Maxims of Equity and Their Applications in Bangladesh

MAXIMS OF EQUITY
Preeti Kana Sikder
Lecturer,
Department of Law & Justice
Jahangirnagar University

WHAT IS A ‘MAXIM’?
Short, pithy formulations of broad and
general principles of common sense and
justice.
__Walker D.M.

Memorise this list
1. Equity will not suffer a wrong to be without a remedy
2. Equity follows the law
3. He who seeks equity must do equity
4. He who comes into equity must come with clean hands
5. Delay defeats equities
6. Equality is equity
7. Equity looks into the intent rather than the form
8. Equity looks on that as done which ought to be done
9. Equity imputes an intention to fulfill an obligation
10. Where there is equal equity, the law shall prevail.
11. Where the equities are equal, the first in time shall prevail
12. Equity acts in personam.

1. EQUITY WILL NOT SUFFER A
WRONG TO BE WITHOUT A
REMEDY
• General Meaning:
Equity will not allow the technical defects
of law to prevent worthy plaintiffs from
obtaining redress.

1. EQUITY WILL NOT SUFFER A
WRONG TO BE WITHOUT A
REMEDY
• Ubi jus ibi remedium – No wrong
should go un-redressed if it is
capable of being remedied by courts

Application of this Maxim
• The Enforcement of Trusts
• The Auxiliary Jurisdiction
• Appointment of Receivers

What is a Trust?
• According to Black’s Law Dictionary: An equitable
or beneficial right or title to land or other property,
held for the beneficiary by another person, in
whom resides the legal title or ownership,
recognized and enforced by courts of chancery.

HISTORICAL
BACKGROUND OF
TRUSTS

What is Auxiliary Jurisdiction?
• The jurisdiction exercised by the Court of
Chancery to aid a claimant at common law; for
example, by forcing a defendant to reveal
documents and thus provide necessary
evidence for his case.
• Auxiliary jurisdiction was rendered obsolete by
the Judicature Acts 1873–75.

Who is a Receiver?
• Courts appoint receivers to take custody,
manage, and preserve money or property that is
subject to litigation so that when the final
judgment is rendered, the property remains
available to accomplish what has been ordered

A. Code of Civil Procedure, 1908
• Section 9 : Courts to try all civil suits
unless barred:
The Courts shall (subject to the provisions
herein contained) have jurisdiction to try all
suits of a civil nature excepting suits of
which their cognizance is either expressly or
impliedly barred.

THIS SECTION
ENTITLES A CIVIL
COURT TO ENTERTAIN
ALL KINDS OF SUITS
UNLESS THEY ARE
PROHIBITED

B. Code of Civil Procedure, 1908
Section 151: Saving of inherent powers
of Court
Nothing in this Code shall be deemed to
limit or otherwise affect the inherent power
of the Court to make such orders as may
be necessary for the ends of justice or to
prevent abuse of the process of the Court

C. The Specific Relief Act, 1877
• Part II: Section 44
The appointment of a receiver pending a suit is a matter
resting in the discretion of the Court.
The mode and effect of his appointment, and his rights,
powers, duties and liabilities, are regulated by the Code of
Civil Procedure.

D. Code of Civil Procedure, 1908
Order XL: Schedule I
• Appointment of receivers
• Remuneration
• Duties
• Enforcement of receiver's duties

Writ provisions in the
Constitution and public interest
litigation devices have now
extended the scope and effective
working of this maxim.

2. EQUITY FOLLOWS THE LAW
Where possible, equity will ensure that its
own rules are in line with the common law
ones.
Equity does not interfere with a man’s legal
rights unless it would be unconscientious on
his part to take advantage of them.

2. EQUITY FOLLOWS THE LAW
• Recognition in Bangladesh:
This sub-continent has never recognised any
distinction between legal and equitable interests.
Equity rules in Bangladesh, therefore, can not
override any specific provision of law.
For example, every suit in Bangladesh has to be
brought within the limitation period and no judge
can create an exception to this on principle of
equity.

