Condon, in the matter of Rayhill v Australia and New Zealand Banking Group Ltd

Summary dismissal 6 It has been emphasised that the power to dismiss an action summarily should not be exercised lightly. Also, the test previously expounded in Dey v Victorian Railways Commissioners [1949] HCA 1; 78 CLR 62 at 90-91 and General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 130, namely that a party should not be denied the opportunity of placing their case before the court in the ordinary way unless there is a high degree of certainty about what would be the ultimate outcome of the proceeding if allowed to go to trial in the ordinary way, does not apply to summary dismissal under s 31A of the Federal Court of Australia Act 1976 (Cth) (FCA Act) (and hence under r 26.01). See Spencer v Commonwealth [2010] HCA 28; 241 CLR 118 at [24] per French CJ and Gummow J and [56] and [60] per Hayne, Crennan, Kiefel and Bell JJ; Trkulja v Google LLC [2018] HCA 25; 263 CLR 149 at [22] per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ. 7 A proceeding or claim need not be "hopeless" or "bound to fail" for it to have no reasonable prospects of success: s 31A(3) FCA Act. The exercise of the power of summary dismissal should be used with caution, particularly where complex questions of fact or law or involved. See Upaid Systems Ltd v Telstra Corporation Ltd [2016] FCAFC 158; 122 IPR 190 at [46]-[49] per Perram, Jagot and Beach JJ.

The statement of claim 8 In the following paragraphs, I summarise the averments in Mr Condon's statement of claim. The bank accepts that for the purpose of the summary dismissal application the statements of fact in the statement of claim can be accepted. 9 Arising out of events prior to November 2005, Appinville Pty Ltd as trustee for the Kenthurst Investment Trust became indebted to Ms Lewis for various amounts, including: (1) $170,000 to enable Appinville to pay the deposit on the purchase of a residential property known as 9 Robson Road, Kenthurst, NSW; (2) $478,693.50 to enable Appinville to pay the purchase price for the property; and (3) various interest and costs payments, amounting to approximately $44,000, to Challenger Managed Investments Ltd on account of Appinville's obligations under a loan from Challenger to enable Appinville to pay the purchase price for the property. The Challenger loan was secured by a first mortgage over the property and the personal guarantee of Ms Lewis. 10 On 1 November 2005, Appinville ceased being the trustee of the Trust, and Ms Lewis was appointed trustee. 11 Appinville was entitled to be indemnified against the trust property for payment of the debts to Ms Lewis, and Ms Lewis became subrogated to Appinville's rights of indemnity (i.e. Ms Lewis had a claim against the trust property for approximately $690,000, being the sum of the three amounts mentioned in [9] above). 12 Between December 2005 and October 2007, Ms Lewis paid approximately $2 million to Challenger on account of and in discharge of the Challenger loan (and, presumably, the mortgage and Ms Lewis's guarantee). 13 Ms Lewis thus became entitled to be indemnified for that amount of approximately $2 million from the trust property and reimbursed from it, and such right to reimbursement was charged against the trust property. 14 In February 2010, the bank advanced $750,000 to Ms Lewis on loan which was secured by a first mortgage over the property. 15 In February 2012, Ms Lewis became the registered proprietor of the property and held the property as property of the Trust. 16 Because of Ms Lewis's default on the bank loan, in March 2012 the bank commenced proceedings for possession of the property in the NSW Supreme Court. 17 In May 2012, Ms Lewis became bankrupt and Mr Condon was appointed trustee of the bankrupt estate. At that time Ms Lewis's property included the rights by way of indemnity against the property in the approximate sums of $690,000 and $2 million mentioned at [11] and [12] above. 18 By reason of s 58 of the Bankruptcy Act 1966 (Cth), all of Ms Lewis's property, including those rights of indemnity, vested in Mr Condon as trustee. 19 In August 2012, the NSW Supreme Court in the possession proceeding made orders that the bank take possession of the property. 20 In February 2013, Truthful Endeavour Pty Ltd was appointed trustee of the Trust. 21 In March 2013, the bank took possession of the property. 22 In July 2013, the bank as mortgagee in possession listed the property for auction on 31 August 2013. 23 At the auction, the second-last bidder, Mr D'Souza, stopped bidding at $2,730,000. 24 The property was knocked down to the highest bidder, Ms O'Neill, at $2,740,000. 25 The second-last and highest bids were fairly representative of the market value of the property. 26 Following the auction, the sale to Ms O'Neill fell through when the cheque for the deposit was dishonoured. 27 The bank thereafter negotiated the sale of the property by private treaty to Mr D'Souza for $2 million (i.e. $730,000 less than he had bid a short time before). The sale settled on 31 October 2013. 28 By reason of the following matters, Mr Condon as trustee of the bankrupt estate of Ms Lewis had and has an interest in the equity of redemption in respect of the property: (1) Appinville's right of indemnity to which Ms Lewis became subrogated; and (2) Ms Lewis's right of reimbursement against the property. 29 The bank therefore owed to Mr Condon the following duties as mortgagee exercising its power of sale: (1) to take reasonable care to ensure that the property was sold for not less than its market value, including pursuant to s 111A of the Conveyancing Act 1919 (NSW); and (2) (as a fiduciary) to act in good faith in selling the property. 30 The bank breached its duties in various respects which resulted in the bank selling the property at less than its true market value, which has caused loss to Ms Lewis's estate and thus to Mr Condon as trustee.

