Carver v Westpac

Supreme Court of NSW|2001-10-16|Before: Austin J

CITATION : Carver v Westpac [2002] NSWSC 431 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4151/00 HEARING DATE(S) : 23, 24, 26, 27 July, 31 August, 5 September, written submissions 16 October 2001 JUDGMENT DATE : 31 May 2002

Dean Starr Joseph Carver (P1) PARTIES : Marie Phillippe Cyril Grely Carver (P2) Westpac Banking Corporation (D) JUDGMENT OF : Austin J

COUNSEL : Mr C Stevens QC with Mr S Davis (P) Mr A Lo Surdo (D) SOLICITORS : Star Carver & Sons (P) Corrs Chambers Westgarth (D) CATCHWORDS : REAL PROPERTY - mortgages - mortgagee's exercise of power of sale - whether exercised in breach of duty - adequacy of advertising - adequacy of valuation - whether sale should have been by public auction - whether sold at gross under-value - whether defendant failed to have regard to subdivision approval and in principle building approval LEGISLATION CITED : Real Property Act 1900 (NSW) s 57(2)(b) Adamse v Broadway Credit Union Ltd (1999) NSW Conv Rep 55-876 Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195 Brutan Investments Pty Ltd v Underwriting and Insurance Ltd (1980) 58 FLR 289 CAGA v Nixon; Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257 Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491 Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 Forsyth v Blundell (1973) 129 CLR 477 CASES CITED : Haddington Quarry Co v Hudson [1911] AC 727 Hawkesbury Developments Pty Ltd v Custom Credit Corporation Ltd (1995) NSW Conv R 55-731 McKean v Moloney [1988] 1 Qd R 628 National Westminster Finance New Zealand Ltd v United Finance & Securities Ltd (1987) ANZ Conv Rep 486 Nixon v Commercial and General Acceptance Ltd [1980] Qd R 153 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 Singer and Friedlander Ltd v John D. Wood & Company (1977) 243 EG 212 Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938 Warner v Jacob (1882) 20 Ch D 220 DECISION : Proceedings dismissed

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4151/00 DEAN STARR JOSEPH CARVER & ANOR V WESTPAC BANKING CORPORATION JUDGMENT (revised to correct typographical errors on 3 June 2002) 1 HIS HONOUR: This is a case about the validity of the exercise of a power of sale by a mortgagee. On 8 November 1994 the first plaintiff exchanged contracts for the purchase of a property at 1 Villiers Road, Padstow Heights ("the Property") for a purchase price of $168,000. Settlement of the purchase took place on 10 March 1995. The first and second plaintiffs were, respectively, the mortgagor and a borrower in respect of a mortgage, registered number 0481797 ("the Mortgage"), by which the defendant advanced $136,000 upon completion of the purchase of the Property, taking security from the first plaintiff over the Property. 2 The Property is a low, flat strip of land at water's edge, about 103 m long and about 12.2 m wide (narrowing to 5.18 m wide at the southern end). It has a water frontage to Salt Pan Creek along its eastern and southern boundaries, in an area known locally as One Tree Point. There are mangrove trees along the boundary, and relatively shallow water along the eastern side, but there is water deep enough for a jetty at the southern tip. Road maps and other diagrams in evidence represent that the northern boundary of the Property abuts Villiers Road, which is depicted as running up to Salt Pan Creek. In fact, however, the land falls away and at all relevant times the constructed road came to an end at a cul-de-sac before it reached the water, at a point substantially higher than the water and the Property. Access to the Property was by foot, down a stone staircase from the cul-de-sac, leading onto a rough track. The Property is not visible from the road. 3 Shortly after contracting to purchase the Property, the first plaintiff had some negotiations with the owners of numbers 2, 3 and 4 Villiers Road, and with the Bankstown City Council, with a view to constructing an extension of Villiers Road to provide vehicular access to those properties. The discussions were on the basis that the Council would contribute 50% of the cost of the extension of the road, provided that the landowners contributed the other 50%. The first plaintiff and his father, a solicitor who was also a councillor, arranged for a quotation for the road extensions, and the Council also made inquiries as to the likely cost. The estimated cost according to Council's inquiries was several hundred thousand dollars higher than the cost estimate produced by the first plaintiff and his father, the discrepancy being at least partly explained by reference to differences in the nature of the proposed construction. Part of the problem related to the construction of a stormwater drain. 4 Plans for the road extension were not implemented at any relevant time. In effect, the Council deferred making any decision. At its meeting on 26 March 1996, the Council resolved that the proposed road extension be considered in conjunction with the 1996/97 Estimates and Works Program. At its meeting on 14 May 1996 the Council resolved that consideration of the extension be deferred until costs associated with drainage requirements could be considered by Council for inclusion in the 1997/98 Draft Estimates of Income and Expenditure. 5 The first plaintiff and his father investigated prospects for developing the Property as soon as the first plaintiff contracted to buy it. They lodged a subdivision application with the Bankstown City Council to subdivide the Property into two lots, each about 50 metres long. They also made a building application for the construction of a residence on each lot. They pursued these applications through various stages of the Council approval process. They also had some discussions with Andrew Kellert, the owner of No 3, with a view to some form of co-operative development of No 1 Villiers Road, from which Mr Kellert later withdrew. 6 It appears that Council officers were initially inclined to reject the proposed development. An undated report on the proposed subdivision stated that it did not comply with Council's requirements for minimum areas, minimum widths and the 30 metre exclusion zone from the mean high water mark. Additionally, vehicle access was not available. The report recommended that the application be refused. An undated report with respect to the building application recommended, for these reasons and also for environmental reasons (including the effect on mangroves and the amenity of the waterfront) that the building application be refused. 7 Nevertheless, a Council Working Party, which reported on 25 July 1995 after a meeting with the first plaintiff and his father, recommended that the subdivision be approved, subject to standard conditions but without any requirement for completion of the road, and that the proposed dwellings be approved in principle subject to the subdivision taking place. The Working Party Report, which is in evidence, is endorsed with a stamp which says "Adopted by Council on 25 July 1995 - R L Dunn, Director Corporate Services". 8 These approvals were confirmed in correspondence. The subdivision approval was confirmed to the first plaintiff in a letter from the Council dated 4 August 1995, and the approval in principle for construction of the new dwellings was communicated to the first plaintiff in Council's letter of 6 September 1995. 9 The plaintiffs failed to make payments due under their loan agreement with the defendant during the period from July 1995. The defendant issued a notice to the first plaintiff under s 57 (2) (b) of the Real Property Act 1900 (NSW) on 17 January 1996, demanding payment of $14,000 for principal and interest due at that time. The payment was not made. In due course, after obtaining a valuation report and instructing estate agents in the manner described below, the defendant sold the Property for $115,000 in purported exercise of its power of sale, exchanging contracts on 13 September 1996 and completing the sale on 30 October 1996. 10 The plaintiffs have brought the present proceeding for relief in respect of the exercise of the power of sale. The plaintiffs claim: · a declaration that in exercising the power of sale, the defendant did not act in good faith, or alternatively that it failed to take reasonable care to obtain a proper price for the property; · an order that an account be taken of all moneys received and dispersed by the defendant or any other person on its behalf in respect of the Property and of the dealings and transactions of the defendant therewith; · a direction that upon the taking of the account, the plaintiffs be credited with the sums that the defendant would have obtained for the property had it exercised its power of sale in good faith, or in the alternative with reasonable care, to obtain a proper price for the Property; and · damages, interest and costs. General principles 11 I have had the benefit of lengthy written submissions from both parties on the law as well as the facts, and I was referred to many decided cases. This is a chapter of the law in which reported cases are hardly scarce. I shall begin by setting out, in summary form, my understanding of general principles on matters relevant to the resolution of this case. In the course of my judgment I shall have occasion to supplement these general principles by some more specific propositions of law. 12 I have decided it is unnecessary for me to attempt any resolution of some differences of legal principle addressed in the written submissions, because of the view I take of the facts. In particular, this is not the occasion to decide whether the mortgagee's duty in exercising its power of sale is exclusively an equitable duty of good faith, or extends to a common law duty to take reasonable care. Nor is it necessary for me to decide whether, in a case where there are two borrowers but only one mortgagor, the mortgagee's duty extends to both borrowers or is confined to the mortgagor. 13 The relevant general principles are:

The power of sale is given to the mortgagee for its own benefit, and is not held by the mortgagee in a fiduciary capacity.

