Hypothetical Questions

Section A

Hypothetical Questions

Question 1.In 2012, Sophie and Dominic buy a parcel of Torrens land in Fannie Bay, Darwin, for $750,000. The land comprised of a tennis court, which is surrounded by a tall wire fence, and a house with a large tropical garden. The purchase price of $750 000 was comprised of Sophie's savings of $500,000, and her brother Dominic's contribution of $250,000. The settlement occurred in March 2012, and the change in registered proprietor was registered on the title. For taxation reasons, Sophie's name alone appeared on the transfer as purchaser. Sophie and Dominic had earlier orally agreed that Dominic (a former builder) would be the housekeeper, would carry out some substantial renovations to the house, and would refurbish the tennis court to make it commercially viable. In return for these contributions (in addition to his financial contribution), they agreed he would get an equal share in the property.

In November 2012, the refurbishment and renovations were complete, and they entered into a licence agreement with Greg, a local tennis professional, to rent out the court for evening and weekend lessons for the next 2 years. He had already signed up a full complement of pupils for lessons for the entire period and paid the full rental in advance.

In March 2013, Sophie and her new partner Chris decided to buy an investment property. Sophie approached a local financier, Lightning Loans Ltd, for a sum of $500,000 to do so. Lightning Loans Ltd agreed to advance the money, in return for a mortgage over the Fannie Bay property. A mortgage agreement was drawn up between Sophie, Chris and Lightning Loans Ltd, detailing their obligations, the property to be mortgaged and the duration of the loan. They all signed it, and the money was advanced. Lightning Loans took possession of the title deeds, though the mortgage was not registered. Sophie made no mention of her arrangement with Dominic to have equal shares in the property.

In January 2014, Sophie and Dominic's friend, Ollie offered them, Sophie and Chris, the opportunity of renting his Sydney harbourside townhouse while he was posted interstate on business for 3 years at a very modest rent. They decided to move and at the same time rent out the Fannie Bay house. They entered into an agreement to rent the property for 2 years to Molly. Rent was to be $2,000 a month payable in advance. A deed of lease containing these terms was executed in February 2014. Molly and her family moved in immediately.

In March 2014, Sophie suffered some serious financial setbacks. The value of her share portfolio had dropped substantially, and she had to give up her job as a dentist because of failing health. With rising interest rates and little income, she decided to re-finance her properties. She takes out a further mortgage on the Fannie Bay property to Barry Blaster. Barry is an old friend of Sophie's and tells her there's no need to register the mortgage as she's a good egg, but he has evidenced in the transaction in writing. He is unaware of the mortgage to Lightning Loans.

Discuss and explain your reasoning in relation to the following questions:

• Can Greg continue to use the tennis court until November 2014? Why?
• 2) Can Molly remain in the house until February 2016? Why?
• 3) Have Sophie's actions amounted to fraud? If so, what is the effect?
• 4) What is Dominic's share in the house? Does your answer differ in law and equity? Why?

Question 2.Kirsty, Gillian and Olivia are 3 friends who are all lawyers. Together, as joint tenants, they have purchased a property on Torrens land in rural Darwin comprising of a 2 storey homestead, and 3 paddocks. They develop a community legal centre at the property.

Olivia marries a millionaire and decides to travel through Europe, and wants to gift her share' of the property to Gillian and Kirsty.

• A) After Olivia gifts her share', what type of co-ownership arrangement(s) does the legal title now reflect?
  
  Kirsty and Gillian continue to use the property as a community legal centre that is mostly funded by government grants and philanthropic donations. Olivia regularly visits the property for social reasons, but doesn't work at the centre. She notices that Gillian seems increasingly stressed by funding uncertainties due to the upcoming government elections. In order to raise some income from the property, Kirsty and Gillian agree to create a life estate in favour of Will over the bottom floor of the homestead. The life estate is measured by reference to Olivia's life and assume all legal requirements have been met to create a valid life estate. Will runs a music and comedy business from the bottom floor. About 6 months after Will moves into the property, Gillian suffers some major injuries in a serious car accident.
  Kirsty has come to you for advice on the following points in the event of Gillian's death:
• B) Advise on the legal title and who the title would reflect as registered proprietor.
• C) Can Kirsty remove Will and lease out the property to a cafe that would render more rent?
• D) Would Kirsty be able to sell a paddock?

Question 1 What does "Bona Fide Purchaser Without Notice" mean? Is this concept still relevant in the Torrens system? Support your answer with law.

Question 2 What is the difference between an easement, a licence and a lease? Support your answer with law.

Question 3 Restraint on alienation and the Rule Against Perpetuities are both legal concepts that have adapted and been refined over time addressing society' expectations, responding to legal challenges and protecting the ability of a private property owner's right of alienation of land. What is the current legal position in the application of these tests? Support your answer with the relevant case law and/or legislation.

Question 4 What is the benefit or risk in lodging a caveat? How can the priority of an interest be impacted by a caveat? Make reference to current case law in your response.

Question 5 What are the paramountcy provisions and why are they important in the Torrens system?