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[2004] SASC 61
Supreme Court of SA
2004-03-03
Besanko J, Mullighan J, Gray J
Original judgment source is linked above.
JOVANOVIC, JOVANOVIC AND FORTSON PTY LTD v COMMONWEALTH BANK OF AUSTRALIA
1 MULLIGHAN J I agree that the appeal should be allowed for the reasons given by Besanko J and I agree with the orders which he proposes.
2 This is an appeal against a judgment following trial.
3 The Commonwealth Bank of Australia (the bank) brought proceedings in the District Court against Douglas and Irini Jovanovic. The Jovanovics had guaranteed the obligations of Fortson Pty Ltd (Fortson) to the bank. The Jovanovics controlled Fortson. Fortson defaulted in its obligations to repay moneys advanced by the bank. After disposing of other securities the bank claimed $39,615.09 from the Jovanovics pursuant to the guarantee.
4 The learned trial judge entered judgment for the bank on its claim against the Jovanovics and dismissed a counterclaim brought by the Jovanovics and Fortson. The Jovanovics and Fortson have appealed.
5 The primary issue at trial related to claims made by the Jovanovics in their defence and by Fortson and the Jovanovics in the counterclaim. It was the appellants' case that the bank had breached its equitable and statutory duties as mortgagee with respect to the sale of the mortgaged property. It was said that the bank had not taken all reasonable care in the sale of the mortgaged property. On appeal it was submitted that the judge had failed to properly consider or apply the provisions of section 420A of the Corporations Law.
6 In 1995 the Jovanovics, through Fortson, purchased a property on which was conducted an hotel business from Slavko and Milorad Govedarica and Roclin Developments Pty Ltd (Roclin). The Govedaricas controlled Roclin. Fortson was incorporated for the purpose of the acquisition and was controlled by the Jovanovics. The Govedaricas were said to be in financial difficulty.
7 The bank advanced $750,000.00 to Fortson to finance the purchase of the property. The property was situated in Hindley Street, Adelaide. The hotel was known as the Plaza Hotel. The business conducted at the property included the provision of short and long term accommodation and three retail tenancies. The hotel offered inexpensive accommodation. It was said that parts of the hotel were in a state of disrepair. A newsagency was also operated from the premises by the Jovanovics.
8 The evidence before the judge did not permit findings to be made about the ownership or operation of the hotel business. No prime records were produced about the occupancy rate or takings. No proper and complete accounts were produced. Limited secondary records were tendered, however, they did not provide a reliable basis for making findings. The evidence suggested that a management company had been involved in the operation of the business. There was apparently no lease of the property. There was no satisfactory evidence about ownership of the business or its operation.
9 At about the time of the 1995 sale an undisclosed side agreement was reached between the Jovanovics and the Govedaricas. Following the sale the Jovanovics were to hold a one-third interest in the property themselves and the remaining two-thirds interest on trust for the Govedaricas.
10 The bank took security over the property, a charge over the business of Fortson and guarantees from the Jovanovics. In 1997 Fortson defaulted and the bank took steps to realise its security.
11 In October 1996 a bank officer, Cindy Helena Barker, took responsibility for the conduct of the bank file concerning the transaction between the bank, Fortson and the Jovanovics. Ms Barker kept detailed notes of her involvement and attendances. She had been employed by the bank for more than 15 years including a term in its asset management unit. Accepting Ms Barker's evidence in its entirety, the judge concluded:
As appears from my earlier comments, Ms Barker gave evidence over a very long period and explained each step undertaken by the bank in endeavouring to obtain repayment of the moneys owed by Fortson. Ms Barker, very properly, diligently and fairly applied herself to this task and, in my opinion, was extremely patient in all of her dealings with Mr Jovanovic. I do not believe she overlooked any matter in any of her memoranda of her dealings with Mr Jovanovic.
...
Ms Barker is an extremely experienced and competent bank officer. Effectively she assumed control of the Jovanovics default in October 1996 and had control of the account until the Govedaricas tender was accepted some 10 months later. During this period she was continually discussing all issues of the default and the proposed bank actions with Mr Jovanovic.
12 On appeal counsel for the appellants did not challenge the judge's acceptance of Ms Barker's evidence. However, challenges were made to inferences and conclusions drawn by the judge.
13 The history of the transaction as recorded by Ms Barker was summarised by the judge:
Her notes and enquiries revealed that the Govedaricas and/or their company, Roclin Developments Pty Ltd ("Roclin"), had initially sold the Plaza Hotel to the Jovanovics who had incorporated the company, Fortson, for this purpose. At that time there appeared to be a close friendship between the parties. It appeared that the Govedaricas at that time were in financial difficulties with another bank and consequently the sale to the Jovanovics evolved. Ms Barker mentioned it was not until quite late in the piece that the bank became aware of an agreement between the Govedaricas and the Jovanovics dated 15 November 1995 now referred to as the "secret agreement" which provided that if the Jovanovics and/or their company obtained sole legal title of the property pursuant to the contract of sale between Roclin and Fortson dated October 1995 the Jovanovics agreed that they would hold the property as to a one-third entitlement for themselves, and, the remaining two-thirds for the Govedaricas. It further provided:
'The Jovanovic's agree that notwithstanding any arrangement that involves their possession of sole legal title of the property, that they hold on trust for the benefit of the Govedarica's, ownership of the property based upon the proportions of ownership outlined above.'
...
The bank had obtained details of the secret agreement prior to the eventual sale
...
Ms Barker said she was aware in the initial period that there were considerable negotiations between all the parties with the Jovanovics endeavouring to arrange finance to pay out the Govedaricas. It appeared that the Govedaricas owned a substantial car park adjoining the hotel property and that in itself had created financial difficulties for them. She was also informed that the Jovanovics had difficulty in taking over the day-to-day operations of the hotel from the Govedaricas and, consequently, this was a significant contributing factor to the ability of the Jovanovics to service the loan to the bank.
14 Ms Barker's review of the bank file disclosed the existence of an ongoing dispute between the Jovanovics and the Govedaricas. Earlier the bank had deferred recovery action against Fortson until litigation between the Jovanovics and the Govedaricas was resolved. However by 17 October 1996 Ms Barker recommended a recovery strategy. Proposals were to be sought from the Jovanovics. Cash flow budgets were to be requested. Attempts were to be made to clarify the legal position of the management of the Hotel.
15 On 21 November 1996 Ms Barker wrote to Fortson accepting a proposal that:
. a lump sum payment of $20,000 ... be payable immediately
. sufficient funds are to be credited ... to meet the Fixed Rate Term Advance instalments when due
. arrangements to be reviewed in January 1997 following the conclusion of the trial scheduled to commence 14 January 1997.
16 These terms were not complied with by the appellants.
17 By January 1997 Ms Barker had formed the opinion that the Jovanovics were in a desperate financial position. At about this time Ms Barker was aware that the legal proceedings between the Jovanovics and the Govedaricas had been resolved and that negotiations were taking place concerning the sale and purchase of the property. On 21 January 1997 Ms Barker was advised that the negotiations had been unsuccessful. She noted:
This is a frustrating development. Recommend we now write to our client and advise that we require clearance of the excess ... otherwise the account is to be placed in reduction and mortgagee action commenced.
The method of sale by the CBA as mortgagee was discussed at length by [solicitor for the Govedaricas]. His clients are keen to avoid public auction. They state their reasons of (sic) being the cost which will be added to the CBA debt. It was again stated that the value of the hotel is $800,000. Our valuation is $1M dated 10/95. This was recently discussed with PVS [Property Valuation Service] who indicated the valuation is likely to be unchanged. Will now request PVS revalue on market and forced sale basis.
18 At about this time Ms Barker learnt that there was a dispute about who was entitled to possession of the property. This caused her to further note:
This information casts a new light on Mr Jovanovics capacity to service our debt and it would appear that, notwithstanding that we have no knowledge of the newsagency profitability, he is unable to meet loan instalments from current income.
... We have given the Jovanovics until 21/2/97 to put all accounts in order. The Jovanovics have made an appointment with us for 13/2/97 and we await developments.
19 On 13 February 1997 a meeting took place with Mr Jovanovic. The bank agreed to a private tender process between the Jovanovics and the Govedaricas. Both parties were required to agree to this process in writing by 21 February 1997. The bank advised Mr Jovanovic that legal notices would be issued so that the bank would be in a position to act if a sale was not achieved. Ms Barker noted:
If the first option of appointing an agent to sell the property goes ahead, we would wish to be able to be satisfied that the agent is reputable and property being marketed properly at a realistic price. Obviously, the Govedaricas could make an offer for the property and I would anticipate that Jovanovic would not sign any contract to them.
20 Following this meeting Ms Barker requested the bank's property valuation service to reconsider the bank's earlier internal valuation of the property. She also spoke with the bank's solicitor. Formal demand was made to Fortson for payment of the $68,078.15.
