Thursday 9 November 2023

How can I have a mortgage discharged if the lender has been wound up?

In an unusual case, the Supreme Court of Victoria was called upon to order the discharge of 2 mortgages in circumstances where one of the mortgagees had been liquidated, and subsequently deregistered. The other mortgagee had become a bank but did not have records dating back over 30 years ago. 

Older readers will recall the demise of the Pyramid Building Society (and its related entities) in 1990. The group collapsed owing over $2 billion, a staggering sum at the time. The liquidation of the group took over 16 years to complete, with final dividend cheques being sent to its investors in 2006. Pyramid was deregistered in 2001. 

In Kam-Sui Ing v Australian Securities and Investments Commission & Anor [2023] VSC 632 Associate Justice Ierodiaconou ordered the removal of the two mortgages in question from the title of the property. 


The plaintiff was the surviving registered proprietor of a residential property in Balwyn. The plaintiff and her husband bought the property and became joint registered proprietors in January 1988. The plaintiff's husband died in 2017, and the plaintiff subsequently became the sole registered proprietor.

A $40,000 loan from Heritage Building Society was secured by a first mortgage on the title to the property, and a later $160,000 loan from Pyramid Building Society was secured by a second mortgage. 

The underlying loans were paid in full in about 1993. As the plaintiff's husband dealt with the family finances, she was unable to provide any further detail. 

The plaintiff provided a copy of a letter from 1993 from Pyramid Building Society confirming that its loan had been repaid and lawyers had been appointed to discharge the mortgage. 

The plaintiff also confirmed that there had been no further demands for money from either mortgagee, and she held the original paper certificate of title.

In the thirty years since, both mortgagees (Heritage Building Society and Pyramid Building Society) had become defunct.  The plaintiff’s solicitors unsuccessfully attempted to find an agent to act on the mortgagees’ behalf and discharge the mortgages

Ultimately, the Supreme Court of Victoria ordered that the Registrar of Titles remove the mortgages from the register.

In the unusual circumstances of the case, the lawyers for the plaintiff conducted extensive inquiries in their search for someone to discharge each mortgage. 

Ierodiaconou As J noted at paragraph 23 of her judgment:

"Given their inquiries had taken a Dickensian turn, the plaintiff initiated this proceeding on 30 June 2023." 

The plaintiff's application was for orders under section 103 of the Transfer of Land Act, which provides: 

(1)              In any proceeding in a court relating to any land or any instrument or dealing in respect thereof if the court directs the Registrar to make any amendments to the Register or otherwise to do any act or make any recordings necessary to give effect to any judgment decree or order of the court the Registrar shall obey such direction.

The Court concluded that amendment in this case was necessary to correct an error on the Register, namely, the undischarged mortgages. The Court accepted the plaintiff’s evidence and was satisfied that the mortgages were paid in full. The discharges were – for reasons unknown – not registered. 

The Court also considered whether section 84(2) of the Transfer of Land Act applied to the case and concluded that it is arguable that the section applied, and as a result, the Court could direct the Registrar to take action under that section. 

The Court was satisfied that the mortgage loans were paid in full. It may be inferred that any action for recovery would be statute-barred per s 20 of the Limitation of Actions Act 1958 (Vic) given the following circumstances: the mortgages were registered in 1988 and 1989 respectively, there were no loan repayments made after mid-1993 and no demands for such were made.

Regarding s 84(2)(b): the evidence showed that despite the extensive inquiries by the plaintiff’s solicitors, mortgage discharges could not be obtained because the mortgagees are body corporates and either their authorised agents cannot be located, or their agent’s signature cannot be obtained within a reasonable time.

Here, the Court found that the owners did everything necessary to achieve the discharges, and due to an unknown error, the discharges were not registered. 

The only other matter for comment should really go without saying: lawyers should encourage their clients to obtain and register a discharge of any mortgages over real estate titles that are repaid. Clearly this happened here, and yet the plaintiff was left without recourse other than a Supreme Court proceeding.

I understand that there may be strategic or commercial reasons for keeping the appearance of a mortgage on the title to real estate, and for allowing the mortgagee to retain the title to real estate, but in reality, disasters like this can be avoided. 

Apart from checking that the discharge was in fact registered it is difficult to see what else the plaintiff could have done. 

WG Stark 

Owen Dixon Chambers

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