Barwick v Latec Investments Ltd - [1966] HCA 54

HIGH COURT OF AUSTRALIA

McTiernan, Taylor, Menzies, Windeyer and Owen JJ.

BARWICK v. LATEC INVESTMENTS LTD.

(1966) 115 CLR 528

7 September 1966

Money-lenders (N.S.W.)

Money-lenders (N.S.W.)—Secured loans—Proceedings other than for enforcement of security prohibited—Repayment of loan guaranteed—Liability of guarantor—Money-lenders and Infants Loans Act, 1941-1961 (N.S.W.), s. 24 (1).* Money-lenders (N.S.W.)—Contracts of loan—Certain classes excluded from operation of legislation by amending Act—Only transactions entered into after amendment affected thereby—Money-lenders and Infants Loans Act, 1941-1961 (N.S.W.), s. 3B.**

Decisions

September 7.
The following written judgments were delivered: -
McTIERNAN J., TAYLOR J., MENZIES J. AND OWEN J. This is an appeal by leave from an order of the Supreme Court entering judgment in demurrer for the plaintiff company, the present respondent, in an action brought by it against the present appellant. The demurrer was to two pleas filed by the defendant and in the Supreme Court and on this appeal the arguments proceeded upon the basis that the facts were as follows, although all of them do not appear from the pleadings. (at p531)

2. The plaintiff was at all relevant times a registered money-lender. In May 1958 it lent to a company, Glen Shee Pty. Ltd., the sum of 10,000 pounds repayable with interest by instalments. To secure the repayment of the loan and interest thereon the plaintiff took from the borrower an equitable mortgage and a "mortgage of lease". In consideration of the making of the loan to Glen Shee Pty. Ltd. the defendant at the time of the making of the loan entered into a contract of guarantee with the plaintiff by which he promised to repay on demand the loan and interest thereon should Glen Shee Pty. Ltd. make default in repaying the same. At the same time he gave the plaintiff, by way of collateral security, a promissory note for 14,000 pounds payable on demand. Glen Shee Pty. Ltd. made default in repayment of the loan and the necessary demands were made upon the defendant. He failed to comply with them and this action was commenced after 7th December 1961, that being the date when Act No. 50 of 1961 (to which we will refer later) came into force, an Act which added, inter alia, s. 3B to the Money-lenders and Infants Loans Act, 1941-1948 (N.S.W.). (at p532)

3. The first matter for decision raises a question as to the construction of s. 24 of the Money-lenders and Infants Loans Act. That section is in Pt III of the Act and, so far as material, is as follows:
"24. (1) If any security is after the commencement of this Act made or taken to secure the payment of any money lent by a money-lender or any interest thereon, the money-lender shall not be entitled to institute any proceedings other than for the enforcement of the security, to recover any amount payable under the contract or payable pursuant to any guarantee for the repayment of the loan or any interest thereon.
(2) In this section 'security' includes…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1966] HCA 54
Decision Date: 7 September 1966

CaseChat Overview and Summary

The case of *Barwick v Latec Investments Ltd* involved a dispute between the appellant, Mr. Barwick, and the respondent, Latec Investments Ltd. Mr. Barwick sought to set aside a contract for the sale of land and a subsequent mortgage, alleging that the sale was fraudulent and that the mortgage was invalid. The matter was heard by the High Court of Australia.

The central legal issues before the High Court were whether the sale of the land by Latec Investments Ltd to a related company, Southern Cross Pty Ltd, was a fraudulent transaction, and consequently, whether the mortgage granted by Southern Cross Pty Ltd to MLC Nominees Pty Ltd was void. The court was required to consider the duties owed by a mortgagee exercising its power of sale and the implications of a sale conducted in circumstances that suggest a lack of good faith or a deliberate disregard for the mortgagor's interests.

The High Court ultimately found that the sale of the land was fraudulent. The court reasoned that the mortgagee, Latec Investments Ltd, had failed to exercise its power of sale in good faith. The sale was conducted at a gross undervalue to a related company, and there was evidence of a deliberate intention to prejudice the mortgagor, Mr. Barwick. The court applied the principle that a mortgagee exercising its power of sale must act in good faith and take reasonable steps to obtain a proper price, and that a sale conducted in breach of this duty may be set aside.

Consequently, the High Court ordered that the contract for the sale of the land and the subsequent mortgage be set aside.

Orders