Elderly Citizens

LAW00115-2015-2 Take Home Exam
Student ID: 21695076
Southern Cross University

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Student Name: Peter Madden
Student ID No.: 21695076
Unit Name:Equity
Unit Code: LAW000115
Unit Assessors name:Rohan Price
Assignment No.: Take Home Exam
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Word Count: 2345
Due date:10 August 2015
Date submitted:10 August 2015
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Citation:
Elderly Citizens Homes of SA Inc v Balnaves (1998) 72
SASR 210
Court:
Supreme Court of South Australia, Debelle J
Date:
18 September 1998
Parties:
Solicitors for Moir Management Pty Ltd: O'Loughlins.

Solicitors for JAD International Pty Ltd: Sykes Bidstrup.
Solicitors for Addstead Pty Ltd: Fisher Jeffries.
Solicitors for the Estate of William Burton deceased:
Ward & Partners.
Solicitors for Jean Balnaves: Thomsons.
CONCISE FACTS
The case initially involved eight competing claimants to the residual
funds of $368, 696.93 remaining after the sale by the first
mortgagee, Elderly Citizens Homes of SA Inc, of a house property
owned by the defendant, Peter Balnaves (Balnaves).
Peter Balnaves became the registered proprietor of the property
through his appointment as trustee of the Balnaves Family Trust on

1 December 1995. The previous trustee was a company called

Cummings Corporation Pty Ltd, of which Balnaves was a director.
The property in question was situated at 100 East Terrace, Adelaide
and the land is comprised and described in the certificate of the title
register book volume 5315 folio 383. It is colloquially referred to as
Rymill House.
The claimants included JAD International Pty Ltd (JAD), Melbourne
Projects Pty Ltd (Melbourne Projects), the estate of William Burton
(Burton), F Moir Management Services Pty Ltd (Moir), Mrs Jean
Balnaves, Mr John Parsons, Mr Brian Warming and the Child Support
Agency. Warming and the Child Support Agency withdrew their
application and decided to not prosecute their claim.
The proceedings are a result of the dealings of Peter Balnaves acting
as the trustee for the Balnaves Family Trust and the subsequent
loans entered into by him with the claimants using Rymill House as
security.
The following interests existed:
JAD held an unregistered mortgage executed on 18 October 1995
and protected by a caveat lodged on 15 July 1997.
Burton had an unregistered mortgage that was executed on 16
February 1996.
On 25 September 1997 the defendant contracted to sell Rymill
House to Moir without disclosing the prior possession order obtained
by Elderly Citizens Homes of SA Inc.
Moir lodged a caveat on 29 September 1997 protecting its interest.

Mr Parsons held an unregistered mortgage dated 5 November 1997

and a caveat lodged on 11 November 1997 protecting his interest.
Mrs Jean Balnaves had a mortgage securing her interest in Rymill
House which was executed sometime in November 1997.
ISSUES
The dominant issue of the case was to resolve the question of which
of the claimants declared interests took priority over the other. In
doing so, the first step for the Court was to identify the nature of the
proprietary interests held by the claimants and ascertain whether
they were of a legal or equitable nature.1 Once this had been done,
and depending on what category the interest fell into, the court was
able to resolve the priority dispute.
Ultimately the court had to consider the following issues:
Does an agreement between two parties for one to take over the
right to purchase land under a contract of sale create an unpaid
vendors lien or does it simply assign the originals interest in the
contract to purchase the land to the later? Additionally, does the
failure to express an agreement in writing have any impact on their
rights or interests?
What affect, if any, does the lodging of a caveat over an interest in
land, and its subsequent withdrawal, have on the order of priorities
of any identified claimants? Do any of those who acquire an interest
1 Peter Radon & Camerson Stewart, Principles of Australian Equity
and Trusts, (LexisNexis Butterworths, 2nd ed, 2015) [7.2].

after this event have the right to assert that the first party lose their
priority by their failure to register a mortgage, and failure to defend
the caveat lodged even after it had been warned by a Registrar?2
Additionally, does a vendor have an equitable lien on the sale for a
land property from the date of the contract or only when and if the
vendor fails to proceed with the full terms of the contract?
HOLDING (APPLIED RULE OF LAW)

The principles that this case stands for include:
Firstly, that the initial starting point for determining the priority of
competing interests in land property is that the interest created
earlier in time is entitled to priority if the merits are equal.3
Additionally, the Court also supported the notion that regard must
be had to all relevant circumstances including the behaviour of the
claimants.4
Secondly, it also discussed the principle that the failure to lodge a
caveat does not on its own necessarily defeat a prior equity. Equally,
the holder of an equitable interest cannot improve their priority
simply by lodging a caveat. Ultimately the caveat must stand on the
merits of the interest is seeks to protect and is a step towards
protecting any existing and legitimate rights.5
2 Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210,

224.
3 Ibid, 210.
4 Ibid.
5 Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210
(FirstPoint).

