When Charles graduated with a PhD from RMIT University and after working for a few years, with help from his parents he was able to gather a deposit for the purchase of a 1-bedroom apartment on William Street for $600,000 with a loan from M-Bank For $400,000 on security of a first mortgage to M-Bank. As a result, M-Bank has a registered first mortgage at the Land Titles Office and holds the duplicate Certificate of Title over the apartment.

Charles has always wanted to drive the Ford Mustang and decides to take out a loan for $30,000 from the Commercial Bank of Victoria (CBV) to buy the car.

Charles approaches CBV for a loan to purchase the car providing as security a second mortgage over his apartment. Arthur, the bank manager at CBV submits the mortgage documentation to CBV's mortgage processing department as part of the settlement of the loan transaction. Gets misplaced in the system and the mortgage is not submitted to the Land Titles Office for registration until three months later.

In the meantime, Charles now needs to pay off a loan from his uncle of $20,000. He approaches Eastpac Banking Corporation for the loan. Stefan, the bank manager at Eastpac causes a title search to be done and the records at the Land Titles Office the Stefan is eager to get Charles as a new customer. Stefan informs Charles that as the loan is not for a large amount and there is enough equity in the apartment he will expedite the paper- Based on this, Eastpac provides the loan of $20,000 to Charles on security of a mortgage of the apartment.

Eastpac successfully registers its second mortgage with the consent of M-Bank as first mortgagee of the apartment at the Land Titles Office.

CBV’s mortgage processing department realising the delay proceeds to attempt to register its mortgage over the apartment but registration is rejected by the Land Titles Office.

Answer the following questions:

(a) Who has priority between M-Bank and Eastpac?

(b) Who has priority between CBV’s mortgage and Eastpac’s mortgage?

(c) What should CBV have done, if any, to protect its interest?

Be sure to provide reasons, relevant cases and/or legislation to support your answer to each question.

Answer rating: 100% (QA)

a As MBank has registered right as a first mortgage so Mbank has priority over t... View the full answer