Commercial & General Acceptance Ltd v Nixon

The decision of this question depends upon the construction and effect of s. 85(1) of the Property Law Act 1974-1976 Q.. That sub-section provides as follows:

It is the duty of a mortgagee, in the exercise after the commencement of this Act of a power of sale conferred by the instrument of mortgage or by this or any other Act, to take reasonable care to ensure that the property is sold at the market value. By sub-s. (3), a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale.

Although a mortgagee is not a trustee of the power of sale for the mortgagor, it is nevertheless clear that in conducting a sale of the mortgaged property he is not entitled to sacrifice the interest of the mortgagor in the surplus of the proceeds of the sale. It is equally clear that the mortgagee must exercise the power in good faith. However, the question whether, apart from statute, a mortgagee exercising a power of sale is under an obligation to take reasonable care to obtain a proper price, as well as an obligation to act in good faith, is one on which the authorities are conflicting, and indeed in my opinion irreconcilable. The question was left open by the majority of this Court in Forsyth v. Blundell [18] , and by Aickin J. in Australia and New Zealand Banking Group Ltd. v. Bangadilly Pastoral Co. Pty. Ltd. [1] , and it is unnecessary to decide it in the present case, because the law for Queensland is settled by s. 85(1). The duty of a mortgagee exercising a power of sale in Queensland is clear; it is to take reasonable care to ensure that the property is sold at market value. It may be accepted that in the present case the appellant took reasonable care to choose competent agents, and then left the conduct of the sale in their hands. In my opinion this does not mean that the appellant thereby discharged its duty under s. 85(1). The duty of the mortgagee is not merely to take care to ensure that the sale is carried out by competent agents. It is to take reasonable care to ensure that the property is sold at the market value. The duty to take reasonable care is one that the mortgagee is bound to perform, and he cannot escape liability for a breach of that duty by delegation to another. In other words, generally speaking at least, a mortgagee does not discharge his duty to take reasonable care simply by choosing a competent agent and then entrusting the conduct of the sale entirely to him. A reasonable man, selling his own property by auction, and wishing to obtain the market value, would not allow the auctioneers a free hand to advertise in whatever manner they thought fit; he would make reasonable endeavours to ensure that the advertising proposed was adequate. It is not unduly burdensome to require a mortgagee to exercise similar care.

1. (1973) 129 C.L.R. 477, at pp. 493, 506. 2. (1978) 139 C.L.R. 195, at pp. 222-225.

This conclusion derives some support from authority. In three decisions which proceeded on the basis that a mortgagee exercising a power of sale has a duty to take reasonable care to obtain a proper price, and in which the present question arose, the view was taken that the mortgagee did not discharge his duty simply by taking reasonable care to select a competent agent. In the first case, Wolff v. Vanderzee [2] , a mortgagee was held liable to the mortgagor for the loss occasioned by the negligence of the auctioneer employed to effect the sale. The auctioneer negligently described the rent in the particulars of sale, showing it to be less than it was in fact. Stuart V.C. held that the mortgagee was bound to take "every proper precaution to secure the best price" and that the negligent misdescription of the rent in the particulars of the sale rendered the mortgagee liable for any loss on the sale. The question arose again in Tomlin v. Luce [3] , where Kekewich J. held the mortgagees liable for loss occasioned to the mortgagors by a negligent misdescription of the property by the auctioneer carrying out the sale. After saying that mortgagee is entitled to employ agents, Kekewich J. went on, as follows [4] :

But whatever is done by him through an agent must be taken to be done by himself, and, as between him and the mortgagors, he must be responsible for any acts and defaults. So long, however, as he selects agents presumably competent he cannot be made liable for their errors in judgment or in matters of detail not seriously affecting the success of the sale or the price realized. On the other hand, I think that if the mortgagee is guilty, directly or indirectly, of a serious blunder inducing a failure to sell, or a large diminution of the price realized, the mortgagor can hold him responsible for that, and it is no answer for him to say that the blunder was no fault of his own, but was that of an agent in whom he properly placed implicit confidence. The mortgagee must in such a case be left to his remedy against his agent. The case was taken to the Court of Appeal [5] , but only in relation to the assessment of the loss occasioned by the negligence, and it was not argued that the mortgagees were not liable for the mistake of the auctioneer. However, the Court of Appeal accepted that they were liable. Cotton L.J. said [6] : The defence seems really to have been very much, if not entirely, directed to this, that the first mortgagees, selling under their power, employed a competent auctioneer, and were not answerable for any blunder which the auctioneer committed. There they were wrong, and that point was not I think argued before us What we think is this, - that the first mortgagees are answerable for any loss which was occasioned by the blunder made by their auctioneer at the sale. In Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd. [7] , a mortgagee was again held liable for a loss on the sale of the property caused by the fault of the auctioneers. Before the Court of Appeal counsel for the mortgagee submitted that a mortgagee should not be liable for the negligent default of his agent, but the Court refused to allow the point to be raised because it had not been taken at first instance. However, Cross L.J. [8] said that in any case he did not accept the submission, and the other two members of the Court, although not expressing a concluded view upon the question, referred to Tomlin v. Luce with apparent approval - see at pp. 969, 980. There appear to be no cases in which it was held that a mortgagee who had a duty to take reasonable care to obtain a proper price discharged that duty simply by taking reasonable care to appoint a competent agent. It is unlikely that the Queensland legislature, in enacting s. 85(1), intended to depart from the prevailing view that a mortgagee, if bound to take reasonable care, would be responsible for the want of care of an agent in affecting the sale. It does not necessarily follow, however, that the legislature intended to accept the distinction drawn by Kekewich J. in Tomlin v. Luce between errors in matters of detail and serious blunders, since in principle the proper distinction is between errors that amount to negligence and those that do not. 1. (1869) 20 L.T. 353. 2. (1889) 41 Ch.D. 573. 3. (1889) 41 Ch.D., at pp. 575-576. 4. (1889) 43 Ch.D. 191. 5. (1889) 43 Ch.D., at p. 194. 6. [1971] 1 Ch. 949. 7. [1971] 1 Ch., at p. 973.

The material words of s. 85(1) bear a close resemblance to those of s. 10 of the Building Societies Act 1939 U.K. which were as follows:

Where any freehold or leasehold estate has been mortgaged to a society as security for an advance, it shall be the duty of any person entitled by virtue of the mortgage to exercise any power, whether statutory or express, to sell the estate, to take reasonable care in exercising that power to ensure that the price at which the estate is sold is the best price which can reasonably be obtained In Reliance Permanent Building Society v. Harwood-Stamper [9] , Vaisey J. expressed the opinion that the obligation placed by this section on a building society mortgagee selling under its power of sale is similar to that of a fiduciary vendor. He described the effect of the section as follows [10] : I think that the "reasonable care" which has to be taken is to make sure, to assure oneself, that the price at which the estate is proposed to be sold is the best price which can reasonably be obtained. Vaisey J. was not dealing with the liability of the building society mortgagee for the fault of an agent, but the duty as he described it was higher than that of merely selecting a competent agent. 1. [1944] 1 Ch. 362, at p. 372. 2. [1944] 1 Ch., at p. 373.

In Tomlin v. Luce and Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd. it was argued, as it was before us in the present case, that a mortgagee exercising a power of sale should not have a higher duty of care than a trustee who, it was said, is not liable for the negligent fault of an agent. This argument was effectively answered by Cross L.J. in Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd., in the following words [11] :

But the position of a mortgagee is quite different from that of a trustee. A trustee has not, qua trustee, any interest in the trust property, and if an agent employed by him is negligent his right of action against the agent is an asset of the trust. A mortgagee, on the other hand, is not a trustee and if he sues the agent for negligence any damages which he can recover belong to him. Of course, in many cases the mortgagee may suffer no damage himself by reason of the agent's negligence because the purchase price, though less than it should have been, exceeds what is owing to the mortgagee. In such circumstances it may be that nowadays the law would allow the mortgagor to recover damages directly from the agent although not in contractual relations with him: but that was certainly not so a hundred years ago when Wolff v. Vanderzee [12] was decided. In those days the only way to achieve justice between the parties was to say that the mortgagee was liable to the mortgagor for any damage which the latter suffered by the agent's negligence and to leave the mortgagee to recover such damages, and also any damage which he had suffered himself, from the agent. I do not think that we can say that the mortgagee used to be liable to the mortgagor for the negligence of his agent but that that liability disappeared at some unspecified moment of time when the law had developed enough to allow the mortgagor to sue the agent himself. 1. [1971] 1 Ch., at p. 973. 2. (1869) 20 L.T. 353.

I consider that the words of the sub-section impose on a mortgagee exercising a power of sale a duty higher than merely to select a proper person to carry out the sale. The duty is to take reasonable care to ensure that the property is sold at the market value, and the mortgagee does not discharge that duty simply by delegating it to another, whether that other be an agent or an independent contractor.

