LAW 1506 Lecture Notes - Lecture 8: Equitable Remedy, Unsecured Creditor, Personal Property
23 May 2018
School
Department
Course
Professor
MORTGAGES AND SECURITIES
SECURITY OVER PERSONAL PROPERTY
1. Common law methods, 4 types personal or land
- All = Right in rem: contractual right. Recourse to property in cases of default/ insolvency
on debt
I. Pledge: chattels only, person must have possession to enforce.
➢ Deliver property for purpose of security (give a clip to A until you can
pay them the money owed)
II. Lien: chattels only, person must have possession to enforce.
➢ Retain for purpose of security. (A repaired watch, B doesnt pay. A retains
watch until B pays)
III. Mortgage: land or chattels. transfer of title as security
IV. Charge: land or chattels. EQUITABLE. right to recourse of property. No transfer of
title
2. Security over personal property
a. Business lending- anything which you have had to take finance out to obtain
i. security over land & personal property including vehicles, money in bank
accounts, shares
b. ROT (retention of title) clauses- title retained by supplier until full payment
c. Personal Property Securities Act 1999 (in operation as of Jan 2012) national online
register where a transaction in substance gives security over personal property
i. No legal interest, no title to car, only a notice board that you have an interest in
the property if that person becomes insolvent
ii. Personal property only- not land or fixtures
iii. Must arise from a transaction
iv. Debtor is the grantor of security, even if title at common law remains with
creditor/ supplier
v. Registration not compulsory
➢ But gives priority over later registered interests and (sometimes) earlier
ones
➢ If no registration, security interest is ineffective (unsecured creditor) if
grantor becomes insolvent
MORTGAGES
STEP 1: is this a mortgage? what type of system is used to deal with the land (common law/
equity or Torrens)?
1. Establish mortgage by using facts to prove there is a security interest connected to land
2. Torrens System Mortgage
a. Procedure
i. Registered proprietor executes mortgage in statutory form, referring to the cert
of title affects s 128-129 RPA
b. Effect
i. S 132 RPA mortgage has effect as a security- no conveyance- title has a charge
but remains with mortgagor
1. Forrest Trust Statutory charge, but with same features as at common law
(right to redeem)
b. On default- mortgagees and mortgagors rights…
i. Mortgagee has statutory right to possession s 137
ii. Sale and receivership
i. Priority of mortgage is determined- later in course
3. Equitable
find more resources at oneclass.com
find more resources at oneclass.com
Issue: Torrens formalities havent been complied with
a. Three ways an equitable mortgage can arise
1. Written contract to create mortgage creates an equitable mortgage - Equity
looks on that as done which ought to be done Walsh v Lonsdale
➢ S 26 LPA; s 4 Statute of Frauds: agreement must be evidence in writing
signed by party seeking to enforce it or their agent If no C*- part
performance
2. deposit title deeds Russel v Russel - no longer possible s 149 RPA removed
deposit of title deeds as here is no certificate of tile to deposit
3. mortgage an equitable interest- cannot turn equitable interest into a legal
interest, therefore must be an equitable mortgage
➢ or where a second or third interest is mortgaged: cant convey legal title
twice, first conveyance = legal; second = equitable
b. Remedies: s 43LPA where order for sale is made, court may vest land in equitable
mortgagee in order for sale to be conducted- priorities may be important.
4. Common law
a. Mortgage: transfer of title as security. If no transfer >
i. CHARGE. = enforced in equity, right to recourse to the property. Hypothecation-
pretend the recipient has the same rights as though a transfer of title has taken
place (mortgage)
STEP 2: Who is seeking to enforce their rights?
MORTGAGOR'S RIGHTS
Issue: Mortgagor wants to stop the bank taking their house
1. At common law: under a Torrens mortgage, the mortgaged property remains vested in the
mortgagor. Therefore, subject to express statement to the contrary in the mortgage doco,
mortgagor retains such rights that attach to the legal estate
a. Possession
b. Lease
c. Retain the title deeds
2. Equitable protections
a. Equity of redemption
i. Mortgage is simply security for repayment of monies- right to discharge of the
mortgage upon full repayment
1. Represents the mortgagors residual interest in the mortgages property
2. Equity will not allow any provision in the mortgage which prevents the
mortgagor from redeeming the mortgaged property upon fulfilment of
their obligations Noakes v Rice
ii. May be extinguished: to protect mortgagees equitable remedy of foreclosure
Campbell
1. Balance mortgagors right to repay secured debt against mortgagees need
to enforce at some point Campbell v Holyland
iii. Limitations on right to redeem (clogs/ fetters)
1. Collateral advantages in the mortgage over and above repayment of
mortgage monies- may be struck down because equity will not permit
a mortgage, through a contractual provision, to obstruct the
mortgagors right to redeem the property
2. SA position s 55B(2) LPA: any covenant collateral to the mortgage has no
effect once the mortgage monies have been repaid
3. Kreglinger v New Patogonia – traditional criteria to strike down
1. clog or fetter on equitable right to redeem
2. Repugnant to right to redeem; or
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Security over personal property: common law methods, 4 types personal or land. All = right in rem: contractual right. Recourse to property in cases of default/ insolvency on debt: pledge: chattels only, person must have possession to enforce. Deliver property for purpose of security (give a clip to a until you can. Lien: chattels only, person must have possession to enforce. pay them the money owed) Retain for purpose of security. (a repaired watch, b doesn(cid:495)t pay. Mortgage: land or chattels. transfer of title as security. But gives priority over later registered interests and (sometimes) earlier ones. If no registration, security interest is ineffective (unsecured creditor) if grantor becomes insolvent. Issue: torrens formalities haven(cid:495)t been complied with: three ways an equitable mortgage can arise, written contract to create mortgage creates an equitable mortgage - equity looks on that as done which ought to be done walsh v lonsdale. = enforced in equity, right to recourse to the property.
