In the matter of Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 the Supreme Court considered the issue of competing priorities between three successive mortgagees holding registered mortgages over a single property.

Background

Clyde Securities (“First Lender”) registered a mortgage over the security property to secure a loan of $273,600. The lender was to advance this amount to the borrower via a series of instalments. The borrower used the security property to carry out construction of three separate blocks of home units.

Subsequent lenders register mortgages

The second and third mortgagees (“Subsequent Lenders”) later registered mortgages to secure their loans. They advanced the subsequent loans before the First Lender had completed all of the instalment advances. However, the subsequent advances occurred with the consent of the First Lender. After registration of the subsequent mortgages, the First Lender continued to make instalment advances as agreed with the borrower.

The borrower defaulted under the First Lender’s mortgage. Therefore the First Lender began an enforcement action to recover the outstanding debt by exercising its power of sale. Prior to selling the security property the First Lender incurred significant expenses in making improvements to the building complex.

Rule against tacking

However, the Subsequent Lenders contended that the pre-sale improvement amounts spent by the First Lender constituted further advances. This was over and above the instalment loan amount of $273,600. The Subsequent Lenders argued that the improvement costs (characterised as ‘further advances’) occurred after registration of their mortgages. Therefore they sought the postponement of these amounts. They argued that the First Lender’s mortgage did not secure these amounts ahead of their registered mortgages. Rather they contested that the rule against tacking applied in this case. 

The Court needed to consider and decide on the following:

• Did the First Lender’s mortgage secure all claimed amounts? In other words, both the instalment advances and pre-sale improvement costs?
• Alternatively, should there be a postponement of some of these amounts in favour of the Subsequent Lenders?
• Was the First Lender improperly seeking to ‘tack on’ to amounts secured by its prior registered mortgage?

Judgment

Holland J, confirmed the principle against tacking as follows:

“…that upon receiving actual notice of a second mortgage, a first mortgagee is not entitled to priority for any further advances it may make”

The rule against tacking is applicable to mortgages registered under the Real Property Act 1900 (NSW). This applies even in circumstances where a borrower is contractually obliged to accept further advances made by the lender (West v Williams).

However, his Honour expressed such rule as having no application in cases where the monies expended by the prior mortgagee increases the value of the security property. Such monies could not properly be characterised as further advances.

His Honour stated:

“The money expended by the first mortgagee in order to complete and subsequently sell the buildings, if regarded as further advances, would be subject to the rule against tacking – because such expenditure was optional”

His Honour concluded that the pre-sales amounts expended by the First Lender were not further advances but rather expenses incurred by a mortgagee in possession to perfect its security. And as a result there could be no postponement due to the rule against tacking.

Ultimately, the equitable principles regarding expenditure or improvements allowed the First Lender to enjoy priority for all amounts claimed under its prior mortgage over the claims of the second and third mortgagees.

Implications

1. The decision confirmed that principles in West v Williams are still valid in cases where the further advances do not facilitate improvements in the value of the security property.

2. Put simply, where two or more mortgagees register mortgages over a common security, the prior mortgagee cannot claim priority for further advances made after the registration of subsequent mortgages. However, where further amounts increase the marketable value of the property (or in construction cases complete buildings in order for sale) the first mortgagee may enjoy priority. Why? Because without such expenditure by the first mortgagee, the subsequent mortgagee’s interest in the security property may be reduced.

3. Prior mortgagees wishing to make further advances and avoid assertions of improper tacking, should enter into a Priority Deed with all subsequent security holders before making any further advances.

4. Subsequent mortgagees wishing to limit the scope for further advances being made by a prior mortgagee that could erode the equity in the security property should be vigilant in ensuring notice has been sent to the prior mortgagee in accordance with State legislation prior to advancing funds.

Related articles

Obligations Imposed on Mortgagees Exercising Power of Sale.

Equitable Interest in Land

Transfer of Mortgage: 2nd Mortgagee vs Borrower?

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

The post Rule Against Tacking vs Expenditure Exercising Power of Sale appeared first on Elliott May.

In Bank of Queensland Limited v Bottomley [2015] QSC 329 the Supreme Court of Queensland considered the requirements surrounding enforcement warrants where a mortgaged property is occupied by tenants.

Outline of Facts

This question was before the court in the matter of Bank of Queensland Limited v Bottomley [2015]. The bank obtained a default judgment against the defendant mortgagor. This included an order that the bank recover possession of the mortgaged land.