On behalf of the appellant it was argued that a breach of s. 85(1) would constitute a misdemeanour under s. 204 of the Criminal Code Q., and that s. 85(1) should therefore be strictly construed. Section 204 provides as follows:

Any person who without lawful excuse, the proof of which lies on him, does any act which he is, by the provisions of any Public Statute in force in Queensland, forbidden to do, or omits to do any act which he is, by the provisions of any such Statute, required to do, is guilty of a misdemeanour, unless some mode of proceeding against him for such disobedience is expressly provided by Statute, and is intended to be exclusive of all other punishment.

The offender is liable to imprisonment for one year.

This argument cannot be accepted. The failure to take reasonable care as required by s. 85(1) is not an omission to do an act which the mortgagee is required to do, within the meaning of s. 204 of the Criminal Code. Section 204 applies only where a statute expressly requires the person concerned to do a particular act. It does not apply to a failure generally to take reasonable care, even though a duty to take reasonable care is imposed by statute. It would indeed be remarkable if the scope of the provisions of the Property Law Act 1974 had to be ascertained by reference to the provisions of the Criminal Code, but that is not the case.

For these reasons I am in agreement with the conclusion reached in the Supreme Court that the appellant was liable in damages to the respondents for a breach of the appellant's duty in relation to the sale. I would accordingly dismiss the appeal.

This appeal comes from the Full Court of the Supreme Court of Queensland which upheld a judgment in favour of the respondents who sued the appellant for damages following the sale by the appellant as mortgagee of land and improvements owned by the respondents and used in a caravan park business. After falling behind in repayments the respondents made their last payment under the mortgage in July 1976. From at least that date the respondents endeavoured to sell the property and the appellant, knowing this, extended forebearance. On 10 December 1976 the appellant executed a notice of default under the mortgage. The notice required payment, gave notice of proposed exercise of the power of sale and operated as a notice to quit. It was served by post on 18 January 1977. However, as the respondents were continuing to negotiate for the sale of the property the appellant took no steps to go into possession until 20 April when it informed the male respondent that it proposed to enter into possession. The respondents had left the property in February. The appellant obtained possession of the keys on 31 May 1977.

On 20 April the appellant instructed its solicitors to set in motion the procedure for a mortgagee's sale. W.E. Curtis & Company, real estate agents of Bundaberg ("the agents"), were retained. The agents advised the local manager of the appellant on 8 June that the value of the property was $50,000 to $60,000. On 10 June the manager determined that the reserve should be $80,000, being a figure midway between the top of the range advised by the agents and $100,000. The reason, according to the manager, was that the respondents had endeavoured to sell at a figure in excess of $100,000. The auction sale was held on 11 June and a bid of $20,000 was received. The property was passed in at this figure. The agents later negotiated with four persons who had attended the auction in an endeavour to interest them in a sale by private treaty. The best offer obtained was $55,000 from the person who had bid at the auction. He later withdrew the offer on his builder's advice. On 13 July 1977 Mr. P. Formosa, who lived in the neighbourhood but had not been at the auction, inquired if the property was still available and offered $55,000. When Mr. Callaghan, an employee of the agents, informed the local manager of Mr. Formosa's offer, indicating that all other avenues had been exhausted, the manager initially declined to contract with Mr. Formosa because a Mr. Clifford had offered $56,000 subject to his wife's approval. However, on 16 July Mrs. Clifford, having inspected the property, rejected it. On 18 July the manager, considering that the market had been established at $55,000, told Mr. Callaghan to proceed with Mr. Formosa. A contract of sale from the appellant as mortgagee to Formosa Estates Pty. Ltd. for $55,000 was executed shortly after this.

The respondents brought the proceedings pursuant to s. 85(3) of the Property Law Act 1974-1976 Q. for damages for breach by the appellant of its duty under s. 85(1) to take reasonable care to ensure that the property was sold at the market value. Section 85(1) provides:

It is the duty of a mortgagee, in the exercise after the commencement of this Act of a power of sale conferred by the instrument of mortgage or by this or any other Act, to take reasonable care to ensure that the property is sold at the market value.

The learned trial judge considered that the agents failed to advertise adequately. It is now settled that a mortgagee is not entitled to sell by public auction without there being some advertisement (Pendlebury v. Colonial Mutual Life Assurance Society Ltd. [13] ; Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd. [14] ; Henry Roach (Petroleum) Pty. Ltd. v. Credit House (Vic.) Pty. Ltd. [15] ).

1. (1912) 13 C.L.R. 676, at pp. 683-685. 2. [1971] 1 Ch. 949. 3. [1976] V.R. 309, at p. 313.

His Honour found that the local advertising was adequate. However, the advertisement in The Courier-Mail, the newspaper which circulates throughout Queensland, was unsatisfactory in a number of respects. The property was advertised once only and only two days before the auction. In addition the agents failed to ensure that the advertisement appeared in Wednesday's issue of The Courier-Mail, the issue in which real estate auctions are usually advertised. The appellant's manager had instructed that the sale be advertised in The Courier-Mail and his Honour held that the default was not that of the appellant itself but of its agents. His Honour further held that the effect of the unsatisfactory advertisement in relation to the auction carried forward to the ultimate sale by private treaty. These findings have not been challenged. The critical issue is whether the mortgagee is liable for the negligence of its agents as if it had been personally negligent or whether a mortgagee discharges its statutory duty to take reasonable care by employing reputable agents or by employing reputable agents and taking such other steps as may be reasonable in the circumstances. This was referred to as an unresolved area of doubt by Aickin J. in Australia and New Zealand Banking Group Ltd. v. Bangadilly Pastoral Co. Pty. Ltd. [16] . The trial judge and the Full Court held that in respect of the advertisement of the auction sale the mortgagee failed to take reasonable care to ensure that the property was sold at the market value although the default in advertising was that of the mortgagee's agent. The correctness of that view is the primary issue in this appeal.

The trial judge left open the contention of the respondent that the mortgagee was personally negligent in failing to notify the mortgagors of the negotiations for sale by private treaty so that they might submit names of possible purchasers and, in particular, in failing to invite an offer from Mr. and Mrs. Ryan who were prospective purchasers with whom the mortgagors had been negotiating shortly before the appellant took possession of the property. If the appellant succeeds on the primary issue it would be necessary to consider whether there was a personal failure to take reasonable care to ensure that the property was sold at the market value by the appellant.

The trial judge held that the property, if properly advertised, would have reached $80,000. He gave judgment for $25,000 being the difference between $80,000 and the price for which the property was sold - $55,000. The appellant has not challenged the correctness of this figure.

The appellant's case is that s. 85(1) imposes no more than a duty to take reasonable care and that this duty is satisfied in this case by the appointment of an agent reputed to be competent to make the sale. The argument gains some support from the language of the sub-section. It is not expressed, as perhaps it might have been, as a duty to ensure that reasonable care is taken in selling the property so as to obtain its market value. The common law concept of reasonable care is based on the standard of the reasonable man; there is a breach of duty if, and only if, the defendant has failed to do what a reasonable and prudent person would do, or has done what a reasonable or prudent person would refrain from doing, in the circumstances.

Generally speaking, a duty to take reasonable care does not make the defendant liable for the collateral negligence of an independent contractor; it is otherwise when the collateral negligence is that of a servant. In some circumstances the duty to take reasonable care will require the defendant not only to select a competent contractor but also to give adequate instructions, to exercise some surveillance over the contractor or to inspect the work which he is doing. A failure by the defendant to do so will involve him in liability for his breach of duty, rather than in vicarious liability for the collateral negligence of the contractor. Statutory duties imposed in the interests of safety have sometimes been classified as "non-delegable" duties so that the defendant cannot escape compliance with the duty by delegating performance of the task to an independent contractor. But these cases give no guidance here.

In some instances a duty to exercise due diligence or take reasonable care has been held to amount to a duty to ensure that due diligence is exercised or reasonable care is taken. Justification for the imposition of this liability has been based on the existence of special circumstances which have served to distinguish the particular case from the general norm. Thus, in Riverstone Meat Co., Pty. Ltd. v. Lancashire Shipping Co. Ltd. [17] the obligation imposed by r. 1 of art. III of the Hague Rules on carriers to "exercise due diligence to make the ship seaworthy" was held to be an obligation that due diligence should be exercised in making the ship seaworthy so that the shipowners were liable for the negligence of a fitter employed by the ship repairers. This interpretation was supported by a line of decisions in the United Kingdom and the United States of America. They recognized that the carrier, who has some form of ownership in the vessel, has "some measure of responsibility for seeing that it is fit and in proper condition for the carriage undertaken" [18] .

1. [1961] A.C. 807. 2. [1961] A.C., at p. 836.

