Priority Arrangements In Mortgage Enforcement Actions

Ronald John Bofinger & Anor v Kingsway Group Limited Formerly Willis & Bowring Mortgage Investments Limited & Ors

This recent unanimous decision of the High Court of Australia highlights the need for mortgagees to carefully consider the terms contained in their guarantees, as certain provisions can displace priority arrangements between mortgagees in any enforcement action, through rights of subrogation.

Facts

Mr Bofinger was the director of B&B Holdings Pty Ltd (B&B), which was a real estate development company operating in New South Wales. B&B obtained three separate loans from three different financiers and provided security to each financier in the form of a first, second and third ranking mortgage over property owned by B&B (B&B Property). A guarantee was also provided to each financier by Mr and Mrs Bofinger which was supported by a mortgage over property which Mr and Mrs Bofinger owned together (Bofinger Property).