"Trump's advice says that once you make a deposit on property, you have an equitable interest in the property and that must make you an owner and therefore you can sell, and that's not accurate," said Oregon lawyer Uffelman.
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In a section that details wholesaling, the curriculum suggests that one can market and sell someone else's property without actually owning it by having the contract assigned, which the university claims is known as an equitable interest in the property.
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But Mr. Cummings has also raised questions about whether the contracts that Vision offers actually provide a path to homeownership or whether the contracts — which require tenants to pay monthly rent as they build an "equitable interest" — are just a marketing ploy to hook consumers.
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Mere equity is an equity which must be made good before an equitable interest can be held to exist. It is distinct from, because logically antecedent to, the equitable interest. The defence of bona fide purchase without notice can only succeed against the equity not the consequential equitable interest. If successful, the "first in time" rule does not apply for it only applies as between equitable interests.
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A trustee has a legal interest in the property of the trust. The beneficiary has an equitable interest. If a person holds both the legal interest and the equitable interest, then the equitable interest will cease to exist and a single legal estate will subsist.. See also: Stickney v. Keeble [1915] AC 386 Swarb Law UK Equity recognises cases where a party places trust/confidence in another, these relationships are protected by equity and are called fiduciary relationships.
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As stated by Brennan J held that "[an] equitable interest is not carved out of a legal estate but impressed upon it". Latec Investments Ltd v Hotel Terrigal Pty Ltd establishes that, in New South Wales, there are 3 classes of equitable interests: equitable interest, mere equity and personal equity.. Mere equity, for example, may arise when one party has been unjustly disadvantaged by the unconscionable behaviour of another. Importantly, however, a ‘mere equity’ will not prevail over an actual bona fide equitable interest – such as an equitable charge.
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The court unanimously held that MLC's equitable interest prevailed over Hotel Terrigal's interest. However, Kitto, Taylor and Menzies JJ each gave separate judgments.
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Secondly, SICL had a true proprietary right. He noted that the proprietary character of an equitable interest in property has sometimes been doubted, but an equitable interest possesses the essential hallmark of any right in rem, and it is enforceable against third parties, subject to the rules of equity for the protection of bona fide purchasers for value without notice, per Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 705.Akers v Samba (SC), at para 82. He then considered what, as a matter of the conflict of laws, which law should determine recognition of an equitable interest.
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In DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW),. the High Court of Australia held that if a person has an equitable interest in property, this implies that some other person has the legal interest in that property. If one person has both the legal and equitable interest in the relevant property, he or she has no ‘equitable interest’ in that property as such. Aickin J said "If one person has both the legal estate and the entire beneficial interest in the land he holds an entire and unqualified legal interest and not two separate interests, one legal and the other equitable". .
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Pettitt v Pettitt [1970] AC 777 is a leading English trusts law case, concerning the presumption of advancement and a spouse's equitable interest in the matrimonial home.
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The beneficiaries under the trust have an equitable interest in the trust property. The precise nature of the interests and rights of the beneficiary under a trust is contested. Ben McFarlane states that there are three principal theses about the nature of equitable rights. The first one is that, equitable interest is a right against a right, rather than right against a thing or right against a person.
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The statute operated to execute the use so that the interest of the cestui que use, which was previously an equitable interest, was converted into a legal interest.
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The majority of the Court of Appeal held that Mrs Gissing was entitled to an equitable interest in the home. Lord Denning MR held that Mrs Gissing was entitled to a half equitable interest in the property, because the home was acquired as a joint venture, even though she contributed no money directly to buying the property. He said the following. Phillimore LJ concurred. Edmund Davies LJ dissented, denouncing the ‘palm tree justice’ of the majority.
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As such, the option was held on a resulting trust for Vandervell. It was held that a resulting trust would arise where equitable interest had not successfully been divested, because an equitable interest cannot merely hang, unattached to an owner. As such, Vandervell was liable to pay surtax on the option. In a second case, Re Vandervell's Trusts [1974] Ch 269, Vandervell again attempted a tax avoidance scheme in relation to the same shares and the same option.
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When disposing of an equitable interest, the Law of Property Act 1925 must also be followed; much of the case law in this area has centred on the meaning of "dispose", with many cases involving people attempting to avoid tax.
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Bryan A. Garner (editor in chief) The equitable interest is a right in equity that may be protected by an equitable remedy. This concept exists only in systems influenced by the common law (connotation 2) tradition, such as New Zealand, England, Canada, Australia and the United States.
