§ Order for Committee read.
§ House in Committee.
§ Clause 1 (Implied or constructive Notice as affecting Purchasers for value and Mortgagees).
THE SOLICITOR GENERAL
said, that the hon. and learned Member for Reading (Sir F. Goldsmid) had given notice of a Motion for the omission of the clause; and, certainly, rather than that it should pass in its present shape it would be better to expunge it altogether. The clause as it stood would disturb and unsettle the existing state of the law regarding constructive notice, which was pretty well understood by those who had to investigate the title to property. It proposed to enact that where a purchaser for valuable consideration or a mortgagee had not direct notice of any instrument or incumbrance affecting the title to the property purchased, or taken in mortgage, but was sought to be charged by constructive notice, he should not he made liable by reason of any such instrument or incumbrance unless the court before which the question was raised should he of opinion that the conduct of such purchaser or mortgagee amounted to fraud, or unless the circumstances of the case were such as to satisfy the court not only that he might have acquired, but that in the exercise of ordinary care and diligence he ought to have acquired, the knowledge with which it was sought to affect him. Until there had been a judicial decision upon the words of the clause, nobody could tell what legal effect they would have; and he thought the Committee ought to pause before it substituted so vague a rule for principles already well known and defined. Moreover, the clause tended to favour the wrong party; 425 for in a case in which the question might be, which of two innocent parties should suffer from the fraud of a third, the operation of the clause might be to favour the more negligent at the expense of one who had used greater diligence, and was also prior in time. This did not seem to him to be a change in the right direction. He had, therefore, himself prepared an Amendment which, while it would mitigate the harshness of the present rule of constructive notice, would be free from the objections to which the clause as it stood was liable. He should propose that the latter part of the clause, beginning at the tenth line, should be omitted, in order to substitute other words protecting the purchaser or mortgagee from all liability on the ground of constructive notice of documents of which he knew nothing except from their being imperfectly recited in other instruments, unless the production of the documents so recited ought to have been required for the purpose of showing the title of the vendor or mortgagor.
§ MR. MALINS
remarked, that upon so abstruse a subject it would be impossible to discuss the Amendment unless it were printed.
THE SOLICITOR GENERAL
said, he was willing to take any course the House might desire as to printing the Amendment; but unless the proposition were acceded to, he should feel bound to oppose the clause altogether.
§ SIR FITZROY KELLY
said, he could not agree that the law upon the subject was at all settled, and, even if it could be called settled, that it was not open to great improvement. Neither could he agree that the clause left any doubt as to what should be the real test of notice. At present, if a person purchased an estate, and his solicitor took all possible pains to investigate the title by laying the deeds before a conveyancer, who reported them to be satisfactory, and after the completion of the purchase it appeared that a certain prior transaction mentioned in the deeds was untruly described—money advanced not having been repaid as stated—the mention of that transaction was held to be constructive notice. It was to remedy that injustice that the Bill was framed. The proposed measure, or one similar, had passed three times the House of Lords. and was recommended by the highest legal authorities in that House. He did not believe that the Amendment proposed by the hon. and learned Solicitor General would effect any improvement in the law, 426 and that the public interest would he best served by passing the Bill as it came from the House of Lords. The principle of the clause was to remedy an injustice to which innocent purchasers were liable, and he could not see what better test of notice could be provided than was afforded by the words of the clause.
§ SIR FRANCIS GOLDSMID
stated, that he should oppose the passing of the clause unless the proposed Amendment of his hon. and learned Friend were assented to. High authorities in the House of Lords having been referred to, it might be well to consider how the House of Commons had dealt with preceding clauses of a similar nature. In I860 a clause to the same effect was objected to by the right hon. Gentleman the present Secretary of War, Mr. Deasy, and others; and the right hon. Member for the University of Cambridge, who had charge of the Bill, requested that the clause might pass pro formâ, undertaking to consult, the Attorney General. The clause was struck out without further observation, and the inference was that the opinions of the Attorney General were unfavourable. Last year the same clause in substance came down in a separate Bill from the Lords, and that Bill was reported against by a Select Committee. That Committee was not obliged to reject the Bill; but it might have amended it if it had considered it desirable to do so. The present Bill would have the effect of unsettling the law, and rendering it more obscure. Lord Cranworth had laid it down, and Lord St. Leonards had adopted the doctrine, that the question of notice was not whether the purchaser might have obtained knowledge, but whether his not obtaining it was an act of gross and culpable negligence. That decision was intelligible, but this clause would only create difficulty and uncertainty by using other words—"in the exercise of ordinary care and diligence." The law was now defined, but the Bill would unsettle it, and give rise to litigation from a belief that a different rule had been sanctioned by Parliament.