21 Ms Barker also requested that the internal property department of the bank revalue the security on both a market and forced sale basis. In late 1996 Ms Barker learnt that the Jovanovics were conducting a newsagency business from the hotel premises. She formed the opinion that this appeared to be their sole source of income. The difficulties between the Jovanovics and the Govedaricas left little cash flow to the bank to meet the ongoing obligations of Fortson.
22 The manager of the bank's property valuation service undertook the revaluation. A written memorandum of revaluation dated 14 February 1997 provided:
As requested we have undertaken a revaluation of the above mentioned security. An inspection was conducted on 26/2/97. Reference is made to previous valuation dated 31/10/95.
Security remains as described in the previous report. One vacancy has since developed. Nominal rental return is now estimated at $135,000. There appears to be some doubt about the Plaza Hotel rental ($96,000 pa) which has been disputed. One of the other leases (payment of $14,000 pa) is not at arm's length. Hotel rental does seem excessive although we have not been able to determine the level of trade. Allowing $75,000 pa for the hotel, total rental on a fully leased basis is put at $138,000.
Building itself may require upgrading in order for it to conform with current fire regulations. We have not been able to confirm the extent of this as thorough inspection was not made possible. At the least external appearance and hotel foyer would stand some degree of updating.
Market value will depend on the extent to which satisfactory leasing agreements are reached. Given our assessment of market rental, current valuation is $950,000. On a forced sale basis our valuation is $850,000.
As a separate matter but subject also to a commercial lease arrangement hotel business would be worth about $200,000 ($150,000 on a forced sale basis).
Forced Sale Valuation: $850,000 less $35,000, $815,000.
Forced Sale Valuation: $150,000 less $8,000, $142,000.
Comments
We have been informed about proposals for the security that might add value if they were to happen. In our view unless major upgrading costs are envisaged nothing is likely to seriously challenge the basis of our valuation.
At present entire site seems to be in need of a clean up. Hotel component has an unsavoury reputation while exterior of retail outlets and the area in front warrants attention. Additionally we have been informed that there are up to 35 permanent residents staying in the hotel who may be subject to the Residential Tenancies Act. It would seem that several items will need to be cleared up before any decision to purchase the site.
This internal bank valuation concluded that market value of the property was $950,000.00. The market value of the business was $200,000.00.
23 On 5 March 1997 the bank gave notice to Fortson alleging a breach pursuant to section 55A of the Law of Property Act 1936 (SA). Ms Barker wrote to the Jovanovics advising that the bank was prepared to postpone a mortgagee sale for a period providing the Jovanovics undertook to sell the property at a realistic price or arrange to refinance the above debts elsewhere.
It is unclear whether the Hotel business is managed under contract by the Govedaricas or whether no contract exists. Consider the latter is more likely.
We are aware that the Govedaricas maintain active and assertive legal representation in this matter.
Both Fortson and Govedaricas consider that no other party will be interested in purchasing the Hotel, outside of these two.
Forced sale valuation in hand for the freehold only does not allow much margin for selling costs if our debt is to be repaid in full.
In addition, the concept of an internal auction has been raised in the past by Mr Jovanovic. This would see sale by tender, open only to these two parties. The reason behind this request appears to be that each of these two parties appears to believe that CBA will sell the Hotel for the amount of its debt. Therefore if the CBA pays Agent or Receiver costs, the cost to purchase will be higher. Both parties want to purchase at the cheapest price.
Have discussed this with Legal ... . Of course our usual basis for setting a sale price is the valuation. Legal advise that if we wish, we could proceed along the internal auction course on the following basis:
- request each party write and state the amount they would be prepared to pay and the terms of settlement
- advise each party that CBA would have the option to refuse both tenders if the amounts offered were not at, or above a reserve price
- sell only if the winning tender is around the reserve mark.
Obviously we would not sell at a price that could not be supported by valuations.
Recommend we issue a [notice of sale] today. In view of the complications with the management aspect, recommend that we avoid public sale and instead attempt sale by the internal auction method. We would write to both parties as guided by legal, seeking their written expression of interest in purchase of the Hotel as a going concern, including price and terms. Response required within 7 days."
25 Ms Barker was concerned that the bank's internal valuer had been unable to make a thorough inspection of the hotel. She was troubled about the nature of permanent residencies under the Residential Tenancies Act 1995 (SA). She was concerned the bank's valuation may not reflect the true position. She wished for more certainty.
26 On 2 May 1997 Ms Barker instructed Knight Frank to value the property. On 22 May 1997 the bank received the Knight Frank valuation. The valuation expressed the opinion that the market value of the property was $660,000.00. Market value was defined to mean:
Current Market Value means the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
Knight Frank was of the view that the property would realize $560,000 on a forced sale. Forced sale was defined as:
the price at which a property might reasonable (sic) be expected to be sold at the date of valuation, assuming that the sale is being negotiated by an anxious vendor or is being offered to the market with the power of sale being exercised by a mortgagee/receiver or manager, the purchaser is fully informed as to the nature of the property and the reason for the sale, the property has been fully exposed to the market during a short, intensive marketing programme, which may be less than an appropriate marketing period for a property of this nature in the current market and that no account has been taken of any additional bid by a special purchaser.
Knight Frank expressed concern over the uncertainty surrounding the hotel's operations and that there was virtually no secure short term income. Assumptions were made as to occupancy rate and rental income. Knight Frank did not value the hotel business.
27 On 22 May 1997 letters outlining a proposed tender process were forwarded to the Jovanovics and the Govedaricas. The bank's tender documents made it clear that the bank was only offering the freehold property for the sale. The hotel business, the plant, fittings and equipment and the newsagency were not the subject of the tender. The bank sold the freehold property and nothing more. Both the Jovanovics and Govedaricas submitted tenders. The tender documents required the lodging of a deposit. The Govedaricas lodged a deposit. The Jovanovics did not.
28 The Jovanovics' business advisor informed Ms Barker that there would be difficulties in gaining approval to an application for finance. He considered that the Jovanovic proposal would be declined by all banks. However he thought it may be attractive to private investors. Ms Barker noted:
Mr Jovanovic's prospects of obtaining finance appear remote. In view of deposit deficiency and incomplete tender recommend we decline this tender.
29 Ms Barker recorded the following observation with respect to the Govedaricas' tender:
Proposal is for CBA (preferred lender) or another financier to lend $650,000. Have discussed with Darryl Royans (Snr Manager Approvals) and Colin Richie (Mobile Sales Force Unit). Colin strongly opposes the bank dealing with the Govedaricas due to his knowledge of their loan conduct when with BankSA (Asset Management Unit). Darryl has indicated that, with this in mind, he would not be inclined to approve the application.
Recommend we decline the Roclin application for finance, under SMA signature.
Roclin are in control of the accommodation business within the Plaza Hotel. There would appear to be some prospect of Roclin being able to raise finance. Tender and deposit provided are in order. The price offered is below PVS FSV but above KF FSV and market valuation, and is considered acceptable.
Recommend we respond to Roclin along the lines that we will defer our decision on their tender until 5pm 20th June 1997. If evidence of formal finance approval is provided to this office by that time, their tender will be accepted. Exact wording of reply to be approved by Legal Department.
30 By 23 June 1997 a decision had been taken by the bank to seek further offers from the Jovanovics and the Govedaricas. Ms Barker noted:
- set deadline for receipt of offers at 12 noon 4/7/97
- request a Receiver make a pre appointment inspection of the Roclin operated hotel (accommodation) business prior to 4/7/97. Recommend Tony Smith of Ernst and Young. We wish to obtain information on the trading of the business, and suspect that if the Govedaricas are not successful in their bid to purchase the Hotel, their co-operation may not be forthcoming. The information will be vital if the sale process is unsuccessful and a Receiver is appointed.
31 On 25 June 1997 the bank sought independent advice from accountants Ernst & Young. The bank's instructions to Ernst & Young included the following:
A review of management agreements and any other documentation between the Company and Roclin Developments Pty Limited and any other relevant entities owned and operated by the Jovanovics and the Govedaricas.
Determine the party with the operating rights for the Plaza Hotel business and if possible establish the viability (or otherwise) of the business operations.
Your advice regarding realisation strategies that can be adopted by the Bank to maximise the return from this account."
On 4 July 1997 Ernst & Young provided a report which contained the following advice:
On the basis of investigations and discussions carried out, our preliminary understanding of the position of the respective parties may be summarised as follows:
...
4.0 Options
Notwithstanding the lack of documentation, we consider the following three options the most practical alternatives:
1. As the tender process is running, if one of the parties can confirm that finance is able to be independently obtained, then a sale of the property to this party is clearly the preferred option.
