Pendlebury v Colonial Mutual Life Assurance Society Ltd

The appellant, William Henry Pendlebury, brought an action against the respondent, Colonial Mutual Life Assurance Society Ltd., in the Supreme Court of Victoria. The dispute concerned the sale of land by the respondent as mortgagee under a power of sale. Pendlebury alleged that the sale was conducted wrongfully, recklessly, and in bad faith, and alternatively sought an account of the sum that would have been realised had the sale been conducted without wilful default or neglect. The trial judge found in favour of the respondent, holding that the sale was conducted honestly and with reasonable care. Pendlebury appealed this decision to the High Court of Australia.

The High Court was required to determine whether the mortgagee, in exercising its power of sale, had acted in good faith and with due regard to the interests of the mortgagor. Specifically, the court had to consider whether the mortgagee had taken all reasonable steps to obtain a fair price for the mortgaged property, particularly in relation to the adequacy of the advertising and the circumstances surrounding the auction. The court also had to assess whether the conduct of the mortgagee's agent amounted to wilful default or recklessness, thereby rendering the mortgagee liable for any loss occasioned by such conduct.

The High Court, in reversing the decision of the Supreme Court, held that the mortgagee had failed to exercise its power of sale in good faith. The court found that the advertisement for the auction was wholly inadequate, providing insufficient detail to identify the property and lacking the necessary reach to attract potential buyers. Furthermore, the circumstances of the sale, including the limited bidding and the apparent disregard for obtaining a competitive price, indicated a wilful disregard for the mortgagor's interests. Applying the principles from *Kennedy v. De Trafford* and *Barns v. Queensland National Bank*, the court concluded that the mortgagee was liable to account to the mortgagor for the amount that would have been realised on a sale conducted without such wilful default or neglect.