The defendant was a lender who held an equitable mortgage which was secured over the borrower’s property by a guarantee and indemnity. St George Bank held a registered first mortgage over the property.
The borrower entered into a contract of sale of the property. The proceeds form the sale would have been insufficient to discharge the first registered mortgage with nothing left for the lender who held the equitable mortgage.
In those circumstances, there was no serious question to be tried as to whether the lender had a caveatable interest that the Court would protect by the grant of an injunction.
Justice Pembroke considered that the balance of convenience favoured the removal of the caveat, as it was threatening to prevent completion of the sale and affecting the rights of the first registered mortgagee. The lender took the equitable mortgage knowing its rights would be subject to the rights of the first registered mortgagee to have the loan discharged.
The Judge ordered that the caveat be removed to allow the completion of the sale of the property. Indemnity costs were ordered because of correspondence which put the lender on notice that its position was untenable.