2. Extend the timeframe for either party to obtain finance. (The Bank should probably go straight to the market unless there is a reasonable opportunity for one of the parties to obtain finance in the next 4 to 8 weeks).
3. Appoint an agent and put the Hotel to the market.
4.1 Option 1
This is clearly the preferred option. Clarification of ownership of the chattels will however be required, particularly if the Jovanovics are the successful purchaser.
4.2 Option 2
If neither party is able to confirm finance by 4 July 1997, the Bank may consider extending the timeframe for obtaining finance for (say) a further 4 to 8 weeks. Both parties can be advised that should they fail to obtain finance, the Bank will be putting the Hotel to the market. In the meantime, the Bank should require that all rental monies from commercial tenants are forwarded to the Bank, including rent due by the newsagency. The Govedaricas should be informed that the Bank requires a weekly accounting of receipts and payments in relation to accommodation and that a minimum payment of $8,000 per month is required in respect to the accommodation receipts. In addition, all monies received the Govedaricas are to be banked into the PHPL account (which we are advised is the operating account for the hotel) maintained at the Commonwealth Bank.
4.3 Option 3
If it is considered that the prospects of finance being obtained by the two parties are remote, then the Bank should, after clarifying ownership of the chattels and the management arrangement, appoint an agent and put the Hotel to the market. In doing this, the Bank will require control of the receipts and payments as detailed in Option 2 above. If it is felt that the Govedaricas will not be remitting the appropriate monies to the Bank then the Bank should consider appointing an agent or a receiver to manage the Hotel providing the existing arrangement, if any, can be terminated. Consideration will also need to be given to an arrangement with PHPL, the alleged owner of the chattels on two grounds:
- rent for usage of the chattels; and
- an option to purchase the chattels either by the Bank prior to selling the property or a purchaser in a separate agreement.
We have asked Mr Govedarica to advise the details and value of the chattels located in the Hotel. He has advised that he believes the chattels to be worth $60,000 which is based on 35% to 40% of current cost. In our discussions with Mr Govedarica, he advised that he did not particularly wish to remove the chattels as he has no real use for them and therefore it is probably that a deal could be done with him for the purchase of the chattels.
4.0 Recommendation
...
If one of the parties is able to obtain finance and the valuations support the price offered, we recommend selling to that party as soon as possible. Further consideration of Options 2 or 3 outlined above should wait until receipt of documents evidencing arrangements between the parties. We will continue to pursue [solicitors for Jovanovics and Govedaricas] for the relevant documents and upon receipt, we will clarify the outstanding issues and provide you with our further advice.
32 On 8 July 1997 Ms Barker's diary notes summarised the position:
Sale of Plaza Hotel freehold
Deadline for lodgement of offers to purchase was 12 noon 4/7/97.
No offer was received from Doug Jovanovic as he was reluctant to pay up front broking fee of $10,000 to obtain finance approval required by CBA. On 7/7/97 ... Solicitor for Doug telephoned and again requested we allow Doug a further two weeks to obtain finance? This request was declined by the writer. An identical request had been declined 2/7/97.
... Solicitor for the Govedaricas called at this office 4/7/97 and spoke to Neil Smith SMCM and the writer. He stated that his clients' offer of $800,000 still stood, however they were unable to raise finance anywhere. CBA had declined to provide finance of $650,000 5/6/97.
[Solicitor for Govedaricas] advised finance requirement had reduced to $620,000 and requested the bank reconsider its' decision. Settlement is offered in 7 days. The application has been completed and is awaiting decision.
33 The Ernst & Young advice identified three options. Critical to the advice was whether confirmation would be forthcoming by one of the parties that finance could be independently obtained. If there was not a reasonable possibility of one of the parties obtaining independent finance within four to eight weeks the bank should proceed "straight to the market". This would involve the appointment of an agent and "putting the Hotel to the market".
34 The bank appeared to accept this advice. Ms Barker noted that the Ernst & Young conclusion and recommendations were identical with the bank's existing strategy. Notwithstanding this position, by 14 July 1997, the bank had accepted the Govedaricas' offer.
35 It is to be observed that the first option identified by Ernst & Young, the preferred option, could not be advanced. Neither the Jovanovics nor the Govedaricas were able to confirm that finance was able to be independently obtained. In this event it was the advice of Ernst & Young that the hotel be put to the market. The bank did not do so. The bank sold the property to the Govedaricas through Roclin. There was no independent financier. The bank provided finance of $620,000.00.
36 As earlier observed the request by the Jovanovics for an advance of $620,000.00 had been refused by the bank. The bank was aware that the Jovanovics could not obtain independent finance. The bank considered that the Jovanovic's financial position was dire. This had been known to the bank from late 1996.
37 The judge made the following finding about the financial position of Mr Jovanovic:
It appears that by March 1997 the financial plight of Mr Jovanovic was extreme particularly with his advice to the bank on 27 March 1997 that he was some four months in arrears with insurance premiums and neither he nor the Govedaricas were able to pay the same. The insurance company had threatened to cancel the relevant policies. The bank had been requested by the insurance company to pay the sum of $6,254.70 for outstanding arrears.
As a consequence the bank treated with one party only. There was no competitive tender process.
38 The sale to the Govedaricas provided further benefits to the bank. The bank retained their rights against Fortson and the Jovanovics. The bank still had the benefit of the guarantees of the Jovanovics and a registered charge over the assets of Fortson. The bank's new debtor was Roclin. The Govedaricas provided guarantees. The bank had been unable to resolve the difficulty over the identity of the owner of the business. If the owner was Fortson, the bank's registered charge provided security. If the owner was Roclin then the bank had a charge over that asset.
39 The bank provided more than 75% of the purchase price. The bank was anxious to exercise its powers of sale to protect its position. It decided in these circumstances not to follow its existing strategy or its independent advice. The sale in these circumstances was not an arms length sale.
40 The judge considered that the bank's conduct in regard to the exercise of the power of sale and in particular that of Ms Barker could not be criticised. He concluded:
[Ms Barker's] actions can be summarised as follows:
(1) She initially undertook a detailed review of the file and involved herself with long attendances upon Mr Jovanovic and his solicitor.
(2) She caused the internal bank valuers to revalue the security.
(3) She was concerned because of the legal issues that had arisen between the warring factions and lack of financial records and then sought -
(a) An independent valuation of the property, and
(b) Professional accounting advice on the hotel operations.
(4) Armed with the internal bank valuation and the Knight Frank valuation and receiving supportive legal advice, she recommended the internal tender process as suggested by Mr Jovanovic and willingly participated in by both parties. The independent accountants who were requested by the back [sic] to endeavour to clarify this mire of deceitful transactions also suggested this course.
(5) In the tendering process she was sympathetic to the Jovanovics making no issue with the lack of payment of a deposit, but rejecting the same because of the fact it could not be supported by appropriate funding.
A private or internal auction by a mortgagee must always be closely scrutinised. Because of the inherent risks it should never be a recommended course of action. However, there will always be exceptions because of a factual matrix of circumstances. In this case, Ms Barker's opinion was the informal tender process between the parties was in the best interests of the bank, whilst not overlooking the interest of the Jovanovics. This opinion was also the preferred option of the independent investigative accountants. Her motives can be summarised as reasoned and careful to ensure that the bank obtained the best possible price for the property.
41 In reaching these conclusions the judge overlooked the advice of Ernst & Young that the bank should only proceed to deal with the Govedaricas or the Jovanovics if they had arranged independent finance. In the event that independent finance was not available the bank was advised to sell by public auction through an agent.
42 Ms Barker's approach was to proceed with the informal tender process and reach an agreement with the Govedaricas'. The judge concluded that this accorded with Ernst & Young's advice. This was incorrect. There was no private auction or competitive tender process in any real sense.
43 Section 420A of the Corporations Act 2001 (Cth) provides:
(1) In exercising a power of sale in respect of property of a corporation, a controller[1] must take all reasonable care to sell the property for:
(a) if, when it is sold, it has a market value - not less than that market value; or
(b) otherwise - the best price that is reasonably obtainable, having regard to the circumstances existing when the property is sold.
44 Section 420A was introduced following recommendations of the Australian Law Reform Commission.
45 The interpretation of section 420A is assisted by considering the court's approach to comparable provisions in two State statutes.
46 Section 77 of the Transfer of Land Act 1958 (Vic) contained a statutory duty to be complied with by mortgagors when selling mortgage property. In Henry Roach (Petroleum) Pty Ltd[3] Lush J observed[4]:
In my opinion s.77 must be regarded as containing a statement of the obligation of the mortgagee in effecting a sale. It sets out as a matter of language two requirements cumulatively, a requirement of good faith and a requirement that regard shall be had to the interests of the mortgagor, grantor or other persons. The effect of its words is to bring together the concepts of an obligation to act in good faith and an obligation akin to an obligation to exercise care in much the same way as they are blended in the dissenting judgment of Menzies, J. in Forsyth v Blundell, supra, at (C.L.R.) p. 481, and in that of Salmon, L.J., in the Cuckmere Brick Co.'s Case, at (Ch.) p.966. I have likened the statutory requirement of regard to a requirement of care deliberately because I think it is impossible to distinguish in this context between having regard to the interests of another and taking care to protect the interests of that other.