The mortgagor defendant had leased out the premises to a number of tenants. On 16 April 2015, the bank sent a letter to the occupants of the property. It stated that the defendant had defaulted under its mortgage with the bank. And therefore the bank was exercising its power of sale. It enclosed a Notice to Vacate in the form required under the Residential Tenancies and Rooming Accommodation Act 2008 (Qld).

The bank’s solicitors became aware that the property in fact comprised three separate units. Two units were occupied by Ms Crump and the third by another individual. On 14 July 2015, a process server for the bank placed a letter explaining that it wished to exercise its power of sale and a Notice to Vacate under the front door of the premises occupied by Ms Crump. The Notice required Ms Crump and any other occupant of the two units to vacate by 16 September 2015. The process server affixed to the front door of the third unit an envelope containing similar documents.

The occupant of the third unit vacated the premises on 9 October 2015.

On 23 July 2015, Ms Crump wrote a letter to the bank’s solicitors stating that she had received the letter and Notice to Vacate served on 14 July 2015. She asked for a 60-day extension for vacating the premises due to certain medical circumstances.

Enforcement Warrants Generally

The process around enforcement warrants for possession is contained in the Uniform Civil Procedure Rules 1999 (Qld). Under r 915, a court may issue an enforcement warrant. This authorises an enforcement officer to enter on the land described in the warrant and deliver possession of the land and appurtenances to the person entitled to possession. Under r 913(2), leave of the Court is required for the issue of an enforcement warrant under r 915 if a person other than person against whom the order for possession of the land has been made is in occupation of it under a lease or tenancy.

Decision

As Ms Crump was still in occupation of the land, the bank needed leave from the court to obtain an enforcement warrant for possession. Ms Crump was a person against whom an order for the possession of the land was to be enforced. Therefore the bank was required to serve her with a copy of the order at least seven days before the warrant was issued. The bank did not comply with this condition. However, the Court has the discretion to override this requirement.

In this case, Justice Lyons found that Ms Crump had significant notice of the bank’s intention to exercise its power of sale. Also, the extension period she nominated had expired. It was therefore appropriate to make an order for the possession of the land in favour of the bank.

The court granted leave to the bank for the issue of an enforcement warrant against Ms Crump.

The full decision may be read by following this link.

Related articles

Mortgagee Possession Increasingly Hindered by Mortgagors

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

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In the matter of Asset Core Pty Ltd & Anor v Jarrett 1 Enterprises Pty Ltd & Anor [2015] QSC 270 the court refused to make an order for the sale of a mortgaged property despite an application under section 99(2) of the Property Law Act 1974 (Qld)

Facts

Jarrett 1 Enterprises (Jarrett) owned property subject to two mortgages held by Permanent Mortgages Pty Ltd (Permanent Mortgages) and Core (Qld) Pty Ltd (Core) respectively. Jarrett defaulted in payment of the loan from Core. Core subsequently obtained judgement by default in District Court proceedings. Jarrett also defaulted in respect of the first mortgage. As a result Permanent Mortgages was in the process of taking steps to enforce its rights over the property.

On 30 July 2015, Asset Core Pty Ltd (Asset Core), a related entity of Core, entered into a contract of sale with Jarrett. Settlement was set to occur on 31 August 2015. And a transfer document necessary to effect settlement of the contract was executed. However, Jarrett failed to settle on the settlement date.

Core applied for an interlocutory injunction against Permanent Mortgages to restrain it from exercising its rights to sell the property. Core submitted that it would suffer monetary loss if Permanent Mortgages exercised its rights under the first mortgage. Further, Core stated its judgment debt would not be satisfied due to the increased costs, interest and expenses resulting from Permanent Mortgage’s exercise of its powers as first mortgagee.

Court directed sale sought

Core sought a Court directed sale of the property on the same terms as the contract of sale pursuant to s 99(2) of the Property Law Act 1974 (Qld), which provides:

(2) In any action, whether for foreclosure, or for redemption, or for sale, or for the raising and payment in any manner of mortgage money, the court, on the request of the mortgagee, or of any person interested either in the mortgage money or in the right of redemption, and, even though—

(a) any other person dissents; or

(b) the mortgagee or any person so interested does not appear in the action;

and without allowing any time for redemption or for payment of any mortgaged money, may direct a sale of the mortgaged property, on such terms, subject to subsection (3), as it thinks fit, including the deposit in court of a reasonable sum fixed by the court to meet the expenses of sale and to secure performance of the terms.

