Vasiliou v Westpac Banking Corporation [2004] VSC 208

2. The plaintiff, Panayiota Vasiliou, was, between 28 October 1998 and 22 June 2000, the registered proprietor of the land situate at and known as 50 Great Valley Road, Glen Iris, and being the land more particularly described in Certificate of Title Volume 8453 Folio 844. In fact, the property had been for some 20 years in her family because the title shows that her father, Andrew Peter Vasiliou, became registered as proprietor on 30 November 1977. He made a gift of the land to his daughter in 1998 the expectation that she might live there when married.

5. The title also shows that when she became registered as proprietor, Ms Vasiliou mortgaged the land to the firstnamed defendant, Westpac Banking Corporation ("the Bank"). This case concerns her allegations that the Bank breached the law in exercising its power of sale under the mortgage when it sold the land to the secondnamed defendant, Lachlan Ian Fenwick, on or about 9 April 2001 for $400,000. Ms Vasiliou seeks orders that the sale be set aside, that she be restored as the registered proprietor of the land and that she be awarded damages. The Registrar of Titles is added as the thirdnamed defendant in order to permit the making of an order, if it be appropriate, for the rectification of the register. Having regard to the allegations made against the Registrar, she was represented at the trial.

8. It should be noted that the plaintiff's case was in fact conducted by her father on her behalf. I permitted this, notwithstanding that he is not a legal practitioner, because it was apparent from what Ms Vasiliou told me she would be unable to do so herself.

11. On Day 1 of the trial the plaintiff sought to amend her claim to add a claim for:

"Compensation for loss of wages, personal suffering, stress, health issues and other disorders resulted from this bizarre and unethical actions by the defendants and associates."[1]

Although there were no O. 44 statements and there had been no discovery upon these matters, I nevertheless allowed the amendment but directed that the trial of these damages, as distinct from her claim for damages for commercial loss, should be deferred until the other issues in the case had been resolved. The other amendments which I then permitted were less controversial and they were addressed at trial.

16. On Day 4 the plaintiff again sought to amend her statement of claim. I allowed this amendment only to the extent of permitting her to amend her allegations in paragraphs 8(a) and 20(a) that the true value of her property at the time of the sale was $720,000 to $760,000. Her other amendments then sought were refused because they raised new issues late in the trial and did not really add anything of substance to the case already pleaded.

20. It was not challenged that Ms Vasiliou granted the mortgage to the Bank in 1998 or that its terms included a right to take possession and to sell to recover the secured loan. The amount of the loan was originally $225,000 which was repayable, including interest, by monthly payments of $1,449.17 for the first 12 months and thereafter by monthly payments of $1,557.95.

23. The land is a residential block of about 678 m2 upon which has been erected a brick veneer dwelling. The residence appears to have been erected in the late 1960s. At the time with which I am concerned it was let to Mr Fenwick pursuant to a 12 month tenancy agreement which commenced on 7 July 2000 at a rental of $1,400 per month. Under the tenancy agreement the rental was to be paid by direct debit in favour of account number 037 117 730 559 standing in the name of Ms Vasiliou at the Bank of Melbourne.

26. On 10 July 2000, a few days after the tenancy agreement commenced, the bank statements show the amount owing under the mortgage to be $217,502.88. It will have been noted that the monthly rental was not sufficient to cover the monthly instalments which were then $1,557.95. The statements also show that Mr Fenwick's rental was credited each month until January 2001. On 5 January 2001, the date of his last payment, the balance stood at $218,153.53.

29. Towards the end of 2000 the Bank was becoming restive. Notices of demand or default were served on 26 October 2000 and 19 December 2000. In response to the latter notice Ms Vasiliou wrote a letter dated 29 December 2000 to the Bank. In this letter she made two statements each of which was false. She offered no excuse for the fact that she had failed to pay the agreed instalments under the mortgage. In the first statement she said that "we" were currently selling another investment property, the proceeds of which would pay the arrears. In evidence she said she thought this referred to a property in Claremont Street, South Yarra. This property was in fact not for sale at this time. The second statement suggested to the Bank that it should be receiving a direct deposit of $4,000 per month. This may have been an inadvertent slip, for Mr Fenwick was paying only $1,400 per month. She then suggested that the Bank capitalise the arrears. The Bank declined this suggestion and required the arrears to be brought up to date by 14 January 2001. These arrears were said to total $3,091.10 with a further $1,706 falling due on 14 January.