Maxims related to Discretionary Quality
• In general, one can say that wherever certain facts
are found and a common law right or interest has
been established, common law remedies will be
available whether that produces a fair result or not.
• By contrast, equitable remedies are discretionary
and the court will not grant them if it feels that the
plaintiff is unworthy, notwithstanding that prima
facie he has established an equitable right or
interest.

THE MAXIM THAT HE WHO SEEKS
EQUITY MUST DO EQUITY, TOGETHER
WITH THE NEXT TWO MAXIMS,
CONCERNING ‘CLEAN HANDS’AND
‘DELAY’, ARE ASPECTS OF THIS
DISCRETIONARY QUALITY.

3. HE WHO SEEKS EQUITY MUST DO
EQUITY
• The person who seeks an equitable remedy must
be prepared to act equitably, and the court may
oblige him to do so.
• This maxim refers to the plaintiff’s future conduct.

•Doctrine of Election
•Equitable Estoppel
•Improvements made by purchaser
•Set Off

ELECTION IN EQUITY ARISES
WHERE THERE IS A DUALITY
OF GIFTS IN THE SAME
INSTRUMENT
Doctrine of Election

Per Lord Chelmsford in Codrington v
Codrington (1875)
“The principle is that,
there is an implied
condition that he who
accepts a benefit under
an instrument must
adopt the whole of it,
conforming to all its
provisions and
renouncing every right
inconsistent with it.”

Illustration
• D gives (by will) X a family estate worth
20,000 pounds belonging to E.
• Also (by same will) D gives E a legacy
(amount of asset left to someone in a will)
of 30,000 pounds of D’s own property.

E has two courses open for him -
• He may take under the
instrument.
• X will take E’s family
property, and E himself
will take the legacy
given to him by D
• He may take against
the instrument
• E will lose the gift
made to him by D to
the extent required to
compensate X for the
disappointment
• X only gets the
compensation and not
the property, therefore
suffers disappointment

Doctrine of Election
• Where a donor A gives his own property to B and in the
same instrument purports to give B’s property to C, B
will be put to an election, either to retain his own
property and reject the benefit under the instrument or
to accept the benefit granted to him by the donor, and
allow the gift of his own property made by A to C to take
effect.
• But in no case can B choose to keep the benefit
granted to himself and at the same time retain his
property referred to in the instrument.

Transfer of Property Act, 1882
• Section 35: Election when necessary
Where a person professes to transfer property which he
has no right to transfer, and as part of the same
transaction confers any benefit on the owner of the
property, such owner must elect either to confirm such
transfer or to dissent from it; and in the latter case he
shall relinquish the benefit so conferred, and the benefit
so relinquished shall revert to the transferor or his
representative as if it had not been disposed of,…

EQUITABLE ESTOPPEL
A principle which precludes a party from alleging or proving in legal
proceedings that a fact is otherwise than it has appeared to be from
the circumstances

Lord Denning, Twentieth Century’s
Greatest Judge
• The assurances intended
to be acted upon and in
fact acted upon are
binding
• Where a government
department wrongfully
assumes authority to
perform some legal act,
the citizen is entitled to
assume that it had that
authority

Improvements made by purchaser
When a person with a defective title who makes
improvements on the land on his possession,
believing that he is absolutely entitled to it is
evicted, the rightful owner has to pay for
compensation on the principle that he did not stop
the person in possession from making
improvements.

Transfer of Property Act, 1882
• Section 51: Improvement made by bona fide holders:
When the transferee of immoveable property makes any
improvement on the property, believing in good faith that he
is absolutely entitled thereto, and he is subsequently evicted
therefrom by any person having a better title, the transferee
has a right to require the person causing the eviction either
to have the value of the improvement estimated and paid or
secured the transferee, or to sell his interest in the property
to the transferee at the then market value thereof,
irrespective of the value of such improvement.

Set Off
Where there have been mutual credits, mutual
debts or other natural dealings between the debtor
and any creditor, the sum due from one party is to
be set-off against any sum due from the other
party, and only the balance of the account is to be
claimed or paid on either side respectively.

