Upton v Tasmanian Perpetual Trustees Limited [2007] FCAFC 57 (27 April 2007)

Last Updated: 27 April 2007

FEDERAL COURT OF AUSTRALIA

Upton v Tasmanian Perpetual Trustees Limited [2007] FCAFC 57

MORTGAGES – mortgagee’s power of sale under the general law – mortgagee’s power of sale under s 78 of the Land Titles Act 1980 (Tas) – extent of obligation – whether mortgagee exercised power of sale in good faith – interests of the mortgagor – whether obligation to get ‘best price’ – whether mortgagee guilty of unconscionable conduct

STATUTORY INTERPRETATION – meaning of s 78 of the Land Titles Act 1980 (Tas)
COSTS – when an indemnity costs order is appropriate

Land Titles Act 1980 (Tas) ss 77, 78 and 81
Acts Interpretation Act 1931 (Tas) s 8B
Trade Practices Act 1974 (Cth) ss 51AA, 51AC and 52

Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925
Commercial and General Acceptance Limited v Nixon [1981] HCA 70; (1981) 152 CLR 491
Cuckmere Brick Co. Ltd. v Mutual Finance Ltd. [1971] 1 Ch 949
Forsyth v Blundell [1973] HCA 20; (1973) 129 CLR 477
Gomez v State Bank of New South Wales Limited [2002] FCA 442
Henry Roach (Petroleum) Pty. Ltd. v Credit House (Vic.) Pty. Ltd. [1976] VR 309
Jovanovic v Commonwealth Bank of Australia [2004] SASC 61; (2004) 87 SASR 570
Kennedy v De Trafford [1897] AC 180
Medforth v Blake [1999] EWCA Civ 1482; [2000] Ch 86
Pendlebury v The Colonial Mutual Life Assurance Society Limited [1912] HCA 9; (1912) 13 CLR 676
Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd [2000] TASSC 185
Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646
Spencer v The Commonwealth of Australia [1907] HCA 70; (1907) 5 CLR 418
Blundell v Associated Securities Limited (1971) 19 FLR 17
Inglis v Commonwealth Trading Bank of Australia [1971] HCA 64; (1972) 126 CLR 161
Patmore v Upton [2004] TASSC 77
Australia and New Zealand Banking Group Limited v Bangadilly Pastoral Co. Pty. Limited [1978] HCA 21; (1978) 139 CLR 195
Porter v Associated Securities Limited (1976) 1 BPR 9279
Expo International Pty. Ltd. (Receivers and Managers Appointed) (In Liq.) v Chant [1979] 2 NSWLR 820
Latec Investments Limited v Hotel Terrigal Pty. Limited (In Liquidation) [1965] HCA 17; (1965) 113 CLR 265
Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225
Gersten v Minister for Immigration & Multicultural Affairs [2001] FCA 260

‘The Mortgagee’s Duty on Sale’, Peter Butt (1979) 53 ALJ 172
Fisher & Lightwood’s Law of Mortgages (Australian ed, Butterworths, 1995)


RICHARD AUSTIN UPTON v TASMANIAN PERPETUAL TRUSTEES LIMITED (ACN 009 475 629)
TAD 32 OF 2006





KIEFEL, GRAHAM AND BESANKO JJ
27 APRIL 2007
SYDNEY (VIA VIDEO-LINK TO HOBART; HEARD IN HOBART)

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	TAD 32 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	RICHARD AUSTIN UPTON Appellant
AND:	TASMANIAN PERPETUAL TRUSTEES LIMITED (ACN 009 475 629) Respondent

JUDGES:	KIEFEL, GRAHAM AND BESANKO JJ
DATE OF ORDER:	27 APRIL 2007
WHERE MADE:	SYDNEY (VIA VIDEO-LINK TO HOBART; HEARD IN HOBART)

THE COURT ORDERS THAT:

1. The name of the respondent be amended to ‘Tasmanian Perpetual Trustees Limited (ACN 009 475 629)’.
2. The appeal be dismissed.
3. The appellant pay the respondent’s costs on an indemnity basis.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	TAD 32 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	RICHARD AUSTIN UPTON Appellant
AND:	TASMANIAN PERPETUAL TRUSTEES LIMITED (ACN 009 475 629) Respondent

JUDGES:	KIEFEL, GRAHAM AND BESANKO JJ
DATE:	27 APRIL 2007
PLACE:	SYDNEY (VIA VIDEO-LINK TO HOBART; HEARD IN HOBART)

REASONS FOR JUDGMENT

KIEFEL and BESANKO JJ:

1 The appellant brought proceedings against the respondent claiming damages arising out of the respondent’s exercise, as mortgagee, of its power of sale of lands owned by him. The lands had been mortgaged by the appellant to secure an advance of $100 000. At the time of sale the lands had been approved for rural-residential subdivision. Title to Lots 1 and 2 had issued but title to the other six potential lots remained subject to the provision of essential amenities such as roads and water. We shall nevertheless refer them as "the six lots", as they were referred to in the proceedings.

2 The claims for damages were dismissed. His Honour the primary Judge, also ordered that the appellant pay the respondent’s costs to be taxed upon an indemnity basis ([2006] FCA 1088).

3 Much of the appellant’s evidence concerning conversations between himself and officers of the respondent about the sale of the lands, and his attempts to retain them for himself, was not accepted by his Honour. No serious attempt was made on the appeal to show that his Honour’s findings in that regard could be disturbed. They were based upon strong findings against the credit of the appellant, supported at some points by inconsistencies between his version of events and contemporaneous written communications. The essential, undisputed, events were:

March 2001	Appellant defaults in payments under the mortgage; makes no further payments.
19 September 2001	Respondent gives notice of intention to sell.
15 October 2001	Saunders and Pitt, valuers, provide respondent with valuation of the lands at $75 108.
November 2001	The respondent instructs agents to offer the land for sale by public auction with a reserve price of $75 000.
21 December 2001	Public auction held; no bids received.
28 October 2002	Judgment given in favour of respondent, in default of the appellant’s appearance, for $112 801.90.
November 2002	Appellant enters into contract with Mr Patmore and his partner for the sale of Lot 2 for $32 000, to be completed on the issue of title. The respondent’s consent to this sale is not sought. It comes to know of the contract prior to its sale of the six lots to Mr Patmore.
9 December 2002	The appellant requests and is advised of a payout figure of $123 033.94.
10 December 2002	Appellant sends a facsimile to the respondent, advising that he is planning to refinance and asks the respondent to be patient.
5 February 2003	Appellant’s application to set aside the judgment is dismissed.
4 March 2003	Appellant sends a facsimile message to the respondent (Kitto) saying all but the condition to provide valuation have been satisfied, so as to enable him to refinance the loan and that he will contact the respondent when it is unconditional.
12 March 2003	Respondent (Stearnes) signs contract of sale of the whole of the land comprising the six lots to Mr Patmore.
24 March 2003	Appellant sends a facsimile to respondent offering $80 000.
25 March 2003	Appellant lodges caveat.
2 April 2003	Appellant sends fax increasing offer ‘to pay out the mortgage’ to $100 000; with copy of caveat.
7 April 2003	Respondent sends fax notifying payout figure of $124 713.08.
11 April 2003	Appellant sends fax advising he was ‘ready to settle’ the mortgage loan on 14 April at that figure.
16 April 2003	Mr Cripps provides second valuation (requested on 1 April); highest value is $75 000.
27 July 2004	Caveat ordered to be removed.
6 August 2004	Contract between respondent and Mr Patmore completed.

4 Four bases for the appellant’s claims for damages were listed by his Honour. The first was the respondent’s alleged breach of its duty as mortgagee, selling the land for a price manifestly less than its market value and failing to sell it as separate lots, either by allowing the appellant to subdivide it or by subdividing itself. The second claim was of breach of s 81(2)(iii) of the Land Titles Act 1980 (Tas) in that the respondent had improperly or irregularly exercised its power of sale. This was not further particularised. The third involved a contravention of s 52 of the Trade Practices Act 1974 (Cth) (‘TPA’), it being alleged that the respondent failed to advise the appellant of its intention to sell and deprived him of the opportunity of subdivision and sale; alternatively, the respondent led him to believe that it would allow him to subdivide and sell the land or to refinance the loan. Fourthly, it was alleged that the respondent engaged in unconscionable conduct within the meaning of the general law or of ss 51AA and 51AC of the TPA. It acted unconscionably because, when it appeared that the property could be sold for less than the appellant’s indebtedness to the respondent, it failed to tell him of its intention to sell and deprived him of the opportunity to purchase.

5 His Honour summarised the content of the respondent’s duty, in connexion with a sale of the appellant’s lands, as follows (at [50]):

‘In exercising its power of sale the respondent was under a duty to act in good faith, and not to fraudulently, or wilfully or recklessly sacrifice the mortgage property. The taking of reasonable precautions to obtain a proper price is part of the duty to act in good faith: Forsyth v Blundell [1973] HCA 20; (1973) 129 CLR 477.’

6 His Honour did not advert to any statutory duty in his reasons. In relation to the second claim, based upon the Land Titles Act , his Honour noted that:

‘Counsel accepted that effectively this substantially overlapped with the common law duty, and at least in the present case there is no further relevant circumstance’.

7 His Honour was satisfied that the respondent had taken all reasonable steps. He accepted the evidence of the respondent’s valuer, Mr Cripps, that the land was worth $75 000. He rejected the much higher value attributed to the land by the appellant’s valuer, Mr Timms. Mr Timms had valued the land as at 27 November 2000, for security purposes, at $175 000. In his Honour’s view that valuer’s allowance for risk was based upon the ‘astonishing proposition’ that, once developmental approval had been given by the local authority, the investment was risk-free. His Honour considered that Mr Cripps’ figure was confirmed by the fact that the land had been on the market, properly advertised and marketed, and had received only one offer in fifteen months. Indeed the appellant had been aware that it was being offered at $80 000 and made no protest. There was no obligation upon the respondent either to subdivide the land or to allow the appellant to do so, his Honour held. Whilst the respondent had a power to do so, if commercially desirable, a mortgagee was under no obligation to spend further money on matters which might improve the value of the mortgaged property. ‘The aphorism about sending good money after bad springs to mind’, his Honour observed.

8 The evidence did not permit of a finding that the respondent acted otherwise than in good faith, his Honour held. A selling mortgagee was not required to consult the mortgagor; nor was it a breach of the mortgagee’s duty to refuse to negotiate with the mortgagor, even if the latter was making the highest offer (citing Fisher and Lightwood’s Law of Mortgage, Aust Ed, par 20.27). In any event the appellant’s case was not that the respondent made any representations or promises to him, but rather that it was uninterested in his position.

9 The appellant’s claim of misleading and deceptive conduct was not made out, his Honour held. The respondent was not required to have any regard to the earlier sale of Lot 2 to Mr Patmore. The appellant could not complete that contract without the respondent’s consent, which he never sought. The appellant’s learning of the proposed sale to Mr Patmore would have made no difference, his Honour found. Even if the respondent had told the appellant of its intention to enter into the contract in March 2003, there was no evidence that, practically speaking, the appellant could have done anything to alter matters. It might reasonably be inferred that he was not able to obtain funds sufficient to pay out the judgment and mortgage debt in full. There was no evidence that the respondent held out any promise that it would accept a discounted sum nor did it give him any right of first refusal, as the appellant had suggested. There was no legal or moral misconduct on the part of the respondent which would amount to unconscionable conduct. It was the appellant’s misfortune that he could not retain the land and that land prices had greatly increased since March 2003, his Honour observed.