Section 85(1) is not a mere reflection of the common law duty of care with all its attendant characteristics. It was in the nineteenth century that equity decided, after much debate, that the mortgagee was not a trustee of his power of sale and that the power was not a fiduciary power (see Waters, The Constructive Trust (1964), pp. 174-183). Even so, there remained in equity the long-standing controversy: Was the duty of the mortgagee in exercising his power of sale limited to acting bona fide or did it extend to the taking of reasonable precautions to ensure that the property was sold at the market value? See Forsyth v. Blundell [19] . Section 85(1) resolved this controversy for Queensland by imposing the large duty.

In ascertaining the content of the statutory statement of the duty it is legitimate to take into account what, according to judicial opinion, was the liability in equity of the mortgagee as principal for the default of his agent in the exercise of the power of sale. The verdict of authority was all one way - that the mortgagee was liable for the default of his agent. Stuart V.C. in Wolff v. Vanderzee [20] ; Kekewich J. in Tomlin v. Luce [21] and Cotton L.J. on appeal [22] and recently Cross L.J. in Cuckmere Brick [23] have all stated that the mortgagee is so liable.

1. (1869) 20 L.T. 353, at p. 354. 2. (1889) 41 Ch.D. 573, at pp. 575-576. 3. (1889) 43 Ch.D. 191, at p. 194. 4. [1971] 1 Ch., at p. 973.

There are a variety of reasons to sustain this liability. The power is exercised primarily on behalf of and for the benefit of the mortgagee by his agent in whose selection the mortgagor has no say. The agent acts in accordance with the instructions of the mortgagee and has no independent discretion to exercise except in so far as the mortgagee may choose to leave arrangements for the sale in the hands of the agent. It is not unfair or unreasonable in this situation that the mortgagee should have the responsibility for the taking of reasonable care to ensure that the market value is obtained, including the responsibility for adequate advertising of the sale. He should satisfy himself that the property has been advertise in accordance with his intructions - that, after all, is what a prudent vendor would do in the circumstances.

The appellant is a finance company, no doubt experienced in the sale of properties. The class of mortgagees generally consists of institutional lenders experienced in the sale of property and to a lesser extent of small investors who for the most part are inexperienced. Unquestionably the duty is more easily discharged by the former than by the latter. But it is not unreasonable to require mortgagees generally, whether experienced or not, to bear the responsibility of seeing that adequate steps are taken to ensure that property is sold at the market value.

The major argument of the appellant against this proposition is to invoke by way of analogy the position of a trustee. In general, a trustee is bound to act in the management of the trust in the same manner that an ordinary prudent man of business would act in his own affairs (Jacobs' Law of Trusts in Australia, 4th ed. (1977), p. 508; Speight v. Gaunt [24] ). He is not guilty of "wilful default and neglect" unless he is personally at fault; thus in the absence of personal negligence he will not be liable for the default of a properly selected agent in a matter in which he was authorized to employ an agent. See s. 54(1) of the Trusts Act 1973 Q.. The appellant argues that as the mortgagee is not regarded as a trustee in exercising his power of sale, his duty should not be higher than that of the trustee.

This argument breaks down in several respects. The duty of the trustee is of general application; it governs all the actions and transactions of the trustee in the management of the trust. The duty of the mortgagee is specific; it relates to the exercise of his power of sale and its object is to ensure the obtaining of the market price. In the management of a trust the trustee is not, unlike the mortgagee, exercising a power for his own benefit subject to an obligation which is designed to ensure that he does not sacrifice the interests of others. Moreover, in Cuckmere Brick [25] Cross L.J., after observing that the position of a mortgagee differs from that of a trustee, said:

A trustee has not, qua trustee, any interest in the trust property, and if an agent employed by him is negligent his right of action against the agent is an asset of the trust. A mortgagee, on the other hand, is not a trustee and if he sues the agent for negligence any damages which he can recover belong to him. There are, accordingly, sound reasons for imposing on the mortgagee a stronger duty than that of the trustee. 1. [1971] 1 Ch., at p. 973.

The appellant, however, argues that in accordance with the modern law of negligence the agent may now be subject to a duty of care to the mortgagor and that a possible justification for making the mortgagee liable for his agent's default has been thereby eliminated. This argument was rightly rejected by Cross L.J. in Cuckmere Brick who said:

In such circumstances it may be that nowadays the law would allow the mortgagor to recover damages directly from the agent although not in contractual relations with him; but that was certainly not so a hundred years ago when Wolff v. Vanderzee [26] was decided. In those days the only way to achieve justice between the parties was to say that the mortgagee was liable to the mortgagor for any damage which the latter suffered by the agent's negligence and to leave the mortgagee to recover such damages, and also any damage which he had suffered himself, from the agent. I do not think that we can say that the mortgagee used to be liable to the mortgagor for the negligence of his agent but that that liability disappeared at some unspecified moment of time when the law had developed enough to allow the mortgagor to sue the agent himself. The mortgagor, lacking knowledge of what passed between the mortgagee and the agent, may encounter difficulty in proving negligence on the part of the agent, who in any event is acting primarily as the agent of the mortgagee and in accordance with his instructions. It is the mortgagee who has the most direct relationship with the mortgagor and who should be expected to have a clearer perception of his obligations to the mortgagor than the agent. If the negligent acts of the agent bring about a breach of the duty owed by the mortgagee to the mortgagor it would be consistent with the general principle of agency that the mortgagee as his principal be liable to the mortgagor for that negligence, even though the act leading to the breach is that of the agent (see Story on the Law of Agency, 9th ed. (1882), par. 452; Bowstead on Agency, 14th ed. (1976), pp. 307 et seq., esp. at p. 308). 1. (1869) 20 L.T. 353.

The presence of s. 85(3), which gives a person damnified by the breach of duty a remedy against the mortgagee exercising the power of sale, suggests that the mortgagor would look primarily to his mortgagee for compensation. As Mr. Griffin for the respondent noted, s. 85 was enacted after the Cuckmere Brick Case [27] . The language of s. 85(1) is very similar to the language used there by Salmon L.J. to describe the measure of the mortgagee's duty [28] . It may be that the dicta in Cuckmere Brick that this duty was not avoided by selecting a competent agent were considered by the draftsman to be part of the general law.

1. [1971] 1 Ch. 949. 2. [1971] 1 Ch., at pp. 968-969.

In the end we come back to the question whether the statutory duty is sufficiently performed by the mortgagee's appointment of an agent reputed to be competent and by leaving the arrangements for the sale entirely to him. The answer to this question depends on the interpretation of s. 85(1) in the light of the considerations already mentioned. The duty imposed by the subsection is specific. It requires "reasonable care" to be taken "to ensure" that the property is sold at the market value; it is not a mere duty to take reasonable care in a general sense. In this context the concept or standard of "reasonable care" is not satisfied by the mortgagee's delegation of the function to a real estate agent reputed to be competent. In the circumstances the standard of reasonable care expected of the mortgagee extends to the making of such arrangements as will ensure that the sale is properly advertised.

The submission that a narrower view should be adopted because otherwise the mortgagee could be criminally liable under s. 204 of the Criminal Code Q. for disobedience to statute law is without substance. Even if one makes the assumption that s. 204 applies to a duty imposed by statute to protect the private interest of a mortgagor, the circumstance that the section makes a breach of the duty an offence punishable by imprisonment is not a reason for giving to s. 85(1) a narrower interpretation than it should receive according to ordinary principles of statutory construction. To conclude otherwise would be to accord to s. 204 a marked influence on the construction of a variety of specific statutory commands and prohibitions.

It is unnecessary to consider whether in the alternative the appellant personally failed to take reasonable care in not advising the respondent of the negotiations for sale by the appellant by private treaty or inviting offers from parties with whom the respondent had been negotiating.

This is an appeal from the Full Court of the Supreme Court of Queensland which upheld the decision of the trial judge in favour of the respondents in an action in which they claimed against Commercial and General Acceptance Ltd. ("CAGA") as mortgagee damages arising out of the negligence of an estate agent employed by CAGA to sell a property. The respondents were the owners of the property and had granted to CAGA a mortgage over that property to secure their indebtedness to CAGA. The respondents were in default in payments due under the mortgage and subsequently CAGA entered into possession of the property and instructed its solicitors to proceed with a mortgagee's sale. A firm of real estate agents was engaged to advertise and conduct an auction sale. It is not now in dispute that the agents were negligent in respect of the manner in which they advertised the property, which they sold for $55,000 after an unsuccessful auction. The trial judge found in favour of the respondents on the issue of negligence and decided that the market value of the property was not less than $80,000 and accordingly gave judgment for the respondents for $25,000. The question for this Court is whether CAGA is liable as mortgagee for the consequences of the negligent conduct of its agent appointed by it to carry out the sale.

