NAB v State of NSW [2014] FCA 298

The lender served a section 57(2)(b) notice upon a defaulting borrower. However before exercising the lender’s power of sale, the borrower declared himself bankrupt and his property vested in the Official Trustee. The Official Trustee disclaimed the property which resulted in it vesting in the Crown.

The court noted that a disclaimer extinguishes the bankrupt’s rights but not the mortgagee’s rights. However the lender has no right to enforce its security against the Crown. As such the court held it just and equitable for the court to order that the property vest in the lender pursuant s133(9) enabling the lender to enforce its security and sell the security.

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