The case of CBA v Shannon  NSWSC 1076 provides useful guidance to lenders in possession selling commercial property. In that case, the guarantor claimed the bank had breached its duty under s420A of the Corporations Act to take all reasonable care to sell the property for not less than market value, in particular advertising the sale as a “mortgagee sale”.
The court found that in determining whether there had been a breach the focus was on the process gone through in selling the property, not merely whether the sale in question did not in fact achieve market value. The court found that advertising the property as a “mortgagee sale” did not breach any duty on the part of the lender. The court was satisfied that the lender complied with its duty by retaining professionals for the marketing campaign and tender process and that such processes resulted in many expressions of interest and several tenders. The allegation of breach of duty was rejected.
The case provides comfort to lenders that if they engage professionals in the marketing and auction process, an action for breach of duty by mortgagors and guarantors will be unlikely to succeed. Any positions taken as to how best to market the property should be sought from professionals, especially if the property is advertised in a particular way, such as a mortgagee sale.