The submissions of Dr Gomez on appeal
21 Counsel for Dr Gomez focused primarily upon the references in the passage cited at [17] above from Ebert to the requirement that a debtor show or make out a prima facie case, and assimilated that to the test of entitlement to an interlocutory injunction subsequently formulated by the High Court in Beecham Group Limited v Bristol Laboratories Pty Limited (1967) 118 CLR 618 at 622, that is to say, the existence of a prima facie case where, "if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief". It will be recalled that in the passage from Ebert, reference was made to "a prima facie case" test in a context like the present. In the same context Dr Gomez pointed to the gravity of the consequences for him of refusal of the relief he sought, namely his bankruptcy and the ensuing likely prejudice to his claim against the Bank for damages in a sum substantially exceeding the unsatisfied balance of the Bank's judgment debt, which was, as earlier stated, $547,334.22.
22 The material relied on to persuade the Court of the existence of the prima facie case for which the appellant contended was the valuation testimony of Mr Phippen, to which reference has already been made, concerning the Leichhardt, Eastwood and St Ives properties. That testimony, if wholly accepted, would have supported an entitlement to damages in the order of $1.3 million. That sum would, of course, substantially exceed the residual indebtedness of Dr Gomez to the Bank quantified in the bankruptcy at $547,334.22. Mr Phippen's three valuations substantially exceeded in amount both the valuations obtained by the Bank before its mortgagee's sales of the three properties, and the sale prices actually achieved. Those valuations of Dr Phippen were said to provide "abundant and compelling evidence" to support a finding, at least prima facie, that the properties had been sold without reasonable care, or alternatively, with reckless disregard for the interests of Dr Gomez.
23 In addition to the valuation evidence of Mr Phippen, Senior Counsel for Dr Gomez, who did not appear for Dr Gomez in the trial at first instance, relied upon the following conduct of the Bank, as indicating a breach of duty in the exercise of its powers of sale as mortgagee:
(i) The brevity, alleged by Mr Phippen, of the Bank's advertising campaign conducted in respect of the St Ives property, and the Bank's failure, according to Dr Gomez, to take reasonable steps to present the St Ives property properly for sale.
(ii) The failure of the Bank, according to Dr Gomez, to take reasonable steps to secure the leasing of the Eastwood property at a proper market rent before it was sold.
(iii) The marketing and selling campaign conducted by the Bank, in relation to the Leichhardt properties alleged by Dr Gomez to have been inadequate, in the light of their development potential, and the decision of the Bank to sell the Leichhardt properties in one line.
Each of these complaints was set out in affidavit evidence placed before the primary judge. We should record that Dr Gomez did not seek to restrain the sale of any of the properties before the conduct of the relevant auction.
24 By way of underlining the implications and significance of the factors propounded in [21-22] above, Senior Counsel for Dr Gomez submitted that the primary judge applied the wrong legal tests or standards, and that the approach which her Honour should have taken was that which had been enunciated in Cuckmere Brick Co Ltd v Mutual Finance Limited [1971] Ch 949, and followed subsequently in the United Kingdom in a number of cases including most recently Medforth v Blake [2000] Ch 86. Those cases examine the proposition that, in exercising its power of sale, a mortgagee owes a duty to the mortgagor to take reasonable care to obtain a proper price for the property. It was acknowledged on behalf of Dr Gomez, however, that the New South Wales courts have consistently imposed on a mortgagee the less stringent duty of acting in good faith in the exercise of the power of sale, and not to act in reckless disregard of a mortgagor's interests. That formulation of the duty has been applied in at least the Supreme Court of New South Wales, since the decision of the High Court in Pendlebury v Colonial Mutual Life Assurance Society Limited (1912) 13 CLR 676, which had applied the earlier English test articulated in Kennedy v De Trafford (see [19] above). However it was submitted on behalf of Dr Gomez that it has been open for the High Court of Australia to adopt the test in Cuckmere since that case was decided by the Court of Appeal in England in 1971. In Forsyth v Blundell (1973) 129 CLR 477 and Commercial and General Acceptance Corporation Limited v Nixon (1981) 152 CLR 491 it had been unnecessary to choose between the two approaches. For instance in Forsyth at 506, Mason J said:
"It will be seen that the conclusion which I reach is that A.S.L. was in breach of its duty to the mortgagors in that it exercised its power of sale without taking reasonable steps to obtain a proper price and in doing so acted otherwise than bona fide, that is recklessly, not caring whether the price obtained was in the circumstances a proper price or not. Accordingly, I need not consider the 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."