This question has not been the subject of authoritative decision in Australia or in the United Kingdom, as I observed in Australia and New Zealand Banking Group Ltd. v. Bangadilly Pastoral Co. Pty. Ltd. [29] and it was not necessary to decide it in that case. In the present case the point was put in two ways. It was said that under s. 85 of the Property Law Act 1974 Q. ("the Act") the mortgagee is under a statutory obligation and responsibility for the wrongful, including negligent, acts of its agents in the conduct of a mortgagee's sale. It was also said in the alternative that under the general law the mortgagee was responsible for failure of his agent to take reasonable care in the advertising and conduct of a mortgagee's sale.

The issue for this Court is whether a mortgagee discharges his statutory duty or his duty under the general law by selecting and employing reputable agents. CAGA contends that it is not responsible if such agents acted negligently or without due care in the performance of their duties as agents.

(1) It is the duty of a mortgagee, in the exercise after the commencement of this Act of a power of sale conferred by the instrument of mortgage or by this or any other Act, to take reasonable care to ensure that the property is sold at the market value.

(2) Within twenty-eight days from completion of the sale, the mortgagee shall give to the mortgagor notice in Form 8 of the Second Schedule.

(3) The title of the purchaser is not impeachable on the ground that the mortgagee has committed a breach of any duty imposed by this section; but a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale.

(4) A mortgagee who, without reasonable excuse, fails to comply with subsection (2) shall be guilty of an offence and liable to a penalty not exceeding $100.

(5) An agreement or stipulation is void to the extent that it purports to relieve, or might have the effect of relieving, a mortgagee from the duty imposed by this section.

(6) Nothing in this section affects the operation of any rule of law relating to the duty of the mortgagee to account to the mortgagor.

(7) This section applies to mortgages whether made before or after the commencement of this Act but only to a sale in the exercise of a power arising upon or in consequence of a default occurring after the commencement of this Act.

It will be observed that the duty of the mortgagee is "to take reasonable care to ensure that the property is sold at the market value" and that "a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale".

It is not I think necessary to decide whether this statutory provision effectively excludes the remedy under the general law. It appears to me to be desirable in the circumstances that the Court should determine this point in relation to the general law as well as under the specific statutory provision in Queensland. The appeal was argued on both bases and it was contended that if the statute did not cover the present case it was covered by the general law in favour of the mortgagors. The point is of general importance and the doubts as to the position under the general law should now be resolved.

The statutory duty is to take reasonable care to ensure that the property is sold at the market value. It will be noted that sub-s. (5) makes it impossible for the mortgagee to escape by agreement with the mortgagor from the responsibility placed upon him by sub-ss. (1) and (3), but the question is what is the nature of that duty.

Does the duty require the mortgagee to do no more than select an apparently qualified agent to arrange advertising and conduct the sale or is he responsible for the consequences of the negligence of his agent in carrying out those functions? The word "ensure" has a number of recognized meanings, or perhaps synonyms; the relevant ones given by the Shorter Oxford English Dictionary are: to warrant, to guarantee, to make certain. Each is concerned with the production of a result not with the means of doing so. Section 85(1) appears to me to be clearly directed to the production of a result, i.e. that the property is sold at the market value. If a mortgagee (whether an individual or a corporation) were to instruct an employee to take all the appropriate steps for the sale of the mortgaged property, he would undoubtedly be liable to the mortgagor if the negligent conduct of the sale produced a figure less than the market value. Does the engagement of an apparently qualified estate agent to conduct the sale discharge the duty to take reasonable care to ensure that the market value is obtained? In this statutory context it appears to me that the duty to take reasonable care cannot be delegated to an agent any more than it can be delegated to an employee, so as to relieve the mortgagee from the statutory duty.

This conclusion is reinforced by the background of decisions on this subject. Although there is no direct decision, there is a series of statements in cases over a period of about 100 years to the effect that a mortgagee is liable for a loss caused by the negligent conduct of an agent engaged by him to conduct a sale of the mortgaged property and there are no dicta to the contrary effect. In such circumstances it seems unlikely that the legislature would have intended to restrict the mortgagor's rights without expressing that intention in unequivocal terms.

I turn now to the various authorities in which this question has been discussed.

The first of the cases is Wolff v. Vanderzee [30] . In that case the mortgagee entered into possession of the mortgaged property after the mortgagor had defaulted in payment and shortly thereafter the mortgagee sold the property. Prior to the sale the auctioneer employed by the mortgagee made inquiries of the tenant as to the amount of rent which he was paying. The tenant told him £150 per annum but refused to produce the agreement. The auctioneer made no further inquiry as to the rent but described it in the particulars of the conditions of sale as being £150 per annum whereas the true figure was £182 per annum. The Vice-Chancellor said [31] :

[T]he court has to decide, upon the evidence before it, whether there has been any negligence in the conduct of the sale. According to rule, as laid down in Marriott v. The Anchor Reversionary Co. [32] , a mortgagee who enters into possession of the mortgaged estate, with a view to a sale, puts himself in a position of responsibility, and if, in selling the property, he fails to take every proper precaution to secure the best price, his conduct is equivalent to wilful neglect and default. He is bound to make inquiries, and is fastened with that knowledge which, by due diligence, he might have obtained. Here there has been neglect and default of the grossest kind. The mortgagee was in possession of the property, and the mortgagor being in embarrassed circumstances, the greatest care and circumspection was necessary in the exercise of the power of sale. Without going into the other particulars of the case, I think the misdescription of the rent at the time of the sale is in itself sufficient to render an inquiry necessary, and I shall therefore make the following decree: It appearing that, having regard to the particulars of sale and the course pursued in offering the said brewery and premises for sale, as in the pleadings mentioned, the same were not sold under circumstances calculated to produce the best price that could reasonably be obtained, order that the chief clerk do ascertain and certify whether the money produced by the said sale was a fair and proper price, and more or less than would have been fixed for a reserved price in case the said brewery, plant, and premises had been sold under a decree of this court. 1. (1869) 20 L.T. 353. 2. (1869) 20 L.T., at p. 354. 3. (1861) 3 De G.F. & J. 177 [45 E.R. 846].

That case comes very close to the present case because it was the auctioneer's failure to make proper enquiry as to the rent which led to the sale being questioned. There is however no express discussion of the difference between inquiries by the mortgagee personally and those undertaken by his auctioneer or agent acting for him.

The next case is Tomlin v. Luce [33] . In this case the mortgagees exercised their powers of sale and put up the land for sale by auction in four lots, the particulars stating: "all the roads on the property are constructed in the best possible manner, are kerbed and sewered, and there is perfect main drainage." Lots 2, 3 and 4 were sold for some £20,000 but the purchaser alleged, as was the fact, that the statement was incorrect and declined to complete unless compensation for the fact that the roads were not properly kerbed was given. The vendors were advised that the proper course was to complete the contract allowing appropriate compensation for the difference between the description and the facts. The second mortgagee claimed against the mortgagees for an account of all moneys received or which, but for their wilful neglect or default they might have received. Kekewich J. said [34] :

A power of sale is given to a mortgagee in order to enable him to realise his security, and he necessarily exercises it to that end. But he is not the owner of the estate, and therefore cannot sell as an absolute owner might, regardless of all other persons than himself. He owes a duty to the person entitled to the equity of redemption, or, as expressed by Lord Justice Lindley in a pregnant passage of the judgment of the Court of Appeal in the recent case of Farrar v. Farrars Ltd. [35] , he is under obligations to him. What restriction does this duty place on his actions? What is the limit of this obligation? Granted that all conditions calling the power of sale into operation have been fulfilled, a mortgagee is entitled to select his own time and mode of sale, and the Court will not interfere with his discretion except under circumstances which prove oppression or otherwise impeach the honesty of the transaction. He is entitled to employ agents. He may instruct a solicitor, and through him, if practising in the country, a London agent. He may, through that solicitor, or directly, instruct surveyors, auctioneers, and other whose services are reasonably required for the proper conduct of the sale. He may, through the solicitor, instruct counsel to settle the conditions of sale. But whatever is done by him through an agent must be taken to be done by himself, and, as between him and the mortgagors, he must be responsible for any acts and defaults. So long, however, as he selects agents presumably competent he cannot be made liable for their errors in judgment or in matters of detail not seriously affecting the success of the sale or the price realized. On the other hand, I think that if the mortgagee is guilty, directly or indirectly, of a serious blunder inducing a failure to sell, or a large diminution of the price realized, the mortgagor can hold him responsible for that, and it is no answer for him to say that the blunder was no fault of his own, but was that of an agent in whom he properly placed implicit confidence. The mortgagee must in such a case be left to his remedy against his agent. That case carries the matter a substantial distance but not all the way because it draws a distinction between different kinds of errors by agents, distinguishing between "errors in judgment or in matters of detail not seriously affecting the success of the sale" and on the other hand "a serious blunder inducing a failure to sell, or a large diminution of the price realized," although in the present case the conduct of the agents as found by the trial judge would fall within the category of a serious blunder inducing "a large diminution of the price realized". With respect I find that distinction difficult to justify in principle and likely to involve the drawing of fine distinctions on matters of degree rather than of substance. 1. (1889) 41 Ch.D. 573. 2. (1889) 41 Ch.D., at p. 575-576. 3. (1888) 40 Ch.D. 395, at p. 410.