Other relevant history 31 The present proceeding is preceded by other litigation that has a bearing on the events in the case. Some elements of it require to be identified. 32 In November 2006, Brereton J in the NSW Supreme Court made orders pursuant to the settlement of a family law proceeding (that had been transferred from the Family Court - Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578) between Ms Lewis and her former husband. One of those orders was that the property in question would be transferred to Ms Lewis and another acknowledged that it would be held by her as trustee of a discretionary trust. See Lewis v Condon [2013] NSWCA 204; 85 NSWLR 99 at [26]. 33 Following the bankruptcy of Ms Lewis and the sequestration order against her estate in May 2012, and the appointment of Mr Condon as her trustee, in October 2012 in a proceeding brought by Mr Condon in the NSW Supreme Court, Nicholas J declared that Mr Condon was entitled to be noted on the register as the registered proprietor in lieu of Ms Lewis. See Lewis v Condon at [44]. 34 There followed a proceeding in the NSW Supreme Court before Rein J in which one of Ms Lewis's daughters, Louise, sought a declaration that Mr Condon held the property in trust for her and other beneficiaries under the deed that created the Trust. In opposing the proceeding, Mr Condon contended that the trust was a sham. His Honour rejected that contention. See Lewis v Condon [2013] NSWSC 120; Lewis (as Trustee of Bankrupt Estate of Rayhill) v Condon (No 2) [2013] NSWSC 126; 11 ASTLR 448. 35 That finding was confirmed on appeal in July 2013: Lewis v Condon at [4]. In the course of its reasoning, the Court of Appeal found that Ms Lewis's legal title to the property had been subject to the terms of the trust (at [86]), and that the sequestration of Ms Lewis's estate had the effect that such interest as she had in the property vested forthwith in equity in Mr Condon. It was that that had enabled him to become registered proprietor and thereby acquire legal title: at [91]. It was declared that the property was an asset of the Trust: at [116]. It was expressly left open whether Ms Lewis, as a former trustee, was entitled to be indemnified from the property for expenses, if any, incurred by her as trustee: at [115]. 36 It will be recalled from the statement of claim that in the meanwhile Truthful Endeavour had, in February 2013, been appointed trustee of the Trust. 37 On 23 January 2015, in this Court, Jagot J held in a proceeding brought by Mr Condon against Truthful Endeavour that Mr Condon had an equitable charge over the sale proceeds to secure a debt owed by the Trust to Ms Lewis, which had priority over the beneficiaries: Condon (Trustee) Re Rayhill (Bankrupt) v Truthful Endeavour Pty Ltd [2015] FCA 7; 323 ALR 83 at [85] and [87]. 38 An appeal by Truthful Endeavour was dismissed by the Full Court in May 2015: Truthful Endeavour Pty Ltd v Condon [2015] FCAFC 70; 233 FCR 174 per Allsop CJ, Katzmann and Gleeson JJ. In the course of its reasoning the Full Court made the following statements of principle (at [84]): First, although there are obvious similarities between an equitable lien and a resulting trust in that both create an equitable interest in the property, there are also important differences. Most importantly, the rights acquired by the holder of a lien are different from the rights acquired by a beneficiary under a trust of any kind. A lien gives the holder an equitable interest in the property but, in contrast to a trust, no beneficial ownership which would enable her or him to use and enjoy the property and take action in respect of it. A lienee has only a security interest. He or she may only resort to the charged property to satisfy a liability. … A beneficiary under a trust may proceed in equity for performance of the trust but not for the sale of the trust property. A lienee, on the other hand, may. See the discussion of this question in Heydon JD and Leeming ML, Jacobs' Law of Trusts in Australia (LexisNexis Butterworths, 2006) [226]-[229] and Burns FA, "The Equitable Lien Rediscovered: A Remedy for the 21st Century" (2002) 25(1) UNSWLJ 1. [Emphasis added.] 39 In the meanwhile, in March 2014 Truthful Endeavour had commenced a proceeding in the NSW Supreme Court against the bank for an accounting in relation to its conduct as mortgagee in possession concerning the sale of the property, and for payment of the surplus on the sale following discharge of the loan and mortgage. Also, in May 2014 the bank commenced a proceeding in the NSW Supreme Court for judicial advice or direction on payment of the balance of the proceeds of the sale of the property. 40 On 6 June 2014, White J in both proceedings (in an unreported judgment) directed that the bank would be justified in paying into court the balance of the proceeds of the sale of the property and retaining a certain sum on account of legal costs and disbursements that it considered may be incurred in defending any claim that may be made against it in relation to its conduct as mortgagee of the property. His Honour (at [6]) recognised that the bank faced potential for a challenge to the propriety of its sale of the property as well as, or as part of, Truthful Endeavour's claim for an accounting. Pursuant to the judicial advice, on 16 June 2014 the bank paid the sum of approximately $740,000 into court. 41 On 11 August 2014, Lindsay J in the judicial advice proceeding gave judgment on competing applications for payment out of court. His Honour ordered payment of the sum of approximately $220,000 to DC Legal Pty Ltd, Truthful Endeavour's former solicitors who asserted a lien in respect of unpaid fees, and ordered that the competing applications of Truthful Endeavour and Mr Condon for payment out to them of the balance of the funds in court be stayed until the final determination of the Federal Court proceeding (being the proceedings before Jagot J and then the Full Court referred to at [37] and [38] above). See Re ANZ Banking Group Ltd; Funds in Court [2014] NSWSC 1076. 42 On 17 July 2015, following the final determination of the Federal Court proceeding by the judgment of the Full Court, Ball J ordered that the remaining sum held in court plus any accumulated interest be paid out to Mr Condon, less the sum of $35,000. On 28 August 2015, Robb J ordered that the remaining balance including any further accumulated interest be paid out to Mr Condon. 43 In the meanwhile, the proceeding by Truthful Endeavour against the bank remained on foot. On 15 September 2016, that proceeding was dismissed by consent by Lindsay J. It was noted that the dismissal was also with the consent of Mr Condon.

