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 just cited prove the wisdom of the ordinary rule which refuses to set aside a conveyance on the mere ground of inadequacy of consideration. If undervalue, not so gross as to be indicative of fraud, and unaccompanied by pressure, is of itself to be a sufficient ground for granting such relief, the question whether the undervalue is gross, or only trivial, cannot arise; and the Court must set aside the deed in every case where the actual consideration falls short of the full value. The paternal care thus exhibited towards expectant heirs and reversioners overstepped the bounds of a legitimate protection, and rendered their expectant interests practically unsaleable, unless they were willing to encounter the publicity, delay, and additional expense of a sale by auction.
General remarks on the cases.
To remedy this state of the law, the Sales of Reversions Act, 1867, which came into operation on the 1st Jan., 1868, provided that no contract, conveyance, or assignment under or by which any beneficial interest in any kind of property may be acquired, made in good faith, and without fraud or unfair dealing, of any reversionary interest in real or personal estate shall be opened or set aside merely on the ground of undervalue: but this enactment does not apply to any purchase concerning which a suit was pending on the 1st Jan., 1868. The rule as to non-interference after conveyance, on the mere ground of undervalue, is now the same whether the estate sold is in possession or reversion ; and, as in the former case, the inadequacy may be so great as of itself to furnish evidence of fraud, so, notwithstanding the late Act, the same rule also applies with equal, if not greater, force, to the purchase of a reversionary interest (n).
Change made by 31 Vict, c. 4.
(i) And see Edwards v. Burt, (1852) 2 D. M. & G. 55, 62.
(k) Jones v. Ricketts, (1862) 31 Beav. 130 ; 31 L. J. Ch. 753.
(0 Foster v. Roberts, (1861) 29 Beav. 467 ; 30 L. J. Ch. 666.
(m) See dictum of the M. R. at p. 471 in Foster v. Roberts, sup.
The effect of the Act, and the present state of the law on the subject, is clearly stated in the words of Lord Selborne (o) : "The Act is carefully limited to purchases 'made in good faith, and without fraud or unfair dealing,' and leaves undervalue still a material element in cases in which it is not the sole equitable ground for relief. Those changes of the law have in no degree altered the onus prohandi in those cases which, according to the language of Lord Hardwicke (p), raise ' from the circumstances or conditions of the parties contracting - weakness on one side, usury on the other, or extortion, or advantage taken of that weakness ' - a presumption of fraud. Fraud does not here mean deceit or circumvention ; it means an unconscientious use of the power arising out of these circumstances and conditions; and when the relative position of the parties is such as to raise this presumption the transaction cannot stand, unless the person claiming the benefit of it is able to repel the presumption by contrary evidence proving it to have been in point of fact fair, just, and reasonable." " The conditions which throw the burden of justifying the righteousness of the bargain upon the party who claims the benefit of it " (q) thus remain the same as they were before the Act, with the exception only that mere inadequacy of consideration alone is not sufficient to avoid the sale (r).
Present state of the law.
(n) Miller v.Cook:, (1870) 10 Eq. 641; 40 L. J. Ch. 11 ; Tyler v. Yates, (1871) 6 Ch. 665 ; 40 L. J. Ch. 768 ; Kcvans v. Joyce, (1896) 1 Ir. R. 442 ; cases since the Act, where mortgages given under extreme pressure and at an exorbitant rate of interest were ordered to stand as securities for the moneys actually advanced, with interest at 5 per cent.
(o) Earl of Aylesford v. Morris,
(1873) 8 Ch. 484, 490 ; 42 L. J. Ch. 546.
(p) Lord Chesterfield v. Janssen, (1750) 2 Yes. sen. 125, 155.
(q) (1873) 8 Ch. 492.
(r) Earl of Aylesford v. Morris, supi. ; Bcynon v. Cook, (1875) 10 Ch. 389 ; O'Rorkc v. Bolingbroke, (1877) 2 A. C. 814, 833 ; Nevill v. Snelling, (1880) 15 Ch. 1). 679 ; 49 L. J. Ch. 777 ; Fry v. lane, (1888) 40 Ch. D
Thus, when the vendors were poor and ignorant and without separate independent professional advice, and the sale of reversionary interests was at a considerable undervalue, they were set aside (s). So, where the plaintiff had sold a reversionary interest at a great undervalue without independent advice, and there was evidence of unfair dealing (t).
Cases since the Act.
Where goods were sold to a person in distressed circumstances by a tradesman, who knew that they were bought merely with a view to raise money by selling them again, and they were charged at fair and reasonable prices, and the purchaser, by way of security for the price, mortgaged his reversionary interests as expectant heir, the Court would not set aside the securities (u). In an earlier case, a bond given for silks taken up to sell to raise money, was allowed to stand as a security only for the sum really raised (x) : but the decision turned upon the transaction being a loan at usurious interest; the transfer of goods being a shift or cloak for usury (y).
Security for price of goods bought to resell and so raise money, supported.
It would seem that where fraud has been practised on a tenant in tail, and has been carried into effect by barring the entail, and he dies without issue, and without confirming the transaction, the next remainderman may file a bill to set it aside; but not if there were an independent intention to bar the entail, and the fraud applied only to some part of the transaction distinct from that object (z).
Sale fraudulent as against tenant in tail, when set aside at suit of remainderman.
When relief is given, the conveyance will, unless the transaction were merely colourable (a), stand as a security for the principal sum and simple (but not compound (b)) interest (c) ; and for moneys expended by the purchaser in lasting and valuable improvements, and interest (d) ; and where interest has been charged to the expectant heir at an exorbitant rate, it will be reduced, notwithstanding the repeal of the usury laws (e).