Mortgagor Wins Right to File Cross-Claim Against Mortgagee

to win cross-claim

In a recent judgment of the Supreme Court of NSW a mortgagor obtains the right to file a cross-claim, but with restrictions. To pursue further claims an additional security amount is payable to the mortgagee.

Australian Securities Ltd v Borina Pty Ltd [2017] NSWSC 1073 considers whether a mortgagor’s claims are futile and doomed to failure.


Australian Securities Ltd (ASL) made a loan of $2, 280, 000 to Borina Pty Ltd (Borina) on 14 November 2005. A mortgage over a motel at 513 Princes Highway, Blakehurst (the property) acted as security for the loan.

ASL rolled over the initial due date multiple times, with the relevant repayment date being 15 December 2014. Thereafter ASL claimed repayment was due. On 19 October 2015 ASL filed a statement of claim to take possession of the property.

Disputed due date

Borina, however, asserted that because of another roll over of the loan for a further two years, the due date was in fact the 15 December 2016. During 2016 the parties filed a number of defences and statements of claim. The trial date was set for 20 February 2017.

As the date loomed ASL pointed out to Borina that the loan payment, even with the alleged loan roll-over, was now without doubt due on 15 December 2016. Settlement negotiations started immediately.

As a result on 22 December 2016 Borina paid $ 2,752,712.99 to ASL. This included $459,187.49, on a without prejudice basis, in order for the discharge of the mortgage. Borina needed to refinance the loan with Baccus Investment Ltd.

The filing of the cross-claim

Thereafter Borina filed a cross-claim to which ASL did not consent. Borina claimed it had suffered loss and damages, in the form of interest, costs and interest on costs.

Borina then filed a second cross-claim which included the following claims of loss and damages due to:

  1. a breach of contract when ASL failed to rollover the loan to 15 December 2016;
  2. costs incurred in having to borrow a higher principal sum ($2.7m) from Baccus as ASL compelled Borina to repay $459,187.49 on top of the original $2.3m loan;
  3. ASL charging Borina interest as if it was in default under the Facility Agreement;
  4. unconscionable conduct by ASL in breach of section 21 of the Australian Consumer Law (ACL). Borina claimed ASL made unreasonable demands and unfairly forced it to repay the loan.

Further, Borina claimed for money had and received. It also sought an order that an account be taken.

Submissions made in response to filing of the cross-claim

ASL made the following submissions:

  1. a damages claim, in any form, should not be permitted to go forward as in law such a claim was not available;
  2. Borina could seek an account and make a claim for money had and received;
  3. a claim of unconscionability, relying on the ACL, was an arguable claim but no loss flowed from any possible breach.


The Court rejected Borina’s claim of a breach of contract. It stated that the only right the mortgagor has after redemption of the mortgage, was taking of accounts between the two parties.

However, the Court did not find Borina’s argument of unconscionability to be hopeless or doomed to fail.

The Court concluded that Borina could file a cross-claim confined to:

  1. taking an account;
  2. the claim for money had and received; and
  3. the claims seeking relief for breaches of section 21 of the ACL.

But, if Borina wanted to pursue its claim for the additional Baccus interest, it must provide ASL with $10,000 as extra security.

This publication is for your general information and interest only. It is therefore not intended to be comprehensive, and does not constitute and must not be relied on as legal advice. You must seek advice tailored to your specific circumstances. 









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