10 His Honour acceded to the respondent’s application for an order of costs on an indemnity basis. The case was a hopeless one, in his Honour’s view, and should have been recognised as such. Given the auction and the time the property was on the market there was no arguable basis for contending that the sale to Mr Patmore was improper. His Honour surmised that at the heart of the appellant’s case was a belief that he had some kind of right of first refusal before the mortgagee could sell, notwithstanding that he was a mortgagor in default.

11 On the appeal the appellant not only maintained that the respondent’s duty of good faith had been breached but sought to argue that its duty was substantially extended by the provisions of s 78(1) of the Land Titles Act . That subsection provides:

’78. Power to sell and appropriation of proceeds

(1) After default in payment or in observance of covenants continuing for the further period of one month from the date of service or publication of the notice pursuant to section 77, or for such other period as may be limited for that purpose in the memorandum of mortgage or memorandum of encumbrance, the mortgagee or encumbrancee may, in good faith and having regard to the interests of the mortgagor, encumbrancer, and other persons –

(a) sell or concur with any other person in selling the mortgaged or encumbered land or any part of that land, altogether or in lots, in such manner and subject to such terms and conditions as he thinks fit; and

(b) for the purpose of making a sale of the land or any part of the land at the best price, do anything that the mortgagor or encumbrancer could do in relation to the land.’

12 The appellant’s case, as pleaded, relied upon s 81(2)(iii) of that Act, as His Honour noted. That subsection does not provide a basis for a claim for damages for an improper exercise of a power of sale. It provides that one effect of the registration of a memorandum of transfer executed by a registered mortgagee ‘for the purpose of a sale pursuant to section 78’ is that the title of the purchaser is not impeachable on the ground that ‘the power of sale was otherwise improperly or irregularly exercised’. The appellant must have intended to rely upon s 81(2)(b) and this is borne out by the oral argument before his Honour. That subsection provides that a person who suffers any loss or damage by reason of the registration of the memorandum of transfer is entitled to recover damages from the person who exercised the power of sale. The appellant did not however plead reliance upon s 78(1) as conditioning a mortgagee’s exercise of power of sale.

13 The appellant seeks to argue that the obligations imposed upon a mortgagee by s 78(1) are more onerous than the requirements of the general law, as summarised by his Honour. More is required than that the mortgagee act in good faith, even if this duty includes one to take reasonable steps to obtain a proper price. Section 78(1) requires the mortgagor’s interests to be protected and part of that obligation is to sell at ‘the best price’, as the subsection provides, the appellant would contend.

No mention appears to have been made of these matters in the hearing before his Honour. At the commencement of closing submissions for the appellant his Honour sought to clarify the bases upon which it was contended that the respondent’s duties as mortgagee had been breached. Counsel agreed with the issues identified by his Honour and later stated in his reasons for judgment. At this point his Honour asked whether the breach of provisions of the Land Titles Act added anything to the appellant’s case. It is apparent from the transcript that his Honour was enquiring whether the statute was different in any respect from the requirements of the general law. Counsel for the appellant did not suggest that it was. It was submitted for the appellant that there was something of a misunderstanding, on his part, about the concession and that he was attempting to draw attention to the Land Titles Act and not the general law. We have no reason to doubt that that may have been his intention, but it could not however have been obvious to his Honour. Nevertheless it does not seem possible to consider his Honour’s formulation of the duties owed by a mortgagee but ignore what the Land Titles Act states them to be.

14 The statements in s 78, that a mortgagee act ‘in good faith and having regard to the interests of the mortgagor’, are found in the general law. It is convenient then to refer, in the first place, to the state of the case law in Australia and then to consider the Tasmanian legislation in that background, a course which is permissible: see eg Commercial and General Acceptance Limited v Nixon [1981] HCA 70; (1981) 152 CLR 491 at 503.

15 The starting point is that the power of sale is given to a mortgagee for his or her own benefit, to enable the realisation of the debt: Fisher & Lightwood’s Law of Mortgage 2^nd Aust edn, par 20.21 and the cases there cited, including Forsyth v Blundell [1973] HCA 20; (1973) 129 CLR 477 at 483. Equity however required a mortgagee exercising that power to act in good faith and not to deal with the property ‘in such a manner that the interests of the mortgagor are sacrificed’. In the passage from Kennedy v De Trafford [1897] AC 180 at 185, cited by Menzies J in Forsyth v Blundell 129 CLR at 481, it was said:

‘...... if a mortgagee in exercising his power of sale exercises it in good faith, without any intention of dealing unfairly by his mortgagor, it would be very difficult indeed, if not impossible, to establish that he had been guilty of any breach of duty towards the mortgagor. Lindley L.J. in the Court below, says that "it is not right or proper or legal for him either fraudulently or wilfully or recklessly to sacrifice the property of the mortgagor". Well, I think that is all covered really by his exercising the power committed to him in good faith. It is very difficult to define exhaustively all that would be included in the words "good faith", but I think it would be unreasonable to require the mortgagee to do more than exercise his power of sale in that fashion. Of course, if he wilfully and recklessly deals with the property in such a manner that the interests of the mortgagor are sacrificed, I should say that he had not been exercising his power of sale in good faith.’

(Kennedy v de Trafford [1897] AC 180 was followed by the High Court in Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925 and Pendlebury v The Colonial Mutual Life Assurance Society Limited [1912] HCA 9; (1912) 13 CLR 676).

16 Mason J in CAGA v Nixon 152 CLR at 502 commented that, after much debate, equity decided that a mortgagee was not a trustee of the power of sale and the power was not a fiduciary power. Nevertheless, his Honour observed, there remained in equity the long-standing controversy:

‘Was the duty of the mortgagee in exercising his power of sale limited to acting bona fide or did it extend to the taking of reasonable precautions to ensure that the property was sold at the market value?’

17 That debate was discussed in Forsyth v Blundell [1973] HCA 20; 129 CLR 477 . By that time English cases such as Cuckmere Brick Co. Ltd. v Mutual Finance Ltd. [1971] 1 Ch 949 had accepted that the more onerous requirements were referrable to a selling mortgagee. Salmon LJ in that case held that that duty was owed by a mortgagee on ‘neighbour’ principles (see at 966). The High Court did not need to resolve the debate in Forsyth v Blundell [1973] HCA 20; 129 CLR 477. Menzies J, however in a dissenting judgment, viewed the statements in Cuckmere Brick Co. Ltd. [1971] 1 Ch 949 in light of the equitable duty and was of the view that they were not at odds with the rule stated in Kennedy v De Trafford [1897] AC 180, because to take reasonable precautions to obtain a proper price was ‘but a part of the duty to act in good faith’ (at 481). More recently a Full Court in Gomez v State Bank of New South Wales Ltd [2002] FCA 442 at [20] commented that there is much to be said for this view, one which has more recently been elaborated upon in Medforth v Blake [1999] EWCA Civ 1482; [2000] Ch 86 at 101-102. The Full Court did not however suggest that this approach had been adopted by Australian courts.

18 The differences of approach have been regarded as irreconcilable: CAGA v Nixon 152 CLR at 494 per Gibbs CJ. The question has not been authoritatively ruled upon by the High Court. Australian courts have not applied the more stringent requirements: see Fisher & Lightwoods, Law of Mortgage at 20.21 and the cases there cited; Gomez v State Bank of New South Wales Ltd [2002] FCA 442 at [24] and [26]; Jovanovic v Commonwealth Bank of Australia [2004] SASC 61; (2004) 87 SASR 570 at 593; [2004] SASC 61 at [91]. They have continued to regard a mortgagee’s duty as equitable but they do not appear to have accepted that the duty is as extensive as that described by Menzies J in Forsyth v Blundell [1973] HCA 20; 129 CLR 477.

19 The reliance placed by the appellant upon Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646 at 650, as indicative of an approach towards some wider obligation on the part of a mortgagee, is misplaced. In that case Young CJ in Eq held that authority compelled the view that there was no duty on a mortgagee in New South Wales to render a mortgagee liable for common law damages if a good price was not obtained for the mortgaged property. The duty of which his Honour spoke, and which the appellant sought to adopt for the purposes of his argument, that to act ‘conscionably’ (see at [38]), was that of good faith and no more.

20 The power to sell in s 78(1) of the Land Titles Act is expressed to require a mortgagee to act in good faith ‘and having regard to the interests of the mortgagor’ and other persons. The appellant relies upon the decision in Henry Roach (Petroleum) Pty. Ltd. v Credit House (Vic.) Pty. Ltd. [1976] VR 309 at 312, where Lush J considered a section of the Victorian Transfer of Land Act 1954 (Vic), which required the mortgagee to act in good faith and having regard to the interests of the mortgagor. His Honour was of the opinion that the effect of the words

‘is to bring together the concepts of an obligation to act in good faith and an obligation akin to an obligation to exercise care in much the same way as they are blended in the dissenting judgment of Menzies, J. in Forsyth v Blundell ... and in that of Salmon, L.J. in the Cuckmere Brick Co’s case ...’.

21 It may be observed that his Honour the primary judge also adopted much the same approach. It is not however one which has the support of any pronouncement of the High Court nor is it one which has been adopted by Australian courts.

22 It is apparent from the passage cited from Kennedy v De Trafford [1897] AC 180 above that the equitable duty is expressed to have regard to the ‘interests of the mortgagor’, as an incident of good faith. The mortgagee was not to wilfully or recklessly deal with the property ‘in such a manner that the interests of the mortgagor are sacrificed’. Brennan J observed in CAGA v Nixon 152 CLR at 525 that, stated in that way, the duty acknowledges the mortgagee’s interest as the primary interest which the power of sale is conferred to protect. It does not require the mortgagee to act in protection of the interests of the mortgagor, unless the mortgagee’s failure to do so would be fraudulent or would amount to a wilful or reckless sacrificing of those interests.

23 It is difficult to avoid the conclusion that the reference in s 78 of the Land Titles Act to ‘the interests of the mortgagor’, in the context of the requirement of good faith, was intended in the sense referred to in Kennedy v De Trafford [1897] AC 180 and applied by the courts. If it were sought to impose another, more onerous, obligation upon a mortgagee different language could have been chosen. By the time the Act was passed other legislation, containing different requirements, had been passed in some Australian States. The provision considered in Forsyth v Blundell [1973] HCA 20; 129 CLR 477 is one example. If there were doubt about what was intended in this regard by the subsection, reference could be had to the Bill’s second reading speech: see s 8B(1) of the Acts Interpretation Act 1931 (Tas). In that speech (The Parliamentary Debate (Hansard) Tasmania, House of Assembly, 38^th Parliament, Second Session, Vol II No 1, 1980 p 630) it was made plain that the section ‘declares the case law’ with respect to a mortgagee’s power of sale.

24 The appellant’s argument with respect to s 78 is not however limited to the words appearing at the commencement of s 78(1). Particular reliance is placed by him upon the reference, in par (b) of the subsection, to the mortgagee being able to do anything that the mortgagor could do ‘for the purposes of making a sale of the land or any part of the land at the best price’. In the second reading speech the Minister was obviously referring to par (b) when he went on to say of the section:

‘...But it also extends his power to subdivide, change the use of, or otherwise develop the land for the purpose of sale. The object is to enable him to get the best price for the land. ...’.