Moreover, the fact that the mortgagee's sale is for a price disadvantageous to the mortgagor is itself no ground for judicial intervention: Warner v Jacob (1882) 20 Ch D 220, 224; Haddington Quarry Co v Hudson [1911] AC 727; Adamse v Broadway Credit Union Ltd (1999) NSW Conv Rep 55-876.

Nevertheless, in exercising the power of sale, the mortgagee is subject to an equitable duty to act in good faith: Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; Forsyth v Blundell (1973) 129 CLR 477. The mortgagee's impropriety is sometimes described as a fraud on the power, and sometimes as a wilful or reckless disregard of the interests of the mortgagor, and sometimes as a sacrificing of the interests of the mortgagor. Whatever description is used, it is clear that the commission of actual fraud (in the sense of an intention to defraud the mortgagor, or corruption, or collusion with the purchaser) need not be shown: Forsyth v Blundell at 496-7, per Walsh J.

It is unclear whether, as a matter of Australian Law, the mortgagor and the mortgagee stand in a relationship of proximity under which the mortgagee owes the mortgagor a common law duty to take reasonable care in the exercise of the power of sale: cf Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949; 2 All ER 633. So far the Australian cases have analysed facts suggesting failure to take reasonable care by recourse to the equitable principles concerning good faith, rather than common law negligence.

Nor is it clear whether different practical results flow from the application of the equitable duty of good faith and the principles of common law negligence. Fisher and Lightwood's Law of Mortgage (Australian edn, 1995), p 459, states: "There may be some practical differences between the two tests, such as in the extent of the mortgagee's duty to others besides the mortgagor, but it is doubtful whether in most cases the result would be different whichever test was applied. In Forsyth v Blundell (1973) 129 CLR 477 at 481 it was said that to take reasonable precautions to obtain a proper price is but part of the duty to act in good faith."

The following are some of the incidents of the mortgagee's duty of good faith: (a) the onus of establishing breach of the duty lies on the mortgagor: Forsyth v Blundell at 499; (b) a mortgagee fails to act in good faith if it looks after its own interests alone and sacrifices or absolutely disregards the interests of the mortgagor: Pendlebury at 680-1 per Griffiths CJ; (c) action which is unfair would normally be regarded as action in bad faith: Pendlebury , at 694 per Barton J; (d) the mortgagee cannot discharge its duty by delegating the exercise of the power of sale to an agent (such as a real estate agent), since the duty requires the mortgagee not only to select a competent contractor but also to give adequate instructions, and to exercise some surveillance over the contractor or to inspect the work he is doing: Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491, 498 per Gibbs CJ, 500 per Mason J; (e) where the mortgagor's case of breach of duty is based on sale at an undervalue, it is not necessary for him to prove that any particular individual would have paid a higher price for the property: Nixon v Commercial and General Acceptance Ltd [1980] Qd R 153 (not disturbed, on this point, on appeal to the High Court); McKean v Moloney [1988] 1 Qd R 628. The plaintiffs' case 14 The essence of the plaintiffs' case is found in paragraph 13 of the Amended Statement of Claim. Five contentions are made, which I shall examine in turn: (a) the defendant did not advertise the Property for sale adequately, or at all; (b) the defendant did not obtain any, or any adequate, valuation of the Property; (c) the defendant sold the Property by private treaty instead of by auction; (d) the defendant sold the Property at a gross under-value, $115,000, when its true value was not less than $380,000 if sold immediately, or $455,000 if the road access to the Property was completed; (e) the defendant failed to have regard to the benefit of the development consent granted by Bankstown City Council for the subdivision of the Property into two allotments, and the approval in principle to the construction and location of dwellings on the proposed allotments. 15 The plaintiffs submitted that the approach to be adopted in a case such as the present one is to consider, first, whether the mortgagor has led evidence sufficient to throw doubt upon the bona fides of the mortgagee in effecting the sale, or on the mortgagee's proper regard for the mortgagor's interests. If that threshold has been crossed, then the Court should scrutinise the mortgagee sale carefully to determine whether, all things considered, the sale was conducted in good faith. I doubt that it is necessary to segregate the elements of the Court's inquiry in this way. However, as a practical matter, although the mortgagor bears the onus of proving breach of duty, the forensic onus will shift to the mortgagee once real grounds for suspicion have been established. 16 In the present case nothing turns on the onus of proof, forensic or otherwise. If one views the facts at a superficial level, there seems to be the basis for a case. Indeed, during the hearing I was inclined to the view that the plaintiffs' case may have substance. The advertising campaign for the sale was short and limited in scope; the price received on sale was substantially less than the price the first plaintiff had paid for the Property two years earlier, and appears very low for waterfront land in the Sydney metropolitan area; and the decisions by Bankstown City Council to approve subdivision of the Property into two allotments and to approve in principle the construction of dwellings did not figure in the marketing of the Property or in the decisions of the defendant concerning the sale. 17 The case has given me difficulty because there is an element of discord between the impression created by a superficial view and the conclusion dictated by closer analysis. After considerable reflection, but in the end firmly, I have decided that the superficial impression created by a somewhat selective overview of the facts is entirely removed when one analyses the evidence as a whole, especially the valuation evidence. Once the evidence has been fully analysed, there is no factual basis for saying that the defendant acted in bad faith, or in fraud on its power of sale, or in wilful or reckless disregard of the plaintiffs' interests, or that the defendant sacrificed the mortgagor's interests, or (if this matter is relevant in law) that the defendant failed to take reasonable care to obtain a proper price for the Property. In other words, whatever be the correct test for improper use of the power of sale, there was no improper use of the power of sale on this occasion. 18 In my opinion the plaintiffs and the first plaintiff's father developed an unrealistically optimistic opinion of the value of the Property, and of the enhancement in value produced by obtaining Council's consent to subdivision and its approval in principle to the construction of two dwellings. They were supported in their opinion by a valuer and two real estate agents, but the more rigorous valuation procedures adopted by the defendant's two valuers have persuaded me that the price received on sale was within the valuation range of true market value. In selling by private treaty rather than by auction, the defendant acted on plausible advice received from competent advisers. The sale of the Property was advertised to the extent thought appropriate by the estate agent engaged to sell it, in a manner that I regard as adequate in all of the circumstances. 19 The valuation of the Property on behalf of the defendant for the purpose of mortgagee sale took place without regard to the subdivision approval and in principle building approval, because the approvals were not discovered when the valuer made such inquiries as were reasonable in the circumstances. By the time of the sale, the defendant and the estate agent were aware of a report by a Council working party recommending the approvals, endorsed with the word "adopted", but in light of the response received by the estate agent to his inquiry to Council, they were entitled to assume that formal approvals had not been given. Moreover, the most plausible evidence is that in view of the special characteristics of the Property, it is questionable whether its market value was materially affected by the presence or absence of the approvals. 20 I shall explain these conclusions more fully by reference to each of the headings under which the plaintiffs challenge the sale. Advertising 21 The adequacy of the advertising associated with a mortgagee sale is relevant to the discharge of the mortgagee's duty of good faith. In Pendlebury, Griffith CJ said (at 683-4): "It is not disputed that some advertising was necessary. In my opinion, the object of a sale by auction is to secure a fair price for the property by means of competition between probable purchasers. And the object of giving public notice of the sale by auction, whether by advertisement, bellman, posters or otherwise, is to bring the subject of the sale to the notice of such probable purchasers, and so to induce such competition as will be likely to secure a fair price. The notice ought, therefore, so far as the circumstances will admit, be of such a nature, both as to particulars given and as to the places in which and the modes by which it is given, as to be likely to secure this result. It is not disputed that if the mortgagee sells by private contract he is bound to take reasonable means to ascertain the value before selling, and the same rule applies, in my opinion, to a sale by auction." 22 The plaintiffs complain about the advertising for the mortgagee sale in this case on three grounds: 1) that the defendant failed to use all appropriate modes of advertising; 2) the advertisement made by the defendant was inadequate and there were material omissions from the defendant's advertising of the Property; 3) the marketing campaign was too short.

