Maxton & Maxton v Port Village Accommodation [2014] WASC 93

A caveator sought an extension of its caveat which was opposed by the registered mortgagee. The caveator argued the fraud exception to indefeasibility. The caveator sought to infer dishonesty from the fact that the borrower knew of the existence of the charge, yet proceeded to grant the mortgage to secure a debt in excess of the value of the land.

The court found that the fraud exception to indefeasibility did not apply. The court held that breach of contract does not of itself establish dishonesty on the borrower’s part. To establish fraud, the caveator must establish that the owner set out to defeat the caveator’s charge by granting a mortgage. The court noted that the allegation of dishonest intent was entirely based on inference and such inference could not be drawn simply on the basis that the owner knew of the charge. The court found that the evidence insufficient to support any allegation of fraud on the part of the owner let alone the mortgagee. Further, the court noted that even if there was fraud and the mortgagee had some constructive notice of the existence of the caveator’s unregistered charge, the mortgagee was entitled to the benefit of section 134 of the Transfer of Land Act 1893 which says that such knowledge shall not of itself be imputed as fraud.

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