Peffer v Rigg [1977] 1 WLR 285

Plaintiff owned a property and had rented rooms out to Plaintiff made his co-owner, X, trustee of his right to half the house and rental income, before X sold his part ownership of the house to Defendant for a nominal amount. 

Plaintiff’s interests were not registered and were not “overriding interests”.

Plaintiff sued Defendant when she re-let part of the house without his permission.

The court held that:

1. Defendant knew the property was on trust for Plaintiff and subject to his interest. Adherence to the strict requirements of registration or overriding interest was inequitable and therefore on equitable principles it was right to find a constructive trust. He also said that the court had a general jurisdiction to impose a Constructive Trust on a purchaser who acts in bad faith.

2. Graham J also denied Defendant’s interest since, under LRA 1925 someone had to be a “purchaser in good faith” and to take free from unregistered minor interests. Defendant had not purchased in good faith since she knew of the unregistered interest.

   • High standard of good faith demanded if mere “knowledge” is enough