## Facts

- The property in question was held by trustees on express trusts for sale, with the trustees having a statutory power to convey the legal estate under the Law of Property Act (LPA) 1925.
- A beneficiary, whose equitable interest would ordinarily be displaced to the purchase money upon a valid overreaching transaction, was approached for consent.
- The beneficiary signed a document purporting to consent, but did so after being given misleading statements about the nature and consequences of the proposed sale.
- In particular, representations made to the beneficiary suggested that the transaction was routine, carried no risk to the beneficial interest, and that the sale proceeds would be safeguarded.
- After completion, it became apparent that the consent had been procured through misrepresentation. The beneficiary therefore challenged the effectiveness of the transaction, asserting that the equitable interest had not been overreached.
- Purchasers, having paid the purchase price to the trustees, relied on the statutory machinery of overreaching and claimed that they had acquired an unencumbered legal estate.

## Issues

1. Whether payment of the purchase price to two trustees, as required by sections 2 and 27 of the LPA 1925, automatically overreaches equitable interests even when a beneficiary’s consent is tainted by misrepresentation.
2. Whether consent obtained through misrepresentation is void or merely voidable, and how that characterisation affects the validity of the trustees’ conveyance.
3. Whether a purchaser who has relied on the statutory formality can nevertheless be met with an equitable claim from a beneficiary whose consent was improperly obtained.

## Decision

- The court held that, while sections 2 and 27 of the LPA 1925 set out the structural requirements for overreaching, the statute presupposes that any necessary consent has been obtained lawfully.
- Consent obtained through deception is ineffective. It is treated as no consent at all for the purpose of permitting the trustees to exercise their power of sale free from the beneficiary’s equity.
- Consequently, equitable interests were not displaced to the purchase money; they remained attached to the land, leaving purchasers with a legal title burdened by the beneficiary’s equitable claim.
- The court emphasised that the protection given to purchasers by overreaching is conditional on the trustees acting within the scope of their authority and in accordance with equitable doctrines.
- Purchasers could not invoke the statutory shield where the transaction was vitiated by fraudulent or misleading conduct.

## Legal Principles

- Overreaching: Sections 2 and 27 LPA 1925 permit a conveyance of the legal estate by at least two trustees or a trust corporation, transferring the beneficiary’s interest from the land to the proceeds of sale, provided the trustees act in proper execution of their power.
- Valid Consent: Equity treats consent procured by fraud, misrepresentation, or undue influence as ineffective. A beneficiary who has been misled may elect to set aside the transaction; where that election occurs, the supposed consent is treated as if it never existed.
- Trustee Duties: Trustees must act bona fide and in the best interests of beneficiaries. If they mislead a beneficiary, they breach fiduciary duty, and any conveyance relying on such misconduct may be set aside.
- Purchaser Protection: The statutory doctrine protects only purchasers in good faith who have paid the price to properly authorised trustees acting within their powers. If the trustees’ authority is compromised by invalid consent, the purchaser’s protection dissolves.
- Equitable Fraud: Misrepresentation capable of influencing a beneficiary’s decision constitutes equitable fraud, giving rise to remedies that include rescission of the transaction or enforcement of the equitable interest against the property.

## Conclusion

Re Herklots establishes that the formal statutory conditions for overreaching are not self-executing; they operate only where the preliminary equitable requirements—including genuine, voluntary beneficiary consent—are satisfied. If consent is contaminated by misrepresentation, it is ineffective, the equitable interest remains attached to the land, and purchasers may find their title exposed to beneficiary claims notwithstanding compliance with the mechanical requirements of the Law of Property Act 1925.


Re Herklots [1964] 1 WLR 583