Nolan v MBF Investments Pty Ltd [2009] VSC 244

INTERNATIONAL LAW - Protection of the home from arbitrary interference - Whether a fundamental human right - Principle of legality - Application of international law to statutory interpretation.

STATUTORY INTERPRETATION - Charter of Human Rights and Responsibilities Act 2006 (Vic.) - Protection of the home from arbitrary interference - Section 32 - Whether retrospective in operation - Whether indicative of contemporary values.

ACCOUNTS - Remedy for breach of mortgagor's duty pursuant to s.77(1) TLA.

1 The issue on liability in this case is whether a sale of real property owned by the plaintiff, conducted by the defendant in the exercise of its statutory power of sale arising under a mortgage, was undertaken in contravention of the statutory duties provided for in s.77(1) Transfer of Land Act 1958 (the "TLA").

2 Section 77(1) TLA relevantly provides:

(1) If within one month after the service of such notice or demand [the notice to pay or demand on a default under s.76] 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 [the mortgaged land] ...

3 The plaintiff alleges that the defendant breached its duties in that it failed to act in good faith and have regard to his interests in the conduct of the sale, and further that its conduct resulted in a fraud on the power of sale. The plaintiff claims damages, equitable compensation or such other relief as is considered appropriate by the Court.

4 The reported cases on the exercise of the statutory power of sale and the duties provided for by s.77(1) TLA centre on allegations that the sale of the mortgaged land by the mortgagee was undertaken at an undervalue.[1] That is not the case here.

5 At the time of the mortgagee's sale, the plaintiff was the owner of three adjoining parcels of land in the residential suburb of Kew in Victoria. All three parcels were mortgaged to the defendant and, there having been default under its mortgage, all three were subject to the exercise by the defendant of its statutory power of sale. Two of the parcels (Lots 2 and 3) comprised vacant land. However, the plaintiff's home, where he and his family had resided for some 10 years, was sited on Lot 1. The plaintiff alleges that the sale of Lots 2 and 3 alone was all that was necessary to discharge his indebtedness to the defendant, after paying proper regard to other persons having security and other interests in the mortgaged property. However, the defendant at public auction, sold all of the allotments, including Lot 1. In this way, the plaintiff and his family came to be deprived of their dwelling house. And, it is on this basis that the plaintiff claims that the defendant, by selling his house on Lot 1, when it was unnecessary to do so, breached its obligations under s.77(1) TLA by failing to have regard to his interests, and acting in bad faith.

6 It is well settled that a mortgagee, in the exercise of its statutory power of sale under s.77(1) TLA, has a duty to take reasonable steps to obtain the best price for the land sold, consistent with its entitlement to realize its security. Such a duty recognises an accepted interest of the mortgagor in the land, namely a proprietary interest in the proceeds of sale.

7 However, is the mortgagee also required to have regard to the 'interest' which the mortgagor claims to have in this case - namely his interest in retaining Lot 1 of the property as a home to be occupied by his family?

8 The issue raises the question as to whether the interest of the mortgagor in his family home was merely an emotional interest unprotected by s.77(1). Such an 'interest' may be typified by the popular Australian film "The Castle" (1997) in which the central character Darryl Kerrigan says in a key passage of the screenplay:

They don't get it. They're judging the place by what is looks like, and if it doesn't have a pool, or a classy front, or a big garden. And because of that its not worth saving. But its not a house, its a home. Its got everything. People who love each other, care for each other. Its got memories, great memories! Its a place for the family to turn to, come back to.

On the other hand, on close analysis, did the mortgagor's claimed interest have a tangible dimension of such a kind as to attract the statutory protection?

9 The plaintiff, Mr Nolan, was the registered proprietor of the property described in Certificate of Title Volume 9473 Folio 608 and known as 16-18 Walmer Street, Kew ("the property").

10 Mr Nolan resided with his family in the dwelling house on the property between January 1975 and November 2001. Mr Nolan and his wife had five children. In 2001 the two youngest children in the family were both undertaking their year 12 schooling, and, I infer, were both living at home with their parents. The elder children by then were pursuing tertiary education and professional training, and although their belongings remained in the house and they returned to live in it from time to time, they were not full time residents of the dwelling.

11 MBF is an investment company which was controlled by the Christian religious order, known as the Good Shepherd Sisters based in Abbotsford in Victoria. In 2001 the head of the order was Sr Anne Dalton. 'MBF' is the acronym for the name of a very prominent Christian, Sister Marie Bernadette Fox, in whose honour the investment company was named.

12 Mr John Date Snr was a foundation director of MBF, and remained a director during the relevant period of 2000 and 2001. He was also a consultant to Cornwall Stodart, a firm of solicitors, who at all times acted for MBF. Mr Date Snr has been a solicitor for 50 years and looked to be well into his 70's. He was the decision maker on behalf of MBF in relation to the mortgage and the realization of this security which is the subject of the proceeding.

13 Mr Peter Macnish is an Australian Legal Practitioner, a solicitor and special counsel engaged by Cornwall Stodart. At the times relevant to the dispute in this proceeding in 2000 and 2001, Mr Macnish was a senior associate with the firm. During this period, Cornwall Stodart acted for MBF and Mr Macnish was responsible for dealing with Mr Nolan and all other relevant parties in relation to the MBF Mortgage, although he had assistance from another solicitor with the firm, Mr Chamberlain who managed some of the conveyancing aspects of the matter. Mr Macnish took his instructions from Mr Date Snr.

14 The property was subject to a first mortgage No.V744368X ("the MBF mortgage") granted by Mr Nolan in favour of MBF. The loan advance provided by MBF, which was secured by the MBF mortgage, was settled on 15 June 1998 with the provision of $975,000 advanced to Mr Nolan. However, the MBF mortgage was not registered with the Registrar of Titles against Mr Nolan's title for the property until 13 November 1998. Until that time, it remained in a dealing awaiting registration.

15 The MBF mortgage was not registered because it was in a dealing behind a transfer of the property to Mr Nolan. Registration of this dealing was prevented by an injunction which remained in force in proceedings initiated by Geoffrey Malcolm Collie ("Mr Collie") in proceedings in the Supreme Court between himself and Mr Nolan. In or about July 2000, following an application by MBF in the Supreme Court, MBF negotiated a settlement with Mr Collie permitting the injunction restraining the transfer to be lifted, and the registration of the MBF mortgage thereby to proceed.

16 The MBF mortgage was an interest only mortgage. Under its terms, Mr Nolan was required to make payments of interest to MBF on the first day of each month commencing on 15 June 1998 until 1 July 2001.

17 The property was also subject to a second mortgage No.W904177L in favour of the Australian and New Zealand Banking Group Limited ('ANZ') registered 11 July 2000 ("the ANZ mortgage").

18 The present proceeding is but part of the long-running saga of litigation between Mr Nolan and Mr Collie and companies associated with those parties. In these reasons for judgment I will make reference to these matters only insofar as they bear directly on the issues presently before the Court. Thus confined, it will be unnecessary to recite the long history of the disputes between these persons and detail the extensive litigation in which they have been involved. The subject matter of the litigation is well described in preceding judgments of this Court.[2]

19 Mr Nolan was the trustee of the Prudent Trust, a trust established for the benefit of the Nolan Family, and held the property as trustee of the trust. The former trustee of the trust was Merlaw Nominees Pty Ltd ("Merlaw").

20 In Supreme Court proceeding No.6265 of 1991 ("the 1991 proceeding"),[3] by order of Byrne J made 24 November 1999, judgment was entered in favour of Mr Collie for the sum of $92,784.74 together with interest of $106,052.96 (a total of $198,837.70) against Merlaw.

21 Upon Merlaw ceasing to be the trustee of the Prudent Trust, and Mr Nolan assuming that position, Mr Collie pursued the judgment debt owed to him by Merlaw by seeking to subrogate to himself the right of indemnity of that trustee company from the assets of the trust of which it was formerly the trustee. A principal asset of the trust was the property. To achieve this objective, Mr Collie issued a further proceeding against Merlaw - which was then in liquidation - and others ("the 2001 proceeding").[4]

22 By order of Warren J in the 2001 proceeding, made 9 March 2001,[5] the Court declared that Mr Nolan was acting as the trustee of the Prudent Trust and that Merlaw was entitled to indemnity out of, and exoneration from, the assets of the Prudent Trust in respect of the judgment in favour of Mr Collie, including costs and interest thereon. It was further declared that Merlaw had an equitable charge or lien over all the assets of the Prudent Trust, including the property, to the full extent of its entitlement to indemnity and exoneration, and that Mr Nolan held the assets of the Prudent Trust subject to the right of indemnity and exoneration of the former trustee, Merlaw. Mr Collie was also declared entitled by subrogation to an indemnity out of the trust estate of the Prudent Trust in respect of his judgment, including costs and interest. Warren J also made orders directed against Mr Nolan restraining him from dealing with the property. It was ordered that:

1. Until further order the second-named defendant (Nolan) is restrained from dealing with or disposing of any of the assets or property of the Prudent Trust, or taking any action whatsoever as trustee of the Prudent Trust. [Emphasis added]

23 As at 16 May 2001, Mr Collie estimated that the judgment debt in his favour amounted to $548,000, comprising $238,000 in respect of the judgment in the 1991 proceeding, together with $150,000 in respect of the taxed costs of those proceedings, and $160,000 in respect of the taxed costs of the 2001 proceeding.

24 However, Mr Collie never took any step to execute upon his judgments. Two caveats prepared on his behalf founded upon an alleged interest in the property arising from the judgments in his favour, although lodged at the Land Titles Office, were never registered on the title to the property. At all relevant times, Mr Collie remained merely judgment creditor, with an equitable charge or lien to the extent of his judgment debt over the property and the proceeds of any sale of the property, should a sale occur. As a result, he never placed himself in a position to force a sale of the property, or any part of it. His rights to initiate recovery from the property were confined to seeking an order for possession founded on his judgment debt, or directing the Court Sheriff to take that step on his behalf, neither of which were pursued by Mr Collie at any time.

25 Mr Nolan fell into default under the MBF mortgage by not paying the monthly payment of interest which fell due. Mr Nolan defaulted in payment of instalments of interest due under the MBF mortgage commencing on 1 May 2000. Thereafter, he failed to meet any of the interest payments which fell due.

26 Following the registration of the MBF mortgage, by notice dated 28 September 2000, MBF served a notice to pay under the MBF mortgage giving Mr Nolan notice pursuant to s.76 TLA that he had failed to pay all of the interest payable under the MBF mortgage when it fell due and demanded payment of the whole of the outstanding moneys secured by the mortgage. It gave further notice that if the amount demanded was not paid to MBF within 7 days, it would exercise the power of sale pursuant to s.77 of the TLA and all other powers it may have under the MBF mortgage, including the power to take possession of the property.

27 As at 30 April 2001 each mortgage was in arrears as follows:

(a) The MBF mortgage - an estimated amount of $1,158,473.49 increasing at approximately $8,000 per month owed to MBF;

(b) The ANZ mortgage - an estimated amount of approximately $275,000 owing to ANZ.

28 In or about May 2001 MBF, as mortgagee, determined to exercise its power of sale pursuant to its mortgage and s.77 of the Transfer of Land Act 1958 (Vic) and to sell the property at public auction.

29 However, ANZ did not require the property to be sold by mortgagee auction in order to satisfy the debt owed to it. ANZ's position was that it wished its debt paid and its mortgage discharged. However, it did not require a mortgagee sale in order to achieve payment. Had the plaintiff retained Lot 1 and then been able to refinance ANZ's debt of $275,000, ANZ was content to be repaid by that mechanism.

30 Mr Nolan, by letter dated 16 October 2000, wrote to Cornwall Stodart, the solicitors engaged by MBF, setting out a proposal for repaying the MBF mortgage. The proposal was for MBF to proceed with the sale of the property in three subdivided Lots, rather than selling the property in its then current condition as one lot. Mr Nolan anticipated that the property realized as three lots would achieve a better price than if it was sold as one lot. Mr Nolan referred to a valuation prepared by valuers Preston Rowe Paterson dated 25 September 2000 which valued the property, if sold in three allotments as follows:

Lot 1 House lot $750,000

Lot 2 Corner Allotment $725,000

Lot 3 Tennis Court $500,000

$1,975,000.

31 Mr Nolan's proposal was rejected by MBF by a letter from its solicitors, Cornwall Stodart dated 20 October 2000. MBF insisted on possession of the property. It did not provide any reasons for taking this course.

32 On 24 October 2000 MBF issued a Writ for Possession of the property. A letter from Cornwall Stodart to Mr Nolan dated 24 October 2000 stated:

We have obtained instructions from our client regarding proposals from you generally.

The position is that the entire loan is now due as a result of your default. Without prejudice to that position, our client is prepared to consider proposals from you.

However any proposal must:

1. Be preceded by payment of all arrears;
2. Be in writing;
3. Include a consent to judgment for possession.

Only proposals put to our client as above will be considered. We look forward to hearing from you or your solicitor. You may expect the Writ to be served shortly.

33 MBF issued a summons for summary judgment for possession based on its writ on 30 June 2000. Judgment for possession was entered by consent. On 19 December 2000 MBF issued a Warrant for Possession.

34 On 8 January 2001 Phillip Rhoden of the firm Rhodens, a solicitor acting for Mr Nolan's wife, Mrs Margaret Nolan, put a further proposal to Cornwall Stodart. The proposal contained an offer for Mrs Nolan to purchase the property for $1,400,000.00 with settlement by 30 April 2001. It was to be an express condition of the proposed contract that Mrs Nolan be permitted to complete the subdivision of the property. Further, and subject to MBF's 'in principle' approval of the proposal, Mrs Nolan was to provide by 22 January 2001, satisfactory evidence in the form of a letter of offer of finance for the completion of the purchase, in accordance with the proposed contract. The letter concluded:

You will also be aware that Mrs Nolan is currently living in the house with her husband and their five children.

35 On or about 12 January 2001 Mr Nolan received a letter from the Sheriff's Office requiring him and the Nolan family to vacate the property by 2 February 2001.

36 Cornwall Stodart on behalf of MBF responded to Rhodens' proposal on behalf of Mrs Nolan by letter dated 15 January 2001. In this and in the ensuing correspondence, MBF demonstrated an apprehension about Mr Collie. It did not want to become embroiled in any legal dispute with him. Cornwall Stodart in its letter said:

Our client is still considering the offer to purchase by Mrs Nolan. Our client must bear in mind its obligations to any other party having an interest in Walmer Street.

Further, our client has to be satisfied that whatever price is ultimately paid for the property represents fair market value at the time.

A preliminary question which arises is the attitude of the second mortgagee. What is your client able to tell us about the ANZ Bank's attitude to her offer to purchase?

We understand that a Mr Collie may or may not have an interest in the method of sale of Walmer Street. Our client does not wish to become engaged in a dispute with Mr Collie as to the method of sale. Has there been any discussion with Mr Collie about this proposal?

Whilst our client is interested in and sympathetic to the arrangement being suggested it will need more information before it can decide whether or not to proceed. Please give us your client's response to the matters raised in this letter as soon as possible. In the meantime the warrant remains active with the Sheriff. [Emphasis added]

37 Rhodens responded on behalf of Mrs Nolan by letter dated 17 January 2001:

Thank you for your letter of the 15th January 2000. We are aware of your client's obligations to the parties having an interest in the property and we assume that you are referring to the provision of Section 77 of the Transfer of Land Act.

The provisions of this Section clearly state that the obligations are to those having an interest in the property and we are of the understanding that the only parties on Title are Damien Nolan, MBF and ANZ.

Our instructions from Mrs Nolan are that the Mr Collie to whom you refer does not have an interest in the property. He is not on Title, nor has a caveatable interest. We are instructed that the current proceedings in the Court are not ever likely to give rise to such an interest.

As to the ANZ Bank's attitude to the offer to purchase, we believe that in the event that the ANZ Bank is to be paid out in full, they would view that proposition with alacrity. Mrs Nolan's offer to purchase is on the basis that all registered mortgagees will be paid out in full.

We note your comments as to price.

We believe that the price represents the figure that will be reflected in a valuation to be obtained by you. Mrs Nolan's offer however is net of the saving of agents commission and advertising.

38 Cornwall Stodart on behalf of MBF responded by letter dated 19 January 2001:

Thank you for your letter of 17 January 2001.

The fact that you were instructed that the current proceedings involving Mr Collie are not every (sic) likely to give rise to an interest in the land does not help our client. Our client remains nervous about Mr Collie.

Our client notes that Mr Collie has proved to be a litigious person in the past. Regardless of what Mr Nolan may think Mr Collie appears to think that he does have an interest in the property.

The fact that Mr Collie has an injunction preventing dealing with the property indicates to us that the court at the time that it granted the injunction accepted there was at least an argument that Collie had an interest in the property.

In the circumstances our client will auction the property rather then (sic) take up Mrs Nolan's offer.

You should note that the Sheriff has informed us that the warrant will be executed as soon as possible after 2 February 2001. [Emphasis added]

39 Cornwall Stodart then wrote to Mr Van Staveren of ANZ on 19 January 2001 advising what had occurred and offering ANZ the opportunity to pay out MBF's mortgage. The letter included the following passage:

Our client [MBF] is not satisfied with the assurances given by Rhodens in its letter to us of 17 January 2001 and remains concerned about Mr Collie. For that reason we have informed Rhoden our client rejects the offer made to (sic) Mrs Nolan. [Emphasis added]

I have been requested to respond to your letter to Mr Van Staveren dated 19 January 2001 and wish to raise the following matters:

• The Bank does not understand the basis of your concerns regarding Mr Collie. Mr Collie has not lodged a caveat over the property and as far as we are aware does not have a caveatable interest.
• Should you be in possession of any information which provides a basis for your concerns regarding Mr Collie, your suggestion that the Bank pay the amount owing to your client and receive an assignment of your security seems quite unconscionable.
• Accordingly, we consider that your client's rejection of the offer by Mrs Nolan, without any apparent basis of your concerns regarding Mr Collie and, more particularly, without the benefit of a sworn valuation, puts your client in breach of its obligations as mortgagee in possession and in particular in breach of its obligations to the Bank.
• The Bank therefore puts you on notice that in the event that the property is sold at auction for an amount less than the offer made by Mrs Nolan and which results in a shortfall to the Bank, the Bank will be looking to your client to recover any shortfall.
• Finally, while you point out in your letter that the amount owing to your client increases monthly, we do not see that you have done anything to mitigate your client's loss_._

41 The consistent position adopted by Mr Collie was for the proposed subdivision to be completed before the property was sold and that all three lots be sold at the same time at a mortgagee's sale to be conducted by MBF.

42 The second mortgagee, ANZ, also preferred to have the property, or such of it as was necessary to realize its security, offered for sale with the subdivision in place to maximise the value of the property as a whole.

43 As things stood prior to 2 May 2001, there was no agreement between MBF, Mr Nolan and Mr Collie on how the proposed subdivision of the property should proceed or how MBF should sell the property.

44 On 2 May 2001, Mr Nolan wrote a letter to the solicitor acting for MBF, Mr Macnish of Cornwall Stodart, in which he repeated his request for the proposed subdivision to be completed before the property was sold. The letter also stated that it was only necessary for MBF to sell Lots 2 and 3 to realize the outstanding sum due under its mortgage, thereby leaving Lot 1 (the house lot) untouched by the sale. Mr Nolan also enclosed with his letter an affidavit sworn by Peter Mitchell of Collins Simms Real Estate Agents dated 1 May 2001. Mr Mitchell was a director of Collins Simms, and a real estate agent of 28 years' experience. He was the responsible person in charge of the Kew office, and had first hand knowledge of the property. Mr Mitchell deposed in his affidavit that the property would realize its highest value if sold in individual Lots, and that Lots 2 and 3 should be sold first with the marketing of Lot 1 to commence after the sale of Lots 2 and 3. Mr Mitchell swore in his affidavit:

In my view it is better for Lots 2 & 3 to be sold first and that the marketing of Lot 1 commence after the auction of Lots 2 & 3. There is an extremely strong demand for vacant Lots in Kew and mixing the house lot with the vacant Lots is likely to reduce the focus on these two unique building blocks. I believe that selling this way will enhance the values obtained for all three Lots, if all are to be sold.

45 If Mr Mitchell's proposal had been adopted, the sale of Lots 2 and 3 may well have achieved the necessary sale prices to pay out MBF under its mortgage, leaving Lot 1 for Mr Nolan and his family to occupy pending the necessary refinancing to pay out ANZ and Mr Collie. On the other hand, if the sale prices for Lots 2 and 3 did not realize sufficient to pay out MBF, Lot 1 could then be sold if necessary. Although in advance of the auction sale there was continuing disagreement between estate agents on the proposed order of sale of the three allotments, the only agreement being that Lot 3 should not be put up for sale first, on the face of it, Mr Mitchell's plan was a reasonable proposition.

46 Mr Nolan also said in his letter that the second mortgagee, ANZ, "has indicated its clear consent to this process", a position which I accept as correct.

