The Gazette 1977

JANUARY/FEBRUARY IV77

GAZT I I H

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

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