equitable interest held by a person in actual occupation to a later registered
charge, applying what it called “the Brocklesby principle”5. The Court of Appeal treated this as the
application of a standalone principle, but in truth it marks a return of the principles of equitable
priorities to registered land.6 This article examines the principles of equitable priorities to
determine how they may be applied to the Land Registration Act 2002 and argues that the Court of
Appeal fell into error by failing to appreciate the differences between common law conveyancing,
around which the rules of equitable priorities were initially fashioned, and the system under the
Land Registration Act.
Wishart v Credit and Mercantile plc
The essential facts of Wishart were these. Mr Wishart had a business partner named Mr Sami
Muduroglu, with whom he conducted a business of land development. They engaged in various
development projects together, each specialising in different aspects of the business. One day,
Mr Wishart wanted to purchase a dwelling house and settled on one called “Dalhanna” in Kent. He
entrusted Sami with the task of purchasing the house for his benefit, and Sami purchased the house
and caused the title to be registered in the name of Kaymuu Ltd, a company he controlled. Sami
was a compulsive gambler, and caused Kaymuu to borrow £500,000 secured by a registered
mortgage from Credit and Mercantile plc (C & M). All this was unknown to Mr Wishart. Sami later
was made bankrupt and then vanished. The trial judge found that Mr Wishart held the beneficial
interest in Dalhanna, under a constructive trust based on the equity in Pallant v Morgan.7 Kaymuu
was thus trustee of the legal title and Mr Wishart the sole beneficiary. At the time of the registration
of the legal title to Kaymuu and the registered mortgage to C & M, Mr Wishart was in actual
occupation of Dalhanna and the trial judge found that the occupation would have been obvious on a
reasonably careful inspection of the land.
So on the facts we have a priority dispute which is similar to the well-known House of Lords case of
Williams & Glyn’s Bank Ltd v Boland.8 The legal title is held on trust. The beneficiary’s interest is
prior in time. A bank then becomes registered mortgagee without the knowledge or consent of the
1 Law Commission, Land Registration for the Twenty-First Century (Law Com No 271), [5.5].
2 Gray and Gray, Elements of Land Law, 5th ed (Oxford: OUP, 2009), [8.2.4]. The full text of s 28 is: “(1) Except as
provided by sections 29 and 30, the priority of an interest affecting a registered estate or charge is not affected by a
disposition of the estate or charge. (2) It makes no difference for the purposes of this section whether the interest or
disposition is registered.”
3 This is the view of Megarry and Wade: Harpum, Bridge and Dixon, Megarry & Wade’s Law of Real Property,
8th ed (London, Sweet & Maxwell, 2012), [7-060], [7-064]. Gray and Gray are slightly more cautious: Gray and Gray,
Elements of Land Law, 5th ed, [8.2.28].
4 Wishart v Credit and Mercantile plc [2015] EWCA Civ 655; [2015] 2 P & CR 15.
5 Wishart v Credit and Mercantile plc [2015] EWCA Civ 655; [2015] 2 P & CR 15, [43] ff, named after Brocklesby v
Temperance Permanent Building Society [1895] AC 173.
6 See the comments of Millett J in Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 1 WLR 978,
1012.
7 Pallant v Morgan [1953] Ch 43, as explained by Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372.
8 Williams & Glyn’s Bank Ltd v Boland [1981] AC 487.
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beneficiary. In Boland, Lord Wilberforce held that there is no room for the operation of the
doctrine of purchaser of the legal estate for value without notice under the English land registration
system.9 Normally the “special priority” rule under section 29 of the Land Registration Act would
mean that a registered mortgage, being a “registrable disposition” made for valuable consideration,
would postpone “any interest affecting the estate immediately before the disposition whose priority
is not protected at the time of registration.” Prima facie, this would include any beneficial interest
under a trust. However, the priority of an earlier interest is protected if it falls within Schedule 3 of
the Act (commonly known as “overriding interests”).10 Schedule 3, paragraph 2 defines what is
commonly called an overriding interest based on actual occupation: “[a]n interest belonging at the
time of the disposition to a person in actual occupation, so far as relating to land of which he is in
actual occupation” unless the interest “would not have been obvious on a reasonable careful
inspection of the land at the time of disposition” and “of which the person to whom the disposition
is made does not have actual knowledge at the time”. Following Boland, since Mr Wishart was in
actual occupation, and his occupation was obvious, his interest should not have been postponed by
the registration of the mortgage to C & M and so would take priority over the interest of C & M as
being prior in time.
It was at this point that the court turned to the application of “the Brocklesby principle”, named
after the decision of the House of Lords in Brocklesby v Temperance Permanent Building Society.11
The Court of Appeal first said that “The principle drawn from Brocklesby is such a rule of law
which, when it applies, prevents an occupier from having a relevant right against the legal owner.”12
Then the Court described the principle in the following terms:
“The Brocklesby principle is not based on actual authority given to the agent, but rather on a
combination of factors: actual authority given by the owner of an asset to a person
authorised to deal with it in some way on his behalf; where the owner has furnished the
agent with the means of holding himself out to a purchaser or lender as the owner of the
asset or as having the full authority of the owner to deal with it; together with an omission
by the owner to bring to the attention of a person dealing with the agent any limitation that
exists as to the extent of the actual authority of the agent. This combination of factors
creates a situation in which it is fair, as between the owner of the asset and the innocent
purchaser or lender, that the owner should bear the risk of fraud on the part of the agent
whom he has set in motion and provided (albeit unwittingly) with the means of
perpetrating the fraud.”
The Court then detailed the conduct which was said to amount to the “furnishing the agent with the
means of holding himself out to a purchaser or lender”
“Mr Wishart left the acquisition of Dalhanna completely in the hands of Sami. Mr Wishart
gave Sami authority to make whatever arrangement he saw fit to acquire Dalhanna, so long
as the net result was that Mr Wishart would have the beneficial ownership of it free of any
mortgage. As the judge said, Mr Wishart gave Sami “free rein” to make the arrangements
for the acquisition (at [162]). Clearly, Sami acted outside the limits of his authority by
arranging for the grant of the mortgage over Dalhanna to C&M, but C&M was not on notice
of any such restriction on his authority. Mr Wishart exercised no supervisory function
whatever in relation to what Sami might do to effect the transaction to acquire Dalhanna.
He did not ask to inspect or countersign the contract of purchase. He did not contact the
vendor to explain his interest in the acquisition; nor did he seek to enter any note of his
interest on the register at the time of the acquisition. He did not arrange for Eren to explain
to anyone that the money which was being provided for Sami to complete the purchase of
9 Williams & Glynn’s Bank Ltd v Boland [1981] AC 487, 504. This was decided under the Land Registration Act 1925,
but is has been held applicable equally to the Land Registration Act 2002: Thompson v Foy [2009] EWHC 1076
(Ch); [2010] 1 P & CR 16, [134]; Mortgage Express v Lambert [2016] EWCA Civ 555; [2016] 2 P & CR 13; [2016]
HLR 34, [21].
10 Land Registration Act 2002, s 29(2)(a)(ii).
11 Brocklesby v Temperance Permanent Building Society [1895] AC 173.

