Muirhead v Commonwealth Bank of Australia [1996] QCA 241

It is possible to determine the issues presently arising in respect of the alleged statutory duty by making factual assumptions in accordance with the appellants' contentions. That is, for present purposes, it can be assumed that there has been a failure to take reasonable care to ensure that the property has been sold at its market value.

I regard Commercial and General Acceptance Ltd v. Nixon [1981] HCA 70; (1981) 152 C.L.R. 491 as providing an interpretation of s.85(1) bearing upon the mortgagee's obligation when he exercises a power of sale by himself directly or acting through his agent. Before the enactment of the statute, cases dealing with this topic had been in disagreement. In Nixon's case, Gibbs C.J. at 494 conveniently states what had previously been the disputed question namely whether "a mortgagee exercising a power of sale is under an obligation to take reasonable care to obtain a proper price, as well as an obligation to act in good faith.". It can be seen that the concern of the Court in Nixon with this question resulted from the way in which the duty is expressed in s.85. Subsection 1 is concerned with "the duty of a mortgagee, in the exercise ... of a power of sale". This wording should, in my view, lead to the conclusion that the statute is intended to apply to the case where the mortgagee himself sells or does so through his agent but does not deal with the different case where the sale is effected by an agent of the mortgagor. Furthermore, if the result of the contractual arrangement between the parties is that any sale made by a receiver is a sale by the mortgagor's agent, then this is not to be regarded as a stipulation having the effect, within the meaning of subs.(5), of relieving a mortgagee from the duty imposed by statute under the section. The only duty imposed by the section is one which applies in the case where the power of sale is exercised by the mortgagee or the mortgagee's agent. When the receiver in the present case came to effect the sale, he did so as the agent of the mortgagor because the parties agreed that that was the character in which he should act. In these circumstances the claimed right to pursue a remedy in damages against the mortgagee under the statute is not available.

I agree that the appeal should be dismissed with costs. I also agree in the further orders proposed by McPherson JA.

This is an appeal by Mr G.A.R. Muirhead and Mrs Muirhead against a decision in Supreme Court chambers giving summary judgment against the appellants for $1,722,984.49 in an action commenced by the respondent Bank by specially indorsed writ. The judgment sum represented the balance, with interest, due to the Bank after applying proceeds of sale paid to it by a receiver appointed under mortgages given over two grazing properties and stock and equipment owned by the Muirheads.

From the joint affidavit of the Muirheads read at the hearing of the application for judgment, it appears that they have been carrying the businesses as farmers, graziers and earthmovers for the past 25 years or more. They became customers of the Bank in 1990 when it accepted a formal written application, which is dated 31 May 1990 (ex GS3), by them to the Bank for "accommodation". By another application, which is ex JJC3 to an affidavit of Ms J.J. Crowther on behalf of the Bank, the Muirheads requested the Bank to open in their names a joint account on which either of them could draw. The date of ex JJC3 is not fully legible from the copy in the record but appears also to be 31 May 1990. Thereafter, according to the Bank's claim, a total of $4,025,000 was lent to them, which was made up as follows: (a) fixed rate bill discount facility, gross amount $3,000,000; (b) bill discount facility, limited to $100,000; (c) fully drawn loan $675,000; and (d) overdraft $250,000.

On the hearing of the appeal, it was items (a) and (b) above that were challenged. The bill facility, as it was called, took the form of eight bills of exchange (GS5A to GS6F) in favour of the Bank which, apart form one for $225,000, were each for amounts of $500,000. They were drawn in favour of the Bank on printed forms, which were signed by Mrs Muirhead immediately beneath the words "For and behalf of GAR & SS Muirhead", printed, or perhaps typed, on each document. The bills bore dates in June or July 1992, and each of them specified due dates for payment either then or shortly thereafter. By s.10 of the Bills of Exchange Act 1909 a bill may be drawn payable to, or to the order of, the drawer. When so drawn in favour of a banker, the banker as drawee is, it has been held, entitled either to debit the drawer's account or to negotiate the bill. See Rigg v. Commonwealth Bank (1989) 97 F.L.R. 261, 266 (Gleeson C.J., with whom Meagher J.A. and Hope A.J.A. agreed), approving Byles on Bills of Exchange (26th ed.), at 32. The Bank in this case debited the Muirheads' joint account with the amounts of the bills, which were applied in discharging liabilities owed principally to the National Bank of Australia ("NBA"), of which the Muirheads had previously been customers, and to another creditor of theirs.

The evidentiary point. Among the matters argued on appeal, the first was that the learned judge was wrong in admitting or acting upon some of the evidence from the Bank deposing to the bills of exchange. The evidence in question appears in para.7 of an affidavit of J.A. Demack, of the solicitors for the Bank, and is to the effect that in 1990 the Bank had at the request of the Muirheads lent moneys in the sum of $4.025 million on four separate accounts corresponding to items (a) to (d) already mentioned. On appeal the objection taken at the hearing was said to have been that para.7 failed to establish the terms of the bill discount facility. In his reasons for judgment Thomas J. remarked that the objection to para.7 had not been "clearly focused". He did not consider it to have been based on hearsay, which by O.18, r.2(2) is expressly permitted on such an application subject to compliance with specified conditions; rather, his Honour conceived it to be an objection based on the unreliability of para.7, in that it appeared to assume there was only one bill for $3 million, whereas in fact there were eight in all; and further that there was insufficient evidence to demonstrate the nature of the bill facility. In the end, his Honour declined to exclude para.7 of the affidavit and ruled instead that the matter was one that went only to the weight of the evidence.

