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Most likely an objective test heid had armed gibby

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Close to a negligence test, but not quite. Most likely an objective test. Heid had armed Gibby with apparent ownership of the company, and had failed to caveat to protect his lien, and was reas forsee that another competing interest would be created. Two categories of cases 1. Arming cases . RP arms a third party with the means to represent himself as the unencumbered owner, and this leads to the creation of a subsequent equitable interest (eg Abigail v Lapin, Breskvar v Wall, Heid v Reliance). Estoppel rationale works better here. 2. Inconsistent interest cases . RP creates a prior interest in A, and then a subsequent inconsistent interest in B. eg Butler v Fairclough, Just Holdings. Reasonable foreseeability rationale works better here. Moffett v Dillon 1. M took an instrument of charge over D’s land to secure a debt owed to him, caveats. D mortgaged the land to W, which knew about the prior charge. W asked M to withdraw the caveat – M didn’t consent but the mortgage was registered in error. All parties agreed that the priorities should be determined on the basis that the mortgage was unregistered. W argued it had the better equity b/c its mortgage was in registerable form, and the charge wasn’t. Moffett v Dillon: the notice test 1. Brooking and Buchanan JJA proposed that there is a separate ‘notice’ test, which is to be applied before the ‘merits’ test. So, ask if 2 nd interest was acquired with knowledge of 1 st . If so, 2 nd interest fails. If not, go to merits test (better equity test). Argued bank too with actual notice. 2. A later equitable interest acquired with notice of the existence of an earlier one cannot prevail over it (except in special cases of waiver and estoppel). 3. Ormiston JA did not support a separate notice test. Agreed a charge should take priority, relied on Abigail test, but didn’t feel loike there was a “notice” test. What amounts to notice? 1. Brooking JA says that ‘notice’ here means notice as opposed to knowledge 2. s199(1) PLA says that a purchaser shall not be prejudicially (ie adversely) affected by notice of any instrument fact or thing, unless it is within his own knowledge or that of his 43
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44 agent in the transaction, or it would have come to his (or his agent’s) knowledge if such inquires and inspections had been made as ought reasonably to have been made by him (or his agent) Priorities problem: method 1. Establish what the interests are – are they equitable interests or mere equities? When was each created? 2. Apply notice test from Moffett v Dillon first. Was second interest acquired with notice (actual, constructive or imputed) of the existence of the first interest? If yes, the first interest holder will have priority (unless he has waived it or is estopped by his conduct). 3. If notice is not clearly established, proceed to the merits test.
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