Walton v Blann

The appellant, Walton, sought to grant a first mortgage to the National Australia Bank to secure an advance, but the respondent, Blann, refused to take the necessary steps to give priority to this proposed mortgage. This refusal led to proceedings between the parties.

The central legal issue before the court was whether a clause within the mortgage agreement, which stated that the mortgage "is to be registered as a second mortgage," imposed a continuing obligation on the respondent to afford priority to any subsequent first mortgage the appellant wished to grant, even if no first mortgage existed at the time of the respondent's mortgage registration. The court was required to interpret the contractual intent and the effect of the relevant statutory provisions, specifically section 56A of the Real Property Act.

The court reasoned that the clause in question, and indeed the entire arrangement, was predicated on the expected circumstances at the time of completion of the sale. The primary judge found that the words "is to be registered" did not create a perpetual obligation to allow future mortgages to take priority. Instead, the clause was intended to facilitate the payment of the purchase price by allowing the respondent's mortgage to be registered as a second mortgage behind an anticipated first mortgage at settlement. Once the purchase price was paid, the need for this specific arrangement ceased. The court concluded that the respondent was not obliged to grant priority to a later mortgage simply because the clause was included in the mortgage document, especially when no first mortgage existed at the time of registration.

The appeal was dismissed with costs.