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The mere equity argument misconceives the significance of Lord Westbury's observation. The Stump v Gaby line of authority established 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 the 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. These cases however has nothing to say concerning the principles upon which the priority of competing equitable interests is to be determined. If such equitable interest is to be postponed, there must be some other reasons than being mere equity.
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The right or benefit being assigned may be a gift (such as a waiver) or it may be paid for with a contractual consideration such as money. The rights may be vested or contingent,. and may include an equitable interest. Mortgages and loans are relatively straightforward and amenable to assignment.
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Superimposed on the legal estate and interests in land, English courts also created "equitable interests" over the same legal interests. These obligations are called trusts which will be enforceable in a court. A trustee is the person who holds the legal title to property, while the beneficiary is said to have an equitable interest in the property.
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An equitable interest is an "interest held by virtue of an equitable title (a title that indicates a beneficial interest in property and that gives the holder the right to acquire formal legal title) or claimed on equitable grounds, such as the interest held by a trust beneficiary."Black's Law Dictionary. Second Pocket Edition. p. 361. 2001 West Group.
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They may get paid via points (e.g. 1 point equals one percent of the total amount borrowed), interest rate (10-20% per year is common), and an equitable interest. These will vary based on the size of the project and the agreed upon contract. Hard money lenders are collateral based and typically require first position on the property.
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Re Vandervell Trustees Ltd [1971] AC 912 is a UK tax law case, concerning the ability of the Revenue to amend tax assessments. This case was the second in a series of decisions involving Tony Vandervell's trusts and his tax liability. The first was Vandervell v Inland Revenue Commissioners,[1967] 2 AC 291 which concerned whether an oral instruction to transfer an equitable interest in shares complied with the writing requirement under Law of Property Act 1925, section 53(1)(c), and so whether receipt of dividends was subject to tax. The third was Re Vandervell Trustees Ltd (No 2),[1974] Ch 269 which concerned whether Vandervell could be taxed because he could have an equitable interest through a resulting trust if he had exercised an option right.
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Unconscionability is also an important element of the English law of trusts. A constructive trust arises, by operation of law, when the conscience of a legal owner is affected meaning they cannot deny the equitable interest of the beneficiary for whom they consequently hold the property as trustee. Additionally, unconscionability is a necessary element to the finding of proprietary estoppel.
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The second was Re Vandervell Trustees Ltd,[1971] AC 912 which involved the Special Commissioner of the Inland Revenue's ability to amend tax assessments. The third was Re Vandervell Trustees Ltd (No 2),[1974] EWCA Civ 7 which concerned whether Vandervell could be taxed because he could have an equitable interest through a resulting trust if he had exercised an option right.
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2 which requires all contracts for the sale of land (which could be specifically enforceable) to be in writing, to contain all the terms of the agreement and be signed by both parties. Any contracts that are not in writing and signed by both parties cannot be specifically enforced and so will not create or transfer an equitable interest in land.
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116 The second, and more complex suggestion, was contained in the other two bills on uses. This simply removed the idea of an equitable interest in land, leaving only the idea of a legal interest, and left uses, maintaining the elastic and variable nature of property law rather than submitting it to the more-rigid standards of the common law.Holdsworth (1912) p.
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The buyer may then either exercise the option by buying the property or sell the option to someone else to exercise (or sell). This is often done to obtain control over a property without much cash. Option premiums are typically non-refundable. The option represents an equitable interest in the property and may be recorded at the county recorders office.
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The second category involves those cases where a specifically enforceable contract to create an easement has taken effect but the easement has not been granted. Here, the regular principles of equity will operate to bring about an easement, since "equity regards as done those things which ought to be done".Barnsley (1999). p. 101. The third category is where the grantor holds only an equitable interest himself.
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Mrs Cooke argued her signature was obtained by undue influence. (Mrs Cooke admitted at trial that the married couple had never discussed any beneficial entitlement.)HTML Version of Judgment at bailii.org per quote extracted The Judge held the bank knew of Mr Cooke's undue influence and that she had an equitable interest given that the wedding gift was partly hers. The bank did not (cross-)appeal on this finding.
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Vandervell had hoped this would mean that he would avoid tax (as opposed to simply getting income for himself, on which he would pay tax, and then giving the money to the College). Unfortunately, in 1960, the Inland Revenue made a claim for tax on the transfer.At this point the trustees exercised the option and took back the shares. The Inland Revenue argued that Vandervell retained an equitable interest in the shares.