Inadequate modes of advertising

(a) Print media 23 When the defendant first wrote to Century 21 Padstow on 29 April 1996, the letter contemplated an auction and asked for a sales inspection report, a draft advertising schedule and budgets, and drafts of the actual signs and advertisement that the agent intended to use. However, there is no direct evidence as to whether these instructions were complied with. By his letter of 23 May 1996, Mr Holt reported on his inspection of the Property and recommended against an auction. Mr Matheson, the bank officer with whom Mr Holt dealt, was in the United States at the time of the hearing and did not give evidence. It seems to me probable that the requests for an advertising schedule and draft advertisements were lost in this wider issue. While Mr Holt gave evidence that he expected there would have been an advertising schedule in the estate agent's file, there was in fact no such document in the file and I think it probable that none was prepared. 24 In their submissions the plaintiffs were critical of the defendant for failing to insist on the detailed advertising schedule that it initially requested, and omitting to follow up its request. The plaintiffs submitted that the defendant left the advertising of the Property completely to the agent's discretion, without any intervention or review of what the estate agent proposed to do or in fact did. The evidence is unclear as to whether there was any surveillance by the defendant of the estate agent's advertising campaign, but in my opinion the advertising campaign was not deficient and therefore there was no occasion for any officer of the defendant to intervene. 25 The Property was advertised for sale in the EAC Multilist of Friday 6 September 1996. The advertisement was one of 12 equivalently sized advertisements on the page, under the heading "Century 21 Padstow". There was a small photograph showing a river with bush on both sides, with the words: "Padstow Heights $125,000 - Potential Goldmine - 049m2 of vacant land located right on the George's River. Build your dream home, have your own private fishing spot. Enjoy nature's scenic show from the comforts of home. Small price to pay for all these benefits." 26 Mr Holt, who was the "office manager" handling the sale of the Property at Century 21 Padstow, said he was under the impression that an advertisement was also placed in the local newspaper, "The Torch". But he admitted that he could not recall whether an advertisement was in fact lodged with that newspaper. In the absence of any advertising schedule, evidence of expenditure, or any relevant other evidence, my conclusion is that there was no newspaper advertising apart from the single advertisement in EAC Multilist. 27 Mr Hyam, a barrister and qualified valuer who gave evidence on behalf of the plaintiffs, said that proper advertising for a property of this nature was very important because potential purchasers may come from far and wide. He said that the Property should have been advertised "Sydney metropolitan-wide at least". The Property should have been advertised, in his view, for a period of two to three months (implying more than one advertisement). 28 To the extent that Mr Hyam's evidence suggested advertisement in a Sydney-wide newspaper such as the Sydney Morning Herald, it is inconsistent with the evidence given on behalf of the defendant by Mr Holt and Mr O'Connor (a valuer engaged by the defendant for the purposes of the proceedings), and on behalf of the plaintiff by Mr Stevens (a valuer engaged by the plaintiffs). They all expressed the view that advertisements in the Sydney Morning Herald generate very little response for properties in the Padstow Heights area. It was not suggested in evidence that any other Sydney metropolitan newspaper would have generated a better response. 29 Practising real estate agents such as Mr Holt can be expected to have some expertise and experience relevant to the issue of the efficacy of advertising in a marketing campaign. Mr Hyam's expertise is in valuation and the law and does not, on its face, extend to expertise or experience in the efficacy of advertising. It seems to me, therefore, that I should prefer the evidence of Mr Holt, supported by Mr O'Connor and Mr Stevens, to the evidence of Mr Hyam on this point. 30 It was suggested by McLelland CJ in Eq in Hawkesbury Developments Pty Ltd v Custom Credit Corporation Ltd (1995) NSW Conv R 55-731 at 55,652 that an allegation to the effect that advertising was inadequate should be supported by expert evidence as to industry practice in relation to the marketing of properties of the kind in issue. Mr Hyam's evidence is of his own opinion, and does not purport to be evidence of industry practice. Taken together, the evidence to the contrary should be regarded as evidence of industry practice in advertising this kind of property in the Padstow Heights area. My conclusion is that there was no departure from industry practice with respect to the print media advertising in this case.

(b) Estate agent's window 31 Mr Holt asserted that the Property was advertised in the shopfront window of the offices of Century 21 Padstow. However, the first plaintiff gave evidence that he did not see that advertisement. Although there was nothing in the estate agent's file to support Mr Holt's assertion, it seems to me probable on balance that an advertisement was displayed in the estate agent's window, at least for a short time before the Property was sold on 13 September 1996. Mr Holt's evidence was that this was the usual practice. The first plaintiff may simply have overlooked the advertisement.

(c) Personal contacts, inquiries and inspections 32 The file for this transaction maintained by Century 21 Padstow did not contain any file card recording inquiries about the Property and disclosing who was shown the Property, and their feedback. However, Mr Holt said that he kept his own card index of potential purchasers of properties in the Padstow Heights area, and the price ranges in which they may be interested, and he says he used it to telephone potential purchasers. He also left his business card in the letterboxes of neighbours in Villiers Road, endorsed with a note saying "4 sale No 1 Villiers 1049m2 vacant land please call me". 33 Mr Holt said that he showed the Property to three or four people. He said that with the defendant's authority, he gave each of them a copy of the Working Party Report dated 25 July 1995, which had been provided to him by the defendant. Two of the people who were shown the Property, namely David Gillis and Anette Skogh, made written offers to purchase the Property for $100,000, although the offer by Mr Gillis was subject to "a DA for a 4/5 bedroom dwelling similar to that approved in 1989". Mr Holt negotiated with Ms Skogh, who eventually offered $115,000, and that offer was accepted by the defendant. 34 At the time of her purchase of the Property, Ms Skogh was in a relationship with Mr Kellett, the owner of the No 3 Villiers Road, which led to their subsequent marriage. Mr Holt gave evidence, which I have no reason to disbelieve, that he was unaware of the relationship between Ms Skogh and Mr Kellert until just before settlement of her purchase of the Property. It has not been suggested that either officers of the defendant or Mr Holt conspired with Ms Skogh or Mr Kellett to procure the Property for Ms Skogh at an undervalue. In the circumstances, it seems to me that the relationship between Ms Skogh and Mr Kellert is not relevant to any matter that I have to decide.

