CHANCERY. enforced her right and had taken possession of the property, and if she were now in receipt of the rents for her separate use, and insisted upon her right to continue so during her life. What in that case would be the right of compensation between the husband of the plaintiff on the one hand, and the defendant on the other? It is clear that the husband, if he resorted to this Court to reverse the arrangement, could not compel the defendant to pay him the annuity of £40, which was given solely in consideration of the defendant obtaining immediate possession of the estate. I am equally clear that the defendant cannot insist on his right to keep the reversion without paying anything for it. It is plain that it was not intended to be a gift; if it had been a purchase, then some consideration must be paid for it. It is clear that the defendant, if he pleased, might take the reversion, which was all the husband had to convey, on paying the consideration he had offered for the whole estate in possession; but I doubt whether the defendant could have maintained a suit for the purchase of the reversion on the footing of making such a deduction from the purchase money, that is from £40 per annum, as the Court might think proper, having regard to the value of the reversion. That would, in fact, be, I think, making a new and totally different contract between the parties. The husband might reasonably say, "I thought I had the fee simple, and that was what I intended to sell, and nothing else, and I object to sell the reversion for the proportion of the annuity of £40 a year." And if this could not be done against him, neither could it be done against his representatives.

Even

where sales of reversions have been completed, this Court has frequently set them aside on proof of inadequate value, and it could not consider a contract for the sale of an estate in possession as a sale of a reversion, and then compel specific performance of it on terms when, if it had been actually carried into effect between the parties upon those terms, the Court would have set it aside on the ground of inadequate value. If, in order to avoid this, the Court were to attempt to fix the value of the reversion, such a proceeding would, I apprehend,

be still more at variance with the rules of the Court, since the effect of it would be to compel one man and the representatives of another man to enter into a contract for the purchase of that which the latter never intended to sell. I have therefore come to the conclusion that the conveyance and bond entered into and executed between Mr. Dally and the defendant, and the contract on which they were founded, were wholly inoperative, and incapable of being enforced by this Court, and therefore these two instruments must be delivered up and cancelled. The defendant must be compelled to re

convey the estate, and the plaintiff put in possession of the rents and profits; and an account must be taken of the rents and profits received by the defendant since the 27th of July, 1861, and in taking such account he must be allowed all sums of money properly expended by him in repairs or lasting improvements, and must also be allowed all sums received by him in respect of the annuity. The plaintiff must have her costs. Solicitor for the plaintiff, G. Becke.

Solicitors for the defendants, Poole & Johnson, for F. W. Lanchester.

CHANCERY.

M., a

nuity deed, covenanted that it was unincumbered. solicitor, who prepared the mortgage, and was himself interested in it, also prepared the annuity deed as solicitor for D.

Held (1), that it must be presumed that M. had fraudulently concealed the existence of the mortgage from D., and that the latter was therefore not affected by constructive notice; (2), that T. must be considered as one of the grantors of the annuity within section 10 of the above Act. Held, therefore, that the deed fell within the exception in section 10, and did not require enrolment.

By indenture dated the 11th of March, 1828, made between Francis Cartwright, deceased, of the first part; Thomas Cartwright, deceased (his brother), of the second part; Arthur Downes, deceased, of the third part; and John Howell, of the fourth part; after reciting to the effect that Thomas Cartwright was entitled to a moiety of certain freehold property, and an agreement for the sale by Francis Cartwright, to Downes, of an annuity for a term of years, determinable on lives, to commence at £139, and to increase after five years to £199, and to be further secured on the freehold property, Francis Cartwright thereby granted the annuity to Downes; and for further securing it, Thomas Cartwright appointed, granted, &c., to Downes, that it should be issuing out of and charged upon his undivided moiety, with power of distress and entry, and Thomas Cartwright, also at the request of his brother, granted the property to Howell, for a term of years, upon trusts for better securing the annuity. The deed contained a covenant by Thomas Cartwright that the property was free from incumbrances. The annuity was made redeemable on notice being given by Francis Cartwright. The annuity had now become vested in John Downes, and the sum of £139 had been regularly paid by Francis Cartwright, up to 1863, the grantee having agreed to accept that sum instead of the larger annuity. John Downes now sought to prove for the value of the annuity against the estate of Francis Cartwright, the testator in the cause. The claim was resisted by the plaintiff, a creditor, on the ground that the annuity deed was not enrolled pursuant to the Act 53 Geo. iii. c. 141 (now repealed by 17 & 18 Vic. c. 90). The question turned upon s. 10 of the Act, which enacted that the Act should not extend to any annuity secured on land of equal or greater annual value than the annuity, over and above the interest of notice at the time of the grant, whereof the grantor was any sum charged thereon, of which the grantee had seised in fee in possession, or which he was enabled to charge. The annual value of the entirety of the property, of which Thomas Cartwright was entitled in possession to a