§ MR. MACDONOGH
said, the Bill came down from the House of Lords commended by the highest authority. The object of the Bill was to protect purchasers for valuable consideration, and to produce such a Bill Lord St. Leonards said had been the object of his life. The most serious evil and inconvenience with which this Bill proposes to deal is that of constructive notice. It was not enough that courts of equity had postponed the registered to the 427 unregistered deed—that they have fixed an innocent person with the consequences of actual notice to an agent, who deceives that innocent principal, but they have held an innocent purchaser to be affected by constructive notice with which they first fix that agent: that is, the courts have imposed on a purchaser for value the penalty of loss of property in cases where there was a total abstinence of frauds—where neither principal or agent had actual notice of the prior title, and where the entire question is this— Was there constructive notice of the prior equitable right?" Judges are how singularly unanimous in the opinion that the doctrine of constructive notice ought not to be extended In "Hare v. Lord Egmont," Lord Cranworth thus expresses himself—It is highly inconvenient for courts of equity to extend the doctrine of constructive notice: that where a person has actual notice of any matter of fact, there can be no danger of doing injustice, if he is held to be bound by all the consequences of that which he knows to exist. But when he has not actual notice, he ought not to be treated as if he had notice, unless the circumstances are such as to enable the court to say, not only that he might have acquired, but also that he ought to have acquired, the knowledge with which it is sought to affect him—that he would have acquired it but for his gross negligence in the conduct of the business in question.He thought the clause was clear and definite, and therefore he should advise the Committee to adopt it, for it would establish the rule that constructive notice should not be allowed to operate if fraud had not been perpetrated by a purchaser or gross negligence: had not been committed by him. The doctrines of law and equity on this point would then be concurrent.
§ MR. LONGFIELD
said, he should support the hon. and learned Member for Reading if he pressed his opposition to the clause to a division. The clause either made a change in the law or it did not. In the first case it was unnecessary; in the second case it would be mischievous. He could not pretend, on the moment, to pass an opinion on the effect of the Amendment of the hon. and learned Solicitor General.
§ MR. MALINS
said, when the clause was before the House in previous Sessions he had been successful in causing its rejection; it now came in an altered shape, but the mischief still remained. The object of it was simply to carry into effect the law as it was laid down in the case of Hare v. Lord Egmont. As Lord St. Leonards had given the clause his high sanction, and the other Law Lords assented to its principle, and as it would do 428 no harm, though it would lead to no good, he would withdraw further opposition.
THE SOLICITOR GENERAL
said, he would not press his Amendment until hon. Members had had an opportunity of seeing it in print. If, therefore, it was the pleasure of the Committee to pass the clause, he should move his Amendment upon the report. It was remarkable enough that no one could tell the Committee whether the clause altered the law or not; and, with great deference to noble and learned Lords who were said to have endorsed this provision, he should feel bound, if a division were called for, to vote against the clause.
§ MR. WALPOLE
said, that the law was not materially altered by the clause, which would not, if adopted, create confusion, because it was expressed in the very words of the decision which the courts now recognised and acted on. Out of deference to the high authorities from whom it had emanated he should support the clause.
§ SIR FRANCIS GOLDSMID
said, the effect of the clause would be to embarrass the judges, and to produce Chancery suit after Chancery suit. Whatever its effect might be, it professed to be something more than a declaratory clause; it would not tend to prevent the alleged vacillation of the judges, and it would lead to the utmost uncertainty.
§ Question put, "That the clause, as amended, stand part of the Bill."
§ The Committee divided:—Ayes 56; Noes 45: Majority 11.
§ Clause 2.
§ MR. MALINS
would move the omission of the clause. It provided that in every case in which a clergyman was made a bankrupt under the Act of last Session, and the sequestration enforced against the living at the time of the bankruptcy, the sequestrating creditor should lose the advantage of his sequestration. He did not see how it was possible to maintain such a provision.
§ SIR FITZROY KELLY
said, the clause would certainly introduce a new principle; and if the sense of the Committee generally should seem to be opposed to it, he would not put them to the trouble of dividing upon the subject.
§ MR. WALPOLE
said, he could not support the clause. A sequestration creditor should not be placed in a worse position than a creditor under an execution.
§ MR. AYRTON
said, he feared that noble Lords, when considering the Bill, had devoted their entire strength to the first clause, and then, finding the dinner hour 429 had come, left the remaining clauses to their fate. The clause ought not to be retrospective in its character. He thought a sequestration should be placed on the same footing as an ordinary execution, and cease the moment the debtor was declared a bankrupt, so as to become part of the general stock to reimburse the entire body of creditors.
§ Clause negatived.
§ Clause 3 struck out.
§ Clauses 4 and 5 agreed to.
§ On the Motion of Mr. Hadfield, clauses added—
§ A. "Judgments, &c., not to affect Lands until memorandum thereof, deposited in Court of Common Pleas, at Westminster."
§ B. "Certain Provisions of Acts 2 & 3 Vict. c. 11, & 3 & 4 Vict. c. 82, to apply to such Judgments."
§ Remaining clauses agreed to.
§ House resumed.
§ Bill reported, with Amendments; as amended, to be considered on Monday next, and to be printed. [Bill 69.]