12 Wishart, [49].
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Dalhanna was to be regarded as Mr Wishart's money. In this way, in practical terms, Mr

Wishart furnished Sami with the means to hold himself out as the true beneficial purchaser
of Dalhanna, and hence as the legal and beneficial owner of the property for the purposes
of borrowing money from C&M against the mortgage in its favour.”
It will be apparent from this that the only positive conduct on the part of Wishart was in leaving it
to Sami to acquire the beneficial interest in Dalhanna for Wishart’s benefit. From that, the court of
appeal drew a very long “authorisation” for Sami and Kaymuu to operate on Wishart’s behalf. There
appears to be no account taken of the fact that upon Kaymuu acquiring the legal title as
constructive trustee, a new trust relationship was created and Wishart received a new and distinct
beneficial interest based on the equity in Pallant v Morgan. From that moment on, the nature of
the relationship changed to that of trustee and beneficiary. The old authority came to an end:
indeed, it was fulfilled; the house was purchased. The trustee became bound by the statutory and
equitable obligations and limitations attaching to the office of trustee, and Wishart obtained the
rights, liberties, powers and immunities incident to his new interest as beneficiary. Wishart did not
then positively “give” this new interest to Sami, Kaymuu or anyone to “hold themselves out as
beneficial owner”. It is submitted that this failure to notice the change in the relationship and the
distinct interest of Wishart led the Court of Appeal to misapply Brocklesby. But more significantly,
the court took no account of the wider place of Brocklesby within the law of equitable priorities and
whether the principles of equitable priorities are applicable under the Land Registration Act 2002.
It is to those questions that this article will now turn.
The principles in Brocklesby did not originate in that case. The House of Lords merely applied an
earlier case13 named Perry Herrick v Attwood,14 which treated the issue as one of equitable
priorities. Millett J in Macmillan Inc v Bishopsgate Investment Trust plc (No 3) also considered
that Brocklesby was part of the law of priorities.15 It is submitted that it is necessary to view
Brocklesby in the context of the rules of equitable priorities in order to ascertain what was meant
when the court spoke of “arming” with the “indicia of title”. Dr Televantos has argued that Wishart
was incorrect in its application of Brocklesby as a principle of the law of agency, and no so more
will be said about that here.16 The focus of this article is to consider the wider law of priorities to
ascertain whether the principles are appropriate for the system of registered land under the Land
Registration Act 2002 and the extent of any adaptations that may be necessary.
The general law of equitable priorities before the 1925 legislation
There are two broad principles which inform the law of equitable priorities. First, there is the
principle that where the equities are equal, the legal title prevails. The most important rule which
gives effect to this principle is the defence of bona fide purchaser of the legal estate for value
without notice. The basis of the defence lay in the division between common law and equitable
jurisdictions before the Judicature Acts. A person who had obtained the legal estate could exercise
all the common law rights which their legal rights of possession allowed, including maintaining an
action for ejectment. All equitable encumbrances ultimately relied upon access to the legal estate.
When a person with a prior equitable interest sought to enforce it in a court of equity, the legal
owner could avoid answering the bill by setting up a plea to the jurisdiction of the court of equity
that they were a bona fide purchaser for value without notice. Their conscience thus being clear,
and therefore having equity on their side, the Chancery simply “let him depart in possession of that
legal estate, that legal right, that legal advantage which he has obtained, whatever it may be”.17 This
13 This was the way it was viewed by contemporary cases: see, eg, Lloyd’s Bank Ltd v Bullock [1896] 2 Ch 192, 198.
14 Perry Herrick v Attwood (1857) 25 Beav 205 (Rolls); 2 De G & J 21 (LC). According to Bacon V-C in Fox v Hawks
(1879) 13 Ch D 822, 834, the principle was even older.
15 Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 1 WLR 978, 1012 (Millett J): “In my judgment the
principle relied on is indeed part of the law of priorities and not agency”.
16 Televantos, “Trusteeship, ostensible authority, and land registration: the category error in Wishart” [2016] Conv
181. Professor Dixon has also argued that Wishart fundamentally contradict Boland: Dixon, “The Boland requiem”
[2015] Conv 285.
17 Pilcher v Rawlins (1872) LR 7 Ch App 259, 269.
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had the effect of extinguishing any earlier equitable interests.18 The supremacy of the legal title was
also the basis of the doctrine of tacking and tabula in naufragio—doctrines which were difficult to
justify on point of principle,19 and rested mainly on the jurisdictional division between law and
equity. To make use of the defence, it was essential for the defendant to demonstrate that they had
equity on their side through lack of notice of any earlier interest. If the plaintiff in equity could
demonstrate that the defendant had notice, any advantage obtained by purchasing the legal title
vanished.
The second principle was that where equities are equal, the first in time prevails. This was the rule
determining the priority between purely equitable interests. It was sometimes expressed with the
aid of the maxim qui prior est tempore potior est jure.20 This maxim was explained in two ways,
which differed in the emphasis placed on the search for the better equity or the temporal priority of
the earlier interest. In the influential decision of Rice v Rice,21 Kindersley V-C argued that “in a
contest between persons having only equitable interests, priority of time is the ground of preference
last resorted to; ie, that a Court of Equity will not prefer the one to the other, on the mere ground of
priority of time, until it finds upon an examination of their relative merits that there is no other
sufficient ground of preference between them”.22 This explanation appears to be favoured by the
High Court of Australia. However, statements of principle can also be found which emphasise that
the earlier in time is ordinarily entitled to priority unless the equities are unequal. This is the
favoured explanation in the English courts.23 The difference between the two explanations is largely
one of emphasis, as the only practical difference would relate to the burden of proof in showing
who has the better equity.24 But it is submitted that the second formulation better reflects the
underlying proprietary logic to which equitable interests must conform, and better helps in
explaining the sort of priority dispute involved in a case such as Wishart.
What then is meant by the search for the better “equity”?25 In Bailey v Barnes,26 Lindley LJ
explained it as follows: “Equality means the non-existence of any circumstance which affects the
conduct of one of the rival claimants and makes it less meritorious than that of the other.” Caution
is needed in generalising about equitable priorities as the cases are very sensitive to their facts. No
single test appears to have been used. Nevertheless, in determining where the better equity lies,
there were two general standards consistently employed by the courts of equity: fraud and
negligence.
Fraud and Negligence
Fraud is a very old head of equity, and the initial cases involving postponement of earlier equitable
interests no doubt involved actual fraud in the nature of dishonest conduct, such as where the
earlier interest-holder deliberately hid the evidence of their interest or lied upon enquiries being
made. Those cases are plain frauds where the fraudster is the holder of the earlier interest and the
victim of the fraud is the holder of the later interest. But in many cases the fraud was perpetrated
by a third person—usually the mortgagor—and so the later interest holder was defrauded, but not
directly by the earlier interest-holder. Over time, equity took the ideas behind fraud and extended
them to situations where there was no intention to defraud, but the court desired to prevent similar
results from occurring. This was termed by Story as “presumptive fraud” and is also known as
constructive or equitable fraud. As explained by Lord Haldane in Nocton v Lord Ashburton, in
18 Though the equitable interest might re-enliven if the legal title fell back into the hands of the defaulting trustee.
19 Jennings v Jordan (1881) 6 App Cas 698, 714.
20 As this article is dealing with interests in land, the rule in Dearle v Hall will not be discussed.
21 Page 77.
22 Page 78.
23 Barclays Bank Ltd. v Taylor [1974] Ch. 137

24 See Tadgell J. There is authority to demonstrate that the burden lies on the later interest-holder: Roberts v Croft
(1857) 24 Beav 223.
25 In Rice v Rice, Kindersley V-C explained it: “when we say that A has a better equity than B, what is meant by that?
It means only that, according to those principles of right and justice which a Court of Equity recognizes and acts
upon, it will prefer A to B, and will interfere to enforce the rights of A as against B.”
26 Bailey v Barnes [1894] 1 Ch 25, 36.