(d) "For sale" signs 35 The plaintiffs say that Century 21 should have placed signs advertising the Property for sale at points visible from the river, and also at the entrance to the staircase from the cul-de-sac. The evidence is that the agent had signs in stock which were readily available. 36 I accept that the display of "for sale" signs is a normal and acceptable part of the marketing of a property, and that Century 21, acting reasonably, may have decided to use signs on this occasion. However, Mr Holt explained that he attempted to obtain the consent of nearby landowners with street access to the erection of a "for sale" sign at the cul-de-sac, and that he was unsuccessful. 37 As to signs visible from the river, Mr Elliott (a real estate agent who gave evidence on behalf of the plaintiffs) said that a large sign should have been erected facing the water. On the other hand, Mr O'Connor (a valuer who prepared a report and gave evidence on behalf of the defendant) said that such a sign, although it "would not go astray for the cost involved", would provide "fairly limited exposure". Further, Mr Holt gave evidence that he thought about the erection of such a sign and decided that it was not in the interest of the marketing of the Property to do so. He said that to place a sign on the waterfront would draw attention to the rubbish on the Property brought in by the ebb and flow of the tide. His preferred marketing strategy was that the first contact the prospective purchaser would have with the Property would be by the telephone, so he could talk the prospective purchaser through any objections that may arise. He specifically did not want the Property to be known as "the one with all the rubbish on it". 38 I accept the evidence given on behalf of the defendant, and I conclude that there is no reasonable basis for criticising the defendant or its agent for not displaying "for sale" signs at the cul-de-sac or the waterfront. 2) Inadequacies in content of advertising and marketing

(a) Uniqueness and potential for jetty 39 The plaintiffs submitted that the Property has some favourable features which ought to have been, but were not, emphasised in marketing its sale. It was either the last or one of the last vacant waterfront properties in Padstow Heights. Although there is not a deep water-frontage all along the eastern and southern boundaries, the water at the southern end is deep enough for a jetty, according to the plaintiffs' contention. The first plaintiff applied to the Department of Land Conservation for a licence to reclaim some land at the southern end, and it appears that this application succeeded after the Property had been transferred to Ms Skogh. 40 The advertisement in the EAC Multilist adequately identified the unique waterfront location, in my opinion, but it did not refer to the potential for a jetty, and there is nothing to indicate that this was mentioned in any other way during the sale process. 41 The evidence given on behalf of the defendant on this point was not entirely consistent. Mr Holt said he could not recall whether he made any inquiries as to whether the Property could sustain a jetty, but he conceded that the opportunity of obtaining a jetty might have interested prospective purchasers. However, Mr O'Connor said that the presence or absence of the opportunity to obtain a jetty was not a major issue; and the addition of a jetty or some other mooring would not create a large enough added value to overcome other problems with the site; and it would have little impact on the value of the Property. 42 A prospective purchaser inspecting the Property would be able to observe the jetty for the adjoining land, and would be able to make his or her own inquiries as to the prospects of constructing a jetty at the southern end of the Property. In those circumstances, my view is that a reasonable selling agent would not regard it as necessary to emphasise the opportunity of constructing a jetty in advertising the Property for sale. This would be so, in my view, even in the absence of the evidence of Mr O'Connor that the addition of a jetty would have little impact on the value of the Property. Mr O'Connor's evidence reinforces my conclusion.

(b) Development and building approvals 43 Proper advertisement of a property offered for sale by a mortgagee requires description of relevant planning approvals and other re-development opportunities, where these matters are material to the value of the property: Cuckmere Brick Co Ltd v Mutual Finance Ltd; National Westminster Finance New Zealand Ltd v United Finance & Securities Ltd (1987) ANZ Conv Rep 486; CAGA v Nixon; Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257; Brutan Investments Pty Ltd v Underwriting and Insurance Ltd (1980) 58 FLR 289. 44 The defendant obtained a copy of the Council's working party report stamped "adopted", and caused this material to be provided to the estate agent on about 22 August 1996. The plaintiffs submitted that from that time, at the latest, the defendant should have made sure that all advertising and other marketing of the Property drew attention to the existence of the approvals. In my opinion this contention is deficient in two respects. First, the evidence of Mr Holt is that when he received a copy of the working party report, he contacted the Council and was told that there had been no formal approval given. I shall consider this evidence in more detail later, but for reasons I shall give, I accept it. In light of the information supplied to him by the Council, it was reasonable of Mr Holt not to treat the working party report as evidence of subdivision approval and in principle building approval by Council. That being so, he cannot be criticised for not referring to the approvals in the advertisement in the EAC Multilist. Secondly, his evidence, which I accept, is that he supplied copies of the working party report to potential purchasers to whom he spoke in person, thereby enabling them to make their own inquiries. In my opinion that was a reasonable step to take. 45 The cases cited above assume that the planning approvals or other re-development opportunities with which they deal were material to the value of the property and the price to be obtained on sale. In the present case, having regard to the unusual nature of the Property, the evidence is that it is questionable whether the subdivision approval and in principle building approval added to the value of the Property or enhanced its prospects of sale. I shall discuss the evidence more fully below. Once that point is accepted, the cited cases are distinguishable and the absence of reference to the approvals in the advertising campaign is of no consequence. 3) Inadequate duration of marketing campaign 46 The plaintiffs submitted that, having regard to the unusual features of the Property, it would have been appropriate to undertake a full and longer than normal marketing campaign, citing Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195; Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938, CAGA v Nixon and McKean v Maloney. In my opinion the question of adequacy of duration of a marketing campaign is a question of fact upon which the decisions in other cases can provide no more than general guidance. 47 In the present case the period during which the Property was marketed was very short. The advertisement was placed in EAC Multilist only a week before exchange of contracts for the sale. Mr Holt's other marketing measures were taken no earlier than in the few days before 6 September, so that the overall marketing campaign lasted for less than two weeks. There is a degree of tension between the evidence of what in fact occurred in the marketing of the Property, and the evidence given by the defendant's experts as to the reasons for proceeding by private treaty rather than public auction. They said, in effect, that if the Property were offered for sale by private treaty, intending purchasers would have the time to make inquiries to clarify the status of the relevant approvals and to ascertain the cost of building and construction work, whereas in a sale by auction the typical four-week marketing period may not be enough. 48 However, in my opinion the shortness of the marketing period does not itself, or in the context of other marketing measures, establish that the marketing campaign was deficient. In fact the activities of Mr Holt produced two offers, of the same amount. He was able to negotiate for an increase of one of those offers by $15,000. The price was in the valuation range advised by Mr Hurst, the valuer engaged by the defendant for an opinion for the purposes of mortgagee sale. While the strategy of selling by private treaty made it possible to allow intending purchasers to make investigations and even to sell by conditional contract, in fact no one came forward who wished to make extended investigations. The question for Mr Holt and the defendant was whether the defendant should accept the best offer that had emerged, quite quickly, from the selling process, or to wait to see if some other offer would emerge for a higher price. There was nothing to indicate to the defendant that postponing its decision to sell would or even might produce a better offer. Since Ms Skogh was pressing for an answer, there was reason to be concerned that if her offer was not accepted promptly, any subsequent sale would be for a lower price. Valuation 49 As a bank frequently required to rely upon property valuations for lending purposes, the defendant prepared a document entitled "Westpac's Valuation Standard". The document specified, to a reasonable degree of detail, the requirements to be fulfilled for a valuation report to be acceptable to the defendant. The document specified that the valuation report should provide details of any current development consent affecting the property, and any conditions to the consent affecting the valuation. It said that a valuation report for an "englobo value" for a property subject to subdivision should also include a hypothetical subdivision analysis with all assumptions clearly defined, and the costs of subdivision addressed. For development projects, the defendant required various assessments including the land value of the Property in its present condition and its value on completion of the building work. 50 At the hearing I was presented with valuation evidence by Mr Hurst and Mr O'Connor on behalf of the defendant, and there was also evidence of a valuation obtained by the defendant from Mr Chenoweth. The plaintiffs' valuation evidence was by Mr Stevens, Mr Alcock and Mr Elliott. I shall consider the evidence of each of these witnesses in turn.

