Following the breakdown of a defacto relationship, a property settlement provided for the defacto mother to receive $28,000 in return for transferring her interest in two properties to the father, which was done. However despite signing a transfer and a discharge of the mortgage with authority to release the title to the father, the mother remains one of the registered proprietors and is still liable to the bank on the mortgage. The father is in default on the mortgage. The mother lodged a caveat over the property and now seeks an extension because she is still liable on the mortgage and is unable to get finance.
The court characterised the mother’s interest as an equitable lien since she remains an unpaid vendor under the settlement contract. She received the cash part of the purchase price for the transfer but the remainder is the money that may become payable pursuant to the indemnity in the event the father defaults. The unpaid indebtedness is not an existing indebtedness but a potential indebtedness. However the extent of vendor’s equitable liens are arguably wide enough to protect her position as partly paid vendor before any default and before any rights of subrogation to the bank’s security rights arise.
The court extended the caveat but noted that the situation regarding the property was unsatisfactory and it may be appropriate for either party to use the statutory power of sale under section 66G Conveyancing Act 1919 to pay out the mortgage fully.