Latec Investments Ltd v Hotel Terrigal Pty Ltd - [1965] HCA 17 - HCA 1965 case summary — Zoe

CTHHCA

Latec Investments Ltd v Hotel Terrigal Pty Ltd

[1965] HCA 17

High Court of Australia|1965-07-01|Before: Menzies JJ

View original source

At a glance

Source facts

Court

High Court of Australia

Decision date

1965-07-01

Before

Menzies JJ

Source

Original judgment source is linked above.

Judgment (49 paragraphs)

[1]

High Court of Australia Kitto, Taylor and Menzies JJ. Latec Investments Ltd v Hotel Terrigal Pty Ltd [1965] HCA 17

[2]

ORDER Appeal allowed and the decree of the Supreme Court of New South Wales in its equitable jurisdiction discharged. In lieu thereof declare that the lands comprised in Certificates of Title Registered Volume 4283 Folio 224, Volume 3969 Folio 66, Volume 4747 Folio 243, Volume 5315 Folio 214 and Volume 7232 Folio 233 are subject to a first equitable charge in favour of the appellant Southern Hotels Pty. Limited (receiver appointed) to secure the payment to the appellant of the principal sum advanced under Memorandum of Mortgage Registered No. G. 830055 together with interest accrued thereon such principal sum and interest being calculated on the basis that the said Memorandum of Mortgage has never been discharged and that the appellant Southern Hotels Pty. Limited (receiver appointed) is entitled in equity to exercise all of the rights and powers which were conferred by the said Memorandum of Mortgage upon the mortgagees thereunder. Further declare that subject to the rights of the appellant Southern Hotels Pty. Limited (receiver appointed) under such equitable charge the lands comprised in the said Certificates of Title are subject to the charge created by Deed of Trust dated 8th March 1960, and are charged with the payment to the appellant The M.L.C. Nominees Limited as trustee under the said Deed of Trust of the whole of the moneys payable under the said Deed of Trust and are subject to all the rights and powers conferred by the said Deed of Trust upon the said trustee thereunder or upon any receiver appointed thereunder in respect of property subject to the charge created by the said Deed of Trust. Further declare that Memorandum of Mortgage Registered No. G. 920299 was at the time of the execution thereof and has been at all relevant times a valid and enforceable mortgage of the lands comprised in the said Certificates of Title. Further declare that subject to the rights of the appellant Southern Hotels Pty. Limited (receiver appointed) under the said first equitable charge and to the rights of the appellant The M.L.C. Nominees Limited and any receiver appointed by it under the said Deed of Trust the respondent Hotel Terrigal Pty. Limited (in liquidation) is entitled to an order setting aside the Contract of Sale dated 26th November 1958 made between Latec Investments Limited and Southern Hotels Pty. Limited for the sale of the lands comprised in the said Certificates of Title and Memorandum of Transfer Registered No. H150682 and for cancellation by the respondent The Registrar-General of the said Memorandum of Transfer and the memorials endorsed upon the said Certificates of Title upon payment by the said respondent Hotel Terrigal Pty. Limited (in liquidation) to the appellant Southern Hotels Pty. Limited (receiver appointed) of such sum as may be found to be payable upon the taking of all proper accounts as between mortgagor and mortgagee in respect of Memorandum of Mortgage Registered No. G. 920299 and that subject to the said rights of the said appellants Southern Hotels Pty. Limited (receiver appointed) and The M.L.C. Nominees Limited and any receiver appointed by the said The M.L.C. Nominees Limited under the said Deed of Trust upon such payment as aforesaid the said Respondent Hotel Terrigal Pty. Limited (in liquidation) is entitled to an order that the appellants do cause to be registered a memorandum of discharge of the said Mortgage. Further order that it be referred to the proper officers of the Supreme Court of New South Wales in its equitable jurisdiction and of this Court to tax and certify the respective costs of the respondents Tooth & Co. Limited and The Registrar-General as submitting parties and that such costs when so taxed and certified be paid by the respondent Hotel Terrigal Pty. Limited (in liquidation) to the said respondents Tooth & Co. Limited and The Registrar-General respectively or their respective Solicitors. Further order that it be referred to the proper officer of the Supreme Court of New South Wales in its equitable jurisdiction to tax and certify the costs of the respondent Idlewise Pty. Limited of the suit excluding the costs occasioned by the counterclaim of the said Idlewise Pty. Limited and that such costs when so taxed and certified be paid by the respondent Hotel Terrigal Pty. Limited (in liquidation) to the said respondent Idlewise Pty. Limited or its Solicitors. Further order that it be referred to the proper officer of this Court to tax and certify the costs of the appellants of this appeal and that such costs when so taxed and certified be paid by the respondent Hotel Terrigal Pty. Limited (in liquidation) to the appellants or their Solicitors, Messrs. Freehill Hollingdale & Page. Further order that liberty be reserved to all parties to apply on seven (7) days notice to the other parties to the Supreme Court of New South Wales in its equitable jurisdiction for any orders and enquiries necessary better to carry into effect the above declarations and by consent further Order that the sum of fifty pounds (£50.0.0) paid into Court by the appellant Latec Investments Limited (receiver appointed) as security for the costs of this appeal be paid out to the said appellant Latec Investments Limited (receiver appointed) or its solicitors Messrs. Freehill Hollingdale & Page.

