Prior to decision, the generally accepted principle under English law was that pursuant to the nemo dat rule it was impossible for a person to convey a security interest in property which they did not own at the time of granting the charge.

The underlying borrower was a businessman named James Taylor, who was engaged as a damask manufacturer at Hayes Mill, Ovenden, near Halifax, Yorkshire.

They subsequently sold it back to him, but because he could not pay for it, the purchase price was left outstanding and a security interest was granted over the machinery.

Lord Westbury started by noting that the respondents had conceded that if the mortgagees (the Holroyds) had an equitable interest in the added machinery then it could not be seized by them as judgment creditors.

This drove him to the inevitable conclusion that: There can be no doubt, therefore, that if the mortgage deed in the present case had contained nothing but the contract which is involved in the aforesaid covenant of Taylor, the mortgagor, such contract would have amounted to a valid assignment in equity of the whole of the machinery and chattels in question, supposing such machinery and effects to have been in existence and upon the mill at the time of the execution of the deed.

[8]Therefore, he concluded: Apply these familiar principles to the present case; it follows that immediately on the new machinery and effects being fixed or placed in the mill, they became subject to the operation of the contract, and passed in equity to the mortgagees, to whom Taylor was bound to make a legal conveyance, and for whom he, in the meantime, was a trustee of the property in question.