This section is from the book "Dart's Treatise On The Law And Practice Relating To Vendors And Purchasers Of Real Estate", by J. Henry Dart . Also available from Amazon: A treatise on the law and practice relating to vendors and purchasers of real estate.
The cases to be considered under this section may be classified under two heads.
Two classes of cases:
I. Where a man has a trust for, or power of sale - as a trustee or mortgagee, or as the vendor's agent for sale - he cannot, as a rule, himself become the purchaser. "A sale by a person to himself is no sale at all (l)."
1st class, where the nature of the authority prevents purchase.
II. Where A. stands to B. in such a fiduciary, or even confidential, position that it is his duty to consider the interests of B. as paramount to his own, a sale by B. to A. is not in the strict sense voidable; but the burden is cast on A. to show that it was in all respects fair, and that no improper influence was exercised.
2nd class, arising from relation of parties.
In cases coming under the first class, the fact that no advantage has been made by the trustee, agent or mortgagee, is no answer to an impeachment of the transaction. "It may sometimes happen that the terms, on which a trustee has dealt, or attempted to deal, with the estate or interests of those for whom he is a trustee, have been as good as could have been obtained from any other person: - they may even at the time have been better. But still so inflexible is the rule that no inquiry on that subject is permitted " (m).
Application bo 1st class;
(g) See Sug. 14th ed. 686.
(h) Burnett v. Howard, 1900, 2 Q. B. 784; 69 L. J. Q. B. 955.
(i) See Divorce, etc. Act, 1857, s. 21; 1858, s. 6; Summary Jurisdiction (M. W.) Act, 1895, s. 5; Be Hughes, 1898, 1 Ch. 529.
(k) See Portland v. Prodgers, (1689) 2 Vern. 105; and other cases cited, 2 Rop. H. & W. 2nd ed. 120.
(l) Per Lindley, L. J., in Farrar v. Farrars, Ltd., (1889) 40 Ch. D. p. 409. See, however, the power given by s. 68 of the S. L. Act, 1925, to a tenant for life to purchase.
But in cases belonging to the second class only, the fact that the terms were as good as could have been obtained becomes very material. It may be added that evidence of knowledge appears to be relevant only as evidence of a dissolution or waiver of the relationship, whether the case falls under the first or the second rule (n).
To 2nd class.
Cases falling within the first class are the following: Cases falling within 1st class:
A trustee (and formerly an assignee) of a bankrupt (o); and the rule precludes a purchase by the trustee's partner on behalf of his firm (p); or by any one so related to the trustee as to stand in a better position than an ordinary purchaser (q). The Court has, however, on the petition of a purchasing assignee, directed a reference to inquire whether the purchase would be for the benefit of the estate, he paying all the costs (r); and, on the report being favourable, has confirmed the sale (s). It has also, under special circumstances, allowed an assignee to be removed, at his own request, in order that he might bid at the sale of the bankrupt's estate (t). Where, however, an assignee, who was also second mortgagee of the property, applied for leave to bid, (remaining assignee,) the Court refused the application, but allowed him to name a price at which he might take the property if not sold at the auction (u). Where one of the creditors' assignees in bankruptcy bought, in another person's name, from a creditor, such creditor's right to a dividend in the bankruptcy, the transaction was declared void (x).
Trustees in bankruptcy.
(m) Aberdeen R. Co. v. Blaikie, (1854) 1 Macq. 461.
(n) Dunne v. English, (1874) 18 Eq. 524; Albion Co. v. Martin, (1875) 1 Ch. D. 580; 45 L. J. Ch. 173; and see Stubbs v. Slater, 1910, 1 Oh. p. 203. The decision in this case was overruled on the facts, 1910, 1 Ch. 632, but the law remains as stated by Neville, J., at p. 203. See also Fox v. Mackreth, 2 Wh. & T. L. C. 9th ed., p. 663, and notes thereto.
(o) Ex p. Lacey, (1802) 6 Ves. 625, 630 n.; Ex p. Bennett, (1805) 10 Ves. at p. 395; Ex p. Alexander, (1835) 2 M. &. A. 492; Turner v. Trelawny, (1841) 12 Si. 49; 10 L. J. Ch. 249; Pooley v. Quitter, (1858) 2 De G. & J. 327; 27 L. J. Ch. 374.
(p) Ex p. Burnell, (1843) 7 Jur. 116; Re Moore, (1881) 51 L. J. Ch. 72.
(q) Ex p. Forder, (1881) W. N. p. 117.
(r) Ex p. Gore, (1842) 3M.D.& D. 77.
(s) S. C, 7 Jur. 136.
It is often said that though an ordinary trustee may purchase trust property from his beneficiaries, a trustee for sale cannot do so (y); but the true rule is, that a trustee for sale cannot unite in himself the characters of buyer and seller; or, in other words, purchase from himself, either directly or indirectly (z), instead of from his beneficiaries (a). When the purchase is from the beneficiaries, and the sale is not conducted, either directly or indirectly, by the trustee for sale, the transaction is not a case of a man selling to himself, and is accordingly taken out of the first class of cases. Apart from circumstances of doubt or suspicion, there is no rule that a person who has ceased to be a trustee of an instrument containing a trust for sale is precluded from becoming a purchaser of the trust property (b).
Trustee holding land on trust for sale.
A tenant for life who acquires land comprised in this settlement must do so from the trustees under s. 68 of the S. L. Act, 1935.
Tenant for life.
(t) Ex p. Perkes, (1843) 3 M. D. & D. 385.
(u) Ex p. Holyman, (1844) 8 Jur. 156.
(x) Pooley v. Quitter, (1858) 2 De G. & J. 327; 27 L. J. Ch. 374.
(y) Benton v. Bonner, (1856) 23 Beav. at p. 290; Luff v. Lord, (1864) 34 Beav. 220; affd. 11 Jur. N. S. 50; and see Franks v. Bollans, (1868) 3 Ch. 717.
(z) Re Postlethwaite, (1888) 59 L. T. 58; reversed on other grounds, 60 L, T. 514.
(a) Ex p. Lacey, (1802) 6 Ves. 625; Luff v. Lord, (1864) 34 Beav. 220; Williams v. Scott, 1900, A. C. at p. 508; 69 L. J. P. C. 77.
(b) Be Boles and British Land Co., 1902, 1 Ch. 244; 71 L. J. Ch. 130.