The bank's submissions on standing 44 In reliance on the quoted passage (at [38] above) from the judgment of the Full Court, the bank submits that the existence of Mr Condon's lien does not enable him "to use or enjoy the property and take action in respect of it" (emphasis added). The bank submits that if it is assumed that the right to bring an action against the bank for an alleged sale at an undervalue constituted property of the Trust, Mr Condon as a lienee has no right to bring that action. It submits that the only proper applicant is the trustee (i.e. Truthful Endeavour). Moreover, it submits that the trustee's claim against the bank was dismissed in NSW Supreme Court proceedings in September 2016 (referred to at [43] above). 45 Insofar as any claim in negligence is concerned, whether at general law or as a statutory claim, the bank submits that any duty owed by it was owed to the Trust, the rights to which passed to the new trustee, Truthful Endeavour. It submits that as a matter of principle, any such duty does not extend to third parties, such as creditors, for their individual economic loss. In that regard it refers to D'Orta-Ekenaike v Victorian Legal Aid [2005] HCA 12; 223 CLR 1 at [98]-[103] per McHugh J and Kestrel Holdings Pty Ltd v APF Properties Pty Ltd [2009] FCAFC 144; 260 ALR 418 at [95] per Gray, Mansfield and Tracey JJ. 46 The bank submits that such a claim ought also to be excluded on the grounds that a claim cannot be advanced for "reflective loss", typically applied to shareholders who claim a loss resulting from a breach of duty to the company. The bank refers to Chen v Karandonis [2002] NSWCA 412 at [39]-[47], applying Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 and Johnson v Gore Wood & Co [2002] 2 AC 1. It submits that there is no reason in principle why the creditor of a trust should be treated any differently in relation to "reflective loss", where the duty is owed to a trust. 47 As to the statutory claim under s 111A of the Conveyancing Act, the bank submits that that section was intended to replicate s 420A of the Corporations Act 2001 (Cth). It submits that the latter provision was "not intended to confer new rights on parties who might be affected by the exercise of a power of sale". The bank refers to James v Australia and New Zealand Banking Group Ltd [2018] NSWCA 41; 97 NSWLR 663 at [66]-[67].

Mr Condon's submissions on standing 48 With reference to Octavo Investments Pty Ltd v Knight [1979] HCA 61; 144 CLR 360 at 367-368 and Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWSC 1344; 74 NSWLR 550 at [13]-[22], Mr Condon submits that the principles that apply to a trustee's right of indemnity and equitable lien include that the lien survives if the trust property is transferred to a new trustee and the new trustee takes subject to the lien of the old trustee. I do not understand that to be controversial. 49 Mr Condon submits, in contrast to the bank's submissions, that the Full Court recognised that an equitable lien gives the holder an equitable interest in the property which the holder may enforce, such as by an order for judicial sale. Mr Condon refers to the same paragraph of the Full Court's judgment quoted above (at [38]). 50 Mr Condon submits that a mortgagee's duty to act in good faith under general law in exercising a power of sale over a mortgaged property is owed to the mortgagor and to anyone else interested in the equity of redemption. He refers to a number of authorities including Medforth v Blake [2000] Ch 86; Tyler ELG, Young PW and Croft C, Fisher and Lightwood's Law of Mortgage (2nd ed, LexisNexis Butterworths, 2005) at [20.22] and Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; 60 NSWLR 646 at [38] per Young CJ in Eq. He submits, as an example, that the mortgagee's duty is also owed to other lower-ranking mortgagees, and that that applies equally to the duty under s 111A of the Conveyancing Act to take reasonable care, as people who suffer loss or damage as a result of breach of that duty have a remedy in damages. 51 Mr Condon submits that his equitable lien conferred an interest in the property in the nature of a security interest, and that interest ranked ahead of the interests of the beneficiaries of the trust. That interest could have been enforced by an order for judicial sale and the appointment of a receiver, subject to the bank's rights as first-ranking mortgagee. In this way, Mr Condon submits that he was a person interested in the equity of redemption in the property. 52 Mr Condon submits that as he had an interest in the property and was owed a duty by the bank, the bank's submissions as to claims for economic loss by third parties are irrelevant.

