ARTICLE · 09 DECEMBER 2010

Indefeasibility and fraud: a silver bullet or a poisoned chalice?

Gadens Lawyers

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The recent decision of the NSW Supreme Court in MDN Mortgages Pty Limited v Caradonna [2010] NSWSC 1298 provides further comfort for lenders that an allegation of fraud will not necessarily compromise the lender’s position as a mortgagee.

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The recent decision of the NSW Supreme Court in MDN Mortgages Pty Limited v Caradonna [2010] NSWSC 1298 provides further comfort for lenders that an allegation of fraud will not necessarily compromise the lender's position as a mortgagee.

Facts

In November 2004, MDN Mortgages Pty Limited (MDN) advanced a loan of $320,000 to Caradonna Investments Pty Limited (Company) secured by, among other things:

a personal guarantee signed by Maria Antonietta Caradonna (Mrs Caradonna) on account of the Company (Guarantee); and
a mortgage granted by Mrs Caradonna (Mortgage) over her home at Bonnyrigg (Property).

The Company was controlled by Mrs Caradonna's son. The loan proceeds were used to pay out a prior mortgage over the Property (Prior Mortgage) held by Magney Mortgages Pty Limited (Magney).

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