This was said to be in the interests of the mortgagor and subsequent mortgagees.

25 In our view the speech makes plain what is evident from the terms of s 78(1)(b) itself. What is provided is a power to carry out certain things with respect to the mortgaged property. It does not cast an obligation upon a mortgagee to undertake activities, such as the improvement of the property or the obtaining of further approvals with respect to it; nor does it require a mortgagee to seek the best price in every case. To extend a mortgagee’s duty to obtain the best price would be to convert the mortgagee to something akin to a trustee of the power of sale. Equity long ago resolved that this was not the case: CAGA v Nixon 152 CLR at 502. There is no indication in the Land Titles Act that it was intended to alter the role of a mortgagee in this way.

26 The decision of Slicer J in Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd [2000] TASSC 185 was brought to the attention of this Court. His Honour there refers to s 78 as conditioning the power of sale to the undertaking of certain procedures, an exercise in good faith and that the sale ‘is at the best price’. The construction of s 78 was not a matter squarely raised in that case, which was principally concerned with the right to caveat. His Honour did not therefore undertake a detailed analysis of the point raised in this appeal.

27 In our view the Land Titles Act states the law as it is generally accepted to be in Australia. It does not extend a mortgagee’s duty to obtain the best price reasonably possible or to act in such a way so as to advance the interests of the mortgagor. These were the basic tenets of the appellant’s argument on the appeal.

28 The argument put by the appellant in these respects is without foundation. The relevant enquiry is even more limited than as stated by his Honour the primary Judge, with respect. The relevant enquiry is whether the respondent acted in good faith or whether it sacrificed the respondents interests by acting in a wilful or a reckless way.

29 The difference in his Honour’s approach of course provides no basis for a different conclusion on the issue of good faith. To the contrary his Honour went further in examining the respondent’s conduct in connexion with the sale and concluded that it had taken reasonable steps to obtain a proper price. The complaints made by the appellant on the appeal depend upon the same facts as those determined by his Honour. In our view no reason has been shown to depart from his Honour’s findings.

30 Although the appellant’s argument on the appeal took a different course, the complaints remained essentially the same, although it was even more strongly suggested that the respondent acted improperly in its dealings with Mr Patmore. In this regard it was argued that it was a breach of good faith for the respondent to advise him of the sum that was sought for the land. This seems an extraordinary proposition. The property had been properly marketed and put to auction. It remained on the market at a price based upon an independent valuation.

31 Critical to the appellant’s case, which ever way it was put, was a finding that the value of the land was substantially in excess of that for which it was sold. His Honour however accepted the opinion of the respondent’s valuer and rejected that of the appellant’s, for the reasons given. It is not suggested that that course was not open to his Honour. Rather, reliance was placed upon the appellant’s sale of Lot 2 to Mr Patmore for $32 000, as suggesting that the price obtained by the respondent for the six lots, $75 000, was insufficient. This was not however put to the respondent’s valuer as a matter which might affect his opinion. It may be that it was realised $32 000 was not the nett profit to be made. The appellant’s contract for the sale of Lot 2 required works to be undertaken so that title could issue.

32 The appellant also submitted that the respondent did not have a current valuation which supported the price at which it was sold. It did not obtain an updated valuation until after the contract had been signed. This may not have been the most prudent course, but of itself is not evidence of want of good faith. In any event the evidence shows that if the respondent had sought an updated valuation, immediately prior to its entry into the contract with Mr Patmore, it would have confirmed that there had been no increase in the value of the land to this point. Even the appellant’s valuer can be taken to have confirmed, at this time, the value he had earlier attributed to the land. The appellant’s case always assumed that the land had increased in value at the time of the respondent’s sale to Mr Patmore. Clearly the land did become more valuable, by the time Mr Patmore sold it. There was however no evidence of any increase in value as at 12 March 2003.

33 The balance of the appellant’s case was founded upon misconceptions about the obligations of a mortgagee and the rights of a defaulting mortgagor. They proceeded upon assumptions that the respondent was obliged to communicate with the appellant, advise of its intentions to sell and respond to his proposals. As his Honour the primary judge observed, they appeared to be based upon some notion that the appellant had a right of first refusal, because his interest in the lands might be lost. The argument advanced for the appellant concerning the respondent’s obligations following its entry into the contract with Mr Patmore are even more difficult to comprehend. It was suggested that it was obliged to seek a higher price from him and that it ought to have accepted his tender of outstanding monies some months later despite having a binding contract with Mr Patmore which was not liable to be set aside.

34 It remains to mention that the ground of appeal which relied upon misleading and deceptive conduct was ultimately said to depend upon the failure to advise the appellant that the property was to be sold. There was no such obligation. The ground referrable to unconscionable conduct was not further articulated. His Honour was clearly correct in holding that this claim was not made out.

35 The evidence before his Honour does not disclose any basis for the allegations made by the appellant, which were of a serious nature. No basis is shown for interfering with the exercise by his Honour of the discretion to award indemnity costs. The proceedings below were based upon misconceptions of law and assumptions of fact. His Honour pointed them out in clear terms. The appellant’s response was to maintain an appeal on different, but equally untenable, grounds. The fact that this Court has felt obliged to determine the question of statutory construction should not be seen as suggesting there was merit in it.

36 It follows in our view that the appeal should be dismissed and the appellant ordered to pay the respondent’s costs of the appeal on an indemnity basis.

I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kiefel and Besanko.

Associate:

Dated: 24 April 2007

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	TAD 32 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	RICHARD AUSTIN UPTON Appellant
AND:	TASMANIAN PERPETUAL TRUSTEES LIMITED (ACN 009 475 629) Respondent

JUDGES:	KIEFEL, GRAHAM AND BESANKO JJ
DATE:	27 APRIL 2007
PLACE:	HOBART

REASONS FOR JUDGMENT

GRAHAM J

37 This appeal concerns a parcel of land in Tasmania having an area of 6.828 hectares in the Parish of Drummond and Land District of Monmouth being Lot 1 in Plan No 116236 and being the whole of the land in Certificate of Title Volume 116236 Folio 1 (‘the Land’).

38 The appellant, Richard Austin Upton, became the registered proprietor of the Land and, as I would understand it, certain adjacent land, on 29 May 1992.

39 On 19 December 1994 Brighton Council approved an eight lot subdivision of the Land and the adjacent land. The subdivision contemplated the creation of two lots having a frontage to Honeywood Drive, Old Beach, three lots having a frontage to a new road yet to be formed, to be known as Binny Court, and three battleaxe blocks also having frontages to Binny Court.

40 It would appear that the subdivision approval was taken up in stages, Lots 1 and 2 in that subdivision becoming separate lots covered by Plan Registered Number SP 116235, the residue, comprising the Land, becoming Lot 1 in Plan Registered Number P 116236 which was approved by the Recorder of Titles on 13 February 1995.

41 By a Memorandum of Mortgage No B929135 which was registered on 14 February 1996 (‘the mortgage’), the appellant mortgaged the Land to secure an advance of $100,000 made by Anthony Adrian Dowd and John Thomas Lewinski, Solicitors, of 53 – 55 Davey Street, Hobart, which was repayable on demand together with interest.

42 On 27 November 2000 the appellant secured a valuation of the Land from D W Timms of Timms Valuers & Property Consultants Pty Limited of Lenah Valley, Tasmania ‘By Order, on Account and on Behalf of’:

‘Mr R Upton
and
any intending Mortgagee’

43 The Land was described by Mr Timms as having a south easterly aspect and as being located approximately 25 kilometres north and east of the Hobart General Post Office, some three kilometres southeast of the satellite township of Brighton. Mr Timms placed a valuation of $175,000 on the Land which he briefly described as:

‘6.828 hectares EnGlobo land approved for subdivision into 6 rural/residential allotments Honeywood Drive, Honeywood.’

44 By a Transfer of Mortgage number C284977 Messrs Dowd and Lewinski transferred their interest as mortgagees of the Land to Tasmanian Trustees Limited ACN 009 475 629, later known as Tasmanian Perpetual Trustees Limited, the respondent in the current appeal (referred to in the judgment under appeal and in the Notice of Appeal as Tasmanian Perpetual Trustees Pty Ltd).

45 Section 77 of the Land Titles Act 1980 (Tas) (‘the LT Act’) laid down a procedure to be followed in the case of default under a real property mortgage and s 78 made provision for a mortgagee to have a power of sale in the event of non-compliance by a mortgagor with a notice given under s 77. The sections relevantly provided:

‘77(1) Where default is made in the payment of any money secured by any registered mortgage ... and that default is continued for one month, or for such other period as may be expressly limited for that purpose in the mortgage [the period limited in the mortgage was "one week" (see clause 6 of the covenant "SECONDLY")] ..., the mortgagee ... may –

(a) give to the mortgagor ... written notice in accordance with subsection (2); ...

...

   (2) A notice referred to in subsection (1) shall –

(a) require the mortgagor ... to pay the money then due or owing under the mortgage ...; and

(b) state that sale will be effected if default in payment of the money referred to in paragraph (a) ... is continued.

...

78(1) After default in payment ... continuing for the further period of one month from the date of service ... of the notice pursuant to section 77, or for such other period as may be limited for that purpose in the memorandum of mortgage [the period limited by the mortgage was again "one week" (see clause 6 of the covenant "SECONDLY")] ..., the mortgagee ... may, in good faith and having regard to the interests of the mortgagor ... and other persons –

(a) sell or concur with any other person in selling the mortgaged ... land or any part of that land, altogether or in lots, in such manner and subject to such terms and conditions as he thinks fit; and

(b) for the purpose of making a sale of the land or any part of the land at the best price, do anything that the mortgagor ... could do in relation to the land.

  (2) Without limiting the generality of subsection (1)(b), the mortgagee ... may –

(a) subdivide, change the use of, or otherwise develop the land;

(b) carry out works upon the land;

(c) set aside part of the land for purposes other than sale, in the course of subdivision;

(d) execute schedules of easements for the purposes of Part 3 of the Local Government (Building and Miscellaneous Provisions) Act 1993, as if he were the owner; and

(e) grant and reserve easements and profits à prendre, and enter into restrictive covenants.
...

  (7) The purchase-money received by a mortgagee who has exercised the power of sale conferred by this section, after discharge of prior mortgages and encumbrances to which the sale is not made subject (if any), shall be applied -

(a) firstly, in payment of all costs, charges, and expenses properly incurred, incidental to or for the purpose of the sale, or any attempted sale, or otherwise consequent on the default;

(b) secondly, in payment of the money which is due and owing on the mortgage;

(c) thirdly, in payment of subsequent mortgages and encumbrances (if any) in the order of their priority;

(d) fourthly, in satisfaction of the claims of all persons who have lodged caveats subsisting when the power of sale was exercised, in accordance with their respective rights and priorities; and

(e) fifthly, in payment of the residue (if any) to the mortgagor.
...’

46 Under s 8B of the Acts Interpretation Act 1931 (Tas) consideration may be given to extrinsic material capable of assisting in the interpretation of a statutory provision in certain circumstances, including ‘to confirm the interpretation conveyed by the ordinary meaning of the provision’. The extrinsic material to which consideration may be given includes the Minister’s Second Reading Speech on the Bill which led to the relevant enactment. In the case of s 78 of the LT Act the Minister’s Second Reading Speech in the Legislative Assembly included the following:

‘Clause 78 declares the case law that a mortgagee, in exercising his power of sale, must act in good faith and having regard to the interests of the mortgagor and other people. But it also extends his power to subdivide, change the use of, or otherwise develop the land for the purpose of sale. The object is to enable him to get the best price for the land. This is in the interests of the mortgagor, and of subsequent mortgagees.’

