Commonwealth Bank of Australia v Hadfield - [2004] NSWCA 350

No judgment structure available for this case.

CITATION: COMMONWEALTH BANK OF AUSTRALIA v HADFIELD [2004] NSWCA 350 revised - 30/05/2005

HEARING DATE(S): 20-24/09/2004

JUDGMENT DATE:
22 April 2005

JUDGMENT OF: Giles JA at 1; Tobias JA at 2; Bryson JA at 6;

DECISION: Appeal allowed with costs: directions to settle mortgage accounts in accordance with decision on appeal.

CATCHWORDS: MORTGAGES - sale under power - remedies of mortgagor - mortgagor sued Bank in District Court to settle mortgage accounts and charge Bank with liabilities for alleged sale at undervalue and conversion of goods left on premises - District Court settled accounts charging Bank with liabilities as claimed - on appeal, held that in substance District Court had applied negligence test not good faith test - Bank had not converted goods left on premises by mortgagor and still there on completion of Bank's sale - on complex facts, consideration of Bank's supposed obligation to carry out mortgagor's subdivision project before sale, interaction of interests of mortgagor with Bank's pursuit of its own interest as mortgagee - large charges against Bank set aside and Court of Appeal to settle mortgage accounts without them.

LEGISLATION CITED: Conveyancing Act 1919
Real Property Act 1900
Environmental Planning and Assessment Act 1979
Trade Practices Act 1974

CASES CITED: ANZ Banking Group Ltd v. Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195
Bourke v. Beneficial Finance Corporation Ltd [1991] ANZ ConvR 473
Commonwealth Bank of Australia v. Hadfield (2001) 53 NSWLR 614
Hallifax Property Corp. Pty Ltd v. GIFC Limited (1987) 4 BPR 9708
Hawkesbury Valley Developments P/L v. Custom Credit Corporation Ltd (1995) NSW ConvR 55-731
Jiwira Pty Ltd v. Primary Industry Bank of Australia Ltd [2000] NSWSC 1094
Lacey v. Bank of New Zealand (NSWCA unreported 5 December 1997)
Pendlebury v. Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676
Silven Properties Ltd and another v. Royal Bank of Scotland plc and others [2004] 1 WLR 997

PARTIES :
Commonwealth Bank of Australia - Appellant
Dennis Ronald Hadfield - Respondent

FILE NUMBER(S): CA 40557/03

COUNSEL: R.G. Forster SC and A. Henskens - Appellant
D.J. Higgs SC and F. Assaf - Respondent

SOLICITORS: J.K. O'Sullivan (A)
Jackson Smith (R)

LOWER COURTJURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 1244 of 2000

LOWER COURT
JUDICIAL OFFICER : Balla J

40557/03

GILES JA
TOBIAS JA
BRYSON JA
FRIDAY 22 APRIL 2005

COMMONWEALTH BANK OF AUSTRALIA v. HADFIELD

Judgment

1 GILES JA: The reasons of Bryson JA demonstrate that the trial judge was in error in holding that the Bank was in breach of its duty as mortgagee exercising its power of sale, and in further holding that it was liable for breach of duty as bailee of, or for conversion of, the deep litter. It is not necessary to consider whether her Honour was in error in her assessments of the amount to be charged against the Bank and damages, both of which were fairly open to challenge. I agree with the orders proposed by his Honour.

2 TOBIAS JA: I have had the benefit of reading in draft the reasons for judgment of Bryson JA. I agree with the orders proposed by his Honour and generally with his reasons. However, I would wish to add the following observations with respect to the trial judge's finding that the Bank had acted in bad faith when exercising its power of sale under the mortgage.

3 Bryson JA articulates the primary plank of the trial judge's decision on the bad faith issue in [108] of his reasons. As his Honour points out in other parts of those reasons, the Bank sold the property in its unsubdivided state as one lot but expressly with the benefit of the council's development consent to its subdivision into two lots. Accordingly, and as observed by Bryson JA in [137], its value to a purchaser would have been increased by its approved potential for subdivision into two lots which would have been reflected in its market price (including the price paid for it by Angreb Pty Limited).

4 In these circumstances, the finding of the trial judge that the Bank had breached its duty to act in good faith by wilfully, recklessly or otherwise sacrificing the interests of Mr Hadfield by failing to itself take the necessary steps to register the two lot plan of subdivision and then selling the lots separately, cannot possibly be sustained in the circumstances of Mr Hatfield's tortured and frustrating relationship with the Bank as exposed by Bryson JA in, for example, [109] to [111] of his reasons.

5 Accordingly, the conclusion reached by Bryson JA on this issue in [139] to [140] of his reasons was inevitable.

6 BRYSON JA: The appellant (the Bank) appeals from the judgment and orders of her Honour Judge Balla given in the District Court at Sydney. The learned Trial Judge published reasons for judgment on 20 December 2002 and further reasons dealing with accounts, set-off and costs on 27 June 2003. The orders of 27 June 2003 settled an account of the moneys due on the dealings between the parties under a mortgage over Mr Hadfield’s rural property in the Yarramalong Valley. Judgment was entered for Mr Hadfield for $732,729.37 being the balance found due to him with interest. Her Honour also made orders relating to costs, some of which were to be assessed on the solicitor and client basis.

7 In settling the mortgage account the learned Trial Judge charged against the Bank $495,000 which her Honour determined was the true value of the mortgaged land at the time the Bank sold it. Her Honour also charged the Bank with damages of $271,000 for conversion of chattels being a quantity of worms in a bed of material referred to as a worm farm ($200,000) and vermicompost ($71,000); with interest. Her Honour credited the Bank with credits totalling $392,217.87. The principal credit item was the actual sale price of $295,000. Other credits were $37,717.87 as Item 6, the conceded deficiency on sale meaning the unpaid balance on Mr Hadfield’s accounts with the Bank, and $60,000.00 as Item 8, the sum which the Bank paid to the plaintiff’s ex-wife Mrs Gostelow, in circumstances relating to her claim under a Family Law settlement and her caveat, which she withdrew on settlement of the Bank’s sale on 31 March 1994.

8 Her Honour noted (Red 94-95) that counsel for Mr Hadfield submitted that there were two formulations of the duty of a mortgagee exercising his power of sale: a duty of good faith and a duty to take reasonable care to obtain the true market value of the mortgaged property. The Trial Judge decided to apply the good faith test and said: (Red 95B)

This duty clearly falls short of the duty in negligence where the defendant would be obliged to take reasonable care in selling the plaintiff’s assets.

