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Harry Davis Properties Pty Ltd v Mahaffey[2002] QDC 330

Harry Davis Properties Pty Ltd v Mahaffey[2002] QDC 330

DISTRICT COURT OF QUEENSLAND

CITATION:

Harry Davis Properties Pty Ltd v Mahaffey [2002] QDC 330

PARTIES:

HARRY DAVIS PROPERTIES PTY LTD

ACN 010 018 890

Plaintiff

and

HARLAN WILBUR MAHAFFEY as Trustee under Nomination of Trustees No. L241289W and HARLAN WILBUR MAHAFFEY and SHIRLEY MAY BUCHANAN

Defendants

FILE NO/S:

Plaint 21/1997

DIVISION:

PROCEEDING:

Trial

ORIGINATING COURT:

District Court at Gympie

DELIVERED ON:

4 November 2002

DELIVERED AT:

Brisbane

HEARING DATE:

20, 21 June;  13, 23 August 2002

JUDGE:

McGill DCJ

ORDER:

Judgment that the defendant pay the plaintiff $32,239.52 plus costs.

CATCHWORDS:

MORTGAGES – Sale under power – whether breach of statutory duty – what communicated to mortgagee prior to sale – whether failure to take reasonable care.

Property Law Act 1974 s 85(1).

Cameron v Brisbane Fleet Sales Pty Ltd [2002] 1 Qd R 463 – distinguished.

Tyler v Custom Credit Corporation Ltd [2001] QSC 495 – followed.

Forsyth v Blundell (1973) 129 CLR 477 – applied.

COUNSEL:

A J Taylor for the plaintiff

A N S Skoien for the first defendant (August 2002)

SOLICITORS:

Chris Reeve & Co for the plaintiff

Graham Isles Solicitor for the first defendant (August 2002)

  1. [1]
    By this action the plaintiff claims the balance owing on a mortgage of certain land, which land was sold by the plaintiff as mortgagee in September 1997. The defendant, Harlan Mahaffey, disputes the plaintiff’s entitlement to recover, and alleges that the plaintiff was in breach of its statutory duty in failing to take reasonable care to ensure that the property was sold at the market value: Property Law Act 1974 s 85(1).

The mortgage

  1. [2]
    As at February 1995 the defendant Harlan Wilbur Mahaffey[1] (“the defendant”) and his wife, Violet May Mahaffey, were owners as tenants in common in equal shares of Lot 10 on Plan MCH4363, County of Marsh, Parish of Goomboorian, the whole of the land contained in Certificate of Title, Volume 6246, Folio 34 (“the land”). It had an area of 6.773 hectares, and had been at least partly cleared, but there were no improvements constructed on it other than some boundary fences; it was (and is) used to some extent as farmland:  p. 19. The land is situated between Tinana Creek and Tin Can Bay Road, a main road, which indeed cuts off part of the property.[2]  I have not been able to discover any accurate indication of the area cut off in this way;  my impression from the plan MCH4363 is that the cut off area is about one-eighth of the total area, that is about .847 hectares. The estimate of a valuer, Mr Horswood, was that the separate portion of land had an area of about one hectare:  Exhibit 14. I will assume that his figure is closer to the correct one, and proceed on the basis that the balance of the land has an area of 5.8 hectares.
  1. [3]
    By a mortgage executed by the owners on 1 February 1995 and by the plaintiff as mortgagee on 16 February 1995, they mortgaged the land to the plaintiff to secure the repayment of $30,000 lent by the plaintiff: p. 22; Exhibit 3, Document 1. The principal was repayable on 16 February 1996, with interest. The mortgage also secured payment of any costs or expenses incurred by the mortgagor in consequence of any default under the mortgage. The mortgage was executed by the defendant and Shirley May Buchanan as attorneys for Violet May Mahaffey. The mortgage was registered in the Titles Office (p. 22), apparently on 22 February 1995.
  1. [4]
    Violet May Mahaffey subsequently died, on 19 August 1995: p. 126. It appears her title to the land was transmitted into the names of the defendant and Shirley May Buchanan, who is the sister of the defendant (p. 66), as personal representatives. She was originally also a defendant in this action, but early this year the plaintiff compromised its claim against her and the action against her was discontinued.
  1. [5]
    By November 1996 the mortgage was in default, although the date for repayment of the principal must have been extended because the plaintiff was complaining only about a failure to pay interest due on 15 April 1996 and subsequently.[3]  A Notice of Exercise of Power of Sale signed on behalf of the plaintiff on 20 November 1996 also referred to a failure of the mortgagors to pay solicitor’s costs of $899.30 (Bill dated 12 June 1996, Exhibit 12) and $527.60 (Bill dated 20 November 1996, Exhibit 7). There were two unsuccessful attempts to sell the land at auction, the later on 13 September 1997:  p. 23-4. The plaintiff subsequently exercised its power of sale, and sold the land for $32,000 to a Mr Croker by a contract dated 26 September 1997:  Document 9 in Exhibit 3. The sale was completed on 15 December 1997: p. 41.[4]  After deducting the costs of the sale, including the costs of earlier attempts to auction the land which were unsuccessful, the sale yielded  $30,279.47[5] which was applied in reduction of the amount owing under the mortgage. It was not however sufficient to discharge the whole of the mortgage debt, and the plaintiff claims the balance of the debt together with interest which has accrued subsequently, and legal costs.

History of the action

  1. [6]
    This matter has taken a long time to come to trial. The plaint was filed on 19 September 1997 and at that stage simply sought repayment of the mortgage debt including interest and solicitor’s costs, no credit then being given in respect of the sale as it had not taken place. A judgment summons was filed on 12 January 1998, but on 20 February 1998 was dismissed. Thereafter, some amended pleadings were filed on behalf of the defendant and Ms Buchanan, but no further step was taken by the plaintiff prior to an application for leave to proceed which was filed on 1 May 2001. On 29 May 2001 another judge gave the plaintiff leave to proceed, and leave to file an Amended Statement of Claim. One was filed on 5 June 2001. On 18 October 2001 the action was discontinued against Ms Buchanan, and on 23 November 2001 a request for trial date signed by the parties was filed.
  1. [7]
    This action was mentioned early in the June sittings of the District Court at Gympie,[6] when Trevor John Mahaffey (“Mr Mahaffey”), son of the defendant, appeared and sought an adjournment of the trial on the basis that the defendant was too ill to come to court. However, the amended entry of appearance and defence and counter claim filed on behalf of the defendants on 19 March 1998, at a time when the defendants had solicitors acting for them, pleaded that Mr Mahaffey had authority to act on behalf of the defendants in relation to the matters arising out of the mortgage (and see p. 53), and it did not appear from a consideration of the pleading that the defendant would be a necessary witness at all, since it was not alleged that he personally had been involved in any relevant way in the events relied on as giving rise to the defence, other than by signing a contract. Under these circumstances I indicated to Mr Mahaffey that I did not consider that his father’s ill health was a sufficient reason for adjourning the trial, since he was obviously able to represent the defendant and would be the person who could give relevant evidence. The defendant is almost 75 (p. 63), and there is the distinct possibility that he will never again be fit to appear in court.[7]  I indicated to Mr Mahaffey that he should be ready for the trial to begin on 20 June 2002.
  1. [8]
    On that day it was necessary for me to stand the matter down until after lunch in order to complete a criminal trial, but I was ready to start this trial shortly before 4.00pm. At that stage a Mr Bruce Bell, who said that he held the defendant’s Power of Attorney, sought to appear for him. He produced what appeared to me to be a Power of Attorney from the defendant, and I gave him leave to appear for the defendant.[8]  Mr Bell told me that he had some legal training. The trial proceeded on that day and the following day, taking evidence from the plaintiff’s witnesses, the solicitor, Mr Reeve, who acted for the plaintiff throughout the transaction, and a valuer, Mr Thorvaldsen. Mr Mahaffey then gave evidence, and the trial was adjourned to Brisbane to a date to be fixed, to enable the defendant to call one or more witnesses from Brisbane, and to give the defendant time to engage counsel.
  1. [9]
    The trial resumed in Brisbane on 12 August 2002, following some negotiation about a date which was suitable to both parties. On that occasion, counsel appeared for the defendant, but then objected to the trial proceeding on the basis that the plaintiff had never made a disclosure (or indeed, when the action was proceeding under the former District Court Rules, discovery). The action was commenced under the District Court Rules 1968, which required discovery in response to an order or notice in writing from the other party: Rule 182. Presumably no discovery was given under the former rules because there was never a notice requiring discovery on behalf of the defendant. However, under the Uniform Civil Procedure Rules the obligation to give disclosure is automatic and continuing (r. 211(2)), and arose, in my opinion, in respect of continuing actions upon the commencement of those rules. Accordingly, the plaintiff ought to have provided disclosure in accordance with the Uniform Civil Procedure Rules after they commenced. It was not alleged on behalf of the plaintiff that that had occurred.[9]   
  1. [10]
    The request for trial date had certified, among other things, that “disclosure has been provided as required by the rules and any order of the court”. Ordinarily, the fact that a party had signed such a document would prevent that party from later complaining about an absence of disclosure where that complaint ought to have been made before the request was signed, and leave is required for an application for an order for disclosure once the request has been filed: Rule 470(c). In the present case, however, by the time the request for trial date was signed the defendant did not have legal representation, and it seemed to me that it would not be fair to the defendant to force him to proceed with the trial without obtaining disclosure of the plaintiff’s documents. Accordingly, I directed that the plaintiff make disclosure, and adjourned the trial until 23 August 2002. The trial proceeded on that day, and was concluded. Counsel for the defendant did not seek the recall of the plaintiff’s witnesses, for further cross-examination.

