The title deeds as a source of constructive notice

Sometimes the title deeds will put the purchaser on constructive notice of an equitable interest and so prevent the purchaser from being equity’s darling. In Sun Sek Haw v Au So Kum ([1999] 3 HKLRD 12) a careful reading of the title deeds revealed that the chain of title included a gratuitous transfer by two administrators of a dead person’s estate to one of those administrators. This was a breach of trust and any of the people with an interest under the dead woman’s estate could apply to have the transfer set aside. The appellants in this case had entered into a contract to buy the property and their solicitors had noticed this weakness in the seller’s title. The question was whether a reading of the title deeds just mentioned put them on constructive notice of the prior equitable interests. If so, they could be released from their obligation to buy the property.

The Court of Appeal found in the purchasers’ favour: they had constructive notice of the prior equitable interests and so need not buy the property. Rogers JA said:

‘[T]he question which should be asked is whether the enquiries which a conveyancing solicitor would have made as a matter of prudence have revealed the fact which would have given the purchaser constructive notice.’ (at 22)

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