In adopting that view, the learned judge was plainly correct. Quite apart from para.7, there was other material before him which disclosed the nature and terms of the transaction, consisting, in particular, of the application ex GS3 and the bills of exchange themselves exs GS5A to GS6F, together with ex JJC3 to the affidavit of a Ms Crowther. Copies of the former were exhibited to the Muirheads' own joint affidavit read at the hearing; as such, they may be regarded as having been admitted and so proved by them. On appeal, the complaint was also made that the original documents had not been produced at the hearing. However, O.41, r.15(2) provides that the relevant portion of a document may be included in the body of the affidavit, in which event "the party filing the affidavit shall ... produce the document whenever the affidavit is used". If the substance of the objection was that the "best evidence" had not been produced, it would, in the way the evidence was presented at the hearing, have been the duty of the Muirheads to produce the original documents to which their joint affidavit referred. As it is, that joint affidavit in paras.5 and 7 amounted to an acknowledgment by them of the veracity of the documents exhibited that was plainly sufficient to justify his Honour's findings with respect to the nature and terms of the transaction in question.

Signature of the bills. No doubt one reason why copies of the bills were exhibited to the joint affidavit of the Muirheads themselves was to enable them to pursue the matter which forms another of their grounds of appeal. It is that the bills were signed only by Mrs Muirhead. Section 28(1) of the Bills of Exchange Act provides that a person is not liable as drawer of a bill if he has not signed it as such. What constitutes signature is dealt with in s.97(1) of the Act:

"97(1) Where, by this Act, any instrument or writing is required to be signed by any person, it is not necessary that he should sign it with his own hand, but it is sufficient if his signature is written thereon by some other person by or under his authority."

It is to be noted that the subsection does not expressly provide that the signature must always be "written", but only that it is sufficient if it is. Nevertheless, it was submitted in reliance on s.97(1) that here the "signature" of Mr Muirhead should have been "written" on the bills, whereas, as already mentioned, what in fact appears on the bills is Mrs Muirhead's signature written immediately beneath the printed inscription "For and behalf of GAR & SS Muirhead".

It should be emphasised that the point being made is not that Mrs Muirhead did not sign the bills, or that she lacked authority to do so on behalf of herself and her husband. What is said is that the form in which she signed was not, under s.28(1) or s.97(1) of the Act, sufficient to render Mr Muirhead liable as a drawer of those bills. His name as well as hers ought, it was submitted, to have been handwritten (and not printed) on the bills in the form of a signature. In support of this proposition, reference was made to Rajanayagam's Law of Negotiable Instruments in Australia (2nd ed., by B. Conrick), paras. 2.14 - 216, at 20-22, and to decisions referred to in that text. One of those decisions is Goodman v. J. Eban Ltd. [1954] 1 Q.B. 550, in which Denning L.J., at 561-562, said that, when a document is required to be "signed by" someone, what is meant is that "he must write his signature with his own hand". The great virtue of a handwritten signature, his Lordship went on:

"lies in the fact that no two persons write exactly alike, and so it carries on the face of it a guarantee that the person who signs has given his personal attention to it."

The remarks of Lord Denning on this subject were, it may be noticed, made in the course of a dissenting judgment, but they have received a measure of approval in subsequent English decisions, such as London County Council v. Agricultural Food Products [1955] 2 Q.B. 218, and, more recently, Firstpost Homes Ltd. v. Johnson [1995] 1 W.L.R. 1567. His Lordship's persistence has, however, not been similarly rewarded in Australia, where there are now decisions to the contrary in three different courts at appellate level: see McRae v. Coulton (1986) 7 N.S.W.L.R. 644 (C.A. N.S.W.); Deputy Commissioner of Taxation (Vic.) v. Boxhall (Fed. Full Ct.); and Vincent v. Johnstone Shire Council (App.87 of 1995; Qld. C.A.). See also R. v. Burchill & Salway, ex p. Kretschmar [1947] St.R.Qd. 249. Unless and until constrained by higher authority, it is conceived that the rule to be followed in this country is that, in the absence of express provision or other indication to the contrary, legislation requiring "signature" of a document is not to be taken to preclude signature by agent, whether that signature is written in the name of the principal or of the agent. See McRae v. Coulton, at 663-664 (Hope J., with whom Kirby P. and McHugh J.A. agreed).

