Thambiappah v CBA [2010] NSWSC 520

The plaintiff borrowed money from the bank which was secured by mortgages over two properties. She defaulted and the bank sold the properties as mortgagee in possession, pursuant to its power of sale.  The bank disposed of certain goods located at one of the properties at the rubbish tip. The plaintiff alleged that the goods were valuable and that the bank breached the terms of the mortgages in dealing with the goods in this way (“the Goods Claim”). The plaintiff also alleged that the bank had sent a notice required under s 57(2)(b) of the Real Property Act 1900 to the wrong address and had therefore failed to comply with the requirement of notice before it exercised its power of sale over Werrington.

As to the Goods Claim, the plaintiff relied upon a clause of the mortgage that read in part as follows:

21.5 If we enter into possession of THE PROPERTY we may:

(a) carry out WORKS on THE PROPERTY as we see fit;

(b) remove goods (for example your furniture) on THE PROPERTY and store them. If you do not reclaim possession of the stored goods within 14 days of our telling you where the goods are, we may dispose of the goods on your behalf. We pay any proceeds from selling the goods into an account we open with us in your name. We are not liable to you in any way due to any action we take under this clause;

The plaintiff argued that the bank had breached the terms of this clause by destroying the goods. Justice Harrison interpreted “to dispose of” as authoring the bank to do what it considered appropriate in the circumstances, including to destroy or discard the goods. The plaintiff also failed to prove the loss claimed to be suffered as a result of the disposal of the goods by clearly identifying the goods in evidence.

With respect to the claim that the s 57(2)(b) notice had been served at the wrong address, the plaintiff relied on a clause of the mortgage which stated:

21.2 If you are in default and we choose to enforce this mortgage, in most cases we give you a notice before doing so. The notice must:

(a) tell you what the default is; and

(b) require you to fix the default (if it can be fixed) within a period stated in the notice… and

(c) contain any other information the law requires us to give you.

The plaintiff also relied on a clause dealing with notices and communications which stated:

23.2 They may be:

(a) given personally…or

(b) left at the address last notified; or

(c) sent by prepaid post to the address last notified; or

(d) sent by facsimile transmission to the fax number last notified; or

(e) given in any other way permitted by law.

The question the Court had to decide was whether the notice was sent to the plaintiff’s last known residential address. Justice Harrison found that it was not, as the last known address was not the same as the address on the loan application form which was the address used by the bank to serve the notice. The plaintiff did not have to prove that she had not received the notice, as the bank argued. The issue was whether the Real Property Act had been complied with.

The bank argued that if notice was not given as required by the Act, the plaintiff did not have a claim for damages but an account to be taken. Justice Harrison set out the law as stated in Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164:

A general rule has long been established, in relation to applications to restrain the exercise by a mortgagee of powers given by a mortgage and in particular the exercise of a power of sale, that such an injunction will not be granted unless the amount of the mortgage debt, if this be not in dispute, be paid or unless, if the amount be disputed, the amount claimed by the mortgagee be paid into court.

The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed.

The case falls fairly, in my opinion, within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument. Failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed by order upon the exercise of the respondent mortgagee’s rights under the mortgage.

The bank argued that the general principle against restraining a mortgagee by making a claim for damages should be extended to prevent the plaintiff’s claim for damages for non-compliance with service of a s 57(2)(b) notice.

After reviewing the authorities Justice Harrison held:

there is no support for the proposition that a disgruntled mortgagor can choose to mount several different cases against a mortgagee, raising various complaints about the exercise of its power of sale or about alleged delinquencies in the manner of performance of a multitude of other obligations said to constrain it, except within the structured and ordered confines of the one account between them.

The only other available remedy for the plaintiff would have been a claim for equitable damages to recover a surplus from the sale of the property. However, there was no surplus and the proceeds of the sale did not discharge the debt owing under the mortgage. The plaintiff’s claims were dismissed with costs.

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