In Kennedy v. de Trafford [36] the material facts were that Carswell and Dodson were tenants in common of a freehold property which they had mortgaged to de Trafford in 1877. Carswell became bankrupt in 1886 and Kennedy was appointed his trustee in bankruptcy. The mortgagee having died, his executors gave notice for repayment in accordance with the terms of the mortgage. Kennedy having refused to redeem, the executors gave notice of intention to sell. Having advertised without result, the executors agreed to sell to Dodson in 1889 for a sum equal to the principal owing with interest and costs. The informed Kennedy of the terms of the proposed sale but did not tell him that the purchaser was Dodson. Kennedy discovered that fact in 1891 but took no action until 1895 when he sued the mortgagee's executors and Dodson seeking to set aside the sale or, alternatively, damages. Kennedy succeeded at the trial but an appeal to the Court of Appeal was allowed and Kennedy's appeal to the House of Lords was rejected. Kennedy alleged (inter alia) that the executors had acted negligently and had taken no steps to obtain the best price. At first instance it was held that the mortgagees had acted bona fide and that the sale was not at a gross undervalue, but that Dodson had used his position unfairly and obtained a private benefit for himself to the attempted exclusion of his co-owner. It was held that the mortgagee had not taken reasonable precautions to ensure that a proper price was obtained and therefore the power of sale had not been properly exercised and the sale was set aside. Neither in the Court of Appeal nor in the House of Lords was any reference made in argument or in the judgments to Wolff v. Vanderzee [37] or Tomlin v. Luce [38] . Lindley L.J. expressed the duty of a mortgagee as follows [39] :

Now, the Vice-Chancellor has come to the conclusion that reasonable precautions to obtain a proper price were not used. The reason why these words were added was this: A mortgagee is not a trustee of a power of sale for the mortgagor at all; his right is to look after himself first. But he is not at liberty to look after his own interests alone, and it is not right, or proper, or legal, for him, either fraudulently, or wilfully, or recklessly, to sacrifice the property of the mortgagor: that is all. If it could be said in this case that the mortgagees had done any of those things, I can understand setting aside the sale; but when one comes to the facts it appears to me that, "reasonable precautions," in the sense in which those words are used in Farrar v. Farrars, Ltd. [40] , to obtain a purchaser at a good price for this property, the mortgagees, through their solicitor, acted from first to last in an honourable and businesslike manner, without in the least sacrificing the interests of the mortgagors. It is impossible to look at the facts without seeing that the mortgagee gave these mortgagors every possible opportunity of transferring the mortgagor, of reducing the mortgage, or of selling if they could. 1. [1896] 1 Ch. 762; [1897] A.C. 180. 2. (1869) 20 L.T. 353. 3. (1889) 43 Ch.D. 191. 4. [1896] 1 Ch., at p. 772. 5. (1888) 40 Ch.D. 395, at p. 411.

In the House of Lords the respondents were not called on and the appeal was dismissed. Lord Herschell said [41] :

My Lords, I am myself disposed to think that if a mortgagee in exercising his power of sale exercises it in good faith, without any intention of dealing unfairly by his mortgagor, it would be very difficult indeed, if not impossible, to establish that he had been guilty of any breach of duty towards the mortgagor. Lindley L.J., in the Court below, says that "it is not right or proper or legal for him either fraudulently or wilfully or recklessly to sacrifice the property of the mortgagor". Well, I think that is all covered really by his exercising the power committed to him in good faith. It is very difficult to define exhaustively all that would be included in the words "good faith," but I think it would be unreasonable to require the mortgagee to do more than exercise his power of sale in that fashion. Of course, if he wilfully and recklessly deals with the property in such a manner that the interests of the mortgagor are sacrificed, I should say that he had not been exercising his power of sale in good faith.

My Lords, it is not necessary in this case to give an exhaustive definition of the duties of a mortgagee to a mortgagor, because it appears to me that, if you were to accept the definition of them for which the appellant contends, namely, that the mortgagee is bound to take reasonable precautions in the exercise of his power of sale, as well as to act in good faith, still in this case he did take reasonable precautions. Of course, all the circumstances of the case must be looked at.

His Lordship thus dealt with the matter on the footing that there was no negligence on the part of the mortgagees and had no occasion to express a view on the present point. Lord Macnaghten went somewhat further when he said [42] : [I]f a mortgagee selling under a power of sale in his mortgage takes pains to comply with the provisions of that power and acts in good faith, I do not think his conduct in regard to the sale can be impeached. 1. [1897] A.C., at p. 185. 2. [1897] A.C., at p. 192.

Those observations seem to me however to be equivocal on the point of liability for negligence in respect of acts done negligently by a mortgagee's agent in arranging and conducting a sale.

The next decision is Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd. [43] , a decision of the Court of Appeal. Salmon L.J. discussed and analysed the authorities to which I have already referred and said [44] :

It is impossible to pretend that the state of the authorities on this branch of the law is entirely satisfactory. There are some dicta which suggest that unless a mortgagee acts in bad faith he is safe. His only obligation to the mortgagor is not to cheat him. There are other dicta which suggest that in addition to the duty of acting in good faith, the mortgagee is under a duty to take reasonable care to obtain whatever is the true market value of the mortgaged property at the moment he chooses to sell it: compare, for example, Kennedy v. de Trafford [45] with Tomlin v. Luce [46] . His Lordship referred to Tomlin v. Luce and Cotton L.J.'s observations which I have quoted above and said [47] : Although the point was not argued in the Court of Appeal, the passage in Cotton L.J.'s judgment which I have read must be treated with the greatest respect. He was a master in this branch of the law, and he and the other members of the court as well as counsel treated the point as too plain for argument. Indeed it had long been so regarded by the courts: see Wolff v. Vanderzee [48] and National Bank of Australia v. United Hand-in-Hand and Band of Hope Co. [49] in which the Privy Council expressed the clear view that a mortgagee is chargeable with the full value of the mortgaged property sold if, from want of due care and diligence, it has been sold at an undervalue. It would seem, therefore, that many years before the modern development of the law of negligence, the courts of equity had laid down a doctrine in relation to mortgages which is entirely consonant with the general principles later evolved by the common law. His Lordship also referred toMcHugh v. Union Bank of Canada [50] which was a case of a mortgage security over horses where the relevant point was whether the mortgagee was liable in damages for the manner in which he dealt with the horse between the time when he took possession of them and the date of sale. In that case Lord Moulton in delivering the reasons of the Privy Council said [51] : It is well settled law that it is the duty of a mortgagee when realizing the mortgaged property by sale to behave in conducting such realization as a reasonable man would behave in the realization of his own property, so that the mortgagor may receive credit for the fair value of the property sold. That passage however does not directly advert to the position where the relevant conduct is that of the mortgagee's agent. Cross L.J. said [52] : In the confused state of the authorities we are, I think, entitled - indeed, I think that we ought - to treat the views in question, though deserving of the greatest respect, as not essential to the decision in Kennedy v. de Trafford, and to consider for ourselves whether we prefer them to the views expressed in Wolff v. Vanderzee and Tomlin v. Luce.

Approaching the problem in that way, I have no hesitation in saying that I prefer the latter. There is no doubt that a mortgagee who takes possession of the security with a view to selling it has to account to the mortgagor for any loss occurring through his negligence or the negligence of his agent in dealing with the property between the date of his taking possession of it and the date of the sale, including, as in the McHugh Case, steps taken to bring the property to the place of sale. It seems quite illogical that the mortgagee's duty should suddenly change when one comes to the sale itself and that at that stage if only he acts in good faith he is under no liability, however negligent he or his agent may be.

Cairns L.J. said [53] : I find it impossible satisfactorily to reconcile the authorities, but I think the balance of authority is in favour of a duty of care. After referring to the cases he said [54] : I therefore consider that Tomlin v. Luce is the stronger authority and I would hold that the present defendants had a duty to take reasonable care to obtain a proper price for the land in the interest of the mortgagors. 1. [1971] 1 Ch. 949. 2. [1971] 1 Ch., at p. 966. 3. [1896] 1 Ch. 762; [1897] A.C. 180. 4. (1889) 43 Ch.D. 191, at p. 194. 5. [1971] 1 Ch., at p. 967. 6. (1869) 20 L.T. 353. 7. (1879) 4 App.Cas. 391. 8. [1913] A.C. 299. 9. [1913] A.C., at p. 311. 10. [1971] 1 Ch., at p. 972. 11. [1971] 1 Ch., at p. 977. 12. [1971] 1 Ch., at p. 978.