[5]

The mortgagee lent the mortgagor £36,365 on 10th March 1958, taking as security a memorandum of mortgage over the subject land (subject to an earlier mortgage) and an equitable mortgage over its undertaking and assets generally. On the subject land was a hotel called the Hotel Terrigal and a guest house. The mortgagee appointed a receiver under its equitable mortgage in June 1958, and on 23rd July 1958 the mortgagor went into voluntary liquidation. The mortgagee took no steps to effect a sale until late in September 1958, and not until after its directors had learned that a stranger might be interested to purchase the property. It made no endeavour to sell to the stranger or to find any other purchaser by private contract. Instead, its board determined at some stage to sell the property to the second appellant, which was one of several subsidiaries of the mortgagee. They had identically composed boards of directors, and the mortgagee held all the shares in the second appellant. Before any sale was made, a firm of estate agents was instructed to put the property up for auction on Friday, 3rd October 1958. A Friday was generally recognized as not a good day for such a sale, and the interval of time available for advertisements was significantly less than usual. Nevertheless the auctioneers made efforts to attract potential buyers and some thirty-five people attended the auction. The highest bid received was £58,000. Although the mortgagee's directors knew that an experienced valuer had valued the property six months before at £54,000 for the hotel and £2,500 for the guest house, a reserve of £85,000 had been fixed and the property was accordingly passed in. The auctioneers then advised the mortgagee to accept the offer of £58,000 if a better should not be forthcoming. The mortgagee, however, made no attempt to negotiate with any of the bidders or to obtain any higher offer. Its directors determined - indeed it is a reasonable inference from the unusual features of the submission to auction that for some time they had had it in mind - that to have the Hotel Terrigal owned by one of their group of companies would be better for them than selling it to a stranger. One of the group owned a competing hotel in the same district, and the benefits to be derived from peaceful co-existence had attractions too obvious to be overlooked. The fact that an exercise of the power of sale so as to bring about this result would amount to a virtual foreclosure did not deter them. Without any further attempt having been made to find an outside purchaser, the mortgagee entered into a contract with its subsidiary, the second appellant, to sell the mortgaged property to the latter at the price of £60,000. There was, of course, no bargaining between them. The common board of directors simply fixed the figure and had a contract prepared and executed by both companies. The contract, dated 26th March 1958, provided for payment of £6,000 as a deposit, but fixed no time for payment either of that amount or of the balance of £54,000. The memorandum of transfer, acknowledging receipt by the mortgagee of £19,675, was registered on 25th February 1959. In fact nothing had been paid at that stage. The first mortgage over the property was paid off by the purchaser in the following July, but it was not until a year after the date of the contract that any of the purchase money was paid to the mortgagee. Then the whole outstanding amount was paid in one sum.