(Hansard, Tasmanian House of Assembly, 26 March 1980, at p600)

47 A notice of demand dated 17 August 2001 calling for the payment of all money owing by the appellant to the respondent under the mortgage was served upon the appellant. Thereafter a ‘NOTICE OF INTENTION TO SELL UNDER MORTGAGE’ dated 4 September 2001 was served on the appellant by the respondent indicating that the appellant’s default under the mortgage had continued for a period in excess of seven days and that, failing payment within a further seven days, the respondent would proceed to sell the Land in accordance with the LT Act.

48 Subsequently, proceedings were instituted against the appellant in the Supreme Court of Tasmania on 10 October 2002, under which the respondent secured judgment in default of appearance against the appellant on 28 October 2002 in the sum of $112,801.90 together with interest up to judgment in the sum of $2,407.46 and $354 for costs, a total of $115,563.36. On 3 January 2003 the appellant applied to have the judgment set aside. That application was dismissed with costs on 5 February 2003.

49 In the meantime, the respondent proceeded to offer the Land for sale. Roberts Limited as agents for the respondent advertised the Land for sale by public auction at their Glenorchy offices at 6:00 pm on Friday 21 December 2001. Display advertisements were placed in ‘The Mercury’, a newspaper published in Hobart, on 30 November 2001, 7 December 2001, 14 December 2001 and 21 December 2001.

50 Before putting the Land up for auction, the respondent obtained a valuation of the Land from Saunders & Pitt, Independent Property Valuers & Consultants of Davey Street, Hobart. On 15 October 2001 a valuation signed by Mr Russell Cripps, an Associate with the firm, and Mr Andrew Pitt, one of the Partners, was provided to the respondent. The current market value as at 15 October 2001 was expressed to be $75,000. This figure was derived after addressing value on a ‘Single Lot – No Subdivision’ basis ($75,108), on a ‘Lot Potential’ basis ($60,000) and a ‘Hypothetical Development’ basis ($39,308).

51 The valuer opined that ‘If subdivision of the land were completed [i.e. the remaining six blocks in the original subdivision were created] with all roads and services in place and titles issued’ the value of the several blocks would add up to $207,000 (the valuation of the individual blocks varying in amount from $29,000 to $50,000).

In their ‘MARKET COMMENTARY’ the valuers said, amongst other things:

‘Demand for vacant building blocks in the Old Beach to Brighton District has improved slightly over the last nine months or so although the selling rate of about 1.5 blocks per month is well below average long term selling rates.

...

The most likely purchaser of the property would be someone who primarily has an expectation of using the land for personal benefit, either as a home site and/or for running a few livestock. Demand levels are unlikely to be very strong. ...

Subdivision of the land as proposed does not appear to be feasible.’

52 The valuers indicated that their valuation had been prepared in accordance with the definition of ‘market value’ promulgated by The Australian Property Institute, namely:

‘Market value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.’

Such an approach to valuation generally accords with the classic test enunciated by Griffith CJ in Spencer v The Commonwealth of Australia [1907] HCA 70; (1907) 5 CLR 418 at 431–2.

53 An auction was conducted at the appointed time and place but, significantly for present purposes, no bids were received.

54 Subsequent to the unsuccessful auction the respondent sought a purchaser for the Land by private treaty. In February 2002 it instructed McGregor First National Real Estate of Moonah as an additional agent to market the Land for sale. An asking price of $80,000 was placed upon it.

55 No further valuation of the Land was sought by the respondent until after it entered into a contract for sale, to which further reference will be made shortly, on 12 March 2003.

56 On 4 March 2003 Mr Timms of Timms Valuers & Property Consultants Pty Limited provided the appellant with another valuation of the Land. That one page valuation was expressed in the same terms as the first page of his valuation of 27 November 2000. Once again it opined that the value of the Land was $175,000. In an affidavit filed 4 August 2006, Mr Timms said:

‘2(b) I valued "Sunnyview Rise" for $175,000 in June 2000, November 2000 and March 2003 always, on the basis that a 6 lot Council approved development would be completed by Upton himself;’ (emphasis added)

57 The appellant conceded that no action was taken by the appellant to communicate Mr Timms’ updated expression of opinion as to the value of the Land to the respondent before it proceeded to sell same on 12 March 2003.

58 By an agreement dated ‘November 2002’ the appellant purported to sell part of the Land to William Garry Patmore and his partner, Glynis May Smith, for $32,000. The property the subject of the agreement for sale was described as:

‘ALL THAT property situate at and known as Lot 2 Sunnyview Rise [presumably a new name proposed for Binny Court] Honeywood 7017 in Tasmania as the same is shown on the plan annexed hereto and more particularly described in Certificate of Title Volume             folio            ’

59 The plan annexed to the agreement for sale was described as a ‘Sale Plan’. It took the form of a draft subdivision of part of the Land, the relevant part roughly according with Lots 3, 5, 6 and 7 in the Plan of Subdivision approved by Brighton Council on 19 December 1994. The ‘Sale Plan’ did not exhaustively deal with the Land. Lot 2 in the ‘Sale Plan’ roughly accorded with, but did not correspond precisely with, Lot 5 in the Council approved subdivision. The agreement for sale into which the appellant entered contained a clause 3 as follows:

‘3. This contract shall be completed on the issue of separate titles when the purchaser shall be entitled to vacant possession of the Property.’

60 Subdivision approval to create the proposed new ‘Lot 2’ would not appear to have been sought by the appellant. In addition the appellant appears never to have sought or obtained from the respondent its agreement to the provision of a partial discharge of the mortgage upon the settlement of the sale of ‘Lot 2’.

61 However, it would appear that on 18 March 2003 Brighton Council approved a subdivision application lodged with it by Mr Patmore and Ms Smith for a development described as ‘Subdivision - One (1) Plus Balance’ which simply allowed for the creation of a ‘Lot 2’ having an area of 6,432 m² roughly in the same location as Lot 5 in the subdivision previously proposed by the appellant and approved by Brighton Council on 19 December 1994, which had an area of 6,003 m^2.

62 Before Mr Patmore and Ms Smith’s application was approved by the Council, the respondent, as mortgagee in possession of the Land, entered into a contract for sale of the Land to Mr Patmore or his nominee for $75,000. That contract, dated 12 March 2003, provided for completion ‘within 30 days of confirmation of clause 4.1B herein’.

Clause 4.1(b) of the contract for sale provided as follows:

‘4.1 The following are conditions precedent to completion of this Contract:

...

(b) that a lending institution makes available to the Purchaser a loan of one hundred and fifty thousand ($150,000) upon terms currently available in transactions of a similar nature within 14 days of this date.’

63 As it transpires this condition was duly satisfied.

64 Subsequently, Mr Patmore and Ms Smith secured a six lot subdivision of the Land, the relevant Plan of Survey, approved by the Recorder of Titles on 4 April 2005, becoming registered as SP 143314. It provided for a Lot 2 generally in the same location as Lot 5 in the appellant’s December 1994 approved plan of subdivision and also Lot 2 in their own approved plan of subdivision of 18 March 2003. However, on this occasion, Lot 2 had an area of 6,438 m².

65 No application was lodged by the appellant for injunctive relief to restrain the respondent from completing the contract for sale of the Land, which had been entered into on 12 March 2003, on the basis that the sale constituted an improper exercise by the mortgagee of its power of sale. No doubt one reason why no such application was brought was that the price of securing an interlocutory injunction would have been the payment into Court of the full amount of the mortgage debt together with interest (see per Fox J at first instance in Blundell v Associated Securities Limited (1971) 19 FLR 17 especially at 44 – 48, per Walsh J in Inglis v Commonwealth Trading Bank of Australia [1971] HCA 64; (1972) 126 CLR 161 at 164 and per Barwick CJ, with whom Menzies and Gibbs JJ agreed, at 169).

66 What the appellant proceeded to do was to lodge a caveat forbidding the registration of any dealing, including a transfer by power of sale, affecting the Land until the caveat be withdrawn or removed or until after the expiration of a period of 28 days from the date of service of a notice of intended registration of a dealing affecting the Land.

67 By proceedings No. M366 of 2003 in the Supreme Court of Tasmania Mr Patmore and Ms Smith sought the removal of this caveat, the existence of which was preventing the respondent from completing its contract to sell the whole of the Land to them for $75,000. That proceeding came before Underwood J, as his Honour then was. On 27 July 2004 his Honour ordered that the caveat be removed (see Patmore v Upton [2004] TASSC 77). No doubt, if it had been allowed to stand, payment into Court of the full amount of the mortgage debt would have been required in those proceedings.

68 On 26 September 2005 the appellant filed an Application in this Court whereby the proceedings out of which the current appeal arises were instituted.

69 In an Amended Application filed 22 March 2006 the case was expressed to be one:

‘... for breaches of Section 52, 51AA, and 51AC of the [Trade Practices] Act, and also for damages pursuant to the Land Titles Act (Tas) Section 81(2)(iii) and negligence, as associated matters, in connection with the sale of mortgaged land by the Respondent (mortgagee) owned by the Applicant (mortgagor) at gross under value, and for misleading and deceptive, and unconscionable conduct in the accomplishing thereof.’

70 The primary judge ordered that the Application be dismissed with costs and further that the applicant [now the appellant] pay the costs of the respondent on an indemnity basis, including reserved costs.

71 In the course of his reasons for judgment the primary judge made a number of findings, including the following:

(a) ‘... I did not find Mr Upton a satisfactory witness. He tended to be argumentative and evasive. His evidence about allegedly obtaining credit approval from Connect Credit Union turned out to be unsupported by evidence which he claimed he would produce. ... the mere fact that Mr Kitto [the lending manager of the respondent] says he does not remember anything happening does not lead me to accept Mr Upton’s assertion that it did.’ (see Upton v Tasmanian Perpetual Trustees Pty Ltd [2006] FCA 1088 at [18])

(b) ‘... Mr Upton says that ... on [9 December 2002] Mr Kitto telephoned him to advise him of the pay out figure, and suggested that Mr Upton should "come back with an offer". Mr Kitto denies that he said this, and I am positively satisfied that he did not. ...’ (at [19])

(c) ‘Mr Upton says that there were various conversations from this time onwards [on and after 1 April 2003] with Mr Kitto during which Mr Kitto said he would recommend to his CEO that Mr Upton’s pay-out [said to be an offer of $100,000] would be accepted. ... I accept that Mr Kitto took the consistent position that any settlement would not have been on the basis that the respondent would hand over the title to Mr Upton because there was the contract with Mr Patmore [referring to the contract dated 12 March 2003 to sell the whole of the Land to Mr Patmore or his nominee for $75,000]’ (at [47])

(d) ‘I am satisfied that the respondent took all reasonable steps [when exercising its power of sale]. The land was put up at a properly advertised auction, and then remained on the market for some 15 months, during which time it only attracted one offer, for which it was sold. ...’ (at [51])

(e) ‘... I am satisfied that the price was a reasonable price, and in fact was at or about market value at the time. ...’ (at [51])

(f) ‘... I reject valuation evidence given on behalf of Mr Upton by Mr Daryll Timms. He valued the land at 27 November 2000 at $175,000 "for security purposes" but on the basis that "a six lot Council approved development would be completed by Mr Upton himself".’ (at [51])

No challenge has been made to his Honour’s findings as set forth in paragraphs (a) and (b) above.