these cases, fraud is merely a term describing the exclusive equitable jurisdiction and need not
involve an intention to deceive. Nevertheless, the earlier interest holder could not be postponed
merely because a later interest holder was defrauded by a third person; there would need to be
some act or omission on the part of the holder of the earlier interest to justify postponing them.
An explanation was found in the notion of “negligence”. So it was common to say that where the
earlier interest-holder, though their negligence, “enabled” a third person to commit a fraud, they
were postponed to the later interest-holder. This idea of negligence imports a notion akin to
secondary liability, where the conduct of the earlier interest-holder is connected to the third party’s
fraud, and hence to the fraud on the later interest-holder.27 Sugden spoke of it as “culpable
negligence”. In the early part of the 19th century, the type of negligence which was required was
said to be gross negligence, which is negligence to such a degree as to amount to fraud.28 This
accords with the modern understanding of that phrase as explained in Armitage v Nurse. In order
to postpone an earlier legal interest gross negligence is still required,29 although some degree of
negligence less than gross negligence will probably suffice to postpone an earlier equitable
interest.30
A great deal of light can be shed on the standard of conduct by considering the actual conduct
which is complained of in the cases. One category of cases, of which Rice v Rice was one of the
earliest, involved a vendor giving a receipt for purchase moneys which had not yet been paid, which
postponed their unpaid vendor’s lien to a subsequent equitable mortgage. But apart from that, the
vast majority of cases involve fraud or negligence in dealing with the title deeds to the land.31 So to
understand what amounts to fraud or negligence in dealing with the title deeds to the land, it is
necessary to examine the principles relating to title deeds at common law. These principles are the
implicit background which inform every conclusion that the defendant’s conduct is “negligent” or
“fraudulent” and therefore to be postponed.
The principles relating to custody of title deeds
In a system of unregistered land, in order for a person in possession of a legal title to prove the
legitimacy of their title, it is necessary to show that their title was derived from a person who in
turn had good title. In conveyancing practice, this required showing a good root of title going back
60 years (later reduced to 40 years by Statute). The proof of this title was the title deeds. Coke
described them as the “sinews of the land”.32 In any conveyance of the fee simple, the standard
conveyancing practice required the vendor to prepare, at their own expense, an abstract of title
summarising the provisions of all dealings with the title going back to a good root of title. The
purchaser’s solicitor then had a right to inspect any title deeds detailed in that abstract. The title
deeds were thus essential to having a marketable title. This process may not have been strictly
legally necessary, but failure to abide by it would put the title of the purchaser at great risk.
This conveyancing practice was reflected in the legal rights relating to title deeds.33 The title deeds
were one of two categories of chattels, together with heirlooms, which were said to descend with the
land. The starting premise was that “whoever is entitled to the land, has also a right to all the deeds
affecting it.”34 The purchaser of the legal fee simple was entitled to the trust deeds and could
27 See, eg, Waldron v Sloper (1852) 1 Drew 193, 200; Roberts v Croft (1857) 2 De G & J 1, 6; Colyer v Finch (1856) 5
HLC 905, 928: “such negligence as to make him responsible for the frauds which he has thus enabled his mortgagor
to commit”.
28 Hewitt v Lossmore, “gross and willful negligence, which in the eye of this Court amounts to fraud”.
29 Whipp. Hewitt v. Loosemore (9 Hare, 449)

30 National Provincial Bank of England v Jackson (1886) 33 Ch D 1, 13.
31 See, eg, Colyer v Finch 5 HLC, 928
32 Co Litt 6a.
33 See generally Sugden, Law of Vendors and Purchasers (14th ed), p 422 ff. For more detail, or for effectual relief
from insomnia, see Copinger, Custody and Production of Title Deeds (London: Stevens & Haynes, 1875) and Dixon,
Practical Treatise on Title Deeds, (London: Sweet et al, 1826).
34 Hooper v Ramsbottom 3 B & Ald 170, 173.

maintain an action for trover to recover them.35 Where the estate was a life estate, the tenant for life
was entitled to title deeds.36 Where the legal title was in co-ownership, the co-owner who obtained
the deeds could keep them, but the other co-owners had a right to inspect them.37 As between
mortgagor and mortgagee, under a mortgage by conveyance of the legal fee simple, the mortgagee
was entitled to the title deeds by virtue of holding the legal fee simple.38 An equitable mortgage by
deposit of title deeds was viewed in equity as an agreement to create a legal mortgage evidenced by
acts of part performance, so the mortgagee would also have custody of the title deeds and be
entitled to keep them. When a mortgage was redeemed, the mortgagee with notice of a subsequent
encumbrance was required to deliver the deeds to the next ranking encumbrancer.39 Where the
legal estate was vested in trustees, the trustees were entitled to the deeds, not the beneficiaries,40
though the beneficiaries had a right to inspect the deeds.41
These legal rights and the conveyancing practice relating to the title deeds were the background
against which the conduct of the prior interest holder was evaluated in determining whether there
was any “fraud” or “negligence” in their conduct. The location of the title deeds, understood against
this background, could communicate a meaningful representation about the interests affecting the
estate. A first mortgagee would either be a mortgagee by conveyance of the fee simple or an
equitable mortgagee by deposit of title deeds; in either situation the mortgagee would take custody
of the deeds. So where one found a legal owner in possession of the land and in possession of the
title deeds, where the last deed contained the conveyance to the possessor, the natural assumption
was that the estate was unencumbered, because if it was encumbered, the legal owner would no
longer have the deeds. Similarly, if a person was in possession of the legal estate and the title deeds
(where the last deed contained the conveyance to the possessor) and the vendor had certified in the
deeds that the purchase money had been paid, any person dealing with the legal owner was
justified in assuming that there was no outstanding unpaid vendor’s lien. Therefore, as a general
rule when there was a prior mortgage, and the mortgagor had somehow obtained the title deeds,
the court would enquire into the circumstances under which the prior mortgagee lost custody of the
title deeds, and if there was a sufficient degree of fault, the prior mortgagee was postponed.
Similarly, if a vendor had given a receipt for payment of purchase moneys which had not in fact
been paid, the unpaid vendor’s lien would be postponed to a subsequent equitable mortgagee.
Estoppel
It would be apparent then that the role of the court in assessing the conduct of the prior interest
holder as “negligent” or “fraudulent” was about determining whether the prior interest holder, by
their acts or omissions, had played a sufficient part in allowing the title deeds to fall into incorrect
hands to make them responsible for the representation which would have been conveyed to the
later interest holder. It was not the case that liability automatically followed when the deeds were
missing from their correct location. The court enquired into the circumstances, and was at times
Smith v Chichester (1842) 2 Dr & War 393, 399–400; Re Williams and Newcastle’s Contract [1897] 2 Ch 144, 148.
35
Where the land is sold in lots, the purchaser of the lot with the largest area was entitled to the title deeds: Griffiths v
Hatchard (1854) 1 Kay & J 17.
36 Strode v Blackburne (1796) 3 Ves Jr 222, 225; Garner v Hannyngton (1856) 22 Beav 627. Though if the deeds are
in danger in the hands of the tenant for life, the court may take charge of the deeds: Leathes v Leathes (1877) 5 Ch D
221.
37 1 Co Rep 1. Upon the death of one joint tenant, the deeds went to one of the survivors: 1 Co Rep 1, 2.
38 Harrington v Price (1832) 3 B & Ald 170; Smith v Chichester (1842) 2 Dr & War 393, 401; Newton v Beck (1858) 3
H & N 220, 222; Re Ingham [1893] 1 Ch 352, 361. A mortgagee by demise did not have a common law right to the
title deeds, being only a lessee, and so needed to rely on an express or implied term for delivery: Wiseman v Fisher
(1826) 1 Y & J 117; Jenner v Morris LR 1 Ch App 603; Stokes v Stokes (1886) 3 TLR 92. This rule was altered by the
Law of Property Act 1925 s 85(1).
39 Corbett v National Provident Institution (1900) 17 TLR 5.
40 Ex p Holdsworth 4 Bing 386. Clayton v Clayton [1930] 2 Ch 12. Where there were co-trustees, the legal position as
between co-owners governed the holding of the deeds. Under a settlement of land, the beneficiary entitled to
possession under the settlement could be given custody of the title deeds by the court. Re Wythes [1893] 2 Ch 369.
[Note, is this because of the Statute of Uses vesting a fee simple by springing use?]
41 Presumably as part of the inherent jurisdiction of the Court to grant access to information relating to the trust: Re
Londonderry and Schmidt v Rosewood. See Copinger, Title Deeds, 16.