Defendant’s arguments

  1. [11]
    It was argued on behalf of the defendant that there had been a breach of statutory duty by the plaintiff in entering into the contract of sale as mortgagee in two respects:
  1. (a)
    The sale price was just too low, and it was not appropriate for the plaintiff to rely on an amended valuation obtained from Mr Thorvaldsen to justify entering into a contract at that price.
  1. (b)
    The plaintiff ought not to have entered into an unconditional contract to sell to the purchaser at that price in circumstances where he ought to have known that the defendant had available either a purchaser at a higher price or a capacity to refinance the transaction, either of which would permit the mortgage to be paid out.
  1. [12]
    In order to understand the argument about the deficiency in the amended valuation, it is necessary to look at the history of the transaction in a little more detail. The defendant and his wife made application in 1994 for a loan of $30,000 to cover a shortfall between construction facilities, which had been made available to a company Coolibah Project Homes Pty Ltd said in the application to be a “member of the Mahaffey group” and “successful building contractors”, and the building costs of house and land packages that had been pre-sold: Exhibit 13, Document 1. Security of a first mortgage over the land was offered, supported by a valuation dated 8 November 1994 by Maddern Valuation Services, which valued the land at $50,000: Exhibit 13, Document 2.

Valuations

  1. [13]
    That valuation had been prepared on behalf of Mr Mahaffey. It described the property as low lying and subject to periodic flooding, although there were said to be a few higher ridges reported to be above flood level. Electricity and telephone services were said to be available. The relevance of this valuation is simply that it was information available to the plaintiff at the time when it was seeking to sell the land. It was not proved as a valuation, so it is not evidence of the actual market value as at 8 November 1994 or any other date.
  1. [14]
    Mr Thorvaldsen, a valuer, provided the plaintiff with a valuation dated 19 June 1997 by which he assessed the market value of the property at $45,000: Exhibit 1. A forced sale range of $35,000 to $45,000 was also given. Reference was made in that document to the property being subject to periodic inundation but it was said to have available as services electricity, telephone and a sealed road. The valuation noted that the highest part of the land was close to the road, so that any possible home site would receive consistent road noise.[10]  The fact that part of the property was cut off by the road was also noted.
  1. [15]
    There were four comparable sales noted, one of which, in Tagigan Road for $55,950 in January 1994, was also mentioned in the valuation by Madden Valuation Services. That valuation had noted, concerning that sale, “the sale was effected by a specialist marketing company which purchased the site for $30,000 on 27 April 1993”. Mr Thorvaldsen’s valuation noted that the same site was resold in October 1995 for $55,000. The two other sales were for much smaller blocks; one nearby was sold for $30,000 in May 1996, and a slightly smaller block also in Tagigan Road sold in September 1996 for $50,000. Mr Thorvaldsen in Exhibit 1 noted that the marketability of the land was moderate, and quality was below average.
  1. [16]
    Subsequently the plaintiff contacted Mr Thorvaldsen (Exhibit 13, Document 3), and he made further enquiries about flooding and electricity. As a result he provided a modified valuation dated 21 August 1997: Exhibit 2. He said that further enquiries from the relevant local authority indicated that any dwelling on the land would have to have a floor level 300mm above the highest known flood level in the area, although a small flood-free house site may exist on the property. There was also advice from the electricity authority that the power line which ran adjacent to the property along the main road was not accessible for domestic power consumers, and an estimate of the cost of bringing domestic supply to the property was $15,000. As a result of these factors, Mr Thorvaldsen amended his valuation to $37,500, with a forced sale price range being $30,000 to $40,000. Mr Thorvaldsen’s valuations were properly proved.
  1. [17]
    Meanwhile, on 8 July 1997 Mr Mahaffey was provided with a valuation by Mr Horswood: Exhibit 14. Mr Horswood was called as a witness, and this valuation can be treated as evidence of the true market value. Mr Horswood assessed the market value of the land at $65,000. He refered to two comparable sales. One was in January 1997 of a property nearby, with an area of 8.223 hectares on which a small home and some other improvements were constructed, but which he said had an estimated land content of $78,000. The property was said to be of a similar level to the land. It can be identified on the plans attached to the valuation, being north of the land, along Anderleigh Road. It is a little curious that it was not mentioned by Mr Thorvaldsen, but he may have been concentrating on sales of vacant land. The other sale was of a lot with an area of 12.45 hectares, reached over three kilometres of gravel road, about six kilometres to the south of the subject land, and sold for $78,000. The land was said to have access to power at approximately 500 metres distance. According to Mr Horswood the raised house site on the block had about 30cms of water over it in 1992, and council policy would require the house site to be filled by 30cms with the floor to be another 30cms higher.
  1. [18]
    There was no evidence that this valuation was shown to the plaintiff or anyone acting on the plaintiff’s behalf.[11]  It was however provided by Mr Mahaffey to a Mr Blair (p. 131). Mr Blair has purchased land from the Mahaffeys, both before and after this occasion (p. 69, 70, 130, 138), and is owed about $150,000 by them (p. 55, 68, 71), and has been involved in other business dealings with them.[12]  Mr Blair said that after he received it he obtained his own valuation of the land, which was for $60,000,[13] although that valuation was not proved as evidence of market value. There was no evidence that that valuation was provided to the plaintiff either. Mr Horswood said that the Valuer-General’s valuation was $46,000 (p. 153) but I do not think that I can treat that as evidence of market value.
  1. [19]
    It is also necessary to consider what actually happened when the plaintiff tried to sell the property. There were two auctions held,[14] one on 26 July 1997 (p. 23) and one on 13 September 1997:  p. 24. All that I know about the first auction is that the land was not sold. The second auction produced the same result, indeed there were no bids received:  p. 3. Mr Mahaffey attended the auction, and he and Mr Blair said that he was authorised to bid on Mr Blair’s behalf for the land up to $60,000 if there was bidding, ie, if there was a prospect of it being sold to someone else:  p. 55, 82, 132. It was after the second unsuccessful attempt to auction the property that it was sold for $32,000, to the only person who appeared to show any interest in buying it.