72 In Commercial and General Acceptance Limited v Nixon (‘Nixon’) [1981] HCA 70; (1981) 152 CLR 491 the High Court had to consider the application of s 85(1) of the Property Law Act 1974 – 1976 (Qld) to a mortgagee sale. That subsection provided as follows:

‘It is the duty of a mortgagee, in the exercise ... of a power of sale conferred by the instrument of mortgage or by this or any other Act, to take reasonable care to ensure that the property is sold at the market value.’

This section was enacted in the context of a difference of opinion in various authorities as to the obligation cast upon a mortgagee exercising a power of sale in the absence of statutory provisions regulating the matter. In Nixon at 494, Gibbs CJ said:

‘... the question whether, apart from statute, a mortgagee exercising a power of sale is under an obligation to take reasonable care to obtain a proper price, as well as an obligation to act in good faith, is one on which the authorities are conflicting, and indeed in my opinion irreconcilable.’

Thus far the resolution of the question has been left open in the decisions of the High Court in Forsyth v Blundell [1973] HCA 20; (1973) 129 CLR 477 (see especially at 493 and 506), Australia and New Zealand Banking Group Limited v Bangadilly Pastoral Co. Pty. Limited (‘Bangadilly’) [1978] HCA 21; (1978) 139 CLR 195 (see especially at 222) and in Nixon.

73 In Nixon at 522-523 Brennan J, as his Honour then was, said:

‘The balance of opinion in this Court accepts that a duty to take reasonable precautions to obtain a proper price [the test formulated by the Court of Appeal in Cuckmere Brick Co. Ltd. v Mutual Finance Ltd. (‘Cuckmere Brick’) [1971] 1 Ch 949, or as Salmon LJ preferred to say, to obtain the true market value of the property] imposes a more onerous duty upon a mortgagee than a duty to act in good faith, the duty to act in good faith requiring the mortgagee to act without fraud and without wilfully or recklessly sacrificing the interests of the mortgagor but stopping short of exposing the mortgagee to liability for mere negligence or carelessness (see Forsyth v Blundell, per Walsh J [at 493] and Mason J [at 506]; Pendlebury v Colonial Mutual Life Assurance Society Ltd. [at 680, 700]). Menzies J expressed a dissenting view in Forsyth v Blundell when he said [at 481]: "To take reasonable precautions to obtain a proper price is but a part of the duty to act in good faith" though his Honour immediately declared the duty to fall short of the standard which the mortgagee, as a shrewd property owner, would be likely to adopt if the property were his own.’

Brennan J proceeded to observe that the statutory duty contained in s 85(1) of the Property Law Act 1974 – 1976 (Qld) appeared to reflect some of their Lordship’s language in Cuckmere Brick and that such statutory duty was ‘more onerous than a duty to act in good faith’ (at 523).

74 At 525.3 his Honour said:

‘The duty imposed by s. 85(1) stands in contrast with the formulation of a mortgagee’s duty as a duty to act in good faith without fraud and without wilfully or recklessly sacrificing the interests of the mortgagor. When the duty is stated in that way, it acknowledges that the mortgagee’s interest is the primary interest which the power of sale is conferred to protect. So stated, the duty does not require the mortgagee to act in protection of the interests of the mortgagor his sureties and others whose interests are dependant on the mortgagor, unless the mortgagee’s failure to do so would be fraudulent or would amount to a wilful or reckless sacrificing of those interests. On the other hand, the statute seeks to protect the interests on the mortgagor’s side, not by requiring an attempt to obtain the best price which could be obtained for the property, but by requiring the taking of reasonable steps to obtain its market value. As Salmon L.J. said in Cuckmere Brick:

"‘Proper price’ is perhaps a little nebulous, and the ‘the best price’ may suggest an exceptionally high price. That is why I prefer to call it ‘the true market value’."

The statutory formulation, taking the sale at market value as the object to which the performance of the duty is directed, strikes a different balance between the interests of mortgagor and mortgagee from that which flows from the test of good faith.’

75 In considering an application for an interlocutory injunction in Henry Roach (Petroleum) Pty. Ltd. v Credit House (Vic.) Pty. Ltd. [1976] VR 309, Lush J in the Supreme Court of Victoria had to consider the reach of s 77 of the Transfer of Land Act 1958 (Vic) which conferred a power on a mortgagee ‘in good faith and having regard to the interests of the mortgagor grantor or other persons’ to sell mortgaged property or any part thereof, together or in lots, by public auction or by private contract, in the event of a default by the mortgagor in complying with a statutory demand for payment of the mortgage debt.

His Honour said at 312-313, in relation to s 77:

‘The effect of its words is to bring together the concepts of an obligation to act in good faith and an obligation akin to an obligation to exercise care in much the same way as they are blended in the dissenting judgment of Menzies, J. in Forsyth v Blundell ... at ... p.481, and in that of Salmon L.J., in the Cuckmere Brick Co.’s Case, at ... p.966. I have likened the statutory requirement of regard to a requirement of care deliberately because I think it impossible to distinguish in this context between having regard to the interests of another and taking care to protect the interests of that other’.

(emphasis added)

I respectfully disagree with the construction placed by his Honour on s 77 of the Victorian Act as one giving rise to a dual obligation, more onerous than a duty of good faith. However, as this case does not concern the Victorian statute, it is unnecessary for me to address the matter in greater detail than will be apparent from the matters referred to in the balance of these reasons.

76 In Porter v Associated Securities Ltd (‘Porter’) (1976) 1 BPR 9279 at 9287 Needham J in the Supreme Court of New South Wales noted, on the question of whether taking reasonable precautions to obtain a proper price was part of the duty to act in good faith, or an extension of that duty, that Mason J, as his Honour then was, took a position which differed from that of Menzies J in Forsyth v Blundell.

77 After referring to the difference of opinion in the authorities, Needham J considered that he was bound to follow the expressions of principle in Pendlebury v The Colonial Mutual Life Assurance Society Limited (‘Pendlebury’) [1912] HCA 9; (1912) 13 CLR 676, illuminated as they were by their statement by Walsh and Mason JJ in Forsyth v Blundell.

Needham J observed that in the case before him there was no suggestion of fraud. Accordingly he saw his task as being ‘to ascertain whether the defendant wilfully or recklessly sacrificed the interests of the plaintiff’. His Honour continued at 9287:

‘If the defendant acted bona fide, and, certainly, if it took reasonable precautions to obtain a proper price, the plaintiff must fail even if the price obtained was below market value and even if, by waiting or by spending more money on the property, a better price could have been obtained.’

Needham J noted that the case before him was not one where the mortgagee had recovered its debt and left the mortgagor without residual benefit. As is the case in the current appeal, the mortgagee had failed to obtain for itself the full amount of its debt. Porter, of course, was decided before the judgments of the High Court in Bangadilly and Nixon.

78 Needham J returned to further consider the correct test to be applied in Expo International Pty. Ltd. (Receivers and Managers Appointed) (In Liq.) v Chant [1979] 2 NSWLR 820, which followed Bangadilly but preceded Nixon.

79 After referring to the High Court’s consideration of the relevant test in Bangadilly, his Honour said at 835, ‘I consider that I should apply to this case the conclusion I expressed in Porter’s case’ as set out above. His Honour proceeded to refer to an article by Peter Butt entitled ‘The Mortgagee’s Duty on Sale’ ((1979) 53 ALJ 172) in which the learned author disagreed with his Honour’s conclusion that the principle enunciated in Pendlebury was different from that followed in Cuckmere Brick. Needham J proceeded to point out that Butt had only referred to part of the conclusion reached by him as recorded in Porter.

80 In Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646 Young CJ in Eq concluded (at [26]) that there was no common law duty in negligence on a mortgagee in New South Wales which made a mortgagee liable in common law damages if he failed to get a good price for a mortgaged property.

81 In the course of his reasons for judgment Young CJ in Eq referred (at [23]) to the 1995 Australian Edition of Fisher & Lightwood’s Law of Mortgages in which it was said:

‘... the Cuckmere principle has not been followed in Australia where the courts have preferred to retain the good faith test’.

Fourteen authorities were cited for that proposition. Mention was also made as follows (at 459):

‘In any event the English courts seem to be moving back from the Cuckmere principle (or at least from an independent duty in tort) to the good faith test ...’

82 It seems to me that the proper approach to the determination of a mortgagee’s duty when exercising a power of sale, absent any relevant statutory provision, is to be discerned from the judgements in Pendlebury and those passages in the subsequent High Court cases which have elucidated the relevant principle as it is expounded in Pendlebury.

83 Approaching the matter with some caution and bearing in mind Griffith CJ’s observation in Pendlebury at 680 that ‘[i]t is very difficult to define exhaustively all that would be included in the words "good faith"’, I would respectfully adopt the summation of the relevant test as expressed by Needham J in Porter (see [41] above).

84 In Pendlebury the relief which was ordered was expressed at 703, as follows:

‘... Declare that the defendants were guilty of wilful default in respect of the sale by auction of the land in the pleadings mentioned. Inquiry directed as to what amount would have been produced if the sale had been conducted without such wilful default. Judgment for the plaintiff for a sum equal to the difference between the amount so ascertained and [sterling]714 with costs of action including costs of de bene esse examination and of interrogatories and discovery. ...’

85 Pendlebury, of course, concerned the sale by a mortgagee exercising power of sale of 640 acres of ‘Mallee Country’, being rural land situated about 235 miles from Melbourne. The land was worth about [sterling]2,000 but realised only [sterling]720. It was sold at an auction which took place in the mortgagee’s agent’s rooms in Collins Street, Melbourne on 14 June 1910. It would appear that it was subsequently resold twice in the ensuing two months, it having been purchased in July 1910 by the wife of a local farmer from a purchaser who in turn had purchased the property from the purchaser at the auction. The local farmer did not know that the land had been for sale (see 686).

The land was only advertised in the ‘Argus’ and ‘Age’ newspapers, being Melbourne daily papers. It was plain that the purchaser at the auction knew nothing of the land beyond the advertisement (see 688). No advertisements had been published in local newspapers and no other notice of the auction had been given (see 683).

86 Given the uncertainty which has existed as to the correct test to be applied and the nuances attending the requirement of ‘good faith’, it may be helpful to record a series of propositions that may be gleaned from Pendlebury and the subsequent High Court cases as follows (where references are made to numbers preceded by a decimal point, an endeavour has been made to identify where on the relevant page the proposition is to be found):

(a) The power of sale is given to a mortgagee entirely for his own benefit, and its purpose is to enable him to realise enough to satisfy his claim, if the property will produce it, and return whatever balance may remain to the mortgagor. It is undoubted law that so long as he observes specified formalities and acts in good faith, his conduct cannot be challenged (per Isaacs J in Pendlebury at 699.9).
(b) A mortgagee is not a trustee, nor is his position similar to that of a trustee. A mortgagee has for his own protection a power of sale but in its exercise he must not sacrifice the interests of the mortgagor or of subsequent incumbrancers (per Aickin J in Nixon at 515.9).
(c) A mortgagee may not fraudulently or wilfully or recklessly sacrifice the property of the mortgagor (see Griffith CJ in Pendlebury at 680.1 and 680.3). This obligation is covered by the mortgagee’s obligation to exercise the power of sale committed to him in good faith (see Griffith CJ in Pendlebury at 680.1 and 680.3).