47 However, Mr Macnish on behalf of MBF wrote in reply on 3 May 2001 that:

Our client's instructions remain unchanged. Our client intends to take possession of the property and sell "as is".

48 Mr Nolan then arranged to serve a writ and statement of claim dated 4 May 2001 issued in the Supreme Court of Victoria (proceeding No.5653 of 2001) (the "method of sale proceeding") seeking, amongst other things, permanent and interlocutory injunctions restraining MBF from selling the property other than as three separate Lots and restraining MBF from selling Lot 1. A summons seeking interlocutory relief, together with supporting affidavits were also served.

49 Mr Collie was also served with the method of sale proceeding instituted by Mr Nolan. He opposed Mr Nolan's application and, consistent with the position he had previously adopted, insisted on the sale of all three lots at the same time, if the subdivision proceeded.

50 Between about 8 May and 16 May 2001 negotiations were entered into between Mr Nolan, MBF, the ANZ, Mr Collie and Mr Rambaldi (the liquidator of Merlaw) in an attempt to achieve agreement as to whether the property would be subdivided prior to sale, how the subdivision would be funded, and once subdivided, how the property should be sold (whether all three lots at the same time, or only some of the lots should be sold). The parties could not agree at this time on the manner of sale, assuming a subdivision was to proceed. Mr Collie wanted all three lots to be sold at the same time, while Mr Nolan wanted Lots 2 and 3 to be sold so that he could retain Lot 1 (the house lot). However, by this time, all parties agreed, or appear to have agreed, that the proposed three lot subdivision should be completed prior to a sale of the property by MBF.

51 On 16 May 2001, Beach J heard Mr Nolan's application in the Practice Court for interlocutory relief in the method of sale proceeding which he had issued against MBF.[6] It was agreed by all parties that if the property was subdivided into three allotments, each allotment then being sold separately, the overall proceeds of the three sales would exceed the amount recovered in the event that the property was sold as it was.

52 The parties dug in on their previously adopted positions. Mr Nolan maintained that the property should be subdivided into the three proposed allotments and that allotments 2 and 3 should then be sold at auction. He maintained that no sale of Lot 1 (the house lot) should take place because the funds produced by the sale of Lots 2 and 3 would be sufficient to discharge MBF's first mortgage, pay the subdivisional costs of $125,000 and either discharge or significantly reduce the amount outstanding under the second mortgage to ANZ. If a sale of Lot 1 should, however, become necessary, this should occur after the auction sale conducted in respect of Lots 2 and 3. MBF was prepared for the subdivision to proceed, but wished not to be bound by any particular method or order of sale. Mr Collie maintained that the subdivision should proceed and insisted that all three allotments be sold at auction on the same day, one after the other.

53 However, if a subdivision was to proceed, the City of Boroondara required Mr Nolan to enter into an agreement pursuant to s.173 agreement of the Planning and Environment Act 1987 before sealing any plan of subdivision in respect of the property. Subsection (1) of that section provided that a responsible authority (in this instance the City of Boroondara) may enter into an agreement with the owner of land in the area covered by a planning scheme for which it is a responsible authority. Section 174 of that Act provided:

(1) An agreement must be under seal and must bind the owner to the covenants specified in the agreement.

(2) An agreement may provide for any one or more of the following matters -

(a) the prohibition, restriction or regulation of the use or development of the land;

(b) the conditions subject to which the land may be used or developed for specified purposes;

(c) any matter intended to achieve or advance -

(i) the objectives of planning in Victoria; or

(ii) the objectives of the planning scheme or any amendment to the planning scheme of which notice has been given under section 19;

(d) any matter extendable to any one or more of the above matters.

54 Further, if Mr Nolan entered into such an agreement, he would have found himself in breach of paragraph 7 of the Orders of Warren J of 9 March 2001, to which I have referred.

55 In the course of the application heard by Beach J in the method of sale proceeding on 16 May 2001, MBF consented to a variation of paragraph 7 of Warren J's order to enable Mr Nolan to execute the necessary s.173 agreement, following which MBF agreed to then take the necessary steps to subdivide the property into the three allotments and sell by auction such of the allotments as was necessary to pay out its mortgage. MBF required any costs incurred by it in doing so to be repaid to it, and also required such co-operation from Mr Nolan as was necessary to subdivide the property.

56 In the course of his reasoning, Beach J said (at paragraphs [26]-[28]):

1. As I intend to vary the order of Warren J to enable Nolan to sign a Sec.173 agreement, in my opinion there is no basis for the grant of any of the injunctive relief sought by Nolan in his writ and summons.
2. It is not for this court to direct a mortgagee as to whether it should sell the three allotments on the one day. As to whether that is done or allotments 2 and 3 are offered for sale on the same day with allotment 1 being offered for sale on a later date, assuming of course that it becomes necessary to do so to discharge MBF's mortgage, is a matter for MBF to determine.
3. In making such a determination MBF will be expected to obtain appropriate advice from an experienced real estate agent and then, unless there is very good reason not to do so, to act upon that advice.

57 Beach J ordered that paragraph 6 of the order of Warren J made 9 March 2001 be varied so that the paragraph read:

1. Save that the Secondnamed Defendant is permitted as mortgagor to sign the agreement under s.173 of the Planning and Environment Act 1987 (Vic) between Boroondara City Council and himself entered into pursuant to Planning Permit No. BOR/98/01353, until further order, the Secondnamed Defendant is otherwise restrained from dealing with or disposing of any of the assets or property of the Prudent Trust, or taking any action whatsoever as trustee of the Prudent Trust.

58 Beach J said further (at paragraphs [30]-[31]):

1. During the course of the hearing before me there was much debate as to whether I should make orders in favour of Collie the effect of which would be to require MBF to pay to Collie the amount awarded to him by Byrne J in his judgment in proceeding No.6265 of 1991 and further sums to cover the costs awarded in his favour by Byrne J and the costs awarded to him by Warren J on 9 March 2001, neither of which have as yet been taxed.
2. In my opinion it would be inappropriate for me to make any such orders. Those matters do not concern MBF. Collie has his judgments and should execute them in the appropriate fashion.

59 Following the hearing before Beach J in the Practice Court in the method of sale proceeding, the parties continued their negotiations in an attempt to resolve the outstanding issues between them. In the course of these negotiations, Mr Macnish drafted a deed ("the Deed") which he proposed would be executed by MBF, Mr Nolan, Mr John Arthur (a friend of Mr Nolan's) and Peter Mulcahy & Associates Pty Ltd (land surveyors). Pursuant to the Deed, MBF would agree to delay taking possession of and selling the property on the terms set out in the document. These terms included the provision of $126,555 to MBF to effect the subdivision, the delivery to it of an irrevocable bank guarantee in the sum of $50,000 as a surety to be provided by a friend of Mr Nolan's, Mr Arthur, and the completion of the subdivision by 20 July 2001. The Deed also provided for the sale of the property, distribution of the subdivision funds, distribution of the sale proceeds, settlement of the method of sale proceeding, and a release.

60 The Deed was executed by the parties to it on 13 June 2001.

61 Mr Collie was not a party to the Deed. Furthermore, the clause of the Deed dealing with the distribution of the sale proceeds did not include any reference to Mr Collie or his judgment debt. It did, however, make provision for payment out of the MBF debt, and the ANZ debt, with the balance of the proceeds of sale to be paid to Mr Nolan "unless prevented by order of the Court from doing so".

62 Following entry into the Deed, on 26 June 2000 a plan of subdivision was issued by the City of Boroondara pursuant to planning permit No.B0R/98/01353 for the subdivision of the property into three allotments.

63 This resulted in the property eventually being the subject of an unregistered three lot plan of subdivision comprising:

(a) Lot 1 (the "house lot") containing a substantial house in which Mr Nolan and his family resided;

(b) Lot 2 being a block of vacant land situated on the north west of the property; and

(c) Lot 3 being vacant land (formerly a tennis court) situated on the north east of the property.

64 The Deed included a provision as to the method of sale proposed by MBF to realize its security. Clause 4 of the Deed provided:

4. SALE OF SECURITY

4.1 It is agreed by Nolan and Arthur that the method and timing of sale of the security is to be at the absolute discretion of MBF Investments and no reasons need or will be given to Nolan and Arthur by MBF for any decision made and action taken with respect to the sale of the property.

4.2 Notwithstanding the sub-clause above, provided Nolan, Arthur or Mulcahy are not in breach of the terms of this deed, MBF acknowledges that it will sell the security after completion of the works in accordance with the advice that it receives from reputable and competent selling agents, which advice need [sic] and may not be disclosed to Nolan and Arthur.

65 In my opinion, clause 4 of the Deed did not operate to exclude the statutory obligations of MBF as the mortgagee selling the property, as they are provided for under s.77(1) Transfer of Land Act 1958. In Duncombe v Porter[7], Dixon CJ observed in relation to the construction of contractual terms:

First and foremost is the general rule which is expressed by Scrutton LJ in Szymonowski & Co v Beck and Co. Scrutton LJ describes it as a principle repeatedly acted upon that if a party wishes to exclude the ordinary consequences that would flow in law from the contract that he is making he must do so in clear terms.

In the same case, Fullagar J described it as a "well-established rule of construction" that:[8]

Rights which exist at common law or by statute are not to be regarded as denied by words of dubious import. Before any such denial is accepted, it must appear with reasonable clarity from the language used that the denial is intended.

66 Applying these principles to the words of clause 4 of the Deed, which make no reference to MBF's obligations under s.77(1) TLA, the clause on its face does not explicitly or unequivocally exclude or curtail the statutory obligations.

67 Indeed, the words actually used can be read consistently with the obligation expressed in s.77(1) TLA. That is to say, the discretion referred to in the words "the method and timing of sale of the security is to be at the absolute discretion of MBF" may be construed as having to be exercised consistently with the obligations of the mortgagee under s.77(1) TLA. Clause 4, interpreted in this way, would sit harmoniously alongside the statutory obligation, and I can see no proper basis for implying into the clause any intention to exclude it.

68 Further, in construing written contracts, the parties to it may be taken to have not intended the terms of their bargain to operate in an unreasonable fashion. Indeed, as Lord Reid put it in L Schuler AG v Wickman Machine Tool Sales Ltd,[9] if the parties did intend an unreasonable result, it is essential that this intention be made "abundantly clear".

69 In my opinion, clause 4 could operate in an unreasonable manner if it was construed free of the statutory protection provided to the mortgagor by s.77(1) TLA. If the clause was to be construed in this way, a method of sale could be capriciously selected by the mortgagee which might result in a sale at a gross undervalue, to the manifest detriment of the mortgagor. Such an outcome would be unreasonable and unjust and would defy "business commonsense".[10]

70 The intention to exclude the operation of s.77(1) TLA by clause 4 of the Deed, is not evidenced sufficiently by the text of the clause and falls well short of the test propounded by Lord Reid in Schuler.

71 The Deed also provided the following by way of a release in favour of MBF:

9.1 In consideration of the covenants and agreements of the parties contained in this deed, Nolan hereby fully and forever releases MBF from all claims, suits, actions and demands which he now has and/or which he might but for the execution of this deed have had and/or may in [sic] future have against MBF arising out of all and any of the acts, facts and circumstances the subject of this deed, the possession proceeding and the method of sale proceeding.

The "possession proceeding" was defined in the deed to mean the Supreme Court proceeding No.7348 of 2000 pursuant to which MBF claimed and was granted an order for possession of the property. The "method of sale proceeding" was defined in the deed to mean the Supreme Court proceeding No.5653 of 2001 pursuant to which Mr Nolan claimed an entitlement, inter alia, to have Lots 2 and 3 in the subdivision of the property sold prior to Lot 1 (the house lot).

72 In Karam v ANZ Banking Group Limited & 1 Ors[11] Santow J summarized the principles applicable to construing releases or purported releases in the following way:

(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.

73 The principles distilled by Santow J in Karam were recently adopted and applied by Einstein J in Shepherds Producers Co-op Ltd (in Liq) v Lamont & Ors[12] with the necessary caveat that: "Naturally however the particular circumstances which arise whenever it becomes necessary to construe a release become of the utmost significance".[13]

74 In this case the particular circumstances of the conduct of the auction of the property by MBF, particularly following the sale of Lot 2, could not have been anticipated by the parties at the time when the Deed was entered into. In these circumstances, I should be slow to infer that Mr Nolan, in executing the Deed, would have intended to surrender rights and claims of which he was unaware and could not have been aware at the time.

75 The release in this case is expressed to apply to all "claims" and the like "arising out of all and any of the acts, facts and circumstances the subject of this deed, the possession proceeding and the method of sale proceeding".

76 The words "arising out of" are not otherwise qualified in the clause. This may be contrasted with cases in which the reach of the release is expanded by use of qualifications in the clause.

77 In IBM Australia Ltd v National Distribution Services Ltd[14] the Court of Appeal of New South Wales considered a clause in a release which provided:

[a]ny controversy or claim arising out of or related to the Agreement or the breach thereof will be settled by arbitration. [Emphasis added].

Kirby P regarded the words "or related to" as extending the meaning of "arising out of".[15] Clarke JA, with whom Handley JA agreed, explained the position in these terms:[16]

The phrases "in relation to" or "related to" are of the widest import and should not, in the absence of compelling reasons to the contrary, be read down: Fountain v Alexander [1982] HCA 16; (1982) 150 CLR 615 at 629; Dowell Australia Ltd v Triden Contractors Pty Ltd [1982] 1 NSWLR 508 at 511 and Ashville Investments Ltd v Elmer Contractors Ltd [1989] QB 488.

78 The words "or connected with" or the even wider phrase, "or in any way connected with", are often added to the words "arising out of" when describing the subject matter intended to be covered by a release. Such words also operate to give an extended meaning to the subject matter said to arise out of the designated class. Similar to the cosanguinous phrase "or related to", these words are of the widest possible import and should not, in the absence of a clear statement to the contrary, be read down.

79 In Elkateb v Lawindi[17] Giles CJ CommD held:

The phrase "in connection with" has on many occasions been said to be of considerable width, satisfied by a link or an association (Commissioner for Superannuation v Miller [1985] FCA 445; (1985) 8 FCR 153) or a relationship (Our Town FM Pty Ltd v Australian Broadcasting Tribunal [No 1] [1987] FCA 301; (1987) 16 FCR 465; Drayton v Martin (1996) 137 ALR 145) and summed-up in the phrase "having to do with": see the same cases and Nanaimo Community Hotel Ltd v Board of Referees [1945] 3 DLR 225. As with the phrase "in relation to", no doubt the context or the purpose may require that the link, association or relationship be of a particular kind, sometimes described as an appropriate or relevant relationship (Perlman v Perlman [1984] HCA 4; (1984) 155 CLR 474; R v Ross-Jones; Ex parte Green [1984] HCA 82; (1984) 156 CLR 185 and O'Grady v Northern Queensland Co Ltd [1990] HCA 16; (1989) 169 CLR 356), but it should not be read down unless there be compelling reason to do so (Fountain v Alexander [1982] HCA 16; (1982) 150 CLR 615).

80 Further, in relation to the expression "in connection with" in Health Insurance Commission v Freeman[18] the Full Federal Court (Von Doussa, Carr and Merkel JJ) held:

The words "in connection with" have been accepted as capable of describing a spectrum of relationships between things, one of which is bound up with or involved in another: see Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280 at 288. However, as was pointed out by Sackville J in Taciak v Commission of Australian Federal Police (1995) 59 FCR 285 at 295, the question that remains in a particular case is what kind of relationship will suffice to establish the connection contemplated by the statute. That requires a "value judgment about the range of the statute": see Pozzolanic (at 289).

81 In this case the release applied to "claims" and the like "arising out of all and any of the acts, facts and circumstances the subject of this deed, the possession proceeding and the method of sale proceeding". [Emphasis added]. Its reach was not expanded by the addition, for example, of further words in common usage in this context such as "or related to", "or in connection with", "or in any way connected with".

82 Although the phrase "arising out of'' may in certain circumstances be of considerable width, in this case the phrase is confined by the subject matter described in the sub-clause, namely "acts, facts and circumstances" which were:

83 The phrase "arising out of" in its textual context is not synonymous with the phrase "having to do with". It is more circumscribed.

84 Clause 4 of the Deed, as I have found, was subject to the mortgagee's obligations under s.77(1) TLA, not by any express reference in the clause, for there was none, but because the clause did not exclude its operation. A future claim pursuant to s.77(1) TLA was therefore not the subject of the Deed. Further, the "acts, facts and circumstances the subject of this deed" did not extend to acts facts and circumstances which might constitute a breach of s.77(1) TLA.

85 The ambit of the release was circumscribed not only by its text, but also by what was specifically in the contemplation of the parties at the time the release was given. The events which occurred on the day of the auction sale, which may have given rise to a breach of s.77(1), were not in the contemplation of the parties at the time of entry into the Deed, nor could they have been anticipated.

86 A future claim pursuant to s.77(1) TLA was not the subject of the possession proceeding or the method of sale proceeding.

87 Properly construed, the release does not bar Mr Nolan's cause of action and he is not estopped from pursuing it.

Duty of the Mortgagee Under S.77(1)

1"> 88 It is well settled that a mortgagee in general is not a trustee as he of she has a substantial beneficial interest in the property. Nor is a mortgagee a trustee in respect of the exercise of the power of sale, whether statutory or conventional, although it has been recognised that the mortgagee becomes a constructive trustee of any surplus purchase money.[19]

89 However, a conflict of views existed as to the duty of a mortgagee in exercising its power of sale. The conflict was clearly articulated by Walsh J in Forsyth v Blundell[20], a case in which, on the facts, it was found by the majority that the mortgagee had acted with calculated indifference to the mortgagor's interests and thereby acted in bad faith. The proceeding concerned the exercise of a power of sale by a mortgagee in respect of property under the Real Property Ordinance 1925-1961 (ACT). Walsh J said:[21]

In the authorities there are to be found conflicting views on the question whether the obligation cast upon the mortgagee is simply that he should act "in good faith" (which means, in my opinion, in the language used in most of the authorities, that he should act without fraud and without wilfully or recklessly sacrificing the interests of the mortgagor) or is an obligation broken also if there is negligence in carrying out the sale. Support for the former view may be found in the statements in Kennedy v de Trafford (1896) 1 Ch 762, at p772 by Lindley LJ and in the same case on appeal (1897) AC 180, at pp184-185, by Lord Herschell, in the adoption of those statements by this Court in Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925, at pp942-943 and in Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676, at pp680, 694, 700 and in the definite opinion expressed by Isaacs J in the latter case (1912) 13 CLR, at p700, that the mortgagee is not answerable for "mere negligence or carelessness". On the other hand, it appears that the view that negligence is enough to make the mortgagee liable to account to the mortgagor for loss arising from a sale is supported, not only by the recent cases of Holohan v Friends Provident and Century Life Office (1966) IR 1 and Cuckmere Brick Co Ltd v Mutual Finance Ltd (1971) Ch 949, but also by the decision of the Privy Council in McHugh v Union Bank of Canada (1913) AC 299.

90 However, in Forsyth, both Walsh J and Mason J who constituted the majority, found it unnecessary to determine the issue in that appeal. Menzies J, on the other hand, although he dissented on the application of the principle to the facts of the case, did venture an opinion with a view to resolving the debate argued before the Court. Menzies J said:[22]

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.

91 The particular text of s.77(1) of the TLA in Victoria, presented an opportunity for the adoption of the broader approach to a mortgagee's duty in the exercise of its power of sale, foreshadowed in the judgment of Menzies J in Forsyth v Blundell. In Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd[23], Lush J provided a more precise analysis of the content of the mortgagee's obligation, observing that:

So far as I am aware, it is only the Victorian Transfer of Land Act 1954 in which a statement of the criteria [sic] appears.

After drawing attention to the division in the authorities as to the duty of a selling mortgagee, Lush J proceeded:[24]

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 should 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 (CLR) p481, and in that of Salmon J in the Cuckmere Brick Co's case, at (Ch) p966. 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 interests first consideration, but also that the reason for the existence of the power is to protect those interests ...

The words of the section do not, as I have said, require the mortgagee to place the interests of others on the same level as his own, but do require that he shall have regard to those interest. The section does not detract from the general law that the mortgagee is entitled to sell at the time of his choice and without waiting for a time which a selling owner might consider more propitious.

92 However, the approach of Lush J in Henry Roach, although recognised and not disagreed with, was not adopted by Murphy J in Goldcel Nominees Pty Ltd v Network Finance Ltd[25]. In that case, his Honour observed:[26]

The High Court in that case [Forsyth] declined to resolve the conflict of opinion as to whether at general law the duty of a mortgagee goes beyond a duty to act in good faith, or includes also an obligation which may be broken if negligence in carrying out the sale is established ...

This important issue could be involved in a consideration of the meaning and application of the words "and having regard to the interests of the mortgagor" in s.77(1) of the Victorian Transfer of Land Act 1958. But in the present case I have not found it necessary to base my decision on such considerations.