9 The good faith test is the orthodox legal doctrine; see Commonwealth Bank of Australia v. Hadfield (2001) 53 NSWLR 614 per Beazley JA at 621 [40]. (That report relates to an interlocutory appeal in this litigation). The Trial Judge referred to authorities establishing the good faith test, principally to Pendlebury v. Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 and also to Lacey v. Bank of New Zealand (NSWCA unreported 5 December 1997), Hallifax Property Corp. Pty Ltd v. GIFC Limited (1987) 4 BPR 9708, ANZ Banking Group Ltd v. Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195 at 201, Bourke v. Beneficial Finance Corporation Ltd [1991] ANZ ConvR 473.

10 A sale in good faith would fall within the following formulations in judgments in the High Court of Australia, collected in Lacey v. Bank of New Zealand by Handley JA:

There is a clear line of Australian authority on the duty of a mortgagee in exercising a power of sale. In Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676, the High Court held that the duty was to act in good faith and the mortgagee must not act wilfully or recklessly sacrifice the interests of the mortgagor. See per Griffith CJ at 680, per Barton J at 695, and per Isaacs J at 701-2.

"It is true that bona fides in this connection is not concerned with the motive for exercising the power of sale but, once a decision to sell has been made it is concerned with a genuine primary desire to obtain for the mortgaged property the best price consistently with the right of a mortgagee to realise his security”. Ibid at 201.

"To take reasonable precautions to obtain a proper price is but a part of the duty to act in good faith. This duty to act in good faith falls far short of the Golden Rule and permits a mortgagee to sell a mortgaged property on terms which, as a shrewd property owner, he would be likely to refuse if the property were his own”.

”... there is no obligation upon a mortgagee to exercise a power of sale if it does not wish to do so ...

11 In Hawkesbury Valley Developments P/L v. Custom Credit Corporation Ltd (1995) NSW ConvR 55-731 at 55,650 McLelland CJ in Eq said:-

What matters is the underlying equitable principle, which in the modern idiom usually finds expression in terms of unconscionability. The mortgagee is not answerable for what Isaacs J in Pendlebury describes (at 700) as “mere negligence or carelessness in carrying out the sale”. Any departure from reasonable standards must be so serious as to be properly characterised as unconscionable, in order to render the mortgagee accountable. If a failure by a mortgagee to take reasonable steps to obtain a proper price is sufficiently serious to be characterised as unconscionable as that expression is understood in equity, then in the taking of accounts between the mortgagee and the mortgagor, the mortgagee will be accountable on the basis of wilful default for the price which would have been obtained if the mortgagee had not been guilty of unconscionable conduct.

12 Compare Silven Properties Ltd and another v. Royal Bank of Scotland plc and others [2004] 1 WLR 997 at 1004G-1005B (English Court of Appeal):

[16] The mortgagee is entitled to sell the mortgaged property as it is. He is under no obligation to improve it or increase its value. There is no obligation to take any such pre-marketing steps to increase the value of the property as is suggested by the claimants…

[17]

13 In Pendlebury v. Colonial Mutual Life Assurance Society Ltd at 701-702 Isaacs J made observations which bear on the position of the mortgagee with respect to outlaying money on the security property.

The mortgagee, when the permitted time arrives, is not bound to wait for his money, merely because the mortgagor might profit by delay. And as ex hypothesi he is engaged in a lawful endeavour to get back money which is overdue, he cannot be expected to further increase the advances of the mortgagor by expending further sums for his sole 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 in increasing that.

But if a further outlay is in the circumstances reasonable, and apparently necessary and prudent to conserve the mortgagor's interest, and to prevent his 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, in my opinion, not justified in refusing to make or incur it merely because he can get enough for himself without it. It 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, he is merely using part of the mortgagor's own property to preserve the rest. Neglect in such circumstances 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 reckless or wilful.

14 Exercise of the power of sale is undertaken by a mortgagee in the interest of the mortgagee, although the mortgagee is confined to exercise of the power in good faith for the purpose for which it was conferred; the mortgagee cannot act for any extraneous purpose or bye-motive, and cannot sacrifice the interest of the mortgagor; to do so would be to depart from good-faith exercise of the power, and from the concept of a sale in the exercise of the power. The sale must bona fide be a sale, not a sacrifice, and the mortgagee cannot be indifferent to the price provided only that its debt is paid. In the pursuit of its own interest the mortgagee is entitled to choose the time at which it sells the property.

Title and areas.

15 The mortgage related to a rural property known as RMB 1134 Yarramalong Road, Wyong Creek. Title particulars in the mortgage show that the land was acquired by Mr Hadfield by Conveyance dated 23 March 1978 registered Book 3317 No. 860. Mr Hadfield mortgaged his land to the Bank by Mortgage dated 30 June 1986 registered Book 3673 No.592. The terms of the mortgage show that Mr Hadfield was the sole mortgagor and proprietor and the mortgage was entered into to secure indebtedness of Mr Hadfield and his then wife Kerry-Anne Hadfield to the Bank. The land title was then under the general law or Old System and the mortgage conveyed the legal estate to the Bank, so Mr Hadfield was the owner of an equitable estate in the land. Power of sale was conferred on the mortgagee by the Conveyancing Act 1919 s.109. The land was brought under the Real Property Act 1900 with Qualified Title on 26 September 1986. Deposited Plan 736396, registered on 22 September 1986, was prepared for the purpose of identification when bringing the land under the Real Property Act 1900 with qualified title. DP 736396 does not purport to be a plan of survey and the boundaries shown on the Plan were not investigated by the Registrar General. The area shown on DP 736396 was 14.54 hectares.

16 Mr Hadfield caused the Plan of Subdivision which became DP788851 to be prepared by Everitt & Everitt Pty Ltd, Surveyors of Wyong. This was registered as a Deposited Plan on 15 May 1989 and divided the land into two lots. Lot 1 was shown to have an area of 4.88 hectares, which was certified to be accurate by Mr Surveyor I.G. Everitt, but the area of Lot 2 was shown (extending abbreviations) as “9.66 hectares excluding road by deduction” meaning that the area was not established by survey, but merely by deduction from earlier survey plans. Mr Hadfield sold and transferred Lot 1 to Mr Christopher J.A. Gainey for $189,000 by Transfer Y449557 dated 14 June 1989 and registered on 28 June 1989; he remained the registered proprietor of Lot 2. Lot 2 had frontage to Wyong Creek on the north-west, and was intersected by Yarramalong Road. The northern part with the creek boundary was ultimately established by survey and registration of Deposited Plan 872263 (in which it was Lot 22) to contain 4.796 hectares and the southern part (Lot 21) was ultimately established to contain 8.106 hectares. The homestead and farm sheds stood on the southern block and there were no buildings on the northern block.

17 Notifications in the Second Schedule of the Certificate of Title included reservations and conditions in the Crown Grant and an exception of the road, and also:

3. Qualified Title. Caution pursuant to s.28J of the Real Property Act, 1900. Entered 26.9.1986

4. Limited Title. Limitation pursuant to s.28T(4) of the Real Property Act, 1900. The boundaries of the land comprised herein have not been investigated by the Registrar General.

