Knight v Marjoribanks
| Jurisdiction | England & Wales |
| Judgment Date | 26 November 1849 |
| Date | 26 November 1849 |
| Court | High Court of Chancery |
English Reports Citation: 42 E.R. 4
HIGH COURT OF CHANCERY
S. C. 11 Beav. 322; 2 Ha. & Tw. 308. See Rushbrook v. Lawrence, 1869, L. R. 8 Eq. 31. Approved, Melbourne Banking Corporation, Limited v. Brougham, 1882, 7 App. Cas. 307.
[10] kniukt v. maejoribanks. Nov. 14, 16, 17, 19, 20, 26, 1849. [S. C. 11 Beav. 322; 2 Ha. & Tw. 308. See Piushln'ook v. Lawrence, 1869, L. R, 8 Eq. 31. Approved, Melbourne Banking Corporation, Limited v. Brougham, 1882, 7 App. Gas. 307.] The decision of the Master of the Rolls, 11 Beav. 322, affirmed. The circumstance that two parties stand to each other in the relation of trustee and cestui qiie trust does not affect any dealing between them unconnected with the subject of the trust. Thus, the rule that a trustee cannot purchase from his cextui que trust does not extend to a purchase by a mortgagee from his mortgagor. The facts of this case, which were very complicated, and of which the following is a short outline, are fully stated in the judgment of the Master of the Rolls, in the llth Volume of Mr. Beavan's Reports, p. 322. a MAC. *0. U. KNIGHT V. MAHJORIBANKS 5 Colonel Lautour, in partnership with S. Marjoribanks and three other persons, embarked in a land speculation in New South Wales. The firm of S. Marjoribanks fe Co. were the London agents of this concern. In 1829 Colonel Lautour was considerably in arrear with respect to his proportion of the requisite funds for the undertaking; and, in August 1829, he executed a deed, whereby he conveyed his share to S. Marjoribanks & Co., in trust to secure the amount due from him to tha concern, and subject thereto in trust for himself ; and he covenanted not to interfere in the control and management of the concern. In 1831 he entered into an agreement to sell his share in the concern to his co-partners, in consideration of the sum in which he was indebted, and of a further sum of 250, of which he received part payment. The deed carrying this agreement into effect was not executed till May 1836r the cause of this delay being the bankruptcy of Colonel Lautour. The assignee* disclaimed all interest in the concern ; and in 1839 Colonel Latour, having obtained from them an assignment of his interest, filed the present bill to set aside the deeds of 1829 and 1836, on the ground of fraud. The caute was heard before the Master of the Rolls in June and July 1848, and on the 10th November 1848 his Lordship pronounced judgment, dismissing [11] the bill, with coats. From this decision the Plaintiff now appealed to the Lord Chancellor. Mr. Elderton, Mr. J. V. Prior, and Sir F. C. Knowles, for the Plaintiff. Mr. Turner, Mr. R. Palmer, and Mr. Cotton, for the principal Defendants. The following cases were referred to and commented upon in the course of the argument; Huddleston v. Briacon (11 Ves. 583), Stratford v. Bosworth (2 V. & B. 341), Earl of Chesterfield v. Janssen (2 Ves. sen. 125), Crowe v. Bollard (1 Ves. jun. 215), Burton v. Wookey (6 Madd. 367), Ex parts Bennett (10 Ves. 381), Ex parte Lacey (6 Ves. 625), Montesquieu v. Samlys (18 Ves. 302), Hickes v. Cooke (4 Dow, 16), Cane v. Allen, (2 Dow, 289), Evans v. Llewellin (1 Cox, 333), Cook v. Oollingridge (Jacob, 607), Glascott v. Lang (2 Phil. 310), Wille v. Gibson (1 H. L. Ca. 605), lie Bloye's Trust (1 Mac. & G. 488). Nov. 26. the lord chancellor [Cottenham], after recapitulating the facts of the case, and commenting on the circumstance that although by the bill the transaction of 1831, which constituted the contract, was not impeached, yet that the deed which carried that contract into effect was impeached, observed-that the only ground which could be relied on for setting aside the transaction was the assumption that this was a purchase by a trustee of his Kfstui que trust. His Lordship then proceeded :- [12] It is not contended that a trustee cannot, under any