The electricity bond

  1. [20]
    One particular criticism directed at Mr Thorvaldsen’s amended valuation was that he had not had regard to what was said to be a bond provided to the power authority in connection with the subdivision of certain land nearby, which was supposed to provide the prospect of domestic power being connected to the land at much less than $15,000. Unfortunately however there is no clear evidence as to just what the situation was in relation to this bond. Mr Mahaffey said that some land across the road had been subdivided some 15 to 20 years ago and there had been a bond of $22,000 lodged for the supply of electricity to those blocks: p. 118. He also said that power could be put on to the other block which could be done at any time, if somebody requested that it be connected and the bond called on for that purposes: p. 121. Mr Mahaffey conceded he had not told the plaintiff about the bond: p. 123.
  1. [21]
    Mr Blair said that a bond had been paid at $25,000 to bring power to the boundary of the land, and the electricity bond had been assigned to him by the defendant, so that it would be easy to put power on at minimal cost: p. 143. He said he had the bond but it was not produced: p. 143. He subsequently said that the bond covered the four properties coming right up to the intersection, but did not cover the land: p. 143. All that was put to Mr Thorvaldsen was that there was a bond already paid for a power line down to “that block”, something of which he was unaware: p. 18.
  1. [22]
    When Mr Horswood was asked about this (p. 154-5), his response was interesting: “Now if I was to ask you to assume that there was a bond with the relevant electricity provider in the area in the sum shortly in excess of $20,000 to contribute towards the connection of power to the subject land and to other parcels of land nearby, can you say whether the existence of that bond would positively or negatively affect the value of the subject land, if any? – It would have to, you know, positively affect it but it’s something I guess that would have to be explored a bit further because it’s a little bit iffy thing if the power’s not there but certainly it would have to have a bit of a positive effect on it, yes.

All right. If – again I ask you to assume if it was suggested that a sum of $15,000 would be required to connect power to the subject land is that the sort of sum that you’d consider in making a valuation report? – No, that would be the type of figure that we’d be looking at, $10,000 to $15,000 by the time you get it up there and get it across – across the road.”

  1. [23]
    There is no evidence from the electricity authority, or any copy of the actual bond, put before me, and, in view of the inconsistency in the evidence that I did hear, it is not possible to know exactly what the effect of this bond is. Importantly, it does appear that any bond was provided in respect of the provision of power to other land, and I do not know whether any purchaser of the land would have been able to obtain any benefit from the bond, unless perhaps some owner of the other land had already taken advantage of it to have the appropriate power line constructed to that other land. That step has not yet occurred, and I do not think that a prospective purchaser would in such circumstances proceed on the basis that it would be appropriate to pay for the land as if it had already occurred. There is no reason to think that the defendant (or Mr Mahaffey) would have been as cooperative with a purchaser from the plaintiff as he was with Mr Blair in terms of any assignment of the bond (whatever that means) which would presumably facilitate any attempt at connection of power to the land (which Mr Blair has apparently not yet undertaken). In these circumstances, like Mr Horswood, I regard the bond as being “a little bit iffy”. Indeed, I think it was quite iffy. I do not think it is a factor which would have had much effect on what a hypothetical purchaser would have paid for this land.[15]  I think it is of some significance that Mr Horswood did not attribute any particular effect to this factor in the context of his assessment of market value.[16] 
  1. [24]
    There is also no evidence that the existence of such a bond could have been ascertained as a result of making enquiries about the land from the power authority.[17]  Mr Thorvaldsen made enquiries, and was not told of it (p. 18), and I infer from the fact that Mr Horswood did not refer to it in his report that he was also not told anything as a result of any enquiries he made. There is no evidence that the defendant or Mr Mahaffey told the plaintiff about this bond at any relevant time,[18] and therefore there is, in my opinion, no basis for criticism of either the plaintiff or Mr Thorvaldsen for not being aware of it.
  1. [25]
    Mr Thorvaldsen’s initial valuation was, in my opinion, reasonably consistent with the earlier valuation, and the amendment to that valuation was reasonably explained by his discovering that the cost of connecting power would be substantially greater than he had assumed from the fact that a high voltage line ran in front of the property: p. 14. The valuation by Madden Valuation Services said that electricity was available to the land, so presumably that valuer was acting on the same assumption as Mr Thorvaldsen was acting on originally. That would be the conclusion that, in my opinion, a reasonable mortgagee would draw from a consideration of the earlier valuation. In my opinion, therefore, on the information available to the plaintiff at the time it had no reason to doubt either the original valuation of Mr Thorvaldsen or his subsequent amended valuation.
  1. [26]
    Counsel for the defendant relied on the decision of Wilson J in Cameron v Brisbane Fleet Sales Pty Ltd [2002] 1 Qd R 463. In that case Wilson J said at p. 472:

“A mortgagee exercising its power of sale by way of auction must exercise reasonable care in fixing the reserve. Its duty goes beyond simply commissioning a report from an expert valuer and fixing as the reserve the figure in the bottom line of the report (or, as in this case, adding an amount to that figure as a safety margin). It is obliged to consider the whole report, to seek clarification as necessary and not to adopt the valuation in the absence of a reasoned case in support of it.”

In that case the mortgagee was selling a half interest as tenant in common in a parcel of land, and had obtained a valuation of the interest at $250,000. The mortgagee also knew that the owner of the other half interest had purchased that half interest for $550,000 about one year earlier, and shortly before the auction had offered to purchase the other half interest for $560,000. It seems to me that her Honour held essentially that the mortgagee ought to have had more regard to the known interest of the other co-owner in purchasing the land as indicative of the true market value. In that case the land went to auction and was sold at the reserve to the co-owner, there being no other bidders.

  1. [27]
    In my opinion her Honour’s conclusion needs to be understood against the background of the particular facts in that case, including the circumstance that the co-owners were associated with the company that held the mortgage. Nevertheless, I would respectfully agree with the general statement quoted above. Certainly the mortgagee must consider the valuation, and the factual basis for it. To take an extreme example, examination of the valuation may reveal that the valuer has inspected the wrong land. Alternatively, it may on its face reveal that there was some misapprehension about some relevant consideration relating to the land. The valuer may have been unaware of some relevant comparable sale of which the mortgagee is aware, or may have been unaware of some special circumstance pertaining to a comparable sale relied on of which the mortgagee is aware. There may even be an error of computation. Anything like this should be discussed with the valuer further, and clarification obtained.
  1. [28]
    That is what occurred in the present case, in that the plaintiff ascertained, from the real estate agent (p. 51), that the valuer’s assumption that power was fairly readily available to the land was not accurate, and went back to the valuer about the situation. That shows a careful and practical approach to the basis of the valuation, consistent with the performance of the duty referred to by her Honour. The valuer’s response was reasonable and rationable. The initial figure was, in my opinion, consistent with the earlier valuation which the mortgagee had, bearing in mind the market conditions at the time; Mr Horswood conceded that at the time the market was slow,[19] a fact which in my opinion was amply borne out by the failure of the attempt to sell this land by auction. Plainly the plaintiff did not simply accept the valuation at face value and act blindly upon it, but in my opinion there was nothing to indicate want of reasonable care in assessing and acting upon the valuation. In particular, there is no evidence that the plaintiff was in fact aware of the existence of any relevant bond to the electricity authority, or that a reasonably careful mortgagee in the position of the plaintiff ought to have been aware of it, or of what effect that knowledge ought to have had in assessing the market value. In my opinion there is nothing in the present case to indicate failure to take reasonable care in relation to the way in which the plaintiff assessed the amended valuation of Mr Thorvaldsen.
  1. [29]
    There is also the consideration that this is not a case where the property was simply sold at auction in accordance with the valuation provided by a valuer. Rather it did not sell at auction, and was sold after auction for a price which was less than the figure provided for the market value in the valuation. Nevertheless the history of the attempts to market this property suggests that it was going to be difficult to sell, a conclusion consistent with the evidence that the market was slow at the time. The mortgagee is not obliged to hang on to a property until market conditions become more favourable,[20] and if reasonable efforts to obtain the market price are unsuccessful then in my opinion it is reasonable for the mortgagee to lower its sights. The duty is not an absolute one;  so long as the mortgagee has taken reasonable care to ensure that the market value has been achieved, a sale below that value will not mean that the statutory duty has been breached.[21]  Unless there are plenty of buyers in the market, it is unsurprising that a mortgagee, in order to effect a sale at all, may well have to accept less than the market value. In the present case the property was extensively advertised[22] and no criticism was offered on behalf of the defendant of the advertising.
  1. [30]
    In the present case the property was sold for an amount which was not greatly below the amended valuation, in circumstances where it had been on the market for some time, and offered at auction and had not been sold, attracting no bids, and there was no other potential purchaser known to the plaintiff. In my opinion those circumstances suggest that the plaintiff mortgagee did take reasonable care to ensure the property was sold for market value, although that target may not have been reached. I reject the first argument relied on by the defendant.

