High Court's decision highlights danger in transferring mortgages

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■ A L L - M O N E Y S          M O R T G A G E S


High Court’s decision highlights danger in transferring
mortgages

By MATTHEW BRANSGROVE              reference, a separate facility      ment will be transferred with it
                                   agreement not forming part of       ... that is a consequence of the
   Matthew Bransgrove is prin-     the register.                       agreement, express or implied,
cipal of Bransgroves Lawyers,                                          between the parties, not of the
email matthew.b@bransgroves.                                           operation of s.62”.
com.au.                                “Practitioners                      This case further highlights
   ON 15 NOVEMBER 2007 the                                             the vulnerabilities of so-called
High Court, in Queensland
                                        transferring                   all-moneys mortgages. There
Premier Mines Pty Ltd v French          mortgages                      has recently been a string of
[2007] HCA 53, held that a reg-                                        decisions, commencing with
istered transfer under Torrens          should adopt                   Perpetual Trustees Victoria
system legislation did not oper-                                       Limited v Tsai [2004] NSWSC
ate to transfer anything more           the prudent                    745, and including Printy v
than the rights expressly set           course of                      Provident Capital Limited
out in the mortgage. Where                                             [2007] NSWSC 287, Chandra v
the mortgage secures obliga-            ensuring the                   Perpetual Trustees Victoria Ltd
tions under extraneous docu-                                           [2007] NSWSC 694 and Sabah
ments (such as a deed of loan),         obligations                    Yazgi v Permanent Custodi-
the obligations in those extra-         contained in                   ans Limited [2007] NSWCA
neous documents are not auto-                                          240, which have drawn clear
matically transferred.                  the separate                   attention to the vulnerability
   The court was asked to                                              of mortgages which rely for
determine whether a transfer            deed of loan                   their efficacy on the integrity
of a mortgage under s.62 of                                            of extraneous documents (usu-
the Land Title Act 1994 (Qld)
                                        are expressly                  ally a deed of loan). Lenders
transferred the obligations             transferred.”                  have been slow to update their
under the separate deed of                                             documents and the majority of
loan which was secured by the         Kiefel J held (at 55) that the   mortgages used in NSW are
mortgage. Judgment was giv-        purpose of the section was to       still all-moneys mortgages.
en by Kiefel J with whom Glee-     effect the transfer of the rights       The effect of these cases
son CJ, Gummow, Hayne, Hey-        in rem, that is those rights that   and the decision of the High
don and Crennan agreed.            expressly, and on the face of       Court in Queensland Premier
   The court noted that since      the register, bind the land.        Mines Pty Ltd v French [2007]
s.62 was materially identical to      The wording of s.62 was not      HCA 53 is to demonstrate that
s.52(1) of the Real Property Act   concerned with transferring         an all-moneys mortgage is an
1900 (NSW), s.46 of the Trans-     other agreements between the        empty shell, ineffective to bind
fer of Land Act 1958 (Vic),        mortgagor and original mort-        the land if something should
s.151 of the Real Property Act     gagee. Kiefel J notied (at 56):     interfere with the efficacy of
1886 (SA), s.83 of the Transfer    “The words of the section are       the separate deed of loan (for
of Land Act 1893 (WA), s.60 of     plain. Neither the historical       example, fraud or failure to
the Land Titles Act 1980 (Tas),    reason for the provision nor its    transfer it).
s.62 of the Land Title Act (NT),   purpose, of effectuating a trans-       In conclusion, although the
and s.78 of the Land Titles        fer of both the security interest   separate deed of loan will often
Act 1925 (ACT), the ratio can      and the right to moneys aris-       be impliedly transferred, this
therefore be taken as apply-       ing from the mortgage trans-        is not always the case. Practi-
ing to all Australian Torrens      action, supports a construction     tioners transferring mortgag-
legislation.                       which extends the section to        es should adopt the prudent
   The mortgage relied for         obligations arising otherwise       course of ensuring the obli-
its efficacy on a clause under     than under the terms of the         gations contained in the sepa-
which the mortgagor cove-          mortgage. It is no part of the      rate deed of loan are express-
nanted to “pay each amount         purpose and function of a stat-     ly transferred. Thought should
included in the secured mon-       ute such as the Land Title Act      also be given to avoiding the
eys to the mortgagee”. The         to rewrite the bargain between      use of all-moneys mortgages
“secured      moneys”       were   transferor and transferee.”         wherever practical to ensure
defined as all moneys owing           Her      Honour        further   clients benefit from the inde-
or which will become payable       observed (at 57) that in most       feasibility provisions of the
on any account. This is a clas-    instances “when a mortgage          Real Property Act.             ❑
sical moneys mortgage which        is transferred, the debt aris-
essentially incorporates, by       ing from a separate loan agree-

April 2008                                                                                                     L AW SOCIETY JOURNAL 1