Can a lender hold onto its mortgage over the borrower’s property not merely as security for the money it loaned, but also as protection against potential claims the borrower might bring against it? And if so, when must the lender say it requires this protection? These were the questions the lender and the borrower faced in the case of Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46.
The Court unpacks the boundary between what a mortgage actually secures and what it does not and whether a lender can require security for costs against potential claims from the borrower as a condition to discharge of mortgage after the borrower has already offered to pay, or in legal terms, tendered.
The Facts
Evolve Wealth Corp Pty Ltd (“the Borrower“) borrowed $450,000 from QB Finance Pty Ltd (“QB Finance“) and SF Mortgage Pty Ltd (“SF Mortgage“), secured by a mortgage over the Borrower’s property. The Borrower failed to repay the loan by the due date and was consequently in default under the mortgage.[1]
The Borrower raised complaints about QB Finance and SF Mortgage’s conduct in respect of the loan facility,[2] sought various disclosures and explanations, and threatened to report them to regulatory bodies.[3] Despite this, the Borrower and QB Finance (which had by then became the sole mortgagee after accepting an assignment from SF Mortgage of its interest in the loan and mortgage) agreed that the Borrower would refinance the loan with ANZ.[4]
On 13 May 2025, QB Finance advised Evolve Wealth that it required a payment of $515,248.75 to discharge the mortgage.[5] QB Finance also advised that it would likely require the Borrower to enter into a deed of settlement although no draft deed was provided at the time.
On 23 May 2025, QB Finance provided a copy of the draft deed of settlement to the Borrower. It relevantly required that the Borrower:
- agree not to pursue any claims it had against QB Finance, SF Mortgage and the mortgage broker, including allegations that they had engaged in conduct preventing the Borrower from exiting the loan facility, were involved in illicit or criminal activity, and had engaged in fraudulent conduct;[6] and
- be prevented from disclosing any information relating to its allegations to any person, including a regulatory body.[7]
The Borrower refused to enter into the deed of settlement but tendered the required amount by making it available for payment to QB Finance through the PEXA platform.[8]
As a result, settlement of the refinance did not occur on 23 May 2025.[9]
On 26 May 2025, QB Finance offered the Borrower an alternative to the deed of settlement, which is to pay $110,000 as substitute security.[10]
From these facts, QB Finance wished to recover any costs it incurred in dealing with any legal claims made by the Borrower, which is why it required the Borrower to enter into the deed of settlement or alternatively pay an additional $110,000 as security.
However, the underlying question is whether QB Finance was entitled to retain the mortgage itself as security for any such costs or was instead obliged to discharge the mortgage upon repayment of the amount owing. To answer that, the Court turned to the terms of the mortgage.
The Terms of the Mortgage
Clause 19.3 of the mortgage states, ‘The transaction party is not entitled to a release or discharge of those securities while there remains an amount owing or the credit provider apprehends the potential for a claim against the transaction party under this [mortgage], including if, in the credit provider’s opinion, there is a prospect of:
19.3.1 litigation involving the credit provider that might give rise to a right to recover damages, costs or expenses against the transaction party; or
19.3.2 a payment received by the credit provider being taken back as a preferential payment; or
19.3.3 an amount owing arising in the future.’
Clause 19.4 of the mortgage states, ‘Any release or discharge of those securities may be on any terms that the credit provider sees fit.’
Clause 19.5 of the mortgage states, ‘The credit provider may demand that the transaction parties release all known and unknown, existing and future claims against the credit provider that relate to, or arise out of, the transaction contemplated by this [mortgage].’
What Does Clause 19.5 of the Mortgage Protect?
The Court construed clause 19.5 in the context of the terms of the mortgage as a whole, including clause 19.3 which refers to the credit provider ‘[apprehending] the potential for a claim against the transaction party’ where, in its opinion, ‘there is a prospect of litigation’.[11] Read together, these clauses gave QB Finance the discretion to set the terms on which it would release the mortgage if QB Finance apprehended a prospective dispute, so as to ensure it would not be left without security unless the dispute was effectively extinguished.[12]
The Court found that the terms proposed by QB Finance as set out in the deed of settlement exceeded what clause 19.5 allowed for two main reasons.[13]
First, QB Finance wanted a release of claims from the Borrower not just against itself, but also against SF Mortgage and the mortgage broker, neither of which was the “credit provider” under the mortgage.[14] Clause 19.5 only permits QB Finance to require a release of claims against itself.