prepared to accept surprisingly flimsy excuses, providing the earlier interest holder was acting in
good faith and their conduct was reasonable.42
Viewed in this light, what the courts were doing, especially when deciding whether the earlier
interest holder was “negligent” could be seen as the application of the principles of estoppel by
representation. The act or omission of the earlier interest holder regarding the title deeds created or
contributed to a representation which was acted upon by the later interest holder in reliance on the
truth of the representation to their detriment. To quote a well-known passage by Sir Owen Dixon:43
“The object of estoppel in pais is to prevent an unjust departure by one person from an
assumption adopted by another as the basis of some act or omission which, unless the
assumption be adhered to, would operate to that other's detriment. Whether a departure by
a party from the assumption should be considered unjust and inadmissible depends on the
part taken by him in occasioning its adoption by the other party. He may be required to
abide by the assumption because it formed the conventional basis upon which the parties
entered into contractual or other mutual relations, such as bailment; or because he has
exercised against the other party rights which would exist only if the assumption were
correct, … or because knowing the mistake the other laboured under, he refrained from
correcting him when it was his duty to do so; or because his imprudence, where care was
required of him, was a proximate cause of the other party's adopting and acting upon the
faith of the assumption; or because he directly made representations upon which the other
party founded the assumption.”44
Only late in the 19th century does the idea of estoppel explicitly begin to be mentioned in
judgments about equitable priorities. Lord Selborne appeared to favour it as an explanation for
equitable priorities,45 as did Ashburner. Perhaps the reason that estoppel was not utilised from the
start as a test for equitable priorities has to do with the timing of its development. The rules of
equitable priorities were already well settled by the start of the 19th century,46 though they achieved
greater articulation in the next century. The modern law of estoppel had not yet emerged fully when
Kindersley V-C decided Rice v Rice in 1854 and explained the law as based upon the search for the
better equity. Pickard v Sears47 and Freeman v Cooke48 had only recently been decided, and
Pickard v Sears, though a milestone in the law of estoppel by representation, does not use the term
“estoppel”.49 Many of the great cases on estoppel, including Jordan v Money and Lou v Bouverie
had not yet been decided. It is also worthwhile to note that the term “estoppel” also came late to the
law of estoppel by representation. In one of the leading 18th century estoppel cases, Savage v
Foster, the court simply speaks of “fraud” in hiding the existence of an earlier encumbrance.50 It is
treated as a leading case on estoppel by White and Tudor, but it could equally be seen as a case on
equitable priorities. Given the diversity of doctrines which grew out of the common root of “fraud”
in equity, this suggests that equitable priorities and estoppel can be seen at least as very closely
related.
Nevertheless, by the end of the 19th century, the test had already been framed and acted upon in
the terms set in Rice v Rice that it would take a landmark decision to reconceptualise the law. In
Capell v Winter, Parker J was invited to view the principles in Rice v Rice as based upon estoppel,
but he rejected the submission, saying: “It is clear from the judgment in Rice v Rice that the Vice-
Chancellor was considering solely which was the better equity…”. This is not a rejection of the
proposition that the principles of equitable priorities are incapable of being rationalised as
42 Dixon v Muckleston (1872) LR 8 Ch App 155, 160–1.

43 Thompson v Palmer (1933) 49 CLR 507, 547.
44 See also the similar remarks by Dixon J in the later case of Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59
CLR 641, 674.
45 Dixon v Muckleston (1872) LR 8 Ch App 155, 160.
46 See, eg, Evans v Bicknell and Brace v Duchess of Malborough.

47 (1837) 6 Ad. & El. 469.
48 (1848) 2 Ex. 654.
49 See Handley, Estoppel by Conduct and Election, [1–026].

50 And see Meagher, Gummow and Lehane, 5th ed, [17-140].

instances of estoppel. It seemed that what Parker J was saying was that this was not the way in
which Rice v Rice actually reasoned. There is always a danger in seeking to re-interpret an
established field of law by reference to a single principle, that the new principle will operate as a
Bed of Procrustes. The warning of the High Court of Australia is apposite:51
“It is to seek to distort the principles of stare decisis and of ratio decidendi to contend that a
decision lacks authority because it might have been reached upon a different path of legal
reasoning to that which was actually followed. That would be to replace what was decided
by that which might have been decided.”
There are difficulties in fitting the myriad of cases relating to equitable priorities into the formula of
estoppel by representation. Particularly difficult are the line of cases which hold that a negligent
failure on the part of a legal owner to get in the title deeds to which they are entitled would
postpone them to any subsequent equitable encumbrance created by a fraudster taking advantage
of that failure52 (though it is possible to interpret these cases as absence of bona fides for the
purpose of the defence of bona fide purchase of the legal estate for value without notice).53 Also, in
some respects, the rules relating to equitable priorities do not behave like ordinary estoppels by
representation. There is authority which suggests that an estoppel by representation does not bind
a liquidator or trustee in bankruptcy, because the liquidator or trustee in bankruptcy is entitled to
ascertain the proprietary claims in accordance with the true state of facts.54 Yet the very purpose of
the rules on equitable priorities is that they can alter the enforcement of the proprietary interests
themselves, and if no use could be made of them in insolvency, it would rob the doctrines of their
use in the situation where they most need it. If the principles of equitable priorities are seen as
resting upon estoppel, it must be an estoppel which is sui generis in its application in insolvency.55
There is no need to pursue further whether the general law principles of priorities can be
rationalised under a single idea of estoppel by representation, as that is beyond the scope of this
article. Also, as will appear later, it is not necessary to go that far in order to determine the
principles which ought to apply under the Land Registration Act 2002.
Where the prior interest is a beneficial interest under a trust
Where the earlier interest is the beneficial interest under a trust, the situation is fundamentally
different. The fact that a person was in possession of the title deeds generally only justified the
inference that there was no prior mortgage. It was not sufficient to justify the inference that there
was no other type of interest whatsoever affecting the estate: in particular, there was nothing to say
that the estate wasn’t held on trust. The law relating to title deeds was of no assistance. The location
of the title deeds could not communicate anything regarding the existence of a trust as the
beneficiaries were not entitled to the title deeds. There were good practical reasons for this: the
trustee would need the title deeds in order to exercise their equitable powers, and there is a great
diversity of ways in which the beneficial interest can be settled, for which it would have been overly
simplistic and impractical to fashion a rule that a single person was entitled to the trust deeds. Nor
could trusts be considered a rare conveyancing phenomenon. In a lecture at the turn of the 20th
century, Maitland remarked to an audience of German lawyers that any English lawyer would
“would remember how he was a trustee and how almost every man that he knew was a trustee.”56
51 Victoria v The Commonwealth (the “Industrial Relations Act Case”) (1996) 187 CLR 416, 484–5 (footnote
omitted). See also Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, 544–5 [73]–[74].
52 Walker v Linom [1907] 2 Ch 104, relying on Oliver v Hinton [1899] 2 Ch 264.
53 This is a possible interpretation of the remarks of Lindley MR in Oliver v Hinton [1899] 2 Ch 264, 273–4,
assuming that good faith is an independent requirement in the defence: Midland Bank Trust Co Ltd v Green (No 1)
[1981] AC 513, 528.
54 Re Exchange Securities and Commodities Ltd [1988] Ch 46, 57–60. The rule is said either to be based upon the
fact that the liquidator or trustee in bankruptcy gets a higher title: Re Ashwell [1912] 1 KB 390, or upon the public
policy behind the insolvency legislation: Ex parte Kibble (1875) 10 Ch App 373, 376.
55 Similar conduct forms the basis of the estoppel in Burrows v Lock (1805) 10 Ves Jr 470, though to the remedy
there was radically different. For the law of priorities to be based upon estoppel, equity would require the earlier
interest holder to make good the representation by postponing them to the later interest holder.
56 Fisher (ed), Collected Papers of Frederick William Maitland, vol 3 (Cambridge: CUP, 1911) 321, 323.

