Written by The recent case of Yang Bai v Watson Elite Pty Ltd [2022] NSWSC 318considered whether a mortgagee had validly exercised an option to purchase land. The plaintiff, Mr Bai sought relief from multiple defendants, and the property in question was the subject of a residential development being undertaken by Watson Elite Pty Ltd (Watson Elite) which involved a strata subdivision of the land.
Watson Elite had entered into a $700 000 Loan agreement with Brick International Pty Ltd (Brick) which was to be repaid within a month with ‘time strictly of the essence.’ The loan agreement contained an option for Brick to purchase the Lot for the price of $700 000
When Watson Elite failed to repay the loan, Brick exercised the option to purchase and took steps to have the transfer registered. Mr. Bai sought to impugn their title on the basis that it constituted a ‘clog’ on the equity of redemption. Brick sold the property for $900 000 6 months after becoming the registered proprietor, and the Court ultimately held that the option was a permissible on the equity of redemption. In the circumstances the option price was adequate and properly referable to the property’s value, so the equity of redemption could not apply to impeach Brick’s registered title. As such, Brick was entitled to the entirety of the proceeds of sale, as they had obtained an indefeasible title as proprietor of the fee simple in the Lot.