93 Resolution of the question was not achieved in Victoria until the Court of Appeal decided Vasiliou v Westpac Banking Corporation[27]. Maxwell P, Neave and Kellam JJA in quoting the passages of Lush J in Henry Roach to which I have referred, stated that these were "the principles under which a mortgagee must act in exercising a power of sale under s.77".[28]

94 Vasiliou also settled the position in Victoria that the mortgagee, in selling a property pursuant to the exercise of the statutory power of sale, is required under s.77(1) to take reasonable steps to obtain the best price consistent with its entitlement to realize its security.[29] As was said by the Court of Appeal in Vasiliou:[30]

Whether advertising is required in such a case depends on the circumstances. The mortgagee is obliged to obtain the best price consistent with its entitlement to realize its security. Whether advertising is a necessary step in the securing of that price will vary from case to case. By itself, the presence, or absence, of advertising will rarely be decisive. What matters is the price obtained. If the price is satisfactory, a failure to advertise will be immaterial. Conversely, if the price is unsatisfactory, as a result of the mortgagee's acts or omissions, the fact that the property was advertised would be unlikely to be an answer to the allegation that the duty under s.77(1) had been breached.

In the present case, the price was satisfactory. The failure to advertise was immaterial.

95 However, the text of s.77(1) TLA does not on its face confine the "interests" of the mortgagor to his interest in obtaining the best price for the property consistent with the mortgagee's entitlement to realize its security. The word is not qualified in any way, a course which was well open to the draftsman had this been the legislative intention.

96 Apart from Tasmania[31], the requirements of s.77(1) TLA differ markedly from those contained in a number of other pieces of legislation in Australia where the duty of a mortgagee in selling mortgaged property is confined to achieving the market value of the property. Section 85(1) Property Law Act 1992 (Qld) defines the mortgagee's obligation as that of taking "reasonable care to ensure that the property is sold at the market value".

97 Section 77(1) is framed more broadly than s.420A Corporations Act 2001 (Cth), which is confined to achieving the best possible price where the mortgagor is a corporation and the mortgagee has taken possession of corporate property, or has appointed a receiver who has undertaken this task. When selling the property, the mortgagee or the appointed receiver on its behalf must comply with the duty in s.420A, which provides:

Controller's**[32]** duty of care in exercising power of sale

(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 price that is reasonably obtainable, having regard to the circumstances existing when the property is sold.

98 On 25 March 2009 the Real Property and Conveyancing Legislation Amendment Bill 2009, was introduced into New South Wales Parliament. The Bill if passed will impose duties on financiers, mortgagees and chargees in exercising a power of sale. By clause 111A of the Bill the Conveyancing Act 1919 (NSW) is proposed to be amended to mirror s.420A Corporations Act 2001.

99 The case law on the meaning of "interests" under s.77(1) TLA, such that it is, does not work to confine the concept. Rather, the indications are that the term has scope for application to a variety of potential interests.

100 The defendant relied on statements of principle such as those contained in Barns v Queensland National Bank Ltd.[33] In this case the jury found that the mortgagee Bank had exercised its power of sale recklessly and without due regard for the interests of the mortgagor owner by selling at an undervalue. Griffith CJ, Barton and O'Connor JJ cited Lindley LJ in the case of Farrar v. Farrar's Ltd as stating the principles to be applied - namely that:

"A mortgagee with a power of sale, though often called a trustee, is in a very different position from a trustee for sale. A mortgagee is under obligations to the mortgagor, but he has rights of his own which he is entitled to exercise adversely to the mortgagor. A trustee for sale has no business to place himself in such a position as to give rise to a conflict of interest and duty. But every mortgage confers upon the mortgagee the right to realize his security and to find a purchaser if he can, and if in the exercise of his power he acts bona fide and takes reasonable precautions to obtain a proper price, the mortgagor has no redress, even although more might have been obtained for the property if the sale had been postponed: Cholmondeley v Clinton 22 Jac & W, 1, 182; Warner v Jacob 320 Ch D 220".

101 However, this passage, an others to similar effect, although undoubtedly correct in their application of the principles to the cases at hand, which invariably involved allegations of breaches of duty arising from a mortgagee's sale of mortgaged property at an undervalue, are not specifically confined to such factual situations. This is illustrated in the passage of the judgment of Griffith CJ, Barton and O'Connor JJ in Barns which immediately followed:

In Kennedy v de Trafford, Lord Herschell LC said: "My Lords, I am myself disposed to think that 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.

102 In Forsyth v Blundell[34], Menzies J held that: "To take reasonable precautions to obtain a proper price is but a part of the duty to act in good faith".

In my opinion s.77 of the Transfer of Land Act formulates the test by which a mortgagee's sale is to be examined and in relation to land to which the Transfer of Land Act applies there is no longer room for disputes as to what the test is. Its application to any given set of facts is another matter. [Emphasis added]

104 In Goldcel, Murphy J adopted an inclusive approach when he said:[36]

In my opinion, for the purposes of the present case, s.77(1) requires that the mortgagee, on selling, must take reasonable steps to ensure that, at the time of sale, he is getting the best price then available for the mortgaged property, and reasonable steps to obtain the best price must be taken, irrespective of the amount of the mortgage debt. The "interests of the mortgagor" must in my opinion include at least his interest to see that the mortgagee takes reasonable steps to get on sale the best possible price available for his property. The mortgagee must have regard to this interest. [Emphasis added]

105 Although an interest in the proceeds of sale is no doubt included in the concept of interest as it is used in the section, the text of s.77(1) contains no words limiting the scope of the word 'interest' in the manner contended for by MBF.

Object and purpose of s.77(1)

1"> 106 I can see nothing in s.77(1) or the Act generally, in the context of its object and purpose, which would lend its aid to the construction contended for by the defendant. Section 35(a) of the Interpretation of Legislation Act 1984 (Vic) provides for a well known principle which is to be applied as an aid to interpretation. It is in the following terms:

35. Principles of and aids to interpretation

In the interpretation of a provision of an Act or subordinate instrument -

(a) a construction that would promote the purpose or object underlying the Act or subordinate instrument (whether or not that purpose or object is expressly stated in the Act or subordinate instrument) shall be preferred to a construction that would not promote that purpose or object.

107 The purpose or object of the Transfer of Land Act 1958 is shortly stated in its preamble to be: "An Act to consolidate the Law relating to the simplification of the Title to and the Dealing with Estates and interests in Land". Nothing contained in this statement assists in advancing the construction contended for by the defendant.

108 Section 77(1) itself is a facilitative provision the purpose of which is to provide a statutory scheme to enable to mortgagee to realize its mortgage security consistently with the terms of the section. The requirement for the mortgagee to exercise good faith in carrying out the statutory process is a reflection of the general law. The requirement that in addition, the mortgagee is to have "regard to the interests of the mortgagor" and other persons, is designed to provide a further measure of protection to the mortgagor on the one hand, and impose a further measure of responsibility on the mortgagee in the exercise of its power. The additional words enabled Lush J in Henry Roach to include the obligation of a mortgagee having to exercise reasonable care to protect the interests of the mortgagee (and others), an approach which has recently attracted the approval of the Court of Appeal in Vasiliou.

109 The section as it is drafted, and as it has been properly interpreted, in my opinion reflects a purpose or object to provide a reasonable measure of protection to a mortgagor, consistently with the right of the mortgagee to realize its security. The provision is designed as a protective counterbalance to the otherwise unfettered power of the mortgagee upon a sale of the mortgaged property.

110 In my opinion, a construction of s.77(1) which ascribes to the word "interests" in the sub-section a meaning which includes the home occupation interest of the mortgagor, is more consistent with the promotion of the purpose or object of the section than not.

111 No reported case on the question of the meaning of the word "interests" in s.77(1) TLA was cited to the Court beyond those cases which dealt with a sale of mortgaged property at an alleged undervalue. However, the lack of reported case law on the issue of whether a mortgagee has any relevant "interest" in his family home situated on mortgaged land, for the purposes of the section, in itself is no answer to the question as to whether it is a relevant "interest". Still less does the fact that the case law on the subject of a mortgagee's obligations under s.77(1) TLA is limited to cases where it is alleged that the mortgagee has sold at an undervalue operate to confine the obligations of a mortgagee under the section only to that circumstance.

112 The novelty of the factual situation and the issue thrown up by that situation is no bar to applying the law in a manner which enables s.77(1) to fulfil its proper function in providing a reasonable measure of protection for the mortgagor, consistently with the mortgagee's right to realize its security.

113 This case must be considered on its own facts and on the proper construction of s.77(1) TLA in the light of those facts.

114 As the mortgagor, Mr Nolan's interests in the property included his right to redeem the MBF mortgage.

115 A mortgagor's right to repay the loan and demand a reconveyance, in the case of general law land, or the discharge of the mortgage, in the case of Torrens land, is the mortgagor's most fundamental right. As Lord Macnaughton said at the beginning of the last century in Noakes & Co. Ltd v Rice:[37]

Redemption is of the very nature and essence of a mortgage, as mortgages are regarded in equity. It is inherent in the thing itself. And it is, I think, as firmly settled now as it ever was in former times that equity will not permit any device or contrivance designed or calculated to prevent or impede redemption. It follows as a necessary consequence that, when the money secured by a mortgage of land is paid off, the land itself and the owner of the land in the use and enjoyment of it must be as free and unfettered to all intents and purposes as if the land had never been made the subject of the security.

116 The mortgagor's right to redeem the mortgage at general law and under the TLA was thoroughly considered by Herring CJ in Re Forrest Trust; Trustees Executors & Agency v Anson.[38] His Honour the Chief Justice said of the nature of the right of redemption: [39]

The essence of redemption would thus seem to be, whether it takes place in or out of Court, the fulfilment by the mortgagor of his obligations under the mortgage, that is to say, payment of the moneys due thereunder, followed by whatever is necessary on the part of the mortgagee to free the land itself and the mortgagor in the use and enjoyment of it, to use the words of Lord Manaughton in Noakes & Co Ltd v Rice (supra).

Herring CJ said of the position under the TLA: [40]

The nature of a mortgage under the Act being what I have described, it necessarily followed that there was inherent in it a right on the part of the mortgagor, upon his fulfilling his obligations under the mortgage. To have the land freed from the mortgage and from all the powers and rights of the mortgagee, which formed a substantial curtailment of the mortgagor's dominion over the land. This is a right to redeem in the sense in which equity understood that term, and the effect of its exercise, by payment off of the money secured by the mortgage, is aptly described in the last sentence of the passage set out above from the judgment of Lord Macnaughton in Noakes & Co. Ltd v Rice (supra).

The proceeding that a mortgagor under the Act can bring against his mortgagee are, I think, the same in essence as that which a mortgagor under the general law can bring against his, viz, proceedings to redeem the mortgage. The right to redeem that is being enforced may not be derived from the same source in each case, nor may the relief required to free "the land itself and the owner of the land in the use and enjoyment of it ... to all intents and purposes as if the land had never been made the subject of the security", to use the words of Lord Macnaughton (in Noakes & Co Ltd v Rice (supra)), be the same in each case, but in each case what equity does is to free the land and the owner in the way described upon the mortgagor fulfilling his obligations under the mortgage. And though what is required for this purpose appears very different in the two cases, viz, a reconveyance in the one case and the discharge of the mortgage in the other, yet the result achieved is substantially the same.

A reconveyance in the one case and a discharge of the mortgage in the other destroy the rights and powers of the mortgagee, and in each case restore to the mortgagor his dominion over the land.

117 Accordingly, the "equity of redemption", which is often said to be vested in a mortgagor under a TLA mortgage, is more accurately described as the mortgagor's "right to redeem", although for practical purposes, the effect of the exercise of the right is the same.

118 The right is partly contractual. In Latec Investments Ltd v Hotel Terrigal Pty Ltd[41], Kitto J noted that, under the Torrens system, the mortgagor had a legal title, not an equity of redemption. The mortgagor remains the proprietor of the fee simple in the land both at law and in equity. He has a contractual right to pay off the debt and have the mortgage removed from the register.[42]

119 The right is also partly founded in equity. Steytler J in Sandgate Corporation Pty Ltd v Ionnou Nominees Pty Ltd[43] said:

... it seems plain that in Australia the expression "right to redemption" has come to comprehend the legal right to have the mortgage discharged as a matter of contractual right if the mortgagee is paid by the due date and also the truly equitable right to "have the land restored" if there is a payment after the due date but before foreclosure.

120 There is another important component of the right which also has its source in equity. After the mortgagee has taken possession of the property following a default, but prior to the exercise of the power of sale, the mortgagor is in a position to restrain the sale by court order provided he pays into court or to the mortgagee the amount of the mortgage debt, or if this is disputed, the amount claimed by the mortgagee to be due for principal, interest, costs and expenses of the sale.[44] As Herring CJ said in Re Forrest Trust:[45]

Express provision might, of course, be made for a contractual right to redeem in the contractual part of a mortgage under the Act and possibly such a right might be said to exist by implication, where repayment took place on the day appointed for payment by the covenant to repay on the mortgagor's part. But after the time fixed for payment has passed, after, in other words, the mortgagor is in default, a right to redeem does undoubtedly exist ...

And it would be to a Court of Equity that a mortgagor would have to turn to recover possession from a mortgagee who had entered into possession, upon default by the mortgagor, in the exercise of the statutory right to take possession conferred upon him by the Act. For this right in the mortgagee would defeat any proceedings at law, based upon the mortgagor's legal title, for the recovery of possession. An equity, for its part, could only come to the assistance of the mortgagor in default upon his fulfilling his obligations under the mortgage. It could not compel the mortgagee to sign and hand over a memorandum of discharge or to deliver up possession except upon payment by the mortgagor of all the money due by him to the mortgagee.

121 Generally speaking, following the exercise of a power of sale, by entry into a binding contract for the sale of the mortgaged property, the mortgagor's right is reduced to an entitlement to the surplus of sale proceeds (if any) after the mortgage has been paid out, subject to any other equities in the surplus. If the proceeds of sale are not sufficient to satisfy the mortgagee's debt, it is open to the mortgagee to sue the mortgagor on the personal covenant for any deficiency. However, upon a binding contract of sale being entered into by the mortgagee, the right of the mortgagor to set aside the sale is strictly limited. Generally, the sale may only be set aside where the purchaser has notice, actual or constructive, of the impropriety of the sale, and where the mortgagor acts promptly.[46] There was no evidence that these pre-conditions for setting aside the sale of Lot 1 arose in favour of Mr Nolan in this case.

122 Accordingly, in this case, the mortgagor Mr Nolan, at least prior to a sale of the land by MBF, could exercise his right of redemption by paying off the debt due to mortgagee and have the mortgage removed from the register. This right existed until the entry into a binding contract of sale by the mortgagee. The statutory power of sale under s.77(1) TLA was effectively exercised by MBF as soon as a binding contract of sale of the mortgaged property arose, which occurred on the day of the auction sale. Prior to this event, by the application of equitable principles, the sale could have been stopped if Mr Nolan paid into court or to the mortgagee the amount of the mortgage debt, or if this was disputed, the amount claimed by the mortgagee to be due for principal, interest, costs and expenses of the sale. On the other hand, upon the sale of Lot 1 on the day of the auction, once a binding contract had been entered into, Mr Nolan's proprietary interest in this part of the property, arising from his ownership of an estate in fee simple, was destroyed. His rights were reduced to an entitlement to the surplus of sale proceeds after the mortgage has been paid out, subject to any other equities in the surplus.

123 However, upon the exercise of the right of redemption, Mr Nolan would have had an unencumbered estate in fee simple in possession, which, as Rich J described in Minister of State for the Army v Dalziel,[47] would give him "the largest possible bundle" of property rights in the land.

The Defendant's Contention as to "Interest" Under s.77(1) TLA

124 The defendant contended that the interest of a mortgagor, grantor or other person protected by s.77(1) TLA is confined to a proprietary interest in the proceeds of sale.

125 The defendant relied in part upon Jarret v Barclays Bank Ltd [48] for the proposition that "possessory" interests in the property are not protected under s.77(1). However, the case does not stand for this proposition and is in any event plainly distinguishable from the present. It did not involve a consideration of the obligations of a mortgagee in the exercise of a power of sale under s.77(1) TLA or any equivalent provision under the law of the United Kingdom.

126 Jarrett concerned a war time provision under the Courts (Emergency Powers) Rules 1943. The Rules provided, inter alia, for an application to be made by a mortgagee for a court order for the sale of the mortgaged property in certain circumstances. Paragraph 3 of the Rules dealt with the position where the mortgagee is uncertain what persons would be affected by the granting of an application for the mortgagee to realize its security. In this context, it was held by Moreton LJ[49] that, assuming that the occupier was a tenant at will or licensee, he would "remain in the same position as against the purchaser" if the property was to be sold pursuant to court order granted under the Rules. Accordingly, the occupier was held not to be a person affected by the application under paragraph 3 of the Rules and was not therefore required to be given notice of the application. It was further held that the occupier, in his capacity as a tenant at will or a bare licensee, had no standing to object to the sale of the freehold - he had no interest in the proceeds of the sale or "whether the property was sold at a high or a low price".[50]

127 It may be readily accepted that a tenant of mortgaged property does not have sufficient interest in the property or the proceeds of sale requiring a mortgagee to have regard to his interests. The interests of a tenant are possessory only. A mortgagee exercising a power of sale is not required to have regard to the interests of a party whose interest in the property is merely possessory.

128 This, however, is not the present case. Mr Nolan held an estate in fee simple, subject to the MBF mortgage and the ANZ mortgage. His possessory rights sprang from his proprietary interest in the land and the terms of his mortgages. His interest was not merely a possessory interest.

129 Accordingly, I do not accept the submission made by the defendant that the interest of a mortgagor, grantor or other person protected by s.77(1) TLA is confined to a proprietary interest in the proceeds of sale. Although an interest in the proceeds of sale is no doubt included in the "bundle of rights" comprised in the concept of interest as it is used in the section, the text of the section contains no words which limit the scope of the word "interest" in the manner contended for by MBF or at all.

130 The "interests" which are the subject of the measure of protection provided to a mortgagor by s.77(1) TLA, comprise a variety of interests in the mortgaged property. Rich J, in Minister of State for the Army v Dalziel[51], said:

Property, in relation to land, is a bundle of rights exercisable with respect to the land. The tenant of an unencumbered estate in fee simple in possession has the largest possible bundle.

131 Gummow J in Yanner v Eaton[52] cited with approval the observations of Finkelstein J in Wily v St George Partnership Banking Ltd [53] that, to Hohfeld,[54] property comprised legal relations not things, and those sets of legal relations need not be absolute or fixed. Hohfeld observed of the concept of "property":[55]

Sometimes it is employed to indicate the physical object to which various legal rights, privileges, etc., relate; then again - with far greater discrimination and accuracy - the word is used to denote the legal interest (or aggregate of legal relations) appertaining to such physical object. Frequently there is a rapid and fallacious shift from the one meaning to the other. At times, also, the term is used in such a 'blended' sense as to convey no definite meaning whatever.

132 Recently in Telstra Corporation Ltd v The Commonwealth[56], in the context of an acquisition of property case, the High Court reaffirmed the "bundle of rights" theory of property, as a legitimate sense in which the word "property" may be used in legal discourse. The Court said:

In many cases, including at least some cases concerning s 51(xxxi) [of the Constitution], it may be helpful to speak of property as a "bundle of rights". At other times it may be more useful to identify property as "a legally endorsed concentration of power over things and resources". Seldom will it be useful to use the word "property" as referring only to the subject-matter of that legally endorsed concentration of power. [Footnotes omitted]

133 Included in the "bundle of rights" the mortgagor had in this case, was his right to occupy the dwelling on the Lot 1 property as his residence. Under the terms of the MBF mortgage, Mr Nolan had a contractual right as the mortgagor to remain in possession of the mortgaged property until possession was granted to the mortgagee following default. Thereafter, he was entitled to remain in occupation with the mortgagee's consent until he was directed to quit the property. Until the property was sold, and while he continued to occupy the land with the permission of the mortgagee, Mr Nolan had all the rights that ownership of an estate in fee simple carried with it, including the full use and enjoyment of the property, within the bounds of the law.

134 Upon discharge of the mortgage, Mr Nolan was entitled to continue in possession by virtue of his interest in the land as owner of an unencumbered estate in fee simple.

135 Mr Nolan's dwelling house was situated on Lot 1. It was an improvement which was affixed to and formed part of the land. The property was situated within a Residential 1 Zone under the Boroondara Planning Scheme. Pursuant to the Scheme, "home occupation" was an as of right use of the land without the need for any planning permit. Mr Nolan under the mortgage and at law was entitled to the use and enjoyment of the dwelling house for home occupation as an incident of his legal interest in the property.

