3 / 264
GAZT
I I
H
JANUARY/FEBRUARY IV77
asked precisely what it meant. It has a clear meaning in
the realm of conveyancing. It means that reasonable
steps, in the circumstances of a particular title, have to be
taken by a purchaser. That normally means that he puts
the usual requisitions or questions to the vendor and may
seek a statutory declaration to support the replies to the
requisitions. He has to make reasonable enquiries to
satisfy himself that there was no need for a consent... It
is only another incident of title that will have to be
investigated on the Conveyance, and it will not be a harsh
or onerous burden".
With every respect to the Minister, this answer begs the
question. Omitting the circularity, it boils down to a
statement that
reasonable
conduct on the part of a
purchaser cons i s ts in doing that which is
wsua/.Unhappily, doing what is usual is in the case of a
.novelty somewhat difficult. Furthermore, the reference to
Section 3 of the Conveyancing Act 1882 was unfortunate.
This reference was clearly made initially by way of
analogy only, and not in the context a wholly sound
analogy at that, but now as a result of the amendments of
Section 3 of the original Bill introduced at the Committee
stage (of which more below) the Act reads
as
//Section 3
of the Conveyancing Act 1882 has of its own motion a
direct application to the type of situation created by the
1976 Act, which it does not. Section 3 of the
Conveyancing
Act
1882 says, inter alia, that "a purchaser
shall not be prejudicially affected by notice of any
instrument, fact or thing, unless . . . it is within his own
knowledge, or would have come to his knowledge if such
inquiries and inspections had been made as ought
reasonably to bave been made by him . . ." This section
does
not
of course operate so as to remove in favour of a
purchaser who has done everything he reasonably ought
to have done by way of investigation of title any
legal
incapacity on the part of the vendor or any
legal
inability
to convey what he purported to convey through lack of
legal title in him. For example, a purchaser may have
properly and fully investigated a forty years title to an
apparent fee simple estate only to find himself defeated
years later by the reversion on a long lease falling in.
Section 3 of the Conveyancing Act will not help him.
Similarly, the vendor's disability under the 1976 Act is
legal, in the sense that his purported conveyance is void at
law except in favour of a limited class of purchasers.
Indeed, it is trite knowledge that Section 3 of the
Conveyancing Act 1882 is concerned
not
with the passing
of legal titles but with the standard to be observed by a
purchaser of a legal estate who wishes to avoid being
bound by a pre-existing
equitable
proprietary interest.
And the framers of the Bill disavowed the intention of
conferring on a wife any such interest in the family home.
Apart from the foregoing conceptual difficulties,
references to Section 3 of the Conveyancing Act 1882 are
scarcely appropriate as a means of elucidating (as the
Minister sought to do) the standards of investigation
required of a purchaser, simply because the Section
Presupposes a pre-existing body of case law, (which in
fact the Section sought to restrict) setting out what a
reasonable purchaser ought to do to avoid being bound
by outstanding equitable interests. This casc-law reflects
current conveyancing practice and the former refects the
ktter in a symbiotic relationship, whereas in the case of
the new "right" created by the 1976 Act there was when
the Minister spoke neither current practice nor case-law.
rne words "ought reasonably to have been made" in
Section 3 of the 1882 Act refer to the enquiries which a
4
purchaser ought as a matter of prudence to have made,
having regard to what is usually done by men of business
under similar circumstances:
Bailey v. Barnes
[1894] 1
Ch. 35.
We are now in a position to turn to the final form of
Section 3 of the 1976 Act as modified by an amendment
introduced by the Minister at the Committee stage of the
Bill. As already mentioned, this amendment swept away
the greater part of the original formulation of the
qualifications in favour of a purchaser quoted above. The
amended form provides:
"(3) No conveyance shall be void by reason only of
subsection (1) — (a) if it is made to a purchaser
for full value, (b) if it is made, by a person
other than the spouse making the purported
conveyance referred to in subsection (1), to a
purchaser for value, or (c) if its validity
depends on the validity of a conveyance in
respect of which any of the conditions
mentioned in . . . paragraph(s) (a) or (b) is
satisfied.
(4) If any question arises in any proceedings as to
whether a conveyance is valid by reason of
subsection . . . (3), the burden of proving that
validity shall be on the person alleging it.
(5) In sub-section (3), "full value" means such
value as amounts or approximates to the value
of that for which it was given.
(6) In this section, "purchaser" means a grantee,
lessee, assignee, mortgagee, chargeant or other
person who in good faith acquires an estate or
interest in property.
(7) For the purposes of tliis section, section 3 of the
Conveyancing Act, 1882 shall be read as if the
words "as such" wherever they appear in
paragraph (ii) of subsection (1) of that section
were omitted."
Considering first the position of an immediate
purchaser of a family home, it will be observed that the
duty to make reasonable inquiries is no longer stated. The
only quality
expressly
required of a purchaser apart from
the giving of full value is that he be in
good faith.
This
somewhat overworked term is capable oi bearing a wider
meaning than merely the avoidance of the collusion
adverted to by the Minister
(supra);
the term, as
commonly understood, embraces more than the freedom
from actual complicity in a fraudulent design. Good faith
requires actual subjective honesty of such a quality that
suspicious circumstances alone, without actual knowledge
of or complicity in them, founds a duty to enquire which,
if not discharged, leads to a person being found
mala
fide Jones
v.
Gordon,
2 App. Cas. [18771 616 at 628, 9).
Honesty is subjective, and it follows that a person's good
faith is judged by his own mental state, equipment and
knowledge at the relevant time (e.g.
Hutton
v.
West Cork
Railway Co.
[1883] 23, Ch. D. 654 at 671); and that
failure to live up to an objective standard such as that of
the ordinary, prudent purchaser envisaged by Section 3 of
the Conveyancing Act 1882 is not necessarily equivalent
to bad faith. Identical facts therefore will result in a
prospective purchaser who appreciates the significance of
what comes to his attention being in bad faith, and
another who does not, being blameless. Thus if good faith
alone were the test, it is arguable that a prospective
purchaser who hears that a prospective vendor had a wife