The Court of Appeal concluded that, as the point had not been raised at the trial, it would in the circumstances be unfair to allow it to be raised for the first time on appeal because the trial might well have taken a different course if it had been argued that there was no liability for the agent's negligence. In that sense the observations on the negligence of the agents are obiter but they represent the considered view of the Court of Appeal after full argument on, and a full review of, the cases.

In these circumstances the question must be decided as a matter of principle and not as governed by any decision of high authority. If there were a line of cases clearly establishing one view or another it would be a serious question whether we should depart from it, but that is not the case.

No sound reason in principle is put forward for regarding the relationship of mortgagee and mortgagor in respect of a sale by the mortgagee as involving no responsibility other than for fraud. It is no doubt true that vicarious liability is more often encountered in relation to torts and breaches of statutory duty. It does not however appear to have been successfully contended that liability for breach of contract can be avoided by contending that performance has been delegated to an authorized agent rather than to an employee; cf. Learoyd Bros. & Co. v. Pope & Sons Ltd. [55] where the plaintiff had agreed that the defendant might have the work done by a subcontractor but was held entitled to recover from the head contractor for the subcontractor's defective workmanship.

The relationship of mortgagor and mortgagee is more than that of contract, the nature of the relationship having been worked out by the Court of Chancery, though now mostly, but not exclusively, contained in the express terms of the mortgage instrument or in statutes. The power of sale is an essential part of the mortgagee's security but it is not to be exercised exclusively in his own interest without regard to the interests of the mortgagor by directing attention exclusively to the recovery of the mortgage debt, interest and expenses rather than obtaining the market value of the property as at the date of the sale.

It must be borne in mind that a mortgagee is not a trustee, nor is his position similar to that of a trustee. A mortgagee has for his own protection a power of sale but in its exercise he must not sacrifice the interests of the mortgagor or of subsequent incumbrancers. If his agent is negligent in the conduct of the sale he may recover any loss suffered by him but he recovers on his own account, not on account of the mortgagor, and could not claim more than his own loss. As a matter of policy these considerations demonstrate that the mortgagee is in a very different position from a trustee and he should be responsible for his agent's negligence in so far as it affects the mortgagor, an obligation for which he would be entitled to an indemnity from his agent.

The argument that the mortgagor would now have a cause of action in negligence against the agent (although such a right did not exist at the time of the earlier cases) and therefore has no need for, and does not possess, a right of action against the mortgagee is fallacious as Cross L.J. demonstrated in Cuckmere Brick [56] . There is nothing unusual in a principal being vicariously liable for the acts of his agent; indeed it is generally so. There is nothing about the relationship of mortgagee and mortgagor which makes it inappropriate that the former should be liable for loss caused to the latter by reason of the negligence of the former's agent in carrying out instruction to conduct a mortgagee's sale.

I am satisfied that the respondent is entitled to succeed under s. 85 of the Act, and if it were not effective to produce that result liability would exist under the general law. I would therefore dismiss the appeal.

The appellant ("CAGA") was the mortgagee, and the respondents ("the Nixons") the mortgagors, of a property known as the "Sunny Seas Caravan Park" situated at Kelly's Beach, Bargara, about eight miles from Bundaberg in Queensland. Following the mortgagors' default in 1976, CAGA entered into possession in 1977 and instructed its solicitors to proceed with a mortgagee's sale. A firm of real estate agents in Bundaberg were engaged. Following an unsuccessful auction sale the property was sold by private treaty for $55,000.

The Nixons then brought this action in the Supreme Court of Queensland, claiming to have suffered loss by reason of the price obtained for the property being substantially less than its market value. They alleged that in the exercise of its power of sale CAGA failed to take reasonable care to ensure that the property was sold at the market value and was therefore in breach of s. 85(1) of the Property Law Act 1974-1976 Q. ("the Act"). It was also alleged, further or in the alternative, that CAGA was in breach of the common law duty imposed on a mortgagee exercising a power of sale.

The learned trial judge (Connolly J.) found that the estate agents failed to advertise the auction sale adequately. Notwithstanding that the failure was not that of CAGA itself, his Honour held it responsible for the negligence of its agent and consequently in breach of the duty imposed upon it by s. 85 of the Act. The advertising was found to be inadequate in that only one announcement was made in The Courier Mail (the daily newspaper circulating throughout Queensland), it was published only two days before the sale on a day not normally favoured for such advertisements, and it failed to identify sufficiently the location of the property. The Nixons also complained of personal negligence on CAGA's part in failing to consult with them with respect to potential purchasers when private negotiations were proceeding following the auction sale. The trial judge appears to have considered that in the particular circumstances of the case this submission was one of substance, but found it unnecessary to pursue it in view of the finding to which I have referred. On the question of damages, his Honour found that had the auction sale been properly and effectively advertised the property would have been saleable for at least $80,000. He therefore gave judgment for the Nixons in the sum of $25,000.

CAGA appealed unsuccessfully to the Full Court (Lucas, Kelly and Sheahan JJ.), and now appeals by special leave to this Court. The sole question which the appellant has pressed before us is whether the finding of breach of statutory duty by CAGA was rightly made. No challenge is now made to the finding of inadequate advertising nor to the manner in which the learned trial judge dealt with the question of damages. Mr. Pincus Q.C., counsel for CAGA, in an attractively succinct argument, argued that in exercising a power of sale a mortgagee discharges his duty of care by employing reputable agents, with the consequence that he ought not be fixed with responsibility for any mistake which those agents may make.

Before proceeding to consider this question, it may be observed that the allegation of breach of the duty which the common law imposes on a mortgagee exercising a power of sale does not call for consideration. It is therefore unnecessary to examine what Mason J. in Forsyth v. Blundell [57] referred to as "there vexed question whether the mortgagee's duty is merely to act bona fide or whether, in addition, he is bound to take reasonable precautions to obtain a proper price"; see also, per Walsh J., in the same case [58] . In Queensland, the Act creates a statutory duty in terms of reasonable care.

1. (1973) 129 C.L.R. 477, at p. 506. 2. (1973) 129 C.L.R., at p. 493.

The material provisions in s. 85 of the Act are as follows:

(1) It is the duty of a mortgagee, in the exercise after the commencement of this Act of a power of sale conferred by the instrument of mortgage or by this or any other Act, to take reasonable care to ensure that the property is sold at the market value.

(2) Within twenty-eight days from completion of the sale, the mortgagee shall give to the mortgagor notice in Form 8 of the Second Schedule.

(3) The title of the purchaser is not impeachable on the ground that the mortgagee has committed a breach of any duty imposed by this section; but a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale.

(4) A mortgagee who, without reasonable excuse, fails to comply with subsection (2) shall be guilty of an offence and liable to a penalty not exceeding $100.

(5) An agreement or stipulation is void to the extent that it purports to relieve, or might have the effect of relieving, a mortgagee from the duty imposed by this section.

(6) Nothing in this section affects the operation of any rule of law relating to the duty of the mortgagee to account to the mortgagor.

(7) This section applies to mortgages whether made before or after the commencement of this Act but only to a sale in the exercise of a power arising upon or in consequence of a default occuring after the commencement of this Act.

There can be no argument that sub-s. (1) of this section imposes on a mortgagee a duty to take reasonable care. The question at issue is whether, having taken reasonable care to engage reputable agents, the mortgagee is nevertheless to be held liable for the negligence of those agents in carrying out the task assigned to them. In the final analysis, the resolution of this question will be found in the proper construction of s. 85. As I have indicated, it is not necessary in this case to examine the quality of the duty which at common law rests on a mortgagee who exercises a power of sale, because the Act has declared a statutory duty in terms of reasonable care. Nevertheless, in relation to the liability of a mortgagee for the acts or omissions of an agent, the analogy provided by the common law is very close and merits attention. It will be seen that although this question cannot be said to be foreclosed by authority at common law, such guidance as there is in the cases is consistently against the appellant's argument in this case.

In Wolff v. Vanderzee [59] the Vice-Chancellor held the mortgagee liable in a case where the auctioneer of a leased property misdescribed the rental being received, with the result that a lower price was obtained for the property. The report of the case does not throw a great deal of light on the subject.

In Tomlin v. Luce [60] Kekewich J. was seized of a case where the auctioneers made a significant mistake in describing the property and the second mortgagees successfully held the first mortgagees responsible. The case went to the Court of Appeal, but the question of liability was not argued. However, Cotton L.J. in his judgment referred to the matter in the following terms [61] :

The defence seems really to have been very much, if not entirely, directed to this, that the first mortgagees, selling under their power, employed a competent auctioneer, and were not answerable for any blunder which the auctioneer committed. There they were wrong, and that point was not I think argued before us. What we think is this, - that the first mortgagees are answerable for any loss which was occasioned by the blunder made by their auctioneer at the sale. 1. (1889) 41 Ch.D. 573. 2. (1889) 43 Ch.D. 191, at p. 194.

