Wang v HSBC Bank Australia Ltd
[2021] QCA 63
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- Unreported Judgment
- Wang v HSBC Bank Australia Ltd[2021] QCA 63
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Wang v HSBC Bank Australia Ltd[2021] QCA 63
Wang v HSBC Bank Australia Ltd[2021] QCA 63
[2021] QCA 63
COURT OF APPEAL
McMURDO JA
Appeal No 3800 of 2021
SC No 2251 of 2021
JIANYI WANGAppellants/Applicants
CHUYUE WANG
HUIFEN XIE
v
HSBC BANK AUSTRALIA LIMITEDFirst Respondent
ACN 006 434 162
CRAIG MAX SCUTELLASecond Respondents
IRYNA MULLIGAN
BRISBANE
THURSDAY, 8 APRIL 2021
JUDGMENT
- [1]This is an application to stay an order made by the Chief Justice that the appellants remove the caveat which they had lodged over their property at Hope Island. The property has been sold by the respondent, HSBC Bank Australia Ltd, as mortgagee exercising its power of sale, to the other respondents. That contract was made last year and was due to settle on 18 December 2020. A few days before then, the appellants lodged the caveat upon the ground that the bank had “failed to act in good faith in the exercise of its power of sale by failing to market the property for sale, and by selling the property at a significant under-value”.
- [2]The contract is yet to settle because of the caveat. The sale price is $5.51 million, which exceeds the bank’s secured debt which is approximately $4.6 million.
- [3]The bank applied to remove the caveat, and the application was heard on 8 March. The judgment was delivered on 25 March. The appeal was commenced on 6 April and the application for a stay of the judgment was filed at the same time. The appellants rightly apprehend that unless the caveat remains in place, or the bank is otherwise restrained from completing its contract, the contract will be settled and the property will be transferred to the other respondents.
- [4]There is no challenge to the fact that the power of sale was exercisable by the bank. Nor is it challenged that the bank is owed the amount which it claims is secured by the mortgage. The appellants’ case is that in the manner in which the power of sale was exercised, the bank did not act in good faith. By that is meant, in the language of Walsh J in Forsyth v Blundell (1973) 129 CLR 477 at 493, that the bank wilfully or recklessly sacrificed the interests of the appellants (see also Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 at 680, per Griffith CJ).
- [5]The appellants’ case, as stated in their caveat and as argued to the Chief Justice and on this application, is that the bank did not act in good faith, rather than that the bank breached its duty under s 85(1) of the Property Law Act 1974 (Qld) to take reasonable care to ensure that the property was sold at the market value. The case which the appellants have advanced involves a neglect of the appellants’ interests of a more serious kind. As McClelland CJ in Eq said in Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1994) 8 BPR 15,581 at 15,583, it involves a “departure from reasonable standards … so serious as to be properly characterised as unconscionable”.
- [6]In the judgment under appeal, her Honour found it unnecessary to determine whether the rule in Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164 applied so as to require the appellants to pay into court the bank’s debt. The appellants failed for other reasons, namely that they demonstrated no prima facie case that the bank breached the mortgagee’s duty of good faith, and that the balance of convenience was in favour of the removal of the caveat.
- [7]On the first question, the evidence demonstrated that the bank did obtain valuations of the house, ahead of exercising its power of sale, and did cause the property to be promoted by advertising and having it open for inspection. It spent about $19,000 in doing so. In January 2020, consultants engaged by the bank obtained a valuation which valued the house in the range of $5.5 million to $7.2 million. But that was upon the basis of a pontoon associated with the property being included, when it was separately owned. The same valuer, at the end of July 2020, valued the house in the range of $5 million and $6.75 million. The valuer then expressed concern about the effect on the market caused by the COVID-19 pandemic, and some caution about reliance upon his valuation because of that circumstance.
