This problem is worth a total of 30 marks.
Robert and Alice have been in a relationship for six months. They decide that they want to go into business together. They want to open a café in Parkville in the base of a two-storey terrace and live in the top floor. An appropriate house is for sale in Parkville at an asking price of $3 million. They enter into a contract of sale to purchase the house. They each pay half of the 10% deposit and jointly enter into a mortgage with Westlink Bank for the remaining 90% of the price. Upon signing the contract, they lodge a caveat to protect their interest in the house. The transfer does not set out the nature of the co-owner relationship between Robert and Alice. However, before signing the transfer, they enter into an agreement setting out their intention to divide their interests and obligations in the house and the business equally.
The transfer is eventually registered into the names of both Robert and Alice. The mortgage with Westlink Bank is also registered. After three months the café is booming, and Robert and Alice are able to pay off 25% of their mortgage. Robert subsequently decides that they need bigger premises. He borrows money from his family for this purpose but does not tell Alice because he does not think she would agree. Robert is a trustee of the family trust. Without consulting his brother, Richard, who is also a trustee, he transfers $1million from the family trust into his bank account. Robert and Alice then sell the terrace house in Parkville and purchase a bigger property in Princes Hill for a price of $5million. To purchase the Princes Hill property, Robert uses the money they receive from the sale of the Parkville house as well as the money he has taken from his family trust. They also take out a new mortgage with Westlink. The Princes Hill property is subsequently registered in the name of Robert and Alice. The nature of their co-ownership is not set out. Due to an error, the mortgage with Westlink is not re-registered over the Princes Hill property. Westlink does not realise this error and therefore do not lodge a caveat.
During the course of setting up the café in the new premises, Robert and Alice decide to redevelop the back of the property into a carpark for their customers. They apply for a permit with the Yarra Council for this purpose. Before the Council will approve of the permit, the owner of the neighbouring property lodges an objection within which he asserts he has an adverse possession claim over 15 feet of the area which has been designated as a car park. There is no fence around the area, but the neighbour argues that he has been parking his car in the same spot for 10 years and this should mean he has a right to continue to do so.
As soon as COVID19 hits, the café is forced to close. Robert and Alice default on their mortgage. The bank tries to be reasonable, given the pandemic, but it quickly becomes clear that it is not possible for Robert and Alice to pay the mortgage instalments. Westlink seeks to exercise its power of sale. Before it can do so, Robert’s brother, Richard, lodges a caveat on the property on behalf of the beneficiaries of the family trust. The combined impact of the pandemic and his financial and family woes are too much for Robert who subsequently suicides. He leaves all of his property to his only brother Richard.
Answer the following questions:
- Describe the nature of the co-owner relationship between Robert and Alice over both the Parkville and the Princes Hill premises?
- Discuss the enforceability of the adverse possession claim by the neighbouring owner against the Princes Hill premises.
- Discuss the enforceability of the claim by Richard against Robert and Alice.
- Discuss the enforceability of the claim by Richard against Westlink.
Problem 2
This question is worth a total of 30 marks. All questions are compulsory
Jamie decides to buy a property in Burwood for $750,000. She pays the deposit of $75,000 with her own savings and signs the contract of sale. She does not lodge a caveat to protect her interest. In order to complete the purchase Jamie requires further finance. She is a favourite child and, after she tells her parents of her purchase, they advise her that they will give her the rest of the money for the property. Jamie tells them she will ‘pay them back when she can.’ No formal loan agreement is executed.
Jamie eventually becomes the sole registered proprietor and acquires a duplicate certificate of title which she stores in her unlocked filing cabinet. She asks her parents whether they would like to have the duplicate certificate of title but they tell her it will be safer if it is kept with her. However, Jamie’s brother, Justin, is envious of her close relationship with their parents. He decides to steal the certificate of title which he does. He then proceeds to forge a transfer of Jamie’s home into his name. He takes the stolen duplicate certificate of title and the forged transfer to Capital Bank. Capital Bank approve a mortgage over the property and make the funds available to a bank account that Jamie’s brother has nominated. The transfer and mortgage are subsequently registered.
Justin absconds with the funds. Capital Bank seeks to enforce their security over Jamie’s house when the mortgage is not paid. Capital Bank subsequently sells the property quickly, at market value, to a purchaser following an online auction during the Covid19 pandemic. Before the purchaser can be registered, Jamie’s parents lodge a caveat claiming an equitable mortgage on the property.
Your advice is sought on the following:
Answer the following questions:
- Will either Capital Bank or Justin acquire an indefeasible title?
- What is the nature of the interest that Jamie’s parents have in the Burwood property and can they enforce it against the purchaser ?
- What other remedies might be available to Jamie?