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An enforceable contract for sale confers an equitable interest on the purchaser of the land, as per the rule established in Lysaght v EdwardsLysaght v Edwards (1876) 2 Ch D 499. It was similarly held in Walsh v Lonsdale that 'equity looks on as done that which ought to be done'.Walsh v Lonsdale (1882) 21 Ch D 9. A contract, which does not meet the requirements of a deed, required by the Law of Property Act 1925 s.
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52(1), may be specifically enforced to convey the equitable interest to the new purchaser. This rule has had a significant impact because it allows interests that have not been conveyed by a deed to still be binding on future purchasers, through the doctrine of constructive notice. However, the UK Parliament has weakened the impact of this rule, with the Law of Property (Miscellaneous Provisions) Act 1989 s.2,Law of Property (Miscellaneous Provisions) Act 1989 s.
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The first basic principle of unregistered land was that all legal property rights bound everyone, whether or not anybody knew about them. These would usually be in the deeds that were kept, though small interests like a lease of under three years would not because of its exemption from formality, as with registered land.Law of Property Act 1925 s 54(2) The second principle was that equitable proprietary rights bound everyone except a bona fide purchaser of the legal estate without any notice of the equitable interest. Being a bona fide purchaser was an "absolute, unqualified, unanswerable defence",Pitcher v Rawlins (1871-1872) LR 7 Ch App 259, 269, James LJ so that the person with an equitable interest would only have an enforceable right against the traceable assets received in return for the land. Being a purchaser for value meant not receiving the property as a gift,cf Basset v Nosworthy (1673) 23 ER 55, 56, 'in Purchases the Question is not, whether the Consideration be adequate, but whether 'tis valuable'.
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When dealing with shares, the transfer is not complete until a transfer document has been completed and the company has entered the change of ownership in its books.Edwards (2007) p.100 One of the equitable maxims is that "equity will not assist a volunteer"; if someone does not have an interest in property, they cannot bring a court case. When trusts are not properly constituted, the trustees and beneficiaries have no equitable interest in the property, and so are volunteers.
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However, Vandervell was not so fortunate in respect of the option to purchase. The option to purchase a substantial fraction of the company for only £5,000 was extremely valuable. As such, Vandervell, if he retained an interest in it, would have to pay considerable surtax on it. The House of Lords held, by a 3–2 majority, that whilst the trust company had the legal title to the option, Vandervell had not successfully divested himself of an equitable interest in the option.
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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 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. It is because a plaintiff in such cases will be denied the assistance of the court to remove the impediment to his title.
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They were still his, as even though the shares were possessed by the College, he had the option to get them back. They also argued his oral instruction to the trust company was not capable of transferring the equitable interest, because it did not comply with the formality requirements specified in Law of Property Act 1925 section 53(1)(c). This section requires signed writing to evidence the existence of a disposition. So he should be liable to pay tax on the value of those shares.
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Mrs Gissing spent £220 of her own money on buying furniture and the laying of the lawn. Mr Gissing always paid the mortgage instalments, but left to live with another woman in 1961. She claimed he told her then the house was hers. She succeeded in 1966 in getting a divorce on grounds of his adultery, with a maintenance order but later reduced to 1s a year, and she brought an action that she would be entitled to an equitable interest in the home.
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But the bigger issue was whether overreaching is a disposition. He noticed overreaching is "where a legal estate is sold to a bona fide purchaser for value without notice, any equitable interest is not transferred to the purchaser: it is overridden, or to put it more colloquially, it is lost or disappears".Akers v Samba (SC), at para 62. He expressed his view that the word "disposition" is linguistically capable of applying to a transaction which involves the destruction or termination of an interest.
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LCA 1972 s 10 One glaring injustice, however, was that the House of Lords held the registration rules to be strict. In Midland Bank Trust Co Ltd v Green, Walter Green gave his son, Geoffrey an option to buy the property, but did not register it. Then Walter changed his mind, and knowing that Geoffrey had not registered this estate contract, he transferred the property to his wife, Evelyne, for £500 to defeat the agreement. Although the purchaser had actual notice of Geoffrey's equitable interest, it did not matter because it was not registered.