136 Mr Nolan's property interest in Lot 1, and the dwelling house situated upon it, is readily distinguishable from his interest in the two vacant allotments. His interest in Lot 1 included the right to occupy the improvement on this part of the land, which was the dwelling house, and to use and enjoy it as his residence pursuant to his occupancy right, as he was entitled to do in the exercise of his proprietary right and under the Planning Scheme.

137 No such interest existed in relation to the vacant lots which could not be occupied in this way. They could not provide shelter.

138 The distinction between Mr Nolan's occupancy rights in respect of the vacant land, compared with the land which included the dwelling house, was recognised in the MBF mortgage.

139 The occupancy right in this case, as in the usual case, carried with it a number of obligations which arose under the MBF mortgage. For example, the necessity to guard against wear and tear in the fabric of the dwelling house was the source of an obligation to maintain it in accordance with the terms of the TLA and the mortgage. Pursuant to s.75(b) TLA, the mortgagor was subject to an implied covenant that he would "repair and keep in repair all buildings or other improvements which have been or are erected or made upon the mortgaged land". Further, pursuant to the applicable standard form Memorandum of Common Provisions[57] pertaining to the MBF mortgage lodged pursuant to s.91A TLA, Mr Nolan was required to "well and substantially repair and keep in tenantable and good and substantial repair all buildings fences and other improvements which have been erected or made upon the land" [clause 12(1)].

140 Further, under the Memorandum of Common Provisions, Mr Nolan was required to expend moneys specifically in respect of the dwelling house. He was required to insure and keep insured the dwelling house on the land against loss or damage by fire "to the full value thereof" [clause 9(1)(a)]; not do anything which may prejudice, affect or make void or voidable any such insurance [clause 9(3)]; and pay all rates, taxes, sewerage connection charges, levies and outgoings in respect of the land, which would have included services provided to the dwelling house [clause 9(10)]. The services supplied to the dwelling house were electricity (Citipower), gas (Origin), water and sewerage (Yarra Valley Water), and telephone (Telstra).

141 Accordingly, in the course of his occupation of the dwelling house it could be expected that Mr Nolan would have expended money on its maintenance and upkeep in accordance with his obligations to do so. These obligations, although they existed in a technical sense also in relation to the vacant allotments, in a practical sense were likely to have had little or no application to them.

142 Further, Mr Nolan had a significant monetary interest in remaining in occupation of the house lot which would not have arisen in respect of the vacant lots. If Lot 1 was sold, Mr Nolan would have been exposed to incurring the costs and expenses of vacating the house with all the family possessions. He would also have to incur the expense of securing alternative accommodation for himself and his family, either in rented premises, which, more than likely, would have resulted in the payment of a bond and rent, or by the purchase of an alternative dwelling, which would have incurred legal costs, stamp duty, and more than likely a mortgage procuration fee. These expenses would have arisen as a direct consequence of the nature of Mr Nolan's occupation of Lot 1 as a domestic dwelling and were an incident of that occupation.

143 The distinction between an interest in land which includes a residence and an interest in other land, such as vacant land, is recognised in at least one piece of legislation in Victoria, namely the compensation provisions of the Planning and Environment Act 1987 (Vic). Compensation rights may arise under this Act pursuant to s.98, where, for example, land is reserved for a public purpose under a planning scheme.[58] However, s.100 makes provision for increased compensation arising from the consequences of exercising the powers referred to in s.98, in the case where the land affected includes a residence. Section 100 provides:

1. Increased compensation for effect on residence

(1) The amount of compensation payable under section 98 in respect of a residence may be increased by an amount which is reasonable to compensate the claimant for any intangible and non-financial disadvantages arising from the circumstances which gave rise to the claim under section 98.

(2) The amount paid under this section must not exceed 10% of the amount of compensation which would have been payable except for this section.

(3) All relevant circumstances must be taken into account in assessing the amount payable under this section including -

(a) the interest of the claimant in the residence;

(b) the length of time during which the claimant has occupied the residence;

(c) the age of the claimant;

(d) the number, age and circumstances of any other people living with the claimant;

(e) the amount of compensation payable arising from a sale of the residence compared with the value of the land at the date of the sale.

144 Mr Nolan had a home occupation interest in the house lot (Lot 1), over and above his interest in the vacant Lots 2 and 3. This interest may be characterised as: the use and enjoyment of the dwelling house situated on Lot 1 for home occupation as an incident of his legal interest in the property as the owner of the estate in fee simple. His home occupation interest in Lot I remained until the time when his legal interest and his right to redemption were destroyed by the mortgagee upon it entering into a binding contract of sale on the day of the auction, 18 August 2001.

145 Further, this home occupation interest would have been obvious to any objective observer, and was in fact obvious to MBF. Mr Date Snr knew that Mr Nolan wanted to stay in his home with his family, and that he had forcefully expressed this as his interest in the sale process.

146 In approaching the matter in the way I have, no inconsistency arises with the decision of the Court of Appeal in Vasiliou. The test propounded by the Court of Appeal in Vasiliou, when read with the test described by Lush J in Henry Roach, of which it approved, when applied to the case where the duty of a mortgagee is brought into question, but the price obtained is not in issue, may be stated as: in selling a property pursuant to the exercise of the statutory power of sale, the mortgagee is required under s.77(1) to have regard to the interests of the mortgagor, grantor or other persons, in the sense of taking reasonable care to protect the interests of those persons, consistent with its entitlement to realize its security.

147 In this way, the mortgagee will be entitled to exercise its legal right to sell the mortgaged property in aid of its right to repayment of the moneys it is owed. At the same time, a reasonable measure of protection for the legitimate interests of the mortgagor is provided, consistently with the rights of the mortgagee.

148 The test so stated is applicable to the circumstances of this case. The home occupation interest which Mr Nolan had in Lot 1 was an interest to which the mortgagee was compelled to have regard in the exercise of its power of sale pursuant to s.77(1) TLA.

149 The home is an essential life-sustaining refuge. In our society, for most it is also the focus of a life-time's endeavour. When stripped of the reward, the consequences are devastating. Apposite is the analogy of Shylock's plea in Shakespeare's The Merchant of Venice: [59]

You take my house when you do take the prop

That doth sustain my house; you take my life,

When you do take the means whereby I live.

Construction of s. 77(1) TLA in the Light of International Law

150 Having found that Mr Nolan had the home occupation interest in the house lot within the meaning of s.77(1) TLA, an examination of international law relevant to the issue reveals that the construction of the section as I have found it is consistent with international law jurisprudence and the contemporary values reflected in it.

151 Following Mabo v Queensland [No 2] ("Mabo")[60], international law now has an entrenched influence on Australian jurisprudence.

152 In Minister for Foreign Affairs and Trade and Others v Magno and Another[61], Gummow J explained, in relation to the application of international treaties to the interpretation of domestic statutes:[62]

... the Parliament may make no attempt to incorporate expressly into domestic law the terms of a convention which has been ratified by Australia. Nevertheless, the terms of the convention may be resorted to in order to help resolve an ambiguity in domestic primary or subordinate legislation: Infabrics Ltd v Jaytex Ltd [1982] AC 1 at 16; R v Home Secretary: Ex Parte Brind [1991] UKHL 4; [1991] 1 AC 696 at 747-8, 749-50, 760; Dietrich v R, supra, at 391-3, 425-6. This is on the footing that, prima facie, the Parliament should be taken as intending to legislate in conformity and not in conflict with international law: Zachariassen v Commonwealth [1917] HCA 77; (1917) 24 CLR 166 at 181 Polites v Commonwealth [1945] HCA 3; (1945) 70 CLR 60 at 68-9, 77, 80-1.

153 In Royal Women's Hospital v Medical Practitioners Board of Victoria[63] the President of the Court of Appeal in Victoria, Maxwell P was definitive in endorsing the application of international law to domestic law when he said:[64]

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.

154 At my invitation, the parties addressed on the international law relating to the right to protection of a person's home from arbitrary interference, and its use in aid of the construction of s.77(1) TLA.

155 The Universal Declaration of Human Rights (the "UDHR") was adopted by the United Nations General Assembly on 10 December 1948. Australia was one of the nations which voted in favour of the Declaration. Article 12 of the UDHR provides:

Article 12

No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks. [Emphasis added]

In the preamble to the UDHR, governments commit themselves and their peoples to measures to secure the universal and effective recognition and observance of the human rights set out in the Declaration. While not itself a treaty, the UDHR was adopted for the specific purpose of defining the meaning of the words "fundamental freedoms" and "human rights" which appear in the United Nations Charter, which is binding on all member states, including Australia. For this reason, the UDHR is regarded as a fundamental constitutive document of the United Nations. Further, the UDHR provided the foundation for the two critical human rights covenants which followed, namely the International Covenant on Civil and Political Rights (the 'ICCPR')[65] and its sister convention, the International Covenant on Economic, Social and Cultural Rights.[66] Together, these instruments constitute the core of United Nations human rights law.

156 The ICCPR was adopted by the General Assembly of the United Nations in 1966 and entered into force on 23 March 1976. Australia ratified the treaty with effect from 13 November 1980.[67] On 6 November 1984 Australia deposited the following declaration in relation to the ICCPR with the Secretary-General of the United Nations:

Australia has a federal constitutional system in which legislative, executive and judicial powers are shared or distributed between the Commonwealth and the constituent States. The implementation of the treaty throughout Australia will be effected by the Commonwealth, State and Territory authorities having regard to their respective constitutional powers and arrangements concerning their exercise.

The First Optional Protocol to the ICCPR was adopted on 16 December 1966, at the same time as the Covenant itself. The Optional Protocol entered into force on 23 March 1976. By ratifying or acceding to the First Optional Protocol, a State party recognises the competence of the Human Rights Committee of the United Nations to receive and consider communications from individuals alleging that that State has violated provisions of the ICCPR. Australia acceded to the Optional Protocol on 25 September 1991 and it came into force for this country three months later. Thus, since 25 December 1991 Australia has recognised the competence of the Human Rights Committee to consider communications from individuals subject to Australia's jurisdiction concerning violations of rights contained in the ICCPR.

157 In Mabo Brennan J (with whom Mason CJ and McHugh J agreed) said that it was inevitable, following Australia's ratification of the ICCPR, and specifically of the First Optional Protocol, that the powerful force of human rights law, endorsed by a ratified international treaty, would bring its influence to bear on the judicial exposition of Australian law. Brennan J said:[68]

The opening up of international remedies to individuals pursuant to Australia's accession to the [First] Optional Protocol to the ICCPR brings to bear on the common law the powerful influence of the covenant and the international standards it imports. The common law does not necessarily conform with international law, but international law is a legitimate and important influence on the development of the common law, especially when international law declares the existence of universal human rights.

No one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence, nor to unlawful attacks on his honour and reputation. [Emphasis added]

159 A treaty in force is binding on the parties to it.[69] Private actors, not being parties to the ICCPR are not bound by it.

160 Nevertheless, provisions of the ICCPR define legal obligations of state parties toward natural persons as rights-holders under the Covenant. Article 2 of the ICCPR is signally important in this respect. It provides:

1. Each State Party to the present Covenant undertakes to respect and to ensure to all individuals within its territory and subject to its jurisdiction the rights recognized in the present Covenant, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.
2. Where not already provided for by existing legislative or other measures, each State Party to the present Covenant undertakes to take the necessary steps, in accordance with its constitutional processes and with the provisions of the present Covenant, to adopt such legislative or other measures as may be necessary to give effect to the rights recognized in the present Covenant.

3. Each State Party to the present Covenant undertakes:

(a) To ensure that any person whose rights or freedoms as herein recognized are violated shall have an effective remedy, notwithstanding that the violation has been committed by persons acting in an official capacity;

(b) To ensure that any person claiming such a remedy shall have his right thereto determined by competent judicial, administrative or legislative authorities, or by any other competent authority provided for by the legal system of the State, and to develop the possibilities of judicial remedy;

(c) To ensure that the competent authorities shall enforce such remedies when granted.

161 Further, the Human Rights Committee of the United Nations (the "Human Rights Committee") has stated that the right to privacy imposes some positive obligations on the state:[70]

[Article 17 rights are] required to be guaranteed against all interferences and attacks whether they emanate from State authorities or from natural persons ...

States are under an obligation to provide adequate legislation to that end. Provision must also be made for everyone to be able to protect himself against any unlawful attacks that do occur and to have an effective remedy against those responsible.

162 The case law of the European Court of Human Rights ("the Strasbourg Court") is also instructive on the positive obligations of state parties to take measures to enable the full enjoyment of the human rights under international human rights conventions. A state party to the European Convention on Human Rights (the "ECHR") which fails to protect its citizens from human rights violations perpetrated by private actors, may find itself in breach of the ECHR. As such, what may have been seen as the classical function of human rights law to act as a protective shield against state intrusion, has been extended. The European Court of Human Rights has held that there may be occasions when a state party has a duty to take certain measures which are directed at private persons to ensure that a convention human right is effectively protected.

163 X and Y v Netherlands[71] was such a case. There the Strasbourg Court found a violation of the right to privacy when a procedural defect in the law prevented the initiation of criminal proceedings in relation to the sexual abuse of a young woman with a disability. The Court stated that "[e]ffective deterrence is indispensable in this area and it can be achieved only by criminal-law provisions; indeed, it is by such provisions that the matter is normally regulated".[72]

164 X and Y v Netherlands was approved in Moldovan and Others v Romania[73], where the Strasbourg Court observed:[74]

The Court has consistently held that, although the object of Article 8 is essentially that of protecting the individual against arbitrary interference by public authorities, it does not merely compel the State to abstain from such interference. There may, in addition to this primary negative undertaking, be positive obligations inherent in an effective respect for private or family life and the home. These obligations may involve the adoption of measures designed to secure respect for these rights even in the sphere of relations between individuals between themselves (see X and Y v Netherlands, judgment of 26 March 1985 at [23]).

165 Accordingly, the fact that the alleged violation of the fundamental human right to protection against arbitrary interference with a person's home in this case was not perpetrated by an agency of state, was no bar to ensuring that the right is adequately protected in domestic legislation from infringing conduct on the part of private actors.

166 The jurisprudence of the ECHR is also instructive as to the implementation of human rights in the context of domestic legislation designed to regulate property rights between private individuals. Article 8 seeks to protect the three classic areas of personal autonomy - private and family life, the home, and personal correspondence. The Article provides:

Article 8 - Right to respect for private and family life

Everyone has the right to respect for his private and family life, his home and his correspondence.

There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others. [Emphasis added]

167 It is to be noted that Article 8(1) does not afford a right to be provided with a home..[75] However, the Article has been held by the Court to have been breached in a case where it was determined that the relevant domestic law provided inadequate procedural safeguards resulting in the eviction of a tenant from his home (Furlepa v Poland[76]; McCann v United Kingdom[77]). The principle was also applied in Cosic v Croatia.[78] In this case the Court reasoned that:[79]

In this connection the Court reiterates that the loss of one's home is a most extreme form of interference with the right to respect for the home. Any person at risk of an interference of this magnitude should in principle be able to have the opportunity to have the proportionality and reasonableness of the measure determined by an independent tribunal in the light of the relevant principles under Article 8 of the Convention, notwithstanding that, under domestic law, his or her right of occupation has come to an end (see McCann v United Kingdom, no. 19009/04, para. 50, 13 May 2008).

168 In the international law instruments to which I have referred, the right to protection afforded to a person's home is provided where the interference is either "unlawful" or "arbitrary". It is clear that conduct may be lawful in the sense of being in conformity with the domestic law, but still be arbitrary and thus contrary to the conventions and the Charter: Saadi v United Kingdom.[80]

169 The Human Rights Committee in Hugo van Alphen v The Netherlands,[81] considered the complaint of a Dutch solicitor that he was the victim of a violation by the Netherlands of a number of articles of the ICCPR which included Article 9(1) (providing for protection against arbitrary arrest or detention). The Committee said as to the concept of "arbitrariness":[82]

The drafting history of article 9, paragraph 1, confirms that "arbitrariness" is not to be equated with "against the law", but must be interpreted more broadly to include elements of inappropriateness, injustice and lack of predictability. This means that remand in custody pursuant to lawful arrest must not only be lawful but reasonable in all the circumstances.

This formulation is not dissimilar to the Oxford Dictionary definition of "arbitrary" which gives it the meaning: "based on or derived from uniformed opinion or random choice; capricious; despotic".[83]

170 The Charter of Human Rights and Responsibilities Act 2006 (Vic) (the "Charter") contains a provision which effectively mirrors Article 17(1) of the ICCPR. The Charter, by s.13(a) provides:

A person has the right -

(a) not to have his or her privacy, family, home or correspondence unlawfully or arbitrarily interfered with; and ... [Emphasis added]

171 The right to protection from arbitrary interference with a person's home provided for in s.13(a) is set out in Part 2 of the Charter. Pursuant to s.7(1): "This part sets out the human rights that Parliament specifically seeks to protect and promote".

172 Section 32 makes provision for use of the Charter and international law in the interpretation of statutory provisions. Insofar as use of the Charter in this manner is concerned, s.32(1) is expressed in mandatory terms. It provides:

(1) So far as it is possible to do so consistently with their purpose, all statutory provisions must be interpreted in a way that is compatible with human rights.

Subsection 32(2) also makes provision for the application of international law to statutory interpretation, although this provision is not expressed in mandatory terms. It provides:

(2) International law and the judgments of domestic, foreign and international courts and tribunals relevant to a human right may be considered in interpreting a statutory provision.

173 Further, s.1(2) of the Charter provides for the main defined purposes of the Charter. These include the purpose provided for under s.1(2)(b) being to protect and promote human rights by -

(b) ensuring that all statutory provisions, whenever enacted, are interpreted so far as is possible in a way that is compatible with human rights. [Emphasis added].

174 However, a question arises as to the applicability of the Charter to the present proceedings. Section 49 of the Charter provides:

Transitional provisions

(1) This Charter extends and applies to all Acts, whether passed before or after the commencement of Part 2, and to all subordinate instruments, whether made before or after that commencement.

(2) This Charter does not affect any proceedings commenced or concluded before the commencement of Part 2.

(3) Division 4 of Part 3 does not apply to any act or decision made by a public authority before the commencement of that Division.

175 Section 32 of the Charter commenced on 1 January 2008, and s.1(2)(b) and s.13 commenced on 1 January 2007. The proceeding before this Court was commenced by writ issued on 7 March 2007.

176 The Charter was not in operation at the time MBF made its decision to sell Lot 1 at the auction sale conducted on 18 August 2001. Consequently, as at that time, s.77(1) TLA could not be interpreted in the light of the Charter and could not bear any different meaning to that which it would otherwise bear, by reason of the Charter provisions. To ignore this impediment, would in effect give the Charter a retrospective operation which it was not intended to have: State of Victoria v Turner.[84]

177 Consequently, even though today the Court is bound to interpret all State legislation, including s.77(1) TLA, in a way that is compatible with human rights, I do not find that MBF was in breach of any duty to the mortgagor in this case by reason that s.77(1) TLA, if construed in the manner now contemplated by s.32(1) of the Charter, gives rise to this result.

178 Nevertheless, the provisions of the Charter to which I have referred reinforce the currency of the contemporary values and the jurisprudential context in which the construction of s.77(1) TLA may be undertaken. The construction of the section as I have found it, is consistent with these provisions of the Charter and the contemporary values reflected in it.

Protection of the Home - a Fundamental Human Right - "Principle of Legality"

179 The right to protection of a person's home from arbitrary interference is reflected in all of the major international human rights instruments to which I have referred and the Victorian Charter. It is unequivocally a fundamental human right.

180 As such, it enlivens the "principle of legality". Gleeson CJ has referred to the principle in a number of landmark cases. In Al-Kateb v Godwin[85] his Honour said:

In exercising their judicial function, courts seek to give effect to the will of Parliament by declaring the meaning of what Parliament has enacted. Courts do not impute to the legislature an intention to abrogate or curtail certain human rights or freedoms (of which personal liberty is the most basic) unless such an intention is clearly manifested by unambiguous language, which indicates that the legislature has directed its attention to the rights or freedoms in question, and has consciously decided upon abrogation or curtailment. That principle has been re-affirmed by this Court in recent cases. It is not new. In 1908, in this Court, O'Connor J referred to a passage from the fourth edition of Maxwell on Statutes which stated that "[i]t is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law, without expressing its intention with irresistible clearness".

... It is the working hypothesis of a liberal democracy.[86] [Footnotes omitted]

181 Gleeson CJ explained the rationale for the principle of legality in observations made in Electrolux Home Products Pty Ltd v Australian Workers Union[87]. His Honour said:

The joint judgment in Coco[88]went on to identify as the rationale for the presumption against modification or abrogation of fundamental rights an assumption that it is highly improbable that Parliament would "overthrow fundamental principles, infringe rights, or depart from the general system of law" without expressing its intention with "irresistible clearness".[89] In R v Home Secretary; Ex parte Pierson,[90] Lord Steyn described the presumption as an aspect of the principle of legality which governs the relations between Parliament, the executive and the courts. The presumption is not merely a common sense guide to what a Parliament in a liberal democracy is likely to have intended; it is a working hypothesis, the existence of which is known both to Parliament and the courts, upon which statutory language will be interpreted. The hypothesis is an aspect of the rule of law.