None of the decisions referred to concerned signature of a bill of exchange. However, far from containing a provision displacing the presumption adopted in the Australian decisions, s.4 of the Bills of Exchange Act expressly provides that "written" includes "printed". With this aid to interpretation, the relevant phrase in s.97(1) is capable of being read as providing "... it is sufficient if his signature is printed thereon by some other person by or under his authority". So to read it appears, however, to be at first sight contrary to a decision of the Supreme Court of Ceylon in Meyappen v. Manchanayake [1961] LKCA 17; (1961) 62 N.L.R. 529, where, in declining to follow the majority in Goodman v. J. Eban Ltd. [1954] 1 Q.B. 550, Samsoni J. said that care should be taken not to introduce a new rule when dealing with documents to which the bills of exchange legislation applies; otherwise, he said, "the negotiability of such instruments like bills, notes and cheques would be seriously affected if the above mode be accepted as valid signatures".

The "signature" considered in the Sri Lankan case took the form of the name of a firm impressed on the document by means of a rubber stamp. In the final analysis, the decision there turned on the fact that, as Samsoni J. said, a "so-called signing by stamping the name of the firm without anything to verify it, as in the present case, is no signing at all" [1960] LKCA 40; (61 N.L.R. 529, 533). It was the absence of verification that was considered critical. Without deciding whether or not the decision should be followed in Australia, it is sufficient for present purposes to say that it is plainly distinguishable. There is an obvious difference between a signature applied in that manner and one which, as in the present case, is authenticated by the handwritten signature of an individual admittedly having authority in that respect. The question in the present case much more closely resembles that considered by the English Court of Appeal in Bondina Ltd. v. Rollaway Shower Blinds Ltd. [1986] 1 W.L.R. 517. With reference to printed cheque forms bearing the printed name and account number of a company, which had been signed by two individuals acting in the capacity of company directors, Dillon L.J. said ([1986] 1 W.L.R. 517, 520):

"As it seems to me, however, when the second defendant signed the cheque, he adopted all the printing and writing on it; not merely the writing designating the payee and the amount for which the cheque was drawn, if that had been written out for him and not by himself, but also the printing of the company's name and the printing of the numbers which designate the company's account."

The form in which cheques and other bills of exchange are now produced and supplied by banks to customers had the consequence that the question considered in Bondina is tending to come before the courts with increasing frequency. In Dickinson v. S.A. General Electric Co. (Pty.) Ltd. 1973 (2) S.A. 620, 628-629, and again in Marshall v. Bull Quip (Pty.) Ltd. 1983 (1) S.A. 23, 29, the Appellate Division of the South African Supreme Court specifically approved, from an earlier but unreported judgment, the following statement:

"It is common knowledge that the cheque forms supplied to their customers by banks which have adopted computerisation, have printed on them a name and a number. The number is that of the bank's customer in which the banking account is conducted; it is not, of course, a signature. The number is that by which the account is identified in the bank's records. Where, at any rate, a single signature is affixed to such a cheque, it may well be argued that, in the light of the circumstances to which I have just referred, that signature is intended to be and is to be interpreted as being the signature of the customer whose account it is. That may be so even where, as in the present case, the name of the customer as printed on the cheque is that of a company ('Boiler Plant and Services (Pty.) Ltd.') and the signature is the unqualified signature of a natural person ('Helen Dickinson').

Prima facie when a person has signed a cheque form such as the present, he intends to write, and will be understood as writing, the signature of the customer of the bank whose name is printed on the cheque. If he intended to sign in his own person he would presumably strike out the printed name and number which appears on the cheque."

The passage quoted is consistent with the remarks of Dillon L.J. in the Court of Appeal in England in Bondina v. Rollaway Shower Blinds Ltd., and also with the statement in Chalmers on Bills of Exchange (12th ed. 1952) at 274, adopted in Australia in Riley's Bills of Exchange Act (4th ed. 1994), at 247n.8, that "'Signature' may perhaps be defined as the writing of a person's name on a bill or notice in order to authenticate and give effect to some contract thereon". It may be compared to provisions in the U.S. Uniform Commercial Code defining the term "signed" as including any symbol executed or adopted by a party with present intention to authenticate a writing: Brady on Bank Checks s3.1 (4th ed. 1969). In a matter like this, there are reasons that favour uniformity of approach as regards the form of bills of exchange, particularly when, as in the case of many countries, the enactments in those jurisdictions have a common origin in the Bills of Exchange Act 1882 (U.K.).

From what has been said, it follows that in signing her name on the bills of exchange in this case, as she did and was authorised to do, the only rational conclusion is that Mrs Muirhead was intending by her own signature to confirm the words "For and on behalf of GAR & SS Muirhead" appearing on the forms she signed. For this purpose it cannot matter whether those words were in fact printed or typed on the form of bill by the Bank before she signed it, or were placed there by Mrs Muirhead herself at the time she signed. In either event, she was adopting and authenticating those words by subscribing her own signature immediately below. In doing so, she thus "signed" not only her own name but that of her husband GAR Muirhead. Indeed, on one view, the case seems to fall fairly within the terms of s.28(3) of the Act, which treats the signature of the name of a firm as equivalent to the signature by the person who signs the names of all the persons liable as partners of the firm. From what is said about the Muirheads in their own affidavits, it appears that they carry on business in partnership.