Ought the plaintiff to have held its hand

  1. [31]
    Turning to the second ground advanced on behalf of the defendant, this was advanced on two bases: on the defendant’s case, that the plaintiff had chosen to enter into the contract with Mr Croker after it had been told that the defendant had sold the land at a much higher price, $60,000. In the alternative, if this factual case were rejected, it was argued that the plaintiff nevertheless had been told that the defendant was attempting to refinance, and ought to have delayed to give the defendant time to explore that opportunity more fully. It is necessary for me to resolve the conflict as to the factual situation.
  1. [32]
    Mr Reeve said that he telephoned Mr Mahaffey on 14 August 1997, apparently returning his call from the previous day, with a request that the plaintiff not proceed with the auction as his solicitor was supposedly providing funds. On 14 August Mr Reeve said that he would delay until 15 August, but that the plaintiff would definitely need some evidence of funds being available otherwise they would have to proceed with the auction: p. 29. On 22 August 1997 he received by fax a letter from Colin Martin of Windsor Craig, solicitors, advising that he acted for “Mr Mahaffey”, and asking them to forbear any action until after 29 August to enable redemption of the mortgage:  Exhibit 3 Document 7. He heard nothing more and the auction was held.
  1. [33]
    Mr. Reeve said that on 26 September Mr Mahaffey telephoned him and spoke to him, and told him that he expected to have loan moneys approved on the Monday: p. 30. The contract with Mr Croker had been obtained by the agent (p. 26) and was before Mr Reeve on 26 September, and had been signed by him that day: p. 26. However the fact that he had signed it had not been communicated to Mr Croker. Mr Reeve told him of the contract and told him the price, which he said upset Mr Mahaffey who said that the plaintiff was selling it too cheaply and asked for time to get back with evidence of the loan money: p. 30. According to Mr Reeve Mr Mahaffey made no reference to a sale at that stage. Mr Reeve said he told Mr Mahaffey that the only thing to hold up proceeding with the sale was some firm evidence of his loan money being available: p. 30. Under cross-examination he added that he said he would wait until the Monday for this to be produced: p. 48.
  1. [34]
    Mr Reeve said that he did not receive any evidence on the Monday, 29 September 1997, all he received was a message[23] passed on by a secretary, “A solicitor will be in touch with you tomorrow re this one. No need to phone him back.”  He said that on 29 September the signed contract was sent by post to the purchaser’s solicitors, thereby communicating acceptance:  p. 50. In fact he did not hear from a solicitor the following day. The first he heard about a contract with Mr Blair was in late October 1997:  p. 27, p. 38.
  1. [35]
    Under cross-examination it was put to him that Mr Mahaffey on 26 September 1997 advised by telephone that he had a buyer and that in response Mr Reeve had undertaken to wait three days before signing the contract with Mr Croker: p. 47-8. Mr Reeve rejected that, and said that he had only been told that Mr Mahaffey was arranging finance, and replied that he had already had the contract of sale but that he would wait to send it off until the Monday, to allow him to produce evidence of a loan with enough money to pay the present debt being available: p. 47-8. It was then put that Mr Mahaffey had telephoned on 29 September and informed Mr Reeve that there was a contract which had been signed with Mr Blair, and that Mr Reeve had informed him that he had decided to sign the contract he had on 26 September 1997:  p. 48. That was denied.
  1. [36]
    Mr Mahaffey said that he spoke to Mr Reeve at the auction, and told him that they had a purchaser at $60,000 (p. 83), and received a response that if he had a purchaser he would want to see it in writing but until then he would continue with the auction: p. 54.[24]  He said that he had spoken to Mr Blair as early as 12 and 13 August 1997 (p. 54) seeking his help in retaining the land. After the auction Mr Blair had told him on 25 September that he was willing to proceed and that his solicitor would do up a contract and he would sign it:  p. 56. Early on the morning of 26 September he telephoned Mr Reeve and was told that there was another offer on the property, that he had not signed the contract and would not do so until they had confirmed whether they had a contract or otherwise. There was some discussion about the inadequacy of the price of $32,000, and Mr Reeve had said that he would give Mr Mahaffey three days to notify him of the contract being signed for $60,000:  p. 56. Mr Mahaffey said that he could not recall how the contract got to him, but some time at the weekend he had the contract signed by Mr Blair. It had definitely been signed by all parties by Monday:  p. 57.[25]  He said he spoke to Mr Reeve on the morning of 29 September and told him the contract had been signed, and his response was that he had already signed the other contract:  p. 57. Mr Mahaffey said that a reasonably forceful discussion ensued, and that Mr Reeve had said that they would have the right to pay the mortgage out any time up to settlement:  p. 57.
  1. [37]
    The sequence in Mr Mahaffey’s evidence was therefore clear: he told Mr Reeve of the proposed contract on 26 September, and was given three days to get the signed contract to Mr Reeve. He obtained a contract signed by Mr Blair at the weekend, and by Monday, 29 September it had been signed by all parties, but when he telephoned Mr Reeve on that day Mr Reeve said the contract with the other party had already been signed. He did not say that he made any attempt to deliver the signed contract with Mr Blair to Mr Reeve on 29 September. His explanation was that he had told his solicitor on the Friday to notify Mr Reeve of the existence of the contract: p. 91. He had for that purpose sent a copy of the contract by fax to Mr Martin: p. 90. He conceded that his solicitor had not done so.
  1. [38]
    Mr Blair’s evidence was significantly different. He said that he received an urgent call from Mr Mahaffey, on he believed Wednesday or Thursday,[26] to advise that there was a contract on the solicitor’s desk and that the solicitor would hold off accepting until the following Monday and that it was urgent that their contract proceed immediately:  p. 132. He immediately telephoned his solicitor[27] and gave him instructions, and the solicitor immediately produced the contract which a friend of Mr Mahaffey’s collected[28] and delivered to his office. He executed it and it was taken that same day to Gympie by the friend:  p. 132. Mr Blair said that he could not recall the day, he could only rely on the date on the contract:  p. 133. He also said that the same day as the contract was signed Mr Mahaffey rang back and said it was not going to proceed because Mr Reeve had changed his mind and had proceeded to accept the other contract:  p. 135. Mr Blair’s account, which did not alter during cross-examination, was in effect that everything happened on the one day;  he was told by Mr Mahaffey that the solicitor was committed to the other contract on the same day that he, Mr Blair, had signed the contract.
  1. [39]
    The original contract[29] was signed by Mr Blair, Mr Mahaffey, the defendant and Ms Buchanan and was dated 26 September 1997. But the proposition that it was signed that day does not fit in with Mr Blair’s evidence that he was told that the solicitor had changed his mind and accepted the other contract on the same day that it was signed. Neither Mr Reeve nor Mr Mahaffey suggested that anything like that occurred on 26 September;  Mr Mahaffey’s evidence was that he was told on 29 September that the other contract had been signed, and Mr Reeve’s evidence was that he had signed the other contract on 26 September but that he had promised to hold off communicating acceptance to the purchaser until the Monday, 29 September, in order to give Mr Mahaffey time to produce evidence of a loan. Unless both of these versions are wrong, Mr Blair’s version cannot be correct.
  1. [40]
    There is a further circumstance which I think is of considerable significance: the original contract, signed as I have referred to, is Exhibit 15, and is a most remarkable document. There are three pages, the first and second of which were photocopied from the schedule to a second edition REIQ form of contract for houses and land; the third page is a copy of page 8 of the first edition of the REIQ contract for home units and townhouses, which however was essentially the same as the previous page, except that it was photocopied from a different document. The special conditions are typed on the second page (page 2 of the houses and land contract), as is the settlement date, and it was signed by the vendors and by Mr Mahaffey (whose signature was appropriate as one of the special conditions provided for the defendant and Mr Mahaffey to repurchase the property: p. 137). The third page did not reproduce the special conditions, but did reproduce the settlement date, again it was signed by the vendors, and this page, and only this page, was signed by Mr Blair.
  1. [41]
    This is supposed to be a contract prepared by a solicitor. It is extraordinary that all that a solicitor would produce in such circumstances is photocopies of three pages of standard form contracts,[30] more extraordinary that he would copy two of those pages from one form of contract and the third from a different form of contract, and most extraordinary of all that he would include the third page in the contract at all, because it fulfils no function other than to receive the signature of Mr Blair, which could just as easily have been placed appropriately on the second page. The solicitor could hardly have known in advance that Mr Blair was going to refrain from executing the second page in the space provided for the buyer to sign, and would need a separate page for his signature. Even if the solicitor did, for some reason incomprehensible to me, decide to include a separate page merely to receive Mr Blair’s signature, that he should choose to photocopy that page from a different form of contract would require an extension of credulity far beyond anything of which I am capable.
  1. [42]
    There are also a number of curious features about the contract. Although it provides for a purchase price of $60,000, it provides for no deposit. The solicitor who was supposedly telephoned by Mr Blair and instructed to prepare the contract has inserted his firm’s name as the seller’s solicitor, but not as the buyer’s solicitor.[31]  The date of settlement was typed in, but not the contract date. The purchase price was payable by $45,000 in cash and the balance in BarterCard trade dollars, on the basis that one of them was equal to one Australian dollar. There was a right to repurchase, exercisable within 18 months at the same price as paid by Mr Blair, although there was an obligation to pay the costs and outlays associated with the purchase, with interest on those costs.[32]  The purchaser agreed to enter into a building contract to construct a dwelling house on the property within 30 days, and the cost price of that house was to be added to the amount payable on the repurchase.[33]  Special condition 3 provided:  “In the event that the purchaser at any time within 12 months from settlement herein pays to the vendor the BarterCard component to this purchase then that amount shall be repaid to the purchaser by the vendor in Australian dollars within 12 months from the date of settlement.”  It is difficult to attribute any particular meaning to this clause.
  1. [43]
