Integrated Lending v Lion International Holdings [2005] NSWSC 1268

In the case the lender loaned $200,000 to borrower at 360% p.a. Later, by agreement this was capped to 120%, however compound interest of 1% for part of the term resulted in a payout figure of $800,000 even though the principal had been repaid.

The loan was secured by an unregistered mortgage pursuant to which the lender placed a caveat on the title of the security. Later the caveat was either lapsed (or withdrawn after a lapsing notice was filed) thus triggering s74O of the Real Property Act so that the first mortgage could be refinanced. The lender then placed the caveat back on the title. Under such circumstances s74O(2)(b) such a caveat has no effect unless (among other exceptions) the caveat is endorsed with the consent of the registered proprietor. The lender purported to give that consent pursuant to a power of attorney contained in the mortgage which read:

The Mortgagor hereby appoints during the continuance of this Mortgage the Mortgagee or its nominee to be the Attorney of the Mortgagor in the name and on behalf of the Mortgagor or otherwise to do, perform, observe or make all acts, matters, things and payments which under all or any of the covenants and agreements contained or implied in this Mortgage ought to be done, performed, observed or made by the Mortgagor of which the Mortgagee is by this Mortgage or by statute authorised or empowered to do or which the Mortgagee as Attorney shall in its discretion think proper for the purpose of giving complete effect to this Mortgage and to the exercise and execution of the powers, rights, remedies and authorities contained or implied in this Mortgage and for the protection and perfection or attempted perfection of this Mortgage and this Power of Attorney being given for valuable consideration is irrevocable until discharge of this Mortgage has been duly executed.

The borrower sought to lapse the second caveat and when the lender resisted the borrower argued that the consent pursuant to the power of attorney was insufficient to comply with s74O(2)(b). The judge noted that in addition to the power of attorney clause there was also a perfection clause and so concluded that the purported consent was sufficient to validate the caveat.

The borrower alternatively argued that the extension of the caveat should be denied because the application was brought on the last day. To this the judge responded:

Certainly the court encourages these applications to be made as early as possible. Unfortunately, they usually are not. The usual excuse, as here, is that there was correspondence between the solicitors. I do not think that I can completely deny relief because the application is made on the last day.

The borrower next argued that the parties had agreed that the borrower would supply alternative security and the lender would release the current security. The lender denied this. The judge accordingly held:

Although there will be interesting questions of fact to be tried, in my view, the evidence at the moment is sufficient to show that the caveat may have substance and, accordingly, upon the lender giving to the court the usual undertaking as to damages, the caveat is extended until further order.

Click here to read the full judgment

Scroll to Top