Notice of dishonour. It is convenient to deal next with the contention that the Bank failed to give notice of dishonour of the bills. Subject to the provisions of the Act, a bill must under s.50(1) of the Act be presented for payment and it is dishonoured by non-payment if payment is refused on due presentment: s.52(1)(a); or, when presentment is excused, if the bill is overdue and unpaid: s.52(1)(b). Subject once again to the provisions of the Act, notice of dishonour must, when a bill has been dishonoured by non-payment, be given to the drawer under s.53. If that is not done, the drawer is discharged under that section.

It is not disputed that notice of dishonour was not given by the Bank in the present case. A short answer to the argument that, in consequence, the drawer or drawers are discharged is the provisions of s.55(2)(c)(iv) and the decision in Rigg v. Commonwealth (1989) 97 F.L.R. 261, 267. By s.55(2)(c) notice of dishonour is, as regards the drawer, dispensed with:

"(iv) where the drawee ... is, as between himself and the drawer, under no obligation to accept or pay the bill;...".

As previously noticed, it was held in Rigg v. Commonwealth Bank, applying the passage from Byles on Bills, that a drawee who is banker is entitled either to debit the drawer's account or to negotiate the bill. In Rigg's case, as in this, the Bank chose to debit the account of the drawer. There the point raised on appeal was that the bill had never been presented for payment and that the drawer was consequently discharged from liability under s.50(1). In disposing of this point, Gleeson C.J. said (97 F.L.R. 261, 267):

"In this regard the material facts include the identity between drawee and payee and, in addition, the fact that prior to the due date of the bill the bank had written to the appellants making it clear that they were required to discharge the debt to the bank. In my view the case clearly falls within s.51(2)(c) of the Act as a case in which presentment for payment was dispensed with. The drawee was not bound, as between itself and the drawers to pay the bill, and the drawer had no reason to believe that the bill would be paid if presented ...".

It is, as Mr Parker Q.C. stressed on behalf of the Muirheads, correct to say that in Rigg v. Commonwealth Bank the point at issue was presentment for payment in accordance with s.50 of the Act, and not, as here, failure to give notice of dishonour in accordance with s.53. Nevertheless the provisions in s.51(2)(c) dispensing with presentment for payment are, so far as material for present purposes, indistinguishable from those in s.55(2)(c)(iv) dispensing with notice of dishonour in the case of the drawer of the bill. Presentment for payment is dispensed with under s.50(2):

"(c) as regards the drawer, where the drawee ... is not bound, as between himself and the drawer, to accept or pay the bill, [and the drawer has no reason to believe that the bill would be paid if presented;]"

The only differences between s.50(2)(c) dispensing with presentment for payment, and s.55(2)(c)(iv) dispensing with notice of dishonour, are, first, that the latter omits the words in parentheses; and, secondly, that the former uses the expression "the drawee ... is not bound ... to accept or pay the bill", whereas the language of s.55(2)(c)(iv) is "where the drawee is ... under no obligation to accept or pay the bill". They are differences which do not affect the authority of the decision in Rigg v. Commonwealth Bank for present purposes. As between the Bank as drawee here and the Muirheads as drawer, the Bank was under no obligation to accept the bills, or to pay them. What the Bank did in fact was to debit the Muirheads' joint account upon paying an amount to discharge their liabilities to the NBA and others. It follows that the Bank was not bound under s.53 to give notice of dishonour for non-payment, and its failure to do so is not fatal to their claim against the Muirheads on the bills.

The cause of action. All that has been said so far confirms that the bills themselves were not relied on as bills of exchange, in the statutory sense, to establish the cause of action on which the Bank rested its claim against the Muirheads. Although para.2 of the special indorsement referred to each of items (a) and (b) as involving a "bill discount facility", it did so only for the purpose of describing them as components of its total claim for "moneys lent in the sum of $4.025 million to the defendants on four separate accounts ...". The indorsement then went on in para. 4 to allege the terms and conditions of the loans referred to in para. 2, and to describe each component in turn. The Bank's cause of action was, therefore, a loan of money of which the "bill discount facility" or facilities were a part and of which the bills signed by the Muirheads simply provided evidence relied upon to prove that claim.

This is readily apparent from ex JJC3 to the affidavit of Ms J.J. Crowther, which is the application signed by both Mr and Mrs Muirhead. It requests the bank to open a joint account in their names and gives authority to:

"either of us whose signatures are at the foot hereof in our names (whether by hand or by stamp or by other mechanical means) and on our behalf to:

(iii) draw make accept negotiate or discount bills of exchange ...".

It might be argued that, if s.97(1) of the Bills of Exchange Act requires handwritten signature by the drawer, then a document authenticated "by stamp or other mechanical means" would not in law be a bill of exchange within the meaning of the Act. But even if, contrary to what has already been said, this argument were to be accepted, it would make no difference to the result in this instance. The contract which the Muirheads entered into in the form of ex JJC3 authorised either of them to draw documents in a form which was to be authenticated in the manner agreed upon. The Bank might in the end have found that documents in that form were not negotiable because of failure to comply with the statutory prescription as to "signature"; but, as between the parties, those documents continued to serve as acknowledgments by the Muirheads of their indebtedness and as promises to pay the amounts on the dates they were due. As has been said more than once, the Bank did not negotiate exs GS5A to GS6F, but relied on them instead as a step taken in performing the agreement to lend money to the Muirheads. Authority to debit those sums to the joint account, and to apply the loans in discharging liabilities of the Muirheads to the NBA and the other unpaid creditor, is specifically conferred on the Bank by the Muirheads' application for accommodation ex GS3 dated 31 May 1990, which in 2(f) provides:

"2(f) The Bank may debit any account of the applicant(s) with all interest in respect of the accommodation, the amounts of any bills or other engagements due or dishonoured, and all costs, charges and expenses as aforesaid."