The possibility that any piece of land was held on trust would have been a very real one, of which no
information could be gathered merely by the picture of the legal state of the title revealed by the
possession of title deeds.
When the legal title was held on trust, a completely separate equitable interest was vested in a
beneficiary or beneficiaries.57 That interest being prior in time, in the absence of any disentitling
conduct on the part of the beneficiaries, it would take priority over the subsequent encumbrancer.
This rule of priorities is the logical consequence of the fact that equitable interests do follow similar
proprietary logic to those at common law. An earlier interest at common law binds a later interest
irrespective of the circumstances of acquisition by the later interest. As it is commonly put, legal
estates “bind the world”.58 That means that any priority dispute is determined by the rule nemo dat
quod non habet. Equitable titles, by contrast, are said to operate in personam by binding the
conscience of the person acquiring the legal title.59 So where a person acquires the legal title in
circumstances where their conscience could not be affected (ie, a purchaser for value without
notice),60 the equitable interest came to an end.
In the mid 19th century, some attempt was made to generalise from this a rule that any purchaser
for value without notice took free of any pre-existing interest. This was supported particularly by
the writings of Lord St Leonards, and a few decisions in the mid 19th century appeared to support
this proposition. But it was put to an end in the decision of Lord Westbury in Phillips v Phillips.
Lord Westbury decided that the defence of purchaser for value without notice did not apply to the
purchaser of an equitable interest. There was good reason to reject this. The defence of purchaser
for value without notice focuses attention only on the conduct of the later interest-holder. All it can
establish is that the holder of the later interest was innocent in terms of their conduct in acquiring
their interest. But if the conduct of the holder of the earlier interest was also innocent, all that
would establish was that they had equal equities. So it was the superiority of the legal estate over
the equitable estate that let the later interest-holder prevail. When the estates were all equitable,
this factor was not present. The later interest-holder was taking an interest that was proprietary,61
and therefore behaved in a proprietary manner. Lord Westbury explained it in Phillips v Phillips as
follows:62
“I take it to be a clear proposition that every conveyance of an equitable interest is an
innocent conveyance, that is to say, the grant of a person entitled merely in equity passes
only that which he is justly entitled to and no more. If, therefore, a person seised of an
equitable estate (the legal estate being outstanding), makes an assurance by way of
mortgage or grants an annuity, and afterwards conveys the whole estate to a purchaser, he
can grant to the purchaser that which he has, viz, the estate subject to the mortgage or
annuity, and no more.
The subsequent grantee takes only that which is left in the grantor. Hence grantees and
incumbrancers claiming in equity take and are ranked according to the dates of their
securities; and the maxim applies, ‘Qui prior est tempore potior est jure.’ The first grantee
is potior—that is, potentior. He has a better and superior—because a prior—equity. The
first grantee has a right to be paid first, and it is quite immaterial whether the subsequent
incumbrancers at the time when they took their securities and paid their money had notice
of the first incumbrance or not.”
57For the purposes of the following discussion, I will assume a fixed trust of land where each beneficiary can be said
to be vested with a fixed “estate”. Under a discretionary trust, the beneficiaries as a whole can still, in some respect,
be said to have some proprietary interest founded in their ability to follow misapplied trust property and recover it
on behalf of all the beneficiaries. This right was treated as an equitable interest, rather than a mere equity, in Cave v
Cave, which enables it to compete in a dispute over priorities: see Latec v Hotel Terrigal.
58 Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 1 WLR 978, 1001.
59 Ibid.
60 Midland Bank Trust Co Ltd v Green (No 1) [1981] AC 513, 528.
61 Jennings v Jordan (1881) 6 App Cas 698, 714 (Lord Blackburn): “for a very long time equitable estates have been
treated and dealt with as to all other intents estates”.
62 Phillips v Phillips (1861) 4 De GF & J 208, 215–16.

So where a trustee, holding a legal title for a beneficiary, attempts to create a subsequent equitable
encumbrance, it is irrelevant that the later interest-holder gave value and had no notice of the
earlier trust. In attempting to purchase an equitable interest, they can take no more than the
trustee could give. These proprietary rules are corollary to the rules relating to trustee powers,
which have recently been clarified by the decision of the Supreme Court in Pitt v Holt. There is
authority which holds that a trustee is incapable of creating an equitable mortgage by deposit of
title deeds for the trustee’s own benefit.63 In light of Pitt v Holt the decision is easily explainable as
an instance of excessive execution by the trustee. No matter how wide the administrative powers of
the trustee, equity requires that they be exercised in good faith.64 A trustee who attempts to create
an equitable mortgage for their own benefit purports to exercise the power in bad faith, the
consequence of which is that the exercise of the power is void in equity and the interest of the
beneficiaries is not overreached. If the interest created is a legal interest, it will be held on
constructive trust for the beneficiaries unless the subsequent incumbrancer is a purchaser of the
legal estate for value without notice.65
In light of these principles, there is a consistent line of authority which holds that the beneficiaries
of a trust have a distinct prior equitable interest which is not to be postponed to a subsequent
incumbrancer unless there is some postponing conduct on the part of the beneficiary. As explained
by Turner LJ in Cory v Eyre:66
“Questions of priority between equitable incumbrancers … are in general governed by the
rule qui prior est tempore potior est jure, and in determining cases depending on the rule
we must of course look at the principle on which the rule is founded. It is founded, as I
conceive, on this principle, that the creation or declaration of a trust vests an estate and
interest in the subject-matter of the trust in the person in whose favour the trust is created
or declared. Where, therefore, it is sought, as in the present case, to postpone an equitable
title created by declaration of trust, there is an estate or interest to be displaced. No doubt
there may be cases so strong as to justify this being done, but there can be as little doubt
that a strong case must be required to justify it. A vested estate or interest ought not to be
disturbed upon any light grounds.”
Similar remarks were made in the House of Lords decision of Shropshire Union Railways & Canal
Co v The Queen,67 and both cases have been approved by the Court of Appeal multiple times
since.68
The reasoning in these cases emphasises that the interest of the beneficiary is distinct from the
trustee, and the beneficiary is not automatically to be implicated in the trustee’s fraud.69 The
beneficiary is entitled to trust the trustee, and the mere fact that the trustee has the legal title and
therefore holds the title deeds in accordance with their legal right is insufficient to amount to some
sort of positive act or omission on the part of the beneficiaries. This point was made emphatically
be Lord Cairns in Shropshire Union Railways & Canal Co v The Queen:70
“My Lords, in the first place, the arguments at your Lordships' Bar on behalf of the
Respondent appeared to me to go almost to this, that whenever you have an equitable
owner who is the absolute owner, that is to say, entitled to the whole equitable interest,
63Manningford v Toleman (1845) 1 Coll 670. See also Stackhouse v Countess of Jersey (1861) 1 John & H 721, 725.
64The Supreme Court has recently confirms that even statutory fiduciary powers are limited by the doctrine of fraud
on a power: Eclairs Group Ltd v JKX Oil & Gas plc [2015] UKSC 71; [2016] 3 All ER 641. A fortiori with the
requirement that fiduciary powers must be exercised in good faith.
65Except under registered land, where the doctrine of notice is irrelevant, and the question is whether s 29 of the
Land Registration Act 2002 would operate to extinguish the prior equitable interest. [It is not clear how this
principle would interact with the statutory overreaching scheme in s 2 of the Law of Property Act 1925.]
66 Cory v Eyre (1863) 1 De GJ & S 149, 167.
67 Shropshire Union Railways & Canal Co v The Queen (1875) LR 7 HL 496, 506–7, 511–12, 514.
68Re Vernon, Ewens & Co (1886) 33 Ch D 402, 409–10, 412, 413; Taylor v London and County Banking Co [1901] 2
Ch 231, 260–2; Burgis v Constantine [1908] 2 KB 484.
69 Cory v Eyre (1863) 1 De GJ & S 149, 164–5, 167–8.
70 Shropshire Union Railways & Canal Co v The Queen (1875) LR 7 HL 496, 507–8.
10