5. BK 3673 No. 592 Mortgage to Commonwealth Bank of Australia.

6. E 893841. Writ by National Australia Bank Limited.

7. E 973969. Caveat by Kerry-Anne Gostlow.

8. I 60498. Caveat by Garry William Chapman & Graham Sidney Herbert.

18 The Caution had the effect of warning persons dealing with the registered proprietor that the land was held subject to any subsisting interest, whether recorded in the qualified folio or not: see subs.28J(1). The effect of the Notification relating to limited title is shown by its terms: the description of the land comprised in the qualified folio had not been investigated by the Registrar General: see subs.28T(4). The notifications relating to the Writ and the two caveats were already on the register at the time of a search dated 7 October 1993.

19 On 21 February 1994, shortly before the Bank’s auction was conducted, Mr Hadfield lodged Caveat U 046951 forbidding the recording of any dealing affecting his estate or interest and stating “Nature of the estate or interest in the land: REGISTERED PROPRIETOR TO PREVENT FRAUD” (BLUE 4/884).

20 The Bank agreed to sell the land to Angreb Pty Ltd for $285,000 on 26 February 1994 after conducting an auction; and completed the sale on 31 March 1994 by Transfer U166483, on the registration of which Mr Hadfield and the Bank ceased to have any interest in the land.

21 Mr Hadfield’s subdivision in 1989 by DP788851 cannot have taken place without the Bank’s consenting to the subdivision plan and releasing the land sold from its mortgage. Mr Hadfield had a further proposal for subdivision in which Lot 2 DP 788851 which he still owned was to be subdivided into two lots divided by the road. He obtained development consent for this subdivision from Wyong Shire Council on 23 December 1992. It had taken Mr Hadfield over a year to get this approval. He had a Plan of Subdivision prepared by a surveyor in Wyong, Mr Paul D. Hutcheon, of Everitt & Everitt Pty Ltd; this plan was completed and Mr Hutcheon signed the Surveyor’s Certificate on 16 November 1993. Exhibit C, tendered by Mr Hadfield is this plan, or a copy of it. Endorsement on that plan of Council Clerk’s Certificate of the Council’s consent was necessary for the plan to be registered and should have been readily available, but Mr Hadfield did not obtain it. Mr Hadfield did not obtain the consent of the Bank as registered mortgagee, which was also necessary for registration, and he did not lodge the plan for registration. The circumstances in which this plan was not lodged for registration while Mr Hadfield remained the registered proprietor are important in this litigation.

22 The plan which Mr Hutcheon certified on 16 November 1993 was eventually lodged for registration in October 1997 with a Council Clerk’s certificate dated 10 October 1996, and was registered DP872263 on 30 October 1997. However it was not lodged by Mr Hadfield or by the Bank, neither of which any longer had a registered interest in the land; it was lodged by Angreb Pty Ltd, the transferee from the Bank. The Deposited Plan as registered appears to be identical with Exhibit C, except that it has additional signatures, Council Clerk’s certificate and notes relating to registration.

23 A Section 88B Instrument was lodged and registered with DP872263; this instrument was executed by Angreb Pty Ltd and related to creation of an easement to pump water over the new Lot 22 (which had frontage to Wyong Creek) in favour of Lot 21. The Development Approval did not require the easement for water supply. The first references to the easement for the water supply are provision for it in an Advance Copy enclosed with Mr Hutcheon’s letter of 12 November 1993 and in the Plan of Subdivision of 16 November 1993. The creation of an easement required a s.88B Instrument to be executed by the registered proprietor and lodged with the plan when lodged for registration. There is no reference in evidence to preparation of a Section 88B Instrument by or on behalf of Mr Hadfield. Its preparation would have caused no great difficulty, but it required professional attention, by a surveyor or by a solicitor.

24 I set out a table in which areas in acres and in hectares are converted at the rate of one hectare equals 2.47 acres. All relevant Deposited Plans show areas in hectares, but witnesses almost always refer to acreages.

1 ha = 2.47 ac

Lot 1 DP736396 – land held at time of Mortgage and Qualified Folio.
14.54 ha = 35.9138 ac

Lot 1 DP788851 – land sold to Mr Gainey in 1989.
4.88 ha by survey = 12.05 ac

Lot 2 DP788851 – land retained by Mr Hadfield and sold by Bank
9.66 ha by deduction = 23.8 ac

Lot 21 – southern lot in Ex. C referred to as Linen Plan and in DP872263
8.106 ha by survey = 20.02 ac.

Lot 22 – northern lot
4.796 ha by survey = 11.84 ac.

Total area of Lot 2 DP788851 as established by DP872263
12.902 ha = 31.86 ac.

Area of land as stated by Mr Hadfield to Bank Officer Mr Smith on 5 October 1993 (i.e. House block approximately 15 ac. and a vacant block of approximately 12 ac.)
10.93 ha = 27 ac.

Events and communications.

25 The substance of the Bank’s written records relating to communications with Mr Hadfield, the Bank’s decision to sell the property and the sale appear in a series of Bank records and letters from 29 August 1991 to 25 February 1994. Her Honour dealt with what these show (Red 62-63) and also set out the effect of the evidence of Mr Hadfield relating to these communications, (Red 73–76). Her Honour found (Red 88W-89C) to the effect that she accepted the history of the dealings set out in the Bank records, but that these generally only summarised the events; but further her Honour accepted Mr Hadfield’s evidence as to oral conversations with Bank employees and preferred his evidence on one matter to a statement in a file note made by Mr Pearce, a Bank officer, relating to a conversation on 19 November 1993. I will set out a summary and not a complete narration of these communications.

26 In 1991 Mr Hadfield was indebted to the Bank on several accounts; he made his last payment on 1 May 1991 and thereafter was in default. Mr Hadfield made a re-financing arrangement with the National Australia Bank (NAB) in September 1991; NAB subsequently withdrew, and he continued to have a debt to NAB. National Australia Bank advanced him $10,000 on 27 September 1991. The National Australia Bank obtained judgment for $10,913.37 on 19 October 1992. Its writ of execution was registered on the title on 30 October 1992.

27 Findings by the Trial Judge establish that Mr Hadfield told the Bank on 29 August 1991 that the property would be subdivided into two lots and that Council approval in principle would be available within one month. The Bank advised him to proceed to voluntary sale. (Red 62 T – X). Mr Hadfield was told that a proposal for an increase in his loan had been rejected. The following day the Bank decided to issue letters of demand.

28 Family Law proceedings between Mr Hadfield and his former wife, now Mrs Gostelow were settled by Terms of Settlement and Orders on 17 October 1991 (Blue 1/59). Mr Hadfield was to pay Mrs Hadfield $60,000 within 28 days, with 18 percent interest if in default. Mrs Hadfield was to transfer the whole of her right, title and interest in the property to Mr Hadfield. If the money were not paid within six weeks the parties were to do whatever was necessary to effect a sale of the property and Mrs Hadfield was to receive $60,000 with interest from the net proceeds; Mr Hadfield was to receive the balance. The Terms of Settlement also dealt with disposition of personal property. Mr Hadfield did not ever make the payment.