Introduction 53 From paragraph [67] of the statement of claim, which is summarised at [29] above, I understand Mr Condon's claim to be put on two alternative bases. One is statutory (i.e., s 111A of the Conveyancing Act) and the other is in equity. Contrary to the bank's submissions, I do not understand a case to be asserted in negligence for pure economic loss. That is not surprising given that the duty that the mortgagee owes, leaving s 111A to one side, is a duty in equity. The Australian courts have elected not to follow Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 in which the English Court of Appeal held that a mortgagee, when exercising the power of sale, owes a duty to the mortgagor to take reasonable care to obtain a proper price. See Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; 13 CLR 676; the discussions by Needham J in Porter v Associated Securities Ltd (1976) 1 BPR 9279 at 9285 and Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 at 834-836, and Young CJ in Eq in Ultimate Property at [15]-[26]; Jovanovic v Commonwealth Bank of Australia [2004] SASC 61; 87 SASR 570 at [92] per Besanko J (Mullighan J agreeing); Upton v Tasmanian Perpetual Trustees Ltd [2007] FCAFC 57; 158 FCR 118 at [15]-[18] per Kiefel and Besanko JJ and [72]-[88] per Graham J; Mijac Investments Pty Ltd v Graham (No 2) [2009] FCA 773; 72 ACSR 684 at [20] per Gordon J; Angyal R and Edgeworth B, "New South Wales Follows Queensland in Imposing a Statutory Duty of Care on Mortgagees Exercising Power of Sale" (2017) 91 ALJ 607. 54 In the circumstances, it is not necessary for me to consider the bank's submissions with regard to a claim in negligence for pure economic loss and "reflective loss". Insofar as the latter is concerned, Mr Condon's claim is in any event not a claim for reflective loss in the sense considered by authorities that are relied on by the bank such as Chen v Karandonis, or Thomas v D'Arcy [2005] QCA 68; 52 ACSR 609, where a shareholder claims for its own loss suffered as a result of a breach of duty to the company. Mr Condon asserts a breach of duty owed to him directly. He is not a creditor of Truthful Endeavour and asserts no claim for loss suffered by him as a result of any breach of duty to Truthful Endeavour. The standing question asks whether he is indeed owed a duty directly. 55 It is convenient to consider the question of standing in relation to the claim in equity first and then in relation to the statutory claim.

The claim in equity 56 Insofar as the claim in equity is concerned, the question that calls for consideration is whether the holder of an equitable lien over real property has standing to bring a claim against the mortgagee for selling the property at less than market value. Put differently, can it be said that the mortgagee in exercising the right of sale owes to the holder of an equitable lien the duty of good faith, or to act bona fide and honestly, that it owes to the mortgagor in selling the property? 57 Although called a lien, the trustee's right of indemnity out of the trust property is a form of equitable charge over the subject property. Property subject to an equitable charge can only be sold subject to the charge, which then attaches to the fund produced by the sale while the fund remains in existence. Moreover, the lienee can enforce the charge by an order for the sale of the property. The equitable lien confers a proprietary interest, in the nature of a security interest, over the trust assets. See Hewett v Court [1983] HCA 7; 149 CLR 639 at 663 per Deane J; Lemery Holdings at [16]-[18]. 58 In Ultimate Property (at [38]), Young CJ in Eq said that the mortgagee's duty is to act conscionably towards the mortgagor "and persons under the mortgagor". To similar effect, the English Court of Appeal in Medforth at 102F per Sir Richard Scott V-C, Swinton Thomas and Tuckey LJJ, after reviewing the authorities, held that the duty is owed to "the mortgagor and anyone else with an interest in the equity of redemption". So, do those descriptions include the holder of an equitable lien? 59 The duty certainly extends to lower-ranking mortgagees. In Southern Goldfields Ltd v General Credits Ltd (1991) 4 WAR 138 the Full Court per Malcolm CJ, Pidgeon and Franklyn JJ imposed the duty to the benefit of the holder of a second mortgage. In Alliance Acceptance Co Ltd v Graham (1974) 10 SASR 220 at 222-223, Hogarth J rejected the submission that there is no duty to a second and subsequent mortgagee and imposed the duty to the benefit of a third mortgagee for the purposes of an injunction restraining the power of sale. 60 The duty is also owed directly to the guarantor of the mortgage debt (subject to the terms of the guarantee): Tooth & Co Ltd v Lapin (1936) 53 WN (NSW) 224 at 225 per Jordan CJ (Street J and Owen AJ agreeing); Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654 at 675 per Brennan J (Gibbs CJ, Murphy and Wilson JJ agreeing); Finance Corp of Australia Ltd v Stevens (1985) Q Conv R ¶54-195 at 57,294 per Moyniham J; Duggan v Thomas [2002] FCA 830 at [33] per Stone J; James at [68]-[69]; Ultimate Property at [80]; Jovanovic at [91]; Fisher and Lightwood at [20.22]. 61 In Barns v Queensland National Bank Ltd [1906] HCA 26; 3 CLR 925, the trustee under a will mortgaged properties to the defendant bank. The bank sold the properties under its power of sale. The claim by a beneficiary under the will against the bank for breach of its duty to realise the security in good faith and with reasonable precautions to obtain a proper price that had succeeded at trial was upheld by the High Court per Griffith CJ, Barton and O'Connor JJ. 62 In MBF Investments Pty Ltd v Nolan [2011] VSCA 114; 37 VR 116, a claim was made by the mortgagor under s 77(1) of the Transfer of Land Act 1958 (Vic) against the mortgagee who had sold the property. An issue in the case was whether the mortgagee had acted contrary to its duty to act "in good faith" when selling the property by considering and being influenced in its actions by the fact of a potential claim from the holder of an equitable lien, Mr Collie. The Court of Appeal held (at [159]) that the mortgagee owes a duty to have regard to the interests of other persons including security holders. It held that that included Mr Collie because an equitable lien "is an 'interest' in the land; it is of a proprietary character", citing Sykes E and Walker S, The Law of Securities (5th ed, Law Book Co, 1993) at 199. Therefore the litigious stance taken by Mr Collie towards the mortgagee was not an irrelevant consideration in its exercise of its powers of sale. 63 With reference to those authorities, I see no reason why the holder of an equitable lien, who unmistakably has a proprietary interest in the property and an interest in any proceeds remaining after satisfaction of claims with higher priority, cannot also sue for breach of the mortgagee's equitable duty. The equitable lienee, having a proprietary interest in the property, is someone who is properly regarded as a "person under the mortgagor" within the phraseology employed in Ultimate Property and a person "with an interest in the equity of redemption" as referred to in Medforth. 64 As indicated above, the bank relies in particular on the statement by the Full Court in Truthful Endeavour Pty Ltd v Condon that the equitable lienee cannot "take action in respect of the property" to found its submission that such an equitable lienee is owed no equitable duty by the mortgagee. The type of action that is referred to in that statement, it seems to me, is the type of action that can be taken by a person with beneficial ownership. It may also refer to the type of action in respect of the property that can be taken by a mortgagee but not by an equitable lienee, such as enforcing the security by foreclosure or by sale out of court: Lemery Holdings at [18]. The statement that the lienee cannot "take action in respect of the property" stands in contrast to the type of action that the lienee can take, which is recorded later in the same paragraph by the Full Court as including proceeding in equity for the sale of the charged property. The Full Court recognised that the equitable lien conveys an equitable interest in the property in the nature of a security interest. There is nothing inconsistent in the exposition of the Full Court, and there is nothing in it that stands in the way of Mr Condon's claim in this proceeding. 65 In the circumstances, there is no merit in the contention that Mr Condon has no standing to sue the bank for breach of its equitable duty as mortgagee in possession in selling the property in respect of which Mr Condon enjoyed an equitable lien.