moiety, was £400, but at the date of the grant his moiety was subject to a mortgage for £1,000 and interest, created by a deed of the 6th February, 1828. William Montriou, a solicitor, was interested in the mortgage, and he acted as solicitor for Thomas Cartwright in the preparation of the mortgage, and for Arthur Downes in the preparation of the annuity deed.

J. Pearson, for the claimant.-The annuity had been paid for thirty-five years, without question. The case came within the exception in section 10. The Act was to be construed strictly. Assuming that Downes had notice of the mortgage, the annuity in the first instance was to be only £139, and no more had ever been paid. This, with the interest on the mortgage, was less than than the income of the property. But there was no evidence of notice against Downes, beyond the fact that he employed

solicitor-Constructive notice.

By deed executed in 1828, F. granted an annuity to D. T. joined in the deed to secure the annuity on an estate belonging to him. The estate was at the time subject to a mortgage created in 1826, the interest on which, added to the annuity, exceeded the income, but T., by the an

notice was not to be extended, and was here excluded, as it was evident that a fraud had been perpetrated by the solicitor, who, although himself one of the mortgagees, had caused Cartwright to covenant that the property was free from incumbrances. It was quite plain, therefore, that they had conspired together to conceal the

CHANCERY.

mortgage from Downes, otherwise the transaction would not have taken place, since the security was insufficient. Montriou's conduct would have prevented his setting up the mortgage against Downes. He cited Jones v. Smith, 1 Ph. 244; Espin v. Pemberton, 3 De G. &. J. 549, 7 W. R. 221.

Hetherington, for the plaintiff.-The case is not within the exemption. 1. Thomas Cartwright, the owner of the property charged, was not the grantor of the annuity; Francis Cartwright alone covenanted to pay it, and received the purchase-money. 2. The case was within the ordinary rule as to constructive notice. The covenant against incumbrances was by Thomas Cartwright alone. As to the value of the land, the income was insufficient, since the annuity must be considered as one of £199 for the purposes of the Act. He cited Darwin v. Lincoln, 5 B. & Ald. 444.

F. Bacon appeared for the executors.

Pearson in reply.-The argument founded on the word grantor" was met by Darwin v. Hinton.

July 31.-The MASTER OF THE ROLLS said that the question was, whether the deed was exempted from the necessity of enrolment by falling within the exception in section 10 of the Act. The annual income of the property

exceeded the annuity, the moiety of Thomas Cartwright being worth £200 per annum. If his share was free from incumbrances, as stated in the deed, there was no question that it was within the exception. But that statement was untrue, as the property was mortgaged in 1826, to secure £1,000 with interest at five per cent. Hence the income, after deducting the interest on the charge, was only £150, which, though more than the annuity of £139, was less than that of £199. The questions to be decided were therefore, 1st, whether the annuity was to be considered as £139 or £199; 2ndly, whether Thomas Cart wright was the grantor within section 10; and 3rdly, whether Downes had notice of the charge when he purchased the annuity. Upon the first question his Honour thought that the annuity must be considered to be of the larger amount, for otherwise the provisions of the Act might be easily evaded. He did not say that if the annuity were one gradually increasing in amount the Court would always treat it as being of the largest amount. The Court must treat each case on its own merits. It might perhaps take the average value of the annuity, but in the present case, in either point of view, it would exceed £150. Upon the second question, the case of Darwin v. Hinton was conclusive, and the Court must consider Thomas Cartwright as one of the grantors. The only real question in the case was the third. The question was, whether it could be presumed that Montriou concealed the prior charge from Downes. The case of Kennedy v. Green, 3 M. & K. 699, established the important principle that if a solicitor was the actual perpetrator of a fraud, it was reasonably certain that he would not communicate it to his client. As a rule, the client must be taken to have notice of all facts known to his solicitor, and the burden of proof lies on him to show that there was a moral certainty that the solicitor did not communicate it to the client. How did this apply to Mr. Downes, and had he discharged the burden of showing that he had no notice? On the whole, his Honour thought that he had. Mr. Montriou prepares a deed containing a covenant against incumbrances. He procured the execution of this deed by the grantor, and caused him deliberately to put his hand and seal to an assertion which was false in fact. This amounted to a solemn statement that there was no charge on the property. It had been well observed by Mr. Pearson, that Mr. Montriou would have been compelled under these circumstances to postpone his charge to that of Mr. Downes, on the ground that this Court compelled a person to abide by his own representations, upon the