[7]

The onus clearly lay upon the purchaser, being a subsidiary of the mortgagee, to satisfy the court that the power of sale was exercised in good faith, and that reasonable steps were taken to obtain a fair price: Farrar v. Farrars Ltd. [1] . That onus it signally failed to discharge. The learned trial judge concluded that there was a lack of that kind of good faith which in the eyes of a court of equity is essential to the validity of a mortgagee's sale on the principles discussed in such cases as Kennedy v. De Trafford [2] ; Barns v. Queensland National Bank Ltd. [3] and Pendlebury v. Colonial Mutual Life Assurance Society Ltd. [4] ; and he also concluded that the collaboration of the mortgagee and the purchaser through their common directors amounted to fraud in the sense of ss. 42 and 43 of the Real Property Act, 1900 N.S.W., so that the mortgagor's claim to have the sale set aside is not defeated by the indefeasibility which those sections accord to a registered title. I have already said enough to show that in the first of these conclusions I agree. As to the second, we were invited to hold that nothing is fraud in the sense which is relevant under the Real Property Act unless it includes a fraudulent misrepresentation. The whole course of authority on this branch of the law is to the contrary. Moral turpitude there must be; but a designed cheating of a registered proprietor out of his rights by means of a collusive and colourable sale by a mortgagee company to a subsidiary is as clearly a fraud, as clearly a defrauding of the mortgagor, as a cheating by any other means: cf. Waimiha Sawmilling Co. v. Waione Timber Co. Ltd. [1] . In the present case it is all very well to say that the directors had reason to think that on a genuine sale they would not have got more than £60,000 for the property. The fact remains - I see no escape from concluding that it is a fact - that the reason why there was only a pretence of attempting to get a better price was simply that the object in view was not really to effect a sale, but was to destroy the mortgagor's interest and get the hotel for the mortgagee's group of companies, without allowing the mortgagor the opportunities to pay off the mortgage which the procedure for foreclosure would have afforded. It is impossible to regard the case as only one of constructive or equitable fraud - there was much more in it than a mere fraud upon the power, as it is sometimes called. There was pretence and collusion in the conscious misuse of a power. It may be that those concerned salved their consciences by telling themselves that the mortgagor company, being already in liquidation, was in so parlous a financial condition that the course they were taking was unlikely in the long run to do anyone any harm. But it was a dishonest course none the less, and the proper name for it is fraud.

[9]

If the mortgagor had sought the intervention of the court without delay, the findings of fact with which so far I have dealt would necessarily have led to a decree setting aside the sale as against the mortgagee and the purchaser and granting consequential relief. But nearly five years went by before proceedings were commenced, and it is necessary to consider whether the mortgagor's right to relief is affected by what occurred in that time. First let me be clear about the nature of the right which the mortgagor might have asserted. To say that the court would have set the sale aside as against the mortgagee and its purchaser is not to say that either the contract or the ensuing transfer would or could have been rendered void at law. It means only that the purchaser would (in effect) have been declared compellable to act in relation to the mortgagor as if the mortgagee had sold and transferred not the mortgaged property but only the mortgage and the moneys thereby secured: see Selwyn v. Garfit [2] ; Stump v. Gaby [3] . The appropriate consequential relief would not have been granted, as in the case of a mortgage of land under common title, on the footing that the sale and transfer had been ineffectual to extinguish an equity of redemption and that the mortgagor was therefore entitled to redeem as against the purchaser: cf. Bailey v. Barnes [1] ; Parkinson v. Hanbury [2] ; Sewell v. Agricultural Bank of Western Australia [3] ; Coroneo v. Australian Provincial Assurance Association Ltd. [4] , for the mortgagor had the legal title, not an equity of redemption, and the transfer had operated to deprive him of the legal title by virtue only of special statutory provisions: see ss. 58 and 59 of the Real Property Act and ss. 109, 110 and 111 of the Conveyancing Act, 1919-1954 N.S.W.. The right which the mortgagor had immediately before the sale was a right to have the mortgagee ordered (notwithstanding that the contractual date for payment had passed) to receive what should be found on a taking of accounts to be owing under the mortgage and thereupon to execute a discharge of the mortgage: Greig v. Watson [5] ; Perry v. Rolfe [6] ; see also Re Forrest Trust [7] . After the sale, however, the reasoning which would have led a court of equity, if the land had been under common law title, to refuse to recognize the sale as having destroyed the equity of redemption would have led necessarily to the conclusion that equity would treat the purchaser as if it had taken a transfer of the mortgage only, though with this difference, that since the purchaser, unlike the mortgagee, had acquired the legal estate in the land the mortgagor must be accorded a true equity of redemption. Against the assertion of this equity of redemption, s. 112 (3) (a) of the Conveyancing Act, 1919-1961 N.S.W. would have afforded no protection, because the purchaser had had the clearest notice of the invalidity of the mortgagee's exercise of its power of sale: see Bailey v. Barnes [8] .