32. On or about 25 January 2001, Mr Fenwick received a letter from the collection agent of the City of Boroondara. This advised him that municipal rates and charges were outstanding on the property and it requested, pursuant to s. 177 of the Local Government Act 1989, that he pay his monthly rental to the council. Mr Vasiliou urged him to ignore this request when Mr Fenwick raised the matter with him soon after. Mr Fenwick, nevertheless, decided to comply with the council's request and no further rental payments were thereafter deposited in Ms Vasiliou's Bank of Melbourne account. This had the consequence that her account became increasingly out of order.

35. From this point the Bank set in train procedures to realise its security. According to Ms Vasiliou, she left the matter in the hands of her father after she received the Bank demand of 19 December 2000 and had sent her response of 29 December at his direction. It seems that her father did nothing further.

38. David Robert Pettet, a companies officer with the Bank, was concerned with accounts which were significantly out of order. The Vasiliou account was brought to his attention as such in November 2000 and it seems he had control of the account from that time. He spoke of a telephone conversation which he had with Mr Vasiliou on 7 February 2001. Mr Vasiliou denied that this conversation took place but I accept the evidence of Mr Pettet, supported as it was by his electronic diary record. He said that in this conversation he told Mr Vasiliou that the Bank's notices had expired and that, if the arrears could not be paid, the Bank would proceed to sell up the property. Mr Vasiliou asked for more time saying, falsely, that he was selling other property. Mr Pettet responded that the Bank was not prepared to wait longer and that it would proceed.

41. By letter dated 14 February 2001, the Bank instructed its agent, Mattisam Pty Ltd trading as Mortgage and Estate Realisation Company ("MERC"), to take steps to obtain vacant possession and to sell the land. On 6 March the Bank wrote to Ms Vasiliou stating that it had taken possession and would be exercising its power of sale. Ms Vasiliou and her father each said that they did not see this letter before this proceeding but the evidence of Mr Pettet was that he sent it. I accept his evidence. In fact two copies of this letter were sent to her, one to a post office box in St Kilda which was conducted by her father and herself, and the other to 18 St Kilda Road which was the address where she was living at the time with her father. On the same day another letter was sent by Mr Pettet to her at each of these addresses requiring her to remove any unfixed property. I assume that these letters were duly delivered to their addresses. I can reconcile the sworn evidence of Mr Pettet and Ms Vasiliou by adopting her suggestion that her father was in fact dealing with the matter so that the letters were intercepted by him. Nevertheless he took no steps to seek to avoid the Bank's action.

44. Thereafter the Bank acted without reference to Ms Vasiliou or, indeed, her father. The matter was handled by its agent, MERC, and in particular by Rosemary Decker, the account manager of that company. She contacted the tenant, Mr Fenwick, and arranged for a notice to vacate to be served upon him by the firm of local estate agents, Noel Jones & Associates. A sub-agent then with that firm, Michael Patrick McCarthy, told me that he served the notice to vacate on the tenant on 20 March 2001. Ms Decker said that Mr Fenwick later telephoned her. In the course of this conversation he indicated to her an interest in purchasing the property. She told him, as was the fact, that the policy of the Bank in such a case was for the Bank to receive one offer only from the tenant. There would be no haggling. If this offer were considered acceptable to the Bank having regard to two independent valuations the Bank might accept the offer and sell to him. If not, the property would be put to auction.

47. Mr Fenwick then obtained a valuation from valuer Glenn Dickinson dated 26 March 2001. The market value shown in this valuation is $400,000 and Mr Fenwick made an offer to purchase at that price.