Mr Chenoweth's valuation 51 The defendant obtained a valuation of the Property from C D Chenoweth & Associates Pty Ltd, dated 6 July 1995. The valuation was prepared by Mr Chenoweth "for mortgage purposes". He noted that there was no vehicular access to the Property, but that the Council intended to continue the road to service the few houses on One Tree Point. Thus, it appears that the valuation assumed a reasonable prospect of future vehicular access. The valuation also noted that the first plaintiff, though not registered on the title, had applied to the Council to subdivide the land into two blocks, although there were "a number of problems associated with the application" and the Council officer to whom Mr Chenoweth spoke was "generally negative about its final outcome". Therefore the value of the lot was assessed on a single lot basis. The valuation was $170,000. Both the valuer and the defendant were aware that the purchase price paid by the first plaintiff was $168,000. 52 The defendant did not rely on Mr Chenoweth's valuation for any purpose connected with the mortgagee sale. It commissioned a new valuation. In my opinion it was correct to do so. Mr Chenoweth's valuation was prepared for mortgage purposes. Its purpose was therefore to assist the defendant to apply its lending standards to determine how much it would be prepared to lend on the security of the Property. The valuation was not undertaken to assist the defendant to predict the proper price recoverable on a mortgagee sale, or to assist in setting the reserve price for a mortgagee sale by way of auction. Additionally, Mr Chenoweth's valuation was about eight months old by the time the mortgagee sale process began. 53 Although Mr Chenoweth's valuation is not irrelevant to the question of the true value of the Property on 13 September 1996, when it was sold, his valuation should not be given great weight, in my opinion. This is because he seems to have assumed good prospects of vehicular access, without any indication of having taken into account the cost of providing it. 54 I should mention, in passing, that there was some inconclusive documentary evidence that some officers of the defendant may have formed the view that the Property had a relatively high value. A Business Banking Manager called Stephen Skwarek wrote an internal memorandum dated 13 July 1995 saying that the Property had been valued (presumably by Mr Chenoweth) at $170,000, and he added that "once subdivision of Villiers Road is approved this value could well exceed $300,000." The statement is purely speculative and no basis is given for it. I do not regard it as having any significance for the purposes of this case. There is also a page of handwritten calculations relating to the Property and another property at Padstow, which attributes some values to the properties. However, it is unclear which figures are attributed to each property, and I regard the document as completely unhelpful for the purposes of this case.

