Schulz v Turner [2008] NSWSC 24

In this case Miss Schultz provided monies to two property developers to purchase a property for a subdivision. They entered an agreement in which they agreed to grant her a first mortgage and she was given the Certificate of Title for safekeeping. Later one of the developers, Mr Brett David Kirkby (who drafted the agreement) refused to execute the mortgage claiming 1. that he did not understand the legal obligations of granting a mortgage, 2. he thought that the mortgage secured only half the purchase price, 3. the deal was he was to receive a half share unencumbered, 4. if there was a mortgage it did not secure an obligation to repay. The Court disbelieved Mr Brett David Kirkby describing his evidence as implausible and found in favour of the lender. The Court discussed the legal principles of when a court will find that there is an equitable mortgage citing Swiss Bank Corporation v Lloyd’s Bank Ltd [1982] AC 584:

An equitable mortgage is created when the legal owner of the property .. enters into some instrument or does some act which, though insufficient to confer a legal estate .. on the mortgagee, nevertheless demonstrates a binding intention to create a security in favour of the mortgagee, or in other words evidences a contract to do so …

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