Issue for Determination

The Court was required to consider whether Core’s application under s 99(2) created an equitable interest in its favour. This would justify the granting of an injunction. Core had to establish a valid claim against Permanent Mortgages to justify the making of an injunction.

Findings

A plaintiff needs to demonstrate that there will be a sufficiently plausible ground for the granting of final relief. However, if it fails to do so then it is likely there is no basis for interlocutory relief. Unable to challenge the enforceability of the first mortgage, Core failed to identify the existence of any cause of action against Permanent Mortgages.

Therefore Core argued that the statutory power under s 99(2) could affect the rights of Permanent Mortgages as the first mortgagee. Thus it was “just and convenient” to restrain Permanent Mortgages from exercising its rights in order to maintain the status quo.

Application for injunction denied

However, Justice Flanagan rejected this argument.  The Court may have the power to grant an interlocutory injunction if it considers it “just or convenient”. But this does not create a “free-standing” right to injunctive relief. Maintaining the status quo through an injunction would restrain Permanent Mortgages from doing something which Core had no right to prevent.

The Court’s power to direct a sale pursuant to s 99(2) is discretionary. At paragraph [25], Justice Flanagan stated:

The mere fact that a statute gives a wide discretion to the Court to order a sale which may directly affect a first mortgagee’s rights and interest does not create an equity in the party requesting the sale which would support an interlocutory injunction.

The proper reading of the judicial power to order a sale is that it only gives an interested party the right to request an exercise of discretion by the Court to direct a sale of the mortgaged property on such terms as the Court thinks fit. It did not create any rights in favour of Core against Permanent Mortgages.

Without any challenge to the enforceability or validity of the first mortgage held by Permanent Mortgages, the mere fact that Core had requested the Court to direct a sale of the property did not create any equity capable of being protected by the granting of an injunction.

Therefore the application for an injunction was refused.

Balance of Convenience

Even if the analysis of s 99(2) was wrong, his Honour would have rejected the application based on balance of convenience considerations. Core sought to protect the position of Asset Core as purchasers. Further Core wanted to ensure it received the amount owed under the relevant loan agreement supported by its second mortgage. However, if Permanent Mortgages exercised its powers under its first mortgage this would reduce the amount Core could recover. But this was merely a consequence of the priority position of Core as second mortgagee.

Related articles

Obligations Imposed on Mortgagees Exercising Power of Sale

Transfer of Mortgage: 2nd Mortgagee vs Borrower?

Rule Against Tacking vs Expenditure Exercising Power of Sale

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

The post Equitable Interest in Land appeared first on Elliott May.

In the matter of Sibonna Nominees Pty Ltd v Evangelos Vouzas and Christina Vouzas [2013] VSCA 369, the Court of Appeal of Victoria affirmed the trial judge’s finding that a mortgage provided by the borrower’s parents secured no money and that the lender was not entitled to exercise any power of sale over 2 ‘mortgaged’ properties.

Facts

In about November 2007, Sibonna Nominees Pty Ltd (“the lender”) began lending money to Steven Vouzas (“the son”) and his company, Speck Projects Pty Ltd. By August 2008, the principal amount owing on the loans was $600,000.

The lender required security for the principal and interest owing on the loans. So the son arranged for his parents to execute a mortgage over two of their properties. The mortgage purported to secure all monies owing by the parents to the lender. However, no monies had in fact ever been lent to the parents.

The son failed to repay all monies owed to the lender and the loan went into default. Therefore the lender entered into possession of the two mortgaged properties. After selling the property, the first mortgagee took some of the proceeds from the sale. The lender received the balance, together with rent after it entered into possession.

Key Arguments

The parents later sued the lender for wrongful exercise of a power of sale. They sought declaratory orders that the proceeds of sale were held on trust for their benefit. They also claimed further loss and damage, including the rent received by the lender.  

The lender argued that the parents were bound and liable because the stamp duty notation on the mortgage cover sheet stated ‘the amount advanced pursuant to this Mortgage is $500,000’. It also argued that a variation of mortgage had the same effect as a credit contract, in that it was an acknowledgement of the debt owed to the lender by the parents.

Decision at Trial

The trial judge found that the mortgage did not secure any money owed. At the time the mortgage was executed there was no separate document which could be considered a credit contract. The stamp duty notation on the cover sheet of the mortgage did not amount to a term of the mortgage. And further, it did not constitute a credit contract.