[14]

But apart altogether from any question of estoppel by conduct, in my opinion the equitable charge of the trustee for the debenture holders stands in the way of the mortgagor's success because it was acquired for value and without any notice either of the existence of the mortgagor's right to set aside the sale or of any facts from which such a right might be inferred. The trustee, of course, has not the legal estate; its rights are purely equitable; but the case falls within one of the categories described in the judgment of Lord Westbury in Phillips v. Phillips [1] in which the legal estate is not required in order that a defence of purchase for value without notice may succeed. It is the case of a suit "where there are circumstances that give rise to an equity as distinguished from an equitable estate - as, for example, an equity to set aside a deed for fraud, or to correct it for mistake" [2] . In such a case, his Lordship said, if the purchaser under the instrument maintains the plea of purchase for value without notice "the Court will not interfere" [2] . It is true that if the mortgagor in the present case was entitled to have the mortgagee's sale set aside it had more than a mere equity: it had, as I have pointed out, an equity of redemption, and such an interest, being in respect of an estate in fee simple, has been considered an equitable estate ever since Lord Hardwicke decided Casborne v. Scarfe [3] see also [4] . But each of the illustrations Lord Westbury chose was also a case where the equity was accompanied by an equitable interest which might constitute an equitable estate. So much had been shown by decisions of most eminent judges, at least twice in the ten years before his Lordship spoke: see Stump v. Gaby [5] ; Gresley v. Mousley [6] , and Lord Westbury's judgment gives every indication of an intention to state systematically the effect of previous decisions, and not to depart from them in any degree. The illustrations therefore make it clear, it seems to me, that the cases to which his Lordship was referring were not only those in which there is an assertion of an equity unaccompanied by an equitable interest (as was held to be the case in Westminster Bank Ltd. v. Lee [7] and National Provincial Bank Ltd. v. Hastings Car Mart Ltd. [8] - indeed he may not have had them in mind at all - but those in which an equity is asserted which must be made good before an equitable interest can be held to exist. In the latter class of cases the equity is distinct from, because logically antecedent to, the equitable interest, and it is against the equity and not the consequential equitable interest that the defence must be set up. That the defence of purchase for value without notice (in the absence of the legal estate) is a good defence against the assertion of the equity in such a case had been established long before Lord Westbury's time. In Malden v. Menill [1] , for example, Lord Hardwicke had refused rectification of an instrument for mistake, as against a purchaser of an equitable interest without notice, on the ground that the mistake should not "turn to the prejudice of a fair purchaser". Such cases as Garrard v. Frankel [2] and Bainbrigge v. Browne [3] were soon to be decided on the same principle. See generally Halsbury's Laws of England, 3rd ed. vol. 14, p. 537, par. 1008. The reason of the matter, as I understand it, is that the purchaser who has relied upon the instrument as taking effect according to its terms and the party whose rights depend upon the instrument being denied that effect have equal merits, and the court, finding no reason for binding the conscience of either in favour of the other, declines to interfere between them. Consequently the party complaining of the fraud or mistake finds himself unable to set up as against the other the equitable interest he asserts; but the fact remains that it is against the preliminary equity, and not against the equitable interest itself, that the defence of purchase for value without notice has succeeded. The maxim qui prior est tempore is not applicable, for it applies only as between equitable interests, the logical basis of it being that in a competition between equitable interests the conveyance in virtue of which the later interest is claimed is considered, as Lord Westbury pointed out, to be innocent, in the sense of being intended to pass that which the conveyor is justly entitled to and no more: [4] . Where a claim to an earlier equitable interest is dependent for its success upon the setting aside or rectification of an instrument, and the court, notwithstanding that the fraud or mistake (or other cause) is established, leaves the instrument to take effect according to its terms in favour of a third party whose rights have intervened, the alleged earlier equitable interest is unprovable against the third party, and consequently, so far as the case against him discloses, there is no prior equitable interest to which his conveyance can be held to be subject.

