Bill was the registered proprietor of the freehold estate in fee simple of Bag End, a parcel of land governed by the Real Property Act 1900 (NSW).

 

In January 2023, Bill leases Bag End for a fixed term of 2 years to Lowbelia who immediately occupies the property. The lease also includes a clause conferring upon the lessee an option to renew the lease for an additional 1 year upon the completion of the original 2 year term. Lowbelia does not lodge a caveat in relation to her unregistered leasehold interest in the property.

 

In February 2023, Bill executes a transfer of his interest in Bag End to Fred for a purchase price of $1 million. Although Fred can only pay Bill half the purchase price (i.e. $500,000) by the time for completion, Bill nevertheless executes a transfer of the property to Fred and even issues a receipt to Fred for the balance of the purchase price (even though it was never actually paid to Bill) as Fred is his nephew and he trusts him to nevertheless pay the remainder of the purchase price. Fred is then recorded as the Registered Proprietor of Bag End

 

Despite becoming recorded as the Registered Proprietor of Bag End, Fred never visits the property and is entirely unaware of Lowbelia's unregistered leasehold interest, as Fred actually continues to live with his cousin Pip and only purchased Bag End as a potential investment.

 

In March 2023 Fred's impecunious friend Sam then surreptitiously takes possession of the documents required for verification of Fred's identity and impersonates Fred to grant a mortgage in favour of Lonely Mountain Bank in exchange for a loan of $2,000,000. At the Lonely Mountain Bank, Sam deals with Barry, the branch manager. Barry genuinely believed that the person dealing with him was actually Fred (as Sam was able to satisfy the verification of identity process as 'Fred' because Sam was a master of disguise).  However, if Barry had personally visited Bag End and spoken to Lowbelia prior to the execution of the mortgage, Barry would have become aware of Sam's fraudulent scheme.

 

Lonely Mountain Bank is now recorded as the present Registered Proprietor of a mortgage interest for $2,000,000 over Bag End and Sam has absconded overseas with the loan money advanced by Lonely Mountain Bank.

 

After hearing about these events, in April 2023 Bill then lodges a caveat over BagEnd in relation to his interest.

 

All students must answer Question 1, providing reasons for their answer:

 

1.Identify the nature of each party's proprietary interest (if any) in BagEnd, and also provide advice regarding the priority that would be accorded to the enforcement of each of those proprietary interests.