The Case
This matter concerned a loan secured by a mortgage granted by the plaintiff. The loan and mortgage were assigned to the defendant.
Terms of the loan included:
The mortgagee was not entitled to a discharge of the mortgage if the lender apprehended the potential for a claim against the “transaction party” under the loan documents.
The lender could demand the mortgagor releases all claims against the “credit provider” that related to the loan.
Any discharge of the mortgage may be on any terms that the lender sees fit.
After default, the plaintiff had the capacity to discharge the mortgage – and the parties agreed on a settlement date for this to happen.
Prior to the settlement, the plaintiff requested the defendant to disclose documents relating to the assignment and the conduct of its mortgage manager – threatening proceedings if there was a failure to disclose.
These requests led the defendant to prepare for an impending dispute and responded with two points to protect their position:
It sought to retain an amount as security for the costs of anticipated future claims, and
It required the plaintiff to enter a deed of settlement as a condition of discharging the mortgage.
The deed contemplated releases for the defendant, its mortgage manager, and its solicitors. The plaintiff refused to sign the deed and the defendant refused to discharge the mortgage.
The plaintiff approached the Court for an order that the defendant accept its payment of the amount owing – with the extra amount for security for costs – and discharge the mortgage.
Findings
The Court recognised that a mortgagee has the right to retain as security an amount as a contingency for the costs if there is a reasonable basis for thinking there would be a future dispute with the lender.
In this case however, no contingency was allowed because there were only indications of claims against the mortgage broker and not the lender.
As to the deed of release, the Court found that a mortgagee has no right to require a deed of settlement unless the loan documents provided for one.
In this case the proposed deed was much wider than the terms of the loan provided, because it also contained releases of mortgage manager, and the lender’s solicitors.
The case emphasises the need to ensure that the loan documents contain whatever rights and powers the lender anticipates will be appropriate to protect it, and then be careful not to exceed the contractual constraints of its own agreements.
DISCLAIMER: This article is current as at July 2026. It is general in nature and does not constitute legal advice. Specific advice should be obtained for your particular circumstances.
Litigation
Priority at discharge: Where the line is drawn
Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd; QB Finance Pty Ltd v Evolve Wealth Corp Pty Ltd [2026] QSC 46
Courts will enforce lender protections – but only to the limits of the contract itself. This case shows that anticipating a dispute is not enough; the lender’s rights at discharge must be found in the loan documents themselves. For lenders, the simple message is this: know where the line is drawn, and only enforce the rights that were drafted.
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