Commonwealth Bank of Australia v Muirhead

[1996] QCA 241

IN THE COURT OF APPEAL	[1996] QCA 241
SUPREME COURT OF QUEENSLAND

Appeal No. 120 of 1995

Brisbane

Before Macrossan CJ

McPherson JA

Davies JA

[Muirhead v. Commonwealth Bank of Australia]

BETWEEN:

GEORGE ARTHUR ROBERT MUIRHEAD and
STEPHANIE SUSAN MUIRHEAD

(Defendants)

Appellants

AND:

COMMONWEALTH BANK OF AUSTRALIA

(Plaintiff)

Respondent

REASONS FOR JUDGMENT - THE CHIEF JUSTICE

Judgment delivered 19/07/1996

I have had the advantage of reading the reasons of McPherson J.A. in which the issues

arising in this appeal are fully recounted. Reserving for some brief separate attention the matter of

alleged breach of duty under s.85(1) of the Property Law Act 1974, I can state my full agreement

with what is otherwise stated in the reasons of McPherson J.A. and on those matters do not feel the

need to add anything. The application below was for summary judgment. Questions of law were

argued that the primary judge might have regarded as establishing justification for leave to defend but

he did not adopt that approach and, stating his reasons, gave judgment for the plaintiff. Those points

having now been fully argued before us on the appeal, the proper course is to express our view
upon them with the consequences that will have for the situation of the original defendants.

As indicated, I wish to add something to the reasons expressed by McPherson J.A. in

respect of the mortgagee's statutory duty under s.85, but in doing this I am able to say that I am in

general agreement on this point also with his reasons.

It is possible to determine the issues presently arising in respect of the alleged statutory duty

by making factual assumptions in accordance with the appellants' contentions. That is, for present

purposes, it can be assumed that there has been a failure to take reasonable care to ensure that the

property has been sold at its market value.

I regard Commercial and General Acceptance Ltd v. Nixon (1981) 152 C.L.R. 491 as

providing an interpretation of s.85(1) bearing upon the mortgagee's obligation when he exercises a

power of sale by himself directly or acting through his agent. Before the enactment of the statute,

cases dealing with this topic had been in disagreement. In Nixon's case, Gibbs C.J. at 494

conveniently states what had previously been the disputed question namely whether "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.". It can be seen that the concern of the Court in Nixon

with this question resulted from the way in which the duty is expressed in s.85. Subsection 1 is

concerned with "the duty of a mortgagee, in the exercise ... of a power of sale". This wording

should, in my view, lead to the conclusion that the statute is intended to apply to the case where the

mortgagee himself sells or does so through his agent but does not deal with the different case where

the sale is effected by an agent of the mortgagor. Furthermore, if the result of the contractual

arrangement between the parties is that any sale made by a receiver is a sale by the mortgagor's

agent, then this is not to be regarded as a stipulation having the effect, within the meaning of subs.(5),

of relieving a mortgagee from the duty imposed by statute under the section. The only duty imposed

by the section is one which applies in the case where the power of sale is exercised by the

mortgagee or the mortgagee's agent. When the receiver in the present case came to effect the

sale, he did so as the agent of the mortgagor because the parties agreed that that was the character in which he should act. In these circumstances the claimed right to pursue a remedy in damages

against the mortgagee under the statute is not available.

I agree that the appeal should be dismissed with costs. I also agree in the further orders

proposed by McPherson JA.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 120 of 1995

Brisbane

Before Macrossan C.J. McPherson J.A. Davies J.A.

[Muirhead v. CBA]

BETWEEN:

GEORGE ARTHUR ROBERT MUIRHEAD

and STEPHANIE SUSAN MUIRHEAD

(Defendants) Appellants

AND:

COMMONWEALTH BANK OF AUSTRALIA

(ACN 123 123 124)

(Plaintiff) Respondent

REASONS FOR JUDGMENT - DAVIES J.A.

Judgment delivered the 19th day of July 1996

I have had the advantage of reading the reasons for judgment of McPherson J.A. and of the

Chief Justice. I agree that this appeal must be dismissed. Except with respect to the appellants'

argument that the respondent was in breach of duty to them under s.85 of the Property Law Act

1974 giving rise to an action for damages I am prepared to adopt the reasons for judgment of McPherson J.A. On that question I would prefer to state my own reasons for agreeing with his

conclusion that that section has no application to this case. In doing so I am prepared to assume,

like the Chief Justice, that there was a failure to take reasonable care to ensure that the property was

sold at the market value.

Section 85 is relevantly as follows:

" (1) 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.

...

(3) The title of the purchaser is not impeachable on the ground that the

mortgagee has committed a breach of any duty imposed by this section, but a
person damnified by the breach of duty has a remedy in damages against the
mortgagee exercising the power of sale.

...

(5) An agreement or stipulation is void to the extent that it purports to

relieve, or might have the effect of relieving, a mortgagee from the duty imposed by
this section.

... "

The purpose of sub-s.(1) was to resolve a controversy as to the extent of the duty of a

mortgagee exercising power of sale[1] and it has been construed as resolving that controversy.[2]

[1]           Queensland Law Reform Commission Report No. 16 pp.67-8.

[2]          Commercial and General Acceptance Ltd. v. Nixon (1981) 152 C.L.R. 491.

Although sub-s.(1) does not say in terms that the exercise of the power of sale to which it refers

must be an exercise of that power by the mortgagee, sub-s.(3), makes it clear that that was

intended.

The sale said to give rise to a breach of s.85(1) here was a sale by a receiver appointed by

the mortgagee (the respondent) pursuant to powers contained in the relevant mortgages. These

permitted the mortgagee, upon default by the mortgagor, to appoint a receiver of the mortgaged

premises with power, amongst others, to sell them and stated that any such receiver would be the

agent of the mortgagor and that the mortgagor alone should be responsible for his acts and defaults.[3]
The relevant questions here are whether the sale by the receiver was nevertheless a sale by

[3]           Clause E(4).

the mortgagee; and whether the provision making the receiver solely the mortgagor's agent was one

purporting to relieve or which might have the effect of relieving the mortgagee from the duty imposed

by sub-s.(1). The second of these questions does not, in my view, require a separate answer

because it presupposes a duty imposed by sub-s.(1) which, as I have said, arises only upon a sale

by the mortgagee.

If cl.E of each of the mortgages had the effect, as it purported to, of making the receiver, in

selling the property, solely the agent of the mortgagor then the sale could not have been one by the

mortgagee. That it should be given its intended effect has been accepted in Australia.[4]

[4]          Visbord v. Federal Commissioner of Taxation (1943) 68 C.L.R. 354 applying the

For those reasons I agree that this case does not come within s.85 of the Property Law Act.

judgment of Rigby L.J. in Gaskill v. Gosling [1896] 1 Q.B. 669 at 691-3.