Property and Conveyancing - Assignment Example

Question 1 Whether Belinda was entitled to sell the land. Belinda being the mortgagee in this case was entitled to sell the land since Albert the mortgagor had defaulted in repayment of the loan as per the agreement of the mortgage. Kay J in the case of Warner Vs Jacobi held that a mortgagee has a power of sale given to him to enable him realize his debt. Belinda was thus entitled to sell the land in order to recover her debt. Question 2 Whether Belinda’s power of sale was exercised properly In the case of Farrar v Farrars Ltd (1888) 40 Ch D 395ii, Kay J affirmed that the duty of a mortgagor was to act bona fide and ensure the exercise of reasonable precautions so as to obtain a fair price. A similar view was held in the case of Warner v Jacob where K Jay observed that a mortgagee is not a trustee of the power of sale but rather this power is given to him to enable him recover his debt. This power should be exercised for that purpose without corruption or collusion with the purchaser. According to the facts provided in our case, Belinda exercised her power of sale after after issuing a notice of default according to section 57(2)(b) of the Real Property Act 1900. She took reasonable precautions by sorting valuation from two qualified valuers and chose the higher value of $220,000. Conducting advertisement for five weeks and opting for a sale by private treaty instead of auction after the highest bidder failed to attain the required target is a clear indication of reasonable precaution. Even though at the end of it all the Mortgagee sold the property at a lower price than the valuation by the qualified valuers, it can be seen that she acted in good faith considering that she waited for a fortnight until she realised that no better offer was forthcoming beyond the $185,000 offered by Carlos. It is also worth noting that there is no indication of any form of corruption or collusion with the purchaser. In the case of Brick Co Ltd v Mutuak Finance Ltdiii it was held that a mortgagee in possession is entitled to sell at any time and is not obliged to wait on a rising market or for the recovery of the market. He cannot also sell without taking proper price at the time in question. This ensures fairness to the mortgagor. Question 3 Felix is only entitled to become the registered proprietor and Giant the registered mortgagee of the land only if Giant would have lodged the transfer and the registration of mortgage at LPI prior to the lodging of a caveat by Eagle. In the case of J & H Just Holdings Pty Ltd. v. Bank of New South Wales (1971) HCAiv, Barwick CJ looked at a caveat as a statutory injunction whose main purpose is to prevent the registrar from registering inconsistent interests. It also allows the caveator time to substantiate their interests. In this case, the interests of Felix and Giant are inconsistent and thus the caveat lodged by Eagle prevents their registration. In the event that Eagle is unable to substantiate its interests, then both Felix and Giant would become the registered proprietor and mortgagee respectively provided that Carlos takes no action to prevent it. Question 4 Indeed Carlos has an unregistered interest on land that is binding on Felix. The inclusion of a clause in the contract between Felix and Davina indicating the acknowledgement of Felix that Carlos may claim an unregistered right over the land affirms the existence of the unregistered interest. In addition the unregistered interest is precipitated by the fact that an amount totaling to dollar $10000 was owed to Carlos by Davina and the transfer of title from Carlos to Davina had already been executed. In this case, Carlos has equitable interest while Giant has legal interest. According to the case of Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491v, a legal/registered interest prevails over the equitable interests even in circumstances where a party was aware of the existence of prior equitable interest. The reverse would only happen if there is fraud or one of the exceptions to indefeasibility has been made out. Registration under the Torrens System confers the highest level of priority to an interest subject to fraud all exceptions to indefeasibility. Giant is said to be aware of the prior existence of Carlos unregistered interest since its employee was there at the time the transfer between Davina and Carlos was settled. Question 5. If Felix becomes a registered proprietor of Land in circumstances under which he is bound by both Carlos’ unregistered interest and Eagle’s unregistered interest a conflict of priority arises between these two unregistered interests. The relevant priority rule to be considered in this case is the equitable v equitable principal. In the case of Moffet v Dillon(1999) Vic SCvi, Brooking JA observed that a priority dispute between equitable interests should be solved by a separate and independent rule that the earlier interest gains priority if the holder of later interest had notice of the earlier one. Under this approach, the doctrine of equity is not subsumed within the broader ‘better equity’ test. In our case Carlos’ unregistered interest has priority over Eagle’s unregistered interest since the later acquired its interest after full notice that the former already had existing unregistered interest. This assertion is supported by the fact that as per details of our case, an employee of eagle was present at the settlement of the transaction between Carlos and Dvina and therefore witnessed the oral undertaking to pay the deficit of $10000 which is the cause of Carlos unregistered interest. This implies that when Eagle was acquiring its unregistered interest at the point of lodging the caveat it was fully aware of Carlos unregistered interests, and hence the latter’s interest takes precedence. In the same case of Moffet v Dillon(1999) Vic SCvii it was also viewed that where a conflict of priority exists between two unregistered interests it should be determined whether there exists any conduct of the first interest holder that warrants the interest first in time to be postponed. If the postponing conduct exists the latter interest prevails. Brooking JA in Moffet v Dillon further observed that a postponing conduct is said to exist if a party A’s conduct leads party B to believe that the prior interest is no longer in existence or will not be enforced against party B in which case B’s interests prevails. In our case, Carlos conduct was in no way postponing in nature as to make Eagle believe that his interest no longer exists or will not be enforceable against it (Eagle). This also affirms the fact that the unregistered interest of Carlos takes precedence over that of Eagle. Question 6 According to the Real Property Act 1900 Section 129(1)(a) a person who suffers loss or damage as a result of any act or omission of the Registrar- General as he executes his functions or duties under this act in relation to the land is subject to compensation. Part (1)(b) further explains that any loss incurred as result of the registration of some other person as the legal proprietor of the land contrary to the provisions of Section 45E is subject to compensation from the Torrens Assurance Fund. According to the facts of our case, the registration of Felix as the proprietor of the land would have been caused by the inability of the registrar to detect the fraud committed by Davina. Registering a forged discharge of mortgage is a clear indication of failure to exercise due diligence by the registrar. It is therefore certain that the lost interest by Eagle can be claimed as compensation from the Torrens Assurance fund as per the provisions of Sec 129(1). In this case, Giants registered mortgage has priority over Carlos unregistered interest because as stated earlier, under the Torrens systemviii the registered interest will always prevail over the un registered interest unless fraud by the registered proprietor is found to have occurred. According to the facts of this question there is no fraud that is related to giants registered mortgage. Based on that argument, giants mortgage takes priority. Under these circumstances Carlos is not entitled to any compensation from the Torens Assurance Fund. The compensation would have been realizable only if there had been breach of the provisions of the Property Act 1990 Section 129 (1) but not because of the existence of a priority issue as it is in this case. Read More