such a person ought not to have a trustee at all holding the indicia of legal ownership; or, if
he chooses, for his own purpose, to have such a trustee, he must be in danger of suffering
for every act of improper conduct by that trustee; and that therefore, if the person entitled
absolutely to the equitable interest in a share in a railway company, chooses for his own
purpose to have that share standing in the name of a trustee for him, he will be bound not
merely by a valid legal transfer of that share by the trustee, but by any equitable dealing or
contract which the trustee may choose to enter into. My Lords, that is a very serious
proposition, It goes not merely to shares, but it goes to land, and to every other species of
property; and it goes to say that, whereas there is a large, well-known, recognised, and
admitted system of trusts in this country, that system of trusts is to be cut down and
moulded and reduced to this, that it is to be a system applicable only to infants, married
women, or persons with limited interests; and that wherever the limited interest has
ceased, and the equitable interest has become entire and complete without any limit, there
the equitable owner is under some measure of obligation with regard to his duty of
watching his trustee, an obligation which does not lie upon a limited owner. I find no
authority for such a proposition, and I feel satisfied that your Lordships will not be
disposed to introduce, for the first time, that as a rule of law.”
Relationship with Brocklesby
There is a superficial conflict between what was said by Lord Cairns in Shropshire and the principle
in Brocklesby, but it is resolved when the true principle on which Brocklesby was based is revealed.
Shopshire confirms that there is nothing inequitable in land being held by means of a trustee. The
interest of the beneficiary is distinct. So in order to postpone the beneficiary, it is necessary that the
conduct of the beneficiary is in some way connected to that of the trustee. There are comments in
the case law that Brocklesby applies only when the prior interest holder designates the holder of
the legal title as their agent. The agency relationship would supply the necessary link, as by the
principal authorising the conduct of the agent, the agent becomes able to bind the principal by their
actions. The principal is not able to plead, as against a third party, any limits on the agent’s
authority which were not obvious on the face of the arrangements conferring authority on the
agent.
However, it is possible to consider Brocklesby as based on the broader principles of the law of
priorities, as did Millett J in Macmillan v Bishopsgate Investment Trusts. Indeed, the original case
of Perry Herrick v Attwood, there was no specific finding of a relationship of agency. There, two
sisters who were equitable mortgagees by deposit of title deeds released the title deeds to the
mortgagor for the express purpose of raising further money. A subsequent mortgage was then
created by the mortgagor beyond the limits contemplated by the sisters. The important point was
that the sisters had already consented or acquiesced to the mortgagor encumbering the land in
accordance with the arrangement under which they parted with the title deeds. Their consent had
been given, but it was limited. Had the mortgagee acted within the limits of their agreement, there
should have been no doubt that the sisters’ estate would be postponed to the subsequent
mortgagee. That being so, their complaint when their agreed arrangement was exceeded was to the
extent to which any later encumbrances bound their interest by reason of their actions.
This is even clearer on the facts of Brocklesby. A father had given his son authority to obtain title
deeds to his property and raise £2,250 on a mortgage. The son obtained a loan of £3,500. The
father argued that the mortgagee could only secure the amount of £2,250 by their mortgage,71
Again, the only argument was as to the extent of the later mortgage. There was no dispute that the
mortgage was binding as to £2,250. The dispute was whether the further amount was secured by
the later interest. The key lies in the specific authority given by the earlier interest-holder to the
agent. That amounts effectively to a consent or acquiescence in the creation of the later interest, but
the fact that the agent exceeds their authority creates an uncertainty about the extent of the consent
or acquiesence. There is no doubt that two parties can agree to alter their priorities by consent.
Even the simple case where a beneficiary mortgages their beneficial interest is based on consent:
their interest is prior in time, but the mortgagee takes priority by virtue of the fact that the
71 See p 179.
11

beneficiary has consented to burden their estate. Thus, where a beneficiary is able to demonstrate
than a mortgage document was fraudulently filled in (essentially a plea of non est factum), the
mortgage does not bind their beneficial interest.72
The principle in Brocklesby simply resolves a difficulty in ascertaining the extent of the consent or
acquiescence as to the creation of the later interest. But something specific needs to be consented to
or authorised by the principal in the first place coupled with some “arming” with the indicia of title
to constitute a representation to the world at large. In Perry-Herrick v Attwood, the sisters
consented to the mortgagor raising further money secured by mortgage and parted with the title
deeds to which they were entitled as first mortgagees. In Brocklesby the father consented to the son
raising a specific amount of money by mortgage and gave control over the title deeds to which he
was entitled to his son. But merely “permitting” a trustee to hold the legal title to the land is not a
positive authorisation for the trustee to affect the beneficiary’s interest, because the trustee is only
permitted to deal with the beneficiary’s interest within the limits of their equitable powers, and the
beneficiary is in no way “permitting” the trustee to have custody of the title deeds: the proper place
for the custody of the title deeds from the start is with the trustees.
The only way in which the title deeds can be thought of as somehow being “given” to the trustee is
to view the whole trust arrangement as one where the beneficiary has “given” the property to the
trustee, but that thinking stems from a misconception about the nature of a beneficial interest
under a trust and a looseness in the use of the term “property”. A trust may arise upon a purchase
of legal fee simple in a number of ways: the purchaser may agree expressly to purchase the legal
title for the benefit of another, which would create an express trust for the beneficiary; or the
circumstances of the purchase may give rise to a resulting or a constructive trust. Alternatively, a
person may hold the legal fee simple and subsequently declare an express trust or become subject
to a constructive trust by reason of their conduct. In all those situations, the beneficiary from the
start would only take a beneficial interest in the land, which is a distinct interest from the legal fee
simple and from the start subject to the trustee’s administrative powers over the trust assets. In no
sense does the beneficiary “give” anything to the trustee. Although it some contexts the beneficiary
can be described as the “real owner” of the assets, it is an error to assume that for all purposes and
in all situations the beneficiary is to be viewed as the “owner”. For instance, the beneficiary cannot
dictate to the trustee the manner in which the trustee should exercise their legal rights under their
discretionary powers.
It might be possible to view the trustee as having been “given” the legal title and the title deeds if
the settlor first held the absolute title and then conveyed it to a trustee to hold on trust for the
settlor as beneficiary, but even then it would be necessary to enquire into why this property holding
arrangement was chosen. There might be many legitimate reasons for engaging in such a
transaction, such as where the settlor wished to create a settlement or a co-ownership arrangement
in equity. Only where the transaction structure was adopted merely for allowing the trustee to act
effectively as the beneficiary’s commercial agent, or to create the mere appearance of a change in
ownership, would there be any justification in treating the beneficiary as having “given” the legal
title and the custody of the title deeds to the trustee.
So the mere fact that land is held under a trust cannot be enough to engage the principle in
Brocklesby. Something more is needed with consists in the beneficiary giving to the trustee some
authorisation to bind the beneficiary’s interest. In the absence of any such authorisation, the
trustee is subject to the limits of their equitable powers, which as explained above does not extend
to the trustee acting in bad faith. Any such dispositions would be ultra vires according to Pitt v
Holt. If the doctrine in Brocklesby applied merely because the beneficiary in some sense “trusted”
the trustee and was therefore bound by all actions of the trustee, that would obliterate any
conceptual limits upon trustee powers and would destroy the principles articulated by the Supreme
Court in Pitt v Holt.
There are cases which hold that the trustee’s conduct can affect the beneficiaries’ interests, but that
is where the trustee’s conduct as the legal owner73 of the trust assets (from which the beneficiaries’
72 Eg, Mortgage Corporation v Shaire.
12