circumstances, buy of a cestui que trust; but it is said there are certain duties and obligations imposed by equity on a trustee so dealing, which have not been observed by those who agreed to purchase Colonel Lautour's interest, and therefore that, the relative situation of trustee and cestui que trust being in existence, the contract entered into is affected by circumstances which would have had no bearing on it at all, unless that relative situation weire first established. Now, what was the relation in which Mr. Marjoribanks stood in reference to Colonel Lautour? Mr. Marjoribanks, it is true, had a share in the concern ; but this was totally distinct from acting as broker or manager of the estate, a character which was filled by the firm in which, however, he was a partner. To this firm the property was, in August 1829, conveyed in trust to sell; and it is true that if the sale had taken place, the parties executing the trust would have been affected by all the equities which protect cestuis que tnist against the acts of their trustees. Now, what are those equities 1 The trustee selling is bound to procure the best price he can for the property, and the law will not permit him to put himself in a situation where his interest would be inconsistent with his duty. He must not, therefore, surreptitiously, and without the knowledge of the cestui qiie trust, bid at an auction either in his own name or by anybody for him ; nor can he therefore in such a case be recognized as a purchaser. This is the rule in the case of a trustee; and its object is to secure the due execution of the duty which the trustee takes upon himself to perform; but if the question arises as to some other dealing unconnected with the trust, then the circumstance of a trust having been undertaken, but not acted upon, can in no way affect [13J such other dealing, if in itself unobjectionable. I threw out an observation to this effect in the course of the argument, having a strong impression and 6 KNIGHT V. MARJORIBANKS 2 AC. ft 0. 14. recollection that such a distinction had been taken; and I find that it was taken long ago, and has been acted upon to the present time. I will state what Sir Edward Sugden says on this subject. Speaking of the rule that a trustee cannot purchase from a cestuigue irust, he says (Sugd. Vend. & Purch. vol. iii. p. 227 (ed. 10)), "The pule has never been applied to a purchase by mortgagee from the mortgagor, and it is to be hoped that it never will:" then he refers to a case of Webb v. Rorlce (2 Sch. & Lef. 661), a decision of Lord Eedesdale's, which is the strongest case against, such a transaction, and where he, Lord Eedeadale, excepts this very case from the rule which he is laying down and laying down very broadly, and under which he held that a mortgagee could not take a lease from his mortgagor, because they were not on an equal footing, one being under the pressure of debt, and the other having all the influence which' a creditor has over his debtor. Sir Edward Sugden, though not entirely approving of the doctrine as thus laid down, but with every inclination to carry the rule as high as possible, makes an exception from it of the case of a mortgagor and mortgagee, and says, there must be misconduct to impeach such a transaction, and then adds, that "a sale by a mortgagor to a mortgagee stands on the same principle as a sale between parties having no connection with each other, and can only be impeached on the ground of fraud," and that inadequacy of price would not be a sufficient ground to impeach a sale. If this be so, then the only ground upon which the Plaintiff relies fails, the relative position of trustee and [14] cestui que trust not having existed, there being nothing like proof of fraud as between a vendor and purchaser, and the question of value being immaterial. Now, the decision of Lord Eedesdale, upon which it is unnecessary for me to express any opinion, clearly shews that when enforcing the general rule, and carrying it