Forsyth and Another v. Blundell and Others1
| DOI | 10.1177/0067205X7400600110 |
| Date | 01 March 1974 |
| Published date | 01 March 1974 |
| Subject Matter | Case Notes |
1974] Case Notes 203
FORSYTH AND ANOTHER
v.
BLUNDELL AND OTHERS1
Mortgages-
Power of Sale
-Duties
of
Mortgagee-
Notice
of
Pur-
chaser-
After
Sale-
Before Completion -Grounds for Restraining
Completion-
Necessity to set Sale
Aside-
Real Property Ordinance
1925-1963, s.94(2)
(A.C.T.).
In
the recent case of Forsyth
v.
Blundell, the High Court of Australia
had an opportunity to clarify the nature of the duty owed to a mort-
gagor, by a mortgagee exercising his power of sale.
It
has never been
clear in this country whether a mortgagor seeking to establish a breach
of that duty must show that the mortgagee has acted with reckless
indifference to his interests
or
whether it
is
sufficient to establish only
negligence.
In
Forsyth
v.
Blundell, Blundell, the mortgagor of land under the
Real Property Ordinance 1925-1963 (A.C.T.), complained that the
mortgagee, Associated Securities Ltd (A.S.L.), had exercised its power
of sale improperly and therefore sought a declaration to that effect, as
well
as
an injunction to restrain the completion of the sale to the Shell
Oil Co. Sometime before the date advertised for the auction at which
the property was to be sold. XL Petroleum Pty Ltd had indicated that
it might pay out the mortgage debt, approximately $120,000,
or
bid up
to $150,000 at the auction. However A.S.L. sold to an agent for Shell
by private treaty for $120,000, the reserve price set for the auction.
This sale was not manifestly at an undervalue. However A.S.L. did not
inform Shell of XL's attitude nor did it attempt to induce
XL
and Shell
to compete.
After careful consideration of these facts, the trial judge in the A.C.T.
Supreme Court, Fox J., decided that
a reasonable mortgagee in the position of A.S.L. could and should
have seen that Blundell might be better
off.
2
Turning to consider the legal position His Honour gave a lucid review
of the relevant authorities and decided that in his view, the mortgagee
was in breach of his duty to the mortgagor.
At
this stage it seemed that
the confusion referred to above had been resolved and that negligence
on the part of the mortgagee was established as sufficient to constitute
a breach of the duty owed to the mortgagor. However, Fox J. also made
an ancillary finding of recklessness on the part of A.S.L.
It
was on this
finding that the High Court based its judgment, electing not to decide
the issue and thus condemning it once more to limbo. Though judicial
prudence in avoiding decisions on issues not strictly relevant
is
often
desirable, there
is
such confusion and conflict in the authorities on this
important point, that the need for guidance from the High Court may
well outweigh the desirability of such caution.
1 [1973] 1 A.L.R. 68. High
Court
of
Australia; Menzies, Walsh and Mason JJ.
2Blundell and Another
v.
Associated Securities
Ltd
(1971) 19 F.L.R. 17, 28.
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