As appears from cl.2(f) the authority of the Bank to debit an account of the Muirheads was not limited to the amounts of "any bills" but extended as well to "other engagements due". Whether or not exs GS5A to GS6F were technically bills of exchange which had been "dishonoured", they were, on any view of their form and substance, at the very least "engagements due" once the time for payment had arrived. Approaching them simply as "engagements due" means that notice of dishonour in terms of s.53 of the Act was not required. The Bank's cause of action for moneys lent was complete without having to comply with that formality.

Amount owing. The amount claimed by the Bank was proved by a statement ex JJC1 given under cl.B15 signed by an officer authorised by the Bank. Clause B15 forms one of the terms and conditions of the Bank's registered memorandum No. J8133224 (ex JJC2) which is automatically incorporated in bills of mortgage registered in favour of the Bank. The clause provides that a statement of the mortgagee, signed by an authorised officer, of the amount due or owing at the date mentioned in the statement "shall be prima facie evidence that such amount is due or owing" without its being necessary to produce the books and vouchers. The amount certified in ex JJC1 as owing to the Bank on 5 May 1995 is $1,789,869.08. The amount for which judgment was given was $1,722,984.49, which includes interest accruing from the date when the writ issued on 13 September 1994 until judgment was given on 5 June 1995. The reduction from the sum originally lent of $4,025 million with interest and charges is accounted for by the Bank's receipt of the net proceeds of sale of the mortgaged properties.

Once an indebtedness is established, it is for the defendant to plead and prove it has been discharged. See Young v. Queensland Trustees Ltd. [1956] HCA 51; (1956) 99 C.L.R. 560, 566- 568. The Muirheads do not claim to have discharged their liability by payment. Instead, they rely on paras. 10 and 14 of their defence delivered on 24 October 1994 and the contents of affidavits of Mr Muirhead and a Mr E.G.Turner, which were read without objection at the hearing. Paragraph 10 of the defence admits paras. 10 and 11 of the indorsed statement of claim to the effect that, under its mortgages or securities, the Bank appointed Mr E.G. Harris to receive and manage the mortgaged properties, and that he sold them and accounted to the Bank for the proceeds. Paragraph 10 of the defence then proceeds to deny the "legality" of any of the receiver's actions, before adding "full particulars of which are set out in paragraph 14 below". Paragraph 10 of the defence then makes the further allegation that:

"Harris acted in breach of his statutory duty to the defendants and his duty not to waste assets, and sold the property at a price substantially below its real value and this was done with the knowledge and acquiescence of the plaintiff."

On turning to para. 14 of the defence, it is found to contain a series of admissions concerning the loan by the Bank and the terms on which it was granted to the Muirheads. Disregarding matters already considered in these reasons, the defence also affects to incorporate what may shortly be described as a version or variation of the "Skyring" defence based on matters, with which we are all thoroughly familiar, that have been litigated and resolved in this Court and the High Court on more than one occasion: see, for example, Re Skyring's Application [No. 2] (1985) 59 A.L.J.R. 561, and Re Skyring (1994) 68 A.L.J.R. 618. Mr Parker Q.C. refrained from relying on those aspects of the defence. He did, however, invite this Court to consider the affidavits of Messrs Muirhead and Turner, together with the earlier part of the allegation in para. 10 of the defence (which he acknowledged was "inartistically" or "inarticulately" drawn) and he complained that the Bank had at all times failed to supply the Muirheads with an "account" of the proceeds arising from the receiver's sale of the subject properties.

There is, however, a further affidavit by Ms Crowther on behalf of the Bank which exhibits a contract dated 23 March 1994 by the receiver, acting in the name of the Muirheads, for the sale of the properties at a purchase price of $4,350,000. After applying the net proceeds, there remained, according to the allegation in para. 12 of the statement of claim, an amount of $1,653,572.86 outstanding on 8 August 1994, on which interest accrued at the rate of $412.54 per day. From this it is possible to arrive at the sum, certified in ex JJC1 under cl.B15, of the $1,789,869.08 as owing to the Bank on 15 May 1995.

