The lender sought a declaration that it had entered into an agreement with the borrower by which the borrower agreed to grant the lender a mortgage over certain land at Voyager Point, in substitution of the lender’s existing mortgage over another property at Helensburgh. The lender sought an order that the agreement be specifically performed.
At the request of the borrower the bank discharged the mortgage over the Helensburgh land. The lender failed to obtain a mortgage over the Voyager Point land or enter into any formal agreement for substitution of the mortgage, before the Helensburgh mortgage was discharged. The only documentary evidence of an agreement was a letter of offer form the lender to vary a ‘Credit Contract’ by adding as security the Voyager Point property. There was no evidence that the offer had been countersigned and returned. However, subsequent correspondence between the parties referred to such an agreement as having been entered into, for the substitution of the Helensburgh property with the Voyager Point property as security for the loan. In oral evidence the director of the borrower admitted he had made an offer to substitute the Voyager Point property which was accepted by the bank by discharge of the Helensburgh mortgage. As a result Justice Hammerschlag found that there was an agreement as alleged by the lender, for substitution of the mortgage security.
However, as far as commencing proceedings to enforce the mortgage, Justice Hammerschlag pointed the lender toward s 54A of the Conveyancing Act which states:
54A Contracts for sale etc of land to be in writing
No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged.
This section applies to contracts whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 and does not affect the law relating to part performance, or sales by the court.
This section applies and shall be deemed to have applied from the commencement of the Conveyancing (Amendment) Act 1930 to land under the provision of the Real Property Act 1900.
Justice Hammerschlag made the order for specific performance based on the doctrine of part performance as evidenced by the discharge of the Helensburgh mortgage, after setting out the relevant legal principles, as follows:
It is well established that the doctrine of part performance enables a Court of Equity to decree specific performance even where the statute has not been complied with, provided the acts done in performance were done with no other view or design than to perform the agreement: Khoury & Anor v Khouri (2006) 66 NSWLR 241 at 260; Meagher, Gummow & Lehane’s Equity Doctrines & Remedies 4th ed [12:100] and following. Section 19(2) provides that the section does not affect the law relating to specific performance. The doctrine of part performance applies equally to enforcement of a contract to execute a mortgage: Takemura v National Australia Bank Ltd  NSWSC 339.