COMMONWEALTH BANK OF AUSTRALIA v GREEN [1997] NSWCA 75

COMMONWEALTH BANK OF AUSTRALIA v GREEN SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL

MASON P, HANDLEY JA and SMART AJA

19 June, 24 September 1997

EQUITY — priority between equitable mortgages — postponement — release of title deed by holder of prior equity.

The respondent, the holder of an unregistered mortgage, released the title deed to the mortgagor so that it could be delivered to a Bank which had lent money to the mortgagor. The mortgagor delivered the deed to the Bank which made a further advance on the security of a mortgage by deposit. The Bank appealed from the finding of Young J that the holder of the earlier equity had priority.

By majority, Smart AJA dissenting: (1) Although Mrs Green held the earlier equity and was prima facie entitled to priority, her conduct in releasing the certificate of title induced the Bank to believe that there was no earlier interest. Her interest was therefore postponed. Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 applied. (2) Mrs Green knew that the mortgagor intended to use the deed as security and did nothing to retain her priority. The later security was within the apparent authority of the mortgagor, and was therefore entitled to priority. Abigail v Lapin [1934] AC 491 applied.

Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326; Abigail v Lapin [1934] AC 491, applied.

Mason P. I agree with Handley JA

Handley JA. On 12 December 1988 Mrs Green took from the registered proprietor, Palansa Pty Ltd (the company), an unregistered mortgage over two blocks of land at Hornsby being the land in certificates of title folio identifiers 21/255127 and 16/240146. She obtained possession of both certificates of title and between 14 December and 19 May 1989 she lent $141,800 to the company under her mortgage.

She owned one third of the issued shares in the company, the other two thirds being owned by Mr Phillip Haberle and Mr Allan Wright, the principals of the franchised Raine and Horne branch at Thornleigh.