29 Mrs Gostelow took some steps in the Family Court with the object of enforcing payment. The Bank obtained leave to intervene in the Family Law litigation. On 23 September 1992 the Family Court ordered, by consent of Mr Hadfield and Mrs Hadfield and the Bank in Terms of Settlement, to the effect that on payment of funds necessary to discharge liabilities under the mortgage the Bank was to deposit any funds left from the sale into a Commonwealth Bank account, withdrawals from which were to be under the control of Mr and Mrs Hadfield’s solicitors. An injunction which Mrs Hadfield had obtained against the Bank relating to dealings with the property was discharged. These Terms of Settlement did not expressly confer a charge or security interest on Mrs Hadfield. The claim that she had an equitable interest which Mrs Hadfield later made in a caveat had little substance because the Family Court orders did not expressly confer an equitable interest on her, and her claim depended on a highly strained construction of the Family Court orders. She did not have priority over the Bank’s registered mortgage, and was not in a position to resist the Bank’s sale. In the circumstances there was unlikely to be any real difficulty in removing Mrs Hadfield’s caveat. She withdrew the caveat on settlement of the Bank’s sale on 31 March 1994, and later the Bank paid her $60,000, which the Trial Judge charged against Mr Hadfield and in favour of the Bank when settling the mortgage accounts. The payment of $60,000 was not made at the time of withdrawal of the caveat or at the time of settlement, but later, after she had made a complaint to the Banking Ombudsman. Evidence does not show what arrangements, if there were any arrangements, existed in connection with her withdrawal of her caveat.

30 The Bank took steps to exert its right to take possession of the property and sell it. On 2 February 1992 the Bank issued a Notice under s.111(2)(b) of the Conveyancing Act 1919 of its intended exercise of the power of sale. The notice was served soon after its date. When Mr Hadfield received the first notice he attempted to re-finance, but without success. He believed that he could reduce the debt if he sub-divided the property. Communications during 1992 included references by Mr Hadfield to his subdivision application. In several communications during 1992 bank officers told Mr Hadfield to the effect that the Bank was looking for a voluntary sale at a reasonable price, and that possession proceedings would be continued.

31 Notice under the Conveyancing Act 1919 was, or was thought by the Bank to be a necessary precondition to exercise of the power of sale. As the Certificate of Title showing qualified and limited title had been issued before then, a notice under the Conveyancing Act 1919 may not have been appropriate. Whether or not the Notice was effective, the Notice was a clear indication of the Bank’s intentions, and opened the period of exercise of the power of sale and of the Bank’s obligation to exercise that power in good faith. Sale by the Bank was clearly contemplated by the Terms of Settlement in the Family Court on 23 September 1992. The Trial Judge was of the view that the Bank was under a duty of good faith from September 1993 at the latest – (Red 99D). In my view the Bank came under that duty much earlier. At later times the Bank acted under provisions of the Real Property Act 1900 conferring on it a right to possession and a power of sale, and it was not disputed that this was appropriate. As both notices were given, it is not necessary to understand which of the two notices was effective; they both showed the Bank’s intentions.

32 The Bank commenced proceedings for recovery of debt and possession in the Common Law Division on 16 June 1992, and on 29 October 1992 Registrar Irwin gave judgment for possession, with leave to issue a Writ of Possession. Counsel instructed by Mr Hadfield opposed leave to issue a Writ of Possession and put forward Mr Hadfield’s intentions to obtain consent of Wyong Council to subdivision, to sell off a portion of the property to reduce the mortgage and to refinance the balance. Registrar Irwin decided to grant leave to issue the Writ after 1 January 1993. Mr Hadfield did not surrender possession, and he was ejected on 18 August 1993 by the Sheriff in execution of a Writ of Possession. After that the Bank issued a notice of its intended exercise of its power of sale under s.57(2)(b) of the Real Property Act 1900, which Mr Hadfield received on 26 October 1993; the amount shown in the notice was $190,577.48.

33 A memorandum of 31 July 1992 by Mr David Smith, the Bank’s Wyong Branch Manager records that Mr Hadfield proposed deferral of sale of the property for a further twelve months to enable him to rejuvenate his businesses; and that the subdivision application had been prepared and Council officers had indicated approval in principle. Internal bank records show that this was considered and that a further proposal would be considered, that the Bank was unlikely to provide further funds and regarded a satisfactory proposal as unlikely. The Bank officers considered the implications of a possible improvement in Mr Hadfield’s business and of his pending litigation in the Family Court. It was decided that recovery action was to continue.

34 On 23 December 1992 Wyong Shire Council gave Mr Hadfield development approval for a two-lot rural subdivision.

35 In January 1993 Mr Hadfield contacted Mr David Smith, Manager of the Wyong Branch of the Bank and told Mr Smith that he had development approval for the subdivision, that he had a financier to provide him with finance and he believed that he needed the Bank’s consent before the property could be subdivided; and Mr Smith told him it was too late as the Bank was to proceed with the power of sale. Mr Hadfield saw Mr Smith later on the same day at the Wyong Branch, gave him the original Council approval and was again told that the Bank would proceed with the power of sale.

36 Shortly afterwards Mr Hadfield spoke to someone at the Bank’s Head Office and said that the Wyong Manager was not letting him complete his subdivision. He was told that they would look into it and get back to him. It appears that the Trial Judge accepted Mr Hadfield’s denial of the Bank’s evidence about a response.

37 Mr Hadfield made attempts to sell part of his land, and later all of the land, in the course of 1993, although he had not then acted on the Development Approval or had a Plan of Subdivision prepared, and so did not have separate titles available with which to complete any sales. Mr Hadfield received Notice to Vacate from the Sheriff on 23 January 1993 and a second notice to vacate in March or April 1993. In March 1993 he listed the northern side of the property for sale with Mr Gainey of Rural Property Centre for $154,000. Mr Gainey, a Real Estate Agent, was the neighbour who had bought Lot 1 DP 788851 in 1989. A Bank memorandum of 12 March 1993 records a decision to allow Mr Hadfield to arrange sale of the subdivided land or refinance of his debt. This led to cancellation of some arrangements to take possession of the property. Mr Hadfield obtained an offer of $300,000 re-finance on 16 March 1993 from Moreland Finance, which did not proceed after a shortfall in valuation. Mr Hadfield spoke to David Smith in April 1993 and told him what he had done and asked for more time. Mr Smith told him that the Bank was not really interested and suggested that Mr Hadfield find other finance. (Red 74R–U)

38 A memorandum of 4 May 1993 records that Mr Hadfield communicated with a Bank officer and asked that the Bank allow him to sell part of the security property with the balance of a loan to be refinanced. He said that his divorce had been completed. He was asked to place a proposition to Mr Smith the Wyong Manager. Mr Smith recorded that he had just found out from Mr Hadfield that the subdivision had been approved by Council but not registered and that an auction was set down for Saturday 8 May 1993. In another conversation on 4 May Mr Hadfield told Mr Smith that he would have his solicitor forward relevant documents confirming full clearance arrangements.