The claim under the Conveyancing Act 66 Section 111A of the Conveyancing Act was inserted with effect from 1 November 2011. It is relevantly in the following terms: 111A Duties of mortgagees and chargees in respect of sale price of land (1) A mortgagee or chargee, in exercising a power of sale in respect of mortgaged or charged land, must take reasonable care to ensure that the land is sold for - (a) if the land has an ascertainable market value when it is sold - not less than its market value, or (b) in any other case - the best price that may reasonably be obtained in the circumstances. … (4) The title of the purchaser cannot be challenged on the ground that the mortgagee or chargee has committed a breach of any duty imposed by this section, but a person who suffers loss or damage as a result of the breach of the duty has a remedy in damages against the mortgagee or chargee exercising the power of sale or selling the land. [Emphasis added.] 67 The question for present purposes is accordingly whether an equitable lienee in the position of Mr Condon who suffers loss or damage as a result of a breach of the duty in subs (1) is "a person" as referred to in subs (4). 68 On the second reading of the Real Property and Conveyancing Legislation Amendment Bill 2009 on 25 March 2009, the Hon Barry Collier MP, Parliamentary Secretary, in moving that the Bill be agreed to in principle stated the following with regard to the insertion of s 111A in the Conveyancing Act: The first of these amendments that the bill proposes to make is to the Conveyancing Act 1919 to clarify the standard of care owed by a mortgagee who exercises its power of sale over the real estate. … The bill therefore proposes to impose a duty of care on mortgagees and chargees when exercising a power of sale in respect of mortgaged or charged land, requiring the mortgagee to take all reasonable care to ensure that the property is sold for not less than the market value at the time of the sale. The proposed amendment will be similar to a provision in the Commonwealth Corporations Act, which requires that where property of a corporation is sold by a controller - defined to include a mortgagee - the controller must take all reasonable care to sell the property for not less than the market price. 69 The provision in the Corporations Act that is referred to is s 420A. It provides that in exercising a power of sale in respect of property of a corporation, a controller must take all reasonable care to sell the property for not less than the market value or, if it does not have a market value when it is sold, at the best price that is reasonably obtainable having regard to the circumstances existing when the property is sold. There is no specific provision equivalent to s 111A(4) of the Conveyancing Act providing that a person who suffers loss or damage as a consequence of a breach of the s 420A duty has a remedy in damages. That has given rise to some debate about whether the section provides an independent remedy or whether it merely informs the quality of the duty with remedies otherwise remaining unchanged. See GE Capital Australia v Davis [2002] NSWSC 1146; 180 FLR 250 at [43]-[57] per Bryson J; Ultimate Property at [94]; Florgale Uniforms Pty Ltd v Orders [2004] VSC 65; 11 VR 54 at [388] per Dodds-Streeton J; Jovanovic at [115]-[116]. 70 In James, which is relied upon by the bank, it was pointed out (at [66]) that s 420A is conspicuously silent as to the remedies available for a breach of the provision. The Court, following GE Capital and Javonovic, held that s 420A is not intended to confer new rights upon third parties who might be affected by the exercise of a power of sale such as guarantors: at [66] per Leeming JA and Sackville AJA (Mcfarlan JA agreeing). 71 Contrary to the bank's submissions, I do not consider that s 420A of the Corporations Act and the jurisprudence in relation to it is of assistance in answering the question of who can sue for breach of the duty in s 111A(1) of the Conveyancing Act. That is because s 420A, on the authorities, speaks only to the content or quality of the duty and not to the question of remedies including who can sue for breach of the duty. In contrast, s 111A(4) provides a specific remedy in damages to "a person who suffers loss or damage as a result of the breach of the duty". 72 I have not been referred to any cases on the outer limits of who is included in the reference to "a person who suffers loss or damage as a result of the breach of the duty" in s 111A. Nor have I been able to find any. However, the provision appears to be modelled on s 85 of the Property Law Act 1974 (Qld) which is relevantly in the following terms: (1) It is the duty of a mortgagee, in the exercise … of a power of sale …, to take reasonable care to ensure that the property is sold at the market value. … (3) … a person damnified by the breach of duty [imposed by this section] has a remedy in damages against the mortgagee exercising the power of sale. 73 In Higton Enterprises Pty Ltd v BFC Finance Ltd [1997] 1 Qd R 168 the Court of Appeal considered who "a person damnified by the breach" is, and more particularly whether a guarantor of the debt secured by the mortgage is such a person. The Court per Fitzgerald P (at 173-174), McPherson JA (at 182-183) and Pincus JA (at 184) held that a guarantor who can show that they suffered loss because of the mortgagee's breach of the duty in subs (1) can claim damages under subs (3). Fitzgerald P (at 174) stated that in his opinion the duty of care imposed by s 85(1) is imposed in favour of all who are "damnified by" a mortgagee's failure "to take reasonable care". See also Thomas v D'Arcy at [17] per McPherson JA (Williams JA and White J agreeing) - "a person 'damnified' by the breach of that statutory duty … is capable of extending beyond the mortgagor himself to persons like guarantors who have, to the extent of their loss, an interest in the due performance of the statutory duty and a claim for damages for breach of it" - and Upton v Westpac Banking Corporation [2016] QCA 220 at [33] per McMurdo JA (Holmes CJ and Fraser JA agreeing) to the same effect. 74 There does not seem to be any reason why "a person" in s 111A of the Conveyancing Act would be any narrower than the categories of persons who have standing to sue the mortgagee for equitable damages. The text of s 111A, which is unlimited save as to require causation, and consideration of the analogous provision in Queensland, and its construction in the authorities, support that conclusion. 75 The bank's contention that Mr Condon has no standing as an equitable lienee to make a claim under s 111A must accordingly fail.