Second, there was no basis for QB Finance to have apprehended, or held the opinion, that there was a prospect of litigation against it that might give rise to a right to recover damages, costs or expenses against the Borrower. There was a letter from the Borrower dated 28 February 2025, which threatened “immediate, aggressive legal action.”[15] That threat was made in response to the possibility of the Borrower’s property being repossessed, not as a threat of proceedings the Borrower itself intended to bring.[16] The Borrower also threatened to report QB Finance and SF Mortgage to a regulatory body. That threat does not, of itself, give rise to a right to recover damages, costs or expenses against the Borrower.[17] A regulatory complaint will only expose QB Finance to disciplinary consequences.
For these reasons, the Court held that QB Finance was not entitled to require the Borrower to enter into the deed of settlement or pay $110,000 as substitute security as a condition of discharging the mortgage
This raises the question of what would happen if the terms of a mortgage were carefully drafted to anticipate costs incurred by other parties, such as SF Mortgage and the mortgage broker, and to address threats to report to regulatory bodies. The Borrower had submitted that such drafting would be inequitable under the laws of equity. Equity is a body of legal principles developed by the courts to provide relief where the application of legal and contractual rights would be unfair or unconscionable. The Borrower contended that a mortgage cannot be made irredeemable and equity protects a mortgagor’s rights to redeem.[18] Because the Court found that QB Finance could not require the Borrower to enter into the deed of settlement under clause 19.5 of the mortgage, it did not need to consider this issue.[19]
What Were the Lender’s Requirements for the Borrower to Discharge the Mortgage?
It is important to consider whether a lender can impose further terms on the redemption and discharge of a mortgage after the borrower has made a tender. The Court briefly explored this issue in relation to the additional $110,000 payment QB Finance sought to require.
The Borrower had tendered the redemption amount on 23 May 2025, based on the payout figure provided by QB Finance. At no point on or before that tender did QB Finance advise that it required payment of $110,000 as a condition to the tender. Its only stated condition at the time was execution of the deed of settlement. The demand for $110,000 was raised after QB Finance refused the Borrower’s tender.
The Court accepted the principle drawn from Overton Investments Pty Ltd v Cuzeno RVM Pty Ltd [2003] NSWCA 27, in which it was held, ‘Where a dispute has arisen or is reasonably anticipated, a mortgagee is entitled to require not merely payment of the amount secured by the mortgage but also payment or security for the probable costs of any contest … where the mortgagee does not require payment or security for the probably costs of any contest, and a question later arises as to whether the mortgagor’s tender was sufficient to entitle the mortgagor to redemption, the mortgagee cannot then claim that the tender was insufficient because it did not include provision for those costs.’[20]
Applying that principle, the Court found that QB Finance could not rely on the Borrower’s failure to pay $110,000 as a reason its tender was insufficient, because QB Finance had never raised that requirement before refusing the tender, a refusal made at the time on the different ground that the Borrower had not executed the deed of settlement.
This indicates that even if the $110,000 demand was, hypothetically, permissible under the terms of the mortgage, QB Finance could not raise it after the Borrower had already tendered the payout figure to redeem the mortgage.
Conclusion
Although the mortgage gave QB Finance broad security and discretion to withhold release of the mortgage where it apprehended a prospect of litigation against itself, that discretion fell short of what was proposed under the deed of settlement and of the $110,000 sought to hold as security for costs QB Finance might incur in dealing with any claim or complaint the Borrower might make.
SF Mortgage and the mortgage broker were not credit providers under the mortgage, so QB Finance could not require a release in their favour.
QB Finance could not have apprehended a prospect of litigation from the Borrower giving rise to a right to recover damages, costs or expenses against it, because the Borrower’s correspondence was directed almost entirely at SF Mortgage and the mortgage broker, and its only threat concerning QB Finance was to report matters to regulatory bodies.
In any event, that latter requirement was not communicated to the Borrower at the time of the tender.
Contact Us
Both the drafting of the terms of the mortgage and the way a lender and a borrower communicate with each other can determine whether the lender is actually offered protection under the mortgage.
If you require legal advice or assistance with drafting your mortgage terms or negotiating with the other party, please contact us on 07 3001 2950.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific circumstances It is intended for information purposes only and should not be regarded as legal advice. Further professional advice should be obtained before taking action on any issue dealt with in this publication.
[1] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [3].
[2] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [13].
[3] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [18].
[4] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [13], [14].
[5] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [23].
[6] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [29].
[7] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [29].
[8] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [7].
[9] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [30].
[10] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [30].
[11] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [46].
[12] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [42], [43].
[13] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [46].
[14] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [47].
[15] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [52].
[16] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [53].
[17] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [53].
[18] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [30].
[19] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [56].
[20] Evolve Wealth Corp Pty Ltd v QB Finance Pty Ltd [2026] QSC 46 [54] (McCafferty J), quoting Overton Investments Pty Ltd v Cuzeno RVM Pty Ltd [2003] NSWCA 27 [63] (Hodgson JA).