Super 1000 v Pacific General Securities [2008] NSWSC 1222

This matter involved a failed development in Dee Why for which the joint venture developers raised funds by both issuing debentures and registered mortgages over the Dee Why development. The first registered mortgage was paid out and by agreements the remaining proceeds were paid into court to await determination of a priority dispute between the debentures holders and the registered second mortgagee.

Had there been no complications, the debenture holder would have unarguably lost priority to the registered second mortgagee regardless of notice by registered second mortgagee. This is because a registered mortgage obtains priority over all other interests due to indefeasibility.

The complication was that the director of the registered second mortgagee was also a director of one of the joint venture companies. It was argued that the indefeasibility of the mortgage was overthrown by the director’s breach of fiduciary duty. The court held that indefeasibility was not affected, however the director was liable for equitable damages for breach of fiduciary duty.

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