182 In R v Home Secretary; Ex parte Simms[91] Lord Hoffman said, in a passage which was subsequently quoted with approval by Gleeson CJ[92] and by Kirby J:[93]

The principle of legality means that Parliament must squarely confront what it is doing and accept the political costs. Fundamental rights cannot be overridden by general or ambiguous words. This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process. In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual. In this way the courts of the United Kingdom, though acknowledging the sovereignty of Parliament, apply principles of constitutionality little different from those which exist in countries where the power of the legislature is expressly limited by a constitutional document.

183 In the case at hand, applying the principle of legality necessarily involves construing the general word "interests" as it appears in s.77(1) TLA in a manner which does not curtail the fundamental human right of protection of a person's home from arbitrary interference.

184 To approach the matter otherwise, would result in an unintended curtailment of the right. In circumstances where the mortgagee is presented with a clear choice as to whether to proceed with the sale of the mortgagee's home or some other property to realize its debt, if the mortgagor was to have no relevant "interest" in his home within the meaning of s.77(1) TLA, the way would be opened for the mortgagor to act in an arbitrary manner in making its choice. Such a construction of the section would render the fundamental human right ineffective in this circumstance. It would have no sphere of operation in the context of a mortgagee's sale in Victoria. An adverse consequence of this kind is not intended by the legislation.

185 Shortly prior to the auction sale, MBF sought the advice of Mr Archibald QC as to which mode of sale should be proceeded with. This occurred prior to 14 August 2001.

187 MBF was advised that a mortgagee could only sell sufficient lots in a multi-lot subdivision to satisfy the mortgage debt, interest and costs.

188 In July 2001 Mr Nolan engaged his solicitor at Nicholas & O'Donohue, Mr Frank Lynch to make representations on his behalf to the solicitors for MBF. Mr Lynch was a principal of his firm and a very experienced property lawyer. He was, for some years, the Chairman of the property law section of the Law Institute of Victoria.

189 Mr Lynch first spoke with Mr Macnish on about 12 July 2001 by telephone. He inquired as to why MBF "were deciding to sell more property they needed in order to obtain the payment that was due under the mortgage" (sic).

190 On 16 July 2001 Mr Lynch wrote to MBF's solicitor, Mr Macnish. He said:

The preferred position of Damien Nolan is that the vacant lots be put to auction first as it is anticipated that the sales of those lots will be sufficient to pay out MBF Investments P/L (and ANZ). You advise that you have an opinion from an independent agent that a better price will be achieved if the house lot was put to auction first (your letter 5/7). That advice is inconsistent with the advice the mortgagor has from other independent agents.

It is my opinion that you should re-engage the valuer who provided your original valuation for the mortgage purposes, to determine the position.

The common sense practical view, supported by Counsel, is that the vacant lots must be put to auction first. It is common ground that the sales of the vacant lots will realize sufficient funds to pay out your mortgagee. That is therefore the course you are bound to follow as it is the preferred course of the mortgagor to whom you owe a duty. As advised, this view is shared by our independent agents. That is the process of sale which must be followed by the mortgagee and, as is usual, the subsequent encumbrancers would be notified of that proposed procedure, including Mr GM Collie caveator.

191 Prior to the auction sale, on 18 August 2001 Mr Lynch continued to press this position on Mr Macnish and MBF.

192 Mr John Arthur had been a friend of Mr Nolan's over many years. He was a businessman in the field of public finance and was a corporate treasurer of a number of Australian public companies. In late 2000, Mr Nolan approached Mr Arthur with a view to him negotiating a reasonable settlement with MBF of the issues surrounding its mortgage and the Kew property.

193 In early June of 2001 Mr Arthur met with Sister Anne Dalton, the Provincial of the Good Shepherd Nuns who controlled MBF. Mr Arthur advised Sister Dalton that with proper due process the sale of the property would realise sufficient funds to repay the debt to MBF and also achieve a just outcome to the Nolan family by enabling them to remain in possession and occupation of their home. Sister Dalton said that she would discuss the matter with Mr Date Snr.

194 Following this representation, Mr Arthur made a further approach to Sister Dalton when he heard that Mr Nolan and his family were about to be evicted from their home pleading with her over the telephone on Mr Nolan's behalf that in the context it was not Christian to proceed with the eviction. Sister Dalton was apologetic, but said that she had discussed the matter with Mr Date Snr, and it was now in the hands of solicitors and she could not provide any more assistance.

195 Mr Arthur also assisted Mr Nolan to advance the subdivision. He provided the $50,000 bank guarantee referred to in the Deed relating to the subdivision, and was a party to that Deed.

196 The advice MBF received from its real estate agents at all times was limited to achieving the maximum sale price on the day of the auction sale. Mr Macnish said in cross-examination:

So - they can only give you advice as to how to achieve the maximum price?---Yes. Well, that was what ... they were being asked for.

197 Further, it could only be expected that the advice of real estate agents would necessarily be limited to obtaining the best price for the land to be sold. In the first place, such advice fell squarely within the expertise of real estate agents. In the second place, it is in the economic interests of real estate agents to achieve the maximum price, an outcome which is directly reflected in the commission which they charge for their services. In this regard, Mr Jenkins of Collins Simms, Real Estate, the conjunctional agents engaged by MBF, said in cross-examination:

Your concern was in marketing, and your interest was marketing the property as effectively as possible, selling all of the lots if possible?---Yes.---and generating as much commission as possible. There's no criticism there. That was your objective?---Yes, and also trying to ensure that the value in the exclusive auction authority was met.

198 By 5 July 2001, MBF had set the time and date for the auction sale at 3 pm, Saturday 18 August 2001. MBF engaged J E Date & Associates (Property Services) Pty Ltd ("J E Date & Associates") and Collins Simms Pty Ltd ("Collins Simms ") to act jointly as its real estate agents to conduct the auction sale of the property. Mr Date Snr's son, Mr John Date Jnr, was the principal of J E Date & Associates. Mr Bob Budden, together with Mr Date Jnr on behalf of J E Date & Associates, and Mr Richard Jenkins on behalf of Collins Simms, were the persons principally involved in the sale of the property, Both companies were reputable real estate agents.

199 Mr Nolan continued to press his position with MBF. On 12 July 2001 Mr Frank Lynch, solicitor and principal of the firm Nicholas O'Donohue & Co, sent a facsimile letter on behalf of his client, Mr Nolan, to Mr Macnish who continued to act for MBF. Mr Lynch said in his facsimile letter:

The preferred position of Damian Nolan is that the vacant lots be put to auction first as it is anticipated that the sales of those lots will be sufficient to pay out MBF Investments P/L (and ANZ). You advise that you have an opinion from an independent agent that a better price will be achieved if the house lot was put to auction first (your letter 5/7). That advice is inconsistent with the advice the mortgagor has from other independent agents.

It is my opinion that you should re-engage the valuer who provided your original valuation for mortgage purposes, to determine the position.

The common sense practical view, supported by Counsel, is that the vacant lots must be put to auction first. It is common ground that the sales of the vacant lots will realize sufficient funds to pay out your mortgagee. That is therefore the course you are bound to follow as it is the preferred course of the mortgagor to whom you owe a duty. As advised, this view is shared by our independent agents.

200 Later in the day on 12 July Mr Lynch sent a further letter by facsimile to Mr John Chamberlain of Cornwall Stodart, who also acted as a solicitor for MBF. Mr Lynch said in the letter:

I am convinced that the only course which should be adopted by the mortgagee is to sell the two vacant lots. These sales will provide sufficient funds to pay out MBF Investments P/L.

There is no need for the mortgagee to sell the house lot, so that lot should not be put to sale. To do so, would be a travesty, counter to the interests of the mortgagor. To do so would add a layer of expense (for needless preparation of a property for sale) [sic which is] not justified.

Richard Jellis is a well known and respected agent operating in the area. I asked him to provide me with his opinion. A copy letter from Mr Jellis is attached for your information.

201 The facsimile letter provided to Cornwall Stodart by Mr Lynch on 12 July enclosed the letter from Mr Jellis referred to. That letter relevantly said:

We believe Lot 2 (cnr Walmer and Raven Streets) is the most valuable of the three lots and as such, should be offered first in order to set a benchmark for the sale of the raven Street block and possibly then, the Walmer Street house.

Land sales in Kew this year have been recorded at $90-$98 perm square foot and there is a strong possibility that lot 2, because of its corner situation, northerly aspect, parkland and city views could realise $100/$110 per square foot.

When Mr Jellis's estimates are applied to the actual area of Lot 2, his values fell within the range of $876,000 to $954,000.

202 Following a meeting conducted on 16 July 2001, MBF received written advice from three real estate agents.

203 The first letter was dated 19 July 2001 from Richard Jenkins of Collins Simms. It stated:

Further to the Cornwall Stodart request at yesterday's meeting we submit the following market driven advice:

Established home, potential to refurbish or new home site. Do not impose any conditions or rights for the purchase of Lot 1 to have first right on purchase of Lot 2.

Prime site of the three lots which would appeal to the buyer of Lot 1 as an existing established garden with swimming pool. Has high appeal as an attractive corner new home site to a wider range of prospects.

New home site which could add value to Lot 1 or Lot 2 to provide more land either in its present form as a tennis court or to enhance

On the analysis of Mr Jenkins, the sales of allotments 2 and 3 would achieve an estimated sale price of between $1,450,000 to $1,610,000.

204 The second letter was from Mr Budden of J E Date to Mr John Bongiorno dated 20 July 2001. It read:

Richard Jenkins has provided a copy of the enclosed advice to us for comment.

Whilst both agents are being asked to give advice on the order of sale solely in relation to marketing, we are also mindful of the mortgagee's responsibilities in the matter. Since we cannot guarantee that the sale of Lots 2 and 3 will cover the first mortgagee's debt and expenses, we do not favour a campaign which does not include the house lot. In today's market conditions however we are very confident that the sale of Lots 1 and 2 will cover all of our client's costs.

On balance, we believe that Lot 2 should be offered before Lot 1, but this is a marginal issue and we would not oppose a sale in the alternate order. Discussions with potential buyers during the campaign may well lead to both agents having a firmer point of view prior to the auction.

Our recommendation is therefore that we offer Lots 1 and 2 for sale, with the order of sale to be determined, say, one week before the auction date. Whether Lot 3 is to be included is obviously a matter for Cornwall Stodart to determine in consultation with the second mortgagee and other parties involved with the property.

Would you please let me know if you require clarification on any point?

205 The third letter was written by Mr Bongiorno to Mr Macnish dated 24 July 2001. It read:

Further to our meeting at your offices on Wednesday 16 July 2001 with:- yourself, John Hutchins and John Chamberlain - Cornwall Stodart: Richard Jenkins and Peter Mitchell - Collins Simms: John Date and Bob Budden- JE Date & Associates and myself I submit the following in relation to the proposed auction of lots 1, 2 and 3 at the above address.

• No definite order of auction be set at the moment
• The selling agents (as best possible) record the interest of each and every enquiry into categories being lot 1, lot 2 and lot 3
• We meet at your offices on Thursday 16 August to review and "possibly" set the auction order
• I believe FLEXIBILITY is needed to be fair to all parties involved to achieve the sale of each lot for the highest and best possible price
• I will inspect the house on Wednesday the 25th July 2001 at the open for inspection
• I would like to receive a copy of the advertising schedule at your convenience.

In the meantime if you have any queries please do not hesitate to contact me.

Availablity of the "Rhoden Loan" to Mr Nolan at the Date of the Auction

206 Mr Phillip Rhoden is a solicitor and was until 2008 principal of Rhodens Solicitors. Mr Rhoden was also a Director of Rhodens Law Mortgages Ltd. - a company which lent money out on first mortgages of real estate to clients of his firm.

207 In early 2001 Mr Nolan telephoned Mr Rhoden to inquire as to whether there were funds available for him to borrow. Mr Rhoden inspected the property, being Lot 1, which was being proposed as a first mortgage security in favour of Rhodens Law Mortgages Ltd to support the proposed loan.

208 On 19 April 2001 Mr Rhoden sent a letter of offer of finance to Mr Nolan (the "Rhoden Loan"). This was in the form of an offer of a loan of up to $450,000.00 or 66% of the valuation of the property, whichever was the lesser.

209 The loan offer was on terms, which included: a 2 year term from the date of drawdown; security by way of a first mortgage over Lot 1; a rate of interest fixed at 7.50% per annum for 2 years (with a default interest rate set at 12.5% per annum); a prohibition on the making of repayments of principal during the term of the loan; payment of a 5% collection fee on the interest payable each quarter and the valuation fee; payment of an application fee of 1% of the sum borrowed; and, payment of the mortgagee's legal fees and disbursements.

210 Notably, the loan offer was made conditional upon a number of factors. The first of these was a valuation report being obtained by the mortgagee from a registered valuer. Second, that in the event that the borrower was a company, the loan was also conditional upon the provision of "any accounting and financial statements ... for the company's latest financial year". However, there was no provision in the loan offer for the borrower, Mr Nolan, to provide any financial statements to the proposed mortgagee prior to taking up the loan.

211 As to this, I accept the evidence of Mr Rhoden when he said that the capacity of a prospective borrower to service a loan provided by his company was of only limited relevance to his decision to advance funds. As he said: "We were equity lenders, not gap lenders based on income. Unlike banks". Mr Rhoden made no enquiry of Mr Nolan as to his capacity to service the loan, and had not made this a condition of the grant of the loan in his letter of offer to Mr Nolan.

212 Mr Rhoden did not know that the property was then under judicial control, requiring an order of the Court for it to be re- mortgaged. However, I am satisfied that this would not have proven an impediment to the loan proceeding in a practical sense. The sales of Lots 2 and 3, had they occurred in a manner which left Lot 1 in the hands of Mr Nolan, would have resulted, as I have found, in the first and second mortgages being discharged at settlement of the sales on 15 November 2001. Given that the purpose of the Rhoden loan, if taken up by Mr Nolan, would have been to discharge his only remaining liability, being the debt to Mr Collie, the high probability is that the order made by Warren J of 9 March 2001 would have been varied to accommodate such a transaction, or discharged altogether.

213 I am satisfied that the Rhodens loan offer was a genuine commercial offer. It remained open for acceptance by Mr Nolan at least at the date of the auction on 18 August 2001.

214 I am satisfied that, had Lot 1 been available to Mr Nolan as an unencumbered property shortly after 15 November 2001, as I have found it would have been after Lots 2 and 3 had been sold and settled, Mr Nolan had available to him up to $450,000 by way of a loan facility to draw upon on and after that date. I am further satisfied that Mr Nolan would have taken up the Rhoden loan in order to pay out Mr Collie, to its limit of $450,000, if that was needed.

215 Mr Nolan estimated that, if only Lots 2 and 3 had been sold, after payment out of the MBF Mortgage and the ANZ Mortgage, a cash surplus of $112,379.41 would have been achieved in his favour. On Mr Nolan's calculation in order to pay out Mr Collie, he would have had to take up only $198,503.55 of the Rhoden loan. On the other hand, it was put to Mr Nolan in cross-examination that if some of the funds in his calculation were not available to him at 15 November 2001, he would need to have borrowed more than this sum, namely about $420,000 or more. For reasons which will become apparent, at this point in the trial, it is unnecessary for me to resolve the issue as to precisely how much Mr Nolan would have had to borrow to pay out Mr Collie.

216 I accept the evidence given by Mr Nolan that, following the auction sale he incurred and paid the following:

(a) $288,600 in rental costs of an alternative dwelling at the rate of $750 per week for 7.4 years;

(c) $101,250 in costs arising from the acquisition of a new dwelling house, which included: stamp duty and legal costs on the acquisition;

(d) repairs and maintenance of $37,000 at the rate of $5000 per annum for 7.4 years, incurred in respect of the rented dwelling house;

(e) rates of $37,000 at the rate of $5000 per annum for 7.4 years, incurred in respect of rented dwelling house; and

(f) mortgage payments on the new dwelling house totalling $39,000 at the rate of $13,000 per annum for 3 years.

Mr Nolan said in his evidence that these particulars were true and he was not cross-examined on the matters.

217 I find that, as at 15 November 2001, Mr Nolan would have had adequate equity in Lot 1, upon discharge of the MBF and ANZ mortgages, to provide a first mortgage security for a loan sufficient to pay out what was due Mr Collie, when combined with the cash surplus of $112,379.41 achieved from the sales of Lots 2 and 3. I find further that, based upon Mr Nolan's proven capacity to subsequently pay rent at the rate of $750 per week from 15 November 2001, he was likely to have been in a position to meet the interest payments to service such a loan. I further find that, in these circumstances, in all likelihood, Mr Collie's debt would have been repaid by Mr Nolan in full on or about 15 November 2001.

218 Given Mr Nolan's capacity meet the expenses on an ongoing basis which I have found, including the payment of rent and payments to service a mortgage to assist in the purchase of another dwelling, had Lot 1 been available to secure an alternative first mortgage loan facility such as that on offer from Mr Rhoden, I find that at the conclusion of the 2 year period of the Rhoden loan and thereafter to the day of judgment, it was likely that a loan on similar terms would have been available to Mr Nolan. However, I am not in a position to determine precisely what those terms including interest rates, which may have been applicable from time to time, would have been.

219 In arriving at these conclusions, I have taken into account an alternative source of funds available to Mr Nolan through Mr Frank Lynch. Mr Lynch, was a principal of the firm Nicholas & O'Donohue and also a director of Australian Securities Limited - a company associated with his firm, and which conducted a mortgage lending business. I accept the evidence of Mr Lynch when he said that had Mr Nolan approached him to borrow some $300,000 in late 2001, secured by first mortgage over Lot 1, he would have been prepared to approve this advance. Mr Lynch did not place an upper limit on funds which he would have been prepared to advance to Mr Nolan.

220 By 27 July MBF had estimated the payout figure required to discharge its loan under the first mortgage. The estimate, as reflected in a facsimile letter from Mr Macnish to Mr Lynch date 27 July 2001, was as follows:

Assuming settlement of the sales of the secured property or some portion of it) occurs on or about 18 November 2001 (that is 90 days after auction date) the amount then payable to MBF under its mortgage will be approximately as follows:

• Principal at 1 July 2001 $1,212,102.40
• Further interest on principal from

• Advertising $ 14,000.00
• Rate arrears $ 14,500.00
• Estimated further legal fees and

221 By 27 July 2001 MBF had determined that it would be in the best position to predict the likely sale prices to be achieved for each of the three allotments, and the most advantageous order of sale for the three lots, during the week leading up to the proposed mortgagee's auction.

222 On 14 August 2001 MBF's real estate agents, J E Date & Associates and Collins Simms provided joint advice in a report to Mr Macnish in relation to the forthcoming auction sale. The report was co-signed by Mr Budden on behalf of J E Date & Associates and by Mr Jenkins on behalf of Collins Simms. The report to Mr Macnish relevantly said:

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?

223 As was made clear in their report, the real estate agents confined their observations to "real estate matters", in conformity with Mr Macnish's request. The advice concluded with the recommendation that the order of sale should be Lot 1 followed by Lot 2.

224 MBF did not follow the recommendation contained in the advice of its real estate agents. By 15 August, MBF settled upon the order of the sale of Lot 2 followed by the sale of Lot 1. Further, a decision was made to withdraw Lot 3 from the sale and proceed only with the sales of allotments 2 and 1. On 15 August Mr Lynch received a facsimile letter from Macnish. A facsimile letter in similar form was sent to ANZ and Mr Collie. The letter read as follows:

We have now received instructions from MBF based on the most up to date information received from our client's selling agents.

Our instructions are that on 18 August 2001 Lots 1 and 2 of the subdivision at 16-18 Walmer Street, Kew will be auctioned. This is the Lot on which the dwelling stands and the vacant corner Lot will be sold.

During the afternoon of 16 August 2001 the selling agents will commence informing potential purchasers of Lot 3 that Lot 3 has been withdrawn from sale. MBF instructs us that it will not withdraw Lot 3 from sale if it receives written acknowledgment from each and all of your prior to noon on 16 august 2001 that you wish our client to proceed with the sale of Lot 3 and that (to the extent it might be necessary) you will cooperate with our client in any way necessary to complete settlement of such sale.

225 On 15 August the solicitors acting for Mr Collie, Howie & Maher, responded by facsimile letter to the letter from Mr Macnish. The letter relevantly stated:

We confirm that if lot 3 is withdrawn from sale, we have instructions from our Client to make an application to the court for a mandatory injunction to sell all three lots. The summons shall be made returnable Friday 17 August at 10.30 am.

We request that prospective buyers not be notified of the withdrawal of lot 3 until the application has been heard on Friday 17 August 2001.

