McElligott v CBA [2012] QCA 61

A company was wound up and its mortgagee sold the land to a purchaser, who granted a mortgage to its lender. The sole director and shareholder of the defunct company lodged a caveat claiming “an equitable interest in the estate in fee simple”. The grounds of claim alleged “fraudulent action on the part of the company’s lawyers” that resulted in the company being wound up and the caveator sought leave to appeal to the High Court in relation to the winding up. The alleged fraudulent action of that firm was the use a statutory demand that did not include a required warning statement, and an assertion by a member of that firm that he believed that there was “no genuine dispute about the existence of (sic) the amount of debt”. In oral submissions, the caveator also claimed that the property had been sold at an undervalue but provided no evidence apart from out of date valuations of the property years earlier.

The caveat prevented the registration of the transfer and mortgage. The new mortgagee demanded the removal of the caveat and sought an order pursuant to s 127 of the Land Title Act 1994 (Qld) that the caveat be removed. The company’s liquidators did not authorise the caveat and did not consent nor oppose the application for the caveat’s removal.

The trial judge found that the original mortgagee had power to sell the property to the purchaser and the company had no interest against the original mortgagee to prevent registration of such transfer. The allegation that the property was sold at an undervalue was dismissed because there was no evidence provided to the court and the valuations were too remote. The court ordered that the caveat should be removed.

The caveator orally applied for a stay, which was refused and appealed.

The Appeal Court found that the trial judge correctly concluded that there was no evidence that original mortgagee had breached its obligations as mortgagee when selling the land.

The law
Section 85(3) provides:

The title of the purchaser is not impeachable on the ground that the mortgagee or receiver has committed a breach of any duty imposed by this section, but a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale.

This means that even if there is some evidence in support of a case against a mortgagee for breach of its duty under s 85 of the Property Law Act 1974 (Qld) to take reasonable care to ensure that property is sold at market value, this does not impeach the title of the purchaser.

The Appeal Court found that even if the High Court set aside the winding up and whatever may be the merits of the claims stated in that caveat in respect of the conduct of the company’s former solicitors, this would not impeach the exercise by the original mortgagee of its power of sale or provide the company with a legal entitlement to prevent the registration of the transfer and the new mortgage.

The Appeal Court found that the trial judge had not erred in ordering the caveat’s removal and declining a stay.

The Appeal Court also noted that in any event there was no utility in setting aside the order for removal of the caveat because the purchaser has become the registered owner and the bank registered as mortgagee.

The appeal was dismissed.

Click here to read the full judgment

Scroll to Top