CBA v Delacy [2010] NSWSC 1449

The borrower bought a unit and a car space, each with separate titles. The bank financed the purchase but only registered its mortgage over the unit forgetting about the car space by oversight. The outgoing mortgagee’s title to the car space remained on the title during this time. Then along came a second mortgagee who took a second unregistered mortgage over both titles.

The bank argued that it had an equitable mortgage over the parking space, either by way of subrogation on the basis that it paid out the previous registered first mortgagee and is subrogated to its rights under its mortgage, or by way of the deposit with it of the Certificate of Title to the parking space. The second mortgagee disputed this on the grounds that there was no intention on the part of the borrower to give, and no intention on the part of the Bank to take, the parking space as security.

In finding for the bank the court noted:

It is well established that where a mortgage is paid off by a third party (in this case, the Bank), unless the contrary appears, the third party is presumed to intend that the mortgage will be kept alive for his benefit. I find it impossible to accept the view that the Bank intended the outgoing mortgage over the car space to be extinguished in the event of it did not obtain equivalent security over the car space.

The judge further found that delivery of the Certificate of Title for the parking space to the Bank was in the context of the provision of security to it and was prima facie evidence of an agreement by the borrower to grant a mortgage over the parking space giving rise to an equitable mortgage.

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