Wakila Hussain

11. Where the equities are

equal, the first in time shall
prevail

12. Where there is equal

equity, the law shall prevail
Equal Equity
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.
Doctrine of Priority
Rice Vs Rice

•Priority is the right of a person 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.
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
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.
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.
“Qui prior est tempore,
potior est 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
Rule 01: 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.
Cave Vs Cave
• 1. The marriage settlement had a sole trustee,
named X.
• 2. X breached the trust fund and bought a land
in the name of his brother Y.
• 3. Y, receiving the land made a legal mortgage to
A and an equitable mortgage to B.
• 4. Who gets priority?
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 installments had been paid.
• A right was given to X to remove the machinery on the company’s
failure to pay an installment.
• 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 favor 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
installment?
It was held that X’s right to
remove fixtures was an equitable
interest in the land, and that as 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 without Notice: Rules
1. Value: The purchaser must have given value for the property,
although it is not important whether or not the consideration was
adequate or not.
2. Legal Estate: The purchaser must have obtained a legal estate or it
must be vested in some person on his behalf.
3. No notice:
a. Actual Notice
b. Constructive Notice (Jones Vs Smith)
c. Imputed Notice (Agent)
Constructive Notice
• A knew about the specific mortgage, but he did not
inspect the mortgage deed and therefore he was held
to be bound by that as he could discover the issue if
he had inspected, as any prudent man would do.
• Bisco vs Earl of Banbury
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 favor 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.
The Transfer of Property Act, 1882

• Section 48: Where a person purports to create by transfer at

different times rights in or over the same immoveable property,
and such rights cannot all exist or be exercised to their full
extent together, each later created right shall, in the absence of
a special contract or reservation binding the earlier transferees,
be subject to the rights previously created.
The Transfer of Property Act, 1882

• Section 78: Where, through the fraud, misrepresentation or gross

neglect of a prior mortgagee, another person has been induced
to advance money on the security of the mortgaged property,
the prior mortgagee shall be postponed to the subsequent
mortgagee.
• Section 79
Doctrines of election, Marshalling,
setoff
• All laws are application of this maxim too.
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,