A mortgagee in exercising his powers is entitled to give first consideration to his own interests, a concept which is consistent with having regard to the interests of others or with taking reasonable care to protect the interests of others, what is reasonable being assessed in the light of the fact that not only is the mortgagee entitled to give his own interests first consideration, but also that the reason for the existence of the power is to protect those interests.
47 In Commercial & General Acceptance Ltd v Nixon[5] the High Court considered a breach of a statutory obligation imposed by section 85 of the Queensland Property Law Act 1974. Mason J observed:
There are a variety of reasons to sustain this [statutory] 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 instructions -- 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 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.[6]
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.[7]
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.[8]
48 Section 420A imposes no lesser duty than that contained in section 85 of the Queensland Property Law Act. Section 420A may even be said to impose a higher duty as the statutory obligation is to take all reasonable care.
49 In Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd & Ors[9] Campbell J observed:
In deciding whether there has been a breach of s 420A, a court looks at the process that a controller of property of a corporation has gone through in selling that property. The enquiry is whether, in the course of that process, the controller has taken all reasonable care to sell the property for not less than its market value. It is not necessary to prove that the property was in fact sold for less than its market value - a controller could breach s 420A, but, through luck, still manage to sell the property for its market value or more. Further, it is not necessary for me to find what actually was the market value of the property, to be able to find that s420A(1)(a) was breached - all that I need find is that the process gone through was not one where all reasonable care was taken to sell the property for its market value, whatever that market value might be.
50 These remarks are apposite. Pursuant to section 420A a consideration of the conduct of the bank involves an analysis of the process used to sell the property. It is unnecessary for the court to come to a conclusion as to whether market value was in fact obtained. However that conclusion will be relevant to the question of final relief.
A Comparison to the Equitable Duty of Good Faith
51 In Nixon[10] the High Court discussed the duty of good faith and compared that duty with the statutory duty created by the Queensland statute. Brennan J observed:
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 and in Australia and New Zealand Banking Group Ltd. v. Bangadilly Pastoral Co. Pty Ltd. In both cases it was found unnecessary to decide between the formulations.
...
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."
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. (94) and Mason J. (95); Pendlebury v. Colonial Mutual Life Assurance Society Ltd. (96).) Menzies J. expressed a dissenting view in Forsyth v. Blundell when he said (97): "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.
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 liability to the mortgagee.
52 If a breach of the statutory duty is established in the present case, it is unnecessary as it was in Nixon, 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.
53 The trial judge referred to section 420A on several occasions in his reasons. However, he did not analyse the provision. In the course of his reasons he said:
In 1988 The Harmer Report was released in an attempt to elucidate the Australian position. This report specifically refrained from using the term "market value" as this could be a "costly and difficult for partly manufactured goods or products with a limited market" (Symes 51). This has further been suggested that to couch this duty in "market value" or "best price possibly obtainable" is to place the duty in an objective standard. This report led to the introduction of section 420A Corporations Law 2001 which introduced a duty to take "reasonable care" when exercising the power of sale. From this legislation, it is stipulated that there is no correct method of sale, with an absence of statutory requirement for such. In this legislation, in deciding if there has been a breach, the court will examine the process the receiver goes through in selling the property (Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd [2002] NSWSC 16). In this case it was held that "any departure from reasonable standards must be so serious as to be properly characterised as unconscionable, in order to render the mortgagee accountable". In fact, in Cape v Redarb Pty Ltd (No 2) (1992) 10 ACLC 1, 272, it was held that under section 420A, "as a consequence of the attitude of hostility and distrust.... So clearly displayed" it put the receiver in a 'no-win' position and is (sic) entitled to act upon his or her own advice a little more than is normal.
The immediate question to consider is in carrying out her duties did Ms Barker and thus the bank act in and about the manner of the execution of her duties and in the eventual exercise of the power of sale in good faith? Did the bank by its actions show a calculated indifference or reckless disregard to the rights of Fortson and the Jovanovics?
54 It is apparent that the trial judge confused the equitable and statutory duties. The judge's enquiry was whether the bank had showed a "calculated indifference or reckless disregard" to the rights of Fortson and the Jovanovics. As earlier observed, the judge's reasons do not disclose any consideration of the terms of section 420A. The judge did not enquire whether the bank took reasonable care to obtain not less than the market value of the property. The judge did not consider whether the bank took all reasonable care to sell the property for the best price that was reasonably obtainable having regard to the then existing circumstances.
55 Counsel for the bank contended that the trial judge had found that the bank through Ms Barker had taken all reasonable care. It was said that it could be inferred that the judge had paid proper regard to the terms of section 420A. It is correct to observe that the judge concluded that he did not believe it was possible to criticise Ms Barker in any way for her handling of the default file. However this conclusion was reached when considering issues of good faith, calculated indifference and reckless disregard.
56 The trial judge erred in his interpretation of section 420A. He misapplied the section to the facts of the case before him. He treated the duty under section 420A as one of good faith.
57 Bryson J in GE Capital Australia v Davis[11] observed that section 420A(1) spoke with "Delphic simplicity" by specifying what a "controller" must do but made no reference to the consequence of a failure to comply with the statutory duty. Bryson J took the view that the statutory duty was only owed to the corporate owner of the property.
These authoritative statements appear to me to have the effect that the surety may complain of anything of which the debtor may complain, and has further rights where the value or realisation of the security has been diminished by the creditor's neglect or default. What is meant by neglect or default is not further defined by the authorities, but it gives more protection than was available to the debtor under Pendlebury. The guarantor has even greater protection and may be completely discharged if the creditor fails to obtain effective security which is available as in Wulff v Jay, or varies the terms of the loan or security without the guarantor's concurrence. Where subs420A(1) applies I am of the view that it should be applied as a fair representation of the standard of neglect or default referred to by Dixon and Brennan JJ. If the guarantors show that the mortgagors would, if they made a claim, be entitled to a remedy under subs420A(1), the guarantors are, in my opinion, entitled to a similar remedy by way of an equitable defence to the claim against them, subject to the provisions of the guarantee. [14]
59 In Standard Chartered Bank v Walker[15] when addressing the question of equitable duty, Lord Denning observed:
So far as the receiver is concerned, the law is well stated by Rigby LJ in Gosling v Gaskell [1897] UKLawRpAC 40; [1896] 1 QB 669, a dissenting judgment which was approved by the House of Lords (see [1897] UKLawRpAC 40; [1897] AC 575, [1895-9] All ER Rep 300). The receiver is the agent of the company, not of the debenture holder, the bank. He owes a duty to use reasonable care to obtain the best possible price which the circumstances of the case permit. He owes this duty not only to the company (of which he is the agent) to clear off as much of its indebtedness to the bank as possible, but he also owes a duty to the guarantor, because the guarantor is liable only to the same extent as the company. The more the overdraft is reduced, the better for the guarantor. It may be that the receiver can choose the time of sale within a considerable margin, but he should, I think, exercise a reasonable degree of care about it. The debenture holder, the bank, is not responsible for what the receiver does except in so far as it gives him directions or interferes with his conduct of the realisation. If it does so, then it too is under a duty to use reasonable care towards the company and the guarantor.
60 In Nixon,[16] Brennan J considered the position of those on the "mortgagor's side" when considering the issue of statutory duty he said:
... 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.
61 The terms of section 85 of the Queensland statute do speak of "a person damnified by the breach of duty" having a "remedy in damages against the mortgagee exercising the power of sale". Section 420A contains no comparable provision.
62 However section 420A is remedial in nature and if any ambiguity exists the section should be given a beneficial construction. As earlier observed there is ambiguity arising from the fact that the section does not provide for the consequences of a failure to comply. The section is fairly open to a liberal interpretation. To allow a guarantor to have the protection of the statute does not strain the language of the statute. Such an interpretation is fairly open on the words used. The position of a mortgagor, a mortgagee and a guarantor are inextricably linked. This is well demonstrated in the present case.
63 The section operates to protect the interests on the mortgagor's side. In these circumstances the statutory duty operated to protect both Fortson and the Jovanovics. The bank owed the same statutory duty to the Jovanovic's as guarantors as it did to Fortson as the corporate debtor. However, if the view of Bryson J is to be accepted, a guarantor would have rights in equity that mirror the statutory right and would entitle the guarantor to a similar remedy by way of an equitable defence subject to the provisions of the guarantee.
