Nolan v MBF Investments Pty Ltd [2009] VSC 244

Nolan v MBF Investments Pty Ltd [2009] VSC 244 - VSC 2009 case summary — Zoe

[110]

(1) In construing a release ... the Court should ascribe to the release the meaning that the release would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties at the time that they signed the document containing the release: ICS v West Bromwich BS [1997] UKHL 28; [1998] 1 All ER 98 per Lord Hoffman at 114.

(2) In order for the Court to give effect to what in an objective sense the contracting parties intended, it is clear that a party may agree to release claims or rights of which it is unaware and of which it could not be aware, provided clear language is used to make plain that that is its intention: see Salkeld v Vernon [1758] EngR 153; (1758) 1 Eden 64, 28 ER 608 per Lord Keeper Henley.

(3) Consistent with this emphasis on intention, general words in a release are limited to what was specifically in the contemplation of the parties at the time when the release was given: Grant v John Grant and Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112 per Dixon CJ, Fullagar, Kitto and Taylor JJ; Iletrait Pty Limited v McInnes (NSWCA, 17 April 1997, unreported) per Priestley JA with whom Grove AJA and Handley JA agreed).

(4) Although there are no special rules of construction, such as a contra proferentem requirement, in the absence of clear language courts have been slow to infer that a party intended to surrender rights and claims of which it was unaware and could not have been aware: BCCL v Ali [2001] 1 All ER961 at 966 per Lord Bingham, (contrast Lord Nicholls in BCCL v Ali (supra) at 971-72 who was of the view that for the purposes of construction a general release is simply a term in the contract).

(5) Although each release should be considered against its own matrix of facts, an example of this line of "cautionary principle" (Lord Bingham's phrase) is the frequently cited judgment of the High Court of Australia in Grant v John Grant & Sons Pty Limited (supra), where Dixon CJ, Fullagar, Kitto and Taylor JJ (at 125) referred with approval to the proposition put by Sir Frederick Pollock in his "Principles of Contract" (Stevens: London, 1950) 13th ed at 412, that "in equity a release shall not be construed as applying to something of which the party executing it was ignorant".

(6) Despite the fact that, strictly speaking, releases are subject to no special rules of construction, a transaction in which one party agrees in general terms to release another from any claims upon it does have special features: BCCL v Ali at 984 per Lord Hoffman.

(7) In such circumstances it may well be appropriate to imply an obligation upon the beneficiary of such a release to disclose the existence of claims of which it actually knows and which it also realizes might not be known to the other party: BCCL v Ali at 984 per Lord Hoffman, for such an obligation is consistent with a concern to protect parties from sharp practice, by preventing advantage being taken of the known ignorance of the conceding party; BCCL v Ali per Lord Nicholls at 973. (The Bank made no such disclosure here.)

(8) Most recently in this Court in Amaca Pty Limited formerly known as James Hardie & Coy Pty Limited v CSR Limited [2001] NSWSC 324, Bergin J adopted the principles of construction broadly as outlined above, including the "cautionary principle" and taking into account the purpose of the contract and the circumstances in which made.

[136]

The rule to be applied here is not in doubt; it was stated authoritatively by Lord Herschell in the last century. In Kennedy v de Trafford (1897) AC 180, which has been followed by this Court in Barns v Queensland National Bank Ltd (1906) 3 CLR 945 and Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676, the Lord Chancellor said (1897) AC, at p185 :

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

I do not think that statements in some cases, such as McHugh v Union Bank of Canada (1913) AC 299 or Cuckmere Brick Co Ltd v Mutual Finance Ltd (1971) Ch 949, that the mortgagee is under a duty to take reasonable precautions to obtain a proper price, are at odds with the rule stated by Lord Herschell. To take reasonable precautions to obtain a proper price is but a part of the duty to act in good faith. This duty to act in good faith falls far short of the Golden Rule and permits a mortgagee to sell mortgaged property on terms which, as a shrewd property owner, he would be likely to refuse if the property were his own.

[226]

The Court will encourage practitioners to develop human rights-based arguments where relevant to a question in the proceeding.

2. Practitioners should be alert to the availability of such arguments, and should not be hesitant to advance them where relevant.

3. Since the development of an Australian jurisprudence drawing on international human rights law is in its early stages, further progress will necessarily involve judges and practitioners working together to develop a common expertise.

That there is a proper place for human rights-based arguments in Australian law cannot be doubted. As the Hospital's well-researched submission pointed out, over the past two decades Australian courts have been prepared to consider the use of international human rights conventions in:

(a) exercising a sentencing discretion;

(b) considering whether special circumstances existed which justified the grant of bail;

(c) considering whether a restraint of trade was reasonable; and

(d) exercising a discretion to exclude confessional evidence.

In John Fairfax Publications Pty Ltd v Doe, Gleeson CJ (as Chief Justice of New South Wales), in considering whether the means of protecting privacy of communication under Part VII of the Telecommunications (Interceptions) Act 1979 (Cth) lacked proportionality, referred to the international recognition of the need for stringent controls in the interests of privacy.