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Equitable tracing is based not on legal ownership but on the claimant's possession of an equitable interest. There are several advantages to equitable tracing; first, it can trace property now mixed with other property. In Boscawen v Bajwa,[1995] 4 Al ER 769 Millett justified this by saying that "equity's power to charge a mixed fund with the repayment of trust moneys enables the claimant to follow the money, not because it is his, but because it is derived from a fund which is treated as if it were subject to a charge in his favour".Hudson (2009) p.
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Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 is a leading English trusts law case, concerning resulting trusts. It demonstrates that the mere intention to not have a resulting trust (for example, to avoid taxes) does not make it so. This case was the first in a series of decisions involving Tony Vandervell's trusts and his tax liability. It concerned whether an oral instruction to transfer an equitable interest in shares complied with the writing requirement under Law of Property Act 1925, section 53(1)(c), and so whether receipt of dividends was subject to tax.
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The trust must then be formally constituted, by the transfer of its property to the trustees. For chattels, merely handing the property to the trustees is sufficient, assuming it comes with the relevant intention to create a trust. In some circumstances, providing the intention and telling the trustees where to find the property is sufficient, as in Thomas v Times Books.[1966] 2 All ER 241 Where the property is land or an equitable interest in land, it must be transferred by writing in accordance with Sections 52-3 of the Law of Property Act 1925.
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Re Vandervell Trustees Ltd (No 2) [1974] EWCA Civ 7 is a leading English trusts law case, concerning resulting trusts. This was the third decision concerning Tony Vandervell's will. The first was Vandervell v Inland Revenue Commissioners,[1967] 2 AC 291 where the House of Lords was concerned with whether an oral instruction to transfer an equitable interest in shares complied with the writing requirement under Law of Property Act 1925 section 53(1)(c), and so whether receipt of dividends was subject to tax. The second was In re Vandervell's Trusts,[1971] AC 912 which involved the Special Commissioner of the Inland Revenue's ability to amend tax assessments.
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Whilst Lord Mance dealt with the primary issue (relating to section 127), most of the concurring judgments largely commented on ancillary issues of wider law which related to the broader issues in the case. In the Supreme Court the primary issue was whether the overreaching of a beneficial interest in trust property by the trustee transferring it to a bona fide purchaser for value without notice amounted to a "disposition" for the purposes of section 127 of the Insolvency Act 1986. If so, then it would be void unless the court otherwise ordered. Samba argued that extinguishing an equitable interest in this manner was not a disposition.
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The Court of Appeal of New Zealand ruled that due to amongst other things, the great speed of the sale (less than 24 hours after listing), that it was sold for only 63% of the market price, and the transaction was stamped and registered the very day after settlement, that the purchaser was aware of the wife's equitable interest in the property (albeit unregistered) and that the sale was registered through fraud, that accordingly, the purchaser did not have indefeasible title and the sale was set aside. However the court vacated the wife's previous award of damages for $3,000 and awarded her legal costs of only $300.
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In the early 20th century, a package of reforms were made to register land in England and Wales to make conveyancing cheaper and simpler, and free land to the market. The main legislation was the Land Registration Act 1925, the Law of Property Act 1925, the Trustee Act 1925, and the Settled Land Act 1925. However, much land was to remain unregistered. Instead, for that land not yet registered, people could choose to explicitly register interests under the Land Charges Act 1925, and so get better protection than the common law might provide against a bona fide purchaser without notice of any equitable interest sought to be protected.
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The basic premise of the Act was that interests in registered land had to be registered in order to bind future purchasers of the property. One of the most important provisions was that if someone had not registered the interests listed in section 70, these would nevertheless "override" the rights of a future purchaser. In particular under section 70(1)(g), a person who had an equitable interest under a trust, and who was in actual occupation of the home, would be able to claim an overriding interest. The occupant would have priority over future purchases without his consent, as if his interest had been in fact registered.
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However, the presumption is strong. This has a consequence when property is transferred in connection with an illegal purpose. Ordinarily, English law takes the view that one cannot rely in civil claims on actions done that are tainted with illegality (or in the Latin saying ex turpi causa non oritur actio).See Holman v Johnson (1775) 1 Cowp 341, 343 However, in Tinsley v Milligan,[1994] 1 AC 340 it was still possible for a claimant, Ms Milligan, to show she had an equitable interest in the house where she and her partner, Ms Tinsley, lived because she had contributed to the purchase price.