226 On 16 August 2001 Mr Lynch sent a letter to Mr Macnish of Cornwall Stodart. After referring to the obligations of a mortgagor in the exercise of a power of sale under the TLA, the letter continues:

The mortgagor has made his position clear: that his priority is to retain his home and avoid the expense and inconvenience of a move. The mortgagee is not entitled to disregard his position.

Lot 1 (the house lot), must be withdrawn from sale if the amount from the sales of Lots 2 and 3 is sufficient to pay out MBF. If there is a shortfall after the vacant lots have been sold, then Lot 1 could be put on the market.

I urge the mortgagee to adopt the commonsense and logical approach to this problem.

227 On 16 August 12001 Mr Collie, by his solicitors Howie and Maher sent a facsimile letter to Mr Nolan. The facsimile stated:

On 15 August 2001 we were advised by Cornwall Stodart that they will not be proceeding with the sale of Lot 3 on Saturday 18 August 2001. A summons and affidavit in support shall be filed and served later today seeking an order:

That the following paragraph be substituted for paragraph 7 of the order of Warren J made 9 March 2001 as varied by the orders of Beach J 23 May 2001

"Save that the Secondnamed Defendant is directed to instruct and authorise MBF Investments Pty Ltd to sell, at the mortgagee's auction of the property known as 16-18 Walmer Street, Kew, to be conducted by it on 18 August 2001, and on similar terms and conditions, any lots not require[d] to be sold by it to satisfy amounts due under registered interests held by it or the ANZ Banking Group Limited on the said property until further order, the Secondnamed defendant is otherwise restrained from dealing with or disposing of any of the assets of the property of the Prudent Trust or taking any action whatsoever as Trustee of the Prudent Trust."

Can you please advise in writing if you are prepared to consent to the proposed variation or will be opposing our application.

228 On 17 August 2001, Mr Lynch sent a facsimile letter to Mr Macnish at 9.00 am which read:

Dear Mr Macnish

I was copied the letter from Minter Ellison (16/8).

Further to that letter, I rang Brendan Watkins [who was the solicitor for the ANZ]. He has confirmed that the bank agree to the order of sale as outlined in my earlier communications to you. That is, Lot 2 (the corner block), then Lot 3 (the tennis court) provided that if there is insufficient to pay out MBF from the sales of those two vacant lots, then Lot 1 (the house lot) would also be put for sale.

You are on notice that if you adopt an order of sale which is different from the order which we have suggested is the commonsense view, an action for damages will be issued against the mortgagee.

229 Mr Collie then made an application for the foreshadowed injunction in the Supreme Court before Beach J on 17 August 2001. The position advanced by Mr Collie was that all allotments should be sold. Beach J refused to grant the injunction sought by Mr Collie.

230 At about 4.30 pm on 17 August 2001 Mr Lynch faxed a letter to Mr Macnish which said:

Dear Mr Macnish

I refer to my earlier fax (17/8 at 9.00 am).

I am instructed that Damien Nolan has also raised with you the order of sale and confirmed that-

A. Order of Sale

The order of sale must be:

1. Lot 2

2. Lot 3

3. Lot 1

B. Where sale of vacant lots insufficient

If the mortgagee's debt of $1,531,000 (which is not admitted) is not satisfied by the sale proceeds of lots 2 & 3, the mortgagee may proceed to auction Lot 1 without consultation with Nolan.

C. Where sale of vacant lots is sufficient

If the sale proceeds are in excess of $1,531,000 the mortgagee will consult with the mortgagor on the reserve. In the event that the highest bid is not acceptable to the mortgagor, the auctioneer will be instructed to pass the property in and treat with the highest bidder at a reserve set by the mortgagor.

D. Consent of relevant parties

I understand that ANZ will consent to this procedure on sale.

231 The position of the second mortgagee, ANZ, was also made clear. It did not insist on the sale of any of Mr Nolan's property at the proposed auction in order to realize the debt due to it. In a facsimile sent at 4.19 pm on 17 August 2001 Mr Brendan Watkins, solicitor with the firm of Minter Ellison, sent a letter on behalf of ANZ to Mr Macnish, with copies to the other parties. The letter stated:

We refer to recent developments in connection with the abovementioned matter.

We understand that you have received a letter from Frank Lynch representing Damien Nolan, in which statements are made concerning discussions between Mr Lynch and the writer late yesterday. The writer has not yet seen a copy of Mr Lynch's letter, and in the meantime, is in receipt of a letter from Damien Nolan to yourself received by email at 3.21pm this afternoon.

Lest there be any confusion, we restate the Bank's position as follows:

1. The Bank does not believe that it is appropriate to dictate to MBF how it should proceed in connection with the auction;
2. The Bank is naturally concerned to ensure that its secured debt is discharged at the earliest possible date, and to that end, does not oppose the sale of all three lots at the auction;

1. Likewise the Bank will not oppose any other determination that MBF may make, concerning the possible withdrawal of one particular lot or the order in which the lots are presented for sale at the auction. These are matters that MBF should determine as the mortgagee conducting the auction.

1. If only two lots are sold at the auction and the sale price is not estimated to realize sufficient funds to discharge the Bank's secured debt, then the Bank will proceed to take prompt action under its mortgage following the auction. In this regard the bank obviously has a number of alternatives which may be available to it, dependant upon which lot remains unsold after the auction is completed. The Bank will address these options at the appropriate time.

232 On the eve of the proposed auction sale, on 17 August 2001, in a joint letter from MBF's selling agents to Mr Macnish, both Mr Budden and Mr Jenkins advised that they had changed their minds as to the order of sale. In this regard they advised:

Following our advice to you on Tuesday, circumstances have caused our view on the proposed order of sale to alter.

You will recall that we believed, on balance, that Lot 1 should be offered first. Two of the purchasers showing very keen interest in Lots 1 & 3 have subsequently stated very forcefully that they will not bid if this is the order of sale. Their rationale is that they do not wish to own the house without the corner block, but would be prepared to take just the block if the house subsequently sold to another party. Other potential purchasers may well have similar, but unstated, views.

In our opinion, these circumstances alter the balance and we now recommend that Lot 2 be offered first, to be followed by Lot 1.

233 During the day prior to the auction, on 17 August 2001, MBF conducted a sales meeting with its real estate agents. MBF had received a pre-auction offer of $975,000 for Lot 2. Its agents who were very hopeful of achieving $1 million or more at the auction. As for Lot 3, MBF's agents estimated that if it sold, the sale price would be somewhere between $600,000 and $660,000. All this information was communicated to MBF. However, I am also satisfied that MBF had received advice from its real estate agents that, as things stood on 17 August, it could not be guaranteed that the sale of the vacant lots, Lots 2 and 3, would have cleared the debt due to MBF, even though there remained an excellent prospect that this could be achieved.

234 Also on 17 August 2001, that MBF determined to proceed with the sale of Lots 2 and 1, in that order. It also confirmed its decision to withdraw Lot 3 from sale. MBF instructed its agents to withdraw Lot 3 from the sale, although little, if anything, was done to effect this instruction. At about 4.30 pm, Mr Macnish communicated this decision to Mr Lynch by facsimile letter.

235 At about 5.20 pm Mr Lynch replied with a further facsimile letter making a final plea to Mr Macnish. Mr Lynch put the position of Mr Nolan forcefully. He said:

Your decision to withdraw Lot 3 from the auction defies gravity. It is not a good decision at law. It is not a fair decision in equity. It is not commonsense. It is not appropriate in the interests of all parties.

Mr Lynch then restated the position of his client as to the appropriate order of sale, keeping Lot 1 in reserve to be sold only if the sales of Lots 2 and 3 did not yield sufficient to pay out the debt due to MBF.

236 Having received no response to this communication from Mr Macnish, Mr Lynch advised Mr Nolan that MBF had decided to proceed with the sales of Lots 2 and 1 in that order. In response, Mr Nolan then decided that if it was the case that Lot 1 was to be sold, the sale of Lot 3 should also proceed. Mr Lynch, on behalf of Mr Nolan, communicated this decision to Mr Macnish. Steps were then taken to proceed with the auction of Lot 3, in addition to the other allotments.

237 Accordingly, on the day of the auction, MBF was presented with a position of maximum flexibility. The second mortgagee, ANZ was not pressing for the sale of any of the allotments, and was expressly reserving its position as to any further steps which it might take to recover the moneys due to it. Mr Collie's attempt to dictate the method of sale had been thwarted by the decision of Beach J on the injunction hearing on 17 August 2001. Further, as a consequence of Mr Nolan's decision to sell Lot 3, MBF was placed in the position of having three allotments to sell in order to recover the mortgage debt, interest, costs and expenses then due to it.

238 The auction conducted by MBF on 18 August 2001 was very well attended.

239 Mr Date Snr attended the auction in his capacity as a director of MBF. Another director of MBF, Mr Fleming, also attended. However, it was Mr Date Snr who had the carriage of the auction on behalf of MBF. He made all of the critical decisions on the day of the auction on behalf of MBF, including which lots should be sold and the order in which the auction of the allotments should proceed.

240 On the day of the auction Mr Date Snr believed that, taking into account all expenses and costs, Mr Nolan owed MBF between $1.53 million to $1.6 million. He also knew, as was the case, that contracts had been prepared for all three lots in order to maintain maximum flexibility on the day of the auction, and that it was intended that MBF would maintain maximum flexibility in the order of sale in the conduct of the auction. He also knew that MBF was not necessarily locked into the sale of Lots 1 and 2. Mr Budden, a real estate agent with the firm J E Date & Co engaged by MBF, confirmed that the order of sale had not been significant with regard to the marketing of the property and the likely outcome of the auction.

241 Mr Date Snr was also aware that it was not unusual in a mortgagee or subdivisional sale for a lot to be withdrawn. He also knew that it was the wish of all of the directors of MBF that its preference was for the vacant lots to sell and for the house lot to be withdrawn from sale, if that was possible. He also understood that Mr Nolan wanted to remain in his home with his family, and that Mr Archibald QC had advised MBF that it should only sell so much of the land as was necessary to get its money back.

242 When the auctioneer announced at the commencement of the auction of Lot 2 that the order of sale would be Lot 2 followed by Lot 3, he was corrected, and the order was restated to be Lot 2 followed by Lot 1 and then Lot 3.

243 At approximately 2.50 pm, just prior to the commencement of the auction, Mr Nolan met with Mr Date Snr and Mr Macnish in the presence of Mr Arthur. Mr Nolan again raised the order of sale proposed by MBF. Mr Date Snr indicated that he had given his instructions and the order was set at Lot 2, then Lot 1 followed by Lot 3. He then said that either Mr Nolan was going to sue him or Mr Collie would. He said that he was acting on advice and would not change the order of sale.

244 In Mr Macnish's words, what occurred at the auction "was a surprise to everyone". Lot 2, achieved the extraordinary price of $1.305 million exceeding even Mr Nolan's agent's prediction. This had the effect of altering the basis of all of the previous advice which MBF had received. As to this event, Mr Macnish made the following concession in his cross-examination:

The agent's advice as to whether or not 2 and 3 would satisfy the estimate - the then estimated debt, had been overtaken by events, had it not?---Yes.

245 Mr Nolan heard Lot 2 Being "knocked down" at $1,305,000. The property had been purchased by a client of the real estate agent Jellis Craig and Company. Mr Nolan immediately approached Mr Richard Jellis of that firm. He also approached Mr Date Snr. Mr Jellis told both Mr Nolan and Mr Date Snr that his client had no further interest in the other allotments. Mr Date Jnr also confirmed directly with the purchasers of Lot 2 that they had no interest in buying the house lot. Mr Nolan then said to Mr Date Snr words to the following effect:

You've got $1.3 million. On your own estimates of $1.53 million that you've written to me about, you need $200,000-odd to get out. Please sell the tennis court and leave our house.

I have my advice and I'm not changing the order of sale.

246 Following the sale of Lot 2, the buyers of that allotment having expressed no desire to purchase Lot 1 in addition to Lot 2, no impediment then existed to withdrawing Lot 1 from sale, or proceeding directly with the sale of Lot 3 and keeping the sale of Lot 1 in reserve should that have been necessary. The possible "dangers" involved in putting Lot 1 up for sale only if the sales of Lots 2 and 3 failed to achieve sufficient to pay out the mortgagee's debt, which had previously been identified by Mr Budden and Mr Jenkins in their joint report to Mr Macnish of 14 August 2001, had now evaporated. The sale of Lot 2 to purchasers with no interest in also purchasing Lot 1 eliminated any prospect of the Lot 2 sale being placed in jeopardy. The sale of Lot 2 also eliminated any potential purchaser who was only interested in purchasing both Lot 1 and Lot 2.

247 As previously noted, Mr Mitchell was a licensed real estate agent of considerable experience. He was a partner of the real estate company Collins Simms - a leading real estate agent in residential sales in the Kew area. He attended the auction of the property on 18 August 2001 on behalf of his company. Mr Mitchell had previously contributed his advice to MBF as to the order of sale and was familiar with the property. He was called by the plaintiff to give evidence. In response to the question: "Did you, as an agent, see any problem had there been a sale of Lot 3 immediately after Lot 2?", he said:

Well, as an agent earlier and preceding the auction my feelings were that Lot 2 followed by Lot 3 would be the - probably the best order to get the best results because they were both vacant sites, and house sites that appeal to people who wanted to build a new home. So after the sale - the extraordinary price that was achieved for Lot 2 I would've thought that it would've been a - good idea to consider with Lot 3 being the tennis court sale to - to capitalise on the momentum that was gained during the - marketing and the amazing auction result of - of Lot No. 2.

248 I accept Mr Mitchell's assessment as a sound opinion. Mr Date Jnr disagreed with it in cross-examination when he was asked to comment on Mr Mitchell's observation. However, he offered no basis for his disagreement.

249 Mr Mitchell's advice was not sought by MBF on the day of the auction following the sale of Lot 2. Further, he did not observe and could not recall MBF getting advice from any other real estate agent at this time.

250 Further, the advice of Mr Date Jnr was not sought by MBF about the order of sale following the sale of Lot 2. Mr Date Jnr said in cross-examination, in response to the question as to whether his advice was sought: "None to us, no, we're too busy signing contracts". There was no evidence from Mr Date Jnr that he observed his father, Mr Date Snr seeking advice from the other MBF agents, Mr Budden or Mr Jenkins, after the sale of Lot 2 on the day of the auction.

251 Mr John Dixon of counsel had been retained by MBF in about 2000 as a junior barrister to represent it in the litigation arising from the MBF Mortgage. Mr Dixon appeared on behalf of MBF in 2000 and 2001 in the various proceedings between MBF, Mr Nolan, and Mr Collie. Mr Dixon also attended at the auction sale conducted by MBF on 18 August 2001. He was not briefed to attend on this day. In particular he was not briefed with regard to the advices of real estate agents as to values and the likely order of sale of the allotments. I am satisfied that Mr Dixon had no detailed knowledge as to what had transpired in the period leading up to the auction and had no knowledge as to the payout figures on any of the loans relating to the property. He attended purely as a matter of personal interest.

252 After the sale of Lot 2 Mr Date Snr approached Mr Dixon and had a conversation with him following Mr Nolan's request for the order of sale to be changed. Mr Dixon sensibly suggested that Mr Date Snr should remain with the procedure which he had adopted in the past and speak to the selling agents and the auctioneer about the proposal. Mr Dixon, however, did not observe and was not a party to Mr Date Snr obtaining any such advice from the real estate agents as he had suggested. Beyond his suggestion, Mr Dixon gave no further advice to Mr Date Snr.

253 In spite of this dramatic alteration in position and the ensuing representations from Mr Nolan, Mr Date Snr said that the advice which he received after the sale of Lot 2 from the MBF solicitor Mr Macnish, was that the order of sale, which had been decided upon prior to the auction, should not change. He also said that two estate agents together, namely Mr Budden and Mr Jenkins, both "concurred" in this advice.

254 However, neither Mr Budden nor Mr Jenkins at any stage in their evidence said that, following the sale of Lot 2, they advised, or concurred with Mr Macnish's advice to Mr Date Snr as to which lot should then be sold.

255 Mr Macnish said in his examination in chief that he witnessed further conversations between Mr Date Snr and Mr Budden and Mr Jenkins which were to the effect that Lot 1 should remain on the market and be sold following Lot 2. However, having had the advantage of observing Mr Macnish give his evidence, and in particular having observed his cross-examination, I am not satisfied that this in fact is what occurred. He said in his cross-examination on the subject:

No, I don't know that that advice came from the agents. That advice came from myself, having gone and got the - it may also - it was confirmed by the agents. It certainly wasn't contradicted but having gone to the trouble of getting expert advice and making its decision, my - my advice on the day was that it was fraught with danger to then change where - where the mortgagee was going, at that short notice.

256 I am satisfied that neither Mr Budden nor Mr Jenkins advised Mr Date Snr at this time not to change the previously planned order of sale. Further, I am satisfied that they did not actively concur in the giving of any such advice by Mr Macnish to this effect. At its highest, they may have been present when Mr Macnish gave his advice to Mr Date Snr, but they offered no advice themselves. Further, and importantly, I am satisfied that they were not asked to give any advice at this crucial stage, despite the suggestion to this effect offered by MBF's counsel, Mr Dixon.

257 I am satisfied that, following the sale of Lot 2, Mr Macnish advised Mr Date Snr as to the order of sale which should then proceed. He advised that, at that late stage MBF had obtained their independent advice from other agents, and it would be wrong to then not act in accordance with the advice they had been given by removing Lot 1 and substituting Lot 3. In particular, he advised Mr Date Snr that to change the order of sale at this time would be "fraught with danger".

258 I am not satisfied that Mr Macnish sought or was given any advice from the estate agents present at the time, or indeed at any other time, that to have removed Lot 1 from sale would have been "fraught with danger", as he described it. No basis for this concern has been shown to exist, and I am not satisfied that any in fact existed.

259 Mr Date Snr confirmed that he did not know why withdrawing Lot 1 or altering the order of sale would be "fraught with danger" as he was advised by Mr Macnish. The absence of any rational decision making process on the critical issue was confirmed when Mr Date Snr said in cross-examination:

You are a mortgagee in charge of the sale. You've been considering withdrawing properties from sale, you want him to stay in his house?---And the advice I got was not to change the order of sale.

Because it was fraught with danger?---I don't know why. My advice was not to change the order of sale.

So you say do you that you didn't ask anything about what's the danger or what's the problem, you just said, "That's the advice I'll go with it?"---Basically, yes.

In a situation in which its your call to decide on the advice?---Yes.

And no danger was ever identified to you?---I spoke to the agents at the same time, before we gave Mr Nolan our response. The agents didn't recommend changing the order after either.

No but I'm asking you to - so you say you just relied on the advice and you didn't make any independent assessment of that advice yourself?---Basically, that's right.

Thank you. The issue of whether or not there is a proper reason is your call on the day isn't it? - Yes, yes.

And in the exercise of that call, you as you have said, basically accepted the advice you got? - I did.

You did not turn your mind to whether you ought change the order of sale for the reasons I've articulated?---The decisions were made under pressure at the time. The advice I got was very specific. The advice I got was from several sources which they all agreed and I followed that advice.

And you did not turn your mind as to whether you should accept that advice or not?---No.

260 There was no logic or principle behind the decision other than, because MBF had decided to proceed in a certain order on the day before, it was reluctant to change its position, even in the face of overwhelming evidence that it should alter its stance given the unexpectedly high sale price achieved for Lot 2. Further, I am satisfied that MBF was influenced in making its decision by the litigious stance taken by Mr Collie - an irrelevant consideration in the exercise of its power under s.77(1) TLA.

261 It will be recalled that on 24 July 2001 Mr Bongiorno had advised Mr Macnish that it was not axiomatic that an order of sale be predetermined prior to the auction. He advised that: "We meet at your offices on Thursday 16 August to review and 'possibly' set the auction order". He further advised that: "FLEXIBITIY is needed to be fair to all parties involved to achieve the sale of each lot for the highest and best possible price".

262 MBF had the opportunity to maintain flexibility on the day of the auction. All three allotments were on the market for the auction sale. Documentation had been prepared for the sale of each, and was on public display, prior to the auction. As noted, it was not an unusual occurrence in a mortgagee or subdivisional sale for a lot to be withdrawn. The options were opened up still further upon the sale of Lot 2 for $1,305,000. Further, the purchasers of Lot 2 had made it clear that they had no interest in Lot 1. At this point, MBF was presented with a very clear option. There was no impediment to proceeding with the sale of Lot 3 after Lot 2 had been sold, and it was in a perfectly good position to do so.

263 However, MBF then acted in disregard of the relevant information presented to it -namely the sale price obtained for Lot 2, and the sources of advice available to it. Beach J In his reasons delivered on 16 May 2001 in the method of sale proceeding had observed:

In making such a determination [as to the order of sale] MBF will be expected to obtain appropriate advice from an experienced real estate agent and then, unless there is very good reason not to do so, to act upon that advice.