Conclusion on standing 76 For those reasons, the bank's application for summary dismissal in so far as it is based on the contention that Mr Condon lacks standing to bring the claims asserted in the statement of claim must fail.

Additional facts relevant to election 77 The bank relies on the following additional facts in submitting that Mr Condon's claim should be summarily dismissed on the basis that pursuit of the claim is inconsistent with an election that he previously made not to pursue the claim. 78 It will be recalled that the property was listed for auction on 31 August 2013 but that after the cheque paying the deposit was dishonoured, the bank sold the property by a contract for sale dated 5 September 2013. The sale was settled on 31 October 2013. 79 On 15 October 2013, which is to say prior to the transfer of title of the property pursuant to the sale by the bank, the bank's solicitors, Gadens Lawyers, wrote to Mr Condon's lawyers, Gillis Delaney Lawyers. The letter stated that the bank would pay the surplus funds from the proceeds of the sale of the property into court subject to three conditions, one of which was that Gillis Delaney provide written confirmation that Mr Condon had no claim against the bank in respect of the matters arising out of or in connection with the loan to the mortgagor, the mortgage or "steps taken by the Mortgagee to realise its security and sell the Property". The letter went on to state that if Mr Condon was unwilling to confirm that he had no claim against the bank then the bank would withhold an amount from the surplus as a contingent liability in the event that a party seeks to make any claim against the bank. 80 Gadens wrote a materially identical letter on the same day to DC Legal, the solicitors for Truthful Endeavour. 81 By letter dated 16 October 2013, Gillis Delaney answered Gadens on behalf of Mr Condon. The letter stated that Mr Condon was "at that time unaware" of any basis on which he could make a claim against the bank. Then, specifically in relation to payment of the surplus into court by the bank the letter stated as follows: Our client has no claim against the mortgagee in respect of the matters arising out of or in connection with the loan to the Mortgagor (being the Bankrupt), the mortgage … or realisation of the security and the sale of the property … 82 On 18 October 2013, Gillis Delaney wrote again to Gadens. The email stated that "any allegation on the part of Truthful Endeavour that it has a claim against the mortgagee lacks any substance given our instructions that persons associated with that company interfered with the conduct of the mortgagee auction and could not therefore be heard to say with any degree of credibility that the mortgagee has not fulfilled its duties in realising the property." 83 On 28 October 2013, DC Legal on behalf of Truthful Endeavour wrote to Gadens saying that at that time they had no information as to whether there was a claim by Truthful Endeavour against the bank in respect of the sale and that before advising Truthful Endeavour they would need more information. 84 On 7 November 2013, Gillis Delaney for Mr Condon wrote to Gadens saying that they saw no proper basis for the bank withholding any portion of the surplus to allow for the possibility that Truthful Endeavour would make some claim against the bank. The letter stated that Truthful Endeavour had lost the opportunity to make any viable claim against the bank. 85 On 3 December 2013, Gadens wrote to Gillis Delaney and DC Legal, as well as to another caveator, stating that the bank had been put on notice that claims might be made against it in connection with the bank's sale of the property. The claims were identified as being made by Truthful Endeavour. It was stated that the bank's position was that the claims were without any foundation. 86 On 6 December 2013, Gillis Delaney wrote to Gadens urging the bank to pay the surplus from the mortgagee sale into court as quickly as possible because in the meanwhile it was not earning interest in Gadens' trust account. The letter stated that it was particularly unsatisfactory for the bank to delay payment into court "in circumstances where Truthful Endeavour has no claim against your client". 87 On 18 August 2015, new solicitors for Truthful Endeavour gave notice to Gadens that they intended to file a statement of claim for Truthful Endeavour against the bank for a breach of the bank's duty as mortgagee to obtain a fair market price. 88 On 9 December 2015, Gadens wrote to Mr Condon's new solicitors, Russo & Partners Pty Ltd, setting out the bank's position that Truthful Endeavour did not have any arguable claim against the bank. The letter then referred to the correspondence from Gillis Delaney dated 16 October 2013 which stated that Mr Condon had no claim against the bank in respect of matters arising out of the bank's mortgage or realisation of the security and sale of the property. It asked Russo to confirm that Mr Condon did not resile from that position. 89 On 10 December 2015, Russo wrote to Gadens setting out that Jagot J had recently awarded Mr Condon the sum of $2,832,154 against Truthful Endeavour and that Mr Condon had received from the proceeds of sale only approximately $515,000, leaving a further amount of $2.315 million owing. The letter stated that should any proceeding by Truthful Endeavour against the bank be successful "for an under-sale (estimated at $700,000)", Mr Condon would be entitled to the whole of that amount. The letter did not in terms give the confirmation that Gadens had sought, namely that Mr Condon did not resile from the position he had taken more than two years earlier that he did not have any claim against the bank. 90 On or about 1 March 2016, a heads of agreement was concluded between Mr Condon as trustee for the bankrupt estate of Ms Lewis, Christopher Lewis, Jason Lewis, The Next Step Enterprises Pty Ltd, Truthful Endeavour and Salvatore Russo. The heads of agreement was stated to be in the settlement of various differences between the parties and included that Truthful Endeavour agreed to the dismissal of its Supreme Court proceeding against the bank (which was later dismissed by consent on 15 September 2016 - see [43] above). 