Question 1
Mr Rahim's name alone appears on the title to a shophouse in Kandahar Street, which the family bought in 1998 during the months his father was ill. His sister Nadia put up two-thirds of the price, on an understanding written into a family memorandum that was signed at the kitchen table and then filed in a drawer; it has never been lodged anywhere. Nadia moved to Melbourne in 2011 and comes back twice a year, usually at Hari Raya. Rahim, who has himself been unwell since January, has now sold the shophouse to a restaurateur who inspected the title, paid the full market price, and had never heard of Nadia or of the memorandum until the week after completion.
Which statement is correct?
Show the answer and full explanation
Answer: B
The rule. The person whose name is on the title holds the legal interest. Someone who has put money in but is not on the title may hold an equitable interest. A legal interest is enforceable against the world. An equitable interest is enforceable against the world except a purchaser who gives value and takes without notice of it.
Why B is correct. Rahim is on the title, so the legal interest is his. Nadia's contribution and the unlodged memorandum give her at most an equitable interest. The restaurateur paid the market price, searched the title, and knew nothing of her — value plus absence of notice. Her interest does not bind him.
The other options.
- A applies the wrong contest: first in time settles priority between two equitable interests, not between an equitable interest and a purchaser without notice.
- C and D both invert the parties — money contributed does not put a name on the title, and Rahim's interest is the legal one, not the equitable one. D is the most dangerous, because it reaches the right practical outcome for the restaurateur by exactly the wrong route.
Exam note. The bona fide purchaser defeats an equitable interest, never a legal one. Check which kind you are looking at before you reach for the defence.