Britannia BS v Earl [1990] 1 WLR 422 (CA)

Facts

• Britannia Building Society held a first legal charge (mortgage) over a property.
• Mr. Earl claimed an equitable interest in the same property and argued that his interest should take priority over the Society's charge due to the conduct of the parties and the transaction's circumstances.
• Mr. Earl had not registered his interest or taken steps to ensure its priority.
• The Britannia Building Society was found to have acted in good faith, taking all necessary steps to protect its interest.
• There was no evidence of negligence, fraud, or other misconduct on the part of the Society.
• The dispute concerned whether the Society's equitable interest could be postponed to Mr. Earl's subsequent equitable interest.

Issues

1. Whether Mr. Earl’s equitable interest could be recognized as having priority over the building society’s charge.
2. Whether the postponement of the building society’s interest to Mr. Earl's could be justified on realistic and practical grounds.
3. What impact, if any, the conduct of the parties had on the priority of their respective interests.

Decision

• The Court of Appeal held that postponement of an equitable interest must be supported by realistic and practical considerations, not theoretical or speculative ones.
• The evidence did not show any conduct by the Britannia Building Society that justified altering the priority of interests.
• Mr. Earl’s failure to take protective steps for his interest (such as registration) undermined his claim to priority.
• The building society’s equitable interest was not postponed to Mr. Earl’s subsequent interest.
• The decision clarified that the conduct of the parties and practical implications are decisive in determining priority of equitable interests.

Legal Principles

• The principle of qui prior est tempore potior est jure (he who is first in time is stronger in law) generally determines priority among equitable interests, but this may be displaced by party conduct or statutory intervention.
• Postponement of priority between equitable interests must be justified by realistic and practical considerations and not by mere hypothetical or speculative arguments.
• A party’s good faith and proactive protection of its interest are essential in retaining priority, while inaction or failing to register may defeat a claim for postponement.
• The broader doctrine of equity aims to balance interests fairly and justly, applying principles in a practical manner.

Conclusion

The Court of Appeal confirmed that postponement of an equitable interest in property must be based on tangible and practical considerations, not mere speculation; parties must act in good faith and take steps to protect their interests, as inaction or lack of evidence justifying postponement will not alter the established priority.