In a recent case, a bank had registered 'all obligations' mortgages over multiple properties owned by the borrower. The first mortgage was originally granted in favour of the bank, but the second mortgage was assigned to the bank as part of the purchase by the bank of the borrower's debt and security from Southern Cross Finance. The borrower defaulted on its loan repayments and the bank argued that the borrower's entire debt to the bank (approximately $10m) was secured under each mortgage. The borrower, on the other hand, argued that the mortgages should remain completely separate and that only the debt originally owed to Southern Cross Finance ($275,000) was secured under the assigned mortgage.
Both the High Court and Court of Appeal agreed with the borrower and confirmed that, in this case, the assigned mortgage only secured the amount of the assigned debt. The mere fact that a mortgage is described as being 'all obligations' does not, in and of itself, result in the mortgage, when assigned, securing all debt of the borrower/mortgagor to the new mortgagee. The High Court noted that it could hardly have been in the borrower's contemplation at the time it signed the mortgage with Southern Cross Finance that the mortgage would come to secure a much larger liability to a different lender. While the Court of Appeal acknowledged that it will be a matter of construction in each case, it noted that the courts are inclined to view such 'mix and match' expansions of liability unfavourably.
See Court decision here.