CBA v ACES [2013] NSWSC 1184

The mortgagor defaulted and the bank sold the secured properties and sued for the balance outstanding. The mortgagor alleged a number of defences and claimed negligence and misleading and deceptive conduct on the part of the bank. The court rejected the negligence claim on the basis that the bank is not subject to a duty to take reasonable care beyond the equitable duty of good faith. The court also fleshed out what this duty entails in terms of the general equitable rules that apply:

  1. The power of sale is given to the mortgagee for his own benefit, to enable him to better realise his debt.
  2. The court may interfere with the exercise of the power at the instance of those interested in the proceeds of sale, but the court will not interfere merely to prevent its exercise contrary to the wishes of the mortgagor, or even (except on terms of payment of the mortgage debt) because the mortgagee is seeking some collateral object and not merely the payment of his debt.
  3. The mortgagee is not a trustee of the power for the mortgagor, and the court will not inquire into his motives for exercising it.
  4. The duty of the mortgagee in respect of a sale itself was, formerly, generally put on the basis of good faith alone.
  5. A mortgagee or a receiver may choose the time for sale at his own convenience and may sell when he considers it appropriate. The mortgagee is not bound to postpone the sale in the hope of obtaining a better price later.
  6. There is no requirement for a mortgagee to have “purity of purpose” in order thoroughly to sell the mortgaged property if the occasion has properly arisen.

The court then disposed of the various defences as follows.

The court rejected the allegation that the loan made to the wrong family trust saying:

The Torrens system was specially designed to ensure that there is no reference to any trust or equitable interests save where the caveat is lodged to protect the trust. It is not possible for a transfer or mortgage or title deed to be in favour of “X as trustee for the Y family trust”. One of the principal purposes of the Torrens system was to ensure as much as possible that people dealing with the registered proprietor of land or an interest in land were not affixed with notice for some equitable interest. Accordingly, it was not possible for the mortgages to be made out in favour of any particular trust.

There is another rule of law and that is that where there is a written document which is intended to be the end result of negotiations to perfect a transaction and that document is registered, that document alone is looked to as properly recording the transaction (and indeed under the Real Property Act is given indefeasibility) and one does not go back to look at what was said during negotiations. There are a couple of exceptions to this principle, such as where a mistake has been made in recording a parties’ position and an Equity Court grants rectification of the document to record what was the intention. No application for rectification has been made.

Accordingly we have mortgages made out to bind the trustee corporation and there is no mention of any trust on the register in accordance with law…. In any event it does not matter because whatever the situation, the documents were registered, the person liable to the Bank is the trustee corporation and whether it is responsible to one or the other family trusts that is a matter for the trustee not for the Bank. There is nothing in this point that would require the Court to hold the mortgages as void… The mortgage had to be under the name of the trustee corporation in its own right no matter what trust on which the trustee may have held its interest in the land.”

The court rejected all the allegations against the bank that it should have allowed the mortgagor to sell, sold below market value, delayed selling and did not properly advertise saying:

“Whilst commercially a lender may permit the mortgagors to sell the property there is no obligation on it to do so and it may take the sale into its own hands if it feels so inclined. .. There was no obligation on the mortgagee to agree to the mortgagor selling and in the present circumstances it would seem that waiting five months for something concrete to happen was probably enough forbearance for a reasonable mortgagee to take… The mortgagee hired responsible estate agents and took the advice of valuers, had advertised (see later) and it sold in accordance with the recommendation of the agents…It may be that the property could have been more extensively advertised but in view of the estate agents marketing strategy it does not seem to me that even if this was so it would have effected the price obtained so that there is no real evidence of any loss.”

The court gave judgment for the bank.

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