Mr Hurst's valuation 55 Kenny and Good Pty Ltd provided a valuation report on 15 April 1996, in response to the defendant's instructions for the purposes of a mortgagee sale by public auction. The valuation was prepared by Mark Hurst, a registered valuer employed as a senior valuer by Kenny and Good. 56 It is clear from reading the report that two things influenced the author towards a low valuation figure. The first was that, according to the report, vehicular access was not available and was not likely in the future. The second was that the Property was within the flood area of Salt Pan Creek. The report said that as the Property was only slightly above the water level, most of it would be within the 1:20 year flood level of 1.9 metres AHD. It said that inquiries at Council indicated that a building approval might be given to a suitably designed dwelling provided that the floor level was 0.5 m above the 1:100 year flood level of 2.5 metres AHD. The report noted an approved building application in 1989 for a house supported by columns to elevate the floor level above the 1:100 year flood level. 57 The report referred to the limited supply of vacant residential land on the waterfront available for sale in the surrounding area, while noting that waterfront land varies quite substantially from accessible sites to deeply sloping sites with difficult access. Waterfront land may therefore vary in price from about $150,000 up to $400,000 depending on the characteristics of the property. However, because of the Property being in the flood area and without vehicular access, it would be in the lower price range for waterfront properties in the surrounding area, and genuine buyer interest would most likely be limited. Comparable sales were identified of five properties in the surrounding area, although two of these were not waterfront properties. Reference was made to inquiries of the selling agent at the time of the sale to the first plaintiff, according to which the Property had been listed for sale over an extended period and had been withdrawn from sale prior to the first plaintiff making an inquiry to purchase it. The report stated that a price in the order of $150,000 might be achieved, but it warned the defendant that properties with similar building difficulties sometimes remain for sale over long periods with limited buyer interest, and a selling price as low as $100,000 may have to be expected. The report valued the Property at $125,000. 58 The defendant instructed an estate agent shortly after receiving Mr Hurst's valuation, and its internal memoranda suggest that it relied on the valuation in preparing for the mortgagee sale. Therefore Mr Hurst's valuation is of particular significance. 59 The plaintiffs attacked Mr Hurst's valuation and his oral evidence on several grounds. They said that Mr Hurst had disregarded the Council's subdivision approval and the in principle building approval, and that if he had taken those matters into account, his valuation would have been substantially higher. Mr Hurst's evidence was that he made inquiries at the Council and was told that there had been no approvals. The plaintiffs invited me to reject that evidence in light of the evidence of Mr Hilt, a Council officer. The evidence on this matter needs to be addressed. 60 Mr Hurst said that he had a conversation with a person he described as Tony Hill, an officer in the building department of the Council, in which he inquired as to whether there was any development or building application or approval in relation to the Property. I infer that the person with whom he spoke was Mr Hilt. He said Mr Hilt told him that there had been an application in 1989 for a single storey dwelling and pool, and he said he inspected the plans for that dwelling in Mr Hilt's presence. He said he asked Mr Hilt whether there were any other applications and Mr Hilt said there were not. 61 Mr Hurst was cross-examined at length about his recollection of his conversation with Mr Hilt, and another conversation he had with Mr Lindsay, another Council officer. Mr Hurst conceded that he could not say on oath that he asked about "development applications or development approvals". However, he said he made a typical inquiry at Bankstown Council which would have included development application and building application approvals. He said this was in conformity with his usual practice. 62 From my observation of him in the witness box, I formed the view that Mr Hurst was a witness of truth. I accept that he made an inquiry with Mr Hilt, and that the inquiry related to the existence of development applications or approvals, in conformity with his usual practice. I also accept Mr Hurst's evidence that he was told by Mr Hilt that there were no development applications or approvals apart from an earlier building application in 1989. In my view that is an appropriate inference in all the circumstances, taking into account Mr Hurst's contemporaneous file note and his evidence about his usual practice and typical inquiries. 63 Mr Hurst's evidence was corroborated by the evidence of Mr Holt, the real estate agent. Mr Holt gave evidence that he contacted the Council officer by telephone shortly after 21 August 1996 to inquire as to whether the development application and building application referred to in the working party report dated 25 July 1995 had ever been approved. He said he was advised that it had not been approved. Mr Holt was also extensively cross-examined on this matter. He said he recollected the conversation because it occurred in extremely unusual circumstances. The circumstances were unusual because Mr Holt had received a copy of the working party report from the defendant, from which it appeared that approval had been given in principle to a subdivision and development application of which he had previously been unaware. He said he telephoned the Council to clarify the position and that he was told "there wasn't any approval given". 64 I accept Mr Holt's evidence on this matter. While he was not generally as impressive a witness as Mr Hurst, I find his evidence that he remembered the matter because of the unusual circumstances to be plausible. When the defendant sent the working party report to him, its covering letter referred to the outcome of the development application for an extension of the public road. It seems to me that the author of the letter had not formed any positive view that there had been an "outcome", let alone an outcome in respect of anything other than the extension of the road. 65 Mr Holt took the view, properly in the circumstances, that he should make an inquiry. It appears to me likely that if he had not made an inquiry and received the answer of which he gave evidence, he would in all probability have adopted a different approach to advertising the Property. The approach in fact taken, according to my findings, is consistent with the conversation with the Council officer to which he deposed. He simply handed over copies of the working party report so that purchasers would be in a position to pursue their own inquiries. 66 The evidence of Mr Hurst and Mr Holt appears to be inconsistent with the record of development applications determined by the Council for the period of 1 July 1995 to 31 August 1995, annexed to the affidavit of Mr Hilt. It seems to me, however, having regard to Mr Hilt's evidence, that an inquiry of a Council officer may well have failed to unearth the records of approval, depending upon how the inquiry was made. 67 The application concerning the proposed subdivision, as disclosed in the computer records, did not contain the address of the Property, although an application lodged by a firm called GV Hull & Associates in relation to the Property did contain the address. Mr Hilt said in cross-examination that he could not say whether the computer would necessarily have cross-referenced each of the applications. His evidence was that an inquiry of the Council in relation to the Property, using the address of the Property as the primary source of reference, would not have disclosed the existence of the development consent, assuming it had been given. Mr Holt and Mr Hurst both said they referred to the address of the Property when they made their inquiries. My conclusion is that the evidence of Mr Hurst and Mr Holt, which I accept, is not contradicted by the evidence of Mr Hilt, given that their inquiries were made by reference to the address of the Property. 68 Therefore both Mr Hurst and Mr Holt believed, on the basis of the inquiries made by them with the Council, that there was no approved subdivision or building approval, and they acted accordingly. The defendant had no greater or other knowledge than them. On the evidence it appears that the defendant relied on Mr Holt and Mr Hurst respectively for their advice within their fields of expertise and had no independent duty of inquiry. 69 The plaintiffs submitted that the defendant could not hide behind Mr Hurst's alleged failure to uncover the subdivision approval in March 1996, because Mr Skwarek had recorded, in his memorandum dated 13 July 1995, that an application for subdivision which might well increase the value of the Property to in excess of $300,000 was presently with the Council, and in those circumstances the defendant should have made follow-up inquiries. The plaintiff relied on the concession by Mr True, an officer of the defendant, that he would have expected the defendant to do so. To the extent that Mr True's evidence means that in his view, the defendant should have a made its own inquiries as to the status of the subdivision approval before instructing Mr Hurst, I disagree with him. In my view it was reasonable for the defendant to expect its valuer to make all inquiries relevant for the purposes of valuation. I should add that I do not regard Mr True's concessions in cross-examination as having any great significance, because he did not have any direct involvement in the management of the sale process. 70 The plaintiffs referred to the fact that at some time before 22 August 1996 the defendant obtained a copy of the working party report concerning subdivision and building approval, dated 25 July 1995. They referred to Mr True's concession in cross-examination that it was "extraordinarily unusual" that there was not a single document in the defendant's file casting any light on the circumstances in which that report was obtained by the defendant. But it seems to me that the concession leads nowhere. It was not submitted, and on the evidence could not be submitted, that the defendant had the working party report in February 1996 when it instructed Kenny and Good to prepare a valuation. At most, the plaintiffs' submission was that when the working party report came to hand, endorsed with a stamp to the effect that it had been "adopted" by the Council, it was incumbent on the defendant to instruct Mr Hurst to reconsider his valuation. 71 The question whether the defendant should have instructed Mr Hurst to reconsider his valuation once the working party report was to hand, before proceeding with the mortgagee sale, is one of some difficulty. The defendant sent the working party report to Mr Holt, the estate agent. Mr Holt's evidence was that he contacted the Council to clarify the position, having previously been informed that there were no relevant approvals. He said he gave copies of the working party report to prospective purchasers. The plaintiffs invited me to reject Mr Holt's evidence on this matter. As I have said, my conclusion is that it should be accepted. 72 That being so, my view is that the conduct of the defendant, by its officers and its authorised selling agent, was not unreasonable. The defendant's officer properly passed the working party report on to the estate agent, and the estate agent properly made an inquiry and made the information available to prospective purchasers. I reject the plaintiffs' submission that the words "adopted by Council" in the stamp on the report were an unambiguous indication that the Council had approved the subdivision and given in principle approval to the building proposal. The adoption of a report in general terms does not necessarily mean that each recommendation in the report has become a resolution of the adopting body. There is an ambiguity that requires clarification, and Mr Holt thought he had obtained clarification when he was told that no approvals had been given. 73 The plaintiffs contended that the defendant should have asked the first defendant and his father to clarify the status of the applications. I disagree. I do not say that a mortgagee is never obliged to make contact with the mortgagor to clarify matters relevant to the sale during the selling process. But it seems to me that in the circumstances of this case, there was no obligation on the defendant to contact the first plaintiff or his father to clarify the status of the applications. In the first place, there was an available avenue of inquiry to an independent party, namely the Council itself. The defendant was entitled to rely on the answers provided by the Council, whereas any information provided by the plaintiffs would, as a practical matter, need to be checked before it was used for the purposes of the sale. Moreover, the plaintiffs were in default and the defendant had signified its intention to proceed with the realisation of the security, even though the plaintiffs were seeking time, endeavouring to find a buyer for the Property themselves, and investigating alternative sources of finance. One can understand that as a commercial matter, the defendant would wish to avoid further contact with the plaintiffs in order to protect the integrity of the selling process. My view is that it was not unreasonable for the defendant to proceed without making contact with the plaintiffs. 74 The plaintiffs attacked the credit of Mr Hurst as a witness in a number of ways. They said that he gave an unconvincing attempt to explain the decline from the purchase price of $168,000 paid by the first plaintiff late in 1994 to a valuation of $125,000 in March 1996. Mr Hurst said that the two matters were not comparable, but in the plaintiffs' submission, the sale of the very same property late in 1994 was more obviously comparable, for the purposes of valuation in March 1996, than the comparison with other properties regarded by Mr Hurst as appropriate for comparison. 75 I do not accept this criticism of Mr Hurst. His task was to ascertain the value of the Property in accordance with proper valuation procedures. Those procedures required him to follow certain procedures, well described by R O Rost and H G Collins, Land Valuation and Compensation in Australia (Commonwealth Institute Valuers, 1971); see also Singer and Friedlander Ltd v John D. Wood & Company (1977) 243 EG 212, at 217. Under the direct comparison method of valuation, the valuer determines what a prudent purchaser might be expected to pay by reference to all available sales and other evidence, taking care to identify "comparable sales" (see Rost and Collins, p 71). I am satisfied by Mr Hurst's evidence that he did his best to identify and use comparable sales, and I note that the sales upon which he relied were reasonably contemporary. It was open to him to take the view, which on his evidence he took, that the sale to the first plaintiff in 1994 was not appropriately comparable. An inference available from the fact that the first plaintiff paid a price higher than Mr Hurst's valuation of the Property some 15 months later is that the first plaintiff paid too much, perhaps placing excessively optimistic reliance on the development potential of the Property. 76 In summary, I was impressed by the valuation evidence of Mr Hurst and I reject the plaintiffs' attacks on it.