39 An auction by Mr Gainey of the northern lot was scheduled for 8 May 1993. (The auction is sometimes spoken of as taking place in March.) Mr David Smith told Mr Hadfield a few days before the auction of 8 May 1993 that Mr Hadfield did not have the Bank’s permission to conduct the auction. However the Bank took no steps to prevent it, and a Bank officer attended at the auction and observed events. It was Mr Hadfield’s evidence that the property was passed in at $110,000. Mr Hadfield knew that he could not sell the northern lot without the sub-division being registered. A memorandum of 12 May 1993 records that Mr Hadfield stated that the property was passed in at auction with only one ‘outside’ bid at $80,000, that the bidder was keen but Mr Hadfield was looking for $125,000 and not $110,000. This memorandum was followed by a decision to proceed with the Writ of Possession.

40 A memorandum of 29 July 1993 records that Mr Hadfield had asked whether the Bank would accept part payment and move to a second mortgagee position with a residual debt between $50,000 and $70,000. This related to some re-financing proposal. His request was declined.

41 Mr Hadfield retained Mr Gainey again to sell the two lots on 22 July 1993; and gave him further retainers on 7 October 1993 and in November 1993. Mr Gainey continued endeavours to sell the land, and he prepared two Sales Advice Notices, one dated 7 October 1993 (Blue 2/275) for a proposed sale to Gregory Allen and Marilyn Norma Waller of the land to the south of Yarramalong Road (which later became Lot 22) and one dated 11 November 1993 for a sale to John Alexander Codrington of the northern lot which became Lot 21 for $97,500; this Sales Advice noted these conditions:

1. Subdivision must be registered [sic]

2. D.A. for turfing to be instated [sic] (Blue 2/274)

42 Two versions of the Waller Sales Advice Notice are in evidence, one exhibited by Mr Hadfield to his principal affidavit (Blue 192) and one sent to Messrs Abbott Tout by his solicitors (Blue 2/275). Both give the area as “approx 15 acres, (6.07 hectares)”; the one produced with the affidavit shows the contract price as $245,000, the one forwarded by his solicitors shows the contract price as $237,500 and this discrepancy was not explained. Mr Waller gave evidence that the price in the sale was to be $245,000, and that figure is shown on the copy of the Sales Advice Note which Mr Waller produced.

43 The Trial Judge found (Red 734-741, 74R-75O) as follows:

After receiving a second notice to vacate in March or April 1993, he said that he spoke again to David Smith in April 1993 and informed him that he was still trying to obtain finance, advised him of a valuation he had obtained of $400,000 and asked for more time. The plaintiff claims that Mr Smith advised him that the defendant was not really interested and he suggested that the plaintiff find other finance.

The plaintiff said that he had his next conversation with Mr Smith on 4 May 1993 when he told Mr Smith that he wanted to sell the northern portion. He was told that the Bank would not support the proposal. An auction for the north side was scheduled for 8 May 1993.

The plaintiff said that he knew that he could not sell the northern block without the subdivision being registered. A few days before the auction he said that he was told by Mr Smith that the defendant would not give him permission to auction the land and that at the auction the property was passed in at $110,000. He denied bidding at the auction.

On 3 June 1993 the plaintiff received a third Notice to Vacate and said that the defendant delayed enforcing the notice because of intervention from the Rural Protection Assistance Board.

On 10 August 1993 the plaintiff received a fourth notice to vacate the property. When the Sheriff arrived on 18 August 1993 he said he spoke to Mr. Hutchinson at the head office of the Bank who thought his plan to either sell the property as a going concern or in two lots sounded feasible. However, after Mr. Hutchinson spoke to Mr. Smith, who was present on the property, Mr. Smith told the Sheriff to proceed. The locks on the doors were then changed and the plaintiff was led off the property. He denied that he had been given an opportunity to telephone a financier as set out in one of the defendant’s memos dated 18 August 1993.

The plaintiff said that he then entered into an arrangement with Mr. Smith to be permitted to enter the property, supervised by a bank employee, to look after his livestock. This arrangement continued for one week after which the padlock was removed completely and he started letting himself into the property daily. He agreed that he had an opportunity to remove his personal property in this period. The plaintiff camped on Council property adjacent to the land and started winding up both the goat farming and turf business. He said that he continued to tend to his animals going on to the property every day up until the date of the auction.
Both businesses were closed by October 1993.

44 A bank diary note of 18 August 1993, the date of execution of the Writ of Possession records conversations with Mr Hadfield that day about a stay of action. Mr Hadfield asked for a stay so that he could arrange refinance and was told that when the Bank received a full pay-out the Bank would hand back possession. Bank officers decided to proceed to take possession of the house property but to allow Mr Hadfield to have access to the rural property to tend “the livestock (goats, geese etc)”. Mr Smith made a diary note of an arrangement to allow Mr Hadfield access for the purpose of caring for animals which were Mr Hadfield’s responsibility, and to allow Mr Hadfield to have access to the house the following day 19 August 1993 to remove furniture: in this arrangement the animals were to be removed within a week. Mr Hadfield disputed some details of the Bank’s evidence about communications on that day, but these details are not important.

45 On the following day 19 August 1993 some further arrangement was made for Mr Hadfield to continue to have access to remove small items, to milk goats and do other chores, and he was to remove all livestock by 31 August 1993. After execution of the writ of possession Mr Hadfield camped on Council property adjacent to the land and started winding up the goat farming and turf business. The goat farming business and the turf business were both closed by October 1993 (Red 75R). He continued to tend to animals and went on to the property every day up until the date of the auction on 26 February 1994 (Red 75 L-N).

46 An internal memorandum by the Bank’s Legal Department of 1 October 1993 shows that it was then known that there was a development approval for subdivision into two titles. An internal bank memorandum of 5 October 1993 (Blue 2/269) shows that the Bank then proposed to auction the property in one line, and a decision was made to proceed in this way although Mr Hadfield had stated that he had Council approval to subdivide the property into two lots, was having a linen plan drawn up by a surveyor and had a buyer for the house block for $245,000 and wanted to know if he should get contracts drawn up. Mr Hadfield probably referred to the prospective sale of the southern lot to Waller. (See Red 75 O-Q). The Trial Judge found (Red 76O-P) that Mr Smith replied “No, the Bank has taken the property in one line and will be selling it in one line.” The memorandum says:

He also claims he is arranging for registration of the linen plan for sub division of the property and will proceed again to auction for the lower portion of the property.

