Court of Appeal Expends First Mortgagee’s Priority in Development Dispute

In ProLend Solutions No 50 Pty Ltd v Monaco Solicitors Pty Ltd [2026] QCA 68, the Court of Appeal significantly expanded a first mortgagee’s priority in respect of disputed proceeds of a residential property development under a Deed of Priority.

The decision highlights the importance of careful drafting of such Deeds.

ProLend Solutions No 50 Pty Ltd and Monaco Solicitors Pty Ltd both funded a residential development.

The Deed of Priority provided for the proceeds of sale to be distributed first ProLend for $8.4 million ‘plus interest, costs, fees, charges, duties and expenses (including legal expenses) and any other amount which may be debited to the account’ under ProLend’s mortgage as the ‘First Priority Amount’, following which Monaco would have priority for the ‘Second Priority Amount’ before ProLend would have priority for the ‘Third Priority Amount’

ProLend advanced the borrower $5.3 million before the borrower defaulted.

At the time, there was no sale of the development in prospect.

ProLend exercised step-in rights to complete the project, paying $6.3 million to the builder and others, including infrastructure charges.

ProLend claimed the ‘First Priority Amount’ encompassed $11.6 million (comprising the advances and completion costs), plus interest and costs and expenses accruing thereon.

Monaco contended that sums in excess of $8.4 million plus interest thereon fell within the ‘Third Priority Amount’ and thereby did not have priority to Monaco.

The trial judge found that ProLend’s ‘First Priority Amount’ was limited to $8.4 million (comprising $5.3 million advanced plus a further $3.1 million as a ‘bonus’) and that interest only accrued on the $5.3 million advanced by ProLend. 

ProLend appealed.

The Court of Appeal allowed the appeal, finding that ProLend’s priority extended to all of the completion costs incurred by ProLend, and associated interest and expenses thereon, finding as follows.

a)     Commercial contracts are interpreted objectively, with regard to text, context and purpose, which relevantly included the existence of a Step-In Deed by which ProLend was empowered to step-in to complete the development (at [30]).

b)    The words ‘any other amount .. debited under the mortgage’ points to a test of whether an amount is one debited to the borrower under the terms of the ProLend mortgage, and that the completion costs were such sums (at [56]).

c)     Advances of a principal sum greater than $8.4 million would give content to the ‘Third Priority Amount’, such that the operative priority clause was not redundant as submitted by Monaco (at [61]).

Monaco was ordered to pay ProLend’s costs at first instance and on appeal.

I appeared with Gavin Handran KC, instructed by Summer Lawyers, for ProLend.