Mr O'Connor's valuation 77 After the commencement of these proceedings the defendant obtained another valuation report, dated 28 February 2001, by Gregory O'Connor, a consultant valuer to Carritt Taylor Valuations Pty Ltd. Mr O'Connor was specifically asked to deal with the significance of the subdivision approval and the in principle building approval. He was supplied with the plaintiffs' affidavit evidence, including their valuation evidence, and the valuation by Mr Hurst. 78 Mr O'Connor's report summarised the flood level and consequent building requirements in a manner closely similar to Mr Hurst's report. This time, however, reference was made to the subdivision approval and the in principle building approval obtained in August/September 1995. While noting that vacant residential waterfront allotments at Padstow Heights and the surrounding Georges River suburbs were limited in supply and generally in good demand by prospective purchasers, Mr O'Connor noted the absence of vehicular access and the potential cost of engineering and construction of a residence as impediments to sale of the Property. He referred to the Council's decision of 14 May 1996 to defer consideration of the road extension and commented that "it would appear that this is not a priority for Council". He said that uncertainty as to the potential cost of engineering and construction of a residence would moderate the demand for and the price of the Property, particularly if plant, equipment and materials had to be carried down from Villiers Road or transported to the site by barge. Mr O'Connor took as comparable sales the three waterfront properties that had been referred to by Mr Hurst, the third of which had been sold after Mr Hurst reported, although he found those three properties to be superior in various ways. 79 Mr O'Connor expressed the opinion that it was questionable whether the subdivision approval and in principle building approval created any added value. His view was that a large single residential allotment had a more general market appeal to prospective purchasers than a subdivision to create two small allotments, and that it may have been preferable to submit a building approval for a single substantial residence on the existing allotment rather than for two elevated two-storey dwellings of relatively small area on two small allotments. Mr O'Connor found it not possible to conduct a hypothetical feasibility study to determine the estimated realizations for the subdivided Property, because he had no details of engineering or development costs. He noted, however, that the required elevation of any proposed dwelling would entail engineer-certified piering of the site and that this would add to the standard construction costs. 80 In the absence of information (in particular, the estimated development costs which were of "paramount importance"), Mr O'Connor determined the fair market value of the Property as a vacant single residential waterfront allotment for which there was a development consent and in principle building approval, but he took into account the risks and costs of providing vehicular access and conducting engineering and construction work. He estimated the value of the Property as at 13 September 1996 as $125,000. He said that the sale price of $115,000 fell within an acceptable valuation range (that is, a tolerance of 10%). 81 As with Mr Hurst, I have formed the view that Mr O'Connor's evidence and report were reliable. In my opinion Mr O'Connor took a realistic approach to the Property, carefully considering its disadvantages in a balanced way. His approach to comparable sales was plausible and, as far as I could see, in conformity with proper valuation practice as explained in Rost and Collins' text. The importance of this conclusion is that, although Mr O'Connor's report was prepared well after the sale, the evidence of Mr O'Connor reinforces and supports the contemporaneous valuation made by Mr Hurst and relied upon by the defendant at the time of the sale.

Mr Alcock's appraisal 82 The plaintiff relied on three valuation opinions. Bruce Alcock, a real estate agent with Village Properties Pty Ltd at Illawong, "appraised" the Property and expressed his opinion in a letter dated 27 January 1996. He drew attention to the unique nature of the Property and the lack of recent comparable sales, and explained that he used sales of waterfront properties in Woronora, with similar land size and no vehicular access. He said that without the road being extended, the likely selling price for the subdivided lots would be $180,000 for Lot 1 and $200,000 for Lot 2. With the road extended, the likely selling price would be $215,000 for Lot 1 and $240,000 for Lot 2. He said his appraisal was based on three assumptions: first, that the prospective purchasers felt confident that removal of the mangroves would be possible; secondly, that all services were provided to both lots; and thirdly, that water from Salt Pan Creek did not encroach upon the land at high tide. 83 Mr Alcock's appraisal did not, on its face, take into account two matters regarded as of crucial significance in the valuation reports by Mr Hurst and Mr O'Connor: namely, that the Property was in a flood area, and that engineering and construction costs would be likely to exceed normal levels. 84 Mr Alcock was not qualified to practice as a valuer until 23 August 1996, so that his level of expertise in valuation, as opposed to real estate sales, was not comparable with the level of expertise in valuation of Mr Hurst and Mr O'Connor, or for that matter Mr Stevens. It seems to me that the comparable sales upon which he relied, being in another area, were rather less reliable than the comparable sales used by Mr Hurst and Mr O'Connor. All in all, I regard his evidence on valuation as weak, compared with the evidence of Mr Hurst and Mr O'Connor.

Mr Stevens' valuation 85 The plaintiffs obtained a valuation report by John Stevens, a registered real estate valuer and a director of John P. Stevens Pty Ltd, dated 23 November 2000. The report by Mr Stevens takes into account the subdivision approval and the in principle building approval, and assesses the value of the Property at $380,000. Mr Stevens' report contains almost no reasoning, although it contains the following observations: "In September 1996 the market was stable with agents reporting good demand with few listings available for sale. Due to the approvals in place and the demand for waterfront properties we would have expected the Property to have been keenly contested had the Property been offered by sale by public auction." 86 There is no reference to comparable sales, problems presented by the limited access, or costs of engineering and construction works for a residence. 87 I found the report of Mr Stevens and his oral evidence to be unsatisfactory. As I have said, the report contains virtually no reasoning. During cross-examination, Mr Stevens agreed that it was relevant to take into account that the Property was in a flood-prone area, there were potential costs of engineering and construction, valuation would be affected by estimated development costs, and that his approach should reflect recent comparable sales. He agreed that his valuation did not address those matters. He also agreed that the fact that the Property was not accessible at all to vehicular traffic would reduce its appeal, but that his report did not in terms take particular account of that factor. Nor did his report consider, as Mr O'Connor did, whether two small allotments would be as valuable as one large allotment to a prospective purchaser, and whether two elevated two-storey dwellings of the kind proposed would be attractive to a prospective purchaser, as opposed to a large single residential building. 88 Although, as I have said, his report contains very little reasoning, Mr Stevens referred in cross-examination to his field notes and working papers. In my opinion the field notes did not cure the deficiencies of his report. The properties he selected as comparable properties were demonstrably not so. They were not vacant land and they had vehicular access. It appears that Mr Stevens allocated a relatively arbitrary figure to the value of the improvements on those properties, without apparently considering the individual characteristics of the dwellings. He allowed an arbitrary figure of $50,000 for difficulties and costs associated with building, without being able to give any clear or coherent expression of the basis for selecting that figure. 89 In all the circumstances, my view is that the evidence of Mr Stevens is unreliable when compared with the evidence of Mr Hurst and Mr O'Connor, and I prefer their evidence on valuation to his.

Mr Elliott's evidence 90 William Elliott, a licensed real estate agent living and working in the Padstow area, but not a valuer, was engaged by the plaintiff's father in approximately mid-1996 to explore the possibility of placing the Property on the market for public auction as two waterfront blocks of land. He inspected the land and saw documents relevant to the subdivision approval and in principle building approval, including plans for the construction of two dwellings, and also road plans and designs for the proposed extension of Villiers Road. He expressed the opinion that the Property was rare and there would be a strong buyer interest if it were offered for sale by auction. He said he would recommend that the reserve price should be set at $180,000 for Lot 1 and $210,000 for lot 2. 91 I give no weight to this expression of opinion, compared with the report to the expert valuers.

Conclusions as to valuation evidence 92 The plaintiffs contended that even apart from the valuation evidence, certain external circumstances known to the defendant established that the Property was sold for an amount very much below its true value. The defendant was aware that the first plaintiff purchased the Property in November 1994 for $168,000. It had obtained a valuation of $170,000 from Mr Chenoweth in 1995. The evidence indicates the common view amongst estate agents that property prices in Sydney were stable or appreciating during the period from 1994 to 1996. According to the plaintiffs, these considerations should have led the defendant's officers to expect a sale at least in the vicinity of $170,000. Additionally, the defendant was aware of the subdivision approval and the in principle building approval, and should have expected that they would have increased the value of the Property. 93 In my opinion, however, the evidence shows that the defendant retained a competent valuer and proceeded in accordance with the opinion expressed by that valuer. On the facts, there was nothing in Mr Hurst's advice to warrant concern, given the professional and relatively thorough nature of the report, and therefore no obligation on the defendant to make further inquiries. The fact that the report may not have completely complied with the defendant's valuation manual did not, in my view, derogate from its reliability.