Civil Procedure Code
• Order VIII, Rule 6: Particulars of set off to be given In
written statement.-
(1) Where in a suit for the recovery of money the
defendant claims to set off against the plaintiff’s demand
any ascertained sum of money legally recoverable by him
from the plaintiff, of exceeding to pecuniary limits of the
jurisdiction of the court, and both parties fill the same
character as they fill in the plaintiff’s suit, the defendant
may, at the first hearing of the suit, but not afterwards
unless permitted by the court, present a written statement
containing the Particulars of the debt sought to be set off.

Overton v Banister (1844)
• An infant, fraudulently misrepresenting herself to be of
age, obtained from her trustees a sum of stock to which
she was entitled only on coming of age
• Subsequently she instituted a suit against the trustees to
compel them to pay over again the stock which they had
improperly transferred to her during her minority
• The court held that the infant could not enforce payment
over again, for although the receipt of an infant is
ineffectual to discharge a debt, yet as the infant had
misrepresented her age, she could not set up the
invalidity of the receipt.

4. HE WHO COMES INTO EQUITY MUST
COME WITH CLEAN HANDS
• General Meaning
A party seeking an equitable remedy must not
himself be guilty of unconscionable conduct and
show that his past record is clean
The ‘uncleanness’ must relate directly to the matter
in hand, otherwise anyone might be denied a
remedy simply because he was of bad character.
Quite similar to the previous maxim but differs from it
in looking to the past conduct of the party seeking
equity rather the future conduct.

A. Specific Relief Act, 1877
• A plaintiff’s unfair conduct will disentitle him to an
equitable relief of specific performance of the contract
under Ss. 17, 18 and 20 of this Act.
• Where the plaintiff is guilty of fraud and undue influence
as detailed under S. 18 or where there is a contract to sell
or let property by a plaintiff who has no title as specified
under S. 17, specific performance will not be granted to
the plaintiff.

A. Specific Relief Act, 1877
• The jurisdiction to specific performance under section 20
is discretionary and the court is not bound to grant such a
relief merely because it is lawful to do so.
• The Court’s discretion is not arbitrary but sound and
reasonable, guided by judicial principles and capable of
correction, by a court of appeal.

B. Trusts Act, 1882
• Section 23: Liability of Breach of Trust:
Where the trustee commits a breach of trust, he is liable to
make good the loss which the trust-property or the
beneficiary has thereby sustained, unless the beneficiary
has by fraud induced the trustee to commit the breach, or
the beneficiary, being competent to contract, has himself,
without coercion or undue influence having been brought
to bear on him, concurred in the breach, or subsequently
acquiesced therein, with full knowledge of the facts of the
case and of his right as against the trustee.

Differences between two maxims
He who seeks equity must do
equity
• Does not proceed on
the assumption of
unconscionable
conduct of the plaintiff
He who comes into equity must
come with clean hands
• Where the plaintiff’s
conduct is unfair and the
defendant has no
separate claim, this
maxim would apply

equity
• Exposes the condition
subsequent to the
relief sought
• Works as a condition
precedent to seeking
equitable relief

equity
• The plaintiff has to
mould his behaviour
according to the
impositions; by the
court
• If the plaintiff’s
conduct is unfair and
unconscionable, it
would not entitle him
to the relief sought

equity
• The plaintiff has an
option or a choice
before him either to
submit to the conditions
put by the court or to
get out of the court
• The plaintiff’s
equitable right can
neither be
recognised, nor
enforced as his
inequitable conduct
takes away his choice

5. DELAY DEFEATS EQUITIES
• General Meaning
Where an injured party has been slow to
demand a remedy for a wrong which he has for
a long time regarded with apparent indifference,
the court will decline to give him that remedy on
grounds of public policy

Lord Camden in Smith v Clay (1767)
“A Court of Equity has always
refused its aid to stale
demands, where a party has
slept upon his right and
acquiesced for a great length
of time. Nothing can call forth
this Court into activity, but
conscience, good faith, and
reasonable diligence; where
these are wanting, the Court is
passive, and does nothing.”

Two Prevalent Doctrines
Acquiescence
Laches

Doctrine of Acquiescence
• Acquiescence is an assent to an infringement of rights,
either express or implied from conduct, by which right to
equitable relief is normally lost.
• It takes place when a person with full knowledge of his
own rights and of any acts which infringe them, has,
either at the time or after infringement, by his conduct
led the person responsible for the infringement to
believe that he has abandoned his rights.
• It is different from agreement, concurrence or from
coinciding.

