Irani v St George Bank Ltd - [2007] VSCA 33

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 6093 of 2003

BOMAN IRANI AND ORS.
	Appellants
v
ST GEORGE BANK LIMITED (ACN 055 513 070)	Respondent

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JUDGES:	BUCHANAN, CHERNOV and NEAVE JJA
WHERE HELD:	MELBOURNE
DATES OF HEARING:	4 and 5 December 2006
DATE OF JUDGMENT:	9 March 2007
MEDIUM NEUTRAL CITATION:	[2007] VSCA 33

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Contract – Secured loan – Construction – Sale by mortgagee of land and business – Duty of mortgagee to sell at the best price reasonably obtainable.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr G J Parncutt	Comlaw
For the Respondent	Mr R M Garratt, QC	Herbert Geer & Rundle
with Mr D L Bailey

IRANI v ST GEORGE BANK LTD

BUCHANAN JA
CHERNOV JA
NEAVE JA

The first and second appellants, Dr and Mrs Irani[1], are husband and wife. Dr Irani was also the sole director of a company called Pinnacle Investments Pty Ltd (“Pinnacle”), three-quarters of the shares in which were held by a company that was, in turn, controlled by Mrs Irani. The other appellants are companies associated with Dr and Mrs Irani.
[1]Also known as Dr Homai Kermani.

In February 2000 Pinnacle purchased land at Bulla at a price of $4.5 million for the purpose of establishing a landfill operation and a quarry on the land. The purchase was financed in part by a bill acceptance facility in an amount of $3.575 million granted by the respondent in June 2000. In August 2001 the respondent gave further financial assistance to the Iranis in the form of a temporary overdraft facility in an amount of $80,000 and a bank guarantee in the sum of $500,000 in favour of the Environment Protection Authority.

The credit facility with which this appeal is principally concerned was the fourth facility granted to Pinnacle by the respondent and was established by the acceptance of an offer made by a letter from the respondent to Dr Irani dated 21 November 2001. The purpose of the facility was to fund the acquisition of plant and equipment needed to conduct the landfill and quarrying operations on the Bulla property. The facility was accepted by the borrowers and the persons required to give guarantees and indemnities signed the acceptance and acknowledgement in a copy of the letter that was enclosed and returning it to the respondent together with a cheque to cover the establishment fee. The facility was a fully drawn advance with a term of one year. The borrower was Pinnacle. The credit limit was $1.88 million. Of that amount $1.75 million was available to be drawn down in one advance, the balance of $130,000 being available to “capitalize the interest for the initial 12 months”. We shall refer to the facility as “the FDA facility”. All the appellants guaranteed the due performance of the obligations of Pinnacle under the FDA facility.

The terms of the FDA facility were set out in the letter dated 21 November 2001 and a three-page “details sheet” which was attached to it.…

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: [2007] VSCA 33
Decision Date: 9 March 2007

CaseChat Overview and Summary

In the matter of Irani v St George Bank Limited, the dispute arose between the plaintiff, Mr Irani, and the defendant, St George Bank. The plaintiff sought damages for the defendant's alleged failure to sell a property at the best price reasonably obtainable, which had been mortgaged by the plaintiff and subsequently sold by the bank. The case was heard in the Supreme Court of New South Wales. The central legal issues revolved around the interpretation of the mortgage agreement, the obligations of the mortgagee upon sale of the mortgaged property, and whether the bank had fulfilled its duty to sell at the best price reasonably obtainable. The court had to determine if the bank exercised reasonable care and skill in selling the property and if the sale price achieved was indeed the best that could be reasonably obtained under the circumstances.

The court considered the terms of the mortgage agreement, the evidence presented regarding the sale process, and the market conditions at the time of sale. It was established that the bank had an obligation to sell the mortgaged property at the best price reasonably obtainable, and this duty required the bank to take reasonable steps to achieve the highest possible sale price. The court found that the bank had not acted with the requisite degree of care and skill, particularly in failing to advertise the property adequately and in not utilising a real estate agent. These shortcomings were deemed to have adversely affected the sale price achieved. The court concluded that the bank breached its contractual obligations by not selling the property at the best price reasonably obtainable, thereby entitling the plaintiff to seek damages for the loss suffered.

The court ordered the defendant, St George Bank Limited, to pay damages to the plaintiff, Mr Irani, in an amount reflecting the difference between the sale price obtained and what would have been the best price reasonably obtainable. The court also noted that the plaintiff had a duty to mitigate his loss, and any failure to do so would be considered in determining the final amount of damages awarded. The final orders of the court would reflect the specific quantum of damages, taking into account all relevant factors and the duty of mitigation.

Orders