interests derived) affects a postponement of the trustee’s interest as against another encumbrancer.
They are not exceptions to the rule that the beneficiaries’ interest is distinct from the trustees. They
are a reflection of the fact that the beneficiaries’ interest in the asset can be no greater than the
interest held by the trustees. In Walker v Linom, the trustee’s negligent failure to get in the trust
deeds to which they were entitled as the legal owners of the estate postponed their legal estate to a
subsequent encumbrance created by the fraudster who had the missing deeds. Since the trustees
from the start held an estate which was vulnerable to postponement, that in turn affected the
beneficiaries’ interest which was derived from the trustee’s legal title. In Lloyd’s Bank v Bullock,74 a
trustee sold trust assets and gave a receipt for the purchase price without having obtained the
money. On the authority of Rice v Rice,75 that meant the unpaid vendor’s lien held by the trustee
was postponed. Viewed in light of Pitt v Holt, the actions of the trustees in these cases were intra
virea the trustee’s administrative powers, and so were not void, but were merely negligent.76
This review of the general law of equitable priorities should be sufficient to demonstrate that
Wishart incorrectly applied the Brocklesby principle. But there is a wider point which needs to be
addressed that was raised by that case: to what extent can the rules of equitable priorities apply to
registered land at all?
Equitable priorities under the Land Registration Act 2002
As mentioned at the beginning of this article, the opinion of the Law Commission, in its final report
on the bill which became the Land Registration Act 2002, was that section 28 meant that “[n]o
question arises as to whether ‘the equities are equal’”. Textbook writers have interpreted that to
mean that ss 28–30 of the Land Registration Act act as a “code” of equitable priorities for
registered land. Whether that is so really turns on the width of the concept of “priorities”, which,
although it is a term of art, does not necessarily have a fixed meaning. At its broadest, principles of
priorities are those rules of law, equity and Statute that determine the order in which claimants can
have access to the legal estate. If section 28 provided a complete statement of all priorities (apart
from sections 29–30 of the Land Registration Act), then every interest would rank in terms of
temporal priority and no other principle could shift that order.
Such a strict interpretation would exclude a startling number of doctrines from operating under
registered land. Where a beneficiary consents to an equitable mortgage of their equitable interest,
the equitable charge takes priority by virtue of the consent given by the prior interest holder, which
alters the temporal priority. It would be nonsensical to interpret section 28 as excluding the ability
to alter priority by consent. Similarly, it is an accepted principle of registered land that a plaintiff
can always assert a personal equity against the holder of a proprietary interest.77 There should be
nothing therefore to stop the holder of an earlier interest from asserting a personal equity against
the holder of a later interest, as in a case where an earlier interest-holder deliberately mislead the
later interest-holder as to the existence of their earlier interest. This equity could be an estoppel by
representation. Again, it would be extraordinary if the doctrines of estoppel in pais were totally
excluded by section 28. Similarly, the priority between competing interests might conceivably be
altered by the operation of the doctrines of subrogation, election, laches or unclean hands. It is
unlikely that Parliament intended to exclude such a variety of doctrines, each ultimately based on
considerations of justice arising from the personal conduct of the interest holder, from operating
against a person who holds an interest in registered land.
But recognising that section 28 does not extinguish these doctrines does not convert section 28 into
a redundancy. It is clear that the principles of equitable priorities as developed before 1925 cannot
be imported wholesale to apply to the Land Registration Act. At the very least, the interpretation of
73 Or equitable owner if the trust asset is equitable property.

74 Lloyd’s Bank v Bullock [1896] 2 Ch 192.
75 Rice v Rice 2 Drew 73.
76 As Chitty J noted, “[the trustee] was acting within the scope of his authority.” Lloyd’s Bank v Bullock [1896] 2 Ch
192, 198. Being merely voidable, the interests of the beneficiary to set aside the disposition could be classed as a
“mere equity” in the sense that equity would not permit it to be exercised against a bona fide purchaser of a legal or
equitable interest for value without notice: Phillips v Phillips; Latec v Hotel Terrigal.
77 Frazer v Walker [1967] 1 AC 569, 585. This is the basis of the so-called license by estoppel.
13

the maxim qui prior tempore est; potior est jure outlined by Kindersley V-C in Rice v Rice, where
priority in time was said to be the last consideration referred to, is incompatible with section 28.
But it is necessary to look beyond the narrow confines of section 28 to determine to what extent the
principle of equitable priorities are applicable to the Land Registration Act. It is necessary to look at
the system of conveyancing which the entire Act has created.
From the outline of the general law of equitable priorities above, it is clear that the judgments made
by courts of equity as to what constitutes “fraud” or “negligence” in the search for the better equity
were given against the backdrop of the system of conveyancing which prevailed at the time. Equity
has always taken account of conveyancing practice and fashioned its doctrines and remedies
around the prevailing conveyancing practice at the time. Equity also must fashion its doctrines and
remedies to the statutory environment in which it operates. That is a consequence of the
constitutional position of the courts relative to Parliament. To take an extreme example, in the 18th
century, the policy of the Shipping Acts prevented the courts from recognising any equitable
interests in a ship. It required a statutory amendment to enable courts to recognise equitable
interests in ships again in the 19th century. More familiar examples can be seen in the previous
land registration system in England.78 Boland held that the doctrine of notice was inapplicable to
the Land Registration Act 1925, and that applies equally to the Land Registration Act 2002. In
Midland Bank v Green, it was held that it cannot be considered a fraud to take advantage of a
registration statute, and therefore a person who deliberately registers under the Land Charges Act
to obtain the priority provided by Statute is not to be postponed by the equitable doctrine of notice.
Both these decisions have robbed the earlier interest holder of the main weapon they had under the
general law in demonstrating an equal equity — the ability to argue that the later interest holder
had constructive notice of their earlier interest. To import the notion of the search for the “better
equity” would commit a serious disservice to the earlier interest holder by taking in a legal
balancing act where the main weapon for unbalancing the later interest holder was removed.
More fundamental is the difference in the role of title deeds. The Land Registration Act 2002 took
the bold step of eliminating all documents of title. Thus there is no land certificate as there was
under the previous English registration systems or certificate of title as there is in the Torrens
system. There exists no paper counterpart to the register or document required to be produced
before registration can take place. Thus there is nothing which can be said to take the place of the
title deeds to the land. The register is thus the sole record of title. Nearly all the cases on the law of
equitable priorities relied on some conduct relating to the title deeds, but it is impossible under the
Land Registration Act to, by an act or omission relating to some document or “indicia of title”,
create a misleading impression as to the state of the register. The very concept of “indicia of title”
which was spoken of in Brocklesby is simply inapplicable. It does appear that the Court of Appeal
in Wishart interpreted the notion of “indicia of title” to mean the holding of the legal estate by the
trustee, which demonstrates the danger of importing a doctrine fashioned to meet the pre-1925 law
of conveyancing and applying it to an alien land registration system.
When it comes to the modern state of trusts, one finds that the English law of trusts of land is once
again flourishing, so that Maitland’s remarks are as true today as when they were made. Every
person in domestic cohabitation is likely to be subject to a trust under Stack v Dowden or Lloyd’s
Bank v Rossett. Moreover, under the Law of Property Act 1925, it is impossible to create a tenancy
in common at common law or a joint tenancy with more than four joint tenants. So anyone who
wishes to co-own land in an arrangement other than a tontine is driven to equity to make use of a
trust of land. It is not misleading that trusts do not appear on the register, it is by the design of the
statutory scheme. A trust cannot be registered nor can it be the subject of a notice. It can be the
subject of a restriction, but there is no evidence of any widespread conveyancing practice making
use of these to justify failure to lodge a restriction as a ground of postponement. It is also
unrealistic to expect beneficiaries under trusts other than express trusts to be able to determine
that they have an interest capable of protection by a restriction on the register, as in the vast
78A further unusual example can be seen in Saltoon v Lake [1978] 1 NSWLR 52, 58 which involved the mortgage of a
horse. The NSW Court of Appeal emphasised that without evidence of the conveyancing practice involved in
mortgaging horses and dealing with the certificate of registration there wasn’t “any basis for a finding that the
plaintiff was guilty of any departure from standard practice in dealing with the certificate of registration”.
14

