Pilcher v Rawlins

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Last modified: 12/10/18 Author: In-house law team

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Pilcher v Rawlins (1871-72) L.R. 7 Ch. App. 259

TRUSTS – LEGAL ESTATES – EQUAL EQUITES – DEFENCE OF BONA FIDE PURCHASER

Facts

A father settled real estate on trust for his children. One of the trustees, P, was the uncle of the beneficiaries. The trustees advanced money to R on the security of a mortgage (the mortgage deed explained the existence of the trust). Two of the trustees died leaving P as the sole trustee. P and R devised a fraud whereby the property would be mortgaged to S and L, who had no notice of the trust or the existence of the beneficiaries’ equitable interest. The fraud was revealed and the beneficiaries sought a declaration that S and L took legal title subject to their equitable proprietary rights in the property and an order that it be reconveyed to the trust.

Issue

This case called for a consideration of how the competing interests of innocent parties ought to be balanced, where it was not possible to give effect to one without unduly prejudicing an equally blameless party. Moreover, the court were required to address the extent of the defence available to a bona fide purchaser for value, without notice of any pre-existing equitable interests.

Held

The court found in favour of S and L, whom thus took their charge free of B’s equitable rights. S and L had acted diligently and reasonably believed they had taken good title, they had ‘neither knowledge nor means of knowledge’ of the trust (at 274, per Mellish LJ); where the equities were equal, as was the case here, the law must prevail.

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