47 On this occasion Mr Hadfield told Mr Smith that the house block was approximately 15 acres and there was a vacant block of approximately 12 acres and “He is having the linen plan drawn up by a surveyor now.” Mr Smith reported: (Red 68D-K)

There are several detracting features to this scenario viz;

i) To allow this to happen subdivision would need to be finalised and costs met by CBA.

ii) For Hadfield to issue a contract CBA would have to cede possession.

iii) There would be an approximate residual debt of $5,000.00 and a separate sale for the other lot would have to be arranged.

In view of the above it is recommended that CBA continue with proposed auction of property “in one line”.

48 A memorandum of 6 October 1993 records that Mr Warwick Hadfield, Mr Hadfield’s brother, had complained about the Bank’s response to his proposed sale.

49 On 26 October 1993 Mr Hadfield received the s 57(2)(b) Notice (which again notified the intention of the Bank to sell the property). (Red 75R).

50 It was Mr Hadfield’s evidence that about late October 1993 (and he was not sure when) he rang Mr McQuiggan a Bank officer at the Sydney office of the Bank and in a conversation said:

Two prospective purchasers have approached me in relation to the property.

We’re not bloody real estate agents. We hold the property as one. We’ll sell it as one.

51 It was anomalous that this conversation was attributed to Mr McQuiggan who was not dealing with Mr Hadfield’s business with the Bank at that time, and in cross-examination Mr Hadfield acknowledged that he was uncertain about who it was he spoke to. The Trial Judge referred to this alleged conversation in her judgment (Red 76 Q-R) and it seems that she accepted that there was such a conversation (88Z-89B). The Trial Judge did not advert to other evidence in which Mr Hadfield accepted that it was not Mr McQuiggan to whom he spoke but someone else. Her Honour’s omitting to note that it was someone other than Mr McQuiggan to whom Mr Hadfield then spoke is not a significant error; what the unidentified bank officer told Mr Hadfield accorded with the decision that the Bank had then made.

52 The Bank’s known unwillingness to consent to subdivision or to separate sale of the southern lot (with the house) did not deflect Mr Hadfield from giving instructions to the surveyor to prepare a plan of subdivision. In late October 1993 Mr Hadfield instructed Everitt and Everitt Pty limited Surveyors to prepare a subdivision plan, and they then surveyed the property for subdivision. Mr Hadfield received an Advance Copy of the Plan of Subdivision on 12 November 1993 and the Advance Copy showed a greater area for the land than was shown in the earlier Deposited Plan (Red 75 R – T). The Advance Copy was stamped with a Disclaimer and accompanied by a letter from the Surveyors to the Registrar General commenting in detail on the plan. There is no evidence and there is no finding that Everitt & Everitt’s letter or the accompanying Advance Plan were in fact ever sent to the Land Titles Office. Nor is there any evidence about any response.

53 In Mr Hadfield’s affidavit (Blue 1/19 T – V) he said:

“Immediately after I got the survey I went to the Wyong branch of the Bank and spoke to David Harold Smith:

I said: “Here is an advance copy of the survey. It shows that there is extra acreage.”

He said: Okay, I’ll let head office know.”

54 There are no diary notes by Mr Smith or otherwise which confirm that the copy was delivered by Mr Hadfield to Mr Smith or that Mr Smith was told by Mr Hadfield that there was “extra acreage”. There is no record that a linen plan was delivered or shown to Mr Smith. Mr Smith died before Mr Hadfield issued proceedings and before there was any known controversy. The Bank came to have in its files an Advance Copy of the Plan of Survey and of Everitt and Everitt’s letter to the Registrar General commenting on it. The Trial Judge accepted Mr Hadfield’s evidence that he delivered a copy of the survey to Mr Smith immediately after receiving it; this finding must refer to the Advance Copy (Red 75 T-U). What Mr Hadfield says he told Mr Smith appears to fall within the Trial Judge’s acceptance of Mr Hadfield’s evidence as to oral conversations with Bank employees.

55 A letter from Aubrey Brown Partners, Solicitors of Wyong, on behalf of Mr Hadfield to Messrs Abbott Tout Russell Kennedy, solicitors on behalf of the Bank dated 12 November 1993 (Blue 2/273) referred to the Sales Advices and said: “Each sale is subject to a subdivision consent which, we are instructed, should be obtained shortly. Please advise as a matter of urgency whether or not your client will consent to the sales proceeding.” This letter is not a request for the Bank to consent to registration of a subdivision plan. It seems to have been written without the solicitors’ knowing that Council’s consent to subdivision had been given on 23 December 1992. The date of the letter is the date of the Advance Copy and of the surveyor’s letter to the Registrar General; the survey plan was not signed by the surveyor until later, 16 November.

56 Her Honour found, in relation to Aubrey Brown Partners’ letter of 12 November 1993 (Red 89N – O) “I am satisfied that the defendant became aware that the plaintiff’s solicitors were taking steps to obtain consents to the subdivision by [their letter] dated 12 November 1993.” This was a misunderstanding on the part of Mr Hadfield’s solicitors, and also of her Honour, as Council’s consent had been obtained on 23 December 1992; her Honour referred to this elsewhere.

57 On 15 November 1993 Abbott Tout by letter advised the Bank, referring to this correspondence: (Blue 2/272)

It is our experience that subdivision is a very lengthy and difficult process in these circumstances we recommend that the Bank refuses the Defendant’s suggestion.

58 Her Honour found (Red 89Q-S) of Messrs Abbott Tout’s letter of advice of 15 November 1993 (Blue 2/272): “It is likely that the solicitor writing the letter of advice was unaware that Council approval had been obtained as conceded by Mr McQuiggan.” This is indeed likely, but the misunderstanding was caused by Mr Hadfield’s solicitors’ not stating, and apparently not knowing, that there actually had been development approval the previous year.

59 The Trial Judge found (Red 89W – 90E):

For these reasons I am satisfied that the defendant had formed the view by mid 1993 that there was no point in assisting the plaintiff as set out for example in the memo dated 4 May 1993. On 5 October 1993 Mr Smith was told that the linen plan was being drawn up, but the defendant expressly decided to proceed with the sale in one line. That view was reinforced by the misleading letter received from the defendant’s solicitors. Mr McQuiggan after taking over the day to day management of the plaintiff’s loan file did not review the previous decision to proceed with the sale in one line despite the provision of the survey plan to the defendant shortly before he took over the file. I am satisfied that that this was an additional matter from which the defendant should have appreciated that the completion of the subdivision was merely a formality.