Doctrine of Laches
• Delay which is sufficient to prevent a party from
obtaining an equitable remedy is technically called
‘laches’ (literal meaning: slackness).
• Plaintiff’s unreasonable delay is a weapon of defence
by the defendant against the plaintiff.
• If the plaintiff is passive and apathetic to his rights for a
considerably longer time than prescribed, his delay
does not remain a mere delay but a delay that has
worked to his disadvantage.

Basic Difference
Acquiescence
• A conduct which is
evidence of an
intention by a party
conducting himself to
abandon an equitable
right.
• It connotes an active
permission
Laches
• Negligence or
omission to assert a
right which operates
as a bar in court of
equity
• Laches is a passive
state

5. DELAY DEFEATS EQUITIES
• Recognition in Bangladesh:
The English doctrine of acquiescence and
laches can not be imported into
Bangladeshi law in view of the applicable
law Limitation Act, 1908, which fixes a time
limit for suits to be filed. The equitable
remedy of specific performance can be
availed only if the suit is filed within one
year of the incident under S. 113 of this Act.
Still there is a limited scope of recognition.

The Specific Relief Act, 1877
Section 56: Injunction when refused:
An injunction cannot be granted-
(h) to prevent a continuing breach in which the
applicant has acquiesced;
(j) when the conduct of the applicant on his
agents has been such as to disentitle him to the
assistance of the Court;

6. EQUALITY IS EQUITY
• Equity will tend towards the adoption of
equal division of any fund to which
several persons are entitled.
• By its very nature, common law courts
zealously preferred and protected individual
interests to common interests. But equity
regarded and maintained the rights of all
those who were connected by any common
obligation

PECULIARITIES OF JOINT
TENANCY

What is joint tenancy?
• When property is given to two or more persons
without words of severance, it is held concurrently
with the other.
• Against strangers all such holders are regarded
as one individual

Main incidents of joint tenancy
Unity of
interests
Unity of
time
Unity of
title
Unity of
possession

Main incidents of joint tenancy
Unity of
interests
Unity of
time
Unity of
title
Unity of
possession
RIGHT
OF
SURVIVOURSHIP

Equity’s dislike for joint tenancy
• As equity is concerned with the present and certainty, the
imperfect and speculative measure of chance introduced
by the doctrine establishing right to survivourship, was
disliked by equity.
• Equity severed joint tenancy on the slightest pretext by
putting such construction on the words as to avoid the
principle of survivourship.

Equity preferred tenancy-in-common in
following cases -
• Joint purchase in unequal shares
• Joint loan on mortgage
• Purchase by partners

•Equal distribution of joint funds or joint
purchases
•Contribution between co-trustees, co-
sureties, and co-contractors
•Rateable distribution of legacies
•Marshalling of assets

A. Contract Act
• Section 42: Devolution of joint liabilities
When two or more persons have made a joint promise,
then, unless a contrary intention appears by the contract,
all such persons during their joint lives, and after the
death of any of them his representative jointly with the
survivor or survivors, and after the death of the last
survivor, the representatives of all jointly, must fulfil the
promise

A. Contract Act, 1872
• Section 43: Any one of joint promisors may be compelled to
perform
When two or more persons make a joint promise, the promisee
may, in the absence of express agreement to the contrary, compel
any one or more of such joint promisors to perform the whole of
the promise.
Each of two or more joint promisors may compel every other joint
promisor to contribute equally with himself to the performance of
the promise, unless a contrary intention appears from the
contract.
If any one of two or more joint promisors makes default in such
contribution, the remaining joint promisors must bear the loss
arising from such default in equal shares.

Black’s Law Dictionary
• A surety is one who at the request of
another, and for the purpose or securing to
him a benefit, becomes responsible for
the performance by the latter of some act in
favor of a third person

• Section 146: Co-sureties liable to contribute
equally
Where two or more persons are co-sureties for
the same debt or duty, either jointly or severally,
and whether under the same or different
contracts, and whether with or without the
knowledge of each other, the co-sureties, in the
absence of any contract to the contrary, are liable,
as between themselves, to pay each an equal
share of the whole debt, or of that part of it which
remains unpaid by the principal debtor.