[22]

In the present case it is contended on behalf of The M.L.C. Nominees that after the sale and transfer to Southern Hotels, Hotel Terrigal had on the view of the facts most favourable to it nothing more than a mere equity to set aside the transaction and, as I understand the argument, this proposition is put upon the authority of the examples given by Lord Westbury of cases where the right which is being asserted is "an equity as distinguished from an equitable estate - for example, an equity to set aside a deed for fraud, or to correct it for mistake". But to my mind the argument misconceives the significance of Lord Westbury's observation and the assertion that Hotel Terrigal had nothing more than a mere equity is made in the face of abundant authority to the contrary to which I shall presently refer. Before doing so, however, it should be observed that this is not a case of a common law mortgage; it is a case where the registered mortgage created a statutory charge over the mortgagor's land leaving the whole of the legal and beneficial ownership thereof in the mortgagor. No doubt the registration of the transfer operated to transfer the legal title in the land to Southern Hotels but I find it difficult to see why it should be thought that a sale and transfer made and given by a mortgagee not bona fide "within the limits of the power" (Pendlebury v. Colonial Mutual Life Assurance Society Ltd. [1] ) can operate to strip the mortgagor of the whole of his equitable interest in the land: cf. Cloutte v. Storey [2] . However this may be, there is, as I have said, abundant authority for the proposition that the owner of land a transfer of which has been obtained by fraud retains an equitable interest therein. Uppington v. Bullen [3] was such a case as also were Stump v. Gaby [4] and Gresley v. Mousley [5] . In Stump v. Gaby [4] Lord St. Leonards said: "I will assume that the conveyance might have been set aside in equity for fraud: what then is the interest of a party in an estate which he has conveyed to his attorney under circumstances which would give a right in this Court to have the conveyance set aside? In the view of this Court he remains the owner, subject to the repayment of the money which has been advanced by the attorney, and the consequence is that he may devise the estate, not as a legal estate, but as an equitable estate, wholly irrespective of all question as to any rights of entry or action, leaving the conveyance to have its full operation at law, but looking at the equitable right to have it set aside in this Court. The testator therefore had a devisable interest. My strong impression is that this very point is concluded upon authority, but if not I am ready to make an authority on the present occasion, and to decide that, assuming the conveyance to have been voidable, the grantor had an equitable estate which he might have devised " [6] . In Gresley v. Mousley [5] the earlier cases were cited and Knight Bruce L.J. said: "The questions accordingly are, first, whether if Sir Roger Gresley had a title in equity to be relieved against the sale" (on the ground of fraud), "he had after the sale a devisable interest in the property sold " [7] . His Lordship then formulated the other questions which arose and added: "The first is concluded by the cases decided by Lord St. Leonards that were mentioned in the argument, if we are bound by those authorities. But if we are not, I still think that the decisions were correct and ought to be followed" [1] . Turner L.J. was of the same opinion. However these cases were, as was pointed out to us, decided before Phillips v. Phillips [2] and it was urged upon us that we should in this case treat Lord Westbury's observation as conclusive on the point. But the point has received attention since then and I refer first of all to Dickinson v. Burrell [3] where Lord Romilly held that the right to institute a suit to set aside a conveyance of property upon equitable grounds passed by the grantor's subsequent conveyance of the same property though he pointed out that it would be otherwise in a case where the subsequent conveyance was not a conveyance of the property itself but merely of the right to sue. In re Garnett; Robinson v. Gandy [4] is another case which illustrates the proposition that the execution of a release voidable in equity for fraud does not deprive the releasor of his equitable title to the subject fund. The contention raised in this case was that upon the setting aside of a release given by a wife before marriage she and her husband then acquired a new title so that it could be said, in accordance with the provisions of a marriage settlement made after the release was executed, that they had become entitled to the subject fund during coverture. The contention was rejected, Cotton L.J. observing: "The setting aside of the release did not give them any new right, but merely had the effect of removing that which, if it had stood, would have been a bar, and have prevented their previously existing right to assert their title to the residuary personal estate of their uncle a right which they had at the time the settlements were executed, and a right which was not obtained by them in consequence of the release having been set aside" [5] .

