Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Almona Pty Ltd v Parklea Corporation Pty Ltd [2021] NSWCA 171 Hearing dates: 16–19 November 2020 Decision date: 11 August 2021 Before: Bathurst CJ at [1]; Basten JA at [80]; White JA at [275] Decision: (1) Dismiss the further amended notice of appeal of Almona Pty Ltd. (2) Order that the appellant pay the costs of each respondent to the appeal. (3) Dismiss the cross-appeal by Parklea Corporation Pty Ltd. (4) Order that Parklea Corporation pay the costs of Almona Pty Ltd of the cross-appeal. (5) Dismiss the summons filed by Secured Asset Portfolio III Ltd (in liq) seeking leave to cross-appeal from the costs order made by the trial judge. (6) Order that Secured Asset Portfolio III pay Almona's costs of the summons seeking leave to cross-appeal. Catchwords: MORTGAGES AND SECURITIES – mortgages – duties, rights and remedies of mortgagee – power of sale – mortgagee's duty to exercise power of sale in good faith – effect of contract of sale upon mortgagor's rights – whether attempt to refinance and discharge mortgage prior to transfer of title can prevent sale – where mortgagor's attempts to refinance accelerated the sale process MORTGAGES AND SECURITIES – mortgagee exercising right of sale – price higher if vacant possession given – requirement of vacant possession not communicated to occupant –damages awarded for failure to communicate occupation condition LAND LAW – Torrens title – exceptions to indefeasibility – fraud by mortgagee exercising power of sale – bid-rigging where alleged collaborator later acquired share in successful purchaser – whether collusion established LAND LAW – mortgages – mortgagee sale – where owner of the mortgagee financed the purchase and acquired option to control purchaser – honesty and independence of sale process – good faith exercise of power of sale – pre-existing relationship between parties acting on other projects – whether lack of independence in sale process indicative of fraud – burden of disproving fraud Legislation Cited: Conveyancing Act 1919 (NSW), ss 109, 111A Corporations Act 2001 (Cth) s 420A Real Property Act 1900 (NSW), ss 42, 43, 45, 56, 57, 59, 118 Legal Profession Uniform Conduct (Barristers) Rules 2015, r 65 Cases Cited: Almona Pty Ltd v Parklea Corporation Pty Ltd (No 4) [2020] NSWSC 553 Assets Co Ltd v Mere Roihi [1905] AC 176 Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195; [1978] HCA 21 Banque Commerciale S.A., en Liquidation v Akhil Holding Ltd (1990) 169 CLR 279; [1990] HCA 279 Barns v Queensland National Bank Limited (1906) 3 CLR 925; [1906] HCA 26 Belton v Bass, Ratcliffe and Gretton Ltd [1922] 2 Ch 449 Butler v Fairclough (1917) 23 CLR 78; [1917] HCA 9 Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425; [2015] HCA 2 Chia v Rennie (1997) 8 BPR 15,601 Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; [2001] NSWCA 440 Davey v Durrant (1857) 1 De G & J 535; (1858) 44 ER 1086 Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; 28 ER 82 Farrar v Farrars Ltd (1888) 40 Ch D 395 Forsyth v Blundell (1973) 129 CLR 477; [1973] HCA 20 Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporations Ltd (1994) 8 BPR 15,581 Kennedy v De Trafford [1897] AC 180 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68 Latec Investments Ltd v Hotel Terrigal Pty Ltd (In liq) (1965) 113 CLR 265; [1965] HCA 17 Nash v Eads (1880) 25 Sol Jo 95 National & Provincial Building Society v Ahmed (1995) 2 EGLR 127 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; [1912] HCA 9 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; [1982] HCA 29 Potts v Miller (1940) 64 CLR 282; [1940] HCA 43 Property & Bloodstock Ltd v Emerton (1968) Ch 94 Provident Capital Ltd v Printy [2008] NSWCA 131; (2008) 13 BPR 25 Robertson v Norris (1858) 1 Giff 421; 65 ER 983 Sahab Holdings Pty Ltd v Registrar General (No 2) [2012] NSWCA 42; (2012) 16 BPR 30 Sewell v Agricultural Bank of Western Australia (1930) 44 CLR 104; [1930] HCA 29 Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349 Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1926] AC 101 Waring (Lord) v London and Manchester Assurance Co Ltd (1935) Ch 310 Warner v Jacob (1881) 20 Ch D 220 Texts Cited: Croft and Hay, The Mortgagee's Power of Sale (4th ed, LexisNexis, 2019) J D Heydon, M J Leeming and P J Turner, Meagher, Gummow and Lehane's Equity – Doctrines and Remedies (5th ed, LexisNexis, 2015) Waters, The Constructive Trust, University of London (1964) Category: Principal judgment Parties: Almona Pty Ltd (Appellant/First Cross-Respondent) Parklea Corporation Pty Ltd (First Respondent/Cross-Appellant) P T Ltd (Second Respondent/Second Cross-Respondent) Secured Asset Portfolio III Ltd (In liq) (Third Respondent) Representation: Counsel: D Williams SC / N Riordan (Appellant/First Cross-Respondent) K Andronos SC / S Keizer (First Respondent/Cross-Appellant) M Izzo SC/ J Burnett (Second Respondent/Second Cross-Respondent) N Hutley SC / E Hyde / G Keesing (Third Respondent) Solicitors: Bartier Perry (Appellant/First Cross-Respondent) Norton Rose Fulbright Australia (First Respondent/Cross-Appellant) Corrs Chambers Westgarth (Second Respondent/Second Cross-Respondent) King & Wood Mallesons (Third Respondent) File Number(s): 2020/197106 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Division Citation: [2019] NSWSC 1868 Date of Decision: 20 December 2019 Before: Robb J File Number(s): 2018/317496 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] The appellant, Almona Pty Ltd (Almona), was until 22 March 2016 the registered proprietor of a large site in western Sydney, including Parklea Markets. In 2013 Almona had entered into a refinancing agreement with the third respondent, Secured Asset Portfolio III Ltd (SAP), a part of the Pacific Alliance Group (PAG). Almona defaulted under the agreement. On 17 April 2015 SAP appointed receivers and managers (PPB Advisory) to Almona; PPB appointed a sales agent, Colliers International, which conducted a sale process by receiving bids from interested parties. The second round of bidding closed on 16 December 2015. The highest bidder was identified as the Dyldam Group, that bid being accepted by SAP. On 4 January 2016 Dyldam's principal, Mr Sam Fayad, established a special purpose vehicle, Parklea Corporation Pty Ltd (Parklea) to be the purchaser. A contract of sale was entered into by SAP and Parklea on 13 January 2016. The sale price with vacant possession was $85.35m; if the principal of Almona, Mr Constantine, whose home was on the land, remained in possession the price would be $81.1m. A deed of variation was entered into on 22 March 2016 to record the purchase price as $81.1m. On 11 December 2015 representatives of PAG and Dyldam had met in Hong Kong. When the sale settled on 22 March 2016, the bulk of the finance for the purchaser came from another PAG company. The ownership of Parklea was held through unit trusts which reflected the financing arrangements, with the PAG entity having an option to acquire 80% of the interests in Parklea. On 18 March 2016, Almona commenced proceedings seeking to prevent the settlement of the sale. It abandoned that relief, but continued the proceedings after settlement seeking to set aside the transactions on grounds of fraud, breach of duty, unconscionable conduct and misleading or deceptive representations on the part of SAP and Parklea. The Court at first instance awarded Almona $4.25m on the basis that it had not been revealed to Mr Constantine that a higher price would have been obtained had he vacated the land prior to settlement. However, Almona's principal claims failed, including allegations that (i) PAG had manipulated the sale process by controlling both the mortgagee (SAP) and the financing of the purchase; (ii) PAG, as the principal of the mortgagee, obtained through another subsidiary an option to acquire a controlling interest in the purchaser, and (iii) there had been collusive bidding, in that the highest bidder in the first round, Wesco Capital Pty Ltd (Wesco), reduced its bid substantially in the second round so as to no longer be the highest bidder, yet ended up with a 20% share of Parklea. If proved, these matters established that the sale was not a truly independent bargain. Almona appealed from the dismissal of its principal claims; Parklea filed a cross-appeal challenging the order for payment of $4.25m. The issues before this Court were: (1) whether SAP, in exercise of its power of sale as mortgagee, breached its duty to Almona; (2) whether there was no independent sale because PAG both controlled the mortgagee, funded the purchaser and obtained an option to control the purchaser; (3) whether there was collusive bidding involving Dyldam and Wesco; (4) if fraud were established, whether the registered holder of the mortgages was affected by fraud; (5) whether Mr Constantine had notice of the occupation condition, and whether any lack of knowledge should have resulted in an adjustment to the sale price; and (6) in the event a breach of duty was established, what relief should be granted. Held, by majority (White JA dissenting), dismissing the appeal: As to (1) – breach of mortgagee's duty Per Bathurst CJ and Basten JA: (1) A mortgagee's power of sale must be exercised honestly for the purpose of the power; however, a mortgagee is not a trustee of the mortgage, and its duty was to act in good faith and take reasonable precautions to obtain a proper price and thus ensure that the interests of the mortgagor were not sacrificed: [56]‑[64] (Bathurst CJ); [105] (Basten JA); importantly, there must be an independent bargain between mortgagee and purchaser: [108]-[115] (Basten JA); [298], [318]-[325] (White JA). Real Property Act 1900 (NSW) s 59, applied; Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd [1978] HCA 21; 139 CLR 195; Barns v Queensland National Bank Ltd (1906) 3 CLR 925; Forsyth v Blundell (1973) 129 CLR 477; [1973] HCA 20, followed; Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporations Ltd (1994) 8 BPR 15581; Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; Pendlebury v The Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676, discussed. (2) A contract of sale is binding upon the mortgagor, and it did not retain rights superior to those of the purchaser up until settlement; at that time, Almona had: been in default for a considerable time and had failed to discharge the mortgage; no criticisms were levelled at the sale process, which produced bids in excess of the valuations: [66] (Bathurst CJ); [194]-[195] (Basten JA). Although the settlement had been accelerated to prevent Almona from discharging its mortgage and SAP had stalled in providing payout figures to Almona to allow it time to settle the sale to Parklea, Almona had no continuing right to pay out the mortgage.[67], [78] (Bathurst CJ); [196] (Basten JA). As to (2) – mortgagee control of purchaser (3) The evidence did not establish that PAG's primary purpose when the contract of sale was signed was not to recover its money but rather to acquire a contingent interest in the property, so as to place a burden on the mortgagee to justify its conduct of the sale: [1] (Bathurst CJ); [198], [225]-[227] (Basten JA). per White JA (dissenting) (4) SAP did not exercise its power of sale in good faith, as they did not exercise the power of sale for the purpose for which it was conferred, being to obtain repayment for the secured debt by way of independent bargain. However, the mere fact that a mortgagee finances a purchaser is not sufficient to demonstrate that the sale was made in fraud of the power: [326]-[332]. (5) Obtaining a fair price does not necessarily mean that a power of sale was exercised in good faith. However, Parklea's actions were marked by haste, secrecy, deception, and the intention to prevent the mortgagor from redeeming the property. They registered the property by fraud, and so did not acquire an indefeasible title: [351]. Real Property Act 1900 (NSW), s 42, applied; Legal Profession Uniform Conduct (Barristers) Rules 2015 r 65, referred to; Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195; Barns v Queensland National Bank Limited (1906) 3 CLR 925; Farrar v Farrars Ltd (1888) 40 Ch D 395, considered; Forsyth v Blundell (1973) 129 CLR 477; Nash v Eads (1880) 25 Sol J 95; Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; Robertson v Norris (1858) 1 Giff 421; 65 ER 983; Warner v Jacob (1881) 20 Ch D 220; Assets Co Ltd v Mere Roihi [1905] AC 176; Belton v Bass, Ratcliff and Gretton Ltd [1922] 2 Ch 449; Butler v Fairclough (1917) 23 CLR 78; [1917] HCA 9; Davey v Durrant (1857) 1 De G & J 535; (1858) 44 ER 1086; Kennedy v De Trafford [1897] AC 180; Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; Sewell v Agricultural Bank of Western Australia (1930) 44 CLR 104; Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1926] AC 101, referred to. As to (3) – collusive bidding (6) The inference that Wesco lowered its second bid to allow Dyldam to make the highest offer in exchange for an interest in the purchaser was available, but this claim was not pleaded and could therefore not be said to have constituted a basis for alleging a breach of the mortgagee's duty: [49]-[55]; (Bathurst CJ) [252], [260]-[262] (Basten JA). Banque Commerciale en Liquidation v Akhil Holding Ltd (1990) 169 CLR 279 at 285; Farrer v Farrars Ltd (1889) Ch D 395; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd [1978] HCA 21; 139 CLR 195, applied. As to (4) – registered holder of mortgages (7) The indefeasibility of PT's interests depended upon it being a bona fide holder of the mortgages, having provided valuable consideration. It was contested whether they had provided valuable consideration or merely fees for services, but the issue did not need to be resolved: [1] (Bathurst CJ); [264]-[267] (Basten JA). (8) Almona did not allege that the mortgage to PT was registered by fraud. Almona's remedy is confined to a claim for equitable compensation on the taking of accounts, but not in respect of PT, given the amount secured in respect of PT's mortgage: [278] (White JA). As to (5) – cross-appeal (9) The failure of SAP to inform Almona of the occupation condition involved a breach of its duty as mortgagee; it was correct to infer that Parklea had knowledge that Mr Constantine had not been advised of the condition: [1] (Bathurst CJ); [199]-[207] (Basten JA). (10) It was unnecessary to consider whether the sale should be set aside, as the Court made no finding that the mortgagee failed to exercise its power of sale having proper regard to the interests of the mortgagor: [264]. As to (6) – available relief per White JA (Bathurst CJ and Basten JA not needing to address relief): (11) An account is the appropriate form of relief where a mortgagee is alleged to have sold a property at an undervalue or in breach of its duty. It would be open to Almona to investigate whether $85.35m was a true market price, or alternatively, whether it represented the real value of the land: [375]-[381]. Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; [2001] NSWCA 440, applied; Potts v Miller (1940) 64 CLR 282, considered Judgment INDEX Bathurst CJ: 1 Background facts 3 Was Almona entitled to rely on a collusive arrangement between SAP Dyldam and Wesco in support of its claim? 48 Was the sale in bad faith or a fraud on the mortgagee's power of sale? 56 Basten JA: 80 Overview 85 Issues raised on appeal 92 Legal principles 105 Circumstances constituting collusive dealing 116 History of events 118 (a) Events in 2015 118 (b) Negotiations in 2016 140 (c) Heads of agreement 147 (d) Final transactions documentation 154 Appellant's first claim of impropriety – mortgagor's right to repay loan 165 (a) Accelerated settlement 186 (b) Conclusions 191 Appellant's second claim of impropriety – sale transaction not independent 198 Appellant's third claim of impropriety: accommodation condition 199 (a) Finding an opportunity to vacate premises 199 (b) Cross-appeal – Parklea Corporation 201 (c) Conclusion – cross-appeal 209 Appellant's fourth claim of impropriety: involvement of Wesco 210 (a) Factual background 210 (b) Available inferences 218 (c) Challenge to findings of trial judge 224 (i) appellant's "wider fraud" case: grounds 1 and 2 225 (ii) inference of fraud in withdrawal of Wesco bid 232 (d) Submissions on appeal 250 Other matters 264 Challenges by Almona and SAP to costs order 268 Orders 274 White JA: 275 Facts 280 Duty of good faith 296 Wesco's involvement: onus of proof 333 Parklea Corporation did not acquire an indefeasible title 337 PT's mortgage 352 Remedy 375 1. BATHURST CJ: I agree with the orders proposed by Basten JA and generally with his reasons. I wish to address two matters. The first is whether or not it was open to Almona Pty Ltd to rely on a collusive arrangement between the first respondent, the third respondent, Dyldam Developments Pty Ltd, and Wesco Capital Pty Ltd or its associated companies Visy Group Holdings Pty Ltd and Visy Projects Pty Ltd in support of its claim that the sale by the third respondent of the appellant's property, Parklea Markets, was an improper exercise of the mortgagee's power of sale. The second is whether the sale was a fraud on the mortgagee's power of sale or otherwise in bad faith. 2. As Basten JA has comprehensively set out the facts surrounding the dispute, I will only repeat them to the extent necessary to understand my reasons. For convenience I will use the same abbreviations as those used by Basten JA. Background facts 1. In considering the issues it must be remembered that at the time of the exercise of the power of sale, Almona had been in default under the facilities secured by the mortgage for a considerable period. Default had occurred by 31 May 2014. On 5 June 2014, SAP confirmed to Almona that the amount owing was $58,911,301.00 and rejected a request for extension. 2. Notwithstanding, no action was taken at that time, and on 12 September 2014 the solicitors for SAP wrote to Almona, indicating that it was prepared to consider a forbearance letter in respect of existing breaches of the facilities on certain terms. It is not clear whether those terms were complied with. 3. On 12 December 2014, the solicitors for Almona wrote to the solicitors for SAP stating their client was in the process of refinancing the facility with a "major bank". Nothing appeared to result from those negotiations, and on 2 February 2015 the solicitors for SAP advised the solicitors for Almona that the amount due as at 31 January 2015 was $65,566,970.91. 4. On 15 April 2015, the solicitors for SAP wrote to Almona demanding payment of $66,720,149.08, and on 17 April SAP appointed receivers and managers to Almona. 5. It should be noted that around this time a number of valuation reports were obtained. A valuation prepared by Abbotts Valuers on behalf of Mr Con Constantine, the managing director of Almona, valued the property as at 1 June 2015 at $115 million. The valuation was not admitted into evidence as proof of the value of the land, and the receivers were not provided with a copy of the report. 6. The receivers obtained two valuations. One dated 29 June 2015 valued the property at $45 million on an "as is, where is" basis and at $67.5 million assuming a residential master plan over the Parklea Markets and adjoining land. The other dated 18 July 2015 valued the property at $48.7 million on an "as is – subject to continuing use" basis and at $70 million on the basis of alternative use based on a residential development scenario. The primary judge noted that it was not suggested by Almona that it was unreasonable for the receivers or SAP to rely on these valuation reports. 7. On 7 August 2015, Mr Dixon-Smith, a partner of King & Wood Mallesons who had commenced acting for SAP, sent a notice under s 57(2)(b) of the Real Property Act 1900 (NSW) stating the amount payable was $71,262,096.22. 8. On 18 August 2015, the solicitors for Almona wrote to the solicitors for the receivers, stating the target date for refinancing was 31 August 2015. In anticipation of settlement on that date, various documents were prepared necessary to effect a release of the securities, but on 31 August settlement was postponed, the solicitors for Almona requesting a payout figure as at 4 September 2015. Settlement was again postponed until 18 September 2015, then postponed to 23 September and finally to 30 September 2015. Settlement did not occur. 9. By the start of October 2015, Colliers on behalf of the receivers had called for expressions of interest in the property. Basten JA sets out the process leading up to the first and second round of offers (at [122]-[129] of his judgment) and it is unnecessary to repeat what is there set out. 10. As Basten JA has pointed out, Wesco was registered on 8 October 2015 with Mr Merhi as the sole shareholder and director. On 12 November 2015, associated companies, Visy Group Holdings Pty Ltd and Visy Projects Pty Ltd, were registered. 11. It should be noted that Wesco first attempted to obtain an interest in the property through negotiations with Mr Constantine. The primary judge noted that it emerged during the cross-examination of Mr Constantine that on 27 October 2015, Mr Constantine, Mr Merhi and a company, Australia International Investment Holdings Group Pty Ltd, entered into a Deed of Agreement which recited that Mr Constantine and Mr Merhi were contemplating a joint venture and/or a share sale and/or another transaction involving the assets of Almona. Clause 2 of the Deed provided that, if an agreement was reached that involved Mr Merhi injecting money into Almona to allow it to discharge all securities granted to SAP, with each of Mr Constantine and Mr Merhi holding an interest in Almona or its assets, they would procure that Almona pay a commission of $5 million to Australia International Investment Holdings Group Pty Ltd. 12. The primary judge stated that Mr Constantine's evidence on the issue was "most unsatisfactory", noting that he "grudgingly admitted" the existence of the Deed but seemed to deny he ever made an agreement as to some of its terms (PJ[87]). The primary judge went on to make the following remarks: "[89] In the context of Almona making a claim that SAP colluded with Dyldam and Mr Merhi to subvert the expressions of interest process, it is telling that there is no objective evidence of any representative of SAP dealing personally with Mr Merhi, or any representative, or knowing anything more about any company of his other than the submissions of expressions of interest by Wesco. The only positive evidence of any party dealing with Mr Merhi is that concerning Mr Constantine's entirely unexplained, and unauthorised, entry into the Deed of Agreement on behalf of Almona." 1. In a time entry narration Mr Dixon-Smith records that on 13 November 2015 he completed a review of funding arrangements required for buyers seeking funding on acquisition of assets and "advice to PAG". This is unusual, as all the buyers who were admitted to the second round of bids, including Dyldam, indicated in their expressions of interest that they had finance to complete the purchase. The time entry narrative records that the review followed meetings Mr Dixon-Smith had with representatives of PAG on 10 November and 11 November, the latter being recorded as a meeting re the sale process. It can be inferred in those circumstances that PAG by that time was interested in retaining an involvement with the property, at least as a potential financier. 2. On 10 December 2015, Mr Dixon-Smith travelled to Hong Kong. His time entry narrative records "Parklea Joint Venture – Meeting with Dyldam in Hong Kong. Prepare and edit Parklea Profit Distribution Table … compose email to James McMurdo and Anshumann Woodhull". The document which was emailed to Messrs McMurdo and Woodhull on 11 December was attached to an email which stated, "how I see the profit ratchet working". That document showed a distribution of net profit between Dyldam and PAG in respect of the venture, Dyldam's share of the profit increasing from a base of 25 per cent at a profit level of $50 million to 40 per cent at a profit level of $400 million, but thereafter constant at 40 per cent (presumably the ratchet). 3. This document demonstrates at least two things. First, to the extent that it can be concluded that it was prepared on the instructions of PAG, it demonstrates confidence that Dyldam would be the preferred bidder, notwithstanding the fact that second round bids had not come in and Wesco's initial bid was higher than that of Dyldam. Second, on its face, leaving aside the risk involved, it appeared to be a commercially attractive proposition to PAG. I agree with Basten JA that it could readily be inferred that the discussion with Dyldam representatives in Hong Kong was in connection with this proposal. 4. It is apparent from Mr Dixon-Smith's time entry narrative that by 21 December 2015, Dyldam was the nominated purchaser and PAG (or its associated company) would provide finance. It was also determined by that stage that the sale would be a mortgagee sale rather than a sale by the receivers. On 23 December, Mr Dixon-Smith emailed solicitors acting for Dyldam's nominee Parklea, attaching a diagram described as the "Diamond Entity Structure (based on total funding of $90m, with $51m from the senior debt facility) discussed at those meetings". The document shows two entities (Dyldam Parklea Holdings #1 Pty Ltd and Dyldam Parklea Holdings #2 Pty Ltd) holding 20 per cent and 80 per cent interests respectively in the development company (Dyldam Parklea Developments Pty Ltd). Although the document is not entirely clear, it seems to envisage equity contributions of $24 million and $2 million from PAG and Dyldam respectively and $5 million mezzanine finance. The total capital, both loan and equity, thus amounted to $82 million. The structure is silent as to where the balance of $8 million was to come from. 5. The structure on its face did not align with Mr Dixon-Smith's calculation of net profit share of 11 December. However, Mr Dixon-Smith explained the position in his email to the solicitors for Parklea of 24 December 2015. That email, which was copied to Mr McMurdo of PAG, was in the following terms: "1. The holdings of Parklea Holdings 1 and 2 in Parklea Corporation P/L should be 80/20 reflecting the agreed 'base' share of the economic interests between the two entities, with any 'earn up' by Dyldam Group earned through a performance based component of the Development Management Fee. Let's say Parklea Holdings 2 is the entity that PAG will primarily fund through, then it should hold 80%. 