CHANCERY.

faith of which another party had acted. His Honour was of opinion that he must treat this as a case in which it was proved that Montriou deliberately and purposely concealed the fact of the prior mortgage, and if he did so the case fell within the 10th section of the Act, and the deed did not require to be enrolled. His Honour had not noticed the fact that the lesser annuity had been paid, although, as far as it went, that fact was favourable to the plaintiff.

Solicitors for the parties, Bridges & Son; Ray & Cartwright.

Mortgagor and mortgagee—Fraud of solicitor-Title deeds -Avoidance of deed by alteration.

In September, 1858, S., a solicitor, having been instructed by II. to raise money for him on the security of some freehold land, obtained an advance from A., and deposited the title deeds with him pending the completion of a legal mortgage. In this and the subsequent transactions S. acted for both parties. £650 was at first advanced. It was afterwards agreed that A. should make a further adrance of £200, but as he had not the money ready, that S. himself. In April, S., having procured the deeds from sum was in the first instance, in April, 1859, advanced by A., prepared a mortgage to himself from H., to whom he stated that he intended to pay A. off, and H., without the knowledge or authority of A., executed the deed. S. concealed this mortgage from A., from whom he fraudulently withheld the real title deeds; and in June, 1859, he handed to him two forged documents, one a mortgage from H. to A., and the other a conveyance of the property to H., together with an abstract. The £200 was afterwards paid The latter raised money by transferring the by A. to S. mortgage from H. to himself to bona fide holders. He was afterwards convicted of the forgeries.

for the £850, which he had not lost by parting with the Held, that A. had acquired a complete equitable charge deeds, or by the subsequent dealings of S., and which he was entitled to enforce subject to the legal mortgage rested in the transferees of S., and that H. was therefore liable to pay both mortgages.

The mortgage to S., when executed by H., contained blanks for the date, the day of payment, and in the parcels, which were afterwards filled up by S.

Held, that this did not invalidate the deed.

In the year 1858, the defendant, Thomas Hives, applied to the defendant, Joseph Shaw, a solicitor at Derby, to procure him a loan upon a mortgage of a freehold estate at Ilkestone, in Derbyshire, for the purpose of enabling him to erect some houses thereon. Shaw accordingly applied to the plaintiff, John Adsetts, who agreed to advance £650, upon a legal mortgage in fee. In this and the subsequent transactions Shaw acted for and was trusted by both parties, no other solicitor being employed, and all the money advanced to Hives passed through the hands of Shaw. On the 29th of September, 1858, the plaintiff paid Shaw £150 as a first instalment of the loan, whereupon Shaw delivered to him the title deeds of the estate by way of equitable security pending the completion of the mortgage. The remainder of the sum of £650 was afterwards paid to Shaw by the plaintiff in instalments, the last of which was to be paid on the 18th of February, 1859. The money was paid over by Shaw to Hives in instalments, between the 1st of October, 1858, and the 17th of March, 1859. After the agreement for the loan of £650, negotiations took place for a further advance of £200, on the same security, which the plaintiff about the beginning of March, 1859, agreed to advance, but as he afterwards found it would be inconvenient for him to advance this sum for some months, it was arranged that Shaw should find it in the meantime, and

