Sub-sect. 2. - This section shall not exempt a purchaser from any liability under, or any obligation to perform or observe, any covenant, condition, provision, or restriction contained in any instrument under which his title is derived, mediately or immediately; and such liability or obligation may be enforced in the same manner and to the same extent as if this section had not been enacted.

Restriction on constructive notice.

Ton, 1892, 2 Q. B. 1, 700; Re Valletort, etc. Co., Ltd., 1903, 2 Ch. 654.

(y) Above, p. 135.

(z) Stat. 45 & 46 Vict. c. 39, s. 3.

(a) By sect. 1 (2) (ii) in this Act, "purchaser" includes a lessee or mortgagee, or an intending purchaser, lessee or mortgagee, or other person, who, for valuable consideration, takes or deals for property, and "purchase" has a meaning corresponding with that of "purchaser."

Sub-sect. 3. - A purchaser shall not by reason of anything in this section be affected by notice in any case where he would not have been so affected if this section had not been enacted.

Sub-sect. 4. - This section applies to purchases made either before or after the commencement of this Act; save that, where an action is pending at, the commencement of this Act (b), the rights of the parties shall not be affected by this section.

Sub-sect. 1 (i) of the above enactment appears to be no more than a statement of the previously existing law(r). But sub-sect. 1 (ii) of the above section has made a substantial alteration of the law. Before this Act came into operation, it was necessary, as a general rule, in order that a purchaser might be affected by notice to his counsel, solicitor, or other agent, that the agent should be affected with notice in the same transaction in which the question of notice to the principal arose (d). But where one transaction was closely followed by and connected with another, or where it was clear that a previous transaction was present to the mind of the agent when engaged in another transaction, the principal was affected by notice to the agent, although received in the previous transaction (e). This exception to the general rule has been removed by the above section. Thus, where A. first mortgaged his share under the trusts of a will to B., who was his solicitor and was also the solicitor of the trustees of the will, and this mortgage was afterwards transferred to C. and then to D. B. acting as C.'s and D.'s solicitor; and within a year after the transfer to D., A. mortgaged the same property to E., when B. acted as A.'s and E.'s solicitor; and E. was the first to give actual notice of his charge to the trustees, who had no personal knowledge of the previous mortgage: it was held that E. was not affected with notice of the previous mortgage by reason of B. having acted as his solicitor, and E.'s charge had accordingly priority over D.'s (f).

(b) Immediately after the 3lst Dec. L882; seet, l (2).

(c) Bailey v. Barnes, 1894, 1 Ch. 26, 35: Berwick .V & Co. v. Price, 1905, l Ch. 632, 639; see Jones v.. Smith, l Hare, 43, l Ph. 244; Wilson v. Hart, L. R 1 Ch. 463; Carter v. Williams, E. K.; Eq. 678; Ratcliffe v. Barnard, L. R.

6 Ch. 652; Agra Bank v. Barry, L. R. 7 H. L. 135: Potman v. Harland, 17 Ch. D. 353; Ketttle well v. Watson, 21 Ch. D. 685.

(d) Sug. V. & P. 757.

(e) Hargreaves v. Rothwell, 1 Keen, 154, 159; Sug. V. & P. 757; see the cases stated below, pp. 250 - 253.

The rule that a purchaser is affected by notice to his counsel, solicitor or other agent (g), seems to rest on this ground: - When a man employs such agents to transact his business he holds them out to the world as standing in his own place and representing himself, in fact, as being identical, for the purposes of the business which he has authorised them to transact, with his own person. He must therefore accept this representation of himself by another, which is the consequence of his own act in employing an agent, as complete for all the purposes of such business, and cannot justly be permitted to sever the identity of person created by him so as to repudiate notice or knowledge given to or acquired by the agent, but not in fact communicated to the principal (h). It is therefore said that, when the relation of principal and agent and the duty of the agent to communicate any matter to the principal have been established, an irrebuttable presumption arises that the agent communicated the matter to the principal - evidence is not admissible to prove that the agent did not in fact communicate his knowledge to the principal (i). The rule is, however, subject to the exception that, if the matter, of which it is sought to affect the principal with notice, be the agent's own fraud or fraudulent dealing or some equity arising thereout (k), or if the agent during the time of his employment as such, and when he acquired the information in question, was a party to a scheme of fraud (l), then the principal is permitted to give evidence to rebut the above presumption and to prove his ignorance of the matter; for the supposition that the agent communicated his own fraud to the principal is too improbable to be entertained even by a Court of Equity.

Reason for the rule that notice to the agent is notice to the principal.

The exception in case of fraud.

(f) Re Cousins Ch. D. 671; and see below, p. 252; Re Valle-tort, etc. Co., Ltd., 1903, 2 Ch. 654, 663.

(g) Sug. V. & P. 756.

(h) See Kennedy v. Green, 3 My. & K. 699, 719; Boursot v. Savage, L. R. 2 Eq. 134; cf. Blackburn v. Vigors, 17 Q,. B. D. 553, 12 App. Cas. 531; Blackburn v. Haslam, 21 Q. B. D. 144.