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The definition of belonging to another is "Property shall be regarded as belonging to any person having possession or control of it, or having in it any proprietary right or interest (not being an equitable interest arising only from an agreement to transfer or grant an interest).". It is possible to have a proprietary right or interest over property that in the ordinary sense belongs to someone else. In the case of R v Turner (No. 2),[1971] 1 WLR 901 the Court of Appeal found that a man had committed theft by driving away his car without having paid for repairs made on the car.
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The purpose of this was to avoid paying stamp duty by a written declaration of disposition of equitable ownership, and to avoid any liability for Vandervell to pay surtax on the dividends since the RCS was a charity and thus not liable to pay tax. This led to a leading case in English trusts law, Vandervell v Inland Revenue Commissioners [1967] 2 AC 291. Unfortunately for Vandervell, his tax avoidance scheme was not successful. In respect of the shares, the Inland Revenue Commissioners (IRC) argued that Vandervell retained an equitable interest (in the shares) and as such, he was liable to pay tax on the value of those shares.
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Any transfers of goods or money may be claimed back in restitution on the basis of unjust enrichment subject to certain defences. Considerable controversy is still present over whether "iniquitous pressure" must actually be exercised by a defendant in order for a consent based obligation to be voidable. While it seems clear that in cases of undue influence the pressure need not come from the person who may lose the contract,e.g. in the case of a husband who pressures his wife to sign a mortgage agreement with a bank, and the bank takes subject to the wife's equitable interest when it is found that her signature was inequitably procured.
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A fee tail can still exist in England and Wales as an equitable interest, behind a strict settlement; the legal estate is vested in the current 'tenant for life' or other person immediately entitled to the income, but on the basis that any capital money arising must be paid to the settlement trustees. A tenant in tail in possession can bar his fee tail by a simple disentailing deed, which does not now have to be enrolled. A tenant in tail in reversion (i.e. a future interest where the property is subject to prior life interest) needs the consent of the life tenant and any 'special protectors' to vest a reversionary fee simple in himself.
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In this court's view, finding unlike the courts below, no equitable interest of Rosset, it would be unnecessary to look at her actual occupation as she, in reality, had no strict economic right to be there so as to outrank the lender. Lord Bridge gave the only legal opinion, holding that because there had never been any express agreement that she would have a share, nor any contributions to the purchase price, Mrs Rosset could establish no right in the home. The other judges said they had pre-read this judgment and they approved it. He said:[1991] 1 AC 107, 132-133 Lord Griffiths, Lord Ackner, Lord Oliver and Lord Jauncey concurred.
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In relation to this point the judge at first instance and the Court of Appeal had disagreed, and their disagreement largely centered upon the decision of the English Court of Appeal in Re Hoicrest [2000] 1 WLR 414. In that case the Court of Appeal had held that a person who had no right to claim legal title to certain shares (only an equitable interest in the shares) was held to be entitled to maintain a claim for rectification of the share register. In a nutshell, Bannister J as the judge at first instance felt this decision was wrong and declined to follow it; the Eastern Caribbean Court of Appeal thought it was correct and reversed him, following the English precedent.
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The borrower may already have spent the money, or already be insolvent and the subject of claims by creditors. Another flaw with both Wilberforce's and Millett's explanations is that if the interest is retained by the lender from the outset of the contract, it is not a resulting trust at all; the complete transfer of money should end the lender's equitable interest. It could be argued that the creation of a Quistclose trust is not based on the recovery of the original interest, but the creation of a new one. Doubts have also been raised about the Twinsectra case in general, in that the facts of the case did not create a stereotypical Quistclose trust; this causes problems with applying Millett's analysis.
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Prentice v. Stearns, 113 U.S. 435 (1885), was an action to recover possession of real estate and damages for its detention, the plaintiff in error being plaintiff below, and a citizen of Ohio, the defendant being a citizen of Minnesota, specifically recovery of real estate deeded from an Indian chief to A, in 1858, of a tract described by metes and bounds and further as: did not convey the equitable interest of the chief in another tract described by different metes and bounds, granted to the said chief by a subsequent patent in 1858 in conformity with the said treaty in such manner that an action at law may be maintained by A or his grantee for recovering possession of the same.Prentice v. Stearns, 113 U.S. 435 (1885) Justia.
