Finance and Security Law: Analyzing Mortgage Types in James' Case

This case study analyzes whether Great Bigg Bank can sell James' house based on different types of mortgages. It examines general law mortgages, Torrens mortgages, and equitable mortgages, considering relevant legislation like the Real Property Act 1900 and Conveyancing Act 1919. The analysis focuses on whether a valid mortgage was created when James deposited his Certificate of Title with Mr. Biggs as security for an increased credit limit. The study concludes that while no general law or Torrens mortgage exists due to lack of deed execution or registration, an equitable mortgage was established. Consequently, Great Bigg Bank can pursue a court order to sell James’ house to recover the debt owed, leveraging its power of sale derived from statute. Desklib provides students with access to similar case studies and solved assignments for enhanced learning.

Running head: Mortgages 1
Mortgages
Name of Student:
Name of Institution:
Name of Tutor:

Mortgages 2
A. Introduction
There are different ways in which a person may be considered to have mortgaged or
charged his/ her property. This could be under the general law mortgage, the torrent mortgage
or equitable mortgage. The report is going to consider each of the said types of mortgages
and case scenario to determine whether Great Bigg Bank can sell James’ house.
1. General Law Mortgage
a) Issue
Can the arrangement between James and Mr Biggs be considered a mortgage under the
general law?
b) Rule
General Law mortgage has the effect of transferring the property to the mortgagee and
also included the proprietors undertaking to pay the sum owed. It is created through
execution of a deed and surrender of the title1. The mortgagor is only left with the equity of
redemption. The mortgagee has a right to sell the property where mortgagor defaults in his/
her obligation to repay the debt and interest if any.
c) Application.
James wanted to increase his loan limit but Mr Briggs was no ready to do that without
security. As a result James was requested and did deposit his title deed. He did not sign any
deed or mortgage document. Based on the conditions of creation of a mortgage under general
law that there must be execution of a deed there is no existing mortgage under the general
law between James and Great Bigg Bank.
d) Conclusion
1 Paul Latimer, Australian Business Law 2012 (CCH Australia Limited, 2011) 891

Mortgages 3
Great Bigg Bank, therefore cannot sell the house on the ground of existence of mortgage
under the general law.
2. Torrens Mortgage
a) Issue
Was James’s property mortgaged under Torrens system of mortgage?
b) Rule
Mortgages under the Torrens system are created in accordance with s 56 (1) of the
Real Property Act 1900. It is a requirement that the proprietor of the land to be mortgaged has
to execute a mortgage in the form provided under the Act. Unlike mortgage under the general
law system, registration of mortgage under the Torrens does not have the effect of
transferring of the property to mortgagee2. Therefore, the proprietor still remains the owner of
the mortgaged property and regains full control of the property upon payment of full money
owing3.
The Real Property Act 1900 and Conveyancing Act 1919 provide remedy to mortgagee
upon default of mortgagor to meet the conditions of the mortgage and one of the remedies
includes the power to sell. It is a requirement that a sell under s. 58 of the Real Property Act
1900 will only apply where the mortgage was registered4. Power to sell is further provided
under s. 109 of the Conveyancing Act 1919 but also this only applies where the mortgage was
registered.
c) Application
2 Real Property Act 1900 s. 57 (1)
3 Ibid 1
4 S. 57 Real Property Act 1900 s. 57

Mortgages 4
James title is registered under Torrens system. He gave it to Mr. Biggs and did nothing
further. He did not execute mortgage in the form provided under the Real Property Act 1900
as per s. 56. Therefore, there was no mortgage under Real Property Act 1900. The power to
sell James house under the Torrens system is derived from ss. 57 and 58 of the Real Property
Act 1900 as well as s. 109 of the Conveyancing Act 1919. However, under the stated
provisions sale will only be allowed where the mortgage was registered. In this case scenario
there was no mortgage registered.
d) Conclusion
Great Bigg Bank cannot sell James property on ground of existence of mortgage under
the Torrens system. There was no execution of a mortgage and no mortgage was registered.
3. Equitable Mortgage
a) Issue
Did the arrangement between Great Biggs Bank and James create an equitable
mortgage?
b) Rule
Equitable mortgage is an imperfect mortgage under Torrens or general law system and
is a creation of equity5. The imperfection could be that the mortgage was not registered or just
that the proprietor only deposited title6 to the property as security for a debt without executing
a mortgage or having one registered. It is inferior to other registered mortgages and can only
be protected by registration of a caveat to give others notice of its existence. The mortgagor
5 Ibid 1, 895
6 Dixon William ‘Equitable Mortgage by deposit of a Certificate of Title’ (2005) 26 (3) The Queensland Lawyer
117, 117