25 The Bank complained that Dr Gomez should not be permitted to raise what may be described as the Cuckmere controversy on this appeal, as the proceedings below had been conducted upon the basis that the Pendlebury test applied. In support of this contention it was argued that, as a general rule appellants are bound by the course they intentionally adopted at first instance (Banque Commerciale SA (In liq) v Akhil Holdings Limited (1990) 169 CLR 279 at 284), and that a point of principle cannot be raised for the first time on appeal when it could have been met by the opponent calling further evidence below. That rule, it was accepted, will be displaced if all facts have been established in any event beyond controversy, or if the point is one merely of construction (Water Board v Moustakas (1988) 180 CLR 491 at 497). He asserted further that, in any event it was apparent from the reasons of the primary judge that she had addressed the particular circumstantial complaints distilled by Counsel for the appellant on appeal (see [23] above), and had found them to lack substance, particularly those relating to the decisions and steps which the Bank had taken, or allegedly had failed to take, with a view to obtaining proper prices for the three properties in issue. The findings of the primary judge, which have been extracted at [7], [12] and [16] above, appear to have addressed all complaints made by Dr Gomez of the inadequacy of steps taken to obtain proper prices for those properties.
26 We agree with the recent observations of Einstein J in State Bank of New South Wales Ltd v Chia & Anor (2000) 50 NSWLR 587 at [878] that "the Cuckmere test has no currency in New South Wales", and consider that, for the reasons already explained, the conclusions of the primary judge in relation to the sale of each property in question render academic for present purposes the controversy about the proper formulation of the principle. However, there is much to be said for the view of Menzies J in Forsyth at 481 that the Pendlebury test (and therefore the earlier De Trafford test in England) on the one hand, and the Cuckmere test on the other hand, may not be incompatible. That view has been elaborated as follows in Medforth at 101-102 in the joint judgment of Sir Richard Scott VC and Swinton and Tuckey LJJ:
"The duties imposed on a mortgagee in possession, and on a mortgagee exercising his powers whether or not in possession, were introduced in order to ensure that a mortgagee dealt fairly and equitably with the mortgagor. The duties of a receiver towards the mortgagor have the same origin. They are duties in equity imposed in order to ensure that a receiver, while discharging his duties to manage the property with a view to repayment of the secured debt, nonetheless in doing so takes account of the interests of the mortgagor and others interested in the mortgaged property. These duties are not inflexible. What a mortgagee or a receiver must do to discharge them depends upon the particular facts of the particular case. A want of good faith or the exercise of powers for an improper motive will always suffice to establish a breach of duty. What else may suffice will depend upon the facts. Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349 is a very good example. The fact that the mortgagee had an interest in the purchasing company placed the mortgagee under an obligation to show that a proper price had been obtained. This was an obligation more onerous than would otherwise have been required. It is true that Lord Herschell in Kennedy v De Trafford [1897] AC 180 expressed the duty on the mortgagee in terms much less onerous than the terms in which Salmon L.J. expressed the duty in the Cuckmere Brick case. That does not make the two cases inconsistent with one another. The facts that constituted the mortgagors' complaints were different. And the duty in equity appropriate to have been owed by a mortgagee selling in 1888 is not necessarily of the same weight as the duty appropriate to have been owed by a mortgagee selling in 1967. Equity is at least as flexible as the common law in adjusting the duties owed so as to make them fit the requirements of the time."
27 The conclusions of the learned primary judge concerning Mr Phippen's valuations of the three properties, extracted at [7], [12] and [16] above, have dispelled, in our opinion, the existence of a justifiable evidentiary basis for satisfaction of the Ebert test. Those conclusions of her Honour constituted a "weighing up [of] considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim" within the Guss v Johnstone test. We do not think that the intrusion of the word "reasonable" in each of the primary judge's conclusions in [7], [12] and [16] above detracted from her conviction that the Ebert test had not been satisfied. The reality of sale prices actually obtained at auction, together with the justifiable rejection by the primary judge of the allegations of Dr Gomez of an absence or insufficiency of reasonable steps taken by the Bank to obtain proper sale prices in the first place, present, in our view, an inseparable obstacle to the appellant satisfying the Court of the existence of a viable counterclaim, set-off or cross-demand in accordance with the principle expounded in Ebert and Guss v Johnstone.
28 For these reasons the appeal must be dismissed with costs.
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Court.