JUDGMENT
1 HER HONOUR: These are the reasons for my refusal of orders sought by the defendants in a motion filed on 13 October 2010.
2 The proceedings have a regrettable history. At one point a concern emerged that on any sale, the value of the rural properties here in issue was not sufficient to ensure repayment of the outstanding loan moneys. An agreement was reached by the parties in August 2010, which resulted in consent orders giving the plaintiff possession of the properties and giving it leave to issue a writ of possession forthwith. The parties also agreed on a regime for the sale of the properties, which included the defendants using their best endeavours to co-operate with the plaintiff on the sale and which provided that on completion, any balance above $4.5 million was to be paid into Court, pending the determination of the defendants' cross claim.
3 That cross claim seeks orders under the Contracts Review Act 1980, the Trade Practices Act 1974 (Cth), the Fair Trading Act 1987 and the Australian Securities and Investments Commission Act 2001 (Cth), in relation to various transactions between the parties. The hearing of the cross claim has been repeatedly adjourned, because of the ill health of one of the defendants, Mrs Croker. It is now listed for hearing on 21 October.
4 The auction was due to proceed at 11 am today. The defendants have had earlier difficulties securing legal representation. Until very recently they were represented by Simmons & McCartney. New solicitors have recently been engaged.
5 Yesterday afternoon a motion was filed in Court for the defendants, seeking orders restraining the plaintiff from conducting or facilitating the auction. The motion was supported by an affidavit sworn by Mrs Croker in which she said that she had had contact with a Mr Arnold, from the plaintiff, about the auction in late August. The properties were subsequently marketed for sale. The auction is being held in Goulburn.
6 I declined to deal with the motion ex parte. Later in the afternoon when the plaintiff appeared, it advised that the orders sought were opposed. The application was heard yesterday morning. The lateness of the application and the circumstances in which it came to be made, did not support it being granted, as a matter of the Court's discretion. There were other difficulties.
7 While the parties did not deal with the applicable caselaw, a mortgagee's obligations on a sale such as this are well established. They were discussed, for example in Commonwealth Bank of Australia v Hatfield [2004] NSWCA 350 at [10] - [14]. The underpinning obligation is that there must be a sale in good faith. Section 420A of the Corporations Act 2001 (Cth) also imposes an obligation to take reasonable care to sell property to which it applies, for market value. A mortgagee must not act wilfully or recklessly to sacrifice the mortgagor's interest; reasonable precautions must be taken to obtain a proper price, but that does not require a sale on terms which a shrewd property owner would seek; there is no duty to sell at a particular time; a mortgagee is answerable for serious departures from reasonable standards which may be characterised as unconscionable; a mortgagee is not answerable for mere negligence or carelessness in carrying out a sale; if there has been an unconscionable failure to obtain a proper price, the mortgagee is accountable on the taking of accounts; there is no obligation to take pre-marketing steps suggested by a mortgagor; the mortgagee can proceed to an immediate sale; the mortgagee is not bound to wait, because the mortgagor might profit by delay; the mortgagee might be required to make an outlay on the property to prevent it being sacrificed on sale; but the mortgagee is not required to take risks for the benefit of the mortgagor; the mortgagee may not sell for an extraneous purpose and cannot be indifferent to the price obtained, provided only that its debt is paid. In pursuit of its own interest the mortgagee is entitled to choose the time at which it sells the property.
8 The defendants are dissatisfied with aspects of the plaintiff's marketing campaign, including its nature and duration and how the properties have been described in advertising material, including as to their location. They are also dissatisfied with the agents appointed on the sale. They fear that the result will be that the properties will be sold for undervalue. They have advice from a valuer, Mr Peter Myonlas and a real estate agent, Ms Dwight, who take the view that these rural properties should be sold by way of tender or auction with a longer marketing campaign, in order to obtain the highest reasonable price, or true market value. They also have advice that the value of the properties is higher than the $1,000 per acre anticipated by the mortgagee. It is claimed that a shortfall in market value of up to $2 million might result from the proposed sale.
9 The plaintiff's solicitor deposed that there had been certain difficulties in obtaining the defendants' co-operation in the sale process, as the parties had agreed in August. The defendants were entitled to remain in occupation under the agreement, pending settlement of the sale. Correspondence in evidence deals with various difficulties, including access being given to real estate agents and potential purchasers, in order to elicit the best possible sale price, as well as the removal of signage advertising the auction from the properties. There was no evidence of any communication or discussions between the parties about the auction or the perceived inadequacy of the marketing campaign, or any disagreement as to the auction proceeding, until the motion was served.
10 It was not disputed that on instructions from the defendants, Mr Mylonas had attempted to market all of the properties since February 2009. Clearly the properties have not yet been sold and were thus due to be auctioned yesterday. A marketing campaign has been conducted in accordance with the parties' agreement that the plaintiff was entitled to possession of the properties and was to sell them, with the proceeds to be dealt with on the basis agreed. A reserve price is to be set for the properties, based on reports prepared by the real estate agents Elders and on valuations prepared by a Mr Peter Reardon. Those reserves have regard to matters such as topography, soil types and the location of the properties.
11 The defendants eschewed any desire to challenge the consent orders earlier made, or the agreement which underpinned it. That agreement was the basis upon which the defendants had secured yet another adjournment of the hearing of their cross claim. They sought no other relief in relation to the auction or the sale. It was submitted that the stay should be granted in the best interests of both parties, so that they could then confer about and agree on a programme for the proper marketing and sale of the property. The balance of convenience was said to favour the grant of the stay.
12 In Inglis and Another v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 Walsh J observed at 164 - 165: