2022 Revision Exam 4 Q+A- ASSURANCE FUND

EXAMINATION PAPER Faculty of Business and Law Trimester 2 2020 Examination Unit Code: MLL325 Unit Name: Land Law Word count: 2,000 words Anticipated writing time: TWO (2) HOURS Maximum exam time: You must submit your exam response within 48 hours of the exam start date and time. Special instructions for candidates:  This examination is OPEN BOOK.  This examination constitutes 60% of your assessment in this unit.  This examination comprises 2 problem questions. You are required to answer both problems and all questions in each problem .  Type your responses to all questions into a separate single word document and save this document on your computer using the file name: student ID, unit code and the unit name, for example : 216123123_MLL325_LandLaw  The total word limit for your exam response is 2,000 words . This includes all components of your response, including headings, references etc. A 10% leeway above 2,000 words is not allowed.  Upload your exam response to the Exam Submission Dropbox in the CloudDeakin unit site. Check that you upload the correct file.  Late submissions will not be marked.  Remember to save your work regularly.  It is important that you complete this task individually. Your submission will be reviewed for the purposes of detecting collusion and/or plagiarism.  If you encounter any technical issues with CloudDeakin, please contact the IT Service Desk online or via phone (1800 463 888; +61 5227 8888 if calling from outside Australia) and record your ticket number as evidence of technical issues during the examination period.  In the unlikely event that you cannot upload your completed exam paper, email it as an attachment to your unit chair [ samantha.hepburn@deakin.edu.au ] within the submission time.  The breakdown of marks in this exam is: Problem 1 Marks Problem 2 Marks Question 1 10 Question 1 10 Question 2 5 Question 2 10 Question 3 10 Question 3 10 Question 4 5 Total Available Marks 60 Page 1 of 8

MLL325 Land Law T2 2020 EXAMINATION PROBLEM 1: 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 Page 2 of 8

MLL325 Land Law T2 2020 EXAMINATION 2. Discuss the enforceability of the adverse possession claim by the neighbouring owner against the Princes Hill premises. (5 marks) Adverse possession is a paramount interest under the TLA. In Victoria, this is set out in s42(2)(b) which set protect ‘any rights subsisting under any adverse possession of the land’ against the impact of a subsequent registration. Students should display their understanding of the indefeasibility provisions and explain that paramount interests remain unaffected by registration. This would mean that despite the registration of Robert and Alice, the interest of the neighbour in the adverse possession will continue. Further, students should clarify that the provision protects ‘any rights’ this includes accumulating rights. So even if the full adverse possession period has not yet been satisfied, the accumulating adverse possession entitlement of the neighbour is not extinguished. Some students may further point out that Robert and Alice would need to write to the neighbour to reclaim their property prior to the full adverse possession period in order to terminate the ‘rights’. This would allow them to continue with their car park application. 3. Discuss the enforceability of the claim by Richard against Robert and Alice. (10 marks) Richard’s claim has two foundations. First, he has a claim as a beneficiary of Robert’s estate. He will inherit the beneficial title that Robert holds under the purchase money resulting trust. To protect this title he will need to lodge another caveat that specifically refers to this interest. The existing caveat protects the interest of the beneficiaries of the family trust of which Richard is a co-trustee. It does not protect the interest of Richard. Students should explain that the caveat can only protect the interest that is claimed so if the property is sold and the new owners are registered, Richards beneficial interest will be defeated. Some reference to Leros v Terara is appropriate here. Also students should display an understanding of the relevant provisions for s89 of the TLA. The claim of the beneficiaries, which is protected by a caveat, is a claim based in fraud. Robert has fraudulently breached his trust obligations. Alice was unaware of this. One issue is whether the title of Robert and Alice over Princes Hill is defeasible for fraud. Importantly, the fraud committed by Robert was upon the beneficiaries of the family trust. The registration over Princes Hill premises is not procured by fraud because it was purchased and transferred without fraud. Arguably the fraud relates to a breach of trust and therefore is beyond the scope of s44(1) of the TLA which sets out that any registration procured or made by fraud shall be void as against any person defrauded or sought to be defrauded thereby and no party or privy to the fraud shall take any benefit therefrom. Even if it is not, and the title is defeasible, a further issue is that the fraud only relates to the interest held by Robert. Assuming that Princes Hill is held pursuant to a presumptive joint tenancy, the fraud cannot apply to the interest held by Alice. Students should mention Cassegrain High Court decision here where it was clearly stated by the majority (French, Hayne, Bell and Gageler J) held that Robert and Alice cannot be treated as one legal person. The majority refused to hold that any person who is a registered joint proprietor would be deprived of their property interest if another proprietor had Page 4 of 8

