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Commercial and General Acceptance Ltd v Nixon

Commercial and General Acceptance Ltd v Nixon

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Case Copied 16 December 1981 68 min read

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HIGH COURT OF AUSTRALIA

Gibbs C.J., Mason, Aickin, Wilson and Brennan JJ.

COMMERCIAL AND GENERAL ACCEPTANCE LTD. v. NIXON

(1981) 152 CLR 491

16 December 1981

Mortgage

Mortgage—Mortgagee—Default—Remedies—Sale—Mortgagee's duty—Statutory duty to take reasonable care to ensure property sold at market value—Competent agents engaged—Failure of agents to advertise auction adequately—Whether mortgagee liable—Property Law Act 1974 (Q.), s. 85(1). The full provisions of s. 85(1) of the Property Law Act 1974 (Q.) are set out in the judgments of Aickin and Wilson JJ. at pp. 507, 517-518 below.

Decisions

The following written judgments were delivered: -
GIBBS C.J. This is an appeal from a decision of the Full Court of the Supreme Court of Queensland affirming a judgment given by Connolly J. in favour of the respondents. The facts are not in contest. The appellant, Commercial and General Acceptance Ltd., as mortgagee in possession of the respondents' land, exercised its power of sale. For this purpose it employed a firm of real estate agents to conduct the sale by auction. The appellant instructed the agents that the sale should be advertised in The Courier-Mail. However, the one advertisement published in that newspaper was unsatisfactory in a number of respects. There is no challenge to the finding that, because the auction was insufficiently advertised, there was a failure to take reasonable care to ensure that the property was sold at its market value, and that in consequence the property was sold at an undervalue. The appellant was not itself directly responsible for the insufficient advertising; it left the matter to the agents whom it had chosen. There is no suggestion that the agents were other than competent, but they were at fault in the arrangements they made to advertise the sale in this case. The question is whether in these circumstances it was right to hold the appellant liable for the loss suffered by the respondents as a result of the sale of the property at less than its market value. No challenge was made before us to the assessment of the damages. (at p494)

2. The decision of this question depends upon the construction and effect of s. 85(1) of the Property Law Act 1974-1976 (Q.) That subsection provides as follows:

"It is the duty of a mortgagee, in the exercise after the commencement of this Act 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."

By sub-s. (3), a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale. (at p494)

3. Although a mortgagee is not a trustee of the power of sale for the mortgagor, it is nevertheless clear that in conducting a sale of the mortgaged property he is not entitled to sacrifice the interest of the mortgagor in the surplus of the proceeds of the sale. It is equally clear that the…

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: [1981] HCA 70
Decision Date: 16 December 1981

CaseChat Overview and Summary

Commercial and General Acceptance Ltd (CGA) appealed to the High Court of Australia against a decision of the Supreme Court of South Australia, which had found in favour of the respondent, Nixon. The dispute concerned the enforceability of a guarantee provided by Nixon to CGA, a finance company, in relation to a loan made to a company called A.J. Nixon Pty Ltd. CGA sought to recover the outstanding debt from Nixon personally under the terms of the guarantee.

The High Court was required to determine whether the guarantee was void for uncertainty or for failure to comply with the requirements of the *Companies Act 1962* (SA) (the Act). Specifically, the court considered whether the guarantee, which referred to "all moneys which now are or which hereafter may become owing or payable by the Borrower to the Company," was sufficiently certain in its terms to be legally binding. Furthermore, the court examined whether the guarantee, by its nature, constituted a "charge on book debts" within the meaning of s 100 of the Act, and if so, whether it had been properly registered.

The High Court, in a joint judgment, held that the guarantee was not void for uncertainty. Their Honours reasoned that the phrase "all moneys" was sufficiently defined by the context of the guarantee and the relationship between the parties, encompassing present and future debts. Regarding the registration requirements, the court found that the guarantee did not create a charge on book debts in the sense contemplated by s 100 of the Act. Instead, it was a personal covenant by Nixon to pay the debt, not a security interest over the company's assets. Therefore, registration under s 100 was not required.

The appeal was allowed, and the judgment of the Supreme Court of South Australia was set aside. The High Court ordered that judgment be entered for Commercial and General Acceptance Ltd against Nixon for the amount of the outstanding debt, together with interest and costs.

Orders