(i) Fry, J., Kettlewell v. Watson, 21 Ch. D. 685, 704-707; Berwick & Co. v. Price, 1905, 1 Ch. 632, 639, 640.

Some very tine distinctions were taken with regard to the above rule and its exception, before the passing of the Conveyancing Act, 1882 (m). Thus it was decided that, where a solicitor has been or is acting fraudulently, but the circumstances are such that if the purchaser were represented by another solicitor innocent of the fraud, that solicitor would be put upon inquiry and so affected with notice of some equity other than that arising out of the fraud, the client will be affected with notice of this equity, notwithstanding the solicitor's Fraud (n). And it was even held, that where in the same transaction a solicitor is engaged in committing a fraud, but has notice of some equity independent of that arising out of his fraud - as where he is a trustee engaged in wrongfully disposing of the trust property for his own benefit - any person who is his client in that transaction will be affected with notice of such independent equity, notwithstanding that, if the client were represented by another solicitor, that solicitor would not be put upon inquiry (o). And it was considered that, where the matter of which notice is sought to be imputed is not the solicitor's own fraud or unjust dealing, the mere fact that it was fraudulent or wrongful of the solicitor to conceal the matter from the client is not sufficient to exempt the client from the consequences of the rule (p). For example, where a solicitor fraudulently induced a client, who was a mortgagee of leaseholds, to execute (without receiving any money) a deed conveying the legal estate to him as upon a transfer of the mortgage, and having subsequently acquired the equity of redemption mortgaged the whole property to another, for whom he acted as solicitor in the transaction, it was held that the latter mortgagee was not affected with constructive notice of the solicitor's fraud on the original mortgagee. But, it appearing that the peculiar form of the deed of transfer of the mortgage and of the receipt endorsed thereon were sufficient to put a solicitor innocent of the fraud upon inquiry whether any money had been paid on the execution of the transfer, it was considered that the latter mortgagee was affected through the solicitor with notice of the equity arising from the fact that no money had been paid, notwithstanding the solicitor's fraud (q). 80, where a solicitor, being one of three trustees entitled to certain leasehold land, the trust not being disclosed on the face of the title deeds, sold and assigned the land to a purchaser, for whom he acted as solicitor, by forging the signatures of his co-trustees to a letter of authority to sell and to the deed of assignment, and it was considered that the deed was a nullity on their part, but passed the legal estate in one-third of the land, the Court held that the purchaser was affected, through the solicitor, with notice of the trusts; for it was said that if the client would be affected with constructive notice of a trust, the existence of which is known to his solicitor, in the case where there was no fraud, the fact that the solicitor was committing a fraud in relation to the trust could not afford any reason why the client should not be affected with constructive notice of the existence of the trust (r). The application of the rule, where the solicitor had notice of some equity not arising out of his own fraud and the only fraud was in his concealment thereof from his client, is illustrated by the following cases: - A solicitor took a mortgage of an equity of redemption and sub-mortgaged it. Soon afterwards he and the first mortgagee and the mortgagor joined in a new mortgage of part of the property, he acting as solicitor of all the parties to the transaction and suppressing all mention of the sub-mortgage. It was held that the new mortgagee was affected, through the solicitor, with notice of the sub-mortgage; notwithstanding that it was fraudulent or wrongful of the solicitor to conceal the sub-mortgage from him(s). A solicitor entitled to an equitable interest in land in Middlesex mortgaged the same to A. by deposit of title deeds and letters of charge, which were not registered. He afterwards mortgaged the same interest by registered deed to B., for whom he acted as solicitor in the transaction. It was held that B. must be taken to have had notice of A.'s mortgage, the Court refusing to find a ground of exception from the general rule in the fact that it was to the solicitor's interest to conceal the prior mortgage from A., and declining to presume that in this conflict of interest and duty the solicitor consulted his own interest in preference to performing his duty to his client (t). The exception to the rule was allowed to prevail in Sharpe x. Foy (u), where a husband and wife mortgaged land, to which the wife was entitled at common law, but which was subject to a covenant for settlement. The same solicitor acted for the mortgagors and the mortgagee. The mortgagors informed the solicitor of the existence of the covenant, but it was agreed between them that the matter should not be mentioned to the mortgagee. It was decided that the mortgagee was not affected, through the solicitor, with notice of the covenant, as the solicitor was party to a scheme of fraud. Again, in Cave v. Cave (x), a solicitor, who was the sole trustee of a marriage settlement, wrongfully applied part of the trust funds in the purchase of certain laud, which was conveyed to his brother. A. advanced to the brother 4,500/. on a first mortgage of this land. The solicitor acted for A. in this transaction, but represented to A. that his brother was the owner of the land, and that the mortgage contained absolute covenants for title by the brother. The solicitor also raised loans for his brother from other persons on mortgage of the same land. In these circumstances the Court found that the trust funds were applied in purchase of the land in pursuance of a scheme of fraud to which the solicitor was a party, his design from the first being to enable his brother to raise money on mortgage of the land; and it was held that A. was not affected, through the solicitor, with notice of the equities in favour of the cestui-que-trusts under the settlement.