50. About this time, the Bank received its own valuation dated 30 March 2001 from valuer Peter Geoffrey Wigg which gave the property a market value of $390,000 and a forced sale value of $360,000.

53. Mr McCarthy, although not a valuer, had himself inspected the property on 23 March and had given to MERC on 29 March his appraisal of the likely selling price of $320,000 to $340,000.

56. Having received this information, Ms Decker on 4 April advised Mr Pettet of the tenant's offer and that she was arranging for a second valuation. On 9 April she instructed Mr McCarthy to have Mr Fenwick execute a contract of sale which would be subject to this second valuation. On the same day, Mr Fenwick signed a contract of sale and handed to Mr McCarthy a cheque for the deposit. These were sent to MERC on 10 April 2001.

59. Meantime, Ms Decker arranged for a second valuation from valuer John Welch whose opinion dated 11 April 2001 was that the property had a market value of only $320,000 and might realise only $300,000 on a forced sale.

62. Some time before, on the 17 April 2001 Robin Francis Matters, a principal and director of MERC, executed the contract of sale on behalf of the Bank.

65. Under the terms of the contract of sale settlement was due on 8 June and it in fact occurred on that date. The transfer was lodged in the Land Titles Office on 18 June and registered on 22 June.

68. On behalf of Ms Vasiliou, it was put that the sale to Mr Fenwick was at an undervalue and that the property should have been put to auction. Mr McCarthy, an auctioneer of considerable experience, disagreed. He thought the tenant's officer was above the market price and that a better offer could not be expected upon auction and he communicated this opinion to Mr Matters. Mr Matters said that, in the light of the information he had as to the value, he had recommended to Mr Pettet that the tenant's offer be accepted. The response of Mr Pettet was that he might sell at that price provided he had two valuations to support it.

71. Mr Fenwick financed his purchase of the land by a mortgage loan from the Bank of Melbourne. This bank obtained a valuation for mortgage purposes dated April 2001 from valuer Andrew Goding. His valuation gave the market value as $400,000. Notwithstanding the association between the Bank of Melbourne and the Westpac Bank, Mr Pettet said, and I accept, that he was not aware of this valuation when he approved the sale, if indeed the Goding valuation had been given at that time.

74. The position, in summary, with respect to these valuations and appraisals obtained on or about the time of sale is as follows:

78. At the time the Bank agreed to sell to Mr Fenwick, the information in its possession was as set out above, but did not include the valuations of Mr Dickinson or Mr Goding and, perhaps, not the municipal valuation. In these circumstances, I conclude that it was reasonable for the Bank to expect in early April 2001 that it might not sell the land on the open market for a price of more than $400,000.

81. One thing the Bank did not know was that, a month later, on 12 May 2001, the adjoining property, at 52 Great Valley Road, would be sold at auction for $890,000. The enormous disparity between this price and the $400,000 obtained for his daughter's property has caused Mr Vasiliou to be suspicious, if not distrustful, of the bona fides of the sale to Mr Fenwick. Much of the trial was occupied with his attempts to use the sale of No 52 to impugn the sale of the land the subject of this litigation.

