Competing equitable interests where the equities are not equal

Where there are competing equitable interests in the same land, the later interest may have priority if the earlier interest is the result of an artificial transaction or if the owner of that interest has made it possible for the second interest to be created.

In Nu Life International Ltd v Healthy Living Products International Ltd ([2008] 2 HKLRD 297) Nu Life International claimed to have an equitable interest under a resulting trust in respect of a house in Sai Kung. The house had been sold to a Mr Murray. Nu Life International claimed that its equitable interest had priority over that acquired by Mr Murray under the purchase agreement. The claim was dismissed on other grounds but the court suggested that Mr Murray’s later equitable interest might have had priority anyway. Deputy Judge Gill referred to Freeguard v Royal Bank of Scotland plc ((2000) 2 HKLRD 297) where to give priority to the earlier interest would be to give effect to a thoroughly artificial transaction. He also referred to the passage in the judgment of Lord Selborne in Dixon v Muckleston ((1872 – 73) LR 8 Ch App 155) which spoke of an earlier equitable interest being postponed to a later where the owner of the earlier interest had ‘armed another person with the power of going into the world with false colours.’

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