- [8]The property was auctioned on 8 August 2020, with a reserve price of $6.75 million. The highest bid was $4.5 million and the property was passed in. Later that month, the agent contacted Mr Scutella (one of the ultimate buyers) who lived in Sydney. He was given a virtual tour of the house and he had a friend inspect the property on his behalf. He and the other respondent (who is his wife) then made an offer of $5.5 million, which they subsequently increased to $5.75 million. However, that included the pontoon and ultimately there was a deduction from their offer which resulted in a contract made on 17 September at the price of $5.51 million. It is to be observed that this was within the range of values which the bank had been given in January 2020, and comfortably within the range given in July 2020.
- [9]The appellants purchased the property some years ago for $9 million, when the bank’s valuation advice ranged from $6.5 million to $7.7 million. The bank’s loan to valuation ratio of almost 60 per cent permitted the inference that the bank considered the property to be then worth at least $7.4 million. But the bank was entitled to act upon more up to date valuation advice.
- [10]The Chief Justice said that the essential complaint of the appellants was that the marketing period was truncated, because the bank accepted the offer within weeks of the auction. As her Honour said, the bank was not obliged to sacrifice its own interests in discharging its duty of good faith, and her Honour referred to the statement by Lush J, in Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 at 313, that a 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”. Her Honour further observed that there was no reason to suppose that a more propitious time was pending. Relevant to that question, of course, were the many uncertainties caused by the pandemic. Her Honour rejected the contention made by the appellants (for which no evidence was offered) that, at the time of the sale, it was a “notorious fact” that Queensland’s borders were about to open. In that respect, her Honour explained that the series of directions made by the State’s Chief Health Officer from April through October 2020, were of no evidentiary significance for the purposes of this case.
- [11]Her Honour rejected the argument that the bank should have undertaken international marketing of the property, a contention which is repeated here. Her Honour said that Mr Hickey, an expert agent in the appellants’ case, did not seem to have proposed that course of action in his “pitch” to the appellant’s consultants. However, the appellants submitted that there was evidence that Mr Hickey, in December 2019, recommended a digital advertising package which would have promoted the property to buyers from interstate or overseas. The bank did not engage Mr Hickey, but instead engaged another agent in May 2020. That agent proposed advertising which included local advertising in the Gold Coast Bulletin, an “editorial” in the Australian Financial Review and advertising on WeChat allowing for “international buyers”.
- [12]Her Honour referred to evidence from Mr Rodrigo that explained the bank’s reasons for accepting this offer, all of which, her Honour said, were “credible and uncontradicted”. Mr Rodrigo explained that this was the best offer which had been received, and was a significant improvement on the highest bid at the auction. He said there was no guarantee that a better offer would eventuate, especially with the uncertainty, as at August 2020, about the future for the economy and the prestige property market in particular, and about when international borders would reopen.
- [13]On the balance of convenience, her Honour said the following. Firstly, there was not a great deal to suggest that damages would not be an adequate remedy. As to that, at the time of the hearing before the Chief Justice, there was no indication of any prospect of the bank’s loan being paid out by another financier. Consequently, the apparent inevitability was then that the property would be sold by the bank, if not to these purchasers because of the caveat, then to another buyer.
- [14]Secondly, although it was probable that the bank would achieve at least a price which would meet the amount which was secured, if it had to resell, there was some risk that it would encounter difficulty finding another buyer within any reasonable time frame. Her Honour noted that the appellants had not paid anything into court to address that risk.
- [15]Thirdly, her Honour referred to the position of the other respondents, the present purchasers. The contract of sale permits the bank to terminate their contract in the event that there is a caveat which is not removed. Consequently, it was argued that the purchasers were not being materially prejudiced, because they did not have an unconditional contract. Her Honour’s point was a different one. She referred to the cost and inconvenience for the purchasers in taking steps to move from Sydney to their new home.
- [16]The notice of appeal lists some 15 errors which were made by her Honour. Nine of those errors are said to have affected her Honour’s consideration of whether there was a prima facie case. However as the argument was developed here, it focused upon two related complaints, namely that the property was marketed for an insufficient period of time, and to only a market in Queensland.