2. All units in the two trusts and shares in the two Parklea Holdings companies would be held 100% by Dyldam, presumably Dyldam Developments Pty Ltd, but we are flexible as to where. As further information, one of the challenges in PAG's arrangements is the potential impact of the thin capitalisation rules. However these rules do not apply if the borrower is an Australia resident and controlled entity, and a direct and indirect 100% ownership by Dyldam gets us into this safe harbour, together with the way we structure PAG's control rights under the documentation – which are generally negative control rights typically held by mezzanine financiers." 1. It is unnecessary to deal with the further negotiations leading up to the date of the contract. 2. Contracts were exchanged on 13 January 2016. The vendor was SAP as mortgagee exercising power of sale, and the purchaser was Parklea. As has been explained by Basten JA, the purchase price was $85,350,000 if the residence on the property, then occupied by Mr Constantine, was vacated, or otherwise $81,100,000. The contract provided for a payment of a deposit of $1 million on the date of contract, $3,267,500 within three business days from receiving written confirmation of Investment Committee approval and the balance of 10 per cent on completion. 3. Clause 36 of the contract provided that completion was to take place on the latest of 28 January 2016, 14 days after Investment Committee approval or any extended completion date provided for in special condition 59.1. That special condition provided that if proceedings were instituted against the receivers or vendors relating to the contract, the vendor could serve a notice delaying completion. 4. Clause 63 of the special conditions provided that the agreement was conditional on approval by the PAG Investment Committee. As Basten JA has pointed out, as a result PAG had control over the sale process. Investment Committee approval was required by 14 March 2016; however, the date was extended to 29 April 2016. It should be noted that prior to the latter extension being given, it appeared that the PAG Investment Committee had approved the transaction. This appears from a note in Mr Dixon-Smith's time entry memorandum of 29 February 2016 to the following effect: "Attending re Investment Committee approval to sale and advice to PAG re declaring contract to be unconditional. Emails and telephone calls with James McMurdo and Woody." 1. On 14 January 2016, Parklea lodged a caveat over the property claiming an "equitable interest in the land pursuant to the Contract of Sale of Land dated 13 January 2016" between SAP and Parklea. 2. At the time of exchange of contracts, documentation relating to the funding arrangements had not been completed. On 10 March 2016, Mr Dixon-Smith sent a draft Heads of Agreement to the solicitors for Parklea. The Heads of Agreement were ultimately entered into on 22 March 2016 along with certain other security documents. 3. The parties to the Heads of Agreement were Parklea ("Landowner"), a related company, Quatro 88 Pty Ltd ("Development Manager"), Parklea Holdings 1 Pty Ltd as trustee of the Parklea Holdings 1 Unit Trust ("Holding Trust 1"), Parklea Holdings 2 Pty Ltd as Trustee of the Parklea Holdings 2 Unit Trust ("Holding Trust 2") and Lord Business Holding VIII Ltd, a British Virgin Islands company ("LBH"). Clause 2.1 of the Heads of Agreement recorded that Parklea had entered into the purchase of the property based on discussions regarding the funding of the Project by members of the LBH group. It should be noted that the Project was defined as meaning "the acquisition, development and sale of the Land". It was not in issue that LBH was an associated company of PAG and SAP. 4. Clause 2.2 of the Heads of Agreement set out the intention of the parties, including that LBH would provide debt, credit and mezzanine finance to Parklea in its capacity as Trustee of the two Holding Trusts, and that the Development Manager would manage the Project under the Development Management Agreement. 5. By cl 3 LBH agreed to grant the facilities. Details of the facilities were set out in cl 8 of the Agreement and it is unnecessary to set out the somewhat complex structure. However, it should be noted that the total amount proposed to be advanced was well in excess of the amount required to discharge the mortgage. 6. Clause 4.1 provided that the parties would procure the entry into the Development Management Agreement, whilst cl 6 gave LBH and the Security Trustee negative control over the Project. 7. Clause 5 provided for the shareholding and unit holding arrangements in the entities to carry out the Project. The structure was set out in an annexure to the Heads of Agreement. It provided that 80 per cent of the shares in Parklea be held by Parklea Holdings 1 Pty Ltd, and 20 per cent by Parklea Holdings 2 Pty Ltd as trustee of the respective Holding Trusts. The structure provided that 800 units in each trust were to be issued to entities associated with Mr Fayad, the managing director of Dyldam, whilst 200 were to be issued to Visy Group Holdings, a company associated with Wesco. However, LBH VIII was granted a call option to purchase all of the Holding Trust 1 shares in Parklea in consideration for payment of $100,000. Thus, LBH VIII could by exercise of the option acquire an 80 per cent interest in Parklea, diluting the interests of entities associated with Dyldam to 16 per cent and those with Wesco to 4 per cent. Basten JA has explained the confusion in the various Heads of Agreement in [156]-[164] of his judgment. 8. The Heads of Agreement also provided for a "development management fee" based on the net profit of the venture. A worked example was given, which showed that the total return of what might be described as the non-PAG interests was identical to that calculated by Mr Dixon-Smith in his document of 11 December 2015. 9. It is not clear why the mechanism of a call option was used rather than a direct allocation to LBH of either units in Holding Trust 1 or shares in Parklea. However, nothing turns on it. 10. In the period between January and March 2016, Almona was still endeavouring to refinance the property. 11. On 22 February 2016, the solicitor for Almona wrote to the solicitors for the receivers requesting a payout figure. The email asserted that Mr Constantine had requested a payout figure just before and just after Christmas. The email stated that Mr Constantine's ability to refinance had been hindered by the lack of information about the level of debt. 12. The request was eventually referred to Mr Dixon-Smith, who advised the solicitors for the receivers in the following terms: "As we know, the property has been sold and (subject to the possible issue of the Investment Committee condition precedent), the equity of redemption has now been wiped out and they can't repay the mortgage. I know there are issues around the fact that the sale hasn't (I think) yet been communicated to Con, but I'd be concerned about responding in any way that could be construed as suggesting that the mortgage is capable of being refinanced. This is tricky to deal with until PAG actually have that meeting with Con, but I think we should tread warily." 1. As a result, the solicitors for the receivers informed Almona's solicitors on 23 February 2016 that it had referred the request for a payout figure to King & Wood Mallesons which would respond directly. 2. Mr Dixon-Smith's time entry narrative records that on 11 March 2016 he had a meeting with PAG senior executives to discuss completion of the sale. The entry is in the following terms: "Meetings with PAG senior executives to discuss completion of sale of Parklea Markets, including comprehensive review of status of sale, including PAG's capacity to complete, purchaser funding arrangements, review of sale process to confirm PAG has complied with all duties of mortgagee exercising power of sale, status of receivership and vacant possession issues. Recommendation to issue notice of IC Approval so as to trigger completion date. Lengthy discussion plus provide signoff regarding moving to completion of contract." 1. On 14 March 2016, the solicitors for Almona sent an email to Mr Dixon-Smith in the following terms: "Our client has instructed us a number of times that he has attempted to ascertain the payout figure from you to finalise a transaction that he has been negotiating for the repayment of the facilities owed to SAP III (Lender). On 22 February 2016 we brought our client's attempts to the receivers' attention through Gilbert & Tobin, their lawyers. On 23rd February 2016 we were advised that the matter would be addressed by the Lender's lawyer, King Wood & Mallesons [sic]. On Friday, 11 March 2016 we attempted to contact both Stuart Dixon-Smith and Jessica Wallis to discuss the matter and obtain a response to our email. Despite our attempts on Friday, we again attempted to contact both Stuart and Jessica this morning and were advised that the earliest that Stuart would be available would be after 11am this morning. As mentioned the failure to advise our client the level of the debt is frustrating our client's opportunity to finalise a transaction for the repayment of the facility. We have been given no reason for the lack of response or even its delay. Our client has advised us that he has reached an agreement which will allow him to repay the debt owed, subject to receiving notification of the level of the debt or the payout figure. Subject to receiving this information the repayment may occur on Friday, 18 March 2016. The failure of both the receivers and the Lender to advise our client of the level of the·debt despite his requests, including those that we have made on his behalf, amounts to a clog on the equity of redemption. It may also amount to a breach of statutory duties and unconscionable conduct. Our client has instructed us to obtain an urgent undertaking from the Lender and the receivers that: 1. no further steps will be taken to sell Parklea Markets or any other property over which security has been granted to the Lender (Secured Property); and 2. no contract of sale will be entered for the sale of any Secured Property, until the later of (i) 5 pm on 18 March 2016; or. (ii) 6 hours after the information requested in paragraph (c) is provided to our client (such date being a business day in Sydney); and 1. payout figures will be calculated promptly and provided to our client as soon as possible (but no later than 9 am on Friday 18 March 2018 [sic]) including sufficient information to determine the assets and liability of any borrower/guarantor and any of their assets controlled by the receivers. We are also instructed that our client has put to the receivers' representative this morning his request to know what is the current status and to have a meeting with the Lender and receivers to discuss the current status. Please let us know if you require any further information as we will obtain it and provide it to you from our clients. The party with whom we are instructed a deal has been reached with is Mackycorp Pty Limited. In the event that we do not receive the undertaking requested on or before 1 pm today, we have been instructed to approach the court on an urgent basis, without further notice to your clients, to obtain appropriate equitable relief. Should any transaction be entered into before our client's request is complied, with our client will be seeking appropriate equitable relief to set aside those transactions for the reasons stated above including requesting that our client's costs be recovered from each of your clients on a full indemnity basis. We look forward to receiving your urgent response." 1. On the same day Mr Dixon-Smith replied as follows: "I have forwarded your email to my client for instructions, but in the meantime will let you have a preliminary response to your email. You client have [sic] previously requested payout numbers in similar circumstances over the past 6 months, assured, like this time, that a repayment is imminent. We and the receivers have diligently undertaken considerable work at significant expense to provide that payout and then nothing has eventuated. In one instance we and the receivers were fully prepared for a settlement which you not only did not turn up to, but failed to give us the courtesy of even contacting us to call off. Our client has expended significant sums calculating the payout figure to no avail and your client has not reimbursed it for those significant costs. Little wonder that we have not taken your latest requests seriously. In anticipation of the instructions I have yet to receive, I would ask that you provide us with comprehensive written evidence of the refinancing arrangements so we can satisfy our client as to the bona fides of any request for a payout figure. I would also foreshadow that our client will not be in a position to participate in any refinancing payout this Friday should that be the actual time frame. In relation to the undertakings sought below in your email, you are not entitled to request those undertakings and they will not be forthcoming. I will respond further once I have had instructions from my client." 