Sale at undervalue. It is necessary now to examine the relevance of these matters to the Bank's claim against the Muirheads. As a general proposition, a mortgagor is not entitled to an account against a mortgagee in possession except in proceedings in which an undertaking to redeem is given by the mortgagor: see Tannock v. North Queensland Securities Ltd. [1932] St.R.Qd. 285, 291, 295-296, 300; Coroneo v. Australian Provincial Assurance Association Ltd. [1935] NSWStRp 47; (1935) 35 S.R. (N.S.W.) 391, 395. No claim or offer to redeem has been made by the Muirheads in this action and, having regard to the fact that the mortgaged properties have been sold and presumably transferred, no such claim for redemption could now survive. There is, however, authority that the general rule does not apply where sale of the property has been completed and the mortgagor's claim is for damages for wrongful or negligent exercise by the mortgagee of its power of sale. See Fisher & Lightwood's Law of Mortgages s39.1 (Aust. ed.), citing National Bank of Australasia v. United Hand-in-Hand & Band of Hope Co. (1879) 4 App.Cas. 391, 401, and Kennedy v. General Credits Ltd. (1982) 2 B.P.R. 9456 (N.S.W. C.A.). It may perhaps be open to debate whether either of these decisions fully establish the exception referred to. The first was a case in which the existence or exercise of the power of sale was impugned, and the latter was one in which it was sought to restrain a sale from taking place. Nevertheless, it may be accepted that, if the mortgagor claims compensation or damages in exercising the power of a sale which has been completed, the rule does not require from the mortgagor an undertaking to redeem the security. Indeed, in such circumstances, the property would ordinarily be quite beyond redemption.

Apart from the bare allegation in para.10 of the defence that the receiver Harris "acted in breach of his statutory duty to the defendants ... and sold the property at a price substantially below its real value ...", there is nothing in that defence giving rise to an issue about the inadequacy of the sale. The Bank is, however, also alleged in para. 10 to have known of and acquiesced in the receiver's action; but the pleading does not claim any amount of damages alleged to have resulted from that breach, nor is it asserted that there is a right to set off any such amount against the Bank's claim for money lent.

To say this is, however, to overlook the two affidavits of Messrs Muirhead and Turner, which Mr Parker Q.C. complains were not adverted to in the reasons of the learned Judge below. The affidavit of Mr Muirhead refers to a person having in November 1992 expressed to him an interest in purchasing the properties at a price above that for which they were later sold by the receiver at auction in March 1994. The affidavit also complains that the properties were not properly advertised; that a dam on one of the properties had not been completed; and that irrigation systems had been "decimated" by being removed and sold separately at some time before auction of the properties for $4.35 million in March 1994. By itself, this might not carry the matter far; but Mr E.G. Turner, who made the other affidavit filed and read on behalf of the Muirheads, is an auctioneer and agent of experience in this field, who has for many years carried on business at Rockhampton as the Queensland Livestock Company. In November 1992 he says he made a thorough inspection of both properties, in the course of which he noticed the dam (which was then almost completed) and the irrigation systems. He describes them as "key features" of the saleability of the properties and adds that he knows that parts of those systems were later disposed of separately at a sale in Mackay. In October 1992 he was approached by a representative (whom he names) of interested parties, who said he was prepared to submit the properties to his principals for $6 million. He communicated this approach to Mr Muirhead, who declared his "bottom line" to be $8 million. Mr Turner's own opinion of the market value of the properties at that time was "somewhere between" $6 million and $7 million. Even without the equipment which had been removed and sold, he considered the market value to be more than $6 million.

No application to amend the defence was made on the hearing of the appeal, nor, as far as can be gathered, at the hearing below. In order to secure leave to defend, it is, however, not essential that a matter said to give rise to a triable issue be distinctly alleged in a defence which is delivered at or before hearing of the summary judgment application. Failure to plead it, or to seek leave to amend, are no doubt matters for comment at the hearing; but O.18, r.3 permits a defendant on such an application to show cause by affidavit or otherwise. Under that rule, the affidavit ought to show whether the defence goes to the whole or to part only, and which part, of the plaintiff's claim. The affidavits filed on behalf of the Muirheads in this instance may not strictly comply with that requirement; but, from the estimate of value given by Mr Turner (which is uncontradicted), a question is raised whether or not the mortgaged properties were sold by the receiver at such an undervalue in 1994 as to give rise to a claim on the part of the Muirheads against the Bank for damages under s.85(3) of the Property Law Act. If a breach of s.85(3) is capable of being established at the trial, the amount of those damages might prove to be enough to extinguish, or at least substantially reduce, the deficiency in repayment of the loan as it then stood.

The receiver as agent. Before deciding whether that is sufficient to raise an issue fit for trial, it is necessary to consider a further submission addressed by the Bank, and accepted by the learned primary judge. The sale about which complaint is made was effected not by the mortgagee Bank itself, but by the receiver Mr E.G. Harris. In the case of the mortgaged land that was registered, he was appointed receiver by the Bank under a deed dated 2 April 1993 pursuant to cl.E4 of the registered memorandum no. J813322Y incorporated in the registered bills of mortgage in favour of the Bank. The deed appointed him to exercise the rights and powers set forth in item 4 of the schedule to the deed. It confers a power "to sell ... all or any of the specified [mortgaged] property ... without being responsible for loss ...". What is more important for present purposes is that in conferring on the Bank as mortgagee the right to appoint a receiver with power to sell, cl.4 of the registered bills of mortgage pursuant to which Mr Harris was appointed, contains an express proviso that every such receiver:

"... shall be the agent of the mortgagor and the mortgagor alone shall be responsible for his acts and defaults ...".