Some parts of this passage call for observations. When Mr Smith was told on 5 October 1993 that the linen plan was being drawn up Mr Hadfield had not yet given instructions to the surveyor; he did so late in October. The misleading letter from Messrs. Abbott Tout was misleading because it was based on what Aubrey Brown Partners had told Abbott Tout. The survey plan provided was marked “Advance Copy”, it was stamped with a disclaimer and was heavily qualified by the accompanying letter from which it appeared that completion of the subdivision might not be a formality. If this finding means or implies that delivery of the Advance Copy and the Everitt & Everitt letter of 12 November 1993 should have made the Bank change its decision to proceed to sale in one line, there was no reasonable basis for that conclusion.

60 On 18 November 1993 Mr Pearce of the Bank wrote to Messrs Abbott Tout and among other things stated: (Blue 2/276)

At this time the Bank has no intention of subdividing the subject land which is in one lot. The debtor applied for, and had approved, a development application which we believe is current. It is the Bank’s intention to sell the property with the approved DA current.

In the meantime, offers to purchase, whether in one or two lots, are not being considered as it is the Bank’s firm intention to proceed to public auction as soon as possible.

61 Mr Pearce made a note, on a file copy of his letter to Abbott Tout of a conversation with Mr Hadfield on 19 November 1993. Mr Pearce’s file note is as follows: (BLUE 2/247-248)

Dennis Hadfield rang - said he is nearly in a position to register the subdivision and asked whether we would agree to sale of one lot if that would pay the Bank out in full. I explained the Bank's position (again) and suggested he place all of the facts and information about progress with the subdivision with his solicitors together with details of the proposed sale. The Bank will listen to a feasible proposal provided it is done in the short term.

62 Mr Hadfield disputed some of the contents of this file note and the Trial Judge preferred his evidence to the file note; Mr Pearce did not give evidence. (See evidence at Blue 2/247-248). The Trial Judge found that the invitation to place facts and information about progress of the subdivision and details of the proposed sale was not made. Mr Hadfield’s evidence on this subject was hard to follow and not altogether consistent, but ultimately he accepted the contents of the file note, except for the part which the Trial Judge rejected. The conversation of 19 November 1983 with Mr Pearce was not an occasion when Mr Hadfield asked the Bank to consent to the subdivision or gave the Bank an opportunity to endorse its consent on a registrable linen plan. The remainder of Mr Pearce’s file note, omitting the passage which the Trial Judge rejected, does not record a refusal of consent to registration of a subdivision plan.

63 On 24 February 1994 solicitors representing Mr Hadfield sent the Bank a letter by FAX referring to the auction of the property which was to take place two days later on 26 February 1994 and calling on the Bank to put off the auction, failing which there would be an application to the Supreme Court for an injunction on Friday 25 February 1994. The letter referred to the development approval of subdivision and asserted that if the land were sold as separate lots it would net Mr Hadfield at least $40,000 more that if sold in one line. The letter also alleged that an extra 8 acres of land in the triangular lot (the northern lot) had not been disclosed to potential purchasers. The letter said “Our client is ready, willing and able to comply, at his cost, with all outstanding requirements of the Wyong Shire Council …”. This letter is as close an approach as was ever made to a call on Mr Hadfield’s part on the Bank to facilitate registration of the Plan of Subdivision, and it did not ask the Bank to assist him to meet the cost. The Bank refused to comply. On 25 February 1994 Mr Hadfield applied to the Common Law Division, by an application in the possession proceedings which the Bank had commenced in 1992, for an injunction to restrain the sale which was to take place on the following day; the Court (Colin Allen J) refused an injunction.

64 The auction proceeded on 26 February 1994. Accounts of events at the auction differ slightly; bids closed at $280,000 (or $285,000) and the property was passed in, but was sold later that day after negotiations. The purchaser was Angreb Pty Ltd and its principal was Mr Theo Onisforou, barrister. The Bank completed the sale by Transfer U166483 dated 31 March 1994 for consideration of $285,000.

Survey uncertainties.

65 If Mr Hadfield had undertaken the project of registering the plan of sub-division in a purposeful and well-considered way it is probable, as the Trial Judge found, that the plan would have been registered by about mid-January 1994. Registration by that time was no more than probable; there were significant uncertainties. One uncertainty related to areas and boundaries stated and indicated by the Advance Copy of the plan and commented on by Everitt and Everitt Pty Limited in their letter of 12 November 1993, (Red 95) a copy of which Mr Hadfield gave to Mr Smith. Everitt and Everitt’s letter (Blue 1/95) is addressed to “Land Titles Office Investigation Branch”, marked “Attention: Investigating Drafts Person” and headed “Report to Accompany Linen Plan.” From its terms the letter was intended to be lodged with the Land Titles Office for an advance ruling or when the linen plan itself was lodged for registration. So far as appears the letter never was delivered to the Land Titles Office. The letter noted that there was a substantial variation between the area stated in the survey and the area ascertained by deduction in Deposit Plan 78851, and set out four points to explain the variation.

i) The base plan (N97 1503) is 138 years old and it is apparent that the course of Wyong Creek has altered substantially over this period of time. There is no evidence to suggest that this movement had been other than "imperceptible" and "gradual."

ii) Surveys performed in this era often did not measure to the "true" bank as defined by s.235 (A) Crowns Lands Consolidation Act 1913.

iii) There has been no complete re-survey of Portion 9 until now.

66 The explanations which the surveyor gave potentially could have raised large difficulties for the registration of the Deposited Plan, which would involve adoption by the Land Titles Office of the plan’s indications of the creek boundary and areas, and acceptance of a creek boundary which had altered substantially since the survey for Parish Portion 9, which apparently took place about 1855, and could involve adverse effects on the neighbouring landowner whose land was also bounded by Wyong Creek. Descriptions and statements of areas and boundaries, particularly in Nineteenth Century surveys, by reference to banks or streams have been a recurring source of difficulties for measurement of area and establishment of boundaries. Whether any actual difficulties and delay in registration of the plan were encountered because of survey difficulties would depend upon the view taken by the Investigating Draftsperson and on other survey information available in the Land Titles Office, and possibly on the attitude of the neighbouring landowner. The terms of Everitt and Everitt’s letter show, on any reasonable view, that there was significant risk that some survey difficulty might cause delay in registration.

67 When what is in substance the same plan was registered DP 872263 on 30 October 1997 there was little delay in the process of registration, which appears to have taken about 17 days from lodgement at the Land Titles Office. No reason appears for the year’s interval between the Council Clerk’s certificate on 10 October 1996 and lodgement of the plan for registration in October 1997. Mr Hadfield’s Senior Counsel pointed to this experience as an indication that the apparent survey difficulties caused no difficulty or delay in obtaining registration of the plan. However the actual experience some three or four years later is an uncertain indication of what the outcome would have been, and no indication at all of what would have been reasonably foreseen, in November and December 1993 and January 1994. The Registrar General’s papers relating to registration in 1997 were subpoenaed but could not be produced as they had been destroyed. Registration of the plan did not take place on the application of any of the present parties, and it is not known whether the survey difficulties pointed out in Everitt and Everitt’s letter of 12 November 1993 were pointed out to the Registrar General in 1997, or whether the application was supported by some documents which facilitated acceptance of the areas and boundaries. Conceivably it might have been supported by other survey information, consents of neighbouring owners or otherwise. From the point of view of the Bank, if it had been called upon to consider the matter in November or December 1993 or January 1994, there should have appeared to be considerable risks of difficulty and delay in registering the plan because of survey difficulties.