1. On the evening of the same day, Almona's solicitors responded in the following terms: "As mentioned in our earlier email, our client has reached an agreement with Mackycorp Pty Ltd and we have been advised that standing behind it is AMB Capital Partners. We are informed that their lawyers, Norton Rose, will by noon tomorrow provide proof of the financial capability to close the transaction. Any transaction entered into by your client or the receivers in disregard of our requests will be challenged on the basis stated in our earlier emails. Suffice to state that the record will show: (a) the picture you are trying to paint of our client's previous requests is not accurate; (b) the number of times that our requests for payout figures have been completely ignored; and (c) at the time of those requests, our client had an honest expectation that he could obtain the finance to repay the debt subject to knowing the payout figure. Your email cryptically states that 'I would also foreshadow that our client will not be in a position to participate in any refinancing payout this Friday should that be the actual time frame'. Please explain what this means. We trust that this is not another attempt to obfuscate the current status of your client's or the receivers' dealing with the Secured Property to frustrate our client's ability to repay the debt (ie another attempt to clog the equity of redemption). With respect our client may seek whatever undertakings are reasonable to request to avoid the need to commence legal proceedings, particularly where its [sic] seeks to obtain the equitable relief we have identified. We believe that our undertakings in the context of the relief sought are reasonable and prudent, and clearly designed to avoid unnecessary costs and court time. If you have any specific concerns about any aspect of the undertakings that you consider to be unreasonable or a concern to your client, please advise us what your concerns are. We look forward to your urgent response." 1. The transaction with Mackycorp Pty Ltd and AMB Capital Partners was not as certain as the solicitors for Almona would seem to suggest. On 14 March 2016, Mackycorp wrote to Mr Constantine, stating that a company associated with Mackycorp would offer to purchase the property for $65 million and on other terms, including the engagement of Almona to manage the market garden, with Almona having the right to retain the existing residence. It also provided for the parties to that agreement to approach SAP to negotiate the payout sum "which is understood to be no greater than $65 million". The offer was said to be subject to satisfactory due diligence and board approval. 2. On 15 March 2016 at 1.22pm, the solicitors for Almona emailed Mr Dixon-Smith, attaching a letter from AMB Capital Partners to Mr Constantine indicating that company was prepared to provide finance of $65 million subject to a three week due diligence period, and seeking confirmation from the receivers that they would not enter into or complete the sale of any assets of Almona during that due diligence period. 3. Prior to receipt of that email, Mr Dixon-Smith sent an email to PAG in the following terms: "I have thought about our action plan this week following our discussion last night and wanted to just map out how I see us proceeding this week. This is a bit long, but this is a complex situation and I wanted to give you a comprehensive action plan to achieve our objectives and cover off a few risks I see… Settlement: I propose that we settle the sale ASAP (target say Thursday) on the basis that the existing PAG fund holding the Almona debt provides vendor finance to the purchaser to enable an accelerated settlement. To this end I propose we have Gilbert + Tobin sent [sic] the purchaser notice saying the Investment Committee approved the contract in January 2016 and giving notice requiring settlement in 14 days (as the contract provides). Sending this notice is very important because it makes the contract unconditional and unquestionably shuts down any right that Almona has to refinance the facility. Notwithstanding this formal notice, we would separately agree to settle on Thursday based on amended terms discussed below… … Dealing with Con/Almona/Norman Donato I haven't replied to Norman's letter last night, I'll let the clock tick a bit. This afternoon I'll send a short reply saying my earlier email was entirely clear and I don't propose to elaborate, but saying I do not propose to take any action until I receive written confirmation from a financier's lawyer that funding has been committed, with copies of a binding term sheet, draft financing documents and a realistic timetable for financial close, at which stage I will respond to all parties. Hopefully that takes until Thursday, at which stage I can write to confirm the sale of the property has completed." 1. Subsequent to the receipt of the email from Almona, Mr Dixon-Smith again emailed PAG. The email attached the letter from AMB Capital Partners and made the following comments: "Woody and James, as envisaged by you, those involved in the proposed refinancing do actually have the firepower to fund this if Con can make it stack up. The good news is they are asking for 3 weeks exclusive DD to get it done, so any refinancing can't be closed by the time it is anticipated that the buyer completes the contract. I'll consider a draft reply and circulate for instructions late today." 1. On 21 March 2016, the solicitors for Almona were informed by Mr Dixon-Smith that the amount outstanding was $70,872,398.57 and a contract for $81.1 million had been exchanged. Basten JA has explained the circumstances in which the contract price was varied to only include that amount rather than the alternative amount if Mr Constantine gave vacant possession. 2. On 22 March 2016, the solicitors for Almona wrote to King & Wood Mallesons and the solicitors for the receivers, stating that whilst Almona had been aware since 18 January 2016 that a caveat had been lodged on the property, it had not been made aware of the details of the contract. The letter stated that Almona would not stand in the way of completion of the transaction. 3. The contract was completed on 22 March 2016. Was Almona entitled to rely on a collusive arrangement between SAP, Dyldam and Wesco in support of its claim? 1. As Basten JA has pointed out, Wesco reduced its first round bid of $92 million to $79 million in the second round, thus leaving Dyldam as the highest bidder. The essence of the collusion case was that the reduction in the Wesco bid was as a result of collusion between SAP, Dyldam and Wesco, whereby Wesco agreed to reduce its bid in return for an interest in the ultimate purchaser. This essentially was an allegation that SAP, Wesco and Dyldam had fraudulently manipulated the bid process. 2. The first thing to note is that no such allegation was pleaded. The further amended Statement of Claim, filed in court on the first day of the hearing before the primary judge, alleged that SAP breached its duty of good faith essentially by first, failing to respond to requests for information concerning the payout figure, second, failing to advise of the terms of the proposed sale and third, implementing Mr Dixon-Smith's action plan to which I have referred at [43] above. There was no allegation of collusion to cause the reduction in Wesco's bid price. 3. Particulars of fraud, breach of duty and unconscionability were supplied on 20 February 2019 and 1 March 2019. As with the further amended Statement of Claim, they made no reference to any collusion with Wesco. 4. The involvement of Wesco was first raised in the particulars supplied on 6 March 2019. It is convenient to set them out in full: "1. By reason of commercial arrangements documented either in whole or in part in the Loan Note Subscription Agreement (LNSA), the Parklea Markets Heads of Agreement (HOA) and the Call Option Deed (COD) dated 22 March 2016, Dyldam through its nominees (including the first defendant, Quatro 88 Pty Ltd, Collrea Pty Ltd) and the PAG Group through its nominees (including Lord Business Holdings VI Limited and Lord Business Holdings VIII Limited) and companies associated with Mr Tony Merhi (namely Visy Group Holdings Pty Ltd, Visy Projects Pty Ltd, Wesco Ventures Pty Ltd, Wesco Capital Pty Ltd and Praise Group Pty Ltd) are involved in a joint venture to develop and purchase the Land through their interests in the first defendant or its shareholders. 2. Those interests are not apparent to third parties who do not have access to the LNSA, POA [sic] and COD. 3. The plaintiff first obtained access to the COD and the POA [sic] when documents were produced following contests about the Notices to Produce on the evening of Thursday 28 February 2019. 4. The sale by the second defendant to the first defendant was not an arm's length transaction. 5. Mr Tony Merhi had through another company controlled by him, Wesco Capital Pty Ltd (Wesco) been the highest first round bidder in the expression of interest process for the sale of the Land conducted by the Receivers of the plaintiff. 6. At or about the time of the closing of the second round of expressions of interest, Wesco reduced its offer from $92,000,000 to $79,000,000 thereby placing the first defendant in the position that it was the highest bidder in the second round expression of interest process. 7. At or about that time, arrangements of the nature that came to be reflected in the LNSA, HOA and COD were discussed or negotiated by representatives of the PAG, Dyldam and companies associated with Mr Merhi." 1. These particulars did not expressly refer to an agreement or arrangement with Mr Merhi that Wesco would lower its bid price in return for a company controlled by him obtaining an interest in the property or the proposed development. Whilst some impropriety may be suggested, particularly having regard to the fact that pars (6) and (7) of the particulars are said to be particulars of fraud, no particular fraudulent conduct is specified. 2. Fraud must be pleaded distinctly and with particularity: Banque Commerciale S.A., en Liquidation v Akhil Holding Ltd (1990) 169 CLR 279 at 285, 295; [1990] HCA 279; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 573; [1995] HCA 68. Deliberate manipulation of the bid process to deprive a mortgagor of its right to receive the best price available for the mortgaged property is fraud and requires specific pleading in accordance with these principles. The particulars fell well short of meeting these requirements. 3. I accept that the nature of the transaction in the present case, involving a sale to a corporation in which an associate of the mortgagee had an 80 per cent economic interest, was such as to cast upon the purchaser and the mortgagee the onus of satisfying the Court that the power of sale was exercised in good faith and that reasonable steps were taken to obtain a fair price: Farrar v Farrars Ltd [1888] 40 Ch D 395 at 398, 410; Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 at 273; [1965] HCA 17. However, the discharge of that onus does not, in my view, extend to disproving allegations that have not been made against the mortgagee and the purchaser. 4. In the present case, both Parklea and SAP were entitled to proceed on the basis that the price offered by Dyldam was the best price which emerged from the sale process. In the absence of any allegation of collusion there was no need for them to adduce evidence that there was no collusion with Wesco either jointly by Dyldam and SAP, or by Dyldam with the knowledge of SAP. In these circumstances the challenge to the sale, insofar as relies on collusive conduct between Wesco, Dyldam and/or SAP, has not been made out. Was the sale in bad faith or a fraud on the mortgagee's power of sale? 1. The obligation of a mortgagee in the exercise of its power of sale has been expressed in various overlapping ways. Thus, in Farrar v Farrars Ltd Lindley LJ at 411 described that the mortgagee's obligation was to act bona fide and take reasonable precautions to obtain a proper price. That statement was approved by Griffith CJ (delivering the judgment of the Court) in Barns v Queensland National Bank Ltd (1906) 3 CLR 925 at 942; [1906] HCA 26, who added (at 943) that the power of sale must be exercised honestly for the purposes of the power. 2. In Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; [1912] HCA 9, Griffith CJ (at 680) stated that the obligation was that the mortgagee not recklessly or wilfully sacrifice the interest of the mortgagor, and that if the mortgagee does so he is to be regarded as not having acted in good faith. Barton J (at 694) stated that if the mortgagee confines his attention to his own interests, and sacrifices the mortgagor's property by doing so, he acts in bad faith, emphasising that the mortgagee only considers his own interest "if he cares no jot whether a fair price be obtained, so only that the price pays his debt". Isaacs J (at 700) stated that the mortgagee's power must be exercised bona fide and having regard to the purpose for which it is conferred. 