further than it had ever been carried before by setting aside a transaction between cestui gue trust and trustee, he still thought it necessary to except the case of mortgagor and mortgagee. In the present case, there is nothing but a release of the equity of redemption ; and it cannot be said that a man who has mortgaged his estate is never to be permitted to get rid of the debt by releasing the equity of redemption. There is no other party with whom a mortgagor can deal; and if a mortgagee is to be considered a trustee for that purpose, and the rule as between trustee and cestui que tmst to be applied, it would be impossible for a mortgagor ever to get rid of his debt by releasing the equity of redemption. The consequence is so monstrous that it shews how untenable the proposition is to endeavour to extend the rule to a transaction between mortgagor and mortgagee. It was so felt by Lord Redesdale, and it is distinctly expressed by Sir Edward Sugden that he trusts the time never will come when the doctrine shall be so extended. It cannot be necessary to say anything farther on that subject. Then here is a transaction not at all connected with the trusteeship. It is true the legal estate is in Marjoribanks, which is nothing at all to the purpose, for the dealing has reference to the contract of 1831, and has no connection with the subject of the trust to sell; it was not a sale to third persons, and required therefore no assistance from those who were authorised to sell and whose duty it was to obtain the best price; it was a [15] dealing between the owner of the estate on the one hand, and the party having a lien upon the estate on the other, for the purpose of settling between themselves what the amount of the debt was. Now that, like every other transaction, is open to be impeached on the ground of fraud; but this fraud must not be of that species which is referable to dealings between trustee and cestui que trust, but only of that species on account of which a transaction between ordinary vendors and purchasers might be set aside. It must, therefore, be shewn...
To continue reading
Request your trial
-
Baker v Bradley
...Hare, 260), Ferraby v. Hubwn (2 Ph. 255), Maguire v. O'fe'% (3 Jo. & Lat. 240), Glasscott v. Zxwi / (2 Ph. 310), Knight v. Marjoribmh (2 Mac. & G-. 10), Price v. Berrington (3 Mac. & G. 486), /^iW v. tfiisow (1 H. L. Ca. 605). Judgment reserved. Nov. 20. the lord justice knight bruce. The b......
-
Between Robert Knight since deceased and His Executors by amendment, and Richard Tomkinson, Plaintiffs; and George Bowyer, John Thomas Groves and Emma, his Wife, Charles Pugh, The Rev George Frazer Mathews and Ann Martha, his Wife, late Ann Martha Bridger, Edward Kynaston Bridger, Wilson Lomer, Charles Bridger, Charles King, Alexander Donovan, Samuel Sturgis, William Whitfield, Harriett Huntingford (since dismissed), John Samuel Bowles, George Warner, The Rev. John Tunnard, Clerk, John Taylor, John Matthews, and Sir George Bowyer, Baronet, Defedants
...Lord Laitderdale (3 Sim. 1, and 2 Russ. & M. 451); or as trustees in an independent matter, and for other parties; Knight v. Marjoribanks (11 Beav. 322 ; S. C. 2 Mac. & got. 10; 2 Hall & Tw. 308); and that such a possession would not give to the three annuitants any such rights as would exc......
-
Tito v Waddell (No. 2); Tito v Attorney General; Ocean Island (No. 2)
...[1902] A.C. 197, H.L.(SC.). Geaves, Ex parte (1856) 8 De G.M. & G. 291.Hickley v. Hickley (1876) 2 Ch.D. 190. Knight v. Marjoribanks(1848) 11 Beav. 322; (1849) 2 Mac. & G. 10. Land Realisation Co. Ltd. v. Postmaster-General [1950] Ch. 435; [1950] 1 All E.R. 1062.Saunders v. Vautier (1841) 4......
-
Kirkwood v Thompson
...v. Hanbury (1 Dr. & Sm, 143; S. C. on appeal, 13 W. R. 331 [2 De G. J. & S. 450]); Dobson v. Land (8 Hare, 216); Knight v. Marjoribanks (2 Mac. & G. 10). Mr. Wflfcock, in reply. the lord chancellor (Lord Cranworth). This case does not appear to me to present any real difficulty. In the firs......