created. The plaintiff was now entitled to enforce that security against Hives, on condition that when Hives redeemed him, he delivered up the deeds to him. This he could do after he had redeemed the company. Suppose that, after an equitable mortgage, the mortgagor executed a legal mortgage, the legal mortgagee, if with notice of the prior charge, was bound by it; otherwise, the equitable mortgagee could only enforce his security by redeeming the second mortgage. That was the difference here. There was a good equitable mortgage to the plaintiff. Then Shaw, as agent for both parties, wrote to Hives, and said he was going to pay off the plaintiff, and that the mortgage was therefore to be in his name. How could that discharge the equitable mortgage? Or why could not the plaintiff have filed a bill to enforce it the next day? Shaw could not be justified in preparing a mortgage to himself, because he intended to pay the plaintiff off. It was argued that the relation of trustee and cestui que trust was created by the mortgage to Shaw, but the trusteeship was only a constructive one. When a man paid another £100, to be given to A. B., the person who received the money became a constructive trustee for A. B., but was in no other sense a trustee. Here Hives executed a mortgage to Shaw, without any authority from the plaintiff. Shaw raised money on it, having obtained the deeds by fraud from the plaintiff. Hives had enabled Shaw to raise that money, which he must therefore pay. But that did not discharge the mortgage to the plaintiff. Hives had entered into one contract to give the plaintiff an equitable mortgage, and another to give a legal mortgage to Shaw. He could not by that deprive the plaintiff of his mortgage, and therefore, when the equitable mortgagee got back the deeds by paying off the prior charge, he was entitled to enforce his mortgage. His Honour was of opinion that although it was a hard case on Hives, the plaintiff was entitled to a decree for the amount due to him.

Solicitors for the parties-W. & H. P. Sharp, for J. Smith; and H. Gover and Scott & Co., for Huish and Eddores.

12 & 13 Viet. c. 106, s. 195-24 & 25 Vict. c. 134, s. 185Bankrupt's right to allowance out of estate.

Where a bankrupt has petitioned the Court, and has produced assets sufficient to pay a dividend of more than 15s. in the pound, and a deed is subsequently executed under the 185th section of the Bankruptcy Act, 1861, for a winding-up out of court, the bankrupt is not entitled as of right to the statutory allowance provided for by the 195th section of the Bankrupt Law Consolidation Act, 1849; and where the bankrupt is charged with offences which, under the 12 & 13 Vict. would have led to the re

fusal of the certificate, the Court refused an application

for allowance.

This was an application by the bankrupt, Maycock,

* Before Mr. Commissioner HOLROYD.

BANKRUPTCY.

under an unrepealed section of the Bankrupt Law Consolidation Act, 1849 (the 195th), for an allowance to him of 10 per cent. upon the amount of assets realised under his estate.

Chidley (solicitor), who appeared for the applicant, tion, with assets sufficient to pay a dividend of more than said the bankrupt came to this Court upon his own petififteen shillings in the pound. The trade assignee and the creditors subsequently came to a resolution under the 185th section of the Bankruptcy Act, 1861, for a stay of proceedings under the bankruptcy, and for the liquidation of the estate out of Court; and on the 7th inst. the bankrupt was desired by the solicitor to the trade assignee to execute a deed with a view to the carrying out of the arrangement proposed by the creditors. The bankrupt his solicitor. It now appeared that no provision was executed the instrument accordingly, in the absence of contained in the deed for the allowance to the bankrupt of the per-centage to which he would have been entitled under the 195th section of the Bankrupt Law Consolidation Act, 1849, if his bankruptcy had proceeded and he had duly obtained his order of discharge. Chidley said that no complaint was made against the solicitor for the assignee; it was only asked that the interest of the bankrupt should be protected.

Mr. Commissioner HOLROYD.-It does not appear from the proceedings that we have arrived at the complete execution of the deed; the matter is just short of that.

Ingle (solicitor), for the assignee, admitted that it was at his instance that the bankrupt executed the deed; he (Ingle) requested him to sign it.

Mr. Commissioner HOLROYD.-I think it would be fair that the bankrupt should have the benefit of the statutory allowance, as he would if his bankruptcy had proceeded. But, at the same time, the present application is rather premature; the deed has not yet been completely executed. The Court has, however, complete power over the deed of arrangement to say that it is reasonable or otherwise; and where a bankrupt produces assets sufficient to entitle him to the statutory allowance if the bankruptcy had proceeded, I think it would be fair that, under the deed in this case, the creditors should give the bankrupt the benefit of the allowance. I know that I could not enforce the payment as in bankruptcy; I could only do it in an indirect way; for before I declared that the deed was completely executed, and before I annulled the bankruptcy, I should say it would be reasonable to allow the bankrupt an equivalent.

With this expression of his Honour's opinion the matter stood over, in order that Ingle might communicate with the creditors and learn their views on the subject.

signees, that the conduct of the bankrupt had been such Subsequently, it was represented by Reed, for the astion Act, to a certificate, and on that ground the creditors as to disentitle him, under the Bankrupt Law Consolidaobjected to any money allowance being made out of the

estate.

circumstances, he could not interfere. Mr. Commissioner HOLROYD said that, under those

Application refused.