The Application of Section 420A in the Present Case
64 The following conclusions can be drawn about the process of sale in the present case.
- The process followed was contrary to the usual practice of the bank.
- The process followed was contrary to the advice of Ernst & Young:
- The bank negotiated with only the one possible purchaser.
- The sale could only proceed because the bank was prepared to act as a financier to the Govedaricas. Given their previous difficulties, the lack of proper information about the running of the hotel business and the failure to identify the owner of the business, the bank did not test the market.
- The transaction provided the bank with particular benefits. It received $180,000.00 cash, a new debtor in Roclin and further guarantors (the Govedaricas). It retained security over the freehold and probably resolved the ambiguity over the ownership of the business.
- The transaction was not an independent arms length transaction.
- The sale was for a consideration of $800,000.00. This was $110,000.00 less than the bank's internal revaluation of $910,000.00.
- The independent valuation from Knight Frank did not resolve the major uncertainties identified in the internal bank valuation.
- Faced with conflicting valuations the bank did nothing to resolve the differences.
- Doubts over the ownership of the business were an impediment to sale. The bank failed to resolve these doubts. The bank could have approached the court either on a possession summons or for a declaration. It did not do so.
65 The bank acted in breach of its obligations under section 420A. The bank breached its statutory duty to both Fortson and the Jovanovics. On the evidence before the trial judge there was a significant difference of view about market value. The bank's internal valuer and Knight Frank both provided contingent valuations. One major uncertainty related to the ownership of the business conducted on the premises. Given the different valuations, the obligation of the bank was to obtain the best price having regard to the circumstances existing when the property was sold.
66 The bank did not engage in a competitive tender. There was no competition. There was only one effective bidder. Further, the sale was not at arms length. The bank provided finance for more than three-quarters of the purchase price. Without the bank's support the Govedaricas would not have been able to purchase the property. The bank only supported the one bidder. The process followed was against the advice of Ernst & Young.
67 As earlier observed the Jovanovics were entitled to the protection of section 420A. They were entitled to pursue their counterclaim. Fortson was entitled to advance its counterclaim. Given the bank's breach of statutory duty the judgment on the bank's claim should be set aside.
68 For these reasons this appeal should be allowed. The orders of the trial judge should be set aside. The action should be remitted for further consideration to determine what relief, if any, the parties are entitled to in respect of the claim and counterclaims.
69 BESANKO J: This is an appeal from orders made by a Judge of the District Court after a trial in that Court. Mr Douglas Jovanovic and Mrs Irini Jovanovic and Fortson Pty Ltd have appealed to this Court against the orders made by the Judge. Except where I need to refer only to Mr Jovanovic, I will refer to those parties as "the Jovanovics" and "Fortson" respectively. The respondent to the appeal is the Commonwealth Bank of Australia ("the Bank").
70 In the action, the Bank sued the Jovanovics on a guarantee for the sum of $39,615.09. The execution of the guarantee, the service of relevant notices under the guarantee, the calculation of the amount claimed under the guarantee and the failure to pay that amount were not in dispute.
71 The main issues at trial were those raised in the defence filed by the Jovanovics, and in the counterclaim filed by the Jovanovics and Fortson against the Bank.
72 At all relevant times, Fortson was owned and controlled by the Jovanovics. In November 1995 Fortson purchased a property at 83-89 Hindley Street, Adelaide, in the State of South Australia ("the property"). The purchase was financed for the most part by a loan provided by the Bank. The Bank took various forms of security to secure repayment of the loan, including a mortgage over the property under the Real Property Act 1886 (SA) and a registered mortgage over the undertaking, property and assets of Fortson. It also obtained a guarantee from the Jovanovics. Fortson failed to make timely repayments of the loan and the Bank took steps to claim the amount it was owed and to enforce its security. In July 1997 the Bank sold the freehold title of the property.
73 In the action in the District Court, the Jovanovics claimed in their defence that the Bank, in exercising its power of sale in relation to the property, acted in breach of the duties it owed to the Jovanovics and Fortson respectively, and failed to secure a proper price for the property. The Jovanovics claimed that they had an equitable set off which defeated the Bank's claim against them under the guarantee. The counterclaim by the Jovanovics and Fortson contained similar allegations of breach of duty by the Bank together with claims for various monetary amounts representing loss said to have resulted from the Bank's breaches of duty. One such claim was for the loss of a newsagency business which had been conducted on the property by the Jovanovics from 1995 to 1998.
74 The Judge found that the Bank owed duties to the Jovanovics and Fortson, but that it had not acted in breach of those duties. He entered judgment for the Bank against the Jovanovics for the amount then owing under the guarantee ($77,643.93) and made an order for costs in favour of the Bank. Although he made no specific order, the Judge said in his reasons that he dismissed the counterclaim, and no point was taken about the absence of a formal order in that respect.
75 Fortson was deregistered on 11 September 1998. On the hearing of the appeal the Court was told that the company had since been re-registered and that its deregistration was not an impediment to the company's ability to pursue the counterclaim and the appeal to this Court.
76 At all relevant times, there has been a private unlicensed hotel on the property. The hotel consists of some 67 rooms over three levels and is known as The Plaza Hotel. There are also three retail shops in the building and these shops front onto Hindley Street, Adelaide. In 1997, two of the retail shops were operating, one as a newsagent and the other as a games shop. From 1995 to 1998, the Jovanovics conducted the newsagency business. Parts of the building on the property were in poor condition and in need of repair.
77 In about 1988 or 1989, the Jovanovics met and became friends with Mr Slavko Govedarica and Mr Milorad Govedarica. I will refer to the latter two as "the Govedaricas". At all relevant times, the Govedaricas owned and controlled a company called Roclin Developments Pty Ltd ("Roclin"). Until late 1995, Roclin owned the property. Roclin, or another entity controlled by the Govedaricas, operated the hotel business on the property.
78 Roclin, or the Govedaricas, also owned a carpark at the rear of the property. They had borrowed moneys from the State Bank of South Australia and were having trouble making the necessary repayments. In late 1994 or early 1995 the Govedaricas suggested to the Jovanovics that Roclin should lease The Plaza Hotel to the Jovanovics so that (as the Judge put it) "if the Bank sold the freehold, this lease would encumber the property". On 12 January 1995 a lease agreement with respect to the property was executed between Roclin as lessor and Mr Jovanovic (trading as Milan Investments) as lessee for a period of three years commencing on 15 January 1995 with rights of renewal and an annual rental of $96,000. At the trial, counsel for the Jovanovics admitted that this document was (to use counsel's words) "a sham" and was executed for the purpose of possibly defeating the creditors of Roclin.
79 In November 1995, Roclin entered into a contract to sell the property to Fortson for the sum of $750,000. The Judge found that the contract was executed on 16 November 1995, although it is dated 12 October 1995. For the purposes of the appeal the difference is not material. Fortson was a shelf company purchased by the Jovanovics for the specific purpose of buying the property. The contract for sale and purchase provided that it was subject to a tenancy, and that the tenant was Entienee Pty Ltd. However, in a later provision in the contract it provided that the lease to Entienee Pty Ltd was to be extinguished prior to settlement. The contract excluded from the sale "All Tenant's goods, chattels, plant and equipment and stock in trade". To finance the purchase, Fortson borrowed the sum of $750,000 from the Bank. As I have said, the Bank obtained various forms of security in relation to the loan. In due course, settlement of the contract of sale and purchase occurred. The Judge found that the proposal which led to the contract evolved as a further attempt by the Govedaricas to defeat and defraud their creditors. The initial proposal involved the sum of $700,000. That figure was later increased to $750,000. The only other tender was from a family member who was involved in the arrangements.
80 On 15 November 1995, the Jovanovics and the Govedaricas entered into an agreement whereby the Jovanovics agreed to hold two-thirds of the ownership and liabilities of the title to the property on trust for the Govedaricas (one-third each). The Judge referred to this agreement as "the secret agreement" and so will I. It is not entirely clear that this agreement encompasses the hotel business as well as the freehold title of the property, but for present purposes I will proceed on an assumption favourable to the Jovanovics and Fortson, namely, that that was the intention of the parties at the time the agreement was executed.
81 On 8 July 1996, Fortson purported to enter into an agreement with MRM International Pty Ltd. I say "purported" because Mr Jovanovic admitted that the document was a sham which had been drawn up for the purpose of representing to a financier that the tenancy was occupied.
82 After the purchase by Fortson in November 1995, the Jovanovics continued to conduct a newsagency business on the property and it seems the Govedaricas (or an entity controlled by them), continued to conduct the hotel business. It seems that the Jovanovics could not gain access to the income stream generated by the hotel business, and it was not long before Fortson failed to make timely repayments of its loan to the Bank. The Jovanovics were in a desperate financial position by at least early 1997.