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Lord Neuberger summarised the facts briefly, and then turned to the direct issue in the case as to whether the overreaching of the beneficial interest in trust property could be a "disposition" for the purposes section 127 of the Insolvency Act 1986. He stated that: "There is no doubt but that SICL's equitable interest in the shares constituted "property" in the light of the very wide definition of that expression in section 436 of the 1986 Act, which is set out in para 7 of Lord Mance's judgment. He cited with approval what Sir Nicolas Browne-Wilkinson V-C said in Bristol Airport Plc v Powdrill [1990] Ch 744, 759, "[i]t is hard to think of a wider definition of property"."Akers v Samba (SC), at para 60.
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Section 10(2) of the Act specifies that property shall be regarded as belonging to any person — :(a) having the custody or control of it; :(b) having in it any proprietary right or interest (not being an equitable interest arising only from an agreement to transfer or grant an interest); or :(c) having a charge on it. These provisions are similar to those set out in section 5 of the Theft Act 1968 in relation to theft. It is clearly a right of property ownership to deal with property as one wishes, including its damage or destruction. However a person setting fire to his own house which is subject to a mortgage can be charged because the mortgagee will have a proprietary right or interest in the property.
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The nature of a beneficiary's interest in the trust fund varies according to the type of trust. In the case of a fixed trust, the beneficiary's interest is proprietary; they are the owners of an equitable interest in the property held under the trust. The position is slightly different in the case of a discretionary trust; in such cases the beneficiaries are dependent upon the exercise by the trustees of their powers under the trust instrument in their favour.In it was argued that because a beneficiary might receive all the income, he should be treated as being entitled to all of the income, however, the House of Lords held that it could not be said that any individual beneficiary under a discretionary trust was entitled to any quantifiable share.
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Bryan A. Garner (editor in chief) It was "the system of law or body of principles originating in the English Court of Chancery and superseding the common and statute law (together called 'law' in the narrower sense) when the two conflict". In equity, a judge determines what is fair and just and makes a decision as opposed to deciding what is legal. Perhaps the most common example of an equitable interest is the interest of a beneficiary under a trust. Under a trust, the trustee has a legal interest in the trust property and all of the rights and powers that follow from that legal interest (for example, rights to deal with that trust property and to invest trust property), subject to the interest of the beneficiary and the terms of the trust (deed).
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Due to his equitable interest in the outcome of the transaction, the buyer who suffers a breach may be entitled to the equitable remedy of specific performance (although not always, see below). If he is successful in seeking a remedy at law, he is entitled to the value of the property at the time of breach regardless of whether it has appreciated or depreciated. The fact that the buyer may be forced to suffer a depreciation in the value of the property means that he bears the risk of loss if, for example, the improvements on the property he bought burn down while he is still in escrow. Problems may sometimes arise because, through some lapse or omission, insurance coverage is not in force at the time a claim is made.
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Common law tracing relies on the claimant having legal ownership of the property, and will fail if the property has been mixed with other property, the legal title has been transferred to the defendant, or the legal title has been transferred by the defendant to any further recipient of the property. Equitable tracing, on the other hand, relies on the claimant having an equitable interest in the property, and can succeed where the property has been mixed with other property. Defences to tracing are possible, particularly if returning the property would harm an innocent defendant, where the claimant has made false representations that the defendant relied on to his detriment, or where the property has been transferred to an innocent third party without anything given to the defendant in return that the claimant could recover in lieu.
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The case drew severe criticism for favouring the interests of banks and money lenders over people living in homes.See S Gardner, Introduction to Land Law (2007) 309 It was pointed out that although a bank's loan might have been necessary for a buyer to complete a purchase, a person who had an equitable interest through financial contribution had given value that was no less necessary for the purchase.See Smith, ‘Mortgagees and Trust Beneficiaries’ (1990) 109 LQR 545, 548-9, ‘Beyond £4000, however, George Cann had two overlapping sources of finance: the proceeds from the previous house and the mortgage. What logic or sense is there in saying that the mortgagee must have priority?’ Smith suggests that the sources of finance be given equal priority according to their quantum, although that could be difficult to quantify when there is a non-financial contribution.
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Ryall v Ryall (1739) 1 Atk 59 If one person transferred property to another, unless there was positive evidence that it was meant to be a gift, it would be presumed that the recipient held the property on trust for the transferee. It was also recognised that if money was transferred as part of the purchase of land or a house, the transferee would acquire an equitable interest in the land under a resulting trust.e.g. Dyer v Dyer (1788) 2 Cox 92 On the other hand, if evidence clearly showed a gift was intended, then a gift would be acknowledged. In Fowkes v Pascoe,(1875) LR 10 Ch App 343 an old lady named Mrs Baker had bought Mr Pascoe some company stocks, because she had become endeared to him and treated him like a grandson.
