1. Carlos is a developer and has undertaken a project to build a large scale housing complex comprising of residential and commercial buildings. Carlos approaches Sven for finance. Sven advances to Carlos the sum of 2 million dollars in the form of a mortgage along with a covenant to provide a further advance of 1 million dollars when Carlos finishes stage 1 of his multi-staged development. The mortgage also provides that Sven can advance, in his discretion, additional monies from time to time. The mortgage is registered.
Carlos quickly runs out of money and approaches Vivian for a loan of $500,000.00. Vivian agrees and advances the funds in a form of a mortgage. The mortgage is registered.
18 months later (after having finished stage 1 of his development), Carlos calls upon Sven to advance more monies. Sven is aware that Carlos has also borrowed money from Vivian. Sven, now sensing that the land would be “worthless” if not fully developed, advances a further 1 million dollars. Carlos runs out of money and is unable to finish all stages of his development. He is facing bankruptcy.
Discuss the priorities of advances as between the mortgagees Sven and Vivian.
2. Mick owns a property in fee simple in Cronulla. Mick is in a wheelchair and has a live-in carer, Gloria, who is also his close friend. A few months before his death, Mick has a conversation with Gloria. Mick’s daughter, Florence, is also present during this conversation. Mick tells Gloria that after his death she can live in the property for the rest of her life. Florence assures Gloria that she will honour the life estate when the property eventually passes to her. The agreement is put in writing but is never registered. Mick dies. Florence inherits the property as sole beneficiary under her father’s will and registers her interest. After some time, Florence decides she would love to move in and enjoy the water views. She gives Gloria two weeks’ notice to vacate the premises. Gloria refuses to move out.