84. His suspicions were fed by a number of events which followed. The Bank went ahead after March and dealt with the property as I have described. It did not keep its customer or her father informed of what was happening. In particular it did not inform either of them of its readiness to sell the property by private sale without advertisement. I say nothing for the moment of its entitlement, as a matter of law, to dispose of the property in this way. Nor do I suggest that, as a matter of law, it was under an obligation to do so. It is, in any event, not the usual way for a mortgagee to realise its security and one might have expected the Bank to bring to the attention of its customer the fact that it was acting in this way and the reasons for it. By not so doing it was taking a serious risk that the customer might at a later time impugn the sufficiency of the price obtained. It did not even inform its customer that her property had been sold. This was compounded in Mr Vasiliou's mind by a telephone conversation which took place on or about 11 June between him and Mr Fenwick. It seems that Mr Vasiliou called Mr Fenwick to discuss the rental which had not been paid since January. Mr Fenwick responded to this enquiry by saying: "There is no rent due. The bank has been in possession of the property since March". This was a misleading statement. I leave to one side the questions whether the payment of the monthly rental to the Council had satisfied its entitlement to arrears of rates so that rent had again become payable to the owner. I put to one side, too, whether it was factually correct to say that the Bank had entered into possession in March or at all. His response that the Bank was in possession was made two months after Mr Fenwick had agreed to purchase the property from the Bank and a few days after that purchase had been completed and he had taken a transfer of the title and had, formally, become entitled to possession as owner. It was a response which lacked the candour which might have been expected of a person with nothing to hide. No explanation for this statement was given. It may have been that Mr Fenwick said what he said in order to avoid an awkward confrontation with a man whom he feared. Nevertheless, the fact that it was made reflects no credit on Mr Fenwick. When Mr Vasiliou later learnt the true situation it is not surprising that he jumped to the erroneous conclusion that the sale was a collusive one and that the former tenant's misleading answer was an attempt to cover this up.

87. The second matter is even more remarkable. Mr Pellet said that, upon the settlement of the sale to Mr Fenwick, there was, after the Bank had taken its entitlements, a surplus due to the mortgagee of about $150,000. In the ordinary course the Bank would be obliged to account to its mortgagor and to pay the surplus to her. In this case the Bank did no such thing. The surplus was transferred by the Bank's solicitors to their client which, in turn, placed it in an interest bearing suspense account. Mr Pettett said, rather unconvincingly, that he overlooked this matter at first and that, after this proceeding had been commenced on 30 July 2001, he decided, acting on legal advice, to retain the money to cover the Bank's entitlement to costs in the event that an order for these might be made in this proceeding. The position was not regularised despite complaint from the plaintiff's solicitors until 17 January 2004 when the money was paid to her with interest. Again, this apparently irregular conduct by a banking institution without explanation caused Mr Vasiliou to entertain doubts about the propriety of its conduct with respect to the whole transaction and led him to the conclusion that it was just another step in a conspiracy to disadvantage him and his daughter.

90. As will appear, I am satisfied that there was no such conspiracy; no collusion between the Bank and Mr Fenwick, and that Mr Vasiliou's suspicions were nothing more than that. Nevertheless these matters have caused Mr Vasiliou to jump to a conclusion which has produced this costly litigation. While it may be understandable that Mr Fenwick was concerned to avoid a confrontation with a man whom I have observed in the witness box and in Court to be irrational, stubborn and even aggressive, the Bank cannot avail itself of this excuse.

94. Of those who provided appraisals or valuations prior to the sale, Mr McCarthy, Mr Wigg and Mr Welch gave evidence before me. All of them rejected the sale of No 52 as a comparable sale. It is clear from the evidence that this was a sale of a vastly superior property. It had been the subject of renovations and it presented as a luxury home. This is to be contrasted with the presentation of the plaintiff's property as an outmoded residence with apparent structural damage, the subject of an unsatisfied council building repair order dated 9 May 2000. It is fair to say that no witness supported the contention of Mr Vasiliou put on behalf of his daughter that the sale of No 52 was comparable or that the value of the subject land was anything near the price obtained for No 52.

97. As I have set out above, the evidence of the persons who provided contemporaneous valuations and who were called before me show that the land at the time of the sale to Mr Fenwick had a market value of between $320,000 to $390,000.

100. In support of a greater value, evidence was led from valuer Patrick John Brady. Mr Brady was retained by Mr Vasiliou in January 2004 to value the property as at that date. His opinion is that the land was then worth $500,000 and the improvements $25,000, a total of $525,000. In response to an attempt to relate this value back to April 2001, Mr Brady expressed the view that prices between that date and January 2004 in the Glen Iris area near the subject property had risen by 80% over the past five years on average. As a matter of mathematics this would give the subject property a value of $292,000 in January 1999.

