LAWS2204-5825-Answer guide

LAWS2204-5825-Answer guide - The question does not state...

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The question does not state that there was an express covenant in the mortgage between Charles and Ingalls Bank giving the Bank the power of sale. However as the mortgage is registered, we know there must be an implied power of sale due to s109(1) of the Conveyancing Act . The bank must abide by the procedures set out in the Real Property Act . Of particular note, it must abide by the notice requirements in s57, which require written notice of the defect to be given to the mortgagor, along with a period of at least one month to remedy the defect (in this case the non-payment of installments). The Bank sent Charles written notice in January 2007, giving Charles one month to pay the installments owing (which he did not do). The property was not advertised until March, so clearly the Bank complied with the requirements of s57. However the Bank may have breached its duty to Charles. In England, the duty is a duty of care ( Cuckmere Brick ) but in Australia the duty has been called a duty of good faith (bona fides) ( Southern Goldfields .) The duty is to not act recklessly against the interests of the mortgagor and to take reasonable steps to obtain a true/proper price ( Southern Goldfields, ANZ v Bangadilly ). If Charles is correct about the actual value of the land then it may be that there has been a breach of the duty. Three possible issues with the sale: 1) Timing 2) Advertisement 3) Sold by contract, not auction Timing – the sale was on Good Friday. It is clear that it is a mortgagee’s choice as to the timing of the sale ( Cuckmere Brick, ANZ v Bangadilly per Jacobs J). So the choice of date in itself cannot be a breach of the duty. However, if the particular choice of date means a mortgagee is not taking reasonable steps to obtain a true price (for example a sale very soon before Christmas in ANZ v Bangadilly ) then the timing may contribute to a finding of a breach of duty. The fact that attendance was so low at the auction suggests that the timing did indeed contribute to not taking reasonable steps to obtain a proper price. Advertisement Scope – the ad was only run in the SMH. Advertising must be done widely ( Pendlebury ) and it is appropriate to advertise both locally and wider ( Bangadilly ).
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Ingalls would argue that it is saving money (and therefore lowering costs) by restricting its advertising, and advertising in such a wide circulating paper is sufficient. Content – the ad describes the house as in bad repair (which it is) but makes no mention of the subdivision approval. The potential uses of land must be made clear in advertising – including development options ( Cuckmere Brick ). Ingalls Building Society would argue it is being honest – which it is – but the exclusion of the information as to subdivision approval is a clear breach of duty. It could have the effect of excluding a class of potential purchasers (ie those people wanting to develop) as in Cuckmere Brick and it seems it could well have lead to a real discrepancy between what was paid for the land and
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LAWS2204-5825-Answer guide - The question does not state...

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