A. Contract Act
• Section 147: Liability of co-
sureties bound in different sums
Co-sureties who are bound in
different sums are liable to pay
equally as far as the limits of their
respective obligations permit.

A. Contract Act
• Section 69: Reimbursement of person
paying money due by another in payment of
which he is interested
A person who is interested in the payment of
money which another is bound by law to pay,
and who therefore pays it, is entitled to be
reimbursed by the other.

• Section 70: Obligation of person enjoying
benefit of non- gratuitous act:
Where a person lawfully does anything for
another person, or delivers anything to him, not
intending to do so gratuitously, and such other
person enjoys the benefit thereof, the latter is
bound to make compensation to the former in
respect of, or to restore, the thing so done or
delivered.

What is Marshalling?
• Where there are two creditors of the same debtor,
one creditor having a right to resort to two funds
of the debtor for payment of his debt, and the
other a right to resort to one fund only, the court
will so ‘marshal’ or arrange the funds that both
creditors are paid as far as possible.

Example of Marshalling
• The court will order the first creditor to be paid as
far as possible out of the fund against which the
second creditor has no claim, so as to leave as
much as possible of the second fund for payment
of the second creditor.

Example of Marshalling
• If the first creditor has already paid himself out of
the second fund, the Court will allow the second
creditor to stand in the first creditor’s shoes and
resort to the first fund to the extent to which the
second fund has been exhausted by the first
creditor.

B. Transfer of Property Act, 1882
• Section 56: Marshalling by subsequent purchaser
If the owner of two or more properties mortgages them to
one person and then sells one or more of the properties
to another person, the buyer is in the absence of a
contract to the contrary, entitled to have the mortgage-
debt satisfied out of the property or properties not sold to
him, so far as the same will extend, but not so as to
prejudice the rights of the mortgagee or persons claiming
under him or of any other person who has for
consideration acquired an interest in any of the
properties.

C. Code of Civil Procedure
• Section 73: Proceeds of execution-sale to be
rateably distributed among decree-holders
(1) Where assets are held by a Court and more
persons than one have, before the receipt of such
assets, made application to the Court for the
execution of decrees for the payment of money
passed against the same judgment-debtor and have not
obtained satisfaction thereof, the assets, after deducting
the costs of realization, shall be rateably distributed
among all such persons

7. EQUITY LOOKS INTO INTENT
RATHER THAN FORM
Courts of Equity make a distinction in all cases
between that which is matter of substance and that
which is matter of form; and if they found that by
insisting in the form, the substance will be defeated, it
holds it to be inequitable to allow a person to insist on
such form, and thereby defeat the substance.
Equity tends to avoid technicalities

Lord Romily, Master of the Rolls
• Courts of Equity make a
distinction in all cases between
that which is matter of substance
and that which is matter of form;
• And if they found that by insisting
on the form, the substance will be
defeated, they hold it to be
inequitable to allow a person to
insist on such form, and thereby
defeat the substance.

Nature of Equity
Equity
Spirit of
Law
Intention
of
Parties
Realities

APPLICATION OF THIS
MAXIM IN BANGLADESH

• Sec 55- Effect of failure to perform at fixed time, in
contract in which time is essential
When a party to a contract promises to do a certain thing
at or before a specified time, or certain things at or
before a specified times, and fails to do any such thing at
or before the specified time, the contract, or so much of it
as has not been performed, becomes voidable at the
option of the promisee, if the intention of the parties was
that time should be of the essence of the contract.

B. Contract Act, 1872
• Sec 74: Compensation for breach of contract where
penalty stipulated for
When a contract has been broken, if a sum is named in the
contract as the amount to be paid in case of such breach,
or if the contract contains any other stipulation by way of
penalty, the party complaining of the breach is entitled,
whether or not actual damage or loss is proved to have
been caused thereby, to receive from the party who has
broken the contract reasonable compensation not
exceeding the amount so named or, as the case may be,
the penalty stipulated for.