There are three important ways in which such instruments, and the associated learning, can influence the resolution of disputes under domestic law. This is so notwithstanding that, unless an international convention has been incorporated into Australian municipal law by statute (as has occurred with the Commonwealth's Racial Discrimination Act 1975 and Sex Discrimination Act 1984), the convention cannot operate as a direct source of individual rights and obligations under Australian municipal law.

First, the provisions of international treaties are relevant to statutory interpretation. In the absence of a clear statement of intention to the contrary, a statute (Commonwealth or State) should be interpreted and applied, as far as its language permits, so that it conforms with Australia's obligations under a relevant treaty.

Secondly, the provisions of an international convention to which Australia is a party - especially one which declares universal fundamental rights - may be used by the courts as a legitimate guide in developing the common law. The High Court has cautioned that the courts should act with due circumspection in this area, given that (ex hypothesi) the Commonwealth Parliament itself has not seen fit to incorporate the provisions of the relevant convention into domestic law.

Thirdly, the provisions of an international human rights convention to which Australia is a party can also serve as an indication of the value placed by Australia on the rights provided for in the convention and, therefore, as indicative of contemporary values.

[344]

Following your request, J E Date and Collins Simms are pleased to provide a progress report on the forthcoming sale, as promised.

Legal Opinion

You have advised of Queen's Counsel opinion that a mortgagee can only sell sufficient lots in a multi-lot sub-division to satisfy the mortgage debt, interest and costs. We understand that these total some $1.6 million for the subject property. Accordingly, you have asked for our advice on the order of sale for two lots at next Saturday's auction. As agreed, with you, we have based our advice purely on real estate matters, without any weighting being given to the somewhat competing interests of the various stakeholders in the property.

List of Prospective Purchasers

Our marketing efforts to date have resulted in a very large number of enquiries, including 1,664 visits to the Collins Simms web site and innumerable telephone calls. A total of more than 120 different potential buyers have inspected the property and we have subsequently contacted each of those buyers in order to draw up the enclosed list of qualified purchasers. Each of these buyers has indicated their intention to attend the auction and bid on the lot(s) indicated.

Order of sale

Based upon buyer responses, we would anticipate the following outcomes for each possible order of sale:

Lot 1 followed by lot 2

The very strong interest shown in each of these lots makes us fully confident that they would both sell under the hammer, for a combined price in the order of $1.6 - $1.9 million.

Lot 2 followed by lot 1

Lot 2 is clearly the premium parcel of land. Offering it first may help to set a benchmark price per square metre for the following sale. Although our estimated price range would still be $1.6 - $1.9 million, on balance we would ordinarily prefer this order of sale in order to maximise the total price received.

Lot 1 followed by lot 3

Relatively few buyers have expressed interest in lot 3, largely due to the challenging topography and the need for expert architectural advice. We are therefore not fully confident of achieving a sale at auction. If both lots did sell, we would expect a combined price in the range of $1.4 - $1.6 million.

Lot 2 followed by lot 3

Some buyers have thoughts of a supplementary subdivision adding part of lot 3 to each of lots 1 and 2, although this strategy is questionable if lot 1 is not offered for sale. Again with the qualification "if both lots sell", we anticipate a combined price in the range of $1.45 - $1.6 million.

It has been suggested that lot 1 could be offered for sale only if lots 2 and 3 fail to realise enough money to cover the mortgagee's debt. We see some dangers in the approach. If the intention is announced beforehand, buyers wishing to secure lots 1 and 2 or the entire property will not participate in the auction. If the announcement is not made and lot 1 is not, in fact, offered for sale, then the buyer of lot 2 may just have cause to cancel the sale.

Lot 3 followed by either Lot 1 or Lot 2

We do not recommend the strategy of offering the least valuable parcel of land first. If the parcel sold, then it would set a low benchmark for the subsequent sale. If it failed to sell, then it would have a deleterious effect upon the buoyant mood required for a successful auction.

Whole property

You have advised that the land surveyor has not released the field notes etc. required to finalise the land sub-division. If this issue cannot be resolved, you have advised that the property must be sold as one parcel. Given the interest to date, we would anticipate a selling price in the order of $2.2 - $2.5 million.

If the property is to be sold as a whole, then we would request urgent consultation with you regarding any further marketing which may be prudent.

Subsequent value

You have asked for our view on the possible change in value of the lot not offered for sale on Saturday.

Excluding any movements in the general market, we would not anticipate any change to the value of lot 3.

Many prospective buyers of Lot 1 have naturally expressed some concern as to the likely bulk of any building on Lot 2. Construction of a building on Lot 2, which is to the north of the house, will remove this doubt and may either increase or decrease the value of Lot 1. Our strong suspicion, however, is that it will be the latter, since the building will loom over the entry porch of the existing house.

Recommendation

We have attempted to provide you with sufficient information on which to form your own opinion as to the order of sales, have[sic having] regard to all of the factors involved.

Our recommendation, based on our brief to ensure recovery of $1.6 million and on the stated intentions of the prospective purchasers, is to firstly offer Lot 1, followed by Lot 2. We further recommend that this intention be advised to the prospective purchasers before the auction day.

Would you please let me know if you require any further information on which to base your decision?

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Judgment (620 paragraphs)

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Legislation Cited (9)

Cases Cited (37)