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Question: karim is an artist who does not earn enough money...

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Karim is an artist who does not earn enough money from his artistic works. In 2013, he inherited a rundown old Edwardian villa located near the Great Ocean Road from his father. The villa sets on a large piece of land. In the same year, he became the registered proprietor of the villa. In December 2013 Karim went holidaying in the Great Barrier Reef where he met Laura, fell in love and decided to get married. Karim had always wanted to turn his old villa into a rental property and list it on Airbnb. Several months after their marriage, Karim and Laura rented a small house near the villa and decided to start renovating it. Karim spent all of his life’s savings on the renovation works and Laura decided to quit her office job to be with him. Laura said to Karim "I’m so sorry darling I couldn’t contribute to the renovation expenses. I will contribute in other ways. When I’m done, this building will be the most highly rated property on Airbnb”. Karim replied “You don’t need to worry dear Laura. We will work together and make this place a successful business. This is our dream. You know if anything happens to me, you can stay here for as long as you wish.”


Over the next few years, Karim and Laura spend most of their time transforming the old villa into a huge 8 bedroom residential property and by March 2014, the place was listed on Airbnb. Laura proved herself as an excellent manager. She was responsible for all the maintenance and housekeeping duties around the property. Karim was too busy with his artistic works and kept controlling the finances. Karim and Laura both draw a modest wage, with the remainder of the proceeds of the business being used to pay the bills and make additional improvements to the property. However, Karim had no time for serious management and his occasional interventions in managing bookings contributed to some negative online customer reviews, the business begins to decline.


Karim and Laura spent most of the following several months in heated arguments while the business continued to decline. In early 2016, Karim decided to break up with Laura and leave to Denmark on a 2-year artist residency. The couple started to live separately. Before leaving for Denmark, Karim decides to sell the property to his cousin, Harvey. Karim says to Harvey, “Laura helped me a lot in transforming this property into a residential place. I will only sell the building for you if you look after Laura”. Harvey replies “that will not be a problem. I need someone to take care of the place when I’m in Melbourne anyways”. Harvey checks the register and finds no registered encumbrances on the title. In July 2016, Karim and Harvey sign the transfer form, Harvey pays the purchase price of $ 950,000. In October 2016, Harvey registers his title. Harvey meets Laura and informs her of what happened. She continues to live in the house. Laura was glad to be left alone and managed to improve the services by offering discounts and free dinners for guests. The business is up and running like never before!


The following year, in 2017, Harvey decides to transform the building into a motel with a large pool and seafood restaurant. He approaches a wealthy friend, Umtiti, and arranges to borrow $300, 000 from him. Umtiti checks the Airbnb page of the house and finds Laura as the contact person for booking enquiries. Harvey informs Umtiti that “the house manager is Laura. She’s my cousin’s ex and she lives there”. A few weeks later, Harvey hands over the certificate of title to Umtiti and Umtiti deposits the money in Harvey’s bank account.


In 2018, Harvey meets Laura and tells her about his plans to transform the house into a hotel. Harvey asks Laura to move out in 30 days. Laura replies “I have worked in this place for years. I will not leave no matter what!”. Harvey responds “Laura, I don’t intend to be cruel to you especially that you are a nice person. But I’m sorry, this place is mine and I need you to leave”. Laura becomes anxious and in the following day, travels to the Land Title Office and lodges a caveat. 


Part A Question 1: 

a.       What property interest(s) does Laura have in the house? 

b. Is Harvey’s interest subject to Laura’s interest(s)? 

c. How would a priority dispute between Laura and Umtiti be resolved? – Umtiti is a mortgage


Part A Question 2: 

If Laura had lodged a caveat in September 2016: 

a. What property interest would Harvey have? 

b. How would a priority dispute between Laura and Harvey be resolved? 



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