Land - Trusts & Coownership (3)

4. In 1996, Donald and Liz bought Rose Cottage. Donald was registered as the sole proprietor. The purchase-price was $100,000, of which Donald paid $30,000, the remaining $70,000 being raised on the security of a mortgage (for which Donald was solely responsible) with the Nationsave Bank. They intended that Donald would pay all the mortgage instalments, and that Liza would pay all the household bills. In 1999, Liz gave birth to twin girls and in 2000 she inherited $10,000, which she used to pay off part of the mortgage debt. In 2001, while Liz and the twins were away on holiday, Donald mortgaged the cottage to the Easyquick Bank for $100,000, using part of the money to redeem the earlier mortgage. Now Donald has lost his job and has defaulted seriously on his mortgage repayments. The bank seeks possession of the cottage with a view to selling it.

* Facts resemble Le Foe v Le Foe
Liz has beneficial ownership?
- If follow Rosset: No, only original contribution to the purchase price or mortgage counts, later contribution (e.g. Liz inherited $10,000 which she used to pay off part of the mortgage debt) doesn’t count
- If follow Le Foe: Yes, broad brush approach even though there is no common intention constructive trust – she paid all the household bills, and part of the mortgage debt

Issue of priority?
- Liz might have LRA 1925 s70(1)(g) overriding interest with actual occupation
- However, 1st mortgage: acquisition mortgage – follow doctrine of implied waiver, 1st mortgage took precedence over any interest that Liz might have
- 2nd mortgage: part of the money to redeem 1st mortgage – that part take precedence same as 1st mortgage (Prestige, Le Foe)
- Thus priority as follows: 1. Easyquick bank mortgage amount that redeems the 1st mortgage; 2. Liz; 3. Easyquick bank rest of 2nd mortgage; 4. Donald

Court’s discretion?
- TLATA s14
- TLATA s15(1)(d) – Court tends to favour secured creditors
- Likely to postpones order of sale because of the twin girls s15(1)(c)

Proceeds of sale?
E.g.:
1st mortgage: $70,000, paid off $20,000
2nd mortgage: $100,000 paid off the rest of $50,000 of 1st mortgage
Distribution of the proceeds of sale:
1. Easyquick Bank: $50,000 for the payment of 1st mortgage by the 2nd mortgage
2. Liz: her interest as per court’s discretion (using broad brush approach on her contribution)
3. Easyquick Bank: $50,000 the rest of 2nd mortgage
4. Donald: anything left, if at all