However, in spite of the suggestion offered by its counsel Mr Dixon that, following the sale of Lot 2 when circumstances had changed dramatically, MBF should speak to the selling agents and the auctioneer about the order of sale, MBF failed to obtain the considered advice of its real estate agents. It proceeded with the sale of Lot 1 without exploring the options which had so clearly been opened up to it and without seeking the recommended advice upon those options.

264 MBF also failed to give effect to the letter and spirit of the advice given to it by its senior counsel that it could only sell sufficient lots in a multi-lot subdivision to satisfy the mortgage debt, interest and costs. If it had proceeded to sell Lot 3 after Lot 2, there would have been no need to sell Lot 1. Following the sale of Lot 2, embarking on the sale of the house lot had become unnecessary.

265 Mr Date Snr knew that Mr Nolan wanted to stay in his home with his family. This was also the preference of the board of directors of MBF if it was possible to achieve this outcome. There was no evidence that Mr Nolan's interest was considered at all when MBF made its decision following the sale of Lot 2. On the contrary, his interest was completely ignored.

266 Following the sale of the vacant allotment, Lot 2, after taking into account the costs of the sale, the outstanding costs of the subdivision, legal costs payable to Cornwall Stodart, and payment out of all that was outstanding under the MBF mortgage a deficit of something in excess of $230,000 remained.

267 Lot 1 was sold at the auction for $915,000. This too exceeded the pre-auction estimates of MBF's real estate agents. Nevertheless, based on the most conservative of those estimates, a very large surplus would have been achieved after payment out of all that was due to MBF upon its sale.

268 The sale price achieved for the sale of Lot 1 on 18 August 2001 being $915,000, was the market value of the property as at the date of sale. I also find that this was the market value of Lot 1 on the date of the settlement, 15 November 2001. I do not make any finding as to the value of Lot 1 at any other time.

269 Following the sale of Lots 2 and 1, it was not necessary for MBF to sell Lot 3 to clear the debt due to it. The reason why Lot 3 was put up for sale was that, Mr Nolan requested that this occur, following MBF's decision to sell Lot 1. In fact, after the sale of Lot 1 Mr Nolan requested that he have some say in the reserve price for the sale of Lot 3.

270 Lot 3 was regarded by the real estate agents as the least attractive of the three allotments. This was largely due to the fact that the site of Lot 3 was well below street level.

271 Nevertheless, on the eve of the auction, on 17 August 2001, the real estate agents engaged by MBF estimated its likely sale price to be between $600,000 and $660,000.

272 Being a vacant allotment, it is more difficult to assess the level of prior interest in the property. Potential interested parties in this case had no need to inspect the property on inspection days organised by MBF's agents. The property was clearly visible from the street to those passing by. Both Mr Mitchell and Mr Budden in this respect agreed:

It is not uncommon for land buyers to stick their hands up for the first time at an auction sale of land because they don't have to go through the house. They can make their own enquiries. They can get the dimensions.

Mr Date Jnr also agreed, when he said: "So for land buyers we may not meet them till the day", ...."because they can look over the fence".

273 During the auction of Lot 3 there were a number of bids between $600,000 up to $645,000 before the allotment was then passed in to the eventual purchasers, Mr and Mrs Donald. The reserve had been set above $645,000. There were at least two bidders up to this point. Negotiations then proceeded with the Donalds, resulting a contract of sale at the agreed purchase price of $690,000.

274 The price achieved for Lot 3 again exceeded MBF's and its real estate agents' expectations.

275 However, even on the most conservative of professional estimates of the value of Lot 3 prior to the auction, its sale would have yielded more than enough to pay out all that was due under the MBF mortgage and the ANZ second mortgage.

276 In fact, based on the purchase price achieved for Lot 3 on the day of the auction, being $690,000, and after taking into account the costs of the sales, the outstanding costs of the subdivision, legal costs payable to Cornwall Stodart, and payment out of all that was outstanding under the MBF mortgage and the ANZ second mortgage, a surplus of $112,379.41 would have been produced.

277 It was submitted by the defendant that if the sale of Lot 3 had followed the sale of Lot 2, there was no guarantee that Lot 3 would have been sold on the day of the auction, and that, if this eventuated, the sale of Lot 1 would have been inevitable, resulting in no compensable loss to the plaintiff. I do not accept this submission. In the light of both Mr Mitchell's evidence to which I have referred, and the auction of Lot 3 conducted on 18 August 2001 and the price achieved, it is highly likely that, had the auction of Lot 3 been conducted after the auction of Lot 2, the same or a very similar result would have been achieved.

278 It was not reasonable for MBF to have accepted the advice Mr Macnish gave after the sale of Lot 2 without it giving proper consideration to the order of sale in the light of the events as they happened. However, even if it had obtained the considered advice of its real estate agents and that advice was to the effect that the order of sale should not change, regardless of the sale price achieved for Lot 2, such advice would not have absolved MBF from a breach of its obligations under s.77(1) TLA.

279 Murphy J in Goldcel made observations in relation to the persons through which the mortgagee may act, and the consequent liability to be attributed to the mortgagee in the event of a breach of its obligations under s.77(1) TLA. His Honour observed in this regard:[94]

In considering whether this has been done [being a sale having appropriate regard to the mortgagor's interest], it is necessary to consider not only the actions of the mortgagee itself, but also those of its authorized officers and those of the agents of the mortgagee, and that includes in this case its solicitor and real estate agent: see Commercial & General Acceptance v Nixon [1981] HCA 70; (1981) 56 ALJR 130, per Gibbs CJ at pp.131-2, and per Mason J at pp.133-4.

280 It has been held that a mortgagee does not relieve himself of his duty to obtain a proper price simply by placing the sale in the hands of reputable agents and following their advice: Cuckmere Bank Co Ltd v Mutual Finance Ltd;[95] Commercial and General Acceptance Ltd v Nixon.[96] A fortiori, the same considerations apply to unthinkingly accepting the advice of a solicitor, particularly in this case, where the relevant interests of the mortgagor extended beyond that of merely obtaining the best price for all lots on the day of the sale, consistently with its right to realize its security.

281 In Barns v Queensland National Bank Ltd[97] the jury found that the mortgagee Bank had exercised its power of sale recklessly and without due regard for the interests of the mortgagor owner by selling at an undervalue. Griffith CJ, Barton and O'Connor JJ said as to this conduct:[98]

The motive of the mortgagee, as distinguished from his intention, is not material. A lawful act does not become unlawful merely because the doer was actuated in doing it by an evil motive. But if a mortgagee exercises a power of sale, not for the purpose of obtaining payment of the mortgage debt (although that is a necessary consequence in whole or part), but for the purpose of depriving the mortgagor of the opportunity of retaining the property by redemption, and, to use the words of Lord Herschell, "if he wilfully and recklessly deals with the property in such a manner that the interests of the mortgagor are sacrificed," we should say that he had not been exercising his power of sale in good faith. It was not contested that a power of sale under a mortgage, like any other power, must be exercised honestly for the purposes of the power, or, as expressed by Lord Westbury in Duke of Portland v Topham "that the donee, the appointor under the power, shall, at the time of the exercise of that power, and for any purpose for which it is used, act with good faith and sincerity, and with an entire and single view to the real purpose and object of the power, and not for the purpose of accomplishing or carrying into effect any bye or sinister object; (I mean sinister in the sense of its being beyond the purpose and intent of the power which he may desire to effect in the exercise of the power)." In the same case Lord St. Leonards said: "A party having a power like this must fairly and honestly execute it without having any ulterior object to be accomplished. He cannot carry into execution any indirect object, or acquire any benefit for himself, directly or indirectly. [Footnotes omitted]

282 In this case, I find that MBF did not act with any wrong or sinister motive. However, its conduct of the auction sale on 18 August 2001, was undertaken deliberately and with full knowledge of the relevant facts, including the impact its decision would have on Mr Nolan and his family. In exercising its power of sale in the way it did, MBF carried into effect the indirect object of destroying Mr Nolan's legal interest in the land by depriving him of full ownership of the property by the exercise of his right of redemption. MBF's decision also had the effect of evicting Mr Nolan and his family from occupation of the land and the dwelling house situated on the land.

283 There was no need for MBF to sell this property for the purpose of obtaining payment of its mortgage debt.

284 The actual outcome of the sales of all three lots at the auction sales conducted on 18 August 2001 yielded a considerable surplus. After taking into account the costs of the sales, the outstanding costs of the subdivision, legal costs payable to Cornwall Stodart, and payment out of all that was outstanding under the MBF mortgage and the ANZ second mortgage, a surplus of $1,007,482.28 was produced. This sum was paid into Court.

285 As for the moneys owing to Mr Collie, as at the date of the settlement of the sales of the three lots, namely 15 November 2001, Mr Collie's entitlements totalled $533,600.31, comprising: the order for damages in the 1991 proceeding ($198,837.70); further costs orders (totalling $134,282.77); further interest orders (totalling $50,479.84); and further costs resulting from orders made by Nettle J in the 1991 proceeding ($150,000.00).

286 Upon the sale of Lots 2 and 3, had Lot 1 been withdrawn from sale as it plainly should have, being an unencumbered property, Lot 1 would have been available to Mr Collie to execute upon to obtain payment of the debt due to him. It was also available to Mr Nolan to borrow against to obtain funds to pay out Mr Collie pursuant to the Rhoden loan which had been offered to him and remained open for acceptance up to the day of the auction sale on 18 August 2001. By these means, the interests of Mr Collie would have been well protected, and if MBF had proceeded to sell Lots 2 and 3, and had not proceeded with the sale of Lot 1, Mr Collie would have had no right to properly claim that MBF had proceeded without regard to his interests or had otherwise acted in bad faith towards him. In fact, by selling Lots 2 and 3 and not proceeding to sell Lot 1, MBF would have made the property comprised in Lot 1 available to Mr Collie as an unencumbered asset to enable him to achieve payment of the debt due to him.

287 MBF completely disregarded Mr Nolan's interest in the property, namely his right to redemption which, if exercised as it would have been on the sale of Lots 2 and 3, would have resulted in him retaining Lot 1 as an unencumbered estate in fee simple. Further, the use and enjoyment of the dwelling house situated on Lot 1 for home occupation, which had been so assiduously brought to the attention of MBF over the months preceding the auction sale, was lost.

288 In the words of Isaacs J in his judgment in Pendlebury v Colonial Mutual Life Assurance Society Limited[99] of more than 100 years ago:

I can see no escape from the conclusion that the mortgagees did not exercise the power of sale in good faith, because the society sold the mortgagor's land without the smallest regard for his interests. He had no real chance whatever to save a plank from the wreck, his very existence was ignored, and his land and improvements and labour were sacrificed without the least sense of obligation to him, though a comparatively small effort was necessary to prevent the disaster, and though, as the respondent society must have recognized, if it even gave the matter a thought, the property itself contained the amplest and safest means of preservation.

This statement is prophetically apt to describe the facts of the present case.

289 In a like manner, and regrettably, MBF recklessly dealt with the property in a way which sacrificed the interests of the mortgagor. The decision of MBF taken on 18 August 2001 to sell Lot 1 at the auction was not made in good faith, having regard to the relevant 'interest' of the mortgagor pursuant to s.77(1) TLA. The conduct was also manifestly unreasonable. It was not founded on the evidence available nor was it founded on principle. It amounted to an arbitrary interference of the most serious kind with Mr Nolan's right to continue in occupation of his home.

290 I find that the defendant was guilty of wilful default in conducting the auction sale of the plaintiff's property on 18 August 2001 and consequently, acted in breach of its obligations under s.77(1) TLA.

291 The plaintiff submitted that the conduct of MBF also amounted to a fraud on the power of sale conferred on it by s.77(1) TLA.

292 Having found a direct breach of the mortgagee's obligations under the section, it is unnecessary to consider whether the same facts also gave rise to a fraud on the power as alleged by the plaintiff.

293 In Barns[100], Griffith CJ said in relation to the relief claimed by a wronged mortgagor:

It remains to consider the measure of damages. In the case of the improper exercise of a power of disposition of property, the appropriate remedy, if available, is to set the transaction aside, and to restore the property to the person from whom it has been improperly divested. If the purchaser had notice of the facts which render the exercise of the power improper, this remedy is available. But if he is a bona fide purchaser for value without notice of the facts, and has already acquired the legal estate, this remedy is not available as against him. That is the present case. But we do not think that these circumstances should make any difference as between the person wrongfully deprived of the property and the wrongdoer. The former should be restored to the same position as if the wrong had not been done. We think therefore that, as the property cannot be restored to the beneficiaries, they are entitled to recover the value of their interest in it. This was the opinion of the learned Chief Justice, in which we concur.

(a) Loss of his right to redemption of his legal interest in Lot 1 free of the MBF mortgage and the ANZ mortgage. This is to be measured by the value of Mr Nolan's equity in Lot 1, and any increase in that value. Taking as the starting point the market value of Lot 1, from this should be deducted:

(i) the costs of establishing a new first mortgage to secure moneys borrowed to pay out the debt to Mr Collie;

(ii) the sum required to discharge the new first mortgage encumbrance to notionally realize the value of Lot 1;

(iii) the interest (if any) he derived from investing the surplus derived from the sales of Lots 1,2 and 3; and

(iv) the increase in the value (if any) of Mr Nolan's equity in the alternative dwelling which he eventually purchased, and any income derived from it, if it was an investment property.

(b) Loss of the right of Mr Nolan and his family to occupy the dwelling on Lot 1. This should be measured by:

(i) the cost incurred by Mr Nolan in moving from the dwelling on Lot 1;

(ii) the cost of renting alternative accommodation (including rental, rates and taxes and maintenance);

(iii) the costs of purchasing an alternative dwelling (including stamp duty, legal fees, and mortgage establishment costs);

(iv) the costs of maintaining the alternative dwelling (including, mortgage interest payments, rates and taxes and maintenance); and

(v) from all of the above should be deducted the costs of maintaining the Lot 1 property (including, mortgage interest payments on the new first mortgage, rates and taxes and maintenance).

295 The method by which a court usually approaches the task of providing relief in cases such as this is by way of taking an account and then entering judgment on the basis of the account. In Barns for example, the jury had made findings which could be expected to comprise the usual components of an account. The remedy of account was directly applied in Pendlebury,[101] in which the final order made by the High Court[102] reflected the following observations made by Griffith CJ:[103]

In my opinion, a mortgagee selling under circumstances which show a reckless disregard of the interests of the mortgagor is responsible to the same extent and on the same principles as an accounting party who is liable for wilful default.

I think, therefore, that the defendants are liable to account to the plaintiff for the amount which would have been realized on a sale of the property conducted without wilful default, which I hold to have been established in the sense in which it is used in judgments directing such an account.

Barton J[104] and Isaacs J[105] were of the same opinion.

296 In Coroneo v Australian Provincial Assurances Association Ltd[106] Jordon CJ took a similar approach. In this case, a mortgagor had brought common law proceedings in respect of the alleged irregular sale of old system land by the mortgagee. The mortgagee challenged by way of demurrer the pleading of the mortgagor. Jordan CJ held:[107]

The power of sale, where it appears in a legal mortgage [of old law land] is not a common law power. It is an equitable power which is inserted to enable the mortgagee to convey a title which is not only good at common law but good in equity to defeat the equitable rights of the mortgagor. The purpose of this equitable power is to cut down the jealously guarded equity of redemption.

Jordan CJ held further that the mortgagor had no cause of action at common law:[108]

The proper remedy of the plaintiff is a suit in equity in which, upon his offering to redeem or to account, he may, if he so desires, litigate the question of any alleged equitable delinquencies on the part of his mortgagee ...

I think the whole of the declaration is an attempt to litigate questions as between mortgagor and mortgagee which can only be the subject of proceedings in Equity, in a suit in which the mortgagor offers to redeem or to account for what is owing.

297 The observations of Jordon CJ in Coroneo were confirmed in Colin D. Young Pty Ltd v Commercial and General Acceptance Ltd.[109] In this case the appellant mortgagor had commenced proceedings for a claim for damages on the basis that the respondent mortgagee had exercised its power of sale in breach of its duty. Hutley JA said:[110]

In my opinion, these proceedings were misconceived from the start and there is no such proceeding known to New South Wales law. The true position was expounded by Sir Frederick Jordan in the case of Coroneo v Australian Provincial Assurance Association Limited 35 SR 391, in which he explained in detail that this is not the right form of action, that the only proceedings available are ... when the sale has been completed, proceedings for accounts between the parties ...

The action was one for damages, albeit what was called equitable damages. It is quite clear that in New South Wales such an action does not lie on the part of the mortgagor against a mortgagee who is alleged to have improperly exercised his right of power of sale. Assuming the sale has been completed, as was the position in the present case, the mortgagor's remedy lies in proceedings for accounts.

298 The principle was also noted more recently by Powell J in Allfox Building Pty Ltd v Bank of Melbourne Ltd & Anor[112] in which his Honour, in citing with approval Pendlebury, Barns, and Colin D. Young Pty Ltd and other authorities to like effect, said, in refusing the continuance of an injunction sought by a mortgagor to restrain a mortgagee from exercising its power of sale:

If there has been, or will be, some impropriety as the Plaintiff says it fears, the Plaintiff will still be entitled to seek an account on a wilful neglect and default basis, and if, on that account being taken, a balance be found due to it, to have an order for that balance.

299 It may be noted that in Pendlebury and the New South Wales cases to which I have referred, accounts were ordered where the mortgagee improperly exercised its power of sale by selling at an undervalue.

300 The principal texts on the subject are all to the same effect.[113] In Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 4th Ed, 2002, the learned authors say:[114]

Where the plaintiff was relying on his equitable right, he was always entitled to a decree for accounts if an account was necessary to give effect to his equitable right;

Accounts between a mortgagor and his mortgagee are essential in all redemption and foreclosure actions; in addition, in the case where a mortgagee has exercised his power of sale, the mortgagor may successfully demand accounts if he is suing to recover surplus proceeds of sale.

The last observation was made in the context of a party suing for surplus proceeds following the exercise of a power of sale.

301 I see no reason in principle to confine the remedy of accounts to the factual circumstances which have hitherto arisen. The remedy is equally appropriate to other breaches of a mortgagee's obligations under s.77(1) TLA, such as the breach I have found in this case.

302 An account of profits is an equitable remedy and is hence discretionary.[115] It is also a flexible remedy. It has its roots in equity. It bears no analogy to common law damages or its equitable equivalent. From at least the year 1200, there was a common law action of account in England. However, as a consequence of the elaborate technicality of the action and the lengthy and cumbrous nature of the associated procedure, which has been described as a monstrum horrendum, it fell into disuse. By the mid-18th century the common law action was superseded by the more versatile equitable remedy of account.[116]

303 The scope of the modern remedy has not been authoritatively determined.[117] Whilst its principal application has been in the area of the equitable wrongs of breach of fiduciary obligations and obligations of confidence, the remedy has also been available to common law wrongs, although the limit of such applications remains open. The learned authors of Meagher, Gummow and Lehane's Equity Doctrines and Remedies say:[118]

Where the plaintiff was relying on a common law right, the position was not so clear. The Chancery Court refused to say when it would grant and when withhold its remedy. Lord Cottenham LC said in North-Eastern Railway Co v Martin (1848) 2 Ph 758 at 762; 41 ER 1136 at 1138 that it was "impossible with precision to lay down rules or establish definitions as to the cases in which it may be proper for this court to exercise this jurisdiction". Again and again it was said that the jurisdiction would not be exercised where the case could be disposed of as fully and conveniently by a court of common law but, in view of the admitted deficiencies of the common law remedy, it is not easy in retrospect to imagine many cases which would fit this description.

304 The equitable remedy of account has been applied principally in two circumstances. The first is where an order is made by which the wrongdoer is "stripped" of any net gain and is ordered to pay it to the other. By this means, a monetary relief is achieved, in the nature of a payment of what, in conscience, belongs to the other. An example of this application was considered by Windeyer J in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd[119] where his Honour noted, in the context of a case of trade mark infringement, that "the account of profits retains the characteristics of its origin in the Court of Chancery. By it a Defendant is made to account for, and is then stripped of, profits he has made which it would be unconscionable for him to retain". Windeyer J also observed in relation to the distinction between damages and the taking of accounts in this context:[120]

As profits, not damages were asked for, it is irrelevant to contrast the position in regard to damages. ... I merely mention that different considerations may govern an enquiry as to damages; for damages being in origin a common law remedy ...