3. In Forsyth v Blundell (1973) 129 CLR 477; [1973] HCA 20, Walsh J at 493 described the obligation to act in good faith as an obligation to "act without fraud and without wilfully or recklessly sacrificing the interests of the mortgagor". He stated (at 496) that "[w]hat has sometimes been described as a fraud on the power and sometimes as a wilful or reckless disregard of the interests of the mortgagor does not necessarily involve … the commission of actual fraud". In Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195; [1978] HCA 21, Jacobs J stated (at 201) that the obligation of the mortgagee once the decision to sell has been made is concerned with a genuine primary desire to obtain the best price obtainable consistently with the right of the mortgagee to realise his security. He also considered that when there is a possible conflict between that desire and a desire that an associate should obtain the best possible bargain, the facts must show that the desire to obtain the best price was given absolute preference over any desire that an associate should obtain a good bargain. Aickin J, after extensively reviewing the authorities, stated the critical question was whether there was a "truly independent bargain". 4. In Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporations Ltd (1994) 8 BPR 15,581, McLelland CJ in Eq (at 15,583) warned against construing and applying particular phrases in judgments "as if embodied in an Act of Parliament", stating that what matters is whether what occurred was unconscionable. 5. In each of the High Court cases to which I have referred, it was clear that no regard was paid to the interest of the mortgagor. In Barns v Queensland National Bank Ltd, there was evidence the property was sold at a price equal to the amount of the debt, the property was worth more than that price, the sale was inadequately advertised and the reserve price was disclosed prior to the auction. 6. In Pendlebury v Colonial Mutual Life Assurance Society Ltd, farming land the subject of the mortgage was not advertised at all in the local papers, and was sold to a person who knew the reserve and who it was found had no money and could only complete the sale by on-selling the property, which he did at a substantial profit. The sale was not authorised by the board of the respondent, 7. In Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq), the property was sold to a wholly owned subsidiary of the mortgagee at a price slightly higher than the highest bid at an auction, which was found to have been conducted so as to make it virtually impossible for a sale to be effected. 8. In Forsyth v Blundell, the mortgagee arranged for an auction with a reserve of $120,000, the amount of the mortgage debt. Prior to the auction a petroleum company, XL Petroleum Pty Ltd, indicated it would pay $150,000 for the property. Notwithstanding, the mortgagee did not proceed with the auction and sold the property to another petroleum company for the amount of the mortgage debt. It was held to constitute a reckless disregard of the mortgagor's interest. 9. Finally, in Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd, the mortgagee took an assignment of the mortgage at a time when the mortgagor was in substantial default. The mortgagee thereafter listed the property for auction at a reserve price less than it had paid for the assignment of the mortgage, whilst at the same time failing to ensure that those entrusted with the arrangement of the sale so timed and advertised the holding of the auction as best to attract interest on the part of potential buyers. The result was that there was only one genuine bidder, a wholly owned subsidiary of the mortgagee, who acquired the property at a price less than the total amount owing under the first mortgage, leaving nothing for the appellant, the second mortgagee. 10. In the present case, the question of whether the sale was carried out in the absence of good faith and whether the interest of the mortgagor was sacrificed to that of the mortgagee must first be considered at the time of entry into the contract of sale. 11. At the time of the contract of sale, the mortgagor had been in default for a considerable period of time and had been given a number of opportunities to discharge the mortgage. Further, unlike the cases to which I have referred above, no criticism was levelled at the bid process which produced bids well in excess of the valuations obtained by the receivers. Third, as the bidding process must be considered in the absence of any collusion with Wesco, it follows that Dyldam emerged as the highest bidder as a result of a legitimate process which did not sacrifice the interests of Almona. 12. The fact that the purchaser was a company in respect of which the mortgagee had a significant economic interest does not lead to the conclusion that there was a lack of good faith on the part of the mortgagee or a disregard of the interest of the mortgagor. As has been pointed out in a number of the cases to which I have referred above, the mortgagee is not a trustee of the mortgage and its duty is to ensure the interests of the mortgagor are not sacrificed. In my view they were not sacrificed by the entry into the contract of sale. 13. In these circumstances, I do not think the entry into the contract with Parklea could be said to be a fraud on the mortgagee's power of sale. 14. It remains necessary to consider the events of March 2016. Having regard to my conclusion on the entry into the contract, the initial question is whether the mortgagor's right of redemption or more accurately, a right to have the mortgage discharged was lost or suspended as a result of the entry into the contract. 15. As at 15 March 2016, the contract remained subject to an unfulfilled condition, namely, notification of Investment Committee approval. However, the condition was a condition subsequent rather than a condition precedent to a binding contract. This is clear from the fact that cl 63(b) expressly stated that completion of the contract was conditional on Investment Committee approval. Thus in March 2016, notwithstanding the fact that the approval had not been confirmed, there was a subsisting binding contract for the sale of the property: see Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 541-543, 551-552; [1982] HCA 29. 16. In Waring (Lord) v London and Manchester Assurance Co Ltd [1935] Ch 310, Crossman J held that it was the entry into the contract to sell the mortgaged property rather than the conveyance which extinguished the mortgagor's equity of redemption. His Lordship made the following remarks: "In my judgment, s 101 of that Act, which gives to a mortgagee power to sell the mortgaged property, is perfectly clear, and means that the mortgagee has power to sell out and out, by private contract or by auction, and subsequently to complete by conveyance; and the power to sell is, I think, a power by selling to bind the mortgagor. If that were not so, the extraordinary result would follow that every purchaser from a mortgagee would, in effect, be getting a conditional contract liable at any time to be set aside by the mortgagor's coming in and paying the principal, interest, and costs. Such a result would make it impossible for a mortgagee, in the ordinary course of events, to sell unless he was in a position to promise that completion should take place immediately or on the day after the contract, and there would have to be a rush for completion in order to defeat a possible claim by the mortgagor. It seems to me impossible seriously to suggest that the mortgagor's equity of redemption remains in force pending completion of the sale by conveyance. The only effect of the conveyance is to put the legal estate entirely in the purchaser: that follows from s 104, sub-s 1, of the Law of Property Act, 1925, which provides that a mortgagee shall have power to convey the legal estate; and the whole legal estate can be conveyed free from all estates, interests, and rights to which the mortgage has priority." 1. The decision was followed by the English Court of Appeal decision in Property & Bloodstock Ltd v Emerton [1968] Ch 94, a case involving a contract which was conditional upon the mortgagee obtaining the consent of the landlord of the leased premises to the assignment of the lease the subject of the mortgage. The condition was held to be a mere matter of title and the contract was held to be equivalent to an unconditional contract. The decision was also followed by the English Court of Appeal decision in National & Provincial Building Society v Ahmed [1995] 2 EGLR 127, where Millett LJ (as his Lordship then was), with whom Russell and Rose LJJ agreed, made the following remarks at 128: "Moreover, in law, the fact that sale had been completed was irrelevant. The relevant transaction was the exchange of contract for the sale of the flat to the purchaser which took place on October 11 1994. A mortgagor's equity of redemption is extinguished when the mortgagee, in the exercise of his statutory power of sale, enters into a contract for sale of the mortgaged property, not when he later completes the sale by conveyance. Even if completion had not taken place, therefore, the defendant no longer had any equity of redemption in the flat at the date of the hearing before the judge." (citations omitted) 1. Waring was approved by Walsh J in Forsyth v Blundell at 499. However, Mason J (at 511) left open the question of whether the decision was correct. 2. The United Kingdom decisions were approved by Young J (as his Honour then was) in Chia v Rennie (1997) 8 BPR 15,601. His Honour held that the principles in those cases were equally applicable to mortgagee sale of land under the Real Property Act 1900 (NSW). 3. It must be emphasised that the principles only apply to a contract entered into as a result of a valid exercise of the mortgagee's power of sale. On my view, they do not extend to the actions of the mortgagee and the purchaser in varying the contract by deleting the alternative purchase price if Mr Constantine gave vacant possession. 4. If these principles are correct, they preclude any complaint by Almona against what was in effect the expedition of completion of a valid contract of sale. However, if they are incorrect, I do not think the actions of SAP and Parklea in implementing the action plan was conduct such as to wilfully disregard the interest of the mortgagee and in fraud on the power of sale. 5. Subject to one qualification, SAP and Parklea were entitled to complete the contract at the time of their choosing. The qualification is that a mortgagor in the position of Almona may well be entitled to complain if there was substantial delay in completion leading to an increase in the amount of interest payable. Further, SAP in my opinion was entitled to serve notice of Investment Committee approval, thus causing the contract to become unconditional. 6. It can be readily inferred that the steps taken pursuant to Mr Dixon-Smith's action plan were designed to protect the purchaser from challenges and frustrate any right Almona may have had to impede the transaction. However, once it is accepted that the contract was validly entered into, it does not seem to me that steps taken to ensure its completion could be said to be in bad faith or in disregard of Almona's rights. This is particularly so in the present case when Almona was not in a position to tender the amount due under the mortgage but had indicated that it had funds available in an amount less than the amount due and the availability of finance was subject to three weeks' due diligence. It does not seem to me that SAP was required to delay completion of the contract to wait and see if the finance became available and Almona was able to fund the difference between the $65 million offered and the amount outstanding. Whilst it is true that on 22 March 2016, the solicitors for Almona wrote to Mr Dixon-Smith, enclosing a copy of a letter from AMB Capital Partners which confirmed to Mr Constantine that, subject to due diligence, AMB Capital Partners was prepared to fund the total amount said to be owing, that letter was enclosed in the context of the solicitors for Almona also indicating that they would not stand in the way of the sale being completed. 7. In these circumstances, I agree with the orders proposed by Basten JA. 8. BASTEN JA: The appellant, Almona Pty Ltd ("Almona"), was until 22 March 2016 the registered owner of a large site in western Sydney on which Parklea Markets operated. In 2013 a receiver and manager was appointed to Almona by its then financier, Westpac Banking Corporation. Almona and its principal, Mr Con Constantine, arranged a refinancing facility with a company known as Secured Asset Portfolio III Ltd ("SAP"). SAP was a special purpose vehicle within a group of companies known as Pacific Alliance Group, or PAG. Almona defaulted under the new financing agreement and, in April 2015, a receiver and manager, PPB Advisory Pty Ltd (PPB), was appointed by SAP. PPB appointed Colliers International as their agent for the marketing and sale of the property. Following a process by which expressions of interest were obtained, an agreement was reached to sell the property to the highest bidder, identified as the Dyldam Group. Dyldam's principal, Mr Sam Fayad, established a special purpose vehicle, Parklea Corporation Pty Ltd, to be the purchaser. Funding for the purchase was organised through other entities within PAG. On 13 January 2016 SAP, as mortgagee exercising a power of sale, entered into a contract to sell the land to Parklea Corporation. 