The lender submitted that a later mortgage variation (‘the mortgagors shall repay the said sum of $1,300,000 on or before 1 October 2009…’) created an unconditional obligation on the parents to pay a certain sum by a certain date in the future.

Consumer Credit Code

In an attempt to deal with the fact that no monies had been advanced to the parents, the lender argued that the parents incurred a deferred debt within the meaning of ‘credit’ in s 4(1)(b) of the Consumer Credit Code. Counsel for the lender argued that nothing in s 4(1) of the Code required that money actually be advanced to the parents. Rather the definition of ‘credit’ focused on the obligations owed by the mortgagor, not on the provision of a loan.

The trial judge did not accept this argument made on behalf of the lender as s 4(1) speaks in terms of credit being ‘provided’. And to suggest otherwise would be an artificial and strained construction of the language used in the legislation. Put simply, there was no advance made to the parents so the mortgage they provided secured nothing.

On this basis the trial judge found that the lender was not authorised to exercise any power of sale. The judge found that the lender had no enforceable mortgage agreement with the parents.

The lender appealed this decision.

Decision of the Court of Appeal

The decision of the trial judge was upheld on appeal. The court found that even if the Code did only require there to be an obligation imposed on the mortgagors and no requirement for monies to be advanced by the mortgagee, the parents did not assume any obligations because the term ‘principal sum’ in the mortgage variation did not appear in the original mortgage document. Therefore the mortgage did not secure any monies.

This serves to illustrate the need for carefully drafted mortgage documents.

If the mortgage or loan agreement you are using to secure your loans is not properly drafted, your funds may be exposed. At Elliott May Lawyers we specialise in mortgage lending and litigation. Our composite mortgage document maximise your prospects of prevailing should borrowers or guarantors attempt to avoid their repayment obligations.

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

The post Careless Drafting Exposes Lender to Unsecured Loan appeared first on Elliott May.

Is a lender precluded from enforcing its rights against a guarantor if there is a period of inactivity after it takes possession of a security property? The Supreme Court of News South Wales was recently required to consider this issue in the matter of Commonwealth Bank of Australia v Thompson [2013] NSWSC 149.

Facts

RHT Developments undertook residential developments in Biloela, Queensland. To fund construction of certain townhouses, it obtained a loan from the Commonwealth Bank of Australia (CBA). A registered mortgage secured the loan. Mr Thompson, a director of RHT Developments, was a guarantor under this mortgage. The property venture failed before completion. Therefore on 11 April 2011, CBA entered into possession of the security property as a mortgagee in possession. CBA took preliminary steps to market the property, but then did nothing for over 18 months. By February 2013, $3.068m remained outstanding under the guarantees, with $1,468 interest accruing daily. The CBA then commenced proceedings against Mr Thompson to recover the $3.068m pursuant to his guarantee.

Arguments

The lender relied upon Westpac v Kingsland which stated that a mortgagee in possession is not obliged to:

• sell at all or at any particular time;
• lease or permit occupation of premises at any particular time;
• exercise its power of sale in circumstances where its exercise would extinguish the liability of its debtors and guarantors.

Counsel for the guarantor cited the case of Palk v Mortgage Services Funding. This case held that a mortgagee does not have an unfettered discretion to delay a sale indefinitely. The guarantor argued that the bank should have taken reasonable steps to sell the property before it enforced the guarantees. Evidence showed that after the bank had taken possession of the properties, its advertising had been inadequate or insufficient. Also, the real estate agent had demonstrated a lack of interest and had not properly maintained the property.

Judgment

The Judge recognised that the bank had done very little to market or maintain the properties until very recently, when CBA took steps to market and sell the property. The Judge however considered the English Court of Appeal decision of Palk v Mortgage Services Funding where it was found that:

‘[A] mortgagee can sit back and do nothing. But if he does take steps to exercise his rights over his security, common law and equity alike have set bounds to the extent to which he can look after himself and ignore the mortgagor’s interests. In the exercise of his rights over his security the mortgagee must act fairly towards the mortgagor.’

Possibly sensing that the court was considering granting some relief to the guarantor, the bank effectively dropped its claim for the accrued interest. Therefore, although the court found the bank had been tardy in selling the property, it held the bank had not breached its duties to the borrower because it had not sought to claim the interest which had accrued during the period of inactivity.

