A lender advanced more than $16m to a property developer, secured by a mortgage over the site and a collateral mortgage over a property owned by a director.
The director claimed the lender was only entitled to enforce against his properties to a limit of $3m. The dispute arose because the lender sent a two page mortgage document to the mortgagor and the mortgagor returned it executed but inserted a third page limiting liability to $3m.
The lender sought to have the mortgage rectified on the basis of a unilateral mistake or alternatively, misleading and deceptive conduct by the mortgagor.
The Law – Rectification
The court found that the director had told Equititrust that he had executed the mortgage in its two page form and his solicitor did not draw the lender’s attention to the additional clause limiting liability. The court found that the solicitor should have drawn the lender’s attention to the additional clause and it was unconscionable not to refer to the alteration. The court found that the lender’s mistake had been induced by the conduct of the director and its solicitor, and ordered rectification of the mortgage to delete the additional clause and make the liability unlimited.
The court then considered the other grounds of challenge, though strictly unnecessary.
Misleading and deceptive conduct
The court found that the mortgagor had misled the lender by making it believe that it had executed the mortgage in the form in which it had been sent and would have granted relief in the same terms as the order for rectification.