Jones, L.W. & Or v Westpac Banking Corporation

[1993] FCA 1034

JUDGMENT No. ........ ........ . 1 0 3 Y J ,.,. 9 3

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	) No. NG 591 of 1993
1
GENERAL DIVISION	1

BETWEEN:

LINDSAY WARWICK JONES and ORS.

A~olicants

m:

WESTPAC BANKING CORPORATION

Respondents

CORAM: SHEPPARD J.

: 9 DECEMBER 1993

REASONS FOR JUDGMENT

in Rocklea, a Brisbane suburb. The property is largely vacant land that is susceptible of use apparently as a second hand car or truck dealers yard. The applicants who are the owners of the property foreshadow that that is the purpose to which they would	trouble is that the applicants have mortgaged that property and	like to put it and for that reason they do not want it sold. The
four others in New South Wales to the bank. The present amount of the indebtedness is in excess of $3 million. No payments have been made in respect of capital or interest for some three years and no offer is made for the provision of security, if the order is made, against any damage which the bank may suffer if the auction is stopped, nor is there any offer to pay to the mortgagee, that is the bank, or into court any sum of money at all in reduction of the very substantial indebtedness which there is.
The parties are in dispute in proceedings both in the Supreme Court and in this court over the circumstances in which a mortgage of their home at Riverwood came into existence. It is unnecessary to go into the detail about that matter, it is enough to say that the issue concerns the question whether they were induced to enter into the mortgage upon the basis that they would receive additional accommodation from the bank. They say that they were and that the bank failed to provide the additional accommodation but retained their home as security thus preventing
them from using the home by way of mortgage to another financial institution or sale and thus obtaining working capital which
would have been available for them to use in an endeavour to extricate themselves from the difficult financial situation in which they then were.
As the case has developed it has increasingly seemed to me that the only basis upon which the applicants could be entitled to relief is this. The applicants were given notice under the Queensland legislation of the bank's intention to sell as long ago as 30 April 1991. The matter has come on very quickly and it may be that the bank has evidence which it could have led about this matter, but so far as the evidence before me goes, nothing was heard by the applicants about a possible sale of the Queensland property until Mr Jonesf brother-in-law saw an auction notice on the property some weeks ago. The ap-licants have not been taken into the bank's confidence about the sale and their case is, and their evidence would establish this if it were accepted, that nothing occurred between the time of the notice of an intention to exercise the bank's power of sale and the observation of the auction notice on the land.
I have been referred to the decision of the High Court in Commercial and General AcceDtance Limited v Nixon (1981) 152 CLR 491 where Aickin J, having referred to the relevant Queensland legislation which is contained in s.85 of the Prooertv Law Act
1974 (Q), said (at 507 ) : -

HIS HONOUR: This is an application for an interlocutory injunction to restrain an auction sale which is to take place at

2.30 p.m. tomorrow. The auction is for the sale of a property

'to take reasonable care to ensure that the property	"It will be observed that the duty of the mortgagee is
is sold at the market value' and that 'a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale.8"

It is for posslble breach of that duty that there may be a colour of a case made out by the applicants.

The evidence which the bank has put on includes two valuations which value the property at $500,000 and $575,000 respectively, but as I understand it on the basis of a forced sale. It seems to me that there is a case for saying that under the Queensland legislation the bank may well not be entitled to take what it can get on the basis of a forced sale. It must have the interests of the mortgagor in mind when it does what it does. There are many authorities in relation to that matter and they are not at one as to the precise standard of the duty which a mortgagee has. I note in passing the declsion of the High Court

in Forsvth v Blundell (1973) 129 CLR 477. I refer particularly

to the judgment of Walsh J (at pp. 493-4).

It seems to me that so long as there is an auction sale and that the reserve is a proper figure I should not interfere. I have taken into account all that has been said on behalf of the applicants but the fact, and I reiterate this, that no payment has been made whatever off the indebtedness of now over $3 million in a period of three years, no offer of security is or

really can be made and no payment to the mortgagee or into court	in part reduction of the indebtedness is offered means that it
would take a great deal indeed to induce me to stop the sale which is to take place tomorrow.
I am troubled by the apparent fact that the mortgagors, that is to say the applicants, have not been notified of the sale because there is always the possibility that they themselves may have known - may now know of - potential buyers who are unaware of the sale or may suggest some course of action which may have the effect of bringing a greater price. Counsel for the bank has informed me of the reserve price which it is proposed to place upon the property tomorrow. I do not wish to mention that price in this judgment because desirably those matters should be kept confidential at least until after an auction takes place but, having heard the amount of it, I am satisfied that my misgivings or at least any misgivings that I have as to what may or may not have been achieved if the applicants had been consulted, are overcome if that reserve or a greater price is reached.
I have to make this decision on short notice and with inadequate ascertainment of facts and also the law but that seems to me prima facie at least to be a result which in all the circumstances ought to be acceptable as a long term result. Of course it may be that the property will not reach that reserve and that then negotiations will commence with one or other of the bidders who are at the auction or perhaps with other people. Perhaps the property will remain on the market for a time before
be a view and perhaps a very valid view that the reserve was too it can be sold but if it does not reach the reserve there will
high and that the property is not worth as much with the consequence that it ought reasonably and fairly be sold for less.
It seems to me that the applicants will be sufficiently protected if, although I allow the sale tomorrow to proceed, I ensure that the reserve, which was communicated to me by counsel for the bank today, is the reserve in fact and that if there is to be a private sale it not be concluded without notice to the applicants who will have an opportunity of bringing the matter back to the court before the contracts are finalised. That is the order which I propose to make.

I note the undertakings of the parties as follows: 1. I

note the usual undertaking as to damages given by the applicants;
2. I note undertakings by the respondent that it will not, until

further order, sell the property 1537 Ipswich Road, Rocklea, Queensland at auction for a price less than that statsd by counsel for the bank in court today as being the reserve price which will be placed on the property tomorrow and in the event that the property is not sold at auction sell it privately for

a lower price without giving the applicants 48 hours notice of

its intention so to do. I reserve liberty to the applicants to

apply as they may be advised on 24 hours notice.

RECORDED NOT TRANSCRIBED

The costs will be the respondent's costs in the principal

application.

1 cert~ty	that thls and the 5 preced~ng
pages are a true copy of the reasons	for
judgment herein of The Honourable

Mr Justice Shsppard, h- Associ~ri8

Dated 1 cl4&4e.,1991