103. The final witness on this topic was Peter Lionel White a licensed real estate agent and director of Hocking Stuart, Glen Iris Pty Ltd. Mr White was and is not a certified practising valuer. He provided Mr Vasiliou with an appraisal dated 29 June 2001 in which he expressed the opinion that the current value of the property as it then stood with just some "cosmetic modifications" was in the vicinity of $520,000 to $560,000. Mr White was called to support this opinion. Needless to say it was the subject of criticism on behalf of the Bank and Mr Fenwick. It was apparent as a result of this that Mr White's assessment was a "drive-by" appraisal; he did not enter upon the property; he did not carry out an inspection of the improvements; and he did not undertake any detailed analysis of comparable sales. He was not aware of any structural faults or of the council building repair order. Moreover, his assessment was based on a description of the buildings given to him by Mr Vasiliou which was, in important respects, erroneous. He was told that there was decking, a double garage with remote control, a ducted vacuum system, a sprinkler system and a family room. The house had none of these. He was told that it had four bedrooms, whereas it had only three. While I could well understand that a competent real estate agent with experience in the locality, as was Mr White, could very accurately predict a likely sale price, I am not prepared to accept his opinion over that of the valuers because his opinion was based on less complete and less accurate information than theirs.

106. I have not overlooked the evidence of Gavan Michael Bourke, a certified practising valuer retained by the solicitors for the Bank in February 2004 to give a retrospective valuation of the property. His opinion was that it had a market value in April 2001 of $400,000. This evidence confirms that of the contemporaneous valuations.

109. I therefore conclude that in early April 2001 the property the subject of this proceeding had a market value of $400,000 or less. I accept that the valuation of real estate is an inexact science, but the overwhelming evidence in this case leads to the conclusion that the price offered by Mr Fenwick was at the upper end of the range of likely market values.

114. The plaintiff's first allegation against the Bank was that it did not conduct the mortgagee's sale in good faith and having regard to the interests of the mortgagor, contrary to s. 77(1) of the Transfer of Land Act 1958. Four particulars of this are given:

"(a) the true value of the house was approximately $720,000 - $760,000;

(b) the house was sold by private treaty rather than by public auction;

(c) the house was not sold with vacant possession but rather was sold to Fenwick who was a tenant in occupation of the house;

(d) the sale of the house was not advertised properly or at all."

As to the first, I have found that it has not been made out. As to each of the other particulars, it has been established as a matter of fact. The Bank in fact took no step by advertisement or otherwise to attract the interest of any person other than Mr Fenwick. While s. 77(1) expressly contemplates a sale by private contract, this must be achieved by the mortgagee acting in good faith and having regard to the interests of the mortgagor.

121. In this case, I have no hesitation in rejecting the suggestion, for it was nothing more than that, put on behalf of Ms Vasiliou that the Bank colluded with Mr Fenwick or that either of them had any fraudulent intent or that the Bank wilfully or recklessly sacrificed the interests of the mortgagor in favour of its own. The cases to which I have been referred used differing expressions to identify what price a mortgagee must take reasonable steps to obtain: The best price available[2], a fair price[3], a proper price[4], or the true market value[5]. I do not have to venture into this debate for the evidence in this case shows that $400,000 was all of these. And having obtained this price, the question, whether the Bank took reasonable steps to obtain it, disappears. I take the failure to advertise as an example. I accept, for present purposes, that a mortgagee exercising its power of sale must sufficiently advertise that the property is for sale so as to attract the attention and interest of likely buyers. It is not difficult to imagine a case where the failure to do so would establish a breach of s. 77(1), that this is because the failure has or is likely to have had the consequence that the sale price obtained was insufficient. If it were shown that the sale price was, nevertheless, not insufficient, then the want of advertisement ceases to be significant.

124. It is for this reason that I conclude that, since the price obtained from Mr Fenwick was a sufficient price, the first contention must fail.