83 In October 1996, the Bank's officer, Ms Cindy Barker was given the file within the Bank and by 17 October 1996 she had recommended a strategy for the recovery of moneys then outstanding.
84 The contract of sale and purchase between the Bank and Roclin dated July 1997 specifically excludes from the sale, "all goods, chattels, plant equipment and machinery and moveable items not in the nature of permanent improvements in or about the Land", and attempts to qualify the Bank's obligation to give vacant possession at settlement.
85 The newsagency business failed in 1998 with large debts owing to various suppliers.
86 In his reasons for judgment, Gray J has summarised the important events which occurred between October 1996 and July 1997, and I gratefully adopt his summary of those events.
87 At this stage, it is convenient to mention some important points about the Judge's findings of fact in relation to the events which occurred between October 1996 and July 1997, and the extent to which those findings were challenged on appeal. First, the Judge accepted Ms Barker's evidence in its entirety, and said that where there was any divergence between the evidence of Mr Jovanovic and that of Ms Barker, he had no difficulty in preferring the evidence of Ms Barker. That conclusion of the Judge was not seriously challenged by counsel for the Jovanovics and Fortson. In any event, there is no reason to disagree with the Judge's conclusion in that regard.
88 Second, although the Judge found that Mr Burton's valuation was a well reasoned document and its conclusion could not be criticised, and that the Bank was entitled to act on the basis of the valuation, the Judge did not make a finding that Mr Burton's figure represented the market value of the freehold title of the property. In fact, the Judge did not make a finding as to the market value of the freehold title of the property. That was expressly accepted by counsel for the Bank during the course of submissions before this Court, and accords with my reading of the Judge's reasons for judgment.
89 Third, the Judge found that even by the time of trial, there was still (as the Judge put it), "great uncertainty as to the legal position of the persons who are either entitled to own or manage the business of the hotel, and that this issue will not be determined until litigation between the former partners is completed". The Judge said that much had been made of the value of the business of the hotel. However, he said that the Bank, no doubt on legal advice, excluded from the sale to Roclin in July 1997 any property associated with the business. I take the Judge to be saying that on the evidence it was not possible for the Bank in 1997 or, for that matter, the Judge at trial, to determine who owned or managed the hotel business. It seems that before the Judge counsel for the Jovanovics and Fortson said that he did not challenge the conclusion that the Bank did not sell the hotel business. There was debate on the hearing of the appeal as to the precise nature of the concession made by counsel. Counsel for the Jovanovics and Fortson said that what in fact he was conceding was that the Bank did not purport to sell the business, but that in the circumstances, by selling the freehold title of the property, the Bank disposed of the business for no consideration. He submitted that in effect the Bank gave the business away. For reasons I will give, I have reached the conclusion that the Bank was not in breach of any duty it owed in relation to the hotel business, and therefore it is unnecessary for me to consider the nature of any concession in the court below, or whether, if it was a concession of the nature suggested by counsel for the Bank, the Jovanovics and Fortson should now be permitted to change their position.
90 In order, I think the issues on appeal are as follows:
1 Did the Judge correctly identify the common law, equitable and statutory duties the Bank as mortgagee owed to Fortson as mortgagor and the Jovanovics as guarantors? If not, what is a correct statement of those duties?
2 In relation to the hotel business which the Bank purported to exclude from the sale to Roclin, was the Judge correct to conclude that the Bank did not act in breach of any of the duties it owed to Fortson and the Jovanovics?
3 In relation to the freehold title of the property which the Bank did sell, was the Judge correct to conclude that the Bank did not act in breach of any of the duties it owed to Fortson and the Jovanovics?
4 If no to question 3, are the Jovanovics entitled to recover from the Bank the loss of the value of the newsagency business?
5 If the Bank did act in breach of one or more of the duties it owed to Fortson and the Jovanovics, what is the nature of the relief to which those parties are entitled, and what orders should now be made by this Court?
The Duties owed by the Bank to Fortson and the Jovanovics
91 In exercising its power of sale, the Bank owed equitable duties to Fortson and the Jovanovics. The Judge defined these duties as a duty to act in good faith, and a duty not to act with calculated indifference or reckless disregard of the rights of Fortson and the Jovanovics. There is authority that there is but one duty, namely a duty to act in good faith (Kennedy v De Trafford [1897] UKLawRpAC 13; [1897] AC 180), and that as part of that duty the Bank must not act with calculated indifference or reckless disregard of the rights of Fortson. For convenience, I will refer to one duty being the duty to act in good faith. There is no doubt that in exercising its power of sale the Bank owed such a duty to Fortson (Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676; Citicorp Australia Ltd v McLoughney & Anor (1983) 35 SASR 375). The extent to which the equitable duty owed by a mortgagee to a mortgagor involves a duty to take reasonable steps to obtain the best possible price for the property has been the subject of considerable debate in the authorities. In Commercial and General Acceptance Ltd v Nixon (1982) 152 CLR 491, Gibbs CJ said the authorities were irreconcilable (at 494). However, it is unnecessary for me to examine that issue in this case, because it was common ground that the Bank owed the duty in s 420A of the Corporations Law, and I think it is right to say that the statutory duty is at least as extensive as the broadest formulation of the equitable duty. Although the issue was not the subject of submissions to this Court, it seems that the equitable duty the Bank owed to the Jovanovics as guarantors was more onerous than the equitable duty it owed to Fortson (Buckeridge v Mercantile Credits Ltd [1981] HCA 62; (1981) 147 CLR 654 per Brennan J (as he then was) at 675). However, the equitable duty owed by the Bank to the Jovanovics as guarantors is no more onerous than the duty in s 420A (Westpac Banking Corporation v Kingsland (1991) 26 NSWLR 700) and as it is common ground that the Bank owed the duty in s 420A, it is unnecessary to discuss this issue any further.
92 The Judge appears to have rejected any suggestion that the Bank, in exercising its power of sale, owed a common law duty of care to take reasonable care to secure the best possible price for the property. I think the Judge was right to take this approach. In my respectful opinion, the weight of authority in this country is that a mortgagee exercising a power of sale does not owe a common law duty of care (Pendlebury v Colonial Mutual Life Assurance Society Ltd (supra); Citicorp Australia Ltd v McLoughney (supra); Westpac Banking Corporation v Kingsland (supra); GE Capital Australia v Davis & Ors [2002] NSWSC 1146). In view of the fact that it was common ground that the Bank owed the duty in s 420A, the issue is of little practical significance in this case in terms of the content of the Bank's duties. However, it is relevant to the question of the appropriate remedies. In my opinion, neither Fortson nor the Jovanovics are able to claim damages at common law against the Bank.
93 The Judge referred to the duty specified in s 420A of the Corporations Law. At the relevant time, that section read as follows:
"(1) 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:
(a) if, when it is sold, it has a market value - not less than that market value; or
(b) otherwise - the best possible price that is reasonably obtainable, having regard to the circumstances existing when the property is sold.
(2) Nothing in subsection (1) limits the generality of anything in section 232."
94 Neither party suggested that the property in question did not have a market value, and in those circumstances I am able to concentrate on s 420A(1)(a).
95 The Judge discussed the scope of the section briefly. He noted correctly that the section does not stipulate a correct method of sale. He referred to the decision of Campbell J in Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd [2002] NSWSC 16, and noted that in that case it was said that in deciding whether there has been a breach of the section the Court will look at the process the holder of the power goes through in selling the property. That is no doubt correct. The market value may be a relevant item of evidence on the question of whether there has been a breach of duty, but it is by no means decisive. It may be possible, although I would have thought fairly rare, that a controller would take all reasonable care to sell the property for not less than market value, and yet, for some reason outside his or her control, not obtain not less than market value. It is certainly possible that a controller might not take all reasonable care to sell the property for not less than market value and yet be fortunate enough to obtain market value. In that situation, those to whom the duty is owed may establish a breach of duty but no entitlement to relief.
96 In the context of his discussion of s 420A of the Corporations Law, the Judge referred to a passage in Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd (supra) that suggested that the relevant question in determining breach of duty was whether "any departure from reasonable standards [was] so serious as to be properly characterised as unconscionable, in order to render the mortgagee accountable". However, that comment was made by Campbell J in the context of a discussion of the relevant equitable duty, not the duty in s 420A. The Judge erred insofar as he said that it was the relevant question for the purposes of s 420A. The relevant question for the purposes of s 420A is whether the controller has taken all reasonable care to sell the property for not less than its market value and that in turn involves a consideration of whether the controller:
"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".
(Commercial and General Acceptance v Nixon (supra) per Mason J (as he then was) at 501).
97 It was common ground that the Bank purported to exclude the hotel business from the sale of the freehold title of the property.