(d) (i) A designed cheating of a registered proprietor out of his rights by means of a collusive and colourable sale by a mortgagee to a subsidiary will clearly constitute a fraud on the mortgagor (per Kitto J in Latec Investments Limited v Hotel Terrigal Pty. Limited (In Liquidation) (‘Latec’) [1965] HCA 17; (1965) 113 CLR 265 at 273.9 – 274.1).
(ii) Whilst a court will set aside such a sale as against the mortgagee and its purchaser neither the contract nor the ensuing transfer would be rendered void at law. The purchaser would simply be declared to be compellable to act in relation to the mortgagor as if the mortgagee had sold and transferred not the mortgaged property but only the mortgage and the moneys thereby secured (per Kitto in Latec at 274.9).
(e) (i) It would be unreasonable to require a mortgagee to do more than exercise his power of sale in good faith. What good faith requires may be difficult to define exhaustively (see Griffith CJ in Pendlebury at 680.2).
(ii) Bona fides in relation to the exercise of a power of sale by a mortgagee is not concerned with the motive for exercising the power of sale but, once the decision to sell has been made, is concerned with a genuine primary desire to obtain for the mortgaged property the best price obtainable consistently with the right of a mortgagee to realise his security. At the same time the mortgagee is concerned with his own interests and not with the interests of the mortgagor or subsequent encumbrancers, and therefore a wide latitude has been allowed to him in his manner of exercising his power of sale (per Jacobs J in Bangadilly at 201.7).
(f) (i) It would be very difficult, indeed, if not impossible, to establish that a mortgagee had been guilty of any breach of duty towards the mortgagor if, in exercising his power of sale, he exercises it in good faith, without any intention of dealing unfairly by the mortgagor (see Griffith CJ in Pendlebury at 679.9).
(ii) Good faith may be equated to fairness (per Barton J in Pendlebury at 694.3).
(g) (i) The interests of a mortgagor will be recklessly sacrificed if a mortgagee omits to take obvious precautions to ensure a fair price and the facts show that the mortgagee was absolutely careless whether a fair price was obtained or not (per Griffith CJ in Pendlebury at 680.7).
(ii) A mortgagee will have improperly exercised its power of sale if the power has been so used as to sacrifice the mortgagor’s property by conducting the sale in complete disregard of the mortgagor’s interest (per Barton J in Pendlebury at 695.1).
(iii) A mortgagee’s conduct when exercising a power of sale will be reckless if it manifests a disregard of the mortgagor’s interest, ignoring his property in the possible surplus, that is to say if the mortgagee does not care whether its fair and proper value was obtained or not. Such a situation must be distinguished from a mere want of care or prudence in the course of honestly trying to conserve the mortgagor’s interest in the mortgaged property. Such recklessness will not be compatible with good faith in enforcing the power of sale. The latter alternative is entirely consistent with good faith, though lacking in skill or attention (per Isaacs J in Pendlebury at 702.3).
(iv) For a mortgagee’s power of sale to be beyond challenge it must be exercised in good faith, reasonable steps being taken to obtain a fair price (see Kitto J in Latec at 273.5).
(v) A mortgagee will have breached its obligation to its mortgagor if it has exercised its power of sale without taking reasonable steps to obtain a proper price and in so doing acted otherwise than bona fide, that is, recklessly, not caring whether the price obtained was in the circumstances a proper price or not (see Mason J in Forsyth v Blundell at 506.3).
(h) (i) The word ‘recklessly’ cannot include mere negligence or carelessness in carrying out a mortgagee sale (per Isaacs J in Pendlebury at 700.3).
(ii) A mortgagee’s rights under the power of sale are adverse to the mortgagor. He cannot, therefore, on any principle known to the law be liable for mere negligence, because that assumes a standard of care owed to another. The mortgagee is however confined by the expressed and implied limits of his power and by nothing else (per Isaacs J in Pendlebury at 700.7).
(i) (i) The Queensland statute under consideration in Nixon required a mortgagee to take reasonable precautions to ensure that the property was sold at market value. This ‘large duty’ required more than that the mortgagee in exercising his power of sale should act bona fide (see Mason J in Nixon at 502.9 – 503.1).
(ii) The statutory duty applicable in Queensland, which appears to reflect to some extent the language in Cuckmere Brick, is more onerous than the duty to act in good faith (see Brennan J in Nixon at 523.2 ([37] – [38] above)).
(j) (i) A mortgagee is not at liberty to look after his own interests alone and absolutely disregard the interests of the mortgagor (per Griffith CJ in Pendlebury at 680.9 – 681.1).
(ii) If a mortgagee confines his attention to his own interests, and sacrifices the mortgagor’s property by doing so, he certainly acts unfairly, that is, in bad faith (per Barton J in Pendlebury at 694.7).
(iii) A mortgagee will have breached his duty if his efforts to secure a fair price were so obviously perfunctory as to warrant the conclusion that he cared for nothing beyond the repayment of his own claim (per Barton J in Pendlebury at 695.7).
(iv) A mortgagee exercising power of sale will have breached his obligation to deal fairly with the mortgagor’s residual property if his real object is to get his own debt paid. On the other hand, he is not answerable for mere carelessness in realisation however anxious he may be to act fairly by the mortgagor (per Isaacs J in Pendlebury at 701.3).
(v) Where a property is sold by a mortgagee by private treaty pre-auction for significantly less than the price at which another party had expressed an interest in bidding at auction, there will have been a reckless disregard of the interests of the mortgagor by the mortgagee (see Walsh J in Forsyth v Blundell at 496.3).

(k) A mortgagee’s duty to act in good faith permits him to sell on terms which, as a shrewd property owner, he would be likely to refuse if the property were his own (per Menzies J in Forsyth v Blundell at 481.8).

(l) (i) A mortgagee selling under circumstances which show a reckless disregard of the interests of the mortgagor is responsible to the same extent and on the same principles as an accounting party who is liable for wilful default (per Griffith CJ in Pendlebury at 692.8).
(ii) If a mortgagee fails to act in good faith, the mortgagor is entitled to be placed in the position in which he would have been had the mortgagee treated him fairly by observing the implied condition of good faith in exercising the power of sale (per Isaacs J in Pendlebury at 703.2).
(m) (i) Very low prices are often obtained at mortgagee sales in spite of all efforts to secure real value. The mortgagee is entitled to force a sale even when the market is not favourable (per Barton J in Pendlebury at 695.4).
(ii) A mortgagee exercising power of sale who has acted in good faith cannot be called to account however disastrous to the mortgagor the outcome may be (per Isaacs J in Pendlebury at 701.1).

(n) A mortgagee is not obliged to tell the mortgagor of the intended sale (per Barton J in Pendlebury at 695.9 cf per Jacobs J in Bangadilly at 202.8).
(o) A mortgagee may be entitled to treat with scepticism any representations made to it by its mortgagor in circumstances where his borrowing record had not been good (per Menzies J in Forsyth v Blundell at 482.2).
(p) The mortgagee is not bound to wait for his money, merely because the mortgagor might profit by delay (per Isaacs J in Pendlebury at 701.5).

(q) (i) As ex-hypothesi a mortgagee exercising power of sale is engaged in a lawful endeavour to get back money which is overdue, he cannot be expected to further increase advances to the mortgagor by expending further sums for the mortgagor’s possible benefit in the shape of a higher surplus price. A prudent owner might well risk considerable outlay in order to secure a possibly enhanced return. But the mortgagee is not called upon to do this, without express stipulation to that effect. He would get no advantage from the outlay beyond the amount of his debt, and he might end up increasing that. But if a further outlay is in the circumstances reasonable, and apparently necessary and prudent to conserve the mortgagor’s interests, and to prevent the mortgagor’s residual property being sacrificed, and if, having regard to what a cautious man would consider the total selling value of the property, it is manifestly safe, the mortgagee is not justified in refusing to make or incur it merely because he can get enough for himself without it. Such an outlay must, however, be safe. If it is not, the mortgagee would be taking risks for the benefit of the mortgagor which he is not called upon to do. If it is safe, the mortgagee is merely using part of the mortgagor’s own property to preserve the rest. Neglect in such circumstances to make a further outlay would be manifestly improvident and would afford cogent evidence upon which a tribunal would be at liberty to think, and probably would think, the neglect to be reckless or wilful. (per Isaacs J in Pendlebury at 701.5-702.1).
(ii) While a mortgagee exercising power of sale is entitled to have regard primarily to his own interests, he is not entitled, if those interests are not at risk, to act in a manner which sacrifices the interests of the mortgagor (per Walsh J in Forsyth v Blundell at 493.9 – 494.1).

87 The following guidelines may be gleaned from Pendlebury as to conduct which would be consistent with a proper application of the relevant principles as elucidated above:

(a) If a mortgagee sells by private treaty he is bound to take reasonable means to ascertain the value before selling, and the same rule applies to a sale by auction (per Griffith CJ in Pendlebury at 683.8).
(b) If the mortgagee selects a presumably competent agent, the mortgagee cannot be made liable for errors in judgment or in matters of detail not seriously affecting the success of the sale or the price realised (see Griffith CJ in Pendlebury at 684.1).
(c) Some advertisement is necessary. Notice of sale ought, so far as the circumstances will admit, to be of such a nature both as to particulars given and as to the places in which and the modes by which it is given, as to be likely to bring the subject of the sale to the notice of probable purchasers and so to induce such competition as will be likely to secure a fair price (per Griffith CJ in Pendlebury at 683.7).
(d) If the mortgagee materially misdescribes the property being offered for sale so that the price realised is reduced, the mortgagee is responsible to the mortgagor for the loss (per Griffith CJ in Pendlebury at 683.9).
(e) A material omission, i.e. an omission of a statement which is plainly and obviously necessary in order that the readers or hearers of the notice of sale may know what the thing is that they are invited to buy, will amount to a material misdescription just as would a material misstatement (per Griffith CJ in Pendlebury at 684.3).
(f) If a mortgagee is aware of qualities which recommend a property for purchase, such qualities should be the subject of notice to potential buyers (per Barton J in Pendlebury at 697.8).
(g) If a mortgagee is aware that values have risen in the area of the subject land since the making of the loan, such information cannot be ignored (per Barton J in Pendlebury at 698.2).
(h) Unfairness amounting to lack of good faith may be evidenced by a failure on the part of an auctioneer to bring salient advantages to the attention of those attending the mortgagee sale (per Barton J in Pendlebury at 698.9).

88 Plainly what is required of a mortgagee exercising power of sale, acting in good faith so that the interests of the mortgagor are not wilfully or recklessly sacrificed, will depend on the facts and circumstances prevailing at the relevant time and in the lead up to the sale in the individual case. What may be thought to have been appropriate in 1910 will not necessarily be the same in 2010.

89 In the instant case the test which the primary judge considered appropriate, absent any statutory qualification or amplification, was set out by his Honour at [50] as follows:

‘In exercising its power of sale the respondent was under a duty to act in good faith, and not to fraudulently, or wilfully or recklessly sacrifice the mortgage property. The taking of reasonable precautions to obtain a proper price is part of the duty to act in good faith: Forsyth v Blundell [1973] HCA 20; (1973) 129 CLR 477.’

