Post on 21-Aug-2015
Making meaning from diverse provisions: how do they work
together?
Case-generated concepts• interpreting instruments• Interpreting legislation
Property Law Act• Relationship with common law• Relationship with other legislation• What is the purpose of the Act, the provisions?
Land Title Act• Relationship with common law• Relationship with other legislation• What is the purpose of the Act, the provisions?
The nature of the mortgage: Two transactions
Loan agreement• Loan of $ + promise to repay (debt)
Security agreement• Create interest in land to cover debt if default
Creating a mortgage
Form• Requirements for
creation legal interest in land
• Requirements for creation equitable interest in land
Substance• Nature of a Torrens
mortgage• Contrast nature of
common law mortgage
Read the instrument of mortgage (echoes approach to statute)
Commence-ment
Interest secured
Structure of instrument
Persons and things covered•Parties•Respective obligations
Does the Property Law Act apply? How/why?
Who has the power, and where are the protections: statute common law
Read your instrument of mortgage
Who is the mortgagor
Who is the mortgagee
Is it legal or equitable? How do you know?
What is the security
property?
What is the debt that is secured?
What are the obligations of
this mortgagor?
What are the obligations of
this mortgagee?
Does the PLA apply? If so,
why?
Does the LTA apply? If so,
why?
Enter into mortgage
1. Legal right to redeem
2. Equitable right to redeem
3. Equity of redemption
Common law concepts
Identify where redemption is provided for
Source of law Provision
Instrument of mortgage
Common law
Property Law Act
Land Title Act
Old System Torrens
Creation of mortgage
By parties By registration – ss72, 181, 182 LTA
Nature of mortgage
Conveyance of estate in fee simple
Charge – s74 LTA
Equity of redemption
Equitable proprietary interest vesting in mortgagor, subsisting from date of creation of mtge, being a right to a reconveyance upon discharge of the debt
Right to have a release of the mortgage, land restored free of charge
Foreclosure Bar on mortgagor’s right to redeem
Bar on mortgagor’s right to redeem + conveyance to mtgee for first time
Once a mortgage, always a mortgage
The very nature of a mortgage is as security only & mortgagor will be able to redeem the property. Interfering with this alters the very nature of the transaction
Noakes v Rice
NB s74
LTA
What do these phrases mean and imply?
• Making the mortgage irredeemable• Making redemption illusory• Imposing a penalty on the mortgagor• Deriving a collateral advantage• Deriving a collateral advantage that
is harsh and oppressive• Deriving a collateral advantage that
is unconscionable
Phrase Meaning/example
Making the mortgage irredeemable Stopping the mtgor from getting back the security property (Samuel v Jarrah Timber)
Making redemption illusory While technically allowing the mtgor to redeem the property, it’s so marginal as to not be real (Fairclough v Swan Brewery; Knightsbridge Estates v Byrne)
Imposing a penalty on the mortgagor Allowing disproportionate benefit to mtgee via repayments in excess of genuine pre-estimate of damages
Deriving a collateral advantage Receipt of some benefit or advantage beyond repayment of principal & interest
Deriving a collateral advantage that is harsh and oppressive
Look at relative power, whether continues beyond end of mtge; whether commercial arrangement (Noakes v Rice)
Deriving a collateral advantage that is unconscionable
Contemporary view; expansion of unconscionability (Westfield Holdings Ltd v Australian Capital Television; Lift Capital Partners Pty Ltd v Merrill Lynch International)
Case Issue How resolved
✗ Samuel v Jarrah Timber & Wood Paving Corp Ltd
Lender had option to purchase mortgaged property
Clause invalid if it prevents mtgor from getting back his property on paying off the loan so clog
✓ Kreglinger v New Patagonia
Pre-emption arrangement beyond redemption (collateral advantage)
OK if: (1) mtgee hasn’t acted unfairly or oppressively; (2) mtge not made irredeemable: no clog
✓ Knightsbridge Estates Trust Ltd v Byrne
Couldn’t be redeemed for 40 yrs – was postponement of redemption a clog?
would grant relief if oppressive or unconscionable BUT here parties at arm’s length in commercial transaction so no clog
Case Issue How resolved
✗ Fairclough v Swan Brewery
17 year lease mtged. Last instalment due 6 wks before end lease
mortgagor’s right to get the property back illusory so clog
✓ O’Dea v Allstates Leasing
On default, paid all instalments & forfeit property
Not genuine pre-estimate of damages therefore penalty; clog
Contemporary Australian position: Lift Capital ✓
Parties borrowed $ from Lift Capital, gave shares as
security (eq mtge)
Lift Capital Lift Nominees Lift Capital Merrill
Lynch
Numbered shares now in general pool:
mere contractual right to equivalent
shares
Lift Capital in liquidation – can
borrowers recover their shares?
Did Merrill Lynch take free from
equitable mortgage?
IF clog on equity of redemption, Lift
Capital can’t enforce the relevant
clause
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Lift Capital: what the court said
Is intervention necessary to prevent unconscionable behaviour? [131]
Allowing mortgagee to acquire mortgaged property ≠ necessarily unenforceable [136]
Real issue is power: ie whether unconscionable