[25]

Finally in Melbourne Banking Corporation Ltd. v. Brougham [2] the question again arose before the Judicial Committee of the Privy Council. In this case a discharged bankrupt who had obtained from his official assignee a conveyance of all his estate then vested in the former, sought a decree setting aside a release of his equity of redemption with respect to land mortgaged by him to the appellant bank before the commencement of the bankruptcy. The release had been given by the official assignee during the subsistence of the bankruptcy and the respondent claimed that it was voidable on the ground that it had been obtained by misrepresentation. Objection was taken to the maintenance of the suit by the respondent and on this point Lord Selborne, on behalf of their Lordships, observed: "It was contended at the bar that this conveyance was not sufficient to enable the respondent to institute a suit to set aside the release of May, 1870, from Goodman to the appellants; but if that release was voidable in equity, it is clear, both on principle and on authority, that there was an equitable interest in the Alma station, which, in 1877, continued to be part of the estate vested in the official assignee, and that the deed executed by Jacomb (the official assignee at the time) was sufficient to pass that interest. Their Lordships, therefore, do not doubt that the respondent, when he instituted this suit, had the same locus standi in curiâ which Jacomb would have had if the deed of 2nd March 1877, had not been executed" [3] . Stump v. Gaby [4] was cited to their Lordships in this case and their Lordships' decision accepts it as authoritative. I regard these authorities as establishing that where the owner of property has been induced by fraud to convey it the grantor continues to have an equitable interest therein and that that interest may be devised or assigned inter vivos and that the grantor's interest in the property does not come into existence only if and when the conveyance is set aside.

[30]

It must be remembered that there was a considerable conflict of opinion between Lord Westbury and Lord St. Leonards concerning the availability of the defence of purchaser for value without notice in the case of competing equitable interests and this is to be noticed in Lord St. Leonards' writings in the year following the decision in Phillips v. Phillips [5] . (The Law of Vendors and Purchasers - Sugden - 1862). He maintained that the defence was always available to the bona fide purchaser of an equitable interest and observed (at p. 798) that: "Till the case of Phillips v. Phillips [5] the validity of the defence against an equitable title appears not to have been questioned". Yet that case, which Lord St. Leonards thought departed from the earlier law, did not deny the availability of the defence to a subsequent purchaser of an equitable interest without notice of an earlier interest which was of the character under consideration in the present case. It cannot, of course, be disputed at the present time that the defence of purchaser for value without notice of a prior equitable interest cannot be generally maintained but it does appear that it has always - that is to say, both before and after Phillips v. Phillips [1] - been allowed to prevail where the person entitled to the earlier interest required the assistance of a court of equity to remove an impediment to his title as a preliminary to asserting his interest. In such cases it seems that the court will not interfere and to me it does not seem to matter much whether it be said that this is because, as Lord Westbury's observations suggest, that a plaintiff seeking to set aside a deed for fraud or to reform it for mistake is, at that stage, asserting an equity as distinguished from an equitable estate, or, because a plaintiff in such cases will be denied the assistance of a court of equity to remove the impediment to his title if, before he seeks that assistance, an equitable interest in the subject property has passed to a purchaser for value without notice of the plaintiff's prior interest. I prefer the latter as a more precise statement of the law and, indeed, I think this is the true meaning of Lord Westbury's observations. But either statement leads to the same result which in the present case means that the interest of The M.L.C. Nominees should be taken to prevail over that of Hotel Terrigal.