8. Equity Looks On That As Done
Which Ought To Be Done
As between two persons, where one of them
has incurred an obligation and undertaken
upon himself to do something for the other,
the equity courts look on it as done and as
producing the same results as if the obligation
or undertaking had been actually performed.

Doctrine of Conversion
• Sir Thomas Sewell, in the case of Fletcher v Ashburner,
Nothing was better established than the principle that money
directed to be employed in the purchase of land, and land
directed to be sold and turned into money, are to be
considered as that species of property into which they are
directed to be converted.

Doctrine of Conversion
• Sir Thomas Sewell, in the case of Fletcher v Ashburner,
…and this, in whatever manner the direction is given:
whether by will, by way of contract, marriage articles,
settlement, or otherwise, and whether the money is actually
deposited, or only covenanted to be paid, whether the land
is actually conveyed or only agreed to be conveyed. The
owner of the fund or the contracting parties may make land
money, or money land.

English Doctrine of Conversion
Realty
Personality

English Doctrine of Conversion
Real
Property
Personal
Property

In the case of
BaiDosabaivMathurdasGovinddas(1980)
“The English doctrine can not be lifted from its native
English soil and transplanted into statute-bound Indian law.
However, many of the doctrines of English equity have
taken statutory form in India and have been incorporated in
occasional provisions of various Indian statutes and where
a question of interpretation of such equity-based statutory
provisions arises, aid from the equity source can be
justifiably sought”

Transfer of Property Act: Part Performance
• Sec 53A. Where any person contracts to transfer for
consideration any immoveable property by writing
signed by him or on his behalf from which the terms
necessary to constitute the transfer can be ascertained
with reasonable certainty,
and the transferee has, in part performance of the
contract, taken possession of the property or any part
thereof, or the transferee, being already in possession,
continues in possession in part performance of the
contract and has done some act in furtherance of the
contract,
and the transferee has performed or is willing to perform
his part of the contract,

Transfer of Property Act: Sec 53A
• then, where there is an instrument of transfer, that the
transfer has not been completed in the manner prescribed
therefore by the law for the time being in force, the
transferor or any person claiming under him shall be
debarred from enforcing against the transferee and
persons claiming under him any right in respect of the
property of which the transferee has taken or continued in
possession, other than a right expressly provided by the
terms of the contract:
• Provided that nothing in this section shall affect the rights
of a transferee for consideration who has no notice of the
contract or of the part performance thereof.]

9. EQUITY IMPUTES AN
INTENTION TO FULFIL AN
OBLIGATION
• Where a person has undertaken an
obligation his later conduct will, if
possible, be interpreted as fulfillment
of that obligation.

Trust Act
• Section 92: Purchase by person contracting to buy
property to be held on trust
Where a person contracts to buy property to be held on
trust for certain beneficiaries and buys the property
accordingly, he must hold the property for their benefit to
the extent necessary to give effect to the contract.

10. Equity Acts in Personam
• Decrees of equity were regarded not
merely as decisions concerning the rights
and properties in dispute but as decrees,
decisions and directions, addressed to the
individual party or parties.

10. Equity Acts in Personam
• In England, there was a distinction drawn between
the jurisdiction of the law courts and that of the
chancery court.
• Courts of law had jurisdiction over property as
well as persons and their coercive power arose out
of their ability to adjust ownership rights.
• Courts of equity had power over persons.
• This distinction helped preserve a separation of
powers between the two courts.

11. WHERE THE EQUITIES
ARE EQUAL, THE FIRST IN
TIME SHALL PREVAIL
+
12. WHERE THERE IS EQUAL
EQUITY, THE LAW SHALL
PREVAIL

Principle of Priority
• These two maxims, taken together, express the principle
regarding ‘priority’
• Here ‘Priority’ means that which pre-exists or is first in
rank.
• Priority is the right of a party to satisfy its own claim of
interest first in comparison to others

When is Priority important?
• Questions of priority or precedence may arise
where there are rival conveyances of land or
assignments of beneficial interests in trust funds.
• Usually such questions arise in connection with
mortgages.

General Meaning
•The maxim ‘Where the equities are
equal, the first in time shall prevail’
lays down that “as between persons
having only equitable interests, when
all other tests give way and are not
able to decide whose equitable
interest came into being first, the test
of time is the deciding factor.