    The solicitor who supposedly prepared this contract on Mr Blair’s instructions was not called as a witness. On the second day of the trial in Gympie, I said that, because of the state of the evidence as to the mechanics of how the contract came to be prepared and signed, it could be of some assistance if that solicitor gave evidence at the resumed hearing: p. 93. The defendant did not account for his absence or provide any explanation as to why it was not possible to call him. Mr Mahaffey said he was still on good terms with him: p. 87. In these circumstances, I believe I am justified in drawing the inference that, if called, any evidence that solicitor gave would not have assisted the defendant: Jones v Dunkel (1959) 101 CLR 298. On the second day of the trial it was put to Mr Mahaffey by counsel for the plaintiff that the Blair contract was not signed on 26 September 1997, so it was always part of the plaintiff’s case that this contract was not executed as alleged by the defendant’s witnesses.
  1. [44]
    I cannot accept that the document Exhibit 15 was prepared by a solicitor for Mr Blair and others to sign. I do not believe Mr Blair’s evidence to that effect. I consider the notion that such a document could have been prepared in such a way as preposterous. Indeed, the fact that Mr Blair gave such evidence is in my opinion a compelling reason why I should regard his evidence as totally unreliable.
  1. [45]
    There is also the consideration that the solicitor had already been appointed to act for the defendant, as indicated by his letter to the plaintiff’s solicitor of 22 August 1997:  Exhibit 3, document 7. That sought merely forbearance until 29 August 1997. The next communication was a letter[34] of 6 October 1997, from the solicitor to Mr Reeve, which stated: “We have been instructed by Mr Mahaffey to seek your urgent advices on the current status of the contract, and in particular, the date of completion. Our client intends to draw finance to redeem the mortgage prior to settlement, and you are hereby requested to proceed accordingly.”  There was no reference at all to what Mr Mahaffey and Mr Blair claim was a then existing contract to sell to Mr Blair, which Mr Blair said that solicitor had himself prepared. Mr Reeve in fact replied on 7 October seeking advice as to when the defendant would be able to pay out the loan:  Exhibit 13, Document 9.
  1. [46]
    The next communication from that solicitor was on 14 October 1997,[35] which said:  “We enclose herewith letter of offer to one Neil Blair, who is proposing to purchase the subject property with settlement on or before 24 October 1997. The purchase price will be in sufficient amount to pay out our client’s indebtedness under the current mortgage held by your client. Please feel free to contact Mr Mulcahy, the solicitor for the lender, who is aware of the matter. Our client seeks your undertaking that you will withhold the settlement currently under contract until at least 24 October, to enable our client to redeem his loan, via the proposed sale. Of course, the contract will be presented to you for your client’s acceptance prior to that date.”  [emphasis added]
  1. [47]
    In my opinion this letter is clearly inconsistent with the evidence Mr Blair, and indeed the evidence of Mr Mahaffey. It is inconceivable that the solicitor would have been unaware on 14 October that the contract which supposedly he drew on or about 26 September, had in fact been signed by all the parties that day if that had occurred.[36]  No satisfactory explanation for that letter was provided on behalf of the defendant. In my opinion the natural inference to be drawn from it is that in fact as at 14 October 1997 there was no contract in existence between the defendant and Mr Blair. On 23 October 1997 Mr Blair signed a caveat claiming an interest as purchaser of the land pursuant to a contract in writing “dated 23 October 1997” between the registered owners as vendors and himself as purchaser:  p. 141. Mr Blair claimed that that was a slip on the part of the solicitors who prepared it, and that the correct date was included in another document prepared at the same time with that caveat, although that document was not put in evidence.
  1. [48]
    There is also the consideration that there is an absence of the sort of material which I would expect to find if Mr Mahaffey really had had a signed contract on either 26 September or 29 September. In such circumstances the obvious thing for him to do would be to take it immediately to the solicitor for the plaintiff. He did not do so. He did not write to the solicitor for the plaintiff, nor did he have the solicitor who had just prepared the contract write to the solicitor for the plaintiff telling him that the contract had been signed, or even confirming that he had prepared it. There was nothing from that solicitor prior to the letters in October, which are inconsistent with the existence at that time of an executed contract. I regard the absence of the sort of documentation I would have expected to have been in existence had the contract actually been signed by 29 September as a matter of some significance.
  1. [49]
    There is also the consideration that I can think of no logical reason why the plaintiff would have entered into a contract to sell the land for $32,000, an amount significantly less than the amount required to pay out the mortgage debt, if there was a real prospect of the land being sold for enough to discharge the debt in full. There was no evidence of malice or bad faith on the part of the plaintiff towards the defendant, or any suggested reason for the plaintiff deliberately to seek to sacrifice the interests of the defendant. In my opinion a prospect of a sale at $60,000 would have been very attractive to the plaintiff at that time, and I think it extremely unlikely that Mr Reeve would have signed the contract to Mr Croker and communicated the plaintiff’s acceptance of it if he had been aware of a signed contract at $60,000, or anything like that. Mr Reeve said, and I accept, that he wanted to sell for as much as possible: p. 42.
  1. [50]
    I think this preference for having the whole mortgage debt paid out is clearly shown by Mr Reeve’s subsequent conduct, after the acceptance of the contract with Mr Croker had been communicated, in trying to add to that contract a condition preserving the right of the mortgagors to redeem prior to settlement. On 30 September 1997 Mr Reeve sent a letter[37] by fax to the solicitors for Mr Croker purporting to confirm that the plaintiff’s ability to complete the sale was “conditional at law upon the mortgagors not exercising their reversionary rights pursuant to the mortgage and paying out our client’s debt.”  That attitude was rejected by the solicitor for Mr Croker in the letter of 1 October 1997, which asserted that the contract was unconditional and binding:  Exhibit 13, Document 7. Once a mortgagee with a right to exercise a power of sale enters into an unconditional contract to sell pursuant to that power, in the absence of fraud or bad faith the right to redeem has been lost and the purchaser is entitled to insist on performance of the contract.[38]  The significance of the letter for present purposes is that it shows that Mr Reeve was not unenthusiastic about the idea of having the mortgage redeemed or the full mortgage debt paid rather than selling the land for less than that amount. I do not consider that the plaintiff’s position in this action has been prejudiced by his mistake in his letters of 30 September 1997.
  1. [51]
    Mr Blair said that he authorised Mr Mahaffey to bid on his behalf at the auction up to $60,000, and Mr Mahaffey also said that he had that authority from Mr Blair. Nevertheless, no bid was made. That would be consistent with the true object of the exercise simply being to preserve the land for the benefit of the defendant and Mr Mahaffey; if it appeared that there was actually going to be a sale to someone else, that person could be outbid, but if that did not occur then things could be left as they were. Nevertheless, if Mr Blair was willing at the time of the auction to purchase the land for up to $60,000, it seems curious that, when Mr Mahaffey was told on 26 September that there was a contract for $32,000, he did not immediately arrange with Mr Blair for Mr Blair to sign and fax to Mr Reeve a contract to purchase at some higher sum. Ultimately, Mr Blair purchased the land from Mr Croker, apparently for $42,000.[39]  I think it very likely that, had Mr Blair signed a contract to purchase the land from the plaintiff for that (or some greater) amount and faxed it to Mr Reeve, it would have been accepted. If the evidence of Mr Mahaffey and Mr Blair were true, that as at the date of the auction Mr Blair had been willing to purchase the land if necessary for up to $60,000, I can see no logical reason why that step would not have been taken on 26 September. But it was not.
  1. [52]
    In these circumstances I do not accept the evidence of Mr Mahaffey that there was a signed contract in existence either on 26 September or on 29 September 1997, and I do not accept his evidence as to what he says passed between himself and Mr Reeve between 25 September and 30 September 1997. I prefer the version of Mr Reeve, which I accept, that he spoke to Mr Mahaffey on 26 September when Mr Mahaffey was talking about the prospect of refinancing, on that day he told Mr Mahaffey that he had a contract for $32,000, and that he would sit on the contract until 29 September but that Mr Mahaffey had to produce evidence that finance would be available to pay out the mortgage by that date otherwise the contract would be accepted. No such evidence was provided within that time, and the acceptance of the contract was therefor communicated to the purchaser. In general I accept the evidence of Mr Reeve in preference to that of Mr Mahaffey. I do not accept the evidence of Mr Blair at all.
  1. [53]
    The defendant’s first argument, that the plaintiff ought not to have entered into a contract to sell for $32,000 when he had available a contract for $60,000, is therefore rejected on the facts. I do not accept that there was a contract for $60,000 in existence, let alone communicated to the plaintiff prior to 30 September 1997.[40]  I do not accept that there was ever mention of a possible contract at that price to Mr Reeve. As to the alternative argument, the position was simply that the plaintiff had been told something vague about refinancing, and had allowed Mr Mahaffey until the Monday to produce evidence. The plaintiff was in a position where it had at last secured a purchaser for this land, something which had been difficult to achieve, and it ran the risk that any further delay could result in the loss of that purchaser. There was a risk that no one else could be found who would be prepared to pay even $32,000 for the land. I do not consider that the plaintiff acted unreasonably, when no evidence of refinancing was forthcoming on 29 September, in accepting and communicating the acceptance of the contract with Mr Croker. The plaintiff had not received any advice from anyone other than Mr Mahaffey about the refinancing, apart from the earlier letter seeking a delay until a date which had by then long passed. No doubt if he had received further advice on the Monday, Mr Reeve would have continued to sit on the contract. Mr Reeve said, and I accept, that he had lost faith in Mr Mahaffey’s keeping his promises by then:  p. 50.
  1. [54]
    Mr Reeve did delay communicating acceptance of that contract until the Monday to enable some evidence to be produced, but it was not and I consider that it was reasonable of him in the circumstances not to risk losing that offer by delaying any further communication of the acceptance, simply on the basis of the message on 29 September. If there really was another solicitor willing to lend money to pay out the mortgage, it would have been very easy for that solicitor to have rung Mr Reeve himself. In those circumstances in my opinion Mr Reeve was entitled to be sceptical about the suggestion that something would happen the following day.
  1. [55]
    I am not persuaded that there was any breach of the duty in s 85(1) by the plaintiff in entering into the contract to sell to Mr Croker, because of anything communicated by Mr Mahaffey prior to the date when the plaintiff became committed to that contract. Nothing had occurred up to then which in my opinion would cause a reasonable mortgagee to risk jeopardising the contract already available to sell the land. This aspect of the defendant’s argument is also rejected.