[38]

The second question - that is, the question of priority between Terrigal's and M.L.C. Nominees' equitable rights - I find one of substantial difficulty. If the maxim " Qui prior est tempore potior est jure " applies, Terrigal's right to have the conveyance set aside and to be restored to the register, without regard to M.L.C. Nominees' equitable interest, prevails, but the appellants' contention is that this right is a mere equity and the maxim has no application when the contest is between such an equity and an equitable interest of the character held by M.L.C. Nominees. This contention rests upon the line of authority based upon Phillips v. Phillips [2] . Lord Westbury there said: "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 Now, the defence of a purchaser for valuable consideration is the creature of a Court of Equity, and it can never be used in a manner at variance with the elementary rules which have already been stated But there appear to be three cases in which the use of this defence is most familiar: - Thirdly, where there are circumstances that give rise to an equity as distinguished from an equitable estate - as for example, an equity to set aside a deed for fraud, or to correct it for mistake - and the purchaser under the instrument maintains the plea of purchase for valuable consideration without notice, the Court will not interfere" [1] . In Cave v. Cave [2] , Fry J., referring to the defence of purchaser for value without notice, said: "That defence, as we all know, has been the subject of a great deal of decision, and it is by no means easy to harmonize the authorities and the opinions expressed upon the subject. Criticisms upon old cases lie many strata deep, and eminent Lord Chancellors have expressed diametrically opposite conclusions upon the same question. The case of Phillips v. Phillips [3] is the one which has been principally urged before me, and that, as being the decision of a Lord Chancellor, is binding upon me, notwithstanding the subsequent comments upon it of Lord St. Leonards in his writings" [4] . His Lordship went on to cite the passage I have already quoted from Lord Westbury's judgment in Phillips v. Phillips [3] and, having come to the conclusion that he was dealing with a contest between equitable estates and not between an equitable estate and a mere equity, concluded: "Therefore I shall conclude that, within the case of Phillips v. Phillips [3] , the interest of the plaintiff in this case is an equitable interest, and not merely an equity like the equity to set aside a deed, and therefore it must take its priority according to the priority of date" [5] .

[40]

There is, however, as Fry J. said, another line of cases, the authority of which is beyond question, establishing that where there is an equity to have the voidable conveyance of an estate set aside, there remains in the conveyor, notwithstanding the conveyance, an equitable estate which may be devised or transferred. Thus, in Stump v. Gaby [6] , Lord St. Leonards, speaking of a conveyance by an heir at law to his solicitor, said: "I do not deny that a deed may be so fraudulent as to be set aside at law; this, however, is not such a case; but I will assume that the conveyance might have been set aside in equity for fraud: what then is the interest of a party in an estate which he has conveyed to his attorney under circumstances which would give a right in this Court to have the conveyance set aside? In the view of this Court he remains the owner, subject to the repayment of the money which has been advanced by the attorney, and the consequence is that he may devise the estate, not as a legal estate, but as an equitable estate, wholly irrespective of all question as to any rights of entry or action, leaving the conveyance to have its full operation at law, but looking at the equitable right to have it set aside in this Court. The testator therefore had a devisable interest. My strong impression is that this very point is concluded upon authority, but if not I am ready to make an authority on the present occasion, and to decide that, assuming the conveyance to have been voidable, the grantor had an equitable estate which he might have devised" [1] . Likewise, in Gresley v. Mousley [2] , Knight Bruce L.J., in deciding that a conveyor of land who has an equity to be relieved against a sale, has a devisable interest in the property sold, said that the Lords Justice were bound by the cases cited to the Court, including Stump v. Gaby [3] . He added that, if the Lords Justice were not so bound, "I still think that the decisions were correct and ought to be followed" [4] . The argument that Stump v. Gaby [3] proceeded on a sound principle, which seems to have been accepted, was as follows: "When a decree is made for setting aside a conveyance it relates back, and the grantee is to be treated as having been, from the first, a trustee for the grantor, who, therefore, has an equitable estate, not a mere right of suit" [5] . As to the conveyance inter vivos of such an interest carrying the right to sue the original conveyee, see Dickinson v. Burrell [6] .