9. The sale price, as originally agreed, was stated to be $85.35 million with vacant possession, or $81.1 million if Mr Constantine remained in possession of the house and curtilage he and his family then occupied. On 22 March 2016, Mr Constantine still being in possession, SAP and Parklea Corporation entered into a deed of variation which reduced the purchase price to $81.1 million. That variation (a reduction of $4.25 million) reflected the alternative price in the contract as payable if Mr Constantine did not vacate the house. Settlement occurred the same day. 10. Some two years and seven months later, on 17 October 2018, Almona filed a summons in the Equity Division (followed by a statement of claim) which sought to set aside the various transactions involved in the sale on grounds of fraud, breach of duty, unconscionable conduct and misleading or deceptive representations on the part of SAP and Parklea Corporation. Following a contested process for the production of documents, the trial commenced on 4 March 2019. It was not completed in the five days allocated and resumed on 29 August 2019. Despite the volume of material involved and the complexity of the issues, the trial judge, Robb J, delivered judgment on 20 December 2019. [1] 11. In substance, the judge upheld Almona's claim that there had been a breach of duty on the part of SAP in failing to reveal to Mr Constantine that a higher price would have been obtained by Almona if he vacated the premises prior to settlement. The judge awarded Almona an amount of $4.25 million plus interest on that account. Otherwise Almona's claims against SAP and Parklea Corporation failed. Further, the judge said he would in any event have declined to set aside the mortgages entered into by Parklea Corporation in relation to the financing of the purchase, which mortgages were registered in the name of PT Ltd, as trustee of the securities. Final orders were entered on 9 June 2020. 12. On 13 July 2020 Almona filed an appeal in this Court. Parklea Corporation filed a cross-appeal challenging the order that it pay $4.25 million plus interest to Almona. SAP sought leave to appeal the refusal of the trial judge to award it costs of the trial. Overview 1. It is convenient at this stage to explain, by way of an overview, the case run by Almona, both at trial and on the appeal, and note the resolution, both at trial and on appeal. 2. Whilst in control of Almona, Mr Constantine entered into a loan transaction with SAP which provided short term finance to Almona. There was an opportunity to obtain an extension of the credit facility, but subject to conditions. Almona did not satisfy the conditions and, being unable to repay the loan, fell into default. SAP appointed the receiver and manager PPB, which proceeded to conduct a sale of the property 3. At various times during the following year, Mr Constantine (although no longer in control of Almona) attempted to obtain funding to pay the outstanding balance owing by Almona to SAP. The first and primary claim made at trial was that SAP was in breach of its duty as a mortgagee exercising a power of sale to the extent that it failed to facilitate attempts by Almona to repay the loan. Almona maintained that position after SAP issued a notice under s 57(2)(b) of the Real Property Act 1900 (NSW), and the property had been placed on the market, and after the agent had obtained final bids from a number of prospective purchasers. Indeed, Almona continued to maintain its entitlement to recover the property by repaying the debt to SAP after a contract of sale had been entered into with the highest bidder. The claim that SAP was in breach of its duty to Almona as mortgagor by failing to provide payout figures when requested, and halt the settlement of the contract to allow a financier dealing directly with Mr Constantine to conduct due diligence, dominated the pleadings at all stages and much of the argument presented at trial. At least from the time the contract of sale became unconditional (and possibly before that point) Almona's claim was bound to fail, unless it could demonstrate that SAP was otherwise carrying the sale process in breach of its duty to Almona. That aspect of the case was properly rejected by the trial judge. 4. Secondly, once Mr Constantine became aware of the "occupation condition" in the sale contract, Almona pursued a claim of fraud, unconscionability and misleading or deceptive conduct against both the mortgagee (SAP) and the purchaser (Parklea Corporation) for failing to disclose that the sale contract contained a higher price and a lower price, the higher price being payable if Mr Constantine vacated the house and curtilage he occupied on part of the land. He was not told of that fact until after the contract had been settled and thus Almona failed to obtain the benefit of the higher price. Almona succeeded on that claim at trial and a cross-appeal by Parklea Corporation challenging that part of the judgment must be rejected. 5. The third basis upon which Almona sought to challenge the propriety of the sale process was an allegation, raised belatedly and then only obliquely in particulars to the pleadings, that the highest bidder in the initial round of offers obtained by the selling agent had reduced its final offer so that it was no longer the highest bidder, but ended up with a 20% share of the ownership of Parklea Corporation. The trial judge rejected the oblique allegation of collusive bidding, because it had not been adequately pleaded, nor pleaded in a timely fashion, and because the necessary factual inferences should not be drawn. That decision also should be upheld. 6. Finally, although both parties had some measure of success at trial, the trial judge declined to apportion costs as between Almona, SAP and Parklea Corporation, directing that each party bear its own costs of the trial. Both Almona and SAP challenged that decision. The decision of the trial judge was not shown to be erroneous and Almona's appeal in that respect should be dismissed, whilst SAP should be refused the leave it required in order to run an appeal limited to costs. 7. It follows that the appeal must be dismissed, the cross-appeal by Parklea Corporation must be dismissed and SAP should be refused leave to appeal with respect to the costs order. The costs of the various proceedings in this Court should follow those events. Issues raised on appeal 1. Before exploring the factual complexities, it is convenient to note a number of issues arising from the appellant's claims in this Court. First, some grounds of appeal spoke of a breach of duty on the part of the mortgagee in the exercise of its power of sale; others referred to a "fraudulent exercise" of the power of sale, as if the concepts were interchangeable. [2] A number of circumstances were said to give rise either to a breach of duty or to constitute fraud. 2. Secondly, the orders sought on the appeal included (i) the setting aside of the contract for sale and the registered mortgages which financed the purchase by Parklea Corporation, (ii) the revesting of the land in the appellant and (iii) the taking of accounts as between the appellant and Parklea Corporation and SAP. Conduct which might warrant one form of relief might not warrant another. Fraud will cover a range of different forms of conduct of which some, but not others, may be sufficient for particular purposes, such as setting aside the indefeasible title obtained by registration. [3] 3. Thirdly, there were two themes underlying the appellant's claims. The first was that PAG effectively manipulated the sale process by its subsidiary and agent, SAP, and by providing funding to the purchaser, Parklea Corporation, which was set up through an arrangement between PAG and Dyldam Developments Pty Ltd. Dyldam was a developer of land in Australia with which PAG (based in Hong Kong) had an established relationship. SAP was therefore exercising the power of sale in part to protect its own interests and in part to ensure that those controlling it obtained a majority interest in the land for the purpose of profit through development. Secondly, although it was not submitted that the land was sold at an undervalue, it was submitted that (i) a better price might have been obtained and (ii) steps were taken to prevent Almona from refinancing and thereby exercising its right of "redemption". [4] The claims appeared to suggest at least an analogous situation to a mortgagee purchasing the land itself, a course not permitted by the exercise of a power of sale. 4. Fourthly, although not expressed in these terms, there were suggestions of fraud on a third party within the fourth category of fraud identified in Earl of Chesterfield v Janssen. [5] In that case Lord Hardwicke LC referred to a transaction which was transparent and consensual between the parties, but which involved a clandestine and private agreement between them to the detriment of a third party. Thus, an entity associated with Mr Tony Merhi, Wesco Capital Pty Ltd, lodged an initial expression of interest at $92 million, well above the conditional offer of $85.35 million made by Dyldam. Wesco's final bid was $79 million. Two other companies controlled by Mr Merhi emerged with a 20% ownership interest in the purchaser, Parklea Corporation. The highest final bid was the original amount offered by Dyldam. The allegation was, in effect, that Mr Fayad and Mr Merhi had colluded to the detriment of Almona. 5. Bearing these considerations in mind, it is convenient to turn to the amended notice of appeal filed on behalf of Almona. The 18 grounds are discursively formulated under a number of headings. The thrust of grounds 1-14 was to identify the basis upon which the judge should have found that SAP acted dishonestly (that is, for an improper purpose) in exercising its power of sale. Thus, in dealing with the "occupation condition", Almona alleged in ground 6: "SAP's intention in not disclosing the Occupation Condition was not to effect the recovery of the money owed to it but to: (A) obtain a substantial interest in the property for an entity within the PAG group (of which it formed part); (B) exploit the commercial opportunities in the land for the benefit of entities within the PAG group; (C) have its joint venture vehicle (Parklea) registered as the purchaser; and (D) have Parklea grant a mortgage over the land for the benefit of a PAG group entity to secure the finance from that PAG Group entity to Parklea". [6] That purpose, Almona submitted, arose no later than 10 December 2015 when PAG and Dyldam entered into a joint venture for Dyldam to purchase the land with finance provided by PAG. 1. The contract of sale was entered into on 13 January 2016. Logically, the primary grounds related to conduct undertaken before that date. Grounds 7, 8 and 11 addressed the precontractual conduct. Ground 7 commenced with a series of factual propositions (consistent with the findings of the trial judge): "(a) the second round of the expression of interest campaign closed on 16 December 2015 …; (b) prior to that time, Mr Dixon-Smith (the solicitor for PAG and SAP and their related entities …) held meetings with Mr Qutami (the solicitor for Dyldam and Parklea …) in Hong Kong on 10 [sic – 11?] December 2015 … and engaged in further correspondence to negotiate the terms of SAP's proposed funding of Dyldam's acquisition of the mortgaged land …; (c) during those meetings, Dyldam and PAG/SAP had reached an agreement (at least in principle) for a joint venture between them and/or their related entities by which they would jointly profit from the purchase of the land by Dyldam's nominee in which PAG and/or one of its related entities would hold a substantial interest …; and (d) the transaction documents giving effect to the Joint Venture discussed on 10 and 11 December 2015 pursuant to which Parklea obtained funding to complete the purchase of the property: (i) were first brought into existence on 16 March 2016 as a first draft …, the day after Almona had notified SAP of its intention to enter into a proposed refinancing transaction with AMB Capital Partners …; and (ii) were only finally entered into on the date of completion of the sale of the land, namely 22 March 2016…". 1. In addition, Almona relied upon the fact that the purchase by a Dyldam entity was to be funded by one of two PAG companies, referred to as Lord Business Holdings VI and Lord Business Holdings VIII. These facts, it was alleged, should have led the judge to the conclusion that SAP's entry into the contract was not "a proper exercise of its mortgagee's power of sale and undertaken in good faith". 