90 It may be that by including, without qualification, the second sentence in his test, the primary judge was suggesting that the obligation cast upon a mortgagee exercising a power of sale was more stringent than was properly the case.

His Honour’s statement of the test certainly accords with what fell from Kitto J in Latec (see [50(g)(iv)] above) although Kitto J chose to use the words ‘fair price’ rather than ‘proper price’.

By suggesting that the taking of reasonable precautions to obtain a proper price was part of the duty to act in good faith, his Honour appears to have accepted the dissenting view of Menzies J in Forsyth v Blundell. But, as Brennan J observed in Nixon (see [37] above) Menzies J qualified his statement of principle by declaring that a mortgagee’s duty to act in good faith would, nevertheless, permit him to sell on terms which, as a shrewd property owner, he would be likely to refuse if the property were his own (see [50(k)] above).

91 It cannot be doubted that, in the absence of a more onerous statutory duty, compliance with the test laid down by the primary judge would necessitate a finding that a mortgagee’s obligation to act in good faith and not to wilfully or recklessly sacrifice the interests of the mortgagor, had been satisfied.

92 The appellant does not take exception to the primary judge’s statement of the ‘common law position’. However, he submits that s 78 of the LT Act:

(a) adds a requirement that a mortgagee should ‘in all good conscience take into account the interests of the mortgagor when selling the property’;
(b) adds a requirement that a mortgagee exercising power of sale must achieve more than good faith requires – ‘the best price available’, ‘the best price in the circumstances’, ‘the best price by doing the best it could in the circumstances’ – by virtue of the reference in s 78(1)(b) to ‘the best price’.

93 It seems to me that s 78(1) of the LT Act does not enlarge the obligation of a mortgagee exercising a power of sale to act in good faith so that the interests of the mortgagor are not wilfully or recklessly sacrificed. The requirement that regard be had to ‘the interests of the mortgagor ... and other persons’ is simply a declaration of the case law as the Minister’s Second Reading Speech indicated (see [50(b)], [50(c)], [50(g)(ii)], [50(g)(iii)], [50(j)(i)], [50(j)(ii)], [50(j)(iii)], [50(j)(iv)] and [50(q)(ii)] above).

94 The section was not intended to detract from the right of a mortgagee to use his power of sale to realise enough to satisfy his claim, if the mortgaged property would produce it, and return whatever balance may remain to the mortgagor. The wide latitude conferred on a mortgagee as to the manner in which he exercises his power of sale remains. In this regard, it may be observed that the power of sale conferred by s 78(1)(a) is to ‘sell ... in such manner and subject to such terms and conditions as he thinks fit’ (emphasis added). No requirement is imposed on a mortgagee to consult or liaise with the mortgagor in effecting a sale.

95 The appellant’s reliance on the expression ‘the best price’ in s 78(1)(b) is misconceived. Section 78(1)(a) is not qualified by the use of words such as PROVIDED HOWEVER that the price obtained shall be ‘the best price available’, ‘the best price in the circumstances’, ‘the best price by doing the best it could in the circumstances’ or any like expression.

96 Section 78(1)(b) is an enabling provision directed at empowering, but not requiring, a mortgagee to be adventurous in the exercise of his power of sale. If he could see that advantage would be had by (say) effecting a subdivision of the mortgaged land with the dedication of part of it to the provision of public gardens and recreation space or (say) the imposition of restrictive covenants limiting the size of buildings that may be constructed on the subdivided lots, regulating the materials that may be used or the colours that may be employed etc, then he would be at liberty to take such action.

97 The section is entirely consistent with the case law as reflected in [50(q)(i) and (ii)] above. What it does is to allow a mortgagee to do more to change the character of the mortgaged property, which he is selling under his power of sale, than he could have done absent the statutory provision. If the mortgagee chooses to exercise the power conferred on him by s 78(1)(b) and s 78(2), he must have an anticipation that it will produce the best price reasonably available. It does not allow him to treat the mortgaged property simply as something of a play thing.

98 In seeking to explain the operation of the statutory provisions in relation to a mortgagee’s sale, in the context of a caveat removal application, Slicer J said in Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd [2000] TASSC 185 at [17]:

‘... A properly executed mortgage (s72) permits, upon default, power of sale (s78) provided certain procedures have been followed (s77), that it is done in good faith and that the sale is "at the best price" (s78(1)(b)). ...’

99 With great respect to his Honour, s 78(1)(b) does not impose an obligation on a mortgagee exercising the statutory power of sale to ensure that the sale is ‘at the best price’. Such a conclusion is inconsistent with both the words of the section and also the legislative intention as revealed in the Minister’s Second Reading Speech.

100 Contrary to the appellant’s submission in this case, s 78 of the LT Act does not require more of a mortgagee exercising a power of sale than is required of such a mortgagee at law.

101 In the appellant’s Notice of Appeal (As Amended) filed 6 December 2006 reliance was placed on 17 separate grounds of appeal. On the hearing of the appeal, counsel for the appellant said:

‘... your Honours, the submissions that are the appellant’s submissions plus the submissions in reply ... - I can’t elaborate much more on them.’

102 The submissions in reply, which were signed by the appellant personally, commence with the statement:

‘(a) The Appellant has not abandoned any of the grounds of appeal;’

This poses something of a difficulty for the Court as the grounds of appeal have not been addressed seriatim in the appellant’s various submissions.

103 It is perhaps convenient to firstly address the appellant’s challenges to some of the more significant findings made by the primary judge (see [35(c), (d), (e) and (f)] above). Such findings were plainly open to the primary judge.

104 In ground of appeal 5 the appellant contended that the primary judge erred in fact and in law in finding that the respondent made it apparent and that the appellant understood that any payment the appellant might make or offer to make to the respondent after 12 March 2003 would only reduce or pay off the mortgage debt but would not, or could not, result in a complete discharge or transfer of the mortgage. This ground would seem to be directed at challenging the finding made by the primary judge which is set out at [35(c)] above. His Honour rejected the appellant’s evidence that in conversations with Mr Kitto on and after 1 April 2003 Mr Kitto made it apparent that the respondent would accept a lesser payment than the full amount of the mortgage debt in discharge of the mortgagor’s obligations under the mortgage.

105 It needs to be borne in mind that the primary judge did not consider the appellant to be a satisfactory witness. He rejected, as he was entitled to do, the appellant’s assertions in respect of his conversations with Mr Kitto on and after 1 April 2003. Once the respondent executed the contract for sale of the Land to Mr Patmore or his nominee for $75,000 on 12 March 2003, Mr Patmore had an equitable interest in the land. It was beyond the power of the respondent to then give a discharge of mortgage to the appellant such that title to the Land would vest in the appellant free from encumbrances. The most that the appellant could effectively secure by paying the full amount of the mortgage debt at that time were the rights of the mortgagee under the contract dated 12 March 2003 with the corresponding obligations with respect to its completion. The primary judge did not err in making the finding which he did.

106 In grounds of appeal 3, 4, 8 and 15 the appellant challenged, indirectly, the findings made by the primary judge and referred to at [35(d) and (e)] above. Any knowledge that the respondent may have had concerning the November 2002 agreement or its terms was irrelevant. That agreement was concerned with the sale of a lot that did not exist and which formed part of the Land. It purported to provide for the transfer of a greater interest in the lot than the appellant could convey. The respondent had no obligation to deal with the Land in a piecemeal fashion that may have suited the interests of the defaulting mortgagor.

107 The mortgage did not secure the payment of a non-recourse loan to the appellant. The fact that the sale of the land to Mr Patmore or his nominee for $75,000 left the appellant with an exposure of roughly $40,000 to the respondent was an irrelevant consideration. The case was not one where the mortgagee sold the mortgaged property for enough to cover its own debt and was disinterested in securing a higher price in the interests of the mortgagor. The sale of the land for only $75,000 was, no doubt, the source of considerable disappointment for the respondent also.

108 Grounds of appeal 8 and 15 challenge the propriety of the respondent’s exercise of its power of sale. No valid basis for that challenge has been advanced. The relevant legal principle enunciated above was satisfied by reference to the facts of this case. There was no suggestion, and could be no valid suggestion on the facts of this case, that any of the Pendlebury guidelines referred to in [51(a)-(h)] above had not been satisfied.

109 It is true that, following the unsuccessful auction of the land on 21 December 2001 and the prolonged attempts on the part of the respondent to sell the land by private treaty through two agents, whose competency has not been put in question, without a single offer being elicited, no further valuation of the land was obtained by the respondent prior to its entry into the 12 March 2003 contract with Mr Patmore. However, it could not seriously be suggested that by proceeding to sell the property for $75,000 the respondent acted otherwise than in good faith, wilfully or recklessly sacrificing the interests of the mortgagor.

110 An after-the-event valuation obtained by the respondent from Saunders & Pitt as at 16 April 2003 in the sum of $75,000, an incomplete copy of which has been included in the appeal books, no doubt provided some comfort to the respondent as to the propriety of its sale of the mortgaged property to Mr Patmore or his nominee in the previous month. However, it was not incumbent upon the respondent to obtain such a valuation.

111 The primary judge was content to find, as he was entitled to do, that the sale was for a reasonable price and in fact at or about the market value at the time.

112 In ground of appeal 16 the appellant challenged the finding made by the primary judge which is referred to at [35(f)] above. In relation to Mr Timms’ valuation of the land as at 27 November 2000, which the primary judge rejected, in the sum of $175,000, his Honour observed that it had been valued by Mr Timms on the basis that ‘a six lot Council approved development would be completed by Mr Upton himself’.

113 His Honour proceeded to state at [52]:

‘52. It is not quite clear what is meant by this last-mentioned basis. If it means that a hypothetical purchaser was to buy on the basis that Mr Upton himself, and nobody else, would carry out works at some unspecified price, it is quite unreal.’

114 What is significant is Mr Timms’ comparison of the ‘comparable valuations’ which he carried out on 31 July 2006 and included as annexure ‘C’ to his affidavit sworn 4 August 2006. In Mr Timms’ analysis he contrasted, amongst other things, Saunders & Pitt’s ‘Hypothetical Development’ valuation of $39,308 (see [14] above) with his own November 2000 valuation of $175,000 (see [7] above). Each hypothetical development valuation proceeded on the premise that there would be six subdivided lots available for sale from the Land. It will be recalled that Saunders & Pitt considered such a possibility, assessing a total value for the subdivided lots at $207,000 with individual lot prices varying from $29,000 to $50,000 (see [15] above).

115 Mr Timms’ November 2000 valuation had proceeded on the basis that there would be six subdivided lots available for sale. He suggested that the value of the several blocks would add up to $279,000, the individual blocks bringing amounts varying from $42,000 to $58,000. One can see that the higher estimates placed upon the value of the individual blocks accounted for $72,000 of the difference between Saunders & Pitt’s valuation of $39,308 and Mr Timms’ valuation of $175,000.

116 Another significant difference between the two valuations lies in the different allowances for development costs.

In his November 2000 ‘VALUATION RATIONALE’ Mr Timms made an allowance for development costs in the sum of $25,000 as follows:

‘Less – development costs
Road Construction
Water Connection
Survey Costs
Fees and Supervision $ 25,000’

117 By way of contrast Saunders & Pitt’s October 2001 valuation proceeded on the basis that there should be an allowance of $69,000 for development costs and an additional $8,580 for survey costs, a total of $77,850. The difference of $52,850 between Mr Timms’ allowance for development costs and Saunders & Pitt’s allowance further explains the difference between Saunders & Pitt’s valuation of the Land on a ‘Hypothetical Development’ basis of $39,308 and Mr Timms’ November 2000 valuation on a hypothetical development basis of $175,000. No doubt Mr Timms’ assessment that the six lot subdivision could be achieved for development costs of only $25,000 was the reason for him indicating in his affidavit that his valuation had always been ‘on the basis that a 6 lot Council approved development would be completed by Upton himself’.

