LLB270 Chapter Notes - Chapter 14-2: Yorkshire Bank, Westpac, Decree Nisi
WEEK 2 – MORTGAGES:
Chapter 14 – Mortgages:
14.37: Rights and Remedies of the Mortgagee:
oEntitled to various rights and remedies
‘may employ every possible remedy… and put them all into motion at the same time’
o14.38: The Personal Covenant:
Mortgage is also a contract between the mortgagee and mortgagor
Involving a ‘personal covenant’ to pay the debt
Allowing the mortgagee to sue is a main form of recourse
In the case where the mortgagor has passed away the mortgagee can sue the
mortgagor’s estate, but only to the extent of the estate itself, and nothing beyond
this – Kenwell v Dye [1949] Ch 517
Conveyancing Act s 102 – prevents the mortgagee from purchasing the
mortgagors interest, the mortgagor must exercise their power of sale
Second covenant – date on which the sum is to be paid
Absent an express term payment on demand will be implied
Clear evidence to the contrary avoids this – Hopkins v Worcester and Birmingham
Canal Proprietors (1869)
If sum is not paid, breach occurs on the day of demand – Bolten v Beckenham
[1981]
Unable to meet repayments of the principle but repaying interest:
If mortgagee accepts interest payments for three consecutive months, mortgagee
is precluded from taking any action unless three months’ notice is given
Not available if mortgagor has defaulted on any other payments
Parties cannot opt out of these provisions – Conveyancing Act s 92(4)
Return of the property upon repayment:
Mortgagee must keep the property in a state which allows the mortgagor to
return
Exception: property sold by power of sale and there’s a balance still owing:
oMortgagor is required to make up the deficit
oPossible to contract out of this obligation
oIf mortgagor has colluded in the alienation of the property is requirement
does not apply – Re Burrell (1869)
Mortgage stipulating for repayment on demand:
Must be given a reasonable time to repay
oInterpreted as enough time to transfer funds, not enough time to get a loan –
Bond v Hong Kong Bank of Australia Ltd (1991)
Limitation periods:
oInterest not paid – Limitation Act 1969 (NSW) s 43: 6 years
oPrincipal not paid – Limitation Act 1969 (NSW) s 42: 12-year limitation period
to recover unpaid principle, foreclose or recover possession of the principal
Conveyance of the equity of redemption:
oReal Property Act s 76: prevents mortgagor simply assigning their equity of
redemption
Requires the transferee to pay the interest or other charges AND
indemnify the transferor
find more resources at oneclass.com
find more resources at oneclass.com
oReal Property Act s 79: implies a covenant that the mortgagor will pay
moneys or meet obligations
o14.42: Possession of the Mortgaged Property:
14.42: Old System Title:
14.42: Possession and Legal Mortgages:
oMortgagee becomes the legal title holder
oFour Maids Ltd v Dudley Marshall (Properties) Ltd [1957]: ‘mortgagee may go
into possession before the ink is dry on the mortgage’
oQuennell v Maltby [1979]: restricted the mortgagee from getting into
possession unless it was ‘reasonably for the purpose of enforcing’ the
security
Uncertain if this case applies in Australia
Australian position: if the mortgagee is in possession, it is for a security,
and all rents and profits must be accounted for
oMortgagee in possession is not in a situation like a trustee or an owner in
possession
Relates to the level of care for the property
Mortgagee is only required to undertake repairs to the extent of the rent
and profits
May be reimbursed for their own spending, but only if reasonable
14.44: Possession and Equitable Mortgages:
oPosition is different to a legal mortgage
oDoes not acquire an interest sufficient to give rise to a right of possession
oPossession in a passive sense
oNothing preventing the equitable mortgagee from taking possession by the
mortgage instrument itself
Doubt was expressed about this in King Investment Solutions Pty Ltd v
Hussain [2005] – even if an equitable mortgage contained a term
allowing possession on default this would not justify an order for
possession as a matter of property law
14.46: Attornment Clauses:
oOccurs when the mortgagor becomes the tenant of the mortgagee
Helps to protect the mortgagors right to possession
Rent owed is usually equal to the instalments
oProvides a better way of protecting possession until default – Birmingham
Citizens Permanent Building Society v Caunt [1962]
Does not override the mortgagees right to entry
15.47: Torrens Title:
No title to the land upon which the mortgagee can make a claim to possession
Real Property Act s 60 – creates a statutory right to possession where there is a
breach of a covenant to pay principal or interest
oCannot be invoked for breaches of other covenants
oRelates to the retaking of possession, rather than the exercise of sale and for
this reason no s 57 notice is required
Equitable mortgages: title to possession is much weaker, dependant entirely on
the application of Walsh v Lonsdale
14.48: Attornment Clauses:
find more resources at oneclass.com
find more resources at oneclass.com
oMay be used in Torrens land
oCommon view is that a tenancy by estoppel is created (this view has critics)
o14.49: Right to Assign:
Mortgagee can assign their interest, there are TWO interests:
Interest in the land
Personal covenant to sue for debt
They aren’t automatically assigned together
Conveyancing Act s 9(1) – mortgage can be assigned by a registered memorandum if it
is signed
Memorandum operates pursuant to s 91(4)
Mortgage can be assigned under both Torrens and Old System Land
Torrens land:
Transferee steps into the shoes of the mortgagee
Can sue to recover debt – s 52 of Real Property Act + PT Ltd v Maradona Pty Ltd
(1992)
Unless personal rights are also transferred the benefit of a guarantee isn’t
transferred
Does not allow transferee to claim for past breaches – unless they are continuing
– Measures v McFadyen
Transferee has an indefeasible interest in the property once it is registered
o14.50: Right to Improve Property:
Law permits the mortgagee to protect and maintain the property
Cannot improve the property to the extent that an owner might
Restricted in how far alteration of the nature of the property can be
Ensures the mortgagor has the same property returned as they mortgaged – Southwell
v Roberts
If the mortgagee spends excessively he or she won’t be reimbursed, and the mortgagor
will have the property returned to them in an improved state
o14.51: Power to Lease:
14.51: Old System Title:
14.51: Mortgagee-Granted Leases:
oMortgagee can enter into leases that are less than the period of the
mortgage, if it extended beyond this it would act as a CLOG
oConveyancing Act s 106 – mortgagee can enter leases that are:
No greater than 5 years long
Will be at best rent that can reasonably be achieved
Must contain a condition of re-entry if rent is not paid within a specified
term
Must be registered according the deeds registration scheme
Does not extend to oral leases
Covenants in s 84 of the Act are not excluded, unless by express
intention
oIn absence of agreement, the mortgagor does not have a right to possession
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
14. 37: rights and remedies of the mortgagee: entitled to various rights and remedies. May employ every possible remedy and put them all into motion at the same time": 14. 38: the personal covenant: Mortgage is also a contract between the mortgagee and mortgagor. Involving a personal covenant" to pay the debt. Allowing the mortgagee to sue is a main form of recourse. In the case where the mortgagor has passed away the mortgagee can sue the mortgagor"s estate, but only to the extent of the estate itself, and nothing beyond this kenwell v dye [1949] ch 517. Conveyancing act s 102 prevents the mortgagee from purchasing the mortgagors interest, the mortgagor must exercise their power of sale. Second covenant date on which the sum is to be paid. Absent an express term payment on demand will be implied. Clear evidence to the contrary avoids this hopkins v worcester and birmingham.