2. It is convenient to set out ground 8 in full. That is because at trial there had been some difficulty in identifying the precise elements of the claims made by Almona. The judge explained the issue in the following passages: "[535] In the context of analysing Almona's pleaded claim, I have considered above the allegations made by Almona in the FASOC and the three additional statements of particulars. The three statements of additional particulars do not relate specifically to the allegations in the FASOC, but are largely separate documents that both overlap and extend the allegations in the FASOC. The defendants consented to Almona relying upon the further particulars, although in SAP's case subject to the qualification set out above. [536] The effect has been that, in respect of the additional allegations that have been permitted, it is a challenging exercise to distil with precision all of the separate breaches of duty that are alleged by Almona. The difficulty is enhanced by the fact that Almona did not deal specifically with all of the breaches in its closing submissions in a manner that precisely reflected the manner in which the allegations had been made." Ground 8 read as follows: "8 As to the allegation of breach of duty relating to PAG/SAP and Dyldam/Parklea entering into the Joint Venture and PAG/SAP agreeing to provide (through a related entity) financial accommodation to Parklea to fund its acquisition of the Land (J[584]), the primary judge erred in: (a) reasoning that the obligation of SAP to disclose to Almena its interest in the transaction arose only in circumstances where the transaction is other than a 'proper or independent one' (J[585]-[587] and J[500]); (b) finding that no breach of duty had been committed on the basis that the transaction was a proper and independent one (J[586]), even if the primary judge was correct in his reasoning referred to in paragraph (a) immediately above; (c) finding that no breach of duty had been committed on the basis that no diminution in the amount received by Almona following the sale of the mortgage land under the Contract had resulted (J[587]); and (d) failing to conclude that in the circumstances which obtained, the onus rested on SAP to justify the transaction, including its failure to disclose to Almona that it had agreed to provide (through a related entity) financial accommodation to Parklea to fund its acquisition of the mortgaged land under the Contract and to enter into the Joint Venture, and that SAP, having led no testimonial evidence, failed to discharge that onus." 1. The reliance on the reversal of the onus of proof in 8(d) was expanded upon in ground 12, which read as follows: "12 Having correctly identified the principles governing the onus of proof in cases where the propriety of a mortgagee's exercise of its power of sale is challenged (J[457]), the primary judge erred in concluding that the allegations made by Almona which first gave rise to a shift in onus [7] were contained in the statement of further particulars dated 1 March 2019 (Further Particulars) (J470]) and the further statement of further particulars dated 6 March 2019 (Second Further Particulars) (J[475]-[476]), when the primary judge ought to have concluded that by reason of Almona having put into issue the independence of the bargain between SAP and Parklea on the filing of its amended statement of claim (ASOC) on 6 December 2018, which included the allegations at [61]-[63] of the ASOC, the onus rested on SAP to justify the transaction from that point forward." 1. Finally, in terms of the precontractual events, it is necessary to refer to ground 11, which relied upon four factual propositions accepted by the trial judge: "11 Having found at J[671] that: (a) 'Wesco reduced its expression of interest by $13,000,000' after PAG/SAP and Dyldam/Parklea had entered into the Joint Venture, and prior to the close of the second expression of interest campaign; (b) 'it has ultimately been discovered that Mr Merhi, through his Visy companies, acquired a 20% interest in Parklea at the time the Contract was completed'; (c) 'the acquisition of the 20% interest must have followed an agreement between representatives of Dyldam and Mr Merhi', and (d) 'if notwithstanding the apparent regularity of the sale process conducted by the receivers and Colliers, PAG and Dyldam had colluded with Mr Merhi and Wesco for the purpose of causing Wesco to reduce its bid of $92,000,000 to $79,000,000, in order to achieve the artificial result that Dyldam's expression of interest was the highest made, so that the Land could be secured for the benefit of the joint venture, that would have constituted dishonest and reprehensible behaviour on the part of PAG and Dyldam' (J[652])". 1. It is convenient to summarise the effect of these grounds, which appeared to be as follows: 1. SAP, as mortgagee exercising a power of sale, allowed the terms on which the sale was effected to be dictated by its own funder and holding company, PAG; 2. PAG entered into a joint venture with Dyldam to purchase the land and fund the vehicle established for that purpose; 3. Dyldam's initial bid in the expression of interest process was below that of Wesco; 4. although there is no direct evidence as to the arrangements between the joint venturers and Wesco, in making final bids, Wesco reduced its bid by $13 million so that it was no longer $6.65 million above the higher of the Dyldam bids, but was more than $2 million below the lower bid and Wesco ended up with a 20% interest in the ownership of Parklea Corporation; 5. there is an inference available that the joint venturers caused Wesco to lower its bid below their bid, in exchange for a share of the profits of the joint venture; 6. in the absence of evidence from the joint venturers and Wesco, in their roles as owners of Parklea Corporation, the Court should have been satisfied that the available inference was established; 7. the result was that SAP obtained an amount which was $6.65 million below the amount which Wesco was prepared to pay; 8. the shortfall was caused by SAP submitting to the direction of PAG, which was funding the purchaser, in breach of its obligation to the mortgagor. 1. Almona supported that reasoning by relying on the failure of SAP to reveal to Almona the effect of the occupation condition in the offer made by Dyldam. That was the subject of a lengthy statement in ground 6. 2. After identifying the relevant legal principles and the factual framework, it will be convenient to address the claims made by the appellant under four headings, namely: 1. Appellant's first claim of impropriety – mortgagor's right to repay loan; 2. Appellant's second claim of impropriety – sale transaction not independent; 3. Appellant's third claim of impropriety – accommodation condition, and 4. Appellant's fourth claim of impropriety – involvement of Wesco. Legal principles 1. The interest of SAP as mortgagee arose under s 56 of the Real Property Act 1900 (NSW). The mortgage constituted a security interest pursuant to s 57(1). Upon default by the mortgagor (Almona), SAP exercised its power to appoint a receiver to the mortgagor and take possession of the land. It also exercised a power of sale. [8] Subject to the requirements of the Real Property Act, the mortgagee had power to sell the mortgaged land. In doing so, it acted in its own interests in order to recover moneys owing under the mortgage, but had obligations with respect to the interest of the mortgagor in any surplus. However, statements of the duty owed to the mortgagor under the general law include the propositions that it "must conduct the sale properly, and must sell at a fair value, and … could not sell to [itself]." [9] At a similar level of generality, it is said that the mortgagee must act "in good faith". In Forsyth v Blundell, [10] Mason J stated that there was a breach of duty by a mortgagee in exercising its power of sale "without taking reasonable steps to obtain a proper price and in so doing acted otherwise than bona fide, that is, recklessly, not caring whether the price obtained was in the circumstances a proper price or not." 2. That obligation has been expanded by s 111A of the Conveyancing Act to a duty to take reasonable care to ensure that the land is sold for not less than its market value. [11] Breach of that obligation does not permit the title of the purchaser to be impugned, but may found an action in damages by the mortgagor who has suffered loss: s 111A(4). (It will be necessary to return to the question of relief for breach of duty.) 3. Underlying the various expressions of the duty is a principle involving protection of the financial interest of the mortgagor. Where the land is worth more than the debt owing under the mortgage it is, in the absence of other creditors, the interests of the mortgagor which requires that the best value be obtained by the sale. 4. The critical issue in this case, as in Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd, [12] "was whether it was a truly independent bargain." [13] In so identifying the issue in Bangadilly Pastoral, Aickin J relied upon the following passage in the judgment of Lindley LJ in Farrar v Farrars Ltd: [14] "It is perfectly well settled that a mortgagee with a power of sale cannot sell to himself either alone or with others, nor to a trustee for himself …; nor to any one employed by him to conduct the sale …. A sale by a person to himself is no sale at all, and a power of sale does not authorise the donee of the power to take the property subject to it at a price fixed by himself, even although such price be the full value of the property. Such a transaction is not an exercise of the power, and the interposition of a trustee, although it gets over the difficulty so far as form is concerned, does not affect the substance of the transaction." 1. In Farrar v Farrars, using similar language, Chitty J made a finding that "there was an honest and independent bargain". [15] 2. Aickin J in Bangadilly applied these principles in the following circumstances: [16] "One of the critical questions here is whether there ever was an independent bargain. The deciding minds were those of Mr and Mrs Hall and of no one else. They were the only directors of the mortgagee (Halco Products); they were the only directors of the purchaser Bangadilly Pastoral Co. They fixed the reserve; they, with their agent Pritchard, were the only bidders, and they fixed the maximum price which the purchaser was prepared to pay. As controllers of the vendor, they knew that a prospective purchaser was prepared to pay $303,000, and as controllers of the purchaser they knew the reserve. In such a situation it seems to me that a purchase at or close to the reserve cannot be an independent bargain. It is of course true to say that separate legal persons were involved and that there was no legal impossibility in a contract between the two companies but that does not go to the central point. … I can see no reason why in such circumstances a sale by auction is in any different position from a private sale. In the circumstances the evidence was such that it could not support a finding that there was an independent bargain. This itself would be enough to require that the sale be set aside." 1. Immediately following this passage, Aickin J compared the circumstances with those in Forsyth v Blundell: [17] "Leaving aside the absence of an independent bargain, the factual situation is very similar to that in Forsyth v Blundell. The situation there was that the mortgagee had a firm offer of $120,000 and sold at that figure, cancelling an advertised auction. That offeror had said that if the offer were rejected he would not necessarily bid at the auction. The mortgagee knew that there was another possible buyer who had expressed interest, and who had said he might pay up to $150,000 at the auction, but who had made no offer. It was held that the failure to follow up the possibility of obtaining more than $120,000 from the other prospective purchaser was 'a serious departure from accepted standards in seeking to obtain the best price then available'." 1. Aickin J also referred to the question of onus: [18] "In the present case it was conceded by the defendants at the trial that the connection between the mortgagee vendor and the associated company which was the purchaser was such that the onus lay on the purchaser to prove the bona fides of the sale." Although the point was conceded, it is clear that the concession was accepted as correct and was applied. 1. The appellant set considerable store by the decision of the High Court in the earlier case of Latec Investments Ltd v Hotel Terrigal Pty Ltd (In liq). [19] The appellant in Latec was the mortgagee in possession. It was owed an amount of some £86,000. The circumstances in which the sale was effected were described by Kitto J in the following terms: [20] "The mortgagee took no steps to effect a sale until late in September 1958, and not until after its directors had learned that a stranger might be interested to purchase the property. It made no endeavour to sell to the stranger or to find any other purchaser by private contract. Instead, its board determined at some stage to sell the property to the second appellant, which was one of several subsidiaries of the mortgagee. They had identically composed boards of directors, and the mortgagee held all the shares in the second appellant. Before any sale was made, a firm of estate agents was instructed to put the property up for auction …. [t]he auctioneers made efforts to attract potential buyers and some thirty-five people attended the auction. The highest bid received was £58,000. Although the mortgagee's directors knew that an experienced valuer had valued the property six months before at [£56,500], a reserve of £85,000 had been fixed and the property was accordingly passed in. The auctioneers then advised the mortgagee to accept the offer of £58,000 if a better should not be forthcoming. The mortgagee, however, made no attempt to negotiate with any of the bidders or to obtain any higher offer. Its directors determined … that to have the Hotel Terrigal owned by one of their group of companies would be better for them than selling it to a stranger. … Without any further attempt having been made to find an outside purchaser, the mortgagee entered into a contract with its subsidiary, the second appellant, to sell the mortgaged property to the latter at the price of £60,000. There was, of course, no bargaining between them. The common board of directors simply fixed the figure and had a contract prepared and executed by both companies." 