Wilson v Fitzsimons [2006] NSWSC 1318

In this case an elderly lady made a loan for $600k to her solicitor in exchange for a mortgage over his property at Potts Point, Sydney. The borrower sent a mortgage instrument to the lender which only mentioned the folio identifier of the property. The lender assumed that the folio identifier was for the Potts Point property, however, it turned out to be the folio identifier of a storage cubicle in Kings Cross, Sydney. The lender sought to have the mortgage instrument rectified to refer to the correct property.

The general proposition is that rectification for unilateral mistake is difficult to obtain except where the party who is not mistaken is guilty of fraud. Justice Gzell stated that he had no doubt that the mistake was caused by the fraud of the borrowers (two solicitors who have fled the country).

However the Potts Point property already had a mortgage over it in favour of the CBA (which was indefeasible). Justice Gzell stated that rectification should not be barred just because it was not possible for the lender to register a first mortgage and instead the court should act upon the equitable principle of practical justice if the precise performance of the original contractual obligations was not possible. Accordingly, an order for rectification was granted and the lender was granted a second mortgage.

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