The question was again before the Court of Appeal in Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd. [62] . At first instance, Plowman J. found the mortgagee in breach of duty by reason of, inter alia, inadequate advertising of the property for sale, but the question of the mortgagee's liability for the acts of its agent was not then argued. In the Court of Appeal, Salmon L.J. referred to the question. He remarked [63] that the submission of no liability "certainly cannot be squared with Cotton L.J.'s judgment in Tomlin v. Luce" but declined to express a concluded view upon the point as it had not been taken below. Cross L.J. [64] firmly rejected the argument that a mortgagee is not liable for the negligence of his agent. Cairns L.J., referring to the trial, said [65] :

Since it was there conceded that the defendants would be liable for any negligence of their agents I do not think it is open to the defendants in this court to contend that they are not so liable The point was not argued in the Court of Appeal in Tomlin v. Luce and it may be that for the reason what was said about it is not strictly binding on us but it is at least of high persuasive authority If it were open I should need more argument to satisfy me that Kekewich J. and Cotton L.J. were wrong. 1. [1971] 1 Ch. 949. 2. [1971] 1 Ch., at p. 969. 3. [1971] 1 Ch., at p. 973. 4. [1971] 1 Ch., at p. 980.

It is clear from the foregoing recital that the question has not been determined authoritatively, and this was recognized in passing by Aickin J. in Australia and New Zealand Banking Group Ltd. v. Bangadilly Pastoral Co. Pty. Ltd. [66] . His Honour found it unnecessary in that case to resolve the question. It follows that Mr. Pincus is entirely correct when he says that the matter is free of binding precedent.

Mr. Pincus submitted that to hold a mortgagee liable for the negligence of an independent contractor was harsh, illogical and unnecessary. It was harsh when applied to the case of a modest private investor who when confronted with the necessity of exercising a power of sale in order to recover money lent could not be expected to do more than engage reputable agents to do whatever was necessary. It was illogical when compared with the lesser responsibility laid upon a trustee for the sale of a property (cf. Speight v. Gaunt [67] ). Finally, it was unnecessary in modern times to hold the mortgagee responsible because the mortgagor could now sue the agent himself.

In Cuckmere Brick, Cross L.J. responded to similar arguments in the following way [68] :

counsel pointed out that a trustee is not liable for the default of an agent whom it is reasonable for him to employ. But the position of a mortgagee is quite different from that of a trustee. A trustee has not, qua trustee, any interest in the trust property, and if an agent employed by him is negligent his right of action against the agent is an asset of the trust. A mortgagee, on the other hand, is not a trustee and if he sues the agent for negligence any damages which he can recover belong to him. Of course, in many cases the mortgagee may suffer no damage himself by reason of the agent's negligence because the purchase price, though less than it should have been, exceeds what is owing to the mortgagee. In such circumstances it may be that nowadays the law would allow the mortgagor to recover damages directly from the agent although not in contractual relations with him; but that was certainly not so a hundred years ago when Wolff v. Vanderzee [69] was decided. In those days the only way to achieve justice between the parties was to say that the mortgagee was liable to the mortgagor for any damage which the latter suffered by the agent's negligence and to leave the mortgagee to recover such damages, from the agent. I do not think that we can say that the mortgagee used to be liable to the mortgagor for the negligence of his agent but that that liability disappeared at some unspecified moment of time when the law had developed enough to allow the mortgagor to sue the agent himself. With respect, I find these comments persuasive. There is the further consideration advanced by Mr. Griffin, counsel for the Nixons, that for a motgagor to sue an agent in circumstances where there has been no prior relationship between them and where he cannot know the instructions that were given by the mortgagee could be an exercise fraught with difficulty. If it is true that the principle may operate harshly so far as the small investor is concerned, this is the consequence of the primary rule which places a duty on the mortgagee in the first place. The law has proceeded on the premise that mortgagors and others with an interest in the property stand in need of protection. In any event, it is to be expected that in a proper case the mortgagee's undoubted right of recourse against the agent would ensure a just result. 1. [1971] 1 Ch., at p. 973. 2. (1869) 20 L.T. 353.

Against the background of the cases to which I have referred, I return now to s. 85 of the Act. As Sheahan J. observed in the Full Court, sub-s. (1), in framing the duty, picks up substantially the language of Salmon L.J. in Cuckmere Brick, a decision which was reported shortly before the enactment of the Act. The provision resolves the conflict which at common law surrounds the nature of the obligation on a mortgagee who exercises a power of sale. The mortgagee must take reasonable care to ensure that the property is sold at the market value. Other points relevant to the construction of the section may be noted. The duty is laid on the mortgagee, and no one else. It is a duty to take reasonable care to "ensure", that is to say, to make sure that market value is achieved (cf. per Vaisey J. in Reliance Permanent Building Society v. Harwood-Stamper [70] ). Sub-section (3) confers on a person damnified by a breach of the duty a remedy in damages against the mortgagee. Sub-section (5) makes plain the legislative intention that the mortgagee should not be able to escape from the duty which the section imposes upon him. In the light of these provisions, it seems to me to follow that the duty imposed on the mortgagee is one which he cannot delegate to another person. In my opinion, it clearly evokes the principle which was stated by Latham C.J. in Torette House Pty. Ltd. v. Berkman [71] :

Further, if a person is himself bound to perform a particular duty, he cannot escape liability for failure to perform that duty by delegating performance of it to another person; cf. also Mason J. in Stoneman v. Lyons [72] . It would make nonsense of the right which is conferred upon persons who suffer loss by reason of the negligent failure to sell the mortgaged property at market value if the mortgagee could escape liability by engaging an independent contractor. It is quite clear that the section gives no right of recourse against anyone but the mortgagee the exercise of whose power of sale is the occasion of the loss. 1. [1944] 1 Ch. 362, at p. 373. 2. (1940) 62 C.L.R. 637, at p. 647. 3. (1975) 133 C.L.R. 550, at p. 574.

In my opinion, therefore, there having been a breach of the duty imposed upon CAGA by s. 85(1) of the Act, that company was rightly held liable to the Nixons for the damages occasioned to them by the breach.

In the course of argument, Mr. Griffin returned to the allegation of personal negligence which was levelled at CAGA in the course of the trial, and to which I adverted at the commencement of these reasons. In the light of the conclusion to which I have come, it is unnecessary to consider this allegation.

The duty of a mortgagee exercising a power of sale has been formulated sometimes as a duty to exercise the power in good faith, sometimes as a duty to take reasonable precautions to obtain a proper price. The divergent strands of authority were referred to in Forsyth v. Blundell [73] and in Australia and New Zealand Banking Group Ltd. v. Bangadilly Pastoral Co. Pty. Ltd. [74] . In both cases it was found unnecessary to decide between the formulations. In Cuckmere Brick Co. v. Mutual Finance Ltd. [75] the Court of Appeal considered the authorities, and held that the mortgagee in exercising the power of sale owed a duty to take reasonable care to obtain a proper price for the property, or, as Salmon L.J. preferred to say, its true market value. An extensive and critical review of the cases was recently offered by Mr. E. L. G. Tyler (Enforcing Mortgage Securities, Australian Law Journal, vol. 55 (1981), p. 559). In Queensland, whence the present appeal has come, the legislature has intervened by enacting s. 85(1) of the Property Law Act 1974 Q.:

It is the duty of a mortgagee, in the exercise after the commencement of this Act of a power of sale conferred by the instrument of mortgage or by this or any other Act, to take reasonable care to ensure that the property is sold at the market value. 1. (1973) 129 C.L.R. 477. 2. (1978) 139 C.L.R. 195. 3. [1971] 1 Ch. 949.

The balance of opinion in this Court accepts that a duty to take reasonable precautions to obtain a proper price imposes a more onerous duty upon a mortgagee than a duty to act in good faith, the duty to act in good faith requiring the mortgagee to act without fraud and without wilfully or recklessly sacrificing the interests of the mortgagor but stopping short of exposing the mortgagee to liability for mere negligence or carelessness (see Forsyth v. Blundell, per Walsh J. [76] and Mason J. [77] ; Pendlebury v. Colonial Mutual Life Assurance Society Ltd. [78] ). Menzies J. expressed a dissenting view in Forsyth v. Blundell when he said [79] : "To take reasonable precautions to obtain a proper price is but a part of the duty to act in good faith" though his Honour immediately declared the duty to fall short of the standard which the mortgagee, as a shrewd property owner, would be likely to adopt if the property were his own.

1. (1978) 129 C.L.R., at p. 493. 2. (1973) 129 C.L.R., at p. 506. 3. (1912) 13 C.L.R. 676, at pp. 680, 700. 4. (1973) 129 C.L.R., at p. 481.