Sale by private treaty 94 When the defendant decided to prepare for sale of the Property, it instructed Kenny and Good to prepare a valuation with a view to a mortgagee auction sale. In his valuation dated 15 April 1996, Mr Hurst referred to the difficulties posed by the fact that the Property was in a flood area and lacked vehicular access. He said: "We consider the most appropriate method of marketing the subject property is that of sale by private treaty as this enables intending purchasers to make satisfactory inquiries at the local Council, with builders and architects ensuring full knowledge of the property prior to purchasing. Should Westpac Banking Corporation be required to offer the property for sale by public auction it should be prepared to pass the property in if it does not reach the reserve price. The property could then be offered for sale by private treaty over an extended marketing campaign of up to 6 months or more." 95 Broadly similar advice was received from Mr Holt of Century 21 Padstow, after the defendant had engaged that firm to conduct an auction sale. In their letter dated 23 May 1996, after referring to difficulties posed by inadequate access and flooding and the cost of building a private road, Century 21 said: "Given the amount of uncertainties surrounding future development of this block, we do not consider it in the bank's favour to submit the property to auction. Rather it would be wise to offer the block to the market and allow prospective purchasers to submit development applications to Council. A purchaser, given time to exhaust his inquiries and succeed in lodging an approved development application, would be likely to pay a substantially better price than if he were to bid blind at an auction." 96 Mr O'Connor, who provided a valuation report for the defendant on 28 February 2001, was asked to comment on whether sale by private treaty rather than auction was likely to have had any impact on the price obtained. He expressed the opinion that sale by private treaty was the preferred method of sale, having regard to the nature of the Property and the prolonged selling periods and settlement terms in some of the comparable sales. He said that a prospective purchaser would need to address the question of vehicular access, the cost of engineering and construction works, and the suitability of the existing development consent and in principle building approval for the purchaser's purposes. He expressed the opinion that those matters could not be satisfactorily resolved within the confines of a typical four-week auction campaign. 97 The plaintiffs contended that the Property should have been offered for sale by public auction rather than by private treaty, and asserted that an auction would have produced a higher purchase price. Alan Hyam, a practising barrister who is also a registered valuer, provided an affidavit on behalf of the plaintiffs and gave oral evidence on this matter. He was given access to the valuations by Messrs Hurst, O'Connor and Stevens, and he inspected the subdivision approval and the in principle building approval. He expressed the opinion that because there were insufficient sales of comparable land to permit a confident assessment of the market value, the Property should have been auctioned to establish its true market value and to obtain the best possible price. 98 The plaintiffs submitted that there was never any adequate explanation given by the defendant as to why it changed its course from auction to private treaty. They drew attention to the evidence of Mr True, who conceded that it was extraordinary and unusual that there were no documents in the defendant's files casting any light on the decision-making process that led to this change. It would have been open to the defendant to have submitted the Property to auction with a reserve price, and if the auction failed to produce a satisfactory market, the defendant could have proceeded to sell by private treaty subsequently. The plaintiffs contended that this approach should have been followed. 99 As I have said, the bank officer who had primary conduct of the matter, Mr Matheson, did not give evidence. Nor did any of his superiors. However, the evidence includes a written explanation by Mr Matheson in a report dated 26 November 1996, in which he said that he had "spent quite an amount of time examining the development prospects of the security property with the Bankstown City Council and considered that an auction of the property would not necessarily achieve exposure to a party specifically interested in purchasing the property as is the nature of the security property." 100 The plaintiffs attacked the evidence of Mr O'Connor that a sale by private treaty would allow more time for potential purchasers to investigate the difficulties of the Property, whereas a sale by auction would limit the time available for this purpose. They pointed out that the defendant accepted the purchaser's offer within 10 days after it authorised the agent to sell, observing that for this particular purchaser, no substantial inquiry time was needed. The plaintiffs noted that the defendant had earlier envisaged allowing a period of up to six months for the process of sale. They said that no valid reason had been given, in expert opinion evidence or otherwise, as to why a sale by auction would be incompatible with a process which allows time for investigation and inquiry by potential purchasers. 101 One can understand that an auction process might lose momentum if it extended over a very long period of time, but it does not follow that, if the subject property is unusual in ways that warrant investigation, the auction process could not allow some time for that investigation to take place. However, in my opinion it was plausible for Mr Hurst and Mr O'Connor to say, in effect, that the marketing atmosphere engendered by an auction process does not encourage potential purchasers to pursue inquiries to overcome obvious impediments in the subject property. Moreover, it was plausible for Mr O'Connor to take into account the delays in the selling process, and postponed settlement times, that had become necessary in the case of some comparable sales. 102 In the end, I was favourably impressed by the quality of the reports and evidence of Mr Hurst and Mr O'Connor, compared with the reports and evidence given by the plaintiffs' expert witnesses. I accept the expert opinions of Mr O'Connor and Mr Hurst, confirmed by the opinion of Mr Holt, that in the special circumstances of this case a sale by private treaty was more appropriate than a sale by auction. 103 Mr Holt wrote to the defendant on 23 May 1996. He said that Century 21 had carried out "a thorough investigation", and continued: "Our findings show the following: A) The block is not accessible by road. Access is provided by walking through mangroves and adjacent properties. B) The block is affected by flooding. Only 18% of the land is suitable for building. Although Council records show a road has been proposed to give access to the block, there is no reason to suggest the proposal will ever be actioned. A prospective purchaser may have the option to build a private road to give access to the lot. However this will require (1) extension of stormwater drainage (2) extra support to alleviate damage to storm water pipes (3) large excavation and the development of retaining walls (given the steep incline to access the lot)." 104 The letter then addressed the question whether the Property should be sold by auction or by private treaty, in the manner set out above. 105 While Mr Holt's advice was marred by inaccurate statements about access and availability of the property for building purposes, I do not regard those inaccuracies as detracting from his judgment as a real estate salesperson. The adequacy of the consideration obtained by the mortgagee 106 In my opinion the plaintiffs' contention that the Property was sold at a substantial undervalue has not been made out by the evidence. For the reasons I have given, I prefer the evidence of value by Mr Hurst and Mr O'Connor to the evidence given by Mr Stevens, Mr Alcock and Mr Elliott. I regard that evidence as establishing that the value of the Property was in a range within which the price of $115,000 fell. The development consent and the "in principle" building approval 107 The defendant decided to enforce its security rights consequent upon the plaintiffs' default in making payments under the loan agreement, early in 1996, well after the Council approvals had been given. It issued its letter of instructions to Kenny and Good on 28 February 1996. Mr Hurst's valuation was issued on 15 April 1996. The defendant subsequently decided to instruct an estate agent to sell the Property, and its letter of instructions was issued to Century 21 Padstow on 29 April 1996. The defendant obtained access to the working party report of July 1995 at some time prior to 22 August 1996, and supplied a copy of the report to Mr Holt with a covering letter of that date. 108 I have found that both Mr Hurst and Mr Holt made inquiries with the Council in which they were informed that there were no development or building approvals affecting the Property. They acted in reliance on that information, and nothing in the working party report pointed to any different conclusion. Conclusions 109 In my opinion the facts, when fully understood and analysed, do not make out any basis for claiming that the defendant's sale of the Property is open to challenge. The appropriate course, in my view, is to dismiss the proceedings. 110 I shall hear the parties on the question costs. **********

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Real Property Act 1900(NSW)s 57(2)(b)

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