Value of land

  1. [56]
    In case a different view may be taken elsewhere, I should make a precautionary finding as to the market value of the land as at the date of the sale. As to that, I think that the comparable sale identified by Mr Horswood of the land nearby in January 1997 is a useful indication of the value of the land, but I have some difficulty in seeing how the land value he attributed to that property of $78,000 supports a market value for the land of $65,000. In three significant respects the land was inferior: it was much smaller in area, having a usable area of only 5.8 hectares,[41] compared with 8.223 for the other site. I accept that value is not on a constant value per hectare basis, but the other land was almost half as big again as the land and that ought to mean significant extra value. In addition, the other land had power connected, whereas the land did not. Presumably the land content of $78,000 was for that land connected to power. On Mr Horswood’s figures, that means that the same land not connected to power should be worth $10,000 to $15,000 less, that is a value of $63,000 to $68,000.
  1. [57]
    The third feature in respect of which the land was inferior was that it was located right on the main road so that there was significantly more traffic noise. I think that is a feature of some importance for rural residential property;[42]  the side road on which the other land was situated was apparently also sealed. Mr Horswood was not able to identify any aspect of the land which was superior to this other land, and it seems to me that the features to which I have referred suggest a market value for the land significantly below $65,000. The second alone would explain the figure adopted by Mr Horswood, but in my opinion it would be unrealistic to make no significant allowance for the other two. The other comparable sale at $78,000 was for land that was more than twice the size, and again it had power available. It seems to me that the comparable sales quoted by Mr Horswood do not support a figure of $65,000. Indeed, it seems to me that those sales properly analysed suggest that Mr Thorvaldsen’s figure of $37,500 was more reasonable.
  1. [58]
    A lower figure is also supported by the closest thing to a “market value” sale,[43] the sale by Mr Croker to Mr Blair for $42,000. Although Mr Blair lodged a caveat and there was the prospect of having to fight him for the land, on my assessment of the strength of Mr Croker’s position I do not think that he would have attributed very much to overcoming that difficulty. There was no evidence that proceedings had been commenced at any time by Mr Blair in support of the caveat. There is also the consideration that the profit that Mr Croker made would have been taxable as income because the land was sold with 12 months, and that would have been a disincentive to selling from Mr Croker’s point of view, which probably cancelled out the incentive of avoiding an argument about the caveat. Mr Blair seems to have been eager to assist the defendant and Mr Mahaffey (p. 147), and so if anything he would have been a more eager purchaser than is assumed in the theoretical test of market value,[44] but on the whole I think that this sale is probably the best indication of the true market value;  it certainly suggests to me that the true market value was not in excess of $42,000.
  1. [59]
    In these circumstances, I give greater weight to the evidence of Mr Thorvaldsen, but taking into account all the proved valuation evidence I find that the market value of the land in the latter part of 1997 was $42,000. This is an intermediate figure, above Mr Thorvaldsen’s valuation of the land without power available. I conclude that the market value is to be determined on that basis. I should add, if it is relevant, that I do not think that, given the market conditions at the time, a reasonably careful mortgagee would have been likely to have obtained that price, other than from Mr Blair, and there is no evidence which I am willing to accept that Mr Blair was in fact in the market for the land as at 26 September 1997.