305 The second principal type of case where accounts are taken arises from circumstances in which it becomes necessary to undertake a detailed inquiry into the financial liability of one party to another. One of the instances where the taking of an account may be ordered is where damages at law is inappropriate as a vehicle for relief because what is involved is essentially an accounting exercise where a specific sum is sought to restore the position of the parties. In such a case the taking of an account may be ordered to determine precisely what is owing by one party to the other. An example of this application is Denmark Productions Ltd v Boscobel Productions Ltd.[121] A taking of an account may also be ordered in cases in which a claim for damages is too complex to be determined at law: O'Connor v Spaight[122]; Taff Vale Railway Co v Nixon.[123]

306 Reference is made to Nocton v Lord Ashburton[124] which underlines the flexibility of courts of equity in measuring damages. Although equity follows the law and equitable relief such as the award of equitable damages may often be assessed on principles which follow those applied in a consideration of common law damages,[125] this is not a rigid rule. For example, the variety of situations in which equitable damages may be assessed may not always lend themselves to the application of the principles which apply to the common law remedy of damages.[126]

307 This was the approach preferred by Megarry J in Wroth v Tyler[127] in assessing damages available to the plaintiffs under Lord Cairns' Act in a case where the defendant refused to proceed with the sale of his house to the plaintiffs in the face of a demand for specific performance. His Honour said:[128]

... the court has jurisdiction to award such [equitable] damages as will put the plaintiff in as good a position as if the contract had been performed, even if to do so means awarding damages assessed by reference to a period subsequent to the date of breach.

Megarry J then proceeded to award date of judgment damages.[129] In Grant v Dawkins[130] Goff J determined that the property in issue should be valued for the purposes of determining damages in addition to specific performance under Lord Cairns' Act, at the date for completion in the court order, rather than the date of breach, thus giving the plaintiff the benefit of appreciation in value between those dates.

308 However, as observed by the learned authors of Meagher, Gummow and Lehane, Equity Doctrines and Remedies,[131] the cases in this area are "tortuous".

309 For example, in Bosaid v Andry,[132] Sholl J held[133] that both at common law and under Lord Cairns' Act damages should be awarded "at the time when the contract goes or is deemed to be gone", which, in that case however, coincided with the date of the judgment declaring the plaintiff's right to judgment.

310 On the other hand, in a Canadian case which followed, the more liberal approach was adopted. In Elsey et al v J.G.Collins Insurance Agencies Ltd,[134] Dickson J said:[135]

It will generally be appropriate to adopt in equity rules similar to those applicable at law... This is so not because the court is obliged to apply analogous legal criteria, but because the amount of compensation which would satisfy the loss suffered, and which the court considers it just and equitable to be paid, usually happens to be equivalent to the amount of legal damages which would be appropriate. The award is still governed, however, by general equitable considerations which would not apply if the plaintiff were seeking damages at law rather than in equity.

In my opinion, this statement of principle is entirely correct.

311 Although the question of whether an award of equitable damages must follow the common law has not been settled, the remedy of taking accounts clearly does not operate in its shadow. It is a distinct remedy which operates on equitable principles.

312 In this case, it is necessary to determine Mr Nolan's entitlement to monetary relief, if any. This is to be done by comparing the position arising from the loss of his legal interest in Lot 1 and the dwelling house situated on the land, with the position he would have been in had he retained Lot 1 and the house. If Mr Nolan would have been worse off by reason of the loss of Lot 1 and the house, this would arise directly from MBF's breach of duty which I have found, and a money sum would be payable by it to Mr Nolan so as to, as nearly as possible, put him in the position which he would have been had it not been for MBF's wilful default. In other words, the account must reflect the difference between the hypothetical situation of Mr Nolan in the absence of the infringement of his rights, and his actual situation given the infringement.

313 In my opinion, in order to properly restore Mr Nolan to the position he would have been in but for the transgression on the part of his mortgagee which I have found, it is essential that an account be taken to give effect to Mr Nolan's right. An examination of nearly eight years of transactions on the part of Mr Nolan is called for in order to arrive at a specific sum to adjust the position of the parties. The exercise is likely to involve a degree of complexity which will make it suitable for the taking of accounts. The remedy also has the advantage of its inherent flexibility, which also makes it the appropriate vehicle for relief.

314 The time for the commencement of the calculation should be 15 November 2001, the time of the settlement of Lot 1 pursuant to the binding contract of sale entered into on 18 August 2001. This was the date by which Mr Nolan and his family were required to vacate the property and occupy alternative premises.

315 In order to properly restore Mr Nolan to the position he would have been in, but for the infringement of the mortgagee, it is just and equitable in this case for the final date of the account to be the date of judgment.

316 Any assessment based on the taking of an account in this case, if it was to be undertaken, would be analogous to the exercise involved in accounting for a trust asset, for example a business which has been mismanaged by a trustee. This will commonly be determined by assessing where the business ought to have been at the time of the accounting, had it been managed properly. As such a court of equity may assess the value of the diminished asset which it should have had at the time of judgment.[136]

317 I bear in mind the observation of the Strasbourg Court in Cosic v Croatia[137] that "the loss of one's home is a most extreme form of interference with the right to respect for the home". I also take into account the long term and adverse effect on Mr Nolan caused by the wilful default of MBF as I have found it to be. A detrimental financial impact, if there was such an impact, is likely to have continued for numbers of years. The conduct of MBF on the day of the auction was harsh, unreasonable and unnecessary. I had the advantage of observing Mr Nolan in the witness box during the trial. I accept that he was justifiably and deeply upset by the conduct of MBF on that day. He was visibly affected by having to recount the events at the auction sale leading up to the decision by MBF to sell his home.

318 I also take these matters into account on the question of delay. The breach of duty on the part of MBF occurred on the day of the auction sale, 18 August 2001. Mr Nolan did not issue his writ until 7 March 2007. Although, this may be considered an unusually lengthy delay in prosecuting his rights, properly considered as it should be by a court of equity in the context of the circumstances of the case as a whole, I do not consider that the delay was such that it would be just and equitable to set an earlier date for the assessment.

319 Furthermore, a court of equity may undertake the exercise with the full benefit of hindsight. Foreseeability has no part to play in the assessment involved in the taking of accounts in equity. With the object of putting the wronged plaintiff back into the position he would have been in, but for the infringement of his rights, the equitable approach is to look at what has actually happened to the value of assets, and what transactions took place, in later years. If necessary, the calculation can also embrace an assessment of loss of a chance.[138]

320 Accordingly, the time to which the account should be calculated should be the date of the pronouncement of the judgment ordering the defendant to pay to the plaintiff the amount, if any, found due on the taking of the account.

321 The plaintiff has presented his case on quantum thus far in a manner consistent with the taking of accounts, although it was framed in terms of a claim for equitable compensation. He did not formally seek an order for the taking of an account and his case, if it is to be put on this basis, is not complete.

322 The particulars of loss and damage, which took the form of accounting calculations undertaken by the plaintiff, were only produced on the first day of the trial. I am not satisfied that the defendant has had an adequate opportunity to address the account, so far as it goes. To take one example: the plaintiff's account makes reference to $101,250 expended in stamp duty and legal costs arising from the acquisition of a new dwelling house. The account also includes reference to the cost mortgage payments on the new dwelling house totalling $39,000 at the rate of $13,000 per annum for 3 years. However, no further details of this property purchase were provided, and no cross-examination was conducted by the defendant on the details of this seemingly important transaction.

323 The statement of claim seeks, in addition to the other relief claimed: "E. Such further or other orders as this Honourable Court considers appropriate". If an order was made granting the relief sought by the plaintiff in paragraph E of its statement of claim it would be open to make an order for the taking of an account. Such an order would be within the scope of the paragraph. It would also be clearly appropriate that I should make such an order, in the light of the authorities to which I have referred.

324 However, neither party addressed this line of cases or made submissions as to whether the taking of an account was the appropriate relief, if any was to be granted. There may well be factors which would militate against the making of an order for the taking of an account at this point, and I am not prepared to make such an order without having the advantage of hearing further from the parties.

325 Were I to make an order for the taking of an account, I would follow the principles referred to by Whelan J in St George Bank Ltd v Irani.[139]

326 The taking of the account, if the order is to be made, would be undertaken on the basis of the findings of fact and law which I have made in this judgment. Issues already determined against a party should not be sought to be re-litigated in the course of any accounting.

327 Further, given the extensive material produced on discovery in the proceedings thus far, and that liability has been finally determined in this proceeding, and further given that some key findings on the quantum of loss are able to be made, like Whelan J in St George Bank, I would not be prepared to order further discovery in relation to any accounting in the absence of affidavit material demonstrating the existence, or likely existence, of specific relevant undiscovered documents.

328 The orders I would make would finally dispose of this proceeding save for any accounting to be undertaken by an Associate Judge. I would reserve liberty to the parties to apply so that any dispute which arises before the Associate Judge can be brought before me if it is considered that this would be appropriate.

329 Were I to make orders for the taking of an account, and subject to hearing the parties on the question, they would be the following orders:

1. That an account be taken before an Associate Judge of the Court pursuant to Order 52 of the Supreme Court (General Civil Procedure) Rules to determine the amount owing by the defendant to the plaintiff arising from the wilful default of the defendant which I have found in accordance with the reasons here delivered.
2. The account be taken in accordance with the following directions, and otherwise as the Associate Judge may direct from time to time:

(a) The proceeding is referred to the Associate Judge responsible for listing for allocation to an Associate Judge in accordance with this order.

(b) The Associate Judge so appointed shall determine the amount, if any, owing by the defendant to the plaintiff.

(c) In accordance with the directions of the appointed Associate Judge, the parties may file and serve any further affidavits which are relevant to the taking of the account and rely upon the same.

(d) The defendant may file and serve interrogatories for the interrogation of the plaintiff in accordance with the directions of the appointed Associate Judge.

(e) The costs of the accounting are reserved to the Associate Judge taking the account.

1. Pursuant to Rule 52.01(2) of the Supreme Court (General Civil Procedure) Rules, the defendant is to pay the plaintiff the amount, if any, found due on the taking of the account.

330 Pending the further hearing which is proposed, I make the following orders:

1. The proceeding be adjourned and re-listed to enable the parties to make submissions on the question as to whether an order for the taking of an account should be made, and the form of any such order.
2. At the re-listed hearing I will also hear the parties on the question of the costs of the proceeding to date, including whether those costs should be awarded now, or whether the award should await the outcome of the taking of the account, should this be ordered.

[1] See, for example: Goldcel Nominees Pty Ltd (Provisional Liquidator Appointed) v Network Finance Ltd [1983] VicRp 86; [1983] 2 VR 257.

[2] Collie v Merlaw Nominees Pty Ltd [1998] VSC 2003 & [1999] VSC 84; Collie v Merlaw Nominees Pty Ltd & Anor [2001] VSC 39; Collie v Merlaw Nominees Pty Ltd (No. 2) [2001] VSC 60.

[3] Collie v Merlaw Nominees Pty Ltd [1998] VSC 2003 & [1999] VSC 84.

[4] Collie v Merlaw Nominees Pty Ltd & Anor [2001] VSC 39.

[5] Collie v Merlaw Nominees Pty Ltd (No. 2) [2001] VSC 60.

[6] Nolan v MBF Investments Pty Ltd [2001] VSC 175.

[7] [1953] HCA 78; (1953) 90 CLR 295 at 306.

[8] Duncombe v Porter [1953] HCA 78; (1953) 90 CLR 295 at 311.

[9] [1973] UKHL 2; [1974] AC 235 at 251.

[10] Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201 per Lord Diplock; Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at 198 [43] per Gleeson CJ, Gummow and Hayne JJ.

[11] [2001] NSWSC 709 at [406].

[12] [2009] NSWSC 294.

[14] (1991) 22 NSWLR 466.

[17] (1997) 42 NSWLR 396 at 402.

[18] [1998] FCA 1340; (1998) 158 ALR 267 at [273].

[19] See: Sykes, E.I. & Walker, S. The Law of Securities, Fifth Edition (1993) at 117-118.

[20] [1973] HCA 20; (1973) 129 CLR 477.

[22] Forsyth v Blundell [1973] HCA 20; (1973) 129 CLR 477 at 481.

[23] [1976] VicRp 26; [1976] V.R. 309.

[25] [1983] VicRp 86; [1983] 2 V.R. 257.

[27] [2007] VSCA 113.

[29] Compare with the distinction noted by Ashley J in Guss v Geelong Building Society (in liq) [2001] VSC 37, and the differing approaches to s.77(1). Whereas Lush J in Henry Roach held that the mortgagee's obligation was to take reasonable care to obtain a proper price, Murphy J in Goldcel Nominees held that the duty was to take "reasonable steps to obtain the best price".

[30] Vasiliou v Westpac Banking Corporation [2007] VSCA 113at [63]-[64].

[31] See: s.78 Land Titles Act 1980 (Tas), which relevantly mirrors s.77(1) TLA.

1. [32] "Controller" is defined in the dictionary in s.9 Corporations Act 2001 to mean : 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 price that is reasonably obtainable, having regard to the circumstances existing when the property is sold.

[33] [1906] HCA 26; (1906) 3 CLR 925 at 943-944.

[34] [1973] HCA 20; (1973) 129 CLR 477 at 481.

[35] Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VicRp 26; [1976] VR 309 at 313.

[36] Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] VicRp 86; [1983] 2 VR 257 at 261-262.

[37] [1901] UKHL 3; [1902] AC 24 at 30.

[38] [1953] VicLawRp 37; [1953] VLR 246.

[41] [1965] HCA 17; (1963) 113 CLR 265 at 275.

1. [42] Windella (NSW) Pty Ltd v Hughes [1999] NSWSC 1129; (1999) 49 NSWLR 158; Fisher, William Richard Fisher and Lightwood's Law of Mortgage. 2nd Australian ed. (2005) at 124 [4.7].

[43] [2000] WASC 91; (2000) 22 WAR 172 at 184.

[44] Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; [1972] 126 CLR 161 at 164 per Walsh J; Allfox Building Pty Ltd v Bank of Melbourne Ltd (1992) NSW ConvR 55-634 (Supreme Court of NSW, Equity Division, Powell J).

[45] Re Forrest Trust. Trustees Executors and Agency Co Ltd v Anson [ [1953] VicLawRp 37; 1953] VLR 246 at 256 and 257.

[46] Fisher, William Richard Fisher and Lightwood's Law of Mortgage. 2nd Australian ed. (2005) at 506 [20.37]; also at 511 [20.42], and 513-514 [20.45]. Also refer the cases therein cited.

[47] [1944] HCA 4; (1944) 68 CLR 261 at 28.5.

[48] [1947] Ch 187 (CA) at 194 per Moreton L.J.

[49] [1947] Ch 187 (CA) at 195.

[51] Minister of State for the Army v Dalziel [1944] HCA 4; (1944) 68 CLR 261 at 285.

[52] [1999] HCA 53; [1999] 201 CLR 351 at [86].

[53] [1999] FCA 33; (1999) 84 FCR 423 at 431.

1. [54] The prominent American jurist Wesley Newcomb Hohfeld (1879-1918) was the author of the seminal Fundamental Legal Conceptions, As Applied in Judicial Reasoning and Other Legal Essays (1919). Hohfeld died prematurely in 1918, leaving only a few law journal articles as his published work. His 'Fundamental Legal Conceptions' was originally published as two articles in the Yale Law Journal for 1913 and 1917 ((1913) 23 Yale Law Journal 16, and (1916-1917) 26 Yale Law Journal 10) and left incompletely revised at his death. His writings were collected and published posthumously.

[55] Hohfeld, Wesley Newcomb "Some Fundamental Legal Conceptions as Applied in Judicial Reasoning" (1913) 23 Yale Law Journal 16 at 21-22.

[56] [2008] HCA 7; (2008) 234 CLR 210 at [44].

[59] Shakespeare, W The Merchant of Venice IV.I.371-373.

[60] [1992] HCA 23; (1992) 175 CLR 1.

[61] [1992] FCA 566; (1992) 112 ALR 529.

[62] Minister for Foreign Affairs and Trade v Magno [1992] FCA 566; (1992) 112 ALR 529 at 535.

[63] [2006] VSCA 85; (2006) 15 VR 22.

[65] Australian Treaty Series 1980 No. 23.

[66] Australian Treaty Series 1976 No. 5.

[67] Save for Article 41 which entered into force for Australia on 28 March 1979.

[68] Mabo and Others v Queensland (No. 2) [1992] HCA 23 at 42.

[69] Vienna Convention on the Law of Treaties, Article 26.

[70] UN Human Rights committee General Comment No. 16 The right to respect of privacy, family, home and correspondence, and protection of honour and reputation - Art. 17, (1988), at para. 4.

[71] Application no. 8978/80, Judgment of the Court Chamber (ECHR) 26 March 1985[1985] ECHR 8978/80; , (1986) 8 EHRR 235.

[73] Applications nos. 41138/98 and 64320/01, Judgment No. 2 of the Court Chamber (ECHR Second Section) 12 July 2005.

[75] Chapman v United Kingdom Application no. 27238/95, Judgment of the Court Chamber (ECHR) 18 January 2001.

[76] Application no. 62101/00, Judgment of the Court Chamber (ECHR) 18 March 2008.

[77] Application no. 19009/04, Judgment of the Court Chamber (ECHR) 13 May 2008.

[78] Application no. 28261/06, Judgment of the Court Chamber (ECHR First Section) 15 January 2009.

[80] Application no. 13229/03, Judgment of the Court Chamber (ECHR) 29 January 2008 at [67].

[81] Communication No. 305/1988, U.N. Doc. CCPR/C/39/D/305/1988 (1990).

[83] Oxford Dictionary and Thesaurus, OUP, 1997.

[84] [2009] VSC 66 at [264]-[269] per Kyrou J.

[85] [2004] HCA 37; (2004) 219 CLR 562 at 577 [19].

[87] [2004] HCA 40; (2003) 209 ALR 116 at [21].

[88] Coco v The Queen [1994] HCA 15; (1994) 179 CLR 427.

[89] See: Potter v Minahan [1908] HCA 63; (1908) 7 CLR 277 at 304, where O'Connor J cited a passage from Maxwell on the Interpretation of Statutes, 4th ed (1905) at 122.

[90] [1997] UKHL 37; [1998] AC 539 at 587, 589.

[91] (2002) 2 AC 115 at 131.

[92] Plaintiff S157/2002 v The Commonwealth (2003) 211 CLR 476 at [30].

[93] Daniels Corporation v ACCC [2002] HCA 49; [2002] 213 CLR 543 at 582.

[94] Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] VicRp 86; [1983] 2 VR 257 at 262.

[96] [1981] HCA 70; (1981) 152 CLR 491.

[97] [1906] HCA 26; (1906) 3 CLR 925 at 943- 944.

[99] [1912] HCA 9; (1912) 13 CLR 676 at 702- 703.

[100] Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925 at 945.

[101] [1912] HCA 9; (1912) 13 CLR 676.

[106] (1935) 35 SR (NSW) 391.

[112] (1992) NSW ConvR [55-634] at 59,629.

[113] See: Fisher and Lightwood, Law of Mortgage (Second Australian Edition) 2005 at 812-813 [39.24]; Sykes and Walker, The Law of Securities, 5th Ed, 1993 at 142; and Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 4th Ed, 2002, at 875-876 [25-035] and 881-2 [25-070].

[114] Ibid at 870 [25-015] and 881-882 [25-070].

[115] Patricia Loughlan, 'The Historical Role of the Equitable Jurisdiction' in Patrick Parkinson (ed), The Principles of Equity (1996) 3, 17 [109]; Ian Davidson, 'Taking Accounts' in Patrick Parkinson (ed), The Principles of Equity (1996) 880, 887 [2605].

[116] Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 4th Ed, 2002, at 869-870

[117] Doyle and Wright, "Restitutionary Damages - The Unnecessary Remedy?" [2001] MULR 1.

[119] [1968] HCA 50; [1970] 122 CLR 25 at 34-35.

[121] [1969] 1 Q.B. 699 at 727 per Salmon LJ.

[122] (1804) Ch 305.

[124] [1914] AC 932 at 958 per Viscount Haldane LC.

[125] See for example the assessment of Dixon AJ (as he then was) in McKenzie v McDonald [1927] VicLawRp 19; [1927] VLR 134 at 146.

[126] Ferrari Investment (Townsville) Pty Ltd (in liq) v Ferrari [2000] 2 Qd 359 per Thomas JA at 371 [38].

[127] [1973] 2 WLR 405.

[129] Compare. Johnson v Agnew [1979] 2 WLR 487 in which Lord Wilberforce disagreed with Wroth v Tyler in so far as it suggested that damages under Lord Cairns' Act should be awarded on a different basis from common law damages.

[130] [1973] 1 WLR 1406.

[132] [1963] VicRp 67; [1963] VR 465.

[134] (1978) 83 DLR (3d) 1.

[136] Getzler 'Am I My Beneficiary's Keeper? Fusion and Loss-Based Fiduciary Remedies' in S Degeling and J Edelman (eds.), Equity in Commercial Law, LBC (2005), at 262.

[137] Judgment of 15.01.2009, Application No. 28261/06.

[138] See: Getzler 'Am I My Beneficiary's Keeper? Fusion and Loss-Based Fiduciary Remedies' in S Degeling and J Edelman (eds.), Equity in Commercial Law, LBC (2005), at 262.; and the Canadian case, Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at 556, per McLachlin J.

[139] [2007] VSC 382.