The Court ordered the borrower to pay the bank the sum of $1,900,000 and the bank’s costs. It also granted the bank the right to enforce the guarantee against the guarantor.

Related articles

Lender Gets an Enforcement Warrant Despite Delay

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

The post Mortgagee Delays in Selling Security Property Impacts Rights appeared first on Elliott May.

In the recent matter of Westpac Banking Corporation v Helicopters Brisbane Pty Ltd & Ors [2012] QSC 263 the Supreme Court of Queensland was asked by Eddy Groves, former CEO of ABC Learning, to dismiss an application for summary judgment. The court was required to consider the operation of s85 Property Law Act 1974 dealing with the obligations imposed on a mortgagee exercising power of sale over secured property.

Facts

Application for summary judgment

Westpac brought an application for summary judgment against the third defendant, Eddy Groves, for a debt of $338,975.16. This debt arose out of a commercial loan agreement executed on 4 March 2004 (Loan Agreement). It was between Westpac as lender, the first defendant (Helicopters Brisbane) as borrower. And the second and third defendants (Groves) as guarantors.

In March 2004, Westpac advanced $808,992.83 to Helicopters Brisbane for the purchase of a thermal imaging helicopter camera. Helicopters Brisbane was obliged to repay the loan in 60 monthly installments. Together with a residual payment of $323,600. Westpac was also granted a bill of sale over the camera.

By November 2007, Helicopters Brisbane had failed to make the monthly payments required under the Loan Agreement. A letter of demand sent to Helicopters Brisbane requiring payment of $506,146.23 was not complied with. Westpac then took possession of the camera and sold it at auction in November 2008 for $112,875.

No set-off clause

Clause 4 of the Standard Conditions of the Loan Agreement contained a “no set-off clause” in the following terms:

4.2 The guarantor (Groves) acknowledges:

(d) that the Guarantor’s liability hereunder shall not be affected by any claim or right to set off or cross action which the Borrower or any other Guarantor may have or claim to have against the Lender on any account whatsoever nor shall the Guarantor be entitled to any set off against the Lender.

Exercising power of sale

A mortgagee when exercising a power of sale must take reasonable care to ensure the property is sold at market value. As required by section 85 of the Property Law Act. The mortgagee must adequately advertise the sale. And obtain reliable evidence of the property’s value while maintaining the property. And then the mortgagee can sell the property at auction unless it is appropriate to sell it in another way. Section 80(5) provides:

‘An agreement or stipulation is void to the extent that it purports to relieve, or might have the effect of relieving, a mortgagee or receiver from the duty imposed by this section’

Guarantee unenforceable

Eddy Groves alleged that Westpac was not entitled to the sum claimed because it sold the camera at a significantly undervalued price. Also that the guarantee was unenforceable because Westpac breached its duty to advise him of the effect of the guarantee. 

Mr Groves claimed that he suffered a loss due to the failure of Westpac to discharge its obligations under section 85. He contended the bank did not provide evidence of any details of advertising the camera. Nor any valuations of the camera obtained by the bank. There were no details of any reserve set by the bank in auctioning the camera. Nor any inquiries made by the bank as to how to market and sell such a specialised item of equipment.

Westpac referred to the “no set-off clause” and argued that if Mr Groves was entitled to damages then he would have to pay the sum owing to the bank. To simplify, Westpac argued that the clause did not extinguish Groves’ claim but postponed it until the debt was paid.

Decision

Justice Martin affirmed the principles expounded by Bryson J in Capital Finance Australia Limited v Davies [2002] NSWSC 1146. In that case, Bryson J stated:

‘The jurisdiction of the courts and the rights of parties to make claims before courts are not conferred by contract and cannot be ousted by contract. However there is… no infringement of this principle where parties agree that in stated circumstances a particular sum of money will change hands without the opportunity at the same time to obtain judicial disposition of any other claim between them.’

Justice Martin felt it unnecessary to decide on whether the “no set-off clause” was valid with respect to section 85(5) of the Property Law Act. This was because of a separate claim raised by Mr Groves regarding a representation said to have been made to him by a Westpac employee. Mr Groves claimed a Westpac employee told him the sale price of the camera would cover the residual cost. And therefore he should not pay the amount in arrears. Westpac did not raise any evidence to counter this claim. And Justice Martin accepted Mr Groves’ account.

