The court concluded, after looking at whether there had been a clog on the equity of redemption in an arm’s length commercial mortgage transaction where a mortgagee had obtained the right to purchase the whole of the mortgaged property, that: ‘There does not appear to be any commercial reason why, in 1992, the court should invalidate any transaction merely because a mortgagee obtains a collateral advantage or seeks to purchase a mortgage property. Quite obviously, equity must intervene if there is unconscionable conduct. Again equity must intervene in a classic case where it can see that a necessitous borrower it not, truly speaking, a free borrower.
In my view, in 1992, the rule [concerning clogs on the equity of redemption] only applies where the mortgagee obtains a collateral advantage which in all the circumstances is either unfair or unconscionable. It may be that the court presumes from the mere fact of a collateral advantage that the transaction is unconscionable unless there is evidence to the contrary, but the principle does not extend to invalidate automatically cases in which the mortgagee has obtained the right to purchase the whole or part of the mortgaged property in certain circumstances or has obtained a collateral advantage where the circumstances show that there has been no unfairness or unconscionable conduct.’
Judges:
Young J
Citations:
(1992) 32 NSWLR 194, 5 BPR 11,615
Jurisdiction:
Australia
Commonwealth, Banking, Equity
Updated: 30 April 2022; Ref: scu.219909