Who should be paid first?
• A is owner of a property, the market value of
which stands at 20,000 Taka.
• A mortgages this property to B obtaining 15,000
Taka from B.
• A again mortgages the property to C. He then
obtained 10,000 Taka from C.
• If B and C both desire to satisfy their claims from
the property at the same time, it becomes
insufficient.

General Meaning
• The other maxim, ‘where there is equal equity, the law
shall prevail’ goes to explain that –
When both the contestants are equally entitled to obtain
help from courts of equity (because their equities are
equal), the party who has law in his favour will succeed.

“QUIPRIOREST
TEMPORE,POTIOREST
JURE”
He who is first in time is stronger than law

BASIC RULE OF
EQUITABLE PRIORITIES
At law, as in equity, the basic rule is that estates and
interests primarily rank in the order of creation

• Where there are two competing equitable interests, the
general rule of equity is that the person whose equity
attached to the property first will be entitled to priority over
the other.
• Where the equities are equal and neither claimant has the
legal estate, the first in time prevails.

Re Samuel Allen & Sons Ltd. Case
• A company hired machinery from X under a hire-purchase agreement
by which the property in the machinery was not to pass to the
company until all instalments had been paid.
• A right was given to X to remove the machinery on the company’s
failure to pay an instalment.
• The machinery was fixed on the business premises of which the
company was the legal owner, and so the legal interest in the
machinery vested in the company.
• Afterwards the company created an equitable mortgage of the
premises in favour of a mortgage who had no notice of the hire-
purchase agreement.

CAN X EXERCISE HIS RIGHT
TO REMOVE THE
MACHINERY WHEN
COMPANY FAILS TO PAY
INSTALMENT?

IT WAS HELD THAT X’S RIGHT TO REMOVE
FIXTURES WAS AN EQUITABLE INTEREST IN
THE LAND,AND THATAS IT HAD ATTACHED
BEFORE THE EQUITABLE MORTGAGE WAS
CREATED, IT HAD PRIORITY OVER THE
MORTGAGEE’S RIGHT

EQUITABLE DOCTRINE
OF NOTICE
Knowledge of a fact which would make a rational man
act in the light of the knowledge so acquired

Application of this Doctrine
• A person who purchases an estate, though for value, after
notice of a prior equitable claim, becomes a mala fide
purchaser and takes subject to that right.
• He cannot beget in the legal estate and defeat such prior
claim.

Application of this Doctrine
• A purchaser for valuable consideration who obtains a
legal estate at the time of his purchase without note of a
prior equitable right, is entitled to priority in equity as well
as in law.
• Here equity follows the law, the purchaser’s conscience
not being in any way affected by the equitable right.

Rules as to Notice
• Notice is an important information which sets a man
thinking
• On it rests the starting point of a legal action as
contemplated by the legislature.
• Notice must be given to an interested person and
should be clear, distinct and unambiguous.
• Notice shall be signed, dated and served on the
proper person

Purchaser is affected by notice of equity
in three cases
Knowledge of a fact is brought home directly to a
party
Knowledge is imparted by the courts on
presumption
Knowledge is given to an agent of the party
either actively or constructively

Whose interest is stronger?
• A agrees with B to sell his property for 5
lakh Taka. But in breach of the above
agreement, A sells the property to C for 6
lakh taka.
• A makes a document and hands over the
possession of the property to C giving
him a legal interest in the property.
• B did not get any legal interest in the
property but has an equitable interest in
his favour binding A’s conscience.

Fraud, Estoppel and Gross Negligence
• A person with a prima facie claim to priority
for his interest may be postponed through
fraud, estoppel or gross negligence
• Thus a mortgagee who enables the
borrower to represent the property as
being unincumbered may be estopped
from asserting his rights against a
subsequent mortgagee who is deceived.
• He may also be postponed by gross
negligence in failing to obtain the title
deeds.

Justice James Fitzjames Stephen
“They are rather
minims than maxims,
for they give not
particularly great, but
a particularly small
amount of
information…they
mostly serve as good
indexes to the law, are

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