Wang & Ors v HSBC Bank Australia Ltd - [2021] QCA 63

[2021] QCA 63

COURT OF APPEAL

McMURDO JA

Appeal No 3800 of 2021
SC No 2251 of 2021

JIANYI WANG Appellants/Applicants

CHUYUE WANG
HUIFEN XIE

HSBC BANK AUSTRALIA LIMITED First Respondent

ACN 006 434 162

CRAIG MAX SCUTELLA Second Respondents

IRYNA MULLIGAN

BRISBANE

THURSDAY, 8 APRIL 2021

JUDGMENT

This is an application to stay an order made by the Chief Justice that the appellants remove the caveat which they had lodged over their property at Hope Island. The property has been sold by the respondent, HSBC Bank Australia Ltd, as mortgagee exercising its power of sale, to the other respondents. That contract was made last year and was due to settle on 18 December 2020. A few days before then, the appellants lodged the caveat upon the ground that the bank had “failed to act in good faith in the exercise of its power of sale by failing to market the property for sale, and by selling the property at a significant under-value”.
The contract is yet to settle because of the caveat. The sale price is $5.51 million, which exceeds the bank’s secured debt which is approximately $4.6 million.
The bank applied to remove the caveat, and the application was heard on 8 March. The judgment was delivered on 25 March. The appeal was commenced on 6 April and the application for a stay of the judgment was filed at the same time. The appellants rightly apprehend that unless the caveat remains in place, or the bank is otherwise restrained from completing its contract, the contract will be settled and the property will be transferred to the other respondents.
There is no challenge to the fact that the power of sale was exercisable by the bank. Nor is it challenged that the bank is owed the amount which it claims is secured by the mortgage. The appellants’ case is that in the manner in which the power of sale was exercised, the bank did not act in good faith. By that is meant, in the language of Walsh J in Forsyth v Blundell (1973) 129 CLR 477 at 493, that the bank wilfully or recklessly sacrificed the interests of the appellants (see also Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 at 680, per Griffith CJ).
The appellants’ case, as stated in their caveat and as argued to the Chief Justice and on this application, is that the bank did not act in good faith, rather than that the bank breached its duty under s 85(1) of the Property Law Act 1974 (Qld) to take reasonable care to ensure that the property was sold at the market value. The case which the appellants have advanced involves a neglect of the appellants’ interests of a more serious kind. As McClelland CJ in Eq said in Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1994) 8 BPR 15,581 at 15,583, it involves a “departure from reasonable standards … so serious as to…

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: [2021] QCA 63
Decision Date: 8 APRIL 2021

CaseChat Overview and Summary

In Wang & Ors v HSBC Bank Australia Ltd, the appellants sought to appeal against an order made by the Chief Justice of the Supreme Court of Queensland that they remove a caveat which they had lodged over their property at Hope Island. The property was sold by HSBC Bank Australia Ltd, as mortgagee exercising its power of sale, to the other respondents. The appellants lodged the caveat on the ground that the bank had failed to act in good faith in the exercise of its power of sale by failing to market the property for sale, and by selling the property at a significant under-value. The bank applied to remove the caveat, and the application was heard on 8 March. The judgment was delivered on 25 March. The appeal was commenced on 6 April and the application for a stay of the judgment was filed at the same time.

The legal issues that the court was required to decide were whether the bank acted in good faith in the exercise of its power of sale and whether the appellants had demonstrated a prima facie case that the bank breached the mortgagee’s duty of good faith. The court was also required to determine whether the balance of convenience was in favour of the removal of the caveat. The court found that the bank had obtained valuations of the house, ahead of exercising its power of sale, and did cause the property to be promoted by advertising and having it open for inspection. The court also found that the property was auctioned on 8 August 2020, with a reserve price of $6.75 million. The highest bid was $4.5 million and the property was passed in. Later that month, the agent contacted Mr Scutella who lived in Sydney. He was given a virtual tour of the house and he had a friend inspect the property on his behalf. Mr Scutella and the other respondent (who is his wife) then made an offer of $5.5 million, which they subsequently increased to $5.75 million. However, that included the pontoon and ultimately there was a deduction from their offer which resulted in a contract made on 17 September at the price of $5.51 million.

The court found that the bank was not obliged to sacrifice its own interests in discharging its duty of good faith. The court also found that the balance of convenience was in favour of the removal of the caveat. The court rejected the argument that the bank should have undertaken international marketing of the property, a contention which is repeated here. The court found that the bank was entitled to sell without waiting for further waves of potential buyers to arrive. The court also found that the advertising was sufficient even for interstate buyers.

The court concluded that there was no arguable error in the reasoning of the primary judge. The court refused the application for a stay. The court found that it would be an improper use of the Court’s power in this context to grant the stay only in order to enhance the prospects of a negotiated outcome. The court ordered that the appellants should pay the costs of each of the respondents of this application.

In conclusion, the court found that the bank had acted in good faith in the exercise of its power of sale and that the balance of convenience was in favour of the removal of the caveat. The court refused the application for a stay and ordered that the appellants should pay the costs of each of the respondents of this application.

Orders