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Mrs Sabherwal was found to have an equitable interest in the property. Lord Justice Walker went to some length in his judgment to detail the family financial history, which showed that Mrs Sabherwal had contributed to the purchase price of the house (although the question of by how much was not considered). The court also accepted that she was in actual occupation. These being the case, the court appears to conclude that Mrs Sabherwal had an overriding interest. Counsel for Mrs Sabherwal attacked the claim that the interest was overreached by arguing that the Trusts of Land and Appointment of Trustees Act 1996 altered the common law precedent, and by arguing that his client’s human rights (specifically the right to respect for one’s home in Article 8 of the European Convention on Human Rights) had been breached.
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The case of Caunce v Caunce [1969] 1 WLR 286, where High Court judge, Stamp J held that a husband's ability to sell title would not be changed by his wife living with him, was cast under heavy doubt by the Court of Appeal in Williams & Glyn's Bank Ltd v Boland [1979] Ch 312. So for example, in Kingsnorth Finance Co Ltd v Tizard, it was held that clothes of a divorcee being present in a home bound a bank's agent who inspected a property with notice of her equitable interest.[1986] 1 WLR 783. cf Hunt v Luck [1901] 1 Ch 45 The general scheme of the law was to do everything possible to ensure that people were not be deprived of their stakes in their homes without their fully informed and true consent, yet it stopped short of simply determining that equitable rights were always binding.
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Lord Wilberforce, in Quistclose, stated that the contract gives the moneylender an equitable interest in the loan. Under Wilberforce's two-stage trust, the interest in the money first goes from the lender to the borrower (the primary trust) and then, when the trust's purpose fails, reverses (the secondary trust). In Twinsectra Lord Millett also explained that a Quistclose trust is a resulting trust, but held that the lender retains the interest throughout the transaction, with no need for this interest to reverse if the purpose of the loan fails. The problem with Wilberforce's analysis, as explained by Alastair Hudson, Professor of Equity and Finance Law at the University of Exeter, is that because the resulting trust only comes into existence after the misuse of the loan, it may come too late; if the money is not available when the claim is brought, there is no remedy.
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This is because, they argued, his oral instruction to the trust company was not capable of transfer of the equitable interest, since it did not comply with the formality requirements specified in s53(1)c of the Law of Property Act 1925, requiring signed writing to evidence the existence of a disposition. The House of Lords held that s53(1)c was not applicable to situations where a beneficiary directs his trustees, by way of his Saunders v Vautier right to do so, to transfer full (legal and equitable: note Lord Browne-Wilkinson's rejection of such terminology in Westdeutsche Landesbank Gironzentralle v Islington LBC) ownership to someone else. As such, Vandervell had successfully divested himself of ownership (legal and equitable) in the shares, notwithstanding that he did so by means of an oral instruction. He was thus not liable to pay tax on the shares.
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As the buyer pays more toward the principal of the loan over time, his(her) equity (equitable title or equitable interest) in the property increases. For example, if a buyer pays a $2000 down payment and borrows $8000 for a $10000 parcel of land, and pays off in installments another $4000 of this loan (not including interest), the buyer has $6000 of equity in the land (which is 60% of the equitable title), but the seller holds legal title to the land as recorded in documentation (deeds) in a government recorder's office until the loan is completely paid off. However, if the buyer defaults on installment payments, the land contract may consider the failure to timely pay installments a breach of contract and the land equity may revert to the seller, depending on the land contract provisions. Since land contracts can easily be written or modified by any seller or buyer; one may come across any variety of repayment plans.
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The third main theory is that Quistclose trusts could be constructive trusts, which are created when the future trustee uses the money in an "unconscionable" manner. In Quistclose situations, the requirement of "unconscionableness" could be met by the borrower using the money for a purpose other than the one for which it was lent, allowing the lender to claim an equitable interest in it. In Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd,[1985] Ch 207 the Quistclose trust principle was said by Peter Gibson J. to be that "equity fastens on the conscience of the person who receives from another property transferred for a specific purpose only and not therefore for the recipient's own purposes, so that such person will not be permitted to treat the property as his own or to use it for other than the stated purpose"; this reference to "conscience" could make Quistclose trusts constructive in nature. However, no constructive trust could be created until the money is misused, which may be too late for an effective remedy.
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