MLL325 Land Law T2 2020 EXAMINATION committed fraud. Instead, actual fraud must be “brought home” to the party whose title is in question. So Alice would retain her interest but if fraud is established, it would impugn any title she acquired upon the death of Robert. 4. Discuss the enforceability of the claim by Richard against Westlink. (5 marks) Richard’s interest as a beneficiary of Robert’s will is not caveated. It will therefore be defeated if Westlink sell under the mortgagee power of sale and the purchaser is registered. On the other hand, Richard has lodged a caveat, as trustee of the family trust, for the interests of the beneficiaries of the family trust. This interest is an unregistered equitable interest protected by a caveat. It arises prior to the unregistered mortgage of Westlink. The competition between two unregistered interests will attract the prior in time if both are equal rule (Rice v Rice, Heid v Reliance). Students should focus upon merit analysis first. Failure to protect is an important one. The real issue here is that Westlink did not caveat (because they did not realise the error) and Richard caveated as soon as he became aware of the fraud. Hence, Westlink was prior in time. The failure to caveat did not result in the interest of Richard’s arising – it was basically an issue of Richard caveating first because he was the first to discover the fraud. Following the holistic analysis proposed by Heid v Reliance, it is likely that Westlink will lose their priority in favour of the interest of Richard. 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. Page 5 of 8

MLL325 Land Law T2 2020 EXAMINATION 1. Capital Bank are likely to acquire an indefeasible title to the registered mortgage. This is because the fraud has not been brought home to them. There was no way they could have known that Jamie’s brother was not the owner as he had forged a transfer. The bank did not act with any deliberate intention to deceive and do not satisfy the requirements for fraud articulated in Russo, Ferguson, Loke Yew. I would expect students to discuss the nature of statutory fraud at length – and to especially mention that fraud can include some species of equitable fraud but must go beyond mere notice (as per s43TLA). I would expect a strong discussion of the indefeasibility provisions and, in particular, s42(1), s43 and s44(1). Jamie’s brother has acted fraudulently. He intended to deceive and the transfer can be set aside against him pursuant to s44(1). 2. Jamie’s parents have (potentially) two different equitable unregistered interests. First, as beneficiaries under a purchase money resulting trust given that they paid for 90% of the Burwood property. This beneficial interest under a presumptive resulting trust is likely to be rebutted by a presumption of advancement given the close nature of the relationship. The further question is whether the ‘gift’ means that Jamie is a volunteer. Students should briefly explore this. Jamie has given some value as she has paid the deposit so it is unlikely that she will be treated as a volunteer. The second interest held by Jamie’s parents is the equitable mortgage. This is what they have caveated. They did not, however, caveat the equitable mortgage when it was first created. Their failure to do this contributed to the creation of the equitable lien in the purchasers pursuant to the mortgagee sale. Arguably therefore, on a merit analysis, their failure to caveat might result in their interest being postponed. Students should engage in this priority discussion and focus on the fact that (i) not caveating is not in itself postponing conduct but (ii) not caveating or taking any other protection (eg keeping the certificate of title in a safe place) has allowed Jamie/brother to hold out indicia of title to Capital Bank and the purchasers under the power of sale. 3. Jamie may be reinstated as registered proprietor but will take subject to a mortgage. The bank sells to the purchasers. If the purchasers interest succeeds, the purchasers will become registered. If the purchasers become registered they will be protected as bona fide purchasers under s44(2) of the TLA. If this happens, Jamie will lose the property. She may seek compensation under the assurance fund. Students should focus upon s110(1)(b) because the loss has occurred due to the amendment of the Register to include the mortgage to Capital Bank. The question will then be whether Jamie is excluded due to s110(3)(a) which sets out that the claimant or someone they derive title from has caused or substantially contributed to the loss due to fraud, neglect or wilful default. Arguably, Jamie caused or contributed to the loss by note ensuring that the duplicate CT was kept locked and safe or deposited with her lawyer where her brother could not access it. I would expect students to discuss the particular provisions in the TLA relevant to the assurance fund and apply them to the facts. - END OF EXAMINATION - Page 7 of 8

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