98 There is an argument which was advanced by the Jovanovics and Fortson which I should mention at the outset. The Jovanovics and Fortson argued that in its Defence to Counterclaim, the Bank admitted that Fortson purchased the hotel business in 1995 and that it disposed of the hotel business in 1997. It was argued that the Judge erred in allowing the Bank to amend its Defence to Counterclaim after the hearing to withdraw such admissions. It does appear that the Bank's Defence to Second Amended Counterclaim, which was filed after the hearing, withdrew certain admissions about the hotel business. However, these matters were raised in correspondence sent to the Judge. The Judge decided to let the Defence to Second Amended Counterclaim stand, and I am not satisfied that he erred in doing so. The Judge had a discretion which he exercised and there are no grounds upon which this Court should interfere with the exercise of the discretion. I am not satisfied that the Jovanovics or Fortson would have, or may well have, conducted their case differently had the Defence to the Second Amended Counterclaim been filed before the hearing.
99 The challenge by counsel for the Jovanovics and Fortson to the Judge's conclusion that the Bank did not act in breach of duty in relation to the hotel business rested on two propositions. To succeed on this issue the Jovanovics and Fortson must make good both propositions. First, they must establish that Fortson was the owner of the hotel business in July 1997 either in law and equity, or at least in law. Second, they must establish that the Bank could not sell the freehold of the property without at the same time selling the business, and its attempt to do so resulted in the loss of the business, or its disposal for no consideration.
100 As to the first proposition, counsel for the Jovanovics and Fortson submitted that the sale of the property by Roclin to Fortson in November 1995 included the sale of the hotel business. Counsel submitted that whatever might have been the position in equity as a result of the secret agreement dated 15 November 1995 or subsequent dealings, Fortson was and remained the legal owner of the hotel business and was entitled to complain about the action the Bank took, or failed to take, when it exercised the power of sale in July 1997. In the ordinary case, there would be force in this submission. However, in this case there was a pervading air of fraud and deception.
101 As I have already said, the Judge found that there was great uncertainty as to the legal position of the persons who are entitled to own or manage the business of the hotel, and that that issue would not be determined until litigation between the Jovanovics and the Govedaricas is completed. The Judge was unable to make a finding on the balance of probabilities that the hotel business was owned by Fortson or the Jovanovics. It is true that he did not make a finding that the hotel business was owned by some other party, but the onus was on Fortson to establish that it owned the hotel business either in law and equity, or at least in law. I do not think the Judge erred in not being satisfied of this fact. The Judge found that from 1995 onwards the Jovanovics and the Govedaricas engaged in a devious web that perhaps could also be viewed as fraudulent conduct to defeat their creditors and for the purpose of retaining the ownership of The Plaza Hotel. That finding was amply justified on the evidence. The lease agreement between Roclin and Mr Jovanovic executed on 12 January 1995 was "a sham" and was entered into for the purpose of possibly defeating the creditors of Roclin. The secret agreement between the Jovanovics and the Govedaricas dated 15 November 1995 was not disclosed to the Bank by the Jovanovics until some considerable time after it had been entered into. It was obviously an important and material fact, and the Judge noted Ms Barker's evidence that had the Bank known of the agreement, it may not have made the loan in the terms it did to Fortson. The contract whereby Fortson purchased the property from Roclin in November 1995 evolved as a further attempt by the Govedaricas to defeat and defraud their creditors. The scope of the exclusion in relation to tenants' goods and chattels is not entirely clear. The agreement between Fortson and MRM International Pty Ltd dated 8 July was a sham which was drawn up for the purpose of representing to a financier that the tenancy was occupied. After November 1995 the Govedaricas and, in particular, Mr Slavko Govedarica, continued to conduct the hotel business as they had done before that date. This continued and was the position in July 1997. As I understand it, during this period, the Jovanovics conducted the newsagency business and played no part in the management or operation of the hotel business. The accountants, Ernst and Young, engaged by the Bank at the time to clarify who held the operating rights for the hotel business said that until they received certain documentation they were unable to state with certainty who held the operating rights for the hotel business. When one adds to these matters the fact that the expert accountancy evidence called at trial did not provide a secure basis for a positive finding, I do not think the Judge erred in not being satisfied that Fortson owned the hotel business.
102 Absent such a positive finding of ownership, neither Fortson nor the Jovanovics can complain of any action the Bank took, or failed to take, in relation to the hotel business. Furthermore, absent such a positive finding of ownership it is simply not possible to say what the Bank would have discovered had it taken the further action before sale suggested during the course of argument before this Court, such as appointing a receiver or seeking an order for possession.
103 In case I am wrong as to the first proposition, I make some observations as to the second proposition. It is clear that there has been a long running dispute between the Jovanovics and the Govedaricas about the commercial relations between them and their respective entitlements to the property, including the hotel business. Even if the Bank had appointed a receiver or sought an order for possession prior to sale, the question of who owned the hotel business may not have been resolved in a way that would have enabled the Bank to realise its security in a timely fashion. The Bank had already taken steps to clarify the position as to the ownership of the hotel business and had been unable to do so. More importantly, even if Fortson did own the hotel business, it is not at all clear on the evidence that the Bank's conduct in selling the freehold title of the property to the Govedaricas and purporting to exclude the hotel business from the sale has led to the loss of the hotel business by Fortson. The contract between the Bank and Roclin excluded all goods and chattels from the sale, and attempted to qualify the Bank's obligation to give vacant possession at settlement. On the face of it, the fact that the freehold title of the property was sold to Roclin (the Govedaricas), rather than an independent third party means that the rights of Fortson and the Jovanovics in relation to the hotel business are not lost and can be asserted against Roclin and the Govedaricas. As I understand it, the issue of the ownership of the hotel business and the entitlement to the profits of the business is the subject of the litigation between the Jovanovics and the Govedaricas.
104 The Bank did not act in breach of duty in relation to the hotel business conducted on the property at the time of sale.
The Alleged Breach of Duty by the Bank in relation to the Sale of the Freehold Title of the Property
105 The Judge asked himself whether the Bank had acted in breach of the equitable duty as he identified it. Perhaps because he considered that the test is the same or at least similar in the case of the statutory duty as it is in the case of the equitable duty, the Judge did not ask himself whether the Bank had acted in breach of the statutory duty in s 420A. In my respectful opinion, he erred in failing to do so.
106 In his reasons for judgment, Gray J has identified a number of matters which have led him to the conclusion that the Bank did act in breach of the duty in s 420A. I disagree with Gray J in relation to one matter. Subject to that matter and the following observations, I respectfully agree with his Honour's analysis and with his conclusion.
107 I do not agree with Gray J that the Bank's approach to the ownership and sale of the hotel business can be criticised, and I would exclude it as a reason for concluding that the Bank acted in breach of the duty in s 420A. I refer to the reasons I have already given.
108 As to the recommendations made by Ernst and Young, I would emphasise the fact that the Bank did not appoint an agent and put the property to the market (an option identified by Ernst and Young) in circumstances in which it should have, rather than the fact that they did not follow the advice of Ernst and Young.
109 It is impossible not to have some sympathy for the position the Bank found itself in. It was the Jovanovics and the Govedaricas who were pressing the Bank to adopt the closed tender process which it eventually did. Although it made a number of inquiries, the Bank could not identify the party which held the operating rights to the hotel business, nor, it seems, could it obtain reliable trading figures for the business. The parties in the best position to know of these matters were the Jovanovics and the Govedaricas. The lack of reliable trading figures would make it difficult to market the business. Furthermore, it was Mr Jovanovic who was assuring the Bank that he could secure the necessary finance. As against those matters, the Bank was aware before the sale that the Jovanovics were not in a position to secure the necessary finance from an independent source. In addition, the closed tender process involving two bidders was far removed from the Bank's usual practice in exercising a power of sale. In my opinion, it was encumbent on the Bank to appoint an agent, conduct a proper marketing campaign and put the property to the market, rather than accept and provide the finance for one bid when the only other bid was from a person the Bank knew could not raise the necessary finance from an independent source. The valuation of Mr Burton was not enough to justify the course taken by the Bank, particularly in light of the differences between Mr Burton's valuation and the Bank's internal valuation. In my opinion, the Bank did not take all reasonable care to sell the freehold title of the property for not less than its market value within the terms of s 420A of the Corporations Law.
110 The Judge found that Mr Jovanovic was obliged to close the newsagency business in 1998, and that at that time there were large debts owed to various suppliers. The Jovanovics argued that they would have been able to sustain the newsagency business with funds which would have been available to them if the Bank had obtained the market value for the property within the terms of s 420A. They claimed that the value of the business was $75,981 and they sought this amount from the Bank.
111 The Bank on the other hand, referred to the Judge's finding that the Jovanovics were in a desperate financial position by no later than early 1997 and argued that this was the reason the newsagency business failed.
