Hypec Electronic v Registrar-General (No 2)

I require the parties to provide me with further submissions, in addition to those already provided, on the effect of the transfer of the mortgage over the Laughtondale property to Grace Yang on the debt formerly owed by Mrs Mead and Grace Yang to the Commonwealth Bank of Australia.

This is not a case of the owner of the fee simple and creator of a mortgage becoming the registered transferee of the mortgage. English Scottish and Australian Bank Ltd v Phillips (1936-1937) 57 CLR 302 does not directly apply.

The Laughtondale property was owned by Mr and Mrs Mead. A mortgage had been granted over it to CBA to secure the debts of Mrs Mead and Grace Yang. Presumably the covenants of Mr and Mrs Mead were given as sureties for the due repayment of the debt by Mrs Mead and Grace Yang.

When the mortgage to Grace Yang was registered, she became entitled to the rights of CBA under the mortgage. It may be that there was no merger of the bank's right under the loan agreement and no question of extinguishment of the debt owed by Grace Yang. There may be a distinction between the rights under the mortgage and the loan obligations to CBA of Mrs Mead and Grace Yang.

Merger is the incorporation of one right in another. The question here is whether Grace Yang's acquisition of the rights of the mortgagee extinguished her liability that was secured by the mortgage. It is unlikely to be a case of merger.

Further, if a question of merger arises, there is the proposition that merger only occurs if the legal and equitable estates are co-extensive and commensurate and it is for the benefit of the party in whom the estates reside ( Chambers v Kingham (1878) 10 Ch D 743, Commissioner for ACT Revenue v Perpetual Trustee Co (Canberra) Ltd (1993) 118 ACTR 1, Brydges v Brydges (1796) 3 Ves Jun 120, Meagher Gummow & Lehane , 4th ed, 40-025, Merest v James (1821) 6 Madd 118, In re Radcliffe (1892) 1 Ch 227, Ingle v Vaughan Jenkins (1900) 2 Ch 368).

The debt was owed by Grace Yang in her personal capacity. The mortgage was transferred to her as trustee for Mrs Tsui and her Taiwanese investors.

I require the parties to provide me with further submissions on this issue and at greater depth than the cursory submissions on behalf of the liquidator and Mr Mead.

The orders I make are these. I direct the parties to serve on each other and deliver to my Associate written submissions on the issue whether the transfer and registration of the mortgage over the Laughtondale and West Ryde properties to Grace Yang affected the debt formerly owed by Lucy Mead and her to CBA by no later than 4pm on Wednesday 27 February 2008. I stand the matter over before me for consideration of these submissions and the entry of final orders at 9.30 am on Friday 29 February 2008. I reserve the costs of today's proceedings. I release Mr Mead from the obligation to comply with these orders.