Papalia v Romeo (No.2)

In *Papalia v Romeo (No.2)*, the Supreme Court of Western Australia considered a dispute concerning the priority of unregistered mortgages over a property and the admissibility of an expert report in bankruptcy proceedings. The applicant creditor sought to establish the priority of its unregistered mortgage over a subsequent unregistered mortgage held by a third party, arguing that its partial caveat should have provided sufficient notice. The court also had to determine whether an expert valuation report, prepared for the purpose of assessing the debtor's property value, was admissible given concerns about the valuer's methodology and reasoning.

The central legal issues before the court were: (1) the priority of unregistered mortgages, specifically whether a partial caveat by an earlier mortgagee was sufficient to give notice of the full extent of its interest and thus affect the priority of a later unregistered mortgagee; (2) the admissibility of an expert valuer's report where the reasoning behind the valuation was not apparent and it was unclear if the opinion was substantially based on specialised knowledge; and (3) whether to grant an adjournment of bankruptcy proceedings, considering the debtor's ongoing litigation against a primary mortgagee and the potential for the outcome of that litigation to resolve the alleged insolvency.

Justice Raphael applied the principle that the priority of unregistered mortgages is generally determined on a "first in time" basis, but this can be displaced if a third party relies on the failure to caveat and subsequently enters into a mortgage. The court found that the applicant creditor's partial caveat was insufficient to give notice of the full amount of its mortgage. Regarding the expert report, the court held that it was inadmissible because the valuer's reasoning was not apparent and it was not clear that the opinion was wholly or substantially based on specialised knowledge. The court ultimately decided not to grant an adjournment, finding that the debtor's prospects of success in the other litigation were not good or reasonable, and there was no sufficient cause to adjourn the bankruptcy proceedings.