A $365K valuation gap, an ASIC ban, and a sale settling the next day
A mortgage fund's power of sale survived a last-ditch challenge in the NSW Supreme Court on October 29, after the court found a property owner's claim that her family home was sold at an undervalue did not justify blocking the deal.
The court ordered the removal of a caveat - a legal block on the property title - that had been lodged over a home in Sydney's Richmond, clearing the way for Equity-One Mortgage Fund Limited to complete a $1,235,000 sale. Settlement was due the very next day.
How the loan unravelled
The story starts with a $780,000 loan. In March 2025, Equity-One lent the money to a company controlled by the property owner's husband. She guaranteed the debt and put up the Richmond property - a home that had been in her family for decades - as security.
The company defaulted. The loan came due on April 1, 2026, and was not repaid. By the time the case reached court on October 22, the outstanding debt had grown to $862,882.68, with interest stacking up at $9,067.50 a month.
Things were falling apart on other fronts too. In August 2026, ASIC secured the appointment of provisional liquidators - temporary administrators brought in to protect creditors - to the borrower company and other entities controlled by the husband. And in September, National Australia Bank served default notices on the property owner herself for arrears of $369,987.33 across home loan facilities with total unpaid balances of $9,167,792.18, secured over other properties she owned.
The sale and the caveat
Equity-One moved to sell. It appointed two joint agents, who estimated the property was worth between $1,200,000 and $1,300,000. The property was listed on four websites, opened for inspection three times, and drew 26 inquiries and 20 inspections over roughly three weeks.
Three written offers came in. Two were conditional on finance. One was unconditional at $1,235,000 with a 10 percent deposit. Equity-One took the unconditional offer and signed a contract on September 2, 2026.
Two weeks later, the property owner lodged a caveat claiming her home had been sold at an undervalue. She produced an independent valuation from Certified Property Valuers putting the market value at $1,600,000 as at July 14, 2026 - a gap of $365,000 above the sale price.
A real question - but not enough to stop the sale
The court accepted the valuation evidence raised a genuine question worth arguing. But the practical question was whether it should block the sale while that argument played out. On that, five factors all pointed the same way.
First, damages were the right remedy. Under the Conveyancing Act 1919, s 111A(4), a buyer's title to a property cannot be challenged because the lender got the price wrong. The owner's remedy, if the sale really was at an undervalue, is a damages claim against the lender - not unwinding the deal. The court was satisfied Equity-One had the financial substance to pay such a claim, noting total equity of $6,660,078 in its most recent financial year, down from $9,463,557 the year before but still what the court described as "a sound financial position."
Second, the property owner had not paid the outstanding debt into court. There is a long-standing principle in Australian mortgage law - from the High Court's decision in Inglis - that a borrower who wants to stop a mortgagee sale must first put up the money they owe. That requirement carries particular force, the court noted, where the borrower entity was in provisional liquidation and the owner herself was in substantial default with NAB.
Third, blocking the sale would hurt the buyers, who had already served a notice to complete requiring settlement by October 30.
A refinance that could not get off the ground
Fourth - and this is the part that matters most for lenders - the court found the owner's refinancing plans were too shaky to justify a delay.
She produced evidence of a loan approval for $1,050,000 through Engive Capital, arranged by her husband through a company called Property 1st Pty Limited. But the approval hinged on a "satisfactory valuation," and the couple had supplied a property estimate of $1.4 million - $165,000 above the most recent market evidence of the September 2 sale price, and $200,000 below their own expert's $1.6 million figure. The court saw "an identifiable risk" the valuation condition would not be met.
The husband's credibility as a borrower faced separate headwinds. He had recently been banned by ASIC for 10 years from managing or controlling a financial services entity - a ban the court described as "likely to be something of a red flag for fully informed re-finance providers." In separate proceedings, a court had expressed "serious concerns" about the management of companies under his control and "the reliability of information he provided and the accuracy and the reliability of the financial statements of companies under his control." The court could not assume the husband and his companies "would have a smooth path in satisfying lenders' requirements on a re-financing."
Fifth, falling Sydney property prices meant delay carried a real commercial risk. The buyers might walk away from the deal and renegotiate at a lower number, further eating into what remained of the property's equity.
What it means for the sale - and for lenders
The court ordered the caveat removed and barred the property owner from lodging further caveats on the title. Costs were reserved.
The court acknowledged the property owner's attachment to a family home held for decades. But the legal architecture is clear: the remedy for a sale at an undervalue is money, not a court order stopping the deal. And in a falling market, every week of delay compounds the damage.
For mortgage professionals, the decision offers a practical walk-through of what lenders need to get right - and what borrowers need to bring - in a power-of-sale challenge. The marketing campaign here was relatively modest: three weeks, four websites, three open inspections. It survived scrutiny. But the court left the undervalue question open, finding it was genuinely arguable even as it declined to halt the sale. The message for lenders is straightforward: document the campaign thoroughly, because the adequacy of the marketing will be examined - even when the only remedy for getting it wrong is damages.