majority of cases the parties will be unaware of their beneficial interest until advised by a lawyer. It
would make for a malevolent and melancholy society to expect individuals, especially in domestic
relationships, to take regular legal advice to ascertain the existence of any interests under resulting
or constructive trusts.
Where does all this leave the law of equitable priorities under the Land Registration Act? First, the
ascertainment of equitable priorities cannot be based upon the notion of the search for the better
equity, and therefore the approach in Rice v Rice is inapplicable without major modification. In
that respect, the Law Commission was right to say that under the Land Registration Act 2002
priorities are not determined by a search for the better equity. Secondly, insofar as earlier case law
relies upon representations, “fraud” or “negligence” relating to title deeds, the principles from those
cases cannot be applied unless account is taken for the lack of a title deed equivalent under the
Land Registration Act 2002. In many cases, this will simply mean that the older cases are not
directly applicable. Thirdly, it is still correct to say that no implications or representations can be
drawn from the state of the register as to the existence of any trusts, and developments in the law of
constructive trusts and the English co-ownership arrangements under the Law of Property Act 1925
mean that trusts continue to form a substantial part of conveyancing practice.79 Yet it would be
incorrect to draw from these changes the conclusion that there is no room for the law of equitable
priorities.
It is submitted that the new statutory environment provides the opportunity for the law of
equitable priorities under the Land Registration Act 2002 to be fashioned by use of the law of
estoppel by representation. This accords with the established principle that the register does not
forbid the enforcement of a personal equities. The Privy Council has remarked that the concept of
indefeasibility under the Torrens system does not interfere with “the ability of the court, exercising
its jurisdiction in personam to insist on proper conduct in accordance with the conscience which all
men should obey”.80 Many formulations for the requirements of estoppel by representation can be
found in the case law. An example can be found in the decision of the House of Lords in Greenwood
v Martins Bank Ltd:81
“(1) A representation or conduct amounting to a representation intended to induce a course
of conduct on the part of the person to whom the representation is made.
(2) An act or omission resulting from the representation, whether actual or by conduct, by
the person to whom the representation is made.
(3) Detriment to such person as a consequence of the act or omission.”
Despite the additional air of authority imported by the organisation of principles in the form of a
numbered list, as with recent authorities on proprietary estoppel, it is essential to recognised that
these requirements are in some measure linked. The requirement of a representation will most
often be satisfied by examining the conduct of the earlier interest holder. That ensures that before a
person is postponed, there must be some act or omission which fixes them with some degree of
fault or responsibility.82 That representation needs to be judged in light of the conveyancing
practice under the Land Registration Act 2002, and that includes the state of the register, the
likelihood of interests being held by those in actual occupation which are not discoverable by the
register, and any other relevant general features of conveyancing practice. The later interest holder
would need to have acted in reliance on that representation to their detriment. In nearly all cases,
79 Because the conduct which gives rise to them: desire to create tenancies in common, cohabitation of dwelling
houses in the domestic setting, and the circumstances giving rise to other constructive and resulting trusts, are all
common occurrences.
80 Oh Hiam v Tham Kong (1980) 2 BPR 9451, 9454; 2 MLJ 159.
81 Greenwood v Martins Bank Ltd [1933] AC 51, 57.

82As Dixon J put it in his dissenting judgment in Lapin v Abigail 44 CLR at 204 “The act or default of the prior
equitable owner must be such as to make it inequitable as between him and the subsequent equitable owner that he
should retain his initial priority. This, in effect, generally means that his act or default must be some way have
contributed to the assumption upon which the subsequent legal owner acted when acquiring his equity.”
15

the requirement of detriment will be present by the detriment which would occur if the later
interest holder was not given the priority they thought they had secured.
The sorts of representations that would then suffice to alter the priority of an earlier interest might
include situations where a person in actual occupation, possessed of an equitable estate that cannot
be the subject of a notice, deliberately hid their interest from a later encumbrancer, gave misleading
information in response to enquiries or deliberately avoided answering enquiries as to the existence
of their interest.
Representations might also arise from the nature of the transaction itself. The parties may have
attempted to use to register to create a deliberately misleading picture as to the state of the
interests in the land, by conveying the fee simple when in fact some lesser interest was intended.
This is a common ground of postponement under the Torrens system. The leading case is Abigail v
Lapin.83 The Lapins conveyed their legal fee simple to Mrs Heavener. The Torrens register showed
what appeared to be an absolute transfer. Yet in reality the Lapins had merely intended to convey
the fee simple to Heavener as a security for a debt. It resembled an old form mortgage by
conveyance of the legal fee simple. The Lapins did not make use of the statutory form of mortgage
by registered charge provided under the Torrens system. Mrs Heavener subsequently mortgaged
the fee simple to Abigail by deposit of title deeds. Under the Torrens system, equitable interests can
be protected by caveat, which the Lapins did not avail themselves of.84 “In the result the public
register showed to all the world, that is, to any one who cared to inspect, that the fee simple was in
the two estates vested in Mrs Heavener; the equity of redemption (if it is so to be called for
convenience) was in no way indicated to any searcher of the register.”85 The false representation lay
in the impression that the transaction was a sale and not a mortgage. An argument was made by the
Lapins that since Abigail did not inspect the register, there was no “representation” made to him.
But the Privy Council thought it was enough that the Lapins played such a role in giving Mrs
Heavener ownership of the fee simple, which was an unusual structure of the transaction given that
there was a statutory form of mortgage of which they could have availed themselves. Lord Wright,
speaking for the Privy Council, distinguished Shropshire Union Railways and Canal Co v The
Queen on the grounds that while there is a well-known system of trusts, that does not extend to any
equitable interest, such as this unusual equity of redemption. The Privy Council also approved of
the application of Brocklesby and Perry Herrick v Attwood on the facts, noting that the Lapins had
effectively given the mortgagee the means of representing themselves as the absolute owner by the
misleading state of the register.
Another example from English case law can be found in the decision of the Court of Appeal in
Freeguard v Royal Bank of Scotland plc. The Freeguards sold some land to developers, and,
believing that the neighbouring land was also ripe for development, retained two small areas of
land, known as the ransom strip, without access to which the development of the neighbouring land
would be impossible. The Freeguards, as part of the devious scheme, wanted to hide their
involvement in any further possible development. So they conveyed the ransom strip to the
developer and retained an option to repurchase, but did not protect the option on the register. The
developer then created a mortgage by deposit of the land certificate in favour of the Royal Bank of
Scotland (RBS). The Freeguards did not protect their option by way of a statutory notice, which
would have secured their priority.86 The Freeguards were postponed because they had created a
“thoroughly artificial transaction” which, in the words of Robert Walker LJ “was, in my judgment,
much more than a mere omission to register. It armed [the purchaser] with the appearance of
absolute and unencumbered ownership”.87
In these cases, it is important to remember that the state of the register was misleading because it
did not give an accurate picture of the supposed interests in the land, when it could have (by
registration of a statutory mortgage in the case of Abigail v Lapin or by retaining the fee simple or
83 Abigail v Lapin [1934] AC 491 (PC).

84 Id p 500.
85 Id, p 501.
86 Freeguard v Royal Bank of Scotland plc (1998) 79 P & CR 81, 86. Land Registration Act 1925, s 49.
87 Id p 89.
16

lodging a Notice in Freeguard). These cases differ from a trust, which cannot realistically be
represented on the register.
Wishart therefore is a cautionary tale. It demonstrates the danger of applying principles developed
under the general law under the old system of conveyancing to a new system of Land Registration
without examining the differences in context in order to determine how the principles should be
applied. This article has sought to argue that principles of equitable priorities can be applied in a
modified form, based upon estoppel by representation or a similar equity, where any
representations must be assessed in light of the legal background to the system of conveyancing
under the Land Registration Act 2002.
17

Equitable Priorities Under Registered Land

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PAPER NO.

Equitable Priorities under Registered Land

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Equitable priorities under registered land

11 Brocklesby v Temperance Permanent Building Society [1895] AC 173.

Dalhanna was to be regarded as Mr Wishart's money. In this way, in practical terms, Mr

23 Barclays Bank Ltd. v Taylor [1974] Ch. 137

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29 Whipp. Hewitt v. Loosemore (9 Hare, 449)

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Londonderry and Schmidt v Rosewood. See Copinger, Title Deeds, 16.

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42 Dixon v Muckleston (1872) LR 8 Ch App 155, 160–1.

46 See, eg, Evans v Bicknell and Brace v Duchess of Malborough.

49 See Handley, Estoppel by Conduct and Election, [1–026].

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72 Eg, Mortgage Corporation v Shaire.

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73 Or equitable owner if the trust asset is equitable property.

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81 Greenwood v Martins Bank Ltd [1933] AC 51, 57.

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83 Abigail v Lapin [1934] AC 491 (PC).

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