Equity - 'Bona Fide Purchase of a Legal Interest for Value Without Notice of a Pre-existing Equitable Interest' Defence
. Toronto-Dominion Bank v. Canada
In Toronto-Dominion Bank v. Canada (Fed CA, 2020) the Federal Court of Appeal considered the equitable title defence of taking property unknowing of an encumbrance:
[73] First, in i Trade Finance Inc. v. Bank of Montréal, 2011 SCC 26, [2011] 2 S.C.R. 360, at paragraph 60, the Supreme Court quoted with approval the following explanation of the bona fide purchaser for value defence:
The full name of the equitable defence is ‘bona fide purchase of a legal interest for value without notice of a pre-existing equitable interest.’ The effect of the defence is to allow the defendant to hold its legal proprietary rights unencumbered by the pre-existing equitable proprietary rights. In other terms, where the defence operates, the pre-existing equitable proprietary rights are stripped away and lost in the transaction by which the defendant acquires its legal proprietary rights.
(L. Smith, The Law of Tracing (1997), at p. 386 (footnote omitted, underlining added))
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