Land - Trusts & Coownership (2)

2. In 1980 Mr. and Mrs. Hall purchased a cottage as their matrimonial home. The price of the cottage was $60,000, of which Mr. Hall provided $30,000, Mrs. Hall provided $20,000, and Norma (Mrs. Hall’s mother) provided $10,000 as a wedding-gift. The cottage (the title to which was not registered) was conveyed into Mr. Hall’s sale name. In 1987 Mr. Hall mortgaged the cottage to the Quickfix Bank in order to raise some money to invest in his brother’s construction business. Mrs. Hall knew about the mortgage idea, but when the bank’s representative came to inspect the cottage prior to granting the mortgage, she was away on a week’s holiday. Recently Mr. Hall has started to default on his mortgage repayments, and the bank is threatening to bring possession proceedings with a view to selling the cottage.
Advise Mrs. Hall. If the cottage were sold, how would the proceeds of sale be divided? What if the LRA 1925 or the LRA 2002 had applied?

Effect of 1980 conveyance?
- Mr. Hall holds the legal estate solely on trust for himself and Mrs. Hall
- It is a trust for sale (instead of trust of land) because the conveyance is pre-1996
- Mrs. Hall has a resulting trust due to her contribution of $20,000
- Norma has no interest in the cottage because her contribution is pure gift
- The rebuttable presumption of a gift of contribution to the purchase of land from parent is a gift not only for the child of the parent but for the couple – presumption can be rebutted
- Mr. Hall’s share becomes $30,000 + ½ of Norma’s contribution, i.e. $5,000 = 35/60 = 7/12
- Mrs. Halls’ share becomes $20,000 + ½ of Norma’s contribution, i.e. $5,000 = 25/60 = 5/12
- Uneven share of the interest, the coownership is Tenant in Common

Effect of mortgage?
- Priority of interest: does mortgage take free from or subject to Mrs. Hall’s interest?
- For unregistered land: Mrs. Hall’s interest is not registrable because it is an unregistered land (LCA only provides statutory right to occupation which is a personal right and not proprietary right) and her interest is not overreachable because there is only one trustee Mr. Hall
- Doctrine of Notice (either actual notice or constructive notice – obvious via reasonable inspection)
- Apparently Quickfix Bank hasn’t done enough, it should have re-inspected the cottage after Mrs. Hall is back from holiday
- Therefore Bank is subject to Mrs. Hall’s interest which has constructive notice
- Doctrine of implied waiver (consent of mortgage and impliedly agrees the mortgage to take free from own interest)
- Mendelson: actively support the mortgage idea – implied waiver
- Cann: should have known that mortgage is necessary – implied waiver
- Acquisition mortgage (mortgage to buy a home) is likely to imply waiver
- Mrs. Hall here knows the mortgage idea, but consent? Not necessarily
- Moreover, the mortgage is not acquisitional and she gets no benefits from it
- Therefore not likely to apply doctrine of implied waiver

Sale / Possession?
- Apply Dhillon
- TLATA s15(1)(a): implied trust, irrelevant
- TLATA s15(1)(b): express trust, relevant
- TLATA s15(1)(c): irrelevant
- TLATA s15(1)(d): relevant
- TLATA s15(3): relevant
- TLATA s14: these are must-consider factors
- Consider Shaire: Court said s15 is designed to change the law; case law under LPA 1925 s30 should be treated with caution
- Consider Bell, Mears, Slayford: Court prefers priority to interests of secured creditors
- AJA 1970 s14 & 15: sale can be postponed if due mortgage is intended to be paid (nothing suggests Mr. Hall will be doing this)

Proceeds of sale?
- Order of Priority: 1. Mrs. Hall, 2. Bank, 3. Mr. Hall
- To determine the amount:
- Resulting trust: old rule is that the amount is determined by original contribution and no variation unless coowners agree to alter
- Constructive trust of common intention: old rule is based on the agreement of share, if the agreement doesn’t state the percentage of share, court will apply broad brush approach
- Midland Bank v Cooke: husband’s contribution 95%, wife’s contribution 5%; resulting trust rule should apply but court took broad brush approach and ordered 50% 50% - blurred the distinction between resulting & constructive trust – bad as makes it uncertain for bank issuing mortgage
- Burns v Burns: Court ruled Mrs. Burns got nothing – But if the case is brought to the court now, and if Mrs. Burns even contributed only a bit, court would order 50% to her
- If follow Cooke: Mrs. Hall may get more through broad brush approach (based on her other and subsequent contribution to the home)
- If follow old rule: Mrs. Hall will get original contribution = 5/12

*if it is registered land: subject to registered interest and overriding interest but free from anything else
- LRA 1925: If Mrs. Hall’s interest not registered, s70(1)(g) overriding interest with actual occupation. Even though she is away on holiday at the grant of mortgage, but physical presence at that point of time is not necessary
- LRA 2002: If Mrs. Hall’s interest not registered, Schedule 3 para 1(2)(c) interest that overrides with actual occupation which is obvious by inspection with reasonable care

Conclusion: principles are different but consequences the same