Mango Media v Smith [2012] NSWSC 686

A lender sought to enforce an unregistered mortgage. There was already a first registered mortgage on the property.

The court held that there was no power of sale available under s58 of the Real Property Act because the mortgage was not registered. However:

Upon default an equitable chargee is entitled as of right to an order for sale. The court has inherent jurisdiction to order a sale of property.

The judge found that ordering possession was incidental to judicial sale orders:

Vacant possession is a normal incident of sale, the availability of which is generally necessary for completion of the sale. A mortgagee exercising power of sale is obliged to recover physical possession of the property from the mortgagor. Mortgagees normally take possession as a preliminary to sale, so that the property can be sold with vacant possession.

The judge next considered the interest rate which was 150% but declined to interfere with it noting:

I have considered the rate of interest applicable under the mortgage. I must remember, however, the rate is part of the contract for which the lender gave good consideration. The borrower received the benefit of independent advice from an accountant and a lawyer each of whom explained his obligations and responsibilities to him.

It is well recognised that contracts should be honoured. Nor is there any suggestion that the borrower lacked understanding of the nature or terms of the mortgage.

Finally in making the order for possession requiring the borrower to vacate the judge noted:

Even though I am prepared to make an order for specific performance, it is an in personam order for the borrower to give up possession, which does not bind the registered first mortgagee. It would be open to the registered first mortgagee to exercise its statutory right under s 60 Real Property Act to possession upon default.

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