Martin & Ors v Commonwealth Bank of Australia

Deane and Toohey JJ of the High Court of Australia considered a dispute between the applicants, Martin and others, and the Commonwealth Bank of Australia. The applicants sought to restrain the Bank from exercising its power of sale over certain mortgaged property.

The central legal issue before the Court was whether the Bank's purported exercise of its power of sale was valid, notwithstanding the applicants' contention that the Bank had acted in breach of an alleged collateral agreement. Specifically, the Court had to determine if the Bank's conduct in relation to the mortgaged property constituted a breach of an implied term of good faith and fair dealing, or if it was otherwise unconscionable, thereby vitiating the exercise of the power of sale.

The Court reasoned that the exercise of a power of sale by a mortgagee, while requiring good faith, does not impose an obligation to act in a way that would be considered commercially prudent or to obtain the best possible price. The applicants' claim was based on the assertion that the Bank had agreed not to exercise its power of sale until certain conditions were met, which they argued was a collateral agreement. However, the Court found no evidence to support the existence of such a collateral agreement. Furthermore, the Court held that the Bank's actions, in the absence of fraud or an improper purpose, did not amount to unconscionable conduct or a breach of any implied duty that would invalidate the sale. The Bank was entitled to exercise its power of sale once the mortgagors defaulted.

The High Court dismissed the applicants' appeal, upholding the decision of the lower court.