118 It is clear that the determination of a value for the Land predicated upon an unrealistic allowance for development costs, it being assumed that the necessary works would be carried out by the appellant without any significant costs being charged to the project, could not be supported. The inability of two agents to secure an offer for the Land when it was on the market for sale by private treaty at a list price of $80,000 for well over 12 months demonstrates that Mr Timms’ assessment of value for the Land in subdivision at $279,000 was unrealistic. The primary judge’s rejection of Mr Timms’ valuation evidence should not be disturbed.

119 No proper basis has been advanced by the appellant for setting aside any of the findings made by the primary judge referred to at [35] above.

120 Further findings made by the primary judge have been challenged by the appellant in his submissions in reply. The relevant findings are found at [61] and [62] of the primary judge’s reasons. These paragraphs were as follows:

‘61 The respondent was not required to have any regard to the earlier sale of Lot 2 to Mr Patmore. Mr Upton could not complete that contract without the respondent’s consent, which he never sought.

62 In any event, as is submitted by the respondent, even if the respondent had told Mr Upton of its intent to enter into the contract in March 2003, there is no evidence that, practically speaking, Mr Upton could have done anything to alter matters. One can reasonably infer from events up to date that he was not able to get together the funds to pay out the judgment and mortgage debt in full, which was his legal obligation. So learning of the proposed sale to Mr Patmore would have made no difference.’

121 In the appellant’s submissions in reply it was said before the provision of a Shakespearean interlude:

‘His Honour held that the respondent was not required to have ANY REGARD to the earlier sale of Lot 2 to Mr Patmore. The Appellant contends that this is the key to his case.’

122 The submission continued, after the Shakespearean interlude, as follows:

‘Once His Honour made that decision, all the cards fell into place in favour of the Respondent. The Appellant hotly disputes para 61 of the Judgment and says His Honour should have found the Respondent WAS required to have regard to the earlier Patmore sale and therefore to the disastrous consequences to the Appellant of selling the whole subdivision to him.

His Honour’s finding in para 62 is also quite incorrect. The Appellant tendered the whole amount owing, and it was rejected, a short time after the 12th March 2003.’

123 The respondent was not required to have any regard to the November 2002 agreement between the appellant as vendor and Mr Patmore and Miss Smith as purchasers of Lot 2 in the ‘Sale Plan’ referred to at [23] above.

124 Once the contract for sale was executed on 12 March 2003 the die was cast. It was no longer open to the appellant to tender monies to secure a discharge of the mortgage.

125 Apart from the above matters of importance, a number of miscellaneous issues need to be addressed. Firstly, the appellant has advanced a series of submissions concerning the operation and effect of s 78 of the LT Act, in respect of which reference should be made to paragraphs [56]-[64] above. It may be noted that the primary judge dealt with the LT Act in one sentence at [59] of his reasons for judgment where he said:

‘59 Counsel accepted that effectively this substantially overlapped with the common law duty, and at least in the present case there is no further relevant circumstance.’

126 The transcript of proceedings before the primary judge on 11 August 2006 included the following exchange between the primary judge and counsel for the appellant as follows:

His Honour: ‘... Well, that breach of section 20 to section 82 of the Lands Titles Act (sic), does that really add anything to the case?’

Appellant’s counsel: ‘We would say, your Honour, that there is a distinct over-lap and similarity between not only the Tasmanian version of section 82B (sic) but the other states have similar provisions, yes.’

His Honour: ‘But is that anything separately to the breach of mortgagee’s duty?’

Appellant’s counsel: ‘No.’

His Honour: ‘... Well, I don’t think we need to consider it do we?’

...

His Honour: ‘I don’t think we need to consider it. I mean if you win on the breach of duty that is good; if you don’t, then you don’t.’

Appellant’s counsel: ‘Yes. Certainly, your Honour.’

127 Before the Court as presently constituted counsel for the appellant submitted that the concession which he had made may have been misunderstood by the primary judge. He contended that he was not conceding that there was no difference between the statutory duty on a mortgagee exercising a power of sale under s 78 of the LT Act and the common law duty.

128 On the hearing of the appeal counsel for the appellant was permitted to argue that s 78 of the LT Act cast a wider obligation on the respondent than the general law. However, for the reasons indicated above it is apparent that the statutory obligation does not require more of a mortgage than the ‘common law duty’ to which counsel for the appellant referred.

129 Some reliance has been placed by the appellant upon an alleged contravention of s 81(2)(a)(iii) of the LT Act. Whilst paragraph (iii) of s 81(2)(a) uses the expression ‘the power of sale was otherwise improperly or irregularly exercised’ it is used in the context of a statement that the title of a purchaser [from a mortgagee exercising a power of sale under s 78] is not impeachable on such a ground. That paragraph is then followed by s 81(2)(b) which provides:

‘81(2)(b) a person who suffers any loss or damage by reason of the registration of the memorandum of transfer is entitled to recover damages, by action in a court of competent jurisdiction, from the person who exercised the power of sale; ...’

130 Section 81 of the LT Act is concerned with the indefeasibility of title conferred upon a transferee from a mortgagee exercising power of sale by virtue of registration of the relevant Memorandum of Transfer. There is no independent conferral on a mortgagor of a right to recover damages from a mortgagee exercising power of sale unless it be established that the power of sale was exercised otherwise than in accordance with s 78 of the LT Act. No such default has been established in this case.

131 Whilst the Amended Application filed 22 March 2006 referred to alleged breaches of s 52, 51AA and 51AC of the Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’), the only Trade Practices Act matter of substance which was advanced on the hearing of the appeal was expressed by counsel for the appellant as follows:

‘... the interests of the mortgagor were disregarded in a misleading and deceptive way by specifically not telling the mortgagor that the mortgagee was selling the land to someone that the mortgagor was also selling the land to, or part of it.’

132 The relevant grounds of appeal relied upon by the appellant were grounds 1 and 13(a) which were expressed as follows:

‘1. His Honour erred in fact and in law in finding that the Respondent did not engage in unconscionable and misleading conduct under the Trade Practices Act Section 51AA and 51AC in all the circumstances of its entry into a contract for the sale of the mortgaged land (6.82 ha) to Messrs Patmore and Smith on or about dated 12^th March 2003, and thereafter until 6 August 2004 when that contract was finally completed by transfer.

...

13(a) His Honour erred in fact and in law in holding that the Respondent had not acted in such a way as to mislead and deceive the Appellant regarding the sale of the mortgaged property.’

133 Section 51AA of the Trade Practices Act provided:

‘51AA(1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.

(2) This section does not apply to conduct that is prohibited by section 51AB or 51AC.’

134 Section 51AC was concerned with unconscionable conduct in business transactions. Without expressing its terms in full, it is sufficient to note for present purposes that it provided:

‘51AC(1) A corporation must not, in trade or commerce, in connection with:

(a) the supply or possible supply of ... services to a person ...; ...

engage in conduct that is, in all the circumstances, unconscionable.’

135 Given the definition of ‘services’ in the Trade Practices Act, I have some difficulty with the proposition that s 51AC could have any application in the circumstances of the present case.

136 Section 52 of the Trade Practices Act relevantly provided:

‘52(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead to deceive.’

137 I do not consider that the respondent’s failure to tell that appellant that it was proposing to sell the Land to Mr Patmore or his nominee could be described as conduct that was unconscionable within the meaning of the unwritten law or as misleading or deceptive or likely to mislead or deceive. The appellant, having defaulted in meeting his obligations under the mortgage, had no right to be involved in or consulted by the respondent in the exercise by it of its power of sale under s 78(1) of the LT Act. This does not mean that the respondent was entitled to disregard any information concerning potential purchasers for the Land that the appellant may have provided to it, but there is no suggestion that it did so in this case.

138 As indicated above, once the contract for sale of the Land was entered into on 12 March 2003, the die was cast and the respondent was obliged to proceed to complete the sale to Mr Patmore or his nominee, in the absence of any injunction restraining it from so doing.

139 None of the grounds of appeal in the Notice of Appeal (As Amended) have been made out by the appellant. Accordingly, the appeal should be dismissed.

140 There is, however, one further matter which needs to be addressed, namely the basis upon which the primary judge ordered that costs should be paid and the basis upon which costs in respect of this appeal should be paid.

141 In relation to costs the primary judge said:

‘67 Mr Sealy on behalf of the respondent sought an order for costs on an indemnity basis. He referred to a number of authorities, including Fountain Meat Sales Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 where Woodward J said that such an order was appropriate where an action has been commenced or continued in circumstances where the party, properly advised, should have known that he had no chance of success. It is not necessary to show that the claim was brought for some collateral purpose or is an abuse of process.

68 In my opinion this was a hopeless case, and should have been recognised as such from the outset. Given the initial auction and the time the property was on the market, there was no arguable basis for contending that the sale to Mr Patmore was improper. On that premise, the respondent could not have been expected to act other than in the way it did. At the heart of Mr Upton’s case is, I suspect, a belief that notwithstanding he was a mortgagor in default he had some kind of right of first refusal before the mortgagee could sell. This is a misconception. There should be an award of indemnity costs.’

142 The relevant principles to be observed in respect of costs are conveniently summarised in the judgment of Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 230 – 234.

143 The ordinary rule is that, where the Court orders that the costs of one party to litigation be paid by another party, the order is for payment of those costs on the party and party basis. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs of some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court departing from the usual course. The existence of particular facts and circumstances capable of warranting the making of an order for payment of costs on the indemnity basis does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always at the discretion of the trial judge. Provided that the discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case, its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.

144 It was plainly open to the primary judge in the present case to describe it as a ‘hopeless’ one, even if there may have been some misunderstanding in respect of the concession made by counsel for the appellant in relation to the need to separately consider the operation of s 78 of the LT Act.

145 In Gersten v Minister for Immigration & Multicultural Affairs [2001] FCA 260 at [19] a Full Court consisting of Lee, Carr and Sackville JJ said:

‘If an action is commenced when proper advice would indicate that the proceeding has no prospect of success, a discretion to award indemnity costs is ordinarily enlivened. ...’

146 In the circumstances of the present case the discretion to order that the appellant, then the applicant, pay the costs of the respondent on an indemnity basis, including reserved costs was clearly enlivened. In my opinion no manifest error or injustice is apparent in the manner in which the discretion was exercised by the primary judge.

147 The proceeding having had no prospect of success, it follows that a like order for costs should be made in respect of the dismissal of the appeal as was made in respect of the dismissal of the application. No matter has been raised on the hearing of the appeal to suggest that the decision of the primary judge was attended with any doubt.

148 In my opinion the appeal should be dismissed with costs which should be paid on an indemnity basis.

I certify that the preceding one hundred and twelve (112) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham.

Associate:

Dated: 24 April 2007

Counsel for the Appellant:	R Skiller
Counsel for the Respondent:	L Sealy and M Chambers
Solicitor for the Respondent:	Shields Heritage
Date of Hearing:	26 February 2007
Date of Judgment:	27 April 2007