Thirdly, the failure to lodge a caveat is a relevant consideration in

equity if the conduct was deliberate and induced a person who
subsequently dealt with the registered proprietor to consider the
title clear of any outstanding equitable interests that could affect
the priority of their interest.6
Finally, where the holder of a prior unregistered mortgage lodges a
caveat but then withdraws the caveat, that action makes their
interest liable to be defeated by the holder of any subsequent
interest who has followed good conveyance practice and searched
the title and relied on that information.7
DECISION/ORDER
In its ruling the court firstly dismissed the claim of Melbourne
Projects. It then went on to rank the remaining interests of the
claimants in the following order; JAD, Moir Management, Mr Burton,
Mr Parsons and Mrs Balnaves.8
The court then stated that it would be desirable that the parties
attempt to agree the amount which is due and owing to each.9
However, failing that, it directed that an accountant would
subsequently need to be appointed to determine what is due and
owing to each claimant.
6 Ibid.
7 Ibid.
231.
9 Ibid (Debelle J).

In conclusion, the court then took time to hear the parties as to

their claims for interest and costs.10
RATIO
Before proceeding with its analysis in determining the priority of
interests, the Court took time to detail its rejection of Melbourne
Projects claim. In determining any interest that they may have had,
the Court focussed on the nature of the transaction between
themselves and Cummings Corporation. It reasoned that the
transaction was in essence simply Melbourne Projects assigning its
interest in the contract with EFG Finance for the purchase of Rymill
House in consideration for Cummings Corporation agreeing to pay
the deposit.11
The Court also found that any argument that Melbourne Projects
held an unpaid vendors lien was grounded on a false premise.12
Any equitable interest that it held essentially failed when it did not
complete the contract for the purchase. In fact, Cummings
Corporation became entitled to the equitable interest in the
property. Additionally, by taking the assignment of the contract in
question, Cummings Corporation was entitled to the equitable
interest at the expense of Melbourne Projects.13
Further, while a party may have an oral promise to repay a debt
and/or to execute a mortgage, if neither is in writing the
10 Ibid.
221.
12 Ibid, 222 (Debelle J).
13 Ibid.

arrangement would not satisfy s 26 of the Law of Property Act 1936

(SA).14
Before determining the priority of the successful claimants, the
Court considered the impact of Burtons failure to lodge a valid
caveat. Referring to J & H Just (Holdings) Pty Ltd v Bank of New
South Wales,15 it identified that it was recognised that a failure to
lodge a caveat does not necessarily defeat prior equities.16 However
it tempered this view by referencing the decision in Butler v
Fairclough,17 that a failure to lodge a caveat should be regarded as
inducing persons subsequently dealing with the registered
proprietor to regard the title as clear of any outstanding equitable
interest.18
In considering the impact of any failure to lodge a caveat, the Court
turned its consideration to whether it was the general practice of
those involved in land property transactions to lodge a caveat and
to search the title for the purpose of discovering any prior claims in
the interest of the land. 19 Essentially the Court recognised that
lodging a caveat gave notice to those conducting a search that
there were claims for an equitable interest in the land and
subsequently by withdrawing the caveat, Mr Burton created the
impression that he no longer sought to protect his interest. 20 As a
result, the Court considered Burtons interest as equitable
mortgagee would normally be defeated by subsequent interests who
had displayed due diligence in conducting the appropriate title
searches. The Court also highlighted that those who did not perform
14 Ibid.
15 (1971) 125 CLR 546
224.
17 (1917) 23 CLR 78.
18 Butler v Fairclough (1917) 23 CLR 78, 90-91.
226.
20 Ibid, 227.

