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Case Study: Alexis, Brett and Andrew

Brief Facts

Alexis owned land and have recorded the purchase in deed. She agreed with Brett for removing sandstones, in writing but was not formalised. Alexis leased the said property to Rita for two years, which was renewable and was also oral. For buying a new property, Alexis borrowed from Robin and agreed that the later can sell the property on default by the former. A contract was entered in to between Alexis and Andrew, and the property was bought by the later.

Issue

  1. Whether Andrew will have to provide access to Brett.

  2. Whether Andrew is subjected to Rita’s lease.

  3. Whether Andrew is subjected to the mortgage with Robin.

  4. Whether holding land in the Torrens system will change Andrew’s actions to Brett, Rita and Robin.

Rule

The doctrine underlying the privity of contract is applicable only to the rights and obligations arising out of the contracts, and cannot be transferred to the third party even if it is beneficial to them. Under Part 7 Dealings of the Real Property Act 19001, under Division 1 and under section 51 details that after registration, the interest and the rights of the transferor become vested on the transferee. Sections 94 and 95 of the Conveyancing Act 19192, details about transferring the mortgage by the mortgagor without discharging it. On the other hand, under the Torrens System, the register of land holdings is determined as the conclusive proof that is the indefeasibility which exists in the title who is recorded as the owner under it.

Application and Conclusion

  1. Based on the facts of the case, Brett contracted with Alexis to remove the stones, so when Andrew bought the property from Alexis, then applying the doctrine of privity, the third party cannot be imposed with the contractual obligations as was held in case of Clarence City Council v Commonwealth of Australia [2019]3. As this is not an insurance case, so the decision in Trident General Insurance Co Limited v McNiece Bros Pty Ltd (1988)4 becomes inapplicable. Hence, Andrew is under no obligation to provide access to Brett.

  2. Secondly, lease with Rita is for two years and was agreed to have it renewed for one more year. The facts are not clear about the time difference between lease with Rita and purchase by Andrew. If it can be assumed that, the lease was valid when Andrew purchased it, then also Andrew is bound to it since the deed of purchase was registered between Alexis and Andrew and hence Andrew is obligated under section 51 of the Real Property Act 1900.

  3. When Andrew purchased the property from Alexis then, according to sections 94 and 95 of the Conveyancing Act 1919, the personals covenants like that of debt and the mortgage is also transferred to him, which is also held in cases of Ley v Scarff (1981)5, Corozo Pty Ltd v Westpac Banking Corp (No 2) [1988]6, Challenge Bank Ltd v Hodgekiss (1995)7. Hence, Andrew is the new mortgagor with Robin and is bound by the terms agreed with Alexis.

  4. The pivotal concept within the Torrens System is that the title is obtained through registration which in itself creates the 'indefeasibility'. But the Torrens System is applicable only for the transfer of the real property that is land, and hence the contractual obligation not affecting the aforementioned class of property does not bring any difference as to the doctrine of privity explained above.

In the instant facts of the case, the lease is for less than three years and Section 53(1) of the Real Property Act 1900 specifically mentions the compulsory registration for leases which exceeds 3 years. So, if any interests get omitted, then Andrew possess the right to claim against the Land Titles Office, provided that a loss must be proved as a consequence of the fraud or that of omission. A conveyance of title passes from a mortgagor to the mortgagee, under the Old system title. Under this title, for obtaining legal title on the mortgaged land by the mortgagee, the deed must be established to suffice the mortgage. When the mortgage becomes executed, the legal title does not remain with the mortgagor, however, an equitable interest becomes vested upon, commonly called equity of redemption, that is the title can be given back when the borrowed amount is paid back. In here, despite the fact that the mortgagee becomes the legal owner, still, the possession remains with the mortgagor.

Within the Torrens Title, security or charge is the only effective method to create a mortgage, and hence land ownership does not get transferred. In here ‘owner in fee simple’ is the position of the mortgagor. However, in this system, the legal mortgage is considered for those mortgages which are registered, and thus the status of the unregistered mortgage becomes an equitable mortgage, as was opined in case of J & H Just (Holdings) Pty Ltd v Bank of NSW (1971)8. Thus, in this system, the legal title remains with the mortgagor, but the security is held by the mortgagee, for the amount which is borrowed by the former. Again, the ownership can also be transferred by the mortgagor, provided that, discharge of mortgage must be done before the actual transfer.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Property Law Assignment Help

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