112 The newsagency business was owned by the Jovanovics, not Fortson. Although the Bank owed a duty to the Jovanovics in their capacity as guarantors, I do not think that in selling Fortson's property the Bank owed a duty to the Jovanovics as owners of the newsagency business. In this respect, they were in effect third parties.
113 The claim by the Jovanovics for the loss of the newsagency business must fail.
The Nature of the Relief to which Fortson and the Jovanovics are entitled and the orders which should be made by this Court
114 I said earlier in these reasons that the Bank did not owe a common law duty of care to Fortson or the Jovanovics and neither has a claim against the Bank for damages at common law. For breach of the equitable duties in relation to the exercise of the power of sale, a mortgagor would be entitled, on the taking of accounts between mortgagee and mortgagor, to have brought to account the loss it has suffered. Guarantors would be entitled to an equitable set off in relation to any claim on the guarantee to the extent of the loss caused by the mortgagee's breach of duty. Guarantors are entitled to no more than a set off of the claim on the guarantee. They are not entitled to make a counterclaim.
115 I have found that the Judge erred in finding that the Bank did not act in breach of the duty in s 420A. In those circumstances, a question arises as to whether s 420A merely adds to the duties the Bank was under, or whether it does that and provides an additional remedy to Fortson and/or the Jovanovics. This issue was considered by Bryson J in GE Capital Australia v Davis & Ors (supra) and his Honour decided that s 420A does not provide an additional remedy. I respectfully agree with his Honour's analysis. Bryson J noted that the Corporations Law did not provide a remedy for a breach of the duty in s 420A. Section 1324(10) of the Law could not be relied upon because at the time the action was commenced there was no prospect an injunction would be granted (see also Executor Trustee Australia Ltd v Deloitte Haskins & Sells [1996] SASC 5874; (1996) 135 FLR 314). Furthermore, there was nothing in the section or elsewhere in the Law which suggested that it was enacted for the benefit of persons who do not have an interest in the corporation's property. Bryson J referred to the authorities which deal with the question of the circumstances in which an individual has a remedy in damages for breach of a statutory duty.
116 Bryson J expressed his conclusions as follows (at [53], [54] and [56]):
"My view is that the requirement imposed on the controller by subsection 420A(1) takes the place of, or it may be operates cumulatively to the obligation otherwise existing with the general law of a controller exercising power of sale in respect of property of a corporation. In so doing the section enhances the duty of the controller and the protection afforded to the corporation. This is achieved, and the apparent legislative intention is fulfilled without altering the remedies available to the corporation for breach of obligation in exercising the power of sale, and without altering the means available for obtaining remedies. Where real property subject to a mortgage has been sold and the mortgagor succeeds in establishing that there has been a sacrifice of the mortgagor's interest in the exercise of the power of sale the mortgagor's remedy is to be credited compensation when accounts are taken of the mortgage debt. Subsection 420A(1) alters this scheme by inserting a more stringent rule, but does not otherwise change the scheme.
Section 420A can readily be given full and effectual operation without resorting to any implication of an intention to confer a remedy in damages on corporations which mortgage their property, still less to confer such a remedy on guarantors of the debts of those corporations; section 420A can readily take a place in the existing remedies without supposing that it was intended to confer or that it does confer any rights at all upon guarantors.
...
In my view there is nothing to indicate that it was the intention of the legislature that subsection 420A(1) should confer any right or remedy on guarantors or other persons who involve themselves contractually in consequences of the exercise of the power of sale, but the guarantor is entitled to rely on the availability to the mortgagor of a remedy, whether the remedy was that previously established by Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676 or is now the remedy available to the mortgagor on breach of the duty declared by subsection 420A(1); the guarantor is entitled to have an equitable remedy on the basis that the mortgage accounts are taken on whatever may be the principle truly applicable to taking mortgage accounts. In my opinion the equitable remedies which in an earlier state of the law were available to a guarantor where there was a breach of the mortgagee's duty to a mortgagor corporation are now to be tested by reference to whether there was a breach of the duty stated in subsection 420A(1)."
117 The question remains as to the price which would have been obtained for the freehold title of the property had the Bank taken all reasonable care in terms of the section. In the circumstances of this case that involved appointing an agent, conducting a proper marketing campaign and putting the freehold title of the property to the market. The difference between the price which would have been obtained had that been done and the price the Bank in fact obtained, together with appropriate adjustments in relation to the expenses of the sale, is the measure of the loss for the breach of the duty in s 420A. Unfortunately, this Court is not in a position to determine that figure. It involves an assessment of the valuation evidence including an assessment of the extent to which that precise issue has been addressed by the valuers, and a determination as to the valuation evidence which should be preferred. It may be noted that the market value as defined by one or more of the valuers who gave evidence is not necessarily the same as the sale price that would have been achieved had the Bank appointed an agent, conducted a proper marketing campaign and put the freehold title of the property to the market.
118 The question which I have identified must be determined by the Judge and it will be a matter for him whether, if the parties wish to call further evidence, he allows that to be done. If the conclusion is reached that there is a difference, then Fortson is entitled to have the difference brought to account in the taking of accounts between it and the Bank. Depending on the figure, it may or may not have a counterclaim. The Jovanovics are entitled to bring to account by way of an equitable set off to the claim on the guarantee the difference, if there be a difference. As guarantors they are not entitled to bring a counterclaim, and although they were directors and shareholders of Fortson, they are not entitled to claim for loss sustained by the company (Gould v Vaggelas (1985) 157 CLR 215). For these reasons, I disagree with the conclusion of Gray J that the Jovanovics are entitled to pursue their counterclaim against the Bank.
2 The orders of the Judge made on 13 June 2003 are set aside.
3 The action is remitted to the Judge for the hearing and determination (including the making of any necessary orders) of the issue identified in the above reasons.
120 I would hear the parties on the question of whether any other orders are appropriate, and on the question of the costs of the appeal.
JUDGMENT CITATIONS LISTED IN ORDER OF APPEARANCE IN JUDGMENT
1 It was accepted by counsel for the bank that the bank was a controller within the meaning of the Act.
2 ALRC, General Insolvency Inquiry, Report No 45 (1988) [236] (commonly referred to as the Harmer Report)
3 [1976] VicRp 26; [1976] VR 309 at 312
4 77(1) If within one month after the service of such notice or demand or such other period as is fixed in such mortgage or charge the mortgagor grantor or other persons do not comply with the notice or demand the mortgagee or annuitant may, in good faith and having regard to the interests of the mortgagor grantor or other persons, sell or concur with any other person in selling the mortgaged or charged land or any part thereof, together or in lots, by public auction or by private contract ...
6 (1982-1983) 152 CLR 491 at 503
7 (1982-1983) 152 CLR 491 at 491 at 515
8 (1982-1983) 152 CLR 491 at 524
9 [2002] NSWSC 16 at [126]
10 (1983) 152 CLR 491 at 522-523
11 [2002] NSWSC 1146 at [45]
12 [1937] HCA 16; (1937) 58 CLR 710 at 738
13 [1981] HCA 62; (1981) 147 CLR 654 at 675
14 [2002] NSWSC 1146 at [92]
15 [1982] 3 All ER 938 at 942
16 (1982-1983) 152 CLR 491 at 525 (per Brennan J)
[1] It was accepted by counsel for the bank that the bank was a controller within the meaning of the Act.
[2] ALRC, General Insolvency Inquiry, Report No 45 (1988) [236] (commonly referred to as the Harmer Report). See also [164].
[3] [1976] VicRp 26; [1976] VR 309 at 312
[4] 77(1) If within one month after the service of such notice or demand or such other period as is fixed in such mortgage or charge the mortgagor grantor or other persons do not comply with the notice or demand the mortgagee or annuitant may, in good faith and having regard to the interests of the mortgagor grantor or other persons, sell or concur with any other person in selling the mortgaged or charged land or any part thereof, together or in lots, by public auction or by private contract ...
[6] (1982-1983) 152 CLR 491 at 503
[7] (1982-1983) 152 CLR 491 at 491 at 515
[8] (1982-1983) 152 CLR 491 at 524
[10] (1983) 152 CLR 491 at 522-523
[12] [1937] HCA 16; (1937) 58 CLR 710 at 738
[13] [1981] HCA 62; (1981) 147 CLR 654 at 675
[15] [1982] 3 All ER 938 at 942
[16] (1982-1983) 152 CLR 491 at 525 (per Brennan J)
JOVANOVIC & ORS
COMMONWEALTH BANK OF AUSTRALIA No. SCCIV-03-802 [2004] SASC 61
(1912) 13 CLR 676
(1983) 35 SASR 375
(1982) 152 CLR 491
(1981) 147 CLR 654
(1991) 26 NSWLR 700
(1996) 135 FLR 314
(1985) 157 CLR 215
(1983) 152 CLR 491
(1937) 58 CLR 710