The origins and effect of a provision in the form of the proviso to cl.4 were explained by Rigby L.J. in his dissenting judgment in Gaskell v. Gosling [1896] 1 Q.B. 669, 691-693, adopted by the House of Lords on appeal in Gosling v. Gaskell [1897] A.C. 575, and apparently accepted as authoritative by the High Court in Visbord v. Federal Commissioner of Taxation [1943] HCA 4; (1943) 68 C.L.R. 354, 368, 376, 382. See also Expo International Pty. Ltd. v. Chant [1979] 2 N.S.W.L.R. 820. Considered apart from particular statutory provisions to be mentioned, the result seems plainly to be that the Bank as mortgagee could not be made liable to the Muirheads as mortgagors for the defaults alleged against their agent Mr Harris in selling the mortgaged property in the exercise of his powers as receiver appointed by the Bank. This was the conclusion arrived at by the primary judge in reliance upon the judgment specifically of Starke J. in Visbord v. F.C.T. [1943] HCA 4; (1943) 68 C.L.R. 354, 376. The question remains whether this conclusion can be sustained in the face of the provisions of s.85 of the Property Law Act 1974. The matter was not raised below, nor on the hearing of the appeal before us; but the parties were later invited by the Court to make further written submissions directed to the point. Both sides have done so.

Section 85(1) of the Act provides that in exercising a power of sale conferred by the instrument of mortgage or by the Act, it is the duty of a mortgagee "to take reasonable care to ensure that the property is sold at market value". By s.85(3) a person damnified by the breach of that duty has a remedy in damages against the mortgagee exercising power of sale. Section 85(5) provides that an agreement or stipulation is void to the extent that it purports to relieve, or might have the effect of relieving, a mortgagee from the duty imposed by the section.

In enacting s.85(1) a primary purpose was to resolve doubts concerning the standard of care required of a mortgagee in selling the mortgaged property in the exercise of a power conferred in that behalf. In Commercial & General Acceptance Ltd. v. Nixon [1981] HCA 70; (1981) 152 C.L.R. 491, the High Court held that a mortgagee was not relieved of the duty imposed by s.85(1) because an apparently competent agent had been engaged to effect or arrange sale of the mortgaged property. Gibbs C.J. (at 495) said that, "generally speaking at least", a mortgagee does not discharge his duty under s.85(1) to take reasonable care "simply by choosing a competent agent and then entrusting the conduct of the sale entirely to him". There is a statement to similar effect in the reasons for judgment of Mason J. (at 505). The reasoning of Wilson J. (at 521), Brennan J. (at 526), and perhaps also of Aickin J. (at 515), proceeds, as the headnote to the report suggests, on what is possibly the slightly different basis that the duty imposed by s.85(1) is statutory and non-delegable.

The question for determination here is whether the duty imposed on a mortgagee by s.85(1) of taking reasonable care to ensure that the property is sold at market value extends to a case like this, where the power of sale has been exercised not by the mortgagee itself but by a receiver appointed by the mortgagee, who in exercising the power is expressed by the bill of mortgage to be acting as agent for the mortgagor. If that question is answered affirmatively, the further question then arises whether the provisions of the mortgage instrument making the receiver agent for the mortgagor is within the meaning of s.85(5), an agreement or stipulation having, or possibly having, the effect of relieving the mortgagee from the duty imposed by s.85(1).

Neither question lends itself to ready resolution. As to the second, s.92(2) of the Property Law Act itself provides that a receiver appointed under the powers conferred by that Act is "deemed to be the agent of the mortgagor, and the mortgagor shall be solely responsible for the receiver's acts or defaults unless the instrument of mortgage otherwise provides". Far from providing otherwise, cl.4 of each of the bills of mortgage in the present case specifically repeats the substance of that statutory provision. Having regard to the explicit terms of s.92(2), the apparent conflict or inconsistency between it and s.85(1) and 85(5) of the Act is capable of being resolved only by treating s.92(2) as a specific provision detracting from the more general provisions of the earlier subsections of s.85. Consistency can be achieved by regarding the general duty to take care imposed by s.85(1) as subject to a special exception recognised by s.92(2) in the case of an act or default of a receiver, who by the terms of that subsection is deemed to be the agent of the mortgagor, and as such outside the ratio of Gibbs C.J. and Mason J. in Nixon's case.

A partial response to an argument to that effect may perhaps be found in the reasons of Aickin, Wilson, and Brennan JJ. in the same case. Irrespective of agency, the mortgagee is subjected by s.85(1) to an overriding duty to take reasonable care to ensure that the property is sold at market value, which duty is not capable of being delegated by the device of appointing a receiver to exercise the power to sell. However, to accept this conclusion is to ignore the fact that s.92(2) not only deems the receiver to be the agent of the mortgagor, but also imposes on the mortgagor the sole responsibility for his acts or defaults. It is, in my opinion, difficult if not impossible to escape the conclusion that the effect of that provision is, in the particular case of a receiver who sells, to displace the non-delegable duty imposed by s.85(1). To the extent that breach of the duty is brought about by "acts or defaults" of the receiver, s.92(2) provides that it is the mortgagor who is "solely" responsible for them.

