It was a modest fibro cottage in Sydney’s south that eventually sold for an immodest $1.5 million.

But beyond the predictable tale of sky-high property prices was a legal mystery about its ownership. This is how one man became its owner under so-called “squatter’s rights”, otherwise known as adverse possession.

NSW Supreme Court Justice Francois Kunc examined reams of evidence and laws dating to the 1830s in a decision that paints an intriguing portrait of the former owner of the lucrative Gymea Bay property.

At the heart of the mystery were two men who lived in near-adjacent suburbs in the Sutherland Shire.

Man ‘treated cottage as his’

Croatian migrant and ship’s engineer Joseph Louis Saric, aged in his mid-40s when he died of cancer, was the original owner of the one-bedroom cottage. The court found the divorcee had lost contact with his family and did not leave a will.

Ross Paul, who lived nearby, notified authorities of Saric’s death in hospital in July 1968 and organised his funeral, “which took place only two days later”, Kunc said in his judgment.

Saric died “without family and, perhaps, friends”, the judge said. He said “perhaps” because the nature of the relationship between Saric and Paul was “not apparent from the evidence”.

“What has been proven is that Mr Paul arranged Mr Saric’s funeral and then treated Mr Saric’s fibro cottage at Gymea Bay as his (Mr Paul’s) for the next nearly 50 years until his own death in 2018,” the judge said.

After Paul’s death, the executor of his estate applied to the court for orders enabling him to sell the property on the basis that Paul, survived by his widow, had become the owner of the cottage by adverse possession, and it formed part of his estate.

The judge found Paul did all the things a homeowner might: he split the cost of a fence with a neighbour, paid rates and electricity bills, insured the cottage, and rented it out from at least 1995.

While there was no documentary evidence before 1995, Kunc said it was “highly unlikely that Mr Paul would have ... delayed in taking possession of the cottage as his own” in light of the “substantial windfall or gift” it represented. He found Paul took possession from January 1, 1969.

The judge referred to “the possibility … that Mr Saric may have told Mr Paul that the latter could have the cottage, perhaps in return for care provided by Mr Paul”. But there was no evidence to this effect.

The court found that “any right to possession of the cottage that may have existed in Mr Saric’s heirs has been definitively extinguished” from January 2009, when a 40-year limitation period expired. The cottage formed part of Paul’s estate.

The property was sold by the executor of Paul’s estate in June for almost $1.5 million.

‘Use it, or lose it’

Sydney barrister Patricia Lane, a senior lecturer at the University of Sydney and property law expert, said that “the rights to land are based loosely on a concept of, ‘use it, or lose it’.”

“The economic value of land is such that the law essentially preserves the ability to buy and sell land … by saying that if you do not exercise rights as owner and somebody else does, and that continues for long enough, that other person will actually wind up with something: the title to the land,” Lane said.

Lane said that “you start with the proposition that the person who’s in adverse possession is actually in possession, that is, doing acts that an owner would do, like, for example, fencing the property, keeping people out, [and renting it out] as occurred in this case”.

The owner would have a right to get an order for possession, Lane said, “but the law also says you don’t have forever to do that, and the normal position is that people have 12 years from the date on which they were dispossessed, or on which they could with reasonable diligence have discovered the fact they had been dispossessed”.

There is also a “back-stop period” of 30 years that applies even if the 12-year limitation period cannot start running for various reasons, such as if the owner were under a mental incapacity or, despite reasonable diligence, had never discovered someone had moved in, such as if the property was remote or inaccessible.

The back-stop period extinguishes any claims by the original owner or their heirs after this date.

In the Gymea Bay case, a limitation period of 20 years with a 40-year back-stop period applied. The shorter 12- and 30-year periods only became law in 1971, after Saric died.

Kunc said the result of the 40-year back-stop period was that “any cause of action to recover possession of the cottage by Mr Saric’s legal personal representatives was completely extinguished from 1 January 2009”. This marked 40 years from January 1, 1969, when Paul took possession of the property.