91 Clause 5(e) of the heads of agreement is as follows: Truthful Endeavours Pty Ltd and (anyone else who might assert any claim that could hold up the money being paid out) agrees to grant to ANZ a full release in respect of all claims which might otherwise be made against the Bank in respect of its actions as mortgagee; … [sic] 92 The same parties, still not including the bank, concluded a deed of settlement and release on 13 October 2016. Clause 6 of the deed of release provided that upon execution of the deed, Mr Condon and Mr Russo acknowledged the heads of agreement including: (b) Up until 1 March 2016 ANZ is permitted to indemnify itself for its costs pursuant to the costs order made by Justice Lindsay in the ANZ Proceedings on 15 September 2016, from the funds it holds pursuant to the White J orders; … (d) Condon and Russo agree not to pursue or make [a] claim against Truthful or ANZ for any monies ANZ has deducted in the past and in accordance with subparagraph (b) above; … (f) Truthful agrees to grant to ANZ a full release in respect of all claims which might otherwise be made against ANZ in respect of its action as mortgagee.

The parties' submissions on election 93 The bank relies in particular on four events which it submits constitute - separately and together - irrevocable elections by Mr Condon not to pursue the claim against the bank as mortgagee in respect of the sale of the property. Those events are: (1) the letter of 16 October 2013 from Gillis Delaney to Gadens; (2) the heads of agreement of 1 March 2016, in particular cl 5(e); (3) Mr Condon acceding or joining in the dismissal of Truthful Endeavour's claim against the bank and his apparent failure to raise with the Court, at that time or earlier, that he might still himself assert a similar claim; and (4) the deed of release of 13 October 2016, in particular cl 6(f). 94 The bank submits that prior to the settlement of the sale of the property by the bank as mortgagee in possession, if Mr Condon had asserted that the sale was at an undervalue and refused to withdraw his caveat, the bank could either have taken action to have the caveat removed or to rescind the sale. In the latter regard it refers to cl 38 in the contract of sale which provided that if the vendor as mortgagee exercising power of sale decides it is prevented from completing the contract by the completion date for any reason, the vendor may by written notice to the purchaser rescind the contract. The bank also submits that Mr Condon could have sought to enforce his lien by seeking the appointment of a receiver to Truthful Endeavour to seek to restrain the sale in reliance on Truthful Endeavour's rights in relation to its equity of redemption. 95 The bank submits that Mr Condon's conduct in facilitating the sale without any challenge or reservation of rights and without informing the Court that he might still himself assert a claim constituted a final and binding election. 96 Mr Condon submits that the letter of 16 October 2013 occurred in the middle of the process for the sale of the property and prior to material facts and evidence as to the conduct of the auction and sale of the property becoming known to Mr Condon through later investigations into Ms Lewis's affairs. He also submits that since the heads of agreement and deed of release took place several years after the sale of the property they could have no bearing on any decisions or course of action by the bank, and that the bank was not a party to those documents. 97 The bank responds by saying that it is not clear what facts were not known by Mr Condon before settlement of the sale. In particular, it submits that insofar as his complaint is that the sale was delayed, he knew those facts because he had previously urged an earlier sale. Also, insofar as his complaint is that the sale occurred at an undervalue, he knew the actual sale price and was aware of the circumstances of the entry into the sale contract. The bank submits that what occurred at the auction, and consequently when Mr Condon knew of those events, is not material because the property was either sold at undervalue or it was not.

The doctrine of election 98 In Commonwealth v Verwayen [1990] HCA 39; 170 CLR 394 at 421-423, Brennan J distinguished between election, estoppel by representation and waiver. Election consists in a choice between rights which the person making the election knows they possess and which are alternative and inconsistent rights. A doctrine closely related to election, and sometimes treated as a species of election, is the doctrine of approbation and reprobation. This doctrine precludes a person who has exercised a right from exercising another right which is alternative to and inconsistent with the right they exercised. The three distinct doctrines serve different purposes. Election, in either species, ensures that there is no inconsistency in the enforcement of a person's rights; estoppel or equitable estoppel ensures that a party who acts in reliance on what another has represented or promised suffers no unjust detriment thereby; waiver recognises the unilateral divestiture of certain rights. See also Sargent v ASL Developments Ltd [1974] HCA 40; 131 CLR 634 at 641 per Stephen J and 655 per Mason J; Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570 at [56]-[61] per Gummow, Hayne and Kiefel JJ. 99 In Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; 182 CLR 26 at 41 per Deane, Toohey, Gaudron and McHugh JJ the following statement was adopted: "It is of the essence of election that the party electing shall be 'confronted' with two mutually exclusive courses of action between which [they] must, in fairness to the other party, make [their] choice."