Mortgages 5
giving the mortgagee title of his/ her property as security for a debt removes the transactions
from the precinct of the Statute of Fraud7.
The Bank of New South Wales v O’Connor8 recognised that even without a written or
oral agreement deposit of title is capable of creating a mortgage securing payment of a debt9.
However, the person must deposit the title. In Kebell v Philpot10 it was stated that the time of
deposit of the title and giving of the loan should be related in order to presume an equitable
mortgage. The parties must have also intended to create a mortgage in order to presume
existence of a mortgage by deposit of title11 and failure to establish such intentions will lead
to failure of the alleged equitable mortgage, re Oliver12. Equity will not presume existence of
a mortgage where the title was deposited for safe keeping.
Mortgagee under the equitable mortgage has certain remedies where the mortgagor
defaults in his/ her obligations. The mortgagee can seek for an order of specific performance,
judicial sale or foreclosure on the property of the defaulting mortgagor13.
c) Application
James wanted to increase his credit limit on overdraft but was informed by Mr. Biggs that
he could not do that except by James providing a security. Mr. Biggs suggested and James
did deposit his Certificate of Title with Mr. Biggs. There was no mortgage executed or
registered and as such the depositing of the title could be treated as equitable mortgage.
7 Edward I. Sykes and Sally Walker, The Law of Security: An Account of the Law Pertaining to Securities over
Real and Personal Property under the Laws of Australian jurisdictions (Law Book Co., 5th ed, 1993) 151
8 (1889) 14 AC 273
9 Re Wallis & Simmonds (builders) Ltd [1974] 1 WLR 391
10 (1838) 7 LJ Ch 237
11 Ibid 7
12 (1873) 3 Mont & A 152
13 Mathew Bangrove, Mortgage Priorities (n.d)
http://www.bransgroves.com.au/documents/PDF/Seminars/CollegeOfLaw/
04.06.15_Mortgage_Priorities.pdf

Mortgages 6
James’ credit limit could not be increased without security and James’ deposit of the title and
increasing of the credit limit are related to impute existence of an equitable mortgage. James
was informed that Mr. Biggs could not increase his loan limit without security and was aware
that he was using his certificate of title as security.
The arrangement between James and Mr Biggs created an equitable mortgage for the
benefit of Great Big Bank. Remedies of a mortgagee under an equitable mortgagee are as
provided by the terms of equitable mortgage or as implied from statute. It can be implied
from statute, Real Estate Property Act and the Conveyancing Act, that a mortgagee under an
equitable mortgage can apply to court and get orders to sell the mortgaged property or
exercise power of foreclosure.
d) Conclusion.
James deposited Certificate of Title in order to have his credit limit increased and to
secure repayment of the said sum. There was established an equitable mortgage. James has
defaulted on repaying the debt. Great Bigg Bank can exercise its power of sale, through a
court order, and sell James’ house to recover the come of money owed. It is power derived
from statute as the mortgage arrangement is presumed by equity and did not provide any term
to refer to.
B. Conclusion
Great Bigg Bank can sell James’ house.

Mortgages 7
Bibliography
Books and Journals
Latimer, Paul, Australian Business Law 2012 (CCH Australia Limited, 2011)
Sykes, Edward and Sally Walker, The Law of Security: An Account of the Law Pertaining to
Securities over Real and Personal Property under the Laws of Australian
jurisdictions (Law Book Co., 5th ed, 1993)
William, Dixon ‘Equitable Mortgage by deposit of a Certificate of Title’ (2005) 26 (3) The
Queensland Lawyer 117
Website
Bangrove, Mathew, Mortgage Priorities (n.d)
http://www.bransgroves.com.au/documents/PDF/Seminars/CollegeOfLaw/
04.06.15_Mortgage_Priorities.pdf
Legislation
Real Property Act 1900
Conveyancing Act 1919
Cases
Bank of New South Wales v O’Connor (1889) 14 AC 273
Kebell v Philpot (1838) 7 LJ Ch 237
re Oliver (1873) 3 Mont & A 152
Re Wallis & Simmonds (builders) Ltd [1974] 1 WLR 391