The borrower lodged a caveat to prevent the sale of the property by the mortgagee which it claimed to be at undervalue. The lender sought a withdrawal of caveat. The Judge found for the lender and the borrower appealed.
Insufficient sale proceeds to discharge the mortgage
The borrower argued the Judge had wrongly taken into consideration that the sale proceeds would not discharge the mortgage. Justice Campbell (with whom Justice Macfarlan and Justice Tobias agreed) confirmed it was a relevant factor because:
- The delay would prejudice the lender’s ability to recover the debt (particularly as it had no other security or methods of recovery);
- The delay would not allow the lender to re-lend the funds;
- The commercial importance to the lender of being able to lend monies;
- The commercial importance of a lender being able to enforce its rights and knowing the Court will allow it to.
Reduction of debt
The borrower argued that the interest the caveat protects was a large one because it amounted to a significant reduction in the debt owing under the mortgage. The Judge held that the amount of the shortfall was not relevant because either way the borrower could not repay it. Further, a bankruptcy notice could not be by the lender until the question of the remaining debt had been litigated, which would afford the borrower the opportunity to argue over the amount owing.
Payment of the mortgage debt into Court
The Judge considered the general rule that if a borrower wants to prevent a sale by mortgagee they must pay the debt into Court in its entirety. The exceptions include:
- Where no power of sale has arisen at all;
- Where the validity of the mortgage is in question;
- Where the amount claimed in the mortgage is obviously wrong.
This case did not fit one of the exceptions and the borrower was ordered to withdraw its caveat.