127. Next, the plaintiff seeks to set up a promissory estoppel based on the terms of the notice of default dated 19 December 2000. This notice contained an information statement which drew the attention of the defaulting borrower to options available to her other than immediate payment of the arrears. One such option was to contact the Bank, "to make a repayment arrangement". This document is then alleged to have induced Ms Vasiliou to the following assumption:

"That if she should contact the bank and propose a repayment arrangement, the Bank would not take any further steps to sell the house without first responding to such proposal."[6]

She then says that, in reliance upon this assumption, she made the proposal contained in her letter of 29 December 2000 but the Bank capitalised the arrears until the non-existent sale of another investment property would enable her to pay them. And, furthermore, she took no further step to pay the arrears. This contention is not supported by the facts or by the law. I find that the notice would not give rise to any such assumption and that it certainly did not do so in this case. The Bank did respond to her proposal and she, or her father on her behalf, well knew this. There is no substance in this contention.

132. There appears also to be in paragraph 18 of the statement of claim a hint of a contention of unconscionability against the Bank. In that paragraph it is said that the plaintiff was in a position of special disadvantage or disability in relation to the conduct of the mortgagee sale inasmuch as the sale was conducted by the Bank and not by the plaintiff herself, so that she could not control the manner and terms of the sale so as to obtain the best price. The plea appears to go nowhere further against the Bank and this is not surprising. There is no evidence of unconscionable behaviour by the Bank.

135. Against Mr Fenwick it was put that he acted unconscionably in that he took unconscientious advantage of the plaintiff's position of special disadvantage or disability to which I have referred. In support of this, reliance was placed upon the full particulars of breach by the Bank of its statutory duty to which I have referred and upon which I have made findings. Further, against Mr Fenwick it is said that he knew or ought to have known those four particularised facts. As to the first of them, I am satisfied that he had no knowledge of the value of the property other than that he had a valuation for $400,000. There is no evidence that he knew or ought to have known otherwise. He knew, however, each of the other three facts particularised.

138. I reject the suggestion put on behalf of Ms Vasiliou that Mr Fenwick acted in any way improperly or unconscientiously. He did not "catch a bargain" at the plaintiff's expense. It also follows from this that her alternative claim against him based on an alleged contravention of s. 7 of the Fair Trading Act 1999 must fail.

141. I turn finally to the contentions put against the Registrar of Titles. The allegation in paragraphs 26 and 27 of the statement of claim is that on 15 June 2001 the plaintiff asked an officer at the office of Land Titles to stop any dealing with respect to the Certificate of Title for the subject land. This request was not acted upon so that the discharge of the Bank's mortgage be transferred to Mr Fenwick and his mortgage were all registered on 22 June.

144. The evidence showed that Mr and Ms Vasiliou attended the Office of Titles on Friday 15 June and sought to lodge an informal caveat on the title. In fact they returned on the same day attempting in vain to lodge three caveats. Mr Vasiliou was informed by Mr Van de Linden an officer at the office of Land Titles that he would not accept the caveats for lodgement. Mr Van de Linden advised him to seek legal advice, pointing out that he had time to do so as "these things wouldn't happen overnight". In fact the dealings were lodged on Monday 18 June.

147. The allegation appears to be that the Registrar was in breach of a statutory duty or in breach of a duty of care in not accepting one or other of the caveats or in not stopping the dealings which had been lodged on 18 June. These contentions cannot succeed. The caveats were irregular in form and did not disclose a caveatable interest. They could not therefore be accepted for lodgement. There was also no basis for the Registrar to stop or delay the Fenwick dealings. It is not for her to enter into the transactions which underlie the dealings which are lodged for registration. These are matters more appropriate for an application for an injunction.

150. I conclude therefore that all of the plaintiff's claims against all of the defendants have failed. There will be judgment for the defendants. I will hear counsel further as to the terms of this judgment and as to any consequential orders including costs.

[1] I have conceded obvious typographical errors in the passage quoted.

[2] Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] VicRp 86; [1983] 2 VR 257 at 261, per Murphy J

[3] Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676 at 680, per Griffith CJ

[4] Forsyth v Blundell [1973] HCA 20; (1973) 129 CLR 477 at 481, per Menzies J (diss); Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VicRp 26; [1976] VR 309 at 312, per Lush J

[5] Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 at 966, per Salmond LJ