Securities

Question 1

Definition of Oppressive (CCFA)

Answer 1

S 118: Meaning of oppressive
In this Act, oppressive means oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice

Question 2

GE Custodians

Answer 2

A contract/term can be oppressive even though they may not subjectively recognise this (industry practice can be oppressive)
The lender must know of the circumstances that makes the contract oppressive

Question 3

Italia Holdings (properties) Ltd v Lonsdale Holdings (Auckland)

Answer 3

Facts:
Finance company agreed to make loan to property developer in exchange for the developer buying their vacant sections
Property developer got into financial troubles
Held:
This was not an oppressive term because the property developer had full knowledge and legal advice and made a commercial decision on this ground

Question 4

Greenbank v Haas

Answer 4

Facts:
Short term loan of $140,000 for 21% interest with a $45,000 loan application fee but without the interest
Held:
Even if it was oppressive, the modification was important and they would uphold the contract (stressed importance of legal advice)

The transaction or term must be in the contravention or reasonable standards of commercial practice
Key consideration; whether the debtor was provided with full knowledge and advice prior to entering into the contract

Question 5

Raptorial Holdings

Answer 5

Facts:
Got a loan for refinancing but the loan had an exit fee of $1.5 million
Held:
On its face the exit fee was oppressive
There was no evidence of what was reasonable commercial practice

Question 6

Taylor v Westpac

Answer 6

Facts:
Exercise of the mortgagee’s power of sale
Westpac had given the lender time to sell, but they didn’t so they stepped in
Held:
This exercise of power was not oppressive
Need to show more than the usual consequences for it to be oppressive

Question 7

Three Types of Oppression

Answer 7

1) Contract (or term) is oppressive
2) A power is exercised in an oppressive manner
3) Contract was entered into by oppression

Question 8

LTA Mortgage

Answer 8

Registered LTA mortgages are a charge to secure the performance of an obligation to pay money whether or not the charge also secured the performance of other obligations
As a mortgage is an interest in land, the normal requirements concerning land under the LTA apply (written etc.)

Question 9

Duration of Loans

Answer 9

Upon demand: A loan can be repaid at any time and the creditor can call it in at any time
Acceleration clauses: If the borrower is in breach of any requirement, the lender has the right to transform the loan into on demand

Question 10

ANZ Banking Group v Gibson

Answer 10

Facts:
Loan for $128,000, ANZ demanded repayment, giving an official notice at 10:30am
Half an hour to an hour later, ANZ decided Gibson had defaulted and appointed receivers
Held:
This was sufficient time
The only proper justification to allow for longer time is that if they are not expected to have the money on hand and they need to get it from other sources

Question 11

Holroyd v Marshall

Answer 11

The mortgage can extend to land/goods that the borrower is yet to acquire

Question 12

Documentation of a Mortgage

Answer 12

• Signed loan agreement
• Mortgage itself
• Full version (document which is registered)
  Short form (standard terms of the lender’s mortgages)
  Authority and instruction form (autorises/instructs their solicitor to register an electronic version of their mortgage upon the register)

Question 13

Duncan v McDonal

Answer 13

Unregistered forged mortgage: Mortgagee cannot sue the real RO and cannot get a judgement ordering the sale of the land

Registered forged mortgage: The reasoning in Frazer v Walker must mean that registration (resulting in an indefeasible title for the mortgagee) validates the charge to the amount of the fixed sum referred to in the mortgage
This allows the lender to sell the land but not sue them
RO will be compensated through the LTA, enough to discharge the mortgage

Question 14

Westpac v Clark

Answer 14

Facts:
All obligations mortgage
Rogue impersonates RO and forges a loan agreement but this was not registered
Bank sues solicitor for not registering it
Held:
The promise to pay a certain sum contained in the unregistered loan agreement can be incorporated in the registered short form mortgage and memorandum of mortgage if the loan agreement comes within the definition of the money secured by the mortgage
The forgers promise to pay a specific sum was not that of the RO so the loan agreement is not incorporated into the registered documents