Section 92(2) applies only to a receiver "appointed under the powers conferred by this Act". In the present case Mr Harris was appointed not under the statutory powers of the Act but under the powers conferred by the bills of mortgage. In the deed of 2 April 1993 by which he was appointed, there is no trace of any reference to the Act, or to the powers it confers of appointing a receiver. An additional point made by the respondent Bank is that the power conferred by s.83(1)(c) of the Act of appointing a receiver is confined to appointing a receiver to receive the income of the mortgaged property, whereas the bills of mortgage granted by the Muirheads specifically provide in sub.cl.(f) of cl.4 that a receiver appointed under that clause is to have power to sell. Under cll.2 and 3 of the deed of appointment itself, Mr Harris was appointed to exercise the powers set forth in items 4 and 6 of the schedule to the deed, which in cl.4(f) of item 4 include the power to sell, which is in turn traceable to cll.2 and 3 of the registered bills of mortgage.

It is, of course, true that the operation of s.85(1) of the Act imposing on a mortgagee the duty to take reasonable care extends to the exercise of a power of sale conferred by the instrument of mortgage and not only to the exercise of power of sale under the Property Law Act. But at this point we are considering not the exercise by a mortgagee of a power of sale but its exercise by a receiver as agent for the mortgagor. In imposing responsibility for the receiver's acts or defaults solely on the mortgagor, s.92(2) is expressed to apply to a receiver appointed "under this Act". To that extent the Bank's argument is self-defeating. But it is scarcely to be supposed that the principle indorsed in s.92(2) was intended to be confined only to receivers so appointed. If it is sound policy to impose sole responsibility on the mortgagor for the acts and defaults of a receiver appointed by the mortgagee, there is no discernible reason to exclude a receiver appointed under the powers conferred by the instrument of mortgage unless, in terms of s.92(2), the instrument itself "otherwise provides". There is no such provision in the bills of mortgage in the present case.

For these reasons I have come to the conclusion that the prospective claim of the appellant Muirheads as mortgagors against the respondent Bank as mortgagee for damages for alleged breach by Harris of the duty imposed by s.85(1) of the Property Act (if that is what is intended to be pleaded) is not one that is in law capable of prevailing over the express provisions of cl.4 of the bills of mortgage that the receiver "shall be the agent of the mortgagor, and the mortgagor alone shall be responsible for his acts and defaults". The learned judge was therefore correct in holding that no triable defence or issue was disclosed on the application for summary judgment.

The appeal should be dismissed with costs. The appellants should have leave to amend their defence as they may be advised but are ordered to pay the costs of and incidental to any such amendment.

I have had the advantage of reading the reasons for judgment of McPherson J.A. and of the Chief Justice. I agree that this appeal must be dismissed. Except with respect to the appellants' argument that the respondent was in breach of duty to them under s.85 of the Property Law Act 1974 giving rise to an action for damages I am prepared to adopt the reasons for judgment of McPherson J.A. On that question I would prefer to state my own reasons for agreeing with his conclusion that that section has no application to this case. In doing so I am prepared to assume, like the Chief Justice, that there was a failure to take reasonable care to ensure that the property was sold at the market value.

Section 85 is relevantly as follows:

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

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

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

The purpose of sub-s.(1) was to resolve a controversy as to the extent of the duty of a mortgagee exercising power of sale[1] and it has been construed as resolving that controversy.[2] Although sub-s.(1) does not say in terms that the exercise of the power of sale to which it refers must be an exercise of that power by the mortgagee, sub-s.(3), makes it clear that that was intended.

The sale said to give rise to a breach of s.85(1) here was a sale by a receiver appointed by the mortgagee (the respondent) pursuant to powers contained in the relevant mortgages. These permitted the mortgagee, upon default by the mortgagor, to appoint a receiver of the mortgaged premises with power, amongst others, to sell them and stated that any such receiver would be the agent of the mortgagor and that the mortgagor alone should be responsible for his acts and defaults.[3]

The relevant questions here are whether the sale by the receiver was nevertheless a sale by the mortgagee; and whether the provision making the receiver solely the mortgagor's agent was one purporting to relieve or which might have the effect of relieving the mortgagee from the duty imposed by sub-s.(1). The second of these questions does not, in my view, require a separate answer because it presupposes a duty imposed by sub-s.(1) which, as I have said, arises only upon a sale by the mortgagee.

If cl.E of each of the mortgages had the effect, as it purported to, of making the receiver, in selling the property, solely the agent of the mortgagor then the sale could not have been one by the mortgagee. That it should be given its intended effect has been accepted in Australia.[4]

For those reasons I agree that this case does not come within s.85 of the Property Law Act.

[1] Queensland Law Reform Commission Report No. 16 pp.67-8.

[2] Commercial and General Acceptance Ltd. v. Nixon [1981] HCA 70; (1981) 152 C.L.R. 491.

[4] Visbord v. Federal Commissioner of Taxation [1943] HCA 4; (1943) 68 C.L.R. 354 applying the judgment of Rigby L.J. in Gaskill v. Gosling [1896] 1 Q.B. 669 at 691-3.