Mr Groves argued that the representations made by the Westpac employee entitled him to an award of compensation under s 82 of the Trade Practices Act . Or alternatively, orders should be made to vary or partially rescind the guarantee. So that it would instead secure the amount due less the sums equal to the losses caused by the bank’s contravening conduct. Justice Martin referred to the relevant case law to support the notion that “no set-off clauses” do not limit a defendant’s right to seek damages under the Trade Practices Act, although the guarantee itself may not be impeached.

Conclusion

Westpac’s application for summary judgement in relation to the debt claimed was dismissed. His Honour confirmed that in these situations a claim will only be decided summarily in the clearest of cases. Justice Martin held that the power to exercise this jurisdiction is one that should be exercised with great care. And should only be exercised where it is clear that there is no real question to be tried.

The matters raised by Mr Groves regarding the ‘no set off’ clause led to the conclusion that there remained a real question to be tried.

The decision of Justice Martin may be read in full by following the link below:

• Westpac v Groves

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

The post Obligations Imposed on Mortgagees Exercising Power of Sale. appeared first on Elliott May.

In McElligott v Commonwealth Bank of Australia [2012] the Queensland Court of Appeal was asked to consider a registered owner’s caveat preventing the registration of a transfer and mortgage. And an order by the Supreme Court to remove this caveat under s 127 of the Land Title Act 1994 (Qld).

Background

Lorain McElligott (the appellant) was the sole director and shareholder of Westwood Enterprises (Qld) Pty Ltd. Westwood was wound up on 14 October 2009. Therefore the appellant lacked authority to perform or exercise a function or power as an officer of Westwood under the Corporations Act 2001 (Cth).

Despite this, she lodged a caveat over land registered in the name of Westwood. The caveat was requisitioned and amended by Ms McElligott to describe the caveator as Westwood as Trustee for the McElligott Discretionary Trust. The grounds of claim contained in the caveat alleged fraudulent action on behalf of the company’s lawyers that led to the company being wound up. The alleged fraudulent behaviour was in relation to a statutory demand which did not include the required warning statement. Importantly, the caveat did not assert grounds of claim against the then registered mortgagee or the purchaser of the property or the CBA, being the respondent to this appeal, which provided finance for the purchase. In her oral submissions Ms McElligott argued that the property had been sold under value, although she provided no evidence apart from dated property valuations.

The caveat lodged by Ms McElligott prevented the registration of a Transfer to the person who had purchased the land from the NAB in exercise of its power of sale as mortgagee. It also prevented a mortgage registering between the purchaser and his financier the CBA. The CBA demanded that the caveat be removed pursuant to s 127 of the Land Title Act 1994 (Qld). Westwood’s liquidators advised the CBA that they neither consented to nor opposed its application to remove the caveat and “at no stage have we authorised Ms McElligott to lodge the caveat on our behalf in our capacity as liquidators or receivers”.

The primary judge found that Westwood had no interest preventing registration of a Transfer consequent upon a sale by the NAB. His Honour noted that there was no allegation that the NAB had fraudulently obtained its mortgage or acted fraudulently in exercising its power of sale as mortgagee in possession. Ms McElligott was in no position to challenge the sale by the NAB since control of the land and the affairs of Westwood rested with the liquidators. The trial judge ordered that the caveat be removed.

The Court of Appeal held that the primary judge was correct to order the removal of the caveat lodged by Ms McElligott on behalf of Westwood. Even if there was some evidence supporting a case against the NAB for breaching its duty to sell the property at market value (s 85 of the Property Law Act 1974 (Qld)), section 85(3) states:

“The title of the purchaser is not impeachable on the ground that the mortgagee or receiver has committed a breach of any duty imposed by this section…”

In relation to the alleged fraudulent behaviour of Westwood’s former solicitors, Justice Applegarth concluded that no allegation was raised in the caveat “that the NAB lacked the power to exercise its power of sale as registered mortgagee of Westwood’s property”. Accordingly, Ms McElligott’s appeal was dismissed.

 The full judgement can be read by following the link below:

• McElligott v CBA

Elliott May Lawyers regularly act for lenders and mortgagees involved in caveat disputes. Elliott May Lawyers specialise in all aspects of mortgage and caveat lending and enforcement, including preparation of offer documentation, loan agreements, mortgages, priority deeds, PPSA charges and guarantees, as well as issuing possession proceedings and facilitating the exercise of power of sale by mortgagees.

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

The post Caveat Dispute: Mortgagee Unable to Transfer Land appeared first on Elliott May.