the appropriate searches would not be able to place the same

reliance on Burtons withdrawal of his caveat. 21
Prior to establishing the order of priorities of the claimants interests
the Court made reference to the Real Property Act 1886 (SA),22 to
outline how the proceeds of the sale by a first mortgagee would be
applied.23 Whilst acknowledging that under this legislation that
Balnaves was entitled to the proceeds remaining after the first
mortgagee had been repaid, this was subject o whatever equitable
interests exist in Rymill House.24 The defendant had not disputed
any of the claims made and subsequently consented to the court
determining the order of priority of those interests and making the
relevant payments to those parties, an approach that the Court
highlighted was consistent with other cases such as Avco Financial
Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR
679.25
In deciding to rank JADs equitable interest before the other
claimants, the Court made reference to the particulars of the
mortgage agreement established between JAD and Cummings
Corporation and a clause allowing the former to advance funds to
the later using the security of the mortgage. Stating that JAD was
therefore entitled to insist on payment of all funds extended to the
mortgagor it drew on the previous cases of Hopkinson v Rolt,26 and
Bradford Banking Co Ltd v Henry Briggs, Son & Co Ltd,27 to support
its view.28
21 Ibid (Debelle J).
22 Real Property Act 1886 (SA) s 135.
221.
25 Ibid, 221.
26 (1861) 9 HLC 514.
27 (1886) 12 App Cas 29.
216.

Also considered by the Court was the creation of an equitable lien in

the property and its subsequent effect on the claimants priority.
Reference was made to the explanation provided by Lord Cranworth
in Rose v Watson,29 as to why a purchaser may acquire an equitable
lien.30 It observed in its judgement that a lien is acquired upon
payment of the deposit and as a result is a charge upon the
land.31 The Court went on to affirm that any purchaser becomes a
secured creditor up until the time the contract for sale is completed
upon where the equitable charge ceases to exist. As a result, it
further identified that if a vendor should default a purchaser is
entitled to rely on the charge and recover the deposit.32 Using this
approach, the Court supported the view that Moir Management had
an equitable lien as of 29 September when it paid a deposit for the
purchase of Rymill House. Subsequently, it rejected the alternative
argument that the purchasers lien held by Moir did not occur until
Balnaves had failed to proceed with the contract of sale. 33
Additionally, the defendant had on 25 September 1997 contracted
to sell Rymill House to Moir Management without disclosing the
possession order. Moir lodged a caveat on 29 September 1997
protecting its interest. This caveat was the next caveat registered on
title after the caveat lodged by JAD. They subsequently had a lien as
purchaser for the deposit.
SIGNIFICANCE
29 (1864) 10 HLC 672.
230.
32 Ibid.
33 Ibid.

Although this case does not declare any new law, it is useful as a
reminder of basic principles governing competing interests in
Torrens Title land.34 Furthermore, it supports the law as previously
declared by the High Court. For example it is in line with Latec
Investments Ltd v Hotel Terrigal Pty Ltd (in liq),35 where the Court
stated that a second equitable interest will take priority over a prior
equity if they are "a bona fide purchaser for value without notice in
cases where an equity",36 is the first in line.
However, this should be taken in the context that the behaviour of
the parties involved can have an impact on a courts determination.
Merits can be considered unequal for instance where conduct on
the part of the owner of the equitable interest has led the other to
acquire his interest on the supposition that the earlier did not exist.
37
This principle was further supported by the Court in Heid v
Reliance Finance Corporation Pty Ltd.38

The case also highlights the potential consequences of a failure to
lodge a caveat and of not conducting appropriate searches when
purchasing an interest in land property and the benefit of solid
conveyance practices.
34 Conveyancing and Property (2000) 74 Australian Law Journal

351, 354.
35 (1965) 113 CLR 265.
36 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113
CLR 265, 266.
37 Ibid, 276 (Kitto J).
38 (1983) 154 CLR 326, 339.

BIBLIOGRAPHY
A. ARTICLES/BOOKS/REPORTS
Conveyancing and Property (2000) 74 Australian Law Journal 351
Radon, P & Stewart, C, Principles of Australian Equity and Trusts,
(LexisNexis Butterworths, 2nd ed, 2015)
B. CASES
Bradford Banking Co Ltd v Henry Briggs, Son & Co Ltd (1886) 12
App Cas 29
Butler v Fairclough (1917) 23 CLR 78
Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210
Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326
Hopkinson v Rolt (1861) 9 HLC 514
J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125
CLR 546
Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR
265
Rose v Watson (1864) 10 HLC 672.
C. LEGISLATION
Real Property Act 1886 (SA)

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LAW00115-2015-2 Take Home Exam

Student ID: 21695076

Southern Cross University

LAW00115-2015-2 Take Home Exam

I declare I have kept a copy of this assignment.