Question 15

Redemption

Answer 15

Ability to pay back the mortgage debt and get the land back

Question 16

Pearce v Morris

Answer 16

Purchaser (unconditional agreement for sale and purchase) should be regarded as having an interest in the property which confers on them the right to redeem the mortgage

Question 17

Tarn v Turner

Answer 17

A tenant has a sufficient interest in the property to exercise their landlord’s right to redemption

Question 18

Coltart

Answer 18

Facts:
GLW has mortage from Westpac (registered)
GLW then gets mortgage from AFI (registered)
Coltart got an option to purchase from GLW while GLW gives another option to Lepionka
Lepionka buys mortgage from Westpac and refuses Coltart’s option to purchase
Did Coltart have the right to redeem?
Held:
Coltart did have the right to redeem because they had an interest in the motgage property

Question 19

Clog on the equity of redemption

Answer 19

LTA mortgage secures another obligation which means that the debtor is not able to get their land back obligation-free

Question 20

Kreiglinger

Answer 20

Facts:
Mortgagor was a meat company, byproduct was sheepskins
Loan from wool brokers with right of first refusal to buy the sheep skins
Held:
The collateral advantage was valid
The collateral advantage was contained in a separate contract distinct from the mortgage and the underlying purpose of the contract was not the loan
Test for determining the validity of collateral advantages
Is it unconscionable?
Is it a penal clause?
It is a repugnant clause?

Question 21

Noakes v Rice

Answer 21

Facts:
Brewery granted loan to tavern and the tavern had to buy malt liquor exclusively from the brewery for the whole term of the lease
Held:
This was a clog
Once redeemed, the mortgagor was entitled to ge their property back with no restrictions

Question 22

Bradley v Carritt

Answer 22

Facts:
Granted securities over shares in a tea company and a promise of employment as a tea broker in the company
Held:
This was a clog
The mortgagor’s property was originally unencumbered shares and if the promise continued after redemption, their freedom over the shares would be restricted

Question 23

Reeve v Lisle

Answer 23

Facts:
Existing partners gave prospective partners the option to enter partnership in exchange for a loan
The existing partners later decided they no longer wanted the prospective partners
Held:
The option was not a clog because the transaction was mainly about the partnership, the security was secondary
The option was also distinct from the mortgage

Question 24

Lewis v Frank Love

Answer 24

Facts:
Mortgage was transferred to a new mortgagee under the condition of a grant of option to purchase the land
Held:
The option was a clog

Question 25

Jones v Morgan

Answer 25

Facts:
Sells part of the land subject to the mortgage, the lender was fine with this but required half of the remaining land to be held in trust for them
Held:
This was a clog

Question 25

Remedies for Mortgagee

Answer 25

1) Sue the mortgagor (breach of the personal covenant)
2) Enter into possession (s 137 PLA)
3) Exercise power of sale
4) Appoint receivers

Question 26

Safeguards for the Mortgagor

Answer 26

Mortgagor must be in default
Mortgagee must serve a PLA notice (s 119 PLA)
Mortgagor can redeem up to time of sale (s 97 PLA)
Duties of mortgagee
- If in possession; duty to account
- If selling; duty of care and duty to act in good faith

Question 27

Apple Fields Ltd v Damesh Holdings Ltd

Answer 27

The statutory duty of care does not restrict the basic rule of equity allowing the mortgagee to sell (the price obtained will be lower then a normal sale)

Question 28

Priority between registered mortgages

Answer 28

The registered mortgage which comes second in time will take subject to the first registered mortgage
If there is a second advance on the first mortgage after the second mortgage has been registered, this will take subject to the second registered mortgage

Question 29

Lockwood

Answer 29

Lockwood
Facts:
Mortgagor of land went into default and lockwood (owner of showhome) removed the home
It was deemed that this was trespass because the showhome was a fixture
Held:
The Bank can sue for trespass for permanent damage to the reversion