Other matters

  1. [60]
    There are a few additional matters that I should deal with. It was submitted that there had been bad faith on the part of the plaintiff shown in the letter to the valuer of 17 July 1997: Exhibit 13, Document 3. The part relied on in particular was the sentence: “We therefore request that you provide us with an update on your valuation if you feel it should be considered lower, so we are at liberty to sell the property at auction for less than the valuation if that should eventuate.” It was suggested that that was in effect an admission that the plaintiff was trying to sell the property at a low price. But that was sent after Mr Reeve had spoken to the real estate agent as to why the land was not attracting potential purchasers: p. 51. The real estate agent drew attention to certain drawbacks with the land, and these were the basis of the enquiry to the valuer. In my opinion this is not evidence of bad faith, at least when understood in that context, and it was conceded on behalf of the defendant that there was no other evidence of bad faith. I therefore find that the plaintiff was not acting in bad faith when conducting this sale.
  1. [61]
    Mr Reeve was cross-examined as to why he did not require a term to be inserted in the written contract with Mr Croker before he signed it reserving the mortgagor’s right to redeem the mortgage (and thus frustrate the sale) prior to settlement. Mr Reeve’s explanation, that inserting such a clause may have led to the withdrawal of that offer (p. 43), seems to me to be reasonable. Mr Reeve also denied that the omission of such clause was due to bad faith on the part of the plaintiff: p. 47. I accept the denial. I am not aware of any authority to the effect that the duty in s 85 requires such a clause to be inserted in the contract of sale by a mortgagee, either generally or in circumstances similar to those which I have found were prevailing here, where all the mortgagee had was an indication that the mortgagor had been for some time attempting to obtain refinancing, but no evidence that there was a lender available willing to lend enough to pay out the mortgage. Indeed, logically it would be inconsistent with an obligation to achieve as high a price as possible, since it would make the contract less attractive to a potential purchaser. I think that Mr Reeve’s evidence, that he had lost faith in Mr Mahaffey’s performing his promises (p. 50), is also of some significance in this context. In all the circumstances I am not persuaded that there was in this case any breach of s 85(1) in failing to include such a clause in the plaintiff’s contract.
  1. [62]
    The letter of 30 September 1997 was not in my opinion effective to vary the acceptance, to convert it into a counter offer of a contract with such a condition, because on the evidence the signed contract was posted back to the purchaser (or his solicitors) on the previous day, and under the postal acceptance rule the contract was made as soon as the letter was posted. It was therefore too late for the plaintiff to seek to convert the acceptance into a counter offer.
  1. [63]
    It was submitted on behalf of the defendant that there was no entitlement to claim the legal costs, apparently because the mortgage when executed in 1995 did not on the execution sheet refer to the terms and conditions of the schedule which were attached. It is true that on the execution sheet in the section “Description of debt or liabilities secured” there is no entry, but the sheet was attached to a schedule specific to this mortgage which identified the principal and interest, and contained the relevant term: “Fourthly: The mortgagor will upon demand pay the mortgagee’s solicitor and own client costs and all charges, expenses and outlays which may be incurred or paid by the mortgagee … or which the mortgagee may in any other way incur or pay in respect of the land hereby mortgaged … in consequence of default in payment of any money intended to be hereby secured or the breach of any covenant, condition or stipulation contained herein and on the part of the mortgagor to be observed or performed such costs and all charges expenses and outlays may be paid by the mortgagee and in that event shall be forthwith payable by the mortgagor to the mortgagee and pending such payment may be debited to the mortgagor and shall be deemed to be further advances under this bill of mortgage payable on demand.”
  1. [64]
    In my opinion the effect of that clause is that the plaintiff is entitled to recover legal costs incurred as a consequence of default on the part of the mortgagor, including costs associated with the exercise of the power of sale. The amounts of costs proved are as follows:

Exhibit 12, Bill dated 12 June 1996: $ 849.30[45]

Exhibit 7, Bill dated 20 November 1996: $ 527.60

Exhibit 8, Bill dated 8 July 1997: $ 1,446.20

Exhibit 10, Bill dated 22 July 1997: $ 1,836.85

Exhibit 9, Bill dated 16 September 1997: $ 2,026.70[46]

Exhibit 6, Bill dated 8 January 1998:$ 2,638.60

Total $ 9,325.25

  1. [65]
    It was submitted on behalf of the defendant that interest should not be awarded to the plaintiff in respect of the whole period of the past six years, including five years when the action was on foot, because of the failure on the part of the plaintiff promptly to pursue its claim against the defendant. Reference was made to two English cases, but it seems to me that they were concerned with the question of whether interest was recoverable under the English equivalent of s 47 of the Supreme Court Act 1995, or as damages for breach of contract. Section 47 gives a discretion as to interest, and it is well recognised that delay in pursuit of the claim is a factor which may be taken into account and may justify an award of interest calculated by reference to a period shorter than the period from the date on which the loss is suffered until the date of judgment.[47]  However, the plaintiff’s claim for interest in this case arises under contract, rather than as a matter of discretion. The mortgage in clause “secondly” provided an obligation to pay interest on the principal or so much thereof as shall from time to time remain unpaid and on all other moneys as hereinafter mentioned. There was also a proviso providing for capitalisation of interest which was unpaid. In my opinion the authorities referred to on behalf of the defendant do not apply where the entitlement to interest arises under a contract. If it were a matter of discretion (and possibly even if it was a question of assessing damages for breach of contract) I would not allow the plaintiff interest in respect of the period when this action was not pursued and ought to have been, a period of three years. However, the entitlement to interest by contract is not discretionary. The remedy to a defendant who wants to prevent interest from running under a contract is to pay or tender the amount properly payable. It was conceded that there had been no tender at any stage:  p. 84.
  1. [66]
    The plaintiff in my opinion therefore is entitled to recover interest as calculated in Exhibit 5, but brought up to the date of judgment, as follows:

Balance as at 16 June 2002 $21,508.07

Plus interest to 16 July 2002 $291.80$21,799.87

Interest to 16 August 2002 $305.50$22,105.37

Interest to 16 September 2002 $309.78$22,415.15

Interest to 16 October 2002 $303.99$22,719.14

Interest to 4 November 2002 $195.14$22,914.28

  1. [67]
    In conclusion the plaintiff is therefore entitled to recover the balance payable under the mortgage including capitalised interest of $22,914.28, and is also entitled to recover the legal costs payable pursuant to the mortgage, a total of $32,239.52. There will therefore be judgment that the defendant pay the plaintiff $32,239.52. I will also order the defendant to pay the plaintiff’s costs of and incidental to the action to be assessed. The parties may put in written submissions within seven days as to the scale on which the costs are to be assessed, if r. 698 is not to apply.