Discussion of election in this case 100 In my view the facts of this case do not give rise to the application of the doctrine of election. 101 The first reason for that is that there was no unequivocal conduct by Mr Condon by which he can be said to have made an election. The letter of 16 October 2013 comes the closest, but even it is equivocal because it records that "at present" (i.e. at that time) Mr Condon was unaware of any basis on which he could make a claim against the bank. Taken together with the following statement that "our client has no claim against the bank", what was being communicated was that on the information then available there was no belief that there was a claim. The letter does not constitute an unequivocal statement, or unequivocal conduct, to the effect that Mr Condon would not at any time in the future assert a claim against the bank. Also, since Mr Condon apparently did not know at that time that he had a right of action against the bank, he cannot be said to have elected not to pursue it. 102 To the extent that there are hints in the bank's submissions that it changed its position to its detriment as a consequence of the statement in the letter, that confuses the doctrines of election and estoppel. The bank has firmly put its case on the basis of election. But in any event, if it was to rely on estoppel it would have to put on evidence to show that it relied on the conduct of Mr Condon (or his lawyers on his behalf) in then changing its position to its detriment. But it has put on no affidavit evidence, and has only tendered the correspondence. This is insufficient to establish the necessary reliance, certainly in the context of summary dismissal. It is also not apparent on what basis it could have withheld payment of the surplus proceeds of sale had it known that it might face a claim from Mr Condon for having sold at undervalue. 103 The subsequent correspondence and conduct relied on by the bank is even more equivocal. Not only was the bank not a party to the heads of agreement or the deed of release, but those documents provided that Truthful Endeavour released the bank, not that Mr Condon released the bank. Since Truthful Endeavour apparently had no remaining interest in the surplus after satisfaction of the mortgage because it would all have been taken up by Mr Condon, it is hardly significant that Truthful Endeavour agreed to release the bank. In any event, it is irrelevant insofar as any election by Mr Condon is concerned. The clauses of the heads of agreement and the deed of release are simply not open to a construction that Mr Condon released the bank from any claim that he might have against it or having sold the property at undervalue. 104 Counsel for the bank advised me during the hearing that the bank had no notice of the heads of agreement and the deed of settlement and release. In any event, there was no proof that it did. Since an election can normally only take effect when communicated to the party affected (Handley KR, Estoppel by Conduct and Election (2nd ed, Sweet & Maxwell, 2016) (Handley) at [14-014]), that is another reason why Mr Condon's conduct in being a party to those agreements cannot amount to an election. 105 To the extent that the bank also relies on Mr Condon's consent to the dismissal of Truthful Endeavour's claim against the bank, that is irrelevant. First, as explained above in relation to Mr Condon's standing to sue the bank, his claim is not derivative of Truthful Endeavour's claim; it stands alone. Secondly, Mr Condon did not by his consent commit to not proceeding against the bank himself. The same is true of Mr Condon not advising the Court at the time that Truthful Endeavour's proceeding against the bank was dismissed, or at some earlier time in that proceeding or in the judicial advice proceeding, that he might also have and at some time pursue a claim against the bank. Since it is expressly not alleged that Mr Condon did not speak up in order to deceive the bank or mislead the Court, but only because at that time he did not know or believe that he had a claim, there was no duty on him to speak and his failure to do so constitutes no election by him. 106 The second reason why there was no election is because there were no alternative inconsistent rights. It is not inconsistent in the relevant sense to say, "I have no claim against you" and then to later bring a claim. Such conduct might in particular circumstances give rise to a waiver (if the waiving party had knowledge of their claim, which is absent here) or an estoppel, but it is not an election. The doctrine of election is typically applied in circumstances where a party can choose between affirming a contract or accepting a repudiation and rescinding it. Once the election is made it is final and cannot be reversed. That is because by the election either the contract is rescinded and cannot be revived, or the right to rescind is extinguished and cannot be revived. 107 This is illustrated by Turner v Labafox International Pty Ltd [1974] HCA 41; 131 CLR 660. The purchaser had a right of rescission of the contract. The purchaser's solicitor in a telephone conversation with the vendor's solicitors insisted upon continued performance by the vendor of its obligations under the contract of sale. After that, having made the election, the purchaser could no longer exercise any right of rescission. See also Handley at [14-007]-[14-008]. 108 Mr Condon was not in such a position of having to choose, or elect, between two inconsistent rights. By electing at one point not to pursue the claim, he did not extinguish the claim. If there was a claim, it still existed. It was not affected by his "election", which was hence not an election in the relevant sense. 109 In the circumstances, election is also no basis to summarily dismiss Mr Condon's proceeding.

Conclusion 110 For the reasons set out above, the respondent's interlocutory application for summary dismissal filed on 31 October 2019 must be dismissed. There is no reason why the respondent should not pay the applicant's costs of the interlocutory application. I certify that the preceding one hundred and ten (110) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stewart.