Geitonia v Westpac [2015] NSWSC 419

The second mortgagee wanted to force the first mortgagee to transfer its mortgage to the second mortgagee. 

The second mortgagee sought to invoke of s 94(1) of the Conveyancing Act 1919 (NSW) which provides:

Where a mortgagor is entitled to redeem the mortgagor shall by virtue of this Act have power to require the mortgagee instead of discharging, and on the terms on which the mortgagee would be bound to discharge, to transfer the mortgage to any third person as the mortgagor directs; and the mortgagee shall by virtue of this Act be bound to transfer accordingly.

The second mortgagee claimed to be the mortgagor for the purpose of this section relying on the definition of “Mortgagor” is defined in s 7 of the Act. This is:

“any person from time to time deriving title to the equity of redemption under the original mortgagor, or entitled to redeem a mortgage, according to the person’s estate, interest, or right in the mortgaged property”. 

It was not disputed that, a second mortgagee is entitled to the benefit of s 94(1). 

The question for determination was whether a second mortgagee can require a first mortgagee to transfer its mortgage to the second mortgagee or whether the second mortgagee must nominate a third person.

The judge considered conflicting authorities ultimately deciding that “third party” is any person independant of the mortgagor. The judge justified this conclusion saying:

s 94 was part of reforms intended to improve the position of mortgagors. However, the reforms were not intended to provide a mechanism by which a mortgagor could defeat or interfere with the rights of second or subsequent mortgagees. Yet that would be the effect if the mortgagor could itself obtain an assignment of the first mortgage. That is why s 94 requires the transfer to be to a third person; and why the expression “third person” has been interpreted as a person genuinely independent of the mortgagor.

Click here to read the full judgement.

Scroll to Top