Footnotes

[1]  The defendant held his interest in the land as trustee under a nomination of trustees. It was not suggested that that was of any significance to this action.

[2]  The road was apparently rebuilt so as to cut off this portion in about 1990:  p. 88. It is built up above the land, by about one metre:  p. 156. See also Plan MCH4363, part of Exhibit 2.

[3]  Letter plaintiff’s solicitors to Mr Mahaffey 20 November 1996: Document 2 of Exhibit 3. That the mortgage was in default when the land was sold was admitted:  p. 81.

[4]  Exhibit 3 Document 18 says 12 December 1997. I prefer the evidence of Mr Reeve.

[5]  On settlement $30,029.47 was received, and the balance deposit after commission was $750 (p. 26) but there was a separate account for $500 for advertising costs:  Exhibit 3, Document 12. Earlier advertising costs of $700 (Exhibit 3 Document 5) are included in the claim for legal costs:  see Exhibit 10.

[6]  It had been mentioned at other earlier sittings of the Court.

[7]  On 20 June Mr Bell told me that the defendant would be unable to conduct the case himself if he were present, as he does not understand the issues:  p. 4. There was therefore no point in adjourning the trial to enable him to be present.

[8]  Mr Bell has also appeared in the Supreme Court, for Mr Mahaffey:  Mahaffey v Thomson & Anor [2002] QSC 45.

[9]  Indeed, counsel for the plaintiff had, on 21 June, drawn attention to the absence of disclosure by either party:  p. 97.

[10]  It was common ground that the highest and best use of the land was as a rural residential site:  Mr Thorvaldsen p. 19;  Mr Horswood p. 152.

[11]  Mr Mahaffey did not recall doing so:  p. 119.

[12]  He owns a car (p. 77) and a truck (p. 80) used by Mr Mahaffey, who said he was still paying him for the car off and on when he could:  p. 79. Mr Blair said Mr Mahaffey had paid for the car about two years ago:  p. 146.

[13]  Page 131;  he obtained it on 25 August 1997:  p. 142.

[14]  Mr Mahaffey said there was only one:  p. 54. The earlier date was certainly advertised (Exhibit 4), but the auction proposed for that date may not have taken place. There was no direct evidence that it occurred. In my opinion it does not matter whether there were one or two auctions.

[15]  Mr Blair claimed that the benefit of the bond was of importance to him:  p. 149. That may have been because of the assignment.

[16]  Mr Mahaffey said he had told Mr Horswood about the bond (p. 121) but the valuation Exhibit 14 does not refer to it, and Mr Horswood did not say he had been told.

[17]  The evidence of Mr Horswood at p. 155 is to the contrary.

[18]  Mr Mahaffey said there was no reason to:  p. 123.

[19]  Page 153, line 40, and see p. 160, line 1-10.

[20]  Duncan and Vann “Property Law and Practice” para 7.2040.

[21]Tyler v Custom Credit Corporation Ltd [2001] QSC 495 at [156].

[22]  See Exhibit 3 Documents 5, 12;  Exhibit 4.

[23]  Exhibit 13, Document 4.

[24]  This was not put to Mr Reeve.

[25]  Later Mr Mahaffey said he believed all parties had signed the contract on or before 26 September, the Friday:  p. 94.

[26]  Wednesday and Thursday were 24 and 25 September 1997.

[27]  Colin Martin, of Windsor Craig, the solicitor who was already acting  for the defendant:  Exhibit 3 Document 7.

[28]  From the solicitor’s office at Spring Hill:  p. 72.

[29]  Exhibit 15, produced by Mr Blair at the hearing (p. 133) having been sent by the then solicitors for the defendant to him on 10 March 1998.

[30]  Mr Blair said that the solicitor produced the whole contract but that the standard conditions were not attached (now):  p. 137. He id not say they had ever been attached. The document did not strike him as unconventional (p. 149) although even Mr Mahaffey recognised that standard terms and conditions ought to have been there, and said they would have been in the original when it was signed:  p. 73. Their absence was not accounted for satisfactorily.

[31]  Mr Blair maintained that Mr Martin was his solicitor in the transaction (p. 140) although Mr Martin in his letter of 14 October 1997 said that a Mr Mulcahy was acting for Mr Blair (Exhibit 3 Document 14). The Caveat was lodged on 23 October 1997 by Barwicks, Lawyers for Mr Blair:  Exhibit 3 Document 17. Mr Mahaffey said Mr Martin was in this transaction acting only for Mr Blair (p. 56, but see p. 92).

[32]  Although the 18 months has long expired, Mr Blair regarded that part of the deal as “left open”:  p. 134.

[33]  That house has never been constructed.

[34]  Exhibit 13, Document 8.

[35]  Exhibit 3, Document 14.

[36]  Particularly if he had been told on 26 September to tell Mr Reeve that the contract had been signed, and had been faxed a copy of it.

[37]  Exhibit 13, Document 5. There was a similar letter the same day to the real estate agent:  Document 6. Mr Reeve attempted to take the argument further by a letter of 7 October:  Exhibit 13, Document 9.

[38]Forsyth v Blundell (1973) 129 CLR 477.

[39]  This figure was put by Mr Bell in cross-examination:  p. 50. It was not confirmed by Mr Blair.

[40]  In view of the letter of 14 October 1997, Exhibit 3, Document 14, I find on the balance of probabilities that there was no such signed contract in existence as at 14 October 1997, ie that Exhibit 15 was created subsequently.

[41]  Mr Horswood regarded the cut off land as of little value:  p. 163.

[42]  Mr Thorvaldsen regarded the situation on a main road as a drawback, because of road noise:  p. 17. Mr Horswood conceded that it was a negative factor:  p. 158.

[43]  Supplying the test of market value in Spencer v The Commonwealth (1907) 5 CLR 418 at 432..

[44]  He also had the benefit of the “assignment” of the bond, which (if of significance) made the land more valuable to him than to another purchaser who would not get such an assignment.

[45]  Deducting $50 unpaid from an earlier bill, not proved.

[46]  Deducting $250 valuer’s fee already claimed in Exhibit 8.

[47]Serisier Investments Pty Ltd v English [1989] 1 Qd R 678 at 679.

Close

Editorial Notes

  • Published Case Name:

    Harry Davis Properties Pty Ltd v Mahaffey

  • Shortened Case Name:

    Harry Davis Properties Pty Ltd v Mahaffey

  • MNC:

    [2002] QDC 330

  • Court:

    QDC

  • Judge(s):

    McGill DCJ

  • Date:

    04 Nov 2002

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Cameron v Brisbane Fleet Sales Pty Ltd[2002] 1 Qd R 463; [2000] QSC 15
2 citations
Jump To
Cite 1 - [2002] 1 Qd R 463
Cite 2 - [2002] 1 Qd R 463
Forsyth v Blundell (1973) 129 CLR 477
2 citations
Jump To
Cite 1 - (1973) 129 CLR 477
Cite 2 - (1973) 129 CLR 477
Jones v Dunkel (1959) 101 CLR 298
1 citation
Jump To
Cite 1 - (1959) 101 CLR 298
Mahaffey v Thomson [2002] QSC 45
1 citation
Jump To
Cite 1 - [2002] QSC 45
Serisier Investments Pty Ltd v English [1989] 1 Qd R 678
1 citation
Jump To
Cite 1 - [1989] 1 Qd R 678
Spencer v The Commonwealth (1907) 5 CLR 418
1 citation
Jump To
Cite 1 - (1907) 5 CLR 418
Tyler v Custom Credit Corporation Limited (in liq) [2001] QSC 495
2 citations
Jump To
Cite 1 - [2001] QSC 495
Cite 2 - [2001] QSC 495

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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