Mitchell v Crane [2009] NSWSC 489

A guarantor made mortgage payments. The lender sold the property and there was a surplus which was paid into Court. Normally, the guarantor would be entitled (pursuant to the doctrine of subrogation) to the surplus, however, there was another party who claimed to be entitled to the money. The other party was a firm of solicitors who had an unregistered mortgage for their fees.

The judge observed that “the positions of the two competing parties do not depend on evaluation of the terms of their caveats or on the dates of their caveats”. This was because neither party acted to its detriment after reading the other party’s caveat. His Honour also held that in the circumstances the actual or inferred knowledge of the other party’s interests, was irrelevant. His Honour concluded:

The only circumstance by which priority can be decided… is priority in point of time. Neither side has been shown to have conducted itself in any way which disentitles it to priority on the ordinary basis which is time related.

On this basis, the guarantor succeeded ahead of the solicitors.

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