- [17]As to that first complaint, the appellants emphasise that the bank had received advice, within the January 2020 valuation, that there was a necessity for “an extended sales and promotion period of up to 6-12 months”. And in the updated valuation (in July 2020), the bank was advised that “the property would usually require an extended sales and promotion period of up to 12 months”. However, that advice had to be read in context. It was followed by the statement that “as the property is being promoted to the market within a shorter time frame or under forced sale conditions, we consider that the potential sale price may be severely reduced.”
- [18]It must be accepted that the bank was obliged, in the interests of the appellants, to bring the property to the notice of persons likely to be interested in buying it, and to allow sufficient time for that to occur. However the bank was also entitled to consider its own interests. Once the relevant market was properly informed of the property being for sale, the bank was entitled, in good faith, to sell without waiting for further waves of potential buyers to arrive.
- [19]As to the adequacy of the advertising, one complaint which is renewed here is that the property was not advertised internationally. For example, it was suggested here that it should have been advertised in the South China Post, a suggestion which does not appear to have been made to the primary judge. However, all of these complaints have to be assessed in the circumstances of last August-September. At that time, as now, most foreign citizens could not enter Australia, and Australian citizens living overseas had difficulties returning to this country. There was then no reason to suppose that any of that was about to change. It is telling that the valuer’s advice, in early January 2020, was a campaign targeted towards local, national and international buyers, whilst the same valuer advised in July that the campaign should be “targeted at local and national buyers”.
- [20]It is submitted for the appellants that the advertising was insufficient even for interstate buyers. There was no advertising in any national newspaper. However, the property was listed, from 2 July 2020, on realestate.com.au and domain.com.au.
- [21]These complaints have to be assessed with the fact that the bank was able to find a purchaser at a price which was comfortably within the range provided by its most recent valuation advice. As the Chief Justice discussed, there was other valuation evidence before her, suggesting that the bank’s valuation advice was too conservative. However, that is the advice which the bank received and upon which it must have acted.
- [22]Underlying the appellants’ argument seems to be a proposition that there was no reason for the bank to sell when it did, rather than waiting for as much as a year for the circumstances created by the pandemic to improve. It is suggested that this is what the bank should have done because its debt, with accumulating interest, would not have reached the value of the property for another year. However, that misconceives the bank’s duty to the mortgagors. The bank was not obliged to prefer their interests to its own interests, by waiting to see whether circumstances improved whilst bearing the risk that, in the longer run, it might not recover all of its money in a falling market.
- [23]In West v Secure Funding Pty Ltd [2020] QCA 296 at [6], Mullins JA summarised the principles to be applied on an application for a stay. She identified the relevant factors as being whether there was a good arguable case, whether the applicant would be disadvantaged if a stay were not ordered and whether there was some competing disadvantage to the respondent should the stay be granted, outweighing the disadvantage suffered by the applicant absent the stay.
- [24]In the present case, I have concluded that there is not a good arguable case in the appeal. There is no arguable error in the reasoning of the primary judge. For that reason, I have concluded that the application for a stay must be refused.
- [25]However, it is necessary to say something about the evidence which was presented to me, but not to the Chief Justice, as to the prospect of the bank’s debt being repaid by the appellants.
- [26]There is evidence that the appellants have reached an agreement in principle with another lender, by which they would pay the whole of the bank’s debt by the end of this month. They do not yet have a concluded agreement with that financier, however. Moreover, there is a second mortgagee which would have to be paid if the new financier is to be given a first mortgage.
- [27]From one perspective, this proposal would seem attractive in securing a satisfactory outcome for both the bank and the appellants. Of course, those parties are free to negotiate that outcome, but only if the bank could do so consistently with its contract with the present buyers. However, so far as this Court is concerned, there is an existing order which requires the removal of the caveat, and the absence of an arguable case for disturbing that order on an appeal. It would be an improper use of the Court’s power in this context to grant the stay only in order to enhance the prospects of a negotiated outcome.
- [28]For these reasons the application for a stay is refused. Subject to any contrary submission, the appellants should pay the costs of each of the respondents of this application.