Bases of findings on breach of mortgagee’s duty.

68 The Trial Judge in expressing conclusions adverse to the Bank said: (Red 96Q to S):

The plaintiff asserts that the defendant breached that duty of good faith by:

1. Failing to complete the subdivision of the property;

2. Undertaking inadequate and improper advertising.

69 The Judge’s contemplation that the project of registering the subdivision plan would have been carried out by Mr Hadfield is exemplified by her treatment of the likely course of events in registration (Red 97K-M) where the findings relate to what Mr Hadfield would have done, and it was found that he would have pursued the subdivision in a timely manner if he had obtained the consent of the Bank.

70 Her Honour found that the Bank: (98K-L)

… was, as at November 1993, well aware that it was likely that the property, if subdivided, would achieve a higher sale price.

173 The Trial Judge’s reasons do not express clearly the basis on which her Honour determined that the Bank incurred liability as a bailee. In my opinion there is upon the facts no reasonable basis for so determining. There is no basis on which it could be concluded that the Bank damaged the deep litter and the worms, by negligence or in any other way, and no basis on which it could be concluded that the Bank prevented Mr Hadfield from taking them away. There was no basis for the finding that the Bank “… was voluntarily and knowingly in possession of the worm farm owned by the plaintiff.” A low standard of care is required of a Bailee in the circumstances in which the Bank stood, in which Mr Hadfield had left chattels on the land when he was ejected, and continued to leave chattels there during the following months when he had opportunities to remove them, and that there was no indication that it was valuable, or that Mr Hadfield thought it was. The Bank’s duty of care required it to do no more than it did, that is, to leave the deep litter alone, so that it was still in position where Mr Hadfield chose to leave it when the Bank parted with title to the land.

174 There is no doubt that the Bank was entitled to sell the land and part with title, and there is no room for a conclusion that a duty of care relating to the deep litter required the Bank not to sell the land, or having sold it not to comply with its obligation to give title to the purchaser. The Bank did nothing to assign the deep litter to the purchaser, or to deal with rights to possession or ownership of the deep litter in any way. The Bank simply left the deep litter where Mr Hadfield left it. If the purchaser had wished to assert title to the deep litter it could not point to any assignment or assurance from the Bank, or to any conduct of the Bank at all in support of such a claim. In my opinion there was no basis for a finding of breach of duty as a bailee, by negligence or in any other way. In my opinion there was no basis for the Trial Judge’s conclusion that the Bank was liable for the tort of Conversion. The Bank incurred no liability to Mr Hadfield and it was an error to award damages and to bring damages into the mortgage account.

Conclusion

175 In my opinion the Court of Appeal should allow the appeal, set aside the orders of the District Court and give directions for the mortgage accounts to be settled without the charges against the Bank which are erroneous. The Court of Appeal should attempt to settle the mortgage accounts: there should not now be any substantial matter in dispute; I know of none. It should be possible to establish the amount payable on taking the mortgage accounts in all respects except that costs of litigation can be left to enforcement under costs orders. If some contentious matter appears the Court of Appeal should take under consideration whether to decide that matter itself or to remit it to the District court. I propose that the Court of Appeal should make these orders and directions:

(1) Appeal allowed with costs: judgment and orders of the District Court set aside.

(2) Within 14 days the Appellant is to bring in its proposed Mortgage Accounts in accordance with the decision on appeal.

(3) Within 28 days the Respondent is to bring in his objections to the Appellant’s proposed Mortgage Accounts.

(4) Thereafter the Appellant is to obtain an appointment for directions before Bryson JA.

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Last Modified: 07/16/2007

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Citations

Commonwealth Bank of Australia v Hadfield [2004] NSWCA 350

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CITATION:	COMMONWEALTH BANK OF AUSTRALIA v HADFIELD [2004] NSWCA 350 revised - 30/05/2005
HEARING DATE(S):	20-24/09/2004
JUDGMENT DATE:	22 April 2005
JUDGMENT OF:	Giles JA at 1; Tobias JA at 2; Bryson JA at 6;
DECISION:	Appeal allowed with costs: directions to settle mortgage accounts in accordance with decision on appeal.
CATCHWORDS:	MORTGAGES - sale under power - remedies of mortgagor - mortgagor sued Bank in District Court to settle mortgage accounts and charge Bank with liabilities for alleged sale at undervalue and conversion of goods left on premises - District Court settled accounts charging Bank with liabilities as claimed - on appeal, held that in substance District Court had applied negligence test not good faith test - Bank had not converted goods left on premises by mortgagor and still there on completion of Bank's sale - on complex facts, consideration of Bank's supposed obligation to carry out mortgagor's subdivision project before sale, interaction of interests of mortgagor with Bank's pursuit of its own interest as mortgagee - large charges against Bank set aside and Court of Appeal to settle mortgage accounts without them.
LEGISLATION CITED:	Conveyancing Act 1919 Real Property Act 1900 Environmental Planning and Assessment Act 1979 Trade Practices Act 1974
CASES CITED:	ANZ Banking Group Ltd v. Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195 Bourke v. Beneficial Finance Corporation Ltd [1991] ANZ ConvR 473 Commonwealth Bank of Australia v. Hadfield (2001) 53 NSWLR 614 Hallifax Property Corp. Pty Ltd v. GIFC Limited (1987) 4 BPR 9708 Hawkesbury Valley Developments P/L v. Custom Credit Corporation Ltd (1995) NSW ConvR 55-731 Jiwira Pty Ltd v. Primary Industry Bank of Australia Ltd [2000] NSWSC 1094 Lacey v. Bank of New Zealand (NSWCA unreported 5 December 1997) Pendlebury v. Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 Silven Properties Ltd and another v. Royal Bank of Scotland plc and others [2004] 1 WLR 997
PARTIES :	Commonwealth Bank of Australia - Appellant Dennis Ronald Hadfield - Respondent
FILE NUMBER(S):	CA 40557/03
COUNSEL:	R.G. Forster SC and A. Henskens - Appellant D.J. Higgs SC and F. Assaf - Respondent
SOLICITORS:	J.K. O'Sullivan (A) Jackson Smith (R)

LOWER COURTJURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 1244 of 2000
LOWER COURT JUDICIAL OFFICER :	Balla J