NAB v Thirup [2011] NSWSC 911

A mortgagee sought judgment for possession of land together with judgment for a monetary sum against the mortgagors. The mortgagors argued they did not agree to the terms of the loan and claimed fraud on the part of the mortgage broker and that this fraud could be sheeted home to the lender. They also cross-claimed against the Torrens Assurance Fund pursuant to sections 128-135 Real Property Act 1900.

Summary judgment
A very clear case is required before summary judgment is granted and involves a consideration of the plaintiff’s claim and an assessment of whether there is an arguable defence to it. To that end, the court takes the defence case at its highest. It is not appropriate to resolve factual disputes.

The lender seeks summary judgment upon the basis that:

  1. it has the benefit of indefeasibility pursuant to section 42 Real Property Act 1900 flowing from the registration of the mortgage;
  2. section 60 Real Property Act 1900 entitles the mortgagee to possession of the mortgaged land upon default, there being clear default in this case;
  3. the mortgagors concede that monies advanced were used to discharge the previous mortgage so that, even if the registered mortgage was not valid, the lender relies upon the principle of subrogation as the basis of its entitlement. Although the subrogation claim was not pleaded, the court held that the admissions by the mortgagors found a judgment under Rule 17.7.

The mortgagors claim that they are entitled to rely upon the fraud exception in section 42 Real Property Act 1900 . With respect to the other heads, the mortgagors claim that there are significant factual issues which would need to be determined at trial concerning the acts of the lender’s officers which may sheet home fraud and forgery to the lender. All of this may constitute equitable or legal defences to the lender’s claim for possession and monetary judgment.

Mortgage fraud
The court held that a mortgage executed fraudulently does not mean that the mortgage is unenforceable unless the fraud was that of the mortgagor or his agent. It is also not sufficient that the lender merely had knowledge of the fraud committed by some one else, which was pleaded case here.

The court noted that it was not pleaded that the mortgage broker was the agent of the lender. The law is that a broker is the agent of the borrower. Hence the court found that any fraud on the part of the mortgage broker was not fraud on the part of the lender. The court held this defence was not arguable.

Other defences
The court noted that none of the defences provide a satisfactory response to the consequences of the mortgagee having no right to obtain possession or to sue for the mortgage debt, namely that the mortgagors would be left with a windfall.

Cross-claim
The court noted that the mortgagor’s arguments may at their highest reduce the level of indebtedness but not affect judgment for possession. The law is that a cross-claim or set-off is not a defence to a claim for possession.

The court gave summary judgment for possession to the lenders pursuant to rule 13.1.

Registrar General’s claim for summary dismissal
A very clear case, which discloses a reasonable cause of action must be demonstrated. The court found that the claim does into comply with pleading rules in that it does not clearly state a loss which is able to be compensated under the Act because it does not result from the operation of the Act and the effects of indefeasibility but from entering into an improvident loan with an interest rate unable to be serviced. In any event the mortgagors obtained the benefit of the discharge of the previous mortgage and this bars any claim.

The court dismissed the claim against the Registrar General pursuant to rule 13.4.

Leave to amend defence
The court only permitted the mortgagors to amend their defence in relation to those parts which relate to monetary judgment because the only controversy remaining is the amount of the lender’s claim.

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The court also awarded to the lender 80% of the costs of its own motion given it almost entirely succeeded and all its costs on the mortgagor’s motion since it succeeded entirely. The Registrar General was also awarded its costs.

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