It follows that the statutory duty, which appears to reflect some of their Lordships' language in Cuckmere Brick, is more onerous than a duty to act in good faith. If a breach of the statutory duty is established, as Connolly J. found and as the Full Court affirmed, it is unnecessary to define the limits of the duty to act in good faith or to determine whether the mortgagee's duty would be so limited if it were not for the statute. The respondent mortgagor sued and recovered a judgment upon a statutory cause of action, and the equitable obligation of the appellant mortgagee was not in issue. The extent of the statutory duty is to be ascertained from the terms in which it is expressed, aided by a consideration of those cases in which the same class of conduct as that complained of in the present case has been relied on to sheet home liablity to the mortgagee.

The finding upon which the respondent succeeded at the trial was that "properly and effectively advertised the mortgaged property would have been saleable for at least $80,000." In fact the appellant sold it for $55,000 to a buyer introduced by a firm of real estate agents whom the appellant's solicitors had engaged to assist in selling the mortgaged property. There was no breach of duty in selecting the firm of real estate agents who advertised the property, held an unsuccessful auction and thereafter negotiated with prospective purchasers. But the real estate agents failed, in breach of a specific instruction given to them, to advertise the auction effectively in The Courier Mail, a newspaper with a wide circulation in Queensland. They inserted only one advertisement on a day which was not propitious for real estate auctions, and it appeared in an inconspicuous part of the newspaper. It was this failure to advertise effectively in The Courier Mail which led, in the view of the learned trial judge, to the sale at $25,000 below what the property would otherwise have fetched. The question is whether the failure to advertise in The Courier Mail for which the firm of real estate agents were responsible is in breach of the duty to be found in s. 85(1) of the Property Law Act. If there were a breach of the mortgagee's statutory duty, he became liable to the mortgagor in damages pursuant to s. 85(3), upon which the mortgagor sued: " a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale."

Section 85(1) imposes a duty to be performed in the exercise by the mortgagee of the power of sale which has been conferred upon him. In the event of breach and consequential damage, he alone is liable. The statute imposes a duty upon him, not upon his servant, agent or independent contractor. The mortgagee cannot relieve himself of the duty by asking another to assume it. Nevertheless, there is no reason why the duty cannot be performed by the acts of another who is engaged to do what the duty requires to be done. It is the duty, not its performance, which is personal to the mortgagee. If there should be an auction, the mortgagee does not have to be the auctioneer; if prospective purchasers wish to inspect the property, the mortgagee may arrange for another to be on hand to let them in. On occasions, he will have to rely upon what others tell him - as to the age of a building, for example, or the likelihood of planning changes affecting the property. Indeed, to discharge his duty a mortgagee would frequently be required to obtain and act upon the opinions and advice of others more knowledgeable than himself. But from beginning to end, the duty to take reasonable care to ensure that the property is sold at market value rests upon the mortgagee. What does the duty oblige the mortgagee to do? The duty, to be performed in the exercise of a power of sale, extends to the steps to be taken to attract potential buyers for the property, the negotiations for sale, and the settling of the terms of sale. Ordinarily a vendor of property engages others whose professional or business skills equip them to perform these tasks and who, by taking the appropriate steps, ensure a sale of the property at market value.

A question therefore arises as to whether the statutory duty is performed if agents are appointed to take the steps appropriate to ensure a sale at market value and care is taken to appoint competent agents, or whether the statute requires that the appropriate steps be taken, though the mortgagee may appoint another to take them on his behalf. The duty is defined in terms which look to the result of its performance - a sale at market value - and the phrase "reasonable care to ensure" describes what is to be done to effect that result. The duty relates to the acts which are to be done, not to the appointment of a person to do them. I would therefore construe s. 85(1) as imposing upon the mortgagee a duty to do what ought reasonably to be done to ensure a sale at market value, though he is at liberty to perform the duty by the hands of others. If an omission is made in doing what ought reasonably to be done to ensure a sale at market value, the duty is not performed, and it is immaterial that the omission was made by another upon whom the mortgagee relied to do it. Although it may have been entirely reasonable - or even necessary - for the mortgagee to rely upon another to do the omitted act, that circumstance does not establish that the mortgagee's duty was performed.

The question is not whether the mortgagee is negligent according to a common law standard in the appointment of a person to do what ought to be done to ensure a sale at market value. Nor is there a question of the mortgagee being held vicariously liable for another's breach of statutory duty (cf. Darling Island Stevedoring and Lighterage Co. Ltd. v. Long [80] ) for the statute does not impose a duty upon a person other than the mortgagee. The question is simply whether the mortgagee has discharged by performance the duty which the statute imposes upon him.

The duty imposed by s. 85(1) stands in contrast with the formulation of a mortgagee's duty as a duty to act in good faith without fraud and without wilfully or recklessly sacrificing the interests of the mortgagor. When the duty is stated in that way, it acknowledges that the mortgagee's interest is the primary interest which the power of sale is conferred to protect. So stated, the duty does not require the mortgagee to act in protection of the interests of the mortgagor his sureties and others whose interests are dependent on the mortgagor, unless the mortgagee's failure to do so would be fraudulent or would amount to a wilful or reckless sacrificing of those interests. On the other hand, the statute seeks to protect the interests on the mortgagor's side, not by requiring an attempt to obtain the best price which could be obtained for the property, but by requiring the taking of reasonable steps to obtain its market value. As Salmon L.J. said in Cuckmere Brick [81] :

"Proper price" is perhaps a little nebulous, and "the best price" may suggest an exceptionally high price. That is why I prefer to call it "the true market value." The statutory formulation, taking the sale at market value as the object to which the performance of the duty is directed, strikes a different balance between the interests of mortgagor and mortgagee from that which flows from the test of good faith. 1. [1971] 1 Ch., at p. 966.

This approach to the mortgagee's liability accords with the cases where the mortgagee's duty has been formulated as a duty to take reasonable precautions to obtain a proper price or true market value. In Tomlin v. Luce, Cotton L.J. said [1] :

The defence seems really to have been very much, if not entirely, directed to this, that the first mortgagees, selling under their power, employed a competent auctioneer, and were not answerable for any blunder which the auctioneer committed. There they were wrong, and that point was not I think argued before us. And in Cuckmere Brick, Salmon L.J. said [2] : Mr. Vinelott submits that the defendants are not responsible for any blunder which their agents may have committed. That submission certainly cannot be squared with Cotton L.J.'s judgment in Tomlin v. Luce. I do not think, however, that it is necessary for me to express any concluded view upon it. The point was not taken below. Cross L.J., noting that a mortgagee was held liable in Wolff v. Vanderzee [3] for his auctioneer's failure to make appropriate enquiries, said [4] : In those days the only way to achieve justice between the parties was to say that the mortgagee was liable to the mortgagor for any damage which the latter suffered by the agent's negligence and to leave the mortgagee to recover such damages, and also any damage which he had suffered himself, from the agent. His Lordship did not think that the mortgagee's liability to the mortgagor had altered. 1. (1889) 43 Ch.D. 191, at p. 194. 2. [1971] 1 Ch., at p. 969. 3. (1869) 20 L.T. 353. 4. [1971] 1 Ch., at p. 973.

Where the duty has been formulated in terms similar to s. 85(1), it appears that the duty is not discharged by the mortgagee's appointment of a competent agent, but extends to responsibility for doing what ought reasonably to be done to obtain a proper price or the true market value. By analogy the statutory duty should be so understood.

Counsel for the appellant submitted that s. 85(1) should be construed strictly because of the provisions of s. 204 of The Criminal Code Q. which makes it an offence for a person to omit "to do any act which he is, by the provisions of any Statute, required to do". I do not think that s. 204 of the Code aids in the construction of s. 85(1) of the Property Law Act. Assuming that s. 85(1) does require the mortgagee "to do any act" within the ambit of s. 204 - an assumption which is difficult to make having regard to the mortgagee's discretion to exercise the power of sale and his entitlement to have others act in performance of the duty imposed upon him - s. 204 does not create an offence of absolute liability. It is subject to the provisions of Ch. V of the Code. I do not perceive that s. 204 is capable of working upon the provisions of s. 85(1), construed as I have indicated, to produce absurdity or injustice.

The question which fell for determination by Connolly J. was whether the statute, binding the appellant to do what was reasonable to ensure a sale at market value, bound him to advertise effectively in The Courier Mail. Some advertising was clearly necessary to ensure a sale at market value, and the learned trial judge found that if reasonable care had been taken to advertise, effective advertisements would have been placed in The Courier Mail. It follows from his Honour's findings, which were not challenged, that a breach of s. 85(1) was established and that the respondent was entitled to judgment for the consequential damage. The appeal should be dismissed with costs.