Westpac Banking Corporation v Etex Australia Pty Ltd [2025] NSWSC 91 | Case summary

Supreme Court of NSW|2025-02-20|Before: Pike J

JUDGMENT - ex tempore (revised from transcript)

By Summons filed 8 October 2024, the Plaintiff (Westpac) seeks declarations and orders with respect to a claim in subrogation in relation to a property located at X Peppercorn Avenue Fairfield New South Wales (Property).
The essence of the relief sought by Westpac is that it seeks to be subrogated to the rights afforded by a mortgage held by an earlier mortgagee, Perpetual Trustee Company Limited, in circumstances where Westpac paid out the Perpetual Mortgage and took its own mortgage, but was unable to register its mortgage on title.
In support of the relief sought in the Summons, Westpac relies upon the following evidence: 1. affidavit of Yvonne Chan of 3 October 2024; 2. affidavit of service of Talysha Sabatino of 27 October 2024; 3. the affidavit of service of Connor Morton of 6 November 2024; and 4. an updating affidavit of debt of Yvonne Chan of 19 February 2025.
In addition, Westpac relies upon certain documents which I have marked as exhibit A on the hearing.
All other interested parties have been served with the Summons and supporting affidavit. No interested party has indicated any opposition to the relief sought by Westpac in its Summons. The proceedings were called outside court this morning and there was no appearance by any other party.
For the reasons that follow, I am satisfied that the Court should grant the relief sought by Westpac. What follows is based heavily on the written submissions provided by Mr Foley of counsel in support of the relief sought.

Determination

The relevant principles relied upon by Westpac on the application were helpfully discussed and analysed by Darke J in Australia and New Zealand Banking Group Ltd v Whitehall [2020] NSWSC 489.
Darke J's judgment stands for the following propositions: 1. a well-recognised area in which the doctrine of subrogation operates is where a creditor pays out a prior security (at [42]); 2. it is not open to doubt that where a third party pays off a mortgage that third party is presumed, unless the contrary appears, to intend that the mortgage shall be kept alive for the third parties own benefit (at [43]). There is a common thread running through the relevant cases to the effect that the conscience of the mortgagor should be effected so as to cause the mortgage to be kept alive (at [44]) 3. where A's money is used to pay off the claim of B, who is a secured creditor, A is entitled to be regarded in equity as having had an assignment to him of B's rights as a secured creditor.
In circumstances where a lender bargains for a first registered mortgage but receives only an equitable charge or mortgage (which is to say an unregistered charge or mortgage), the lender will not have obtained the security it bargained for and the doctrine of subrogation will apply; (see Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291, as cited in Highland v Exception Holdings Pty Ltd (in liq) and Another [2006] NSWCA 318 at [107]-[108]).
Insofar as issues of priority may arise, it is clear that a claimant that is entitled to be subrogated is to have the benefit of the same priority as the prior security; see Aged Care Services Pty Ltd v Kanning Services Pty Ltd [2013] NSWCA 393 at [90].
All of the above illustrates the settled legal principle that a lender will be entitled to be subrogated to the rights of a prior secured creditor (that is, be treated as having been assigned the rights of a prior creditor) where: 1. the lender has paid out the prior creditor, with the expectation that the lender would have obtained security; and 2. the lender has, for some reason, not received the security bargained for.
The facts of the present case are a paradigm example of the circumstances in which the doctrine of subrogation applies.
In the present case: 1. Westpac advanced funds to PTCL on the expectation that it would receive a first registered mortgage over the Property; 2. Westpac did not obtain the security it bargained for, as it was not able to register the Westpac mortgage; and by that 3. It would be unconscionable to deny Westpac's right to subrogate to the position of the PTCL Mortgage to secure the amount advanced by Westpac to PTCL, plus interest on those amounts.
In respect of interest, Westpac recognises that under the doctrine of subrogation it is not entitled to be placed in any better position than it would have been had it obtained the bargain for security. Accordingly, Westpac only seeks interest on the amount it paid to PTCL in accordance with the terms of the Westpac loan agreement, being the rate that would have applied had Westpac obtained its bargain for security, and taking into account amounts related to Westpac since the advance.
For these reasons, I am satisfied that it is appropriate for the Court to make the orders sought by Westpac.
Accordingly, the orders of the Court are: 1. DECLARES that the plaintiff (Westpac) is subrogated to the rights afforded by the mortgage held by Perpetual Trustee Company Limited, registered as dealing 9954581 (PTCL Mortgage), on the title of the property of the land comprising of X Peppercorn Avenue, Fairfield NSW (XXX/1025302) (Property). 2. ORDERS that the sixth defendant (the Registrar General) do all acts and things necessary to transfer the PTCL Mortgage to Westpac. 3. DECLARES that the PTCL Mortgage secures the repayment to Westpac of the following amounts: 1. the sum of $176,935.92; 2. interest on the sum stated in declaration 3(a) above, from 19 February 2025 onwards, at the interest rate provided in the loan agreement between Westpac and Zhi Li and Olga Otean executed on 20 February 2018 (Westpac Loan); 3. charges and expenses incurred by Westpac in connection with the Westpac Loan, including Westpac's costs of these proceedings on an indemnity basis; and 4. all other amounts which Zhi Li and Olga Otean become liable to pay Westpac pursuant to the terms of the Westpac Loan and/or the PTCL Mortgage.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 February 2025

Westpac Banking Corporation v Etex Australia Pty Ltd

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