When the court of equity introduced some rules and doctrines to mitigate the harshness of Common Law, with it came the Doctrine of Notice. The doctrine was a tool by the court of equity (the Chancery Court) to determine priorities between rival claimants of interest in property especially where one is an equitable interest and the other a legal interest.
Prior to the evolution of the Court of Equity the only judicial nomenclature available to the English man of the time was the Common Law courts. These courts were bound by strict rules which occasioned great hardship to the people of the time. Worst still, the rules were so religiously adhered that they could not be varied even for a just course. Instances of such rules abound but one example is where the Common Law court under a trust only recognized the right of the legal owner of property (the trustee) and disregarded beneficiary’s equitable interest on the property even where duly and rightfully entitled.
However, with the advent of the Court of Equity, it regarded the beneficiary of a trust property even though with equitable interest to be the owner of that property. Therefore, while the trustee was the owner at law, the beneficiary was the owner in equity. These conflicting opinions of the different courts brought about two distinct rights; legal rights and equitable rights with the former being enforced by the Common Law Court and latter by the Court of Chancery.
With the fusion of the Court of Chancery and the Common Law Court by the Judicature Acts of 1873 -75, there was still great need to distinguish between legal and equitable rights as it was the administration of the rights and not the rules of the court that were fused. Hence where ‘A’ acquires a legal interest in property for value without notice of ‘B’s prior equitable interest, ‘A’ will take free. But if ‘A’ acquires an equitable interest without notice of ‘B’s prior equitable interest ‘A’ takes subject to the interest of ‘B’. Where however, ‘A’ acquires an interest whether legal or equitable with notice of ‘B’s prior equitable interest, ‘A’ takes subject to ‘B’s. By this, the doctrine of notice was created by equity as a tool to determine priorities amongst competing interest.
The question of priority becomes important when there are two or more competing interest in property, more so when the various competing interest cannot be satisfied by the total value of the property that is subject to these interests. According to Maitland;
It happens with unfortunate frequency that a man having title to land contrives by means of fraudulent concealment to get money from a number of different persons on the security of the land – then disappears – and the lenders are left to dispute among themselves as to the order in which they are to be paid out of the value of the land which is insufficient to pay them all.