1. With respect to the question of onus, Kitto J stated: [21] "The onus clearly lay upon the purchaser, being a subsidiary of the mortgagee, to satisfy the court that the power of sale was exercised in good faith, and that reasonable steps were taken to obtain a fair price: Farrar v Farrars Ltd." 1. It was held that the mortgagee acted with "a lack of that kind of good faith which in the eyes of a court of equity is essential to the validity of a mortgagee's sale"; further, "the collaboration of the mortgagee and the purchaser through their common directors amounted to fraud in the sense of ss 42 and 43 of the Real Property Act, 1900 (NSW), so that the mortgagee's claim to have the sale set aside is not defeated by the indefeasibility which those sections accord to a registered title." The last point was the subject of further consideration in the light of interests obtained by those holding a subsequent security over the property. Circumstances constituting collusive dealing 1. There were in substance two limbs to the appellant's case with respect to the sale of the property by SAP to Parklea Corporation. The first concerned the relationship between the mortgagee exercising its power of sale (namely, SAP) and the purchaser (Parklea Corporation); the second concerned the circumstances by which the highest bidder on the first expression of interest became the beneficial owner of a 20% interest in Parklea Corporation. With respect to the first limb, the case differs from both Bangadilly and Latec in that there was no common shareholding or directorship in vendor and purchaser. Rather, there was a complex web of corporate interests, which demonstrated that PAG controlled and financed both SAP and Parklea Corporation. 2. With respect to the second limb, there are only three known facts, namely that (i) Wesco made the highest bid in the first expressions of interest, (ii) Wesco's final bid was below that of Dyldam, and (iii) Wesco ended up with a 20% shareholding in the purchaser. The appellant contended that, absent any explanation from the respondents, the Court should have inferred that Wesco reduced its bid from the highest to one below Dyldam's as a result of an arrangement by which it obtained a beneficial interest in the joint venture between Dyldam and PAG. The absence of any documentation available to the appellant was a consequence of the belated exposure of the fact of Wesco's interest in the joint venture, after the trial was due to have commenced. History of events (a) events in 2015 1. There was no dispute that SAP, via a web of related companies, was a member of the Pacific Alliance Group, both through directorships and ownership via subsidiary companies. Its authorised signatory was Mr Jon Lewis, who was a principal of PAG. In 2013, pursuant to a "loan notes subscription agreement", SAP provided Almona with funds in an amount of $53.2 million, which refinanced bank finance previously procured by the Almona from Westpac, in respect of which Almona had defaulted, resulting in the appointment of receivers by Westpac. The SAP loan was provided for a period of 12 months. The loan could be extended if certain conditions were met, but they were not met and the loan thereupon became repayable on 31 May 2014. Almost 12 months later, on 17 April 2015, SAP appointed PPB Advisory as receiver and manager of Almona. The amount outstanding at that time was in excess of $66 million. 2. The receiver obtained a number of valuations of the land, which ranged from $115 million down to $45 million, the lower valuations being based on a continuation of present use. It concluded that a fair value was between $80 million and $91 million. 3. On 20 August 2015 SAP served a notice under s 57(2)(b) of the Real Property Act, as a preliminary to the exercise of its power of sale. In August 2015 the receiver appointed Colliers International as its selling agents. An initial report identified Dyldam as one of 10 local buyers who might be interested in the property. 4. On 8 October 2015 Wesco Ventures Pty Ltd was registered with Tony Merhi as the sole shareholder and director. A month later, on 12 November 2015 a further company, Visy Group Holdings Pty Ltd was registered, with Wesco Ventures and Mr Merhi as the shareholders. On the same day, Visy Projects Pty Ltd was registered with the same shareholders as Visy Group Holdings. 5. On 30 October 2015 Dyldam Developments lodged an expression of interest, signed by its director, Sam Fayad, offering $85,350,000. Wesco Capital lodged an expression of interest in the sum of $92 million. Eleven other expressions of interest were lodged, ranging from $40 million to $84,250,000. Colliers advised the receiver that of the 14 expressions of interest six were between $80 million and $92 million and the bottom eight between $60 million and $70 million. Colliers suggested that they should notify the top six parties on 16 November 2015 that a second round of expressions of interest would run for two weeks closing on 30 November 2015. (The proposal was not immediately adopted and the closing date was later extended to 18 December 2015.) 6. By early November 2015 King & Wood Mallesons (KWM) were the solicitors acting for Pacific Alliance Investment Management (HK) Ltd, a part of PAG, in relation to Parklea Markets. The responsible partner was Stuart Dixon-Smith. On 10 and 11 November 2015 Mr Dixon-Smith had meetings with PAG in relation to the sale process. On 13 November he undertook a review of funding arrangements "required for buyers seeking funding on acquisition of assets" and gave advice to PAG. On 27 November 2015 Mr Dixon-Smith met at PAG with representatives of the receiver and Colliers. On 3 December he had discussions with PAG as to whether the sale should be conducted as a mortgagee sale or as a receiver sale. 7. On 11 December 2015 Mr Dixon-Smith provided to Anshumann Woodhull of PAG a spreadsheet indicating how a "profit rachet" would work, which envisaged a starting apportionment between PAG (80%) and Dyldam (20%) but allowed the ratio to vary in favour of Dyldam on a sliding scale as profits increased. Almona relied on the document as demonstrating an expectation that by purchasing the property, PAG would share net profits of as much as $700 million. At the highest level, Dyldam would obtain 36.4% and PAG 63.6%. It is apparent that, by that stage, there must have been a reasonably sophisticated proposal being discussed by PAG (the email went to two officers of PAG, under the heading "Almona") as to a joint venture with Dyldam involving both PAG and Dyldam sharing ownership of the development. The mechanism to achieve that would later crystallise in the purchaser granting the PAG company funding the purchase a call option over 80% of the unit holdings in two trusts which owned the purchaser. 8. By this time, on 11 December 2015 Mr Dixon-Smith had met "with Dyldam in Hong Kong". On the morning of Monday, 14 December 2015, Colliers wrote to Messrs Fayad and Jarrett of Dyldam noting that there was an updated closing date for final expressions of interest, being Wednesday 16 December at 4pm. Mr Meynell (Colliers) also emailed Mr Carter (receiver) to say that he had a meeting that day at Dyldam's office and was flying to Hong Kong the following morning. At that stage it was clear that the sale of the land would attract an amount well in excess of the SAP debt funded by PAG. It is unclear why the selling agent of land in Australia would take the trouble to fly to Hong Kong to discuss the sale with the funder of the mortgagee. 9. The meeting with Dyldam in Sydney had involved "three main items of discussion": "• Caltex – First right (maybe worth addressing KFC as well) • Market Licences – Retail leases act, are there any options, when could they achieve VP • VP for Constantine – they understand the contract is no longer VP and Constantine is not on a lease but could there be a special condition following exchange that they could commence the process to obtain VP." It may be inferred that "VP" referred to vacant possession. The email recounting the meeting with Dyldam was sent to Brett Schofield at Gilbert + Tobin, the solicitors for the receiver. The time entry for Mr Dixon-Smith on 15 December 2015, contained on the KWM invoice to PAG, read as follows: "Attending resale contract conditions, PAG Investment committee consents, review mortgagee sale contract terms, review s 57(2)(b) notice status. Calls with PAG and PPB." 1. Three parties submitted second round expressions of interest on 16 December 2015. Each made an offer subject to vacant possession as follows: Dyldam Developments – $85,350,000 Billbergia Group – $80 million Wesco Capital – $79 million Wesco Capital did not make an alternative offer; the other two did, namely Dyldam Developments – $81,100,000 (subject to existing leases/occupancy arrangements) Billbergia Group – $60 million (subject to existing leases/occupancy arrangements) 1. Dyldam's final expression of interest, together with a copy of the contract with marked up special conditions, was emailed to Colliers at 4:04pm on 16 December 2015. The document was still in the form of a sale by Almona, to be executed by the receiver and manager. The change to a mortgagee sale was agreed in the course of a conference call on 21 December between Mr Dixon-Smith and PPB Advisory and Gilbert + Tobin. The file note read: "Composed email to Amanda Hempel [solicitor at G+T] confirming PAG's instructions to issue a new draft contract to Dyldam as a mortgagee sale based on the mortgagee contract previously drafted by G+T including 'Subject to Investment Committee Approval' clause for review." 1. An important qualification to the terms of the Dyldam offer was identified in an email of Monday 21 December, from Mr Meynell at Colliers to Mr Schofield at PPB, noting that the first offer based on vacant possession meant "Con [Mr Constantine] gone, understand licence holders will still be there until 2019". The offer "subject to existing leases" meant "Con will still be there as well as all licence holders until 2019". Accordingly, the difference in the price was identified by reference to Mr Constantine remaining on the land as at settlement date. 2. On 22 December 2015 the time entry for Mr Dixon-Smith read: "Email to Peter Law and James McMurdo re power of attorney to facilitate mortgagee sale." Mr Law was legal counsel for PAG; Mr McMurdo was (with Mr Woodhull) the PAG officer apparently having responsibility for the arrangements in relation to the mortgagee sale by SAP and the funding of the purchaser. 1. On 23 December 2015 at 7:29pm, Mr Dixon-Smith emailed Ramy Qutami, the solicitor at Madison Marcus acting for Dyldam, as follows: "As you know, we act for Pacific Alliance in connection with the proposed funding of Dyldam's acquisition of Parklea Markets, as discussed in our recent meetings on this issue. For ease of reference I have prepared the below diagram which depicts the proposed 'Diamond Entity Structure['] (based on a total funding of $90m, with $51m from the senior debt facility) discussed at those meetings: … I have seen the current version of the special conditions to the contract of sale and note it does not reflect the proposed 'diamond structure' of the purchasing entity that was discussed during our meetings in Hong Kong as shown above. As I'm sure you will agree, it is not feasible, especially at this time of year, to have the above entities within the Diamond Entity Structure incorporated in time for exchange to take place tomorrow. So I suggest that the purchasing entity remain as Dyldam Developments for exchange purposes however a 'Pre-incorporation clause' be included in special conditions to enable the Transfer to be registered in the name of ['Dyldam Parklea Developments Ply Limited]' and avoid any double duty." The "Diamond Structure" involved PAG funding two holding companies, each of which was wholly owned by Dyldam Developments, and each of which in turn was an owner of the purchaser in proportions of 20% and 80% respectively. Dyldam was to provide $7 million in funding ($5 million mezzanine funding and $2 million equity). 1. On 23 December 2015 Madison Marcus proposed a variation, in that the purchaser (yet to be incorporated) would be Parklea Corporation Pty Ltd, with 50% of its shares held by each of two holding companies under a unit trust arrangement, with the unitholders yet to be determined. On 24 December 2015 Mr Dixon-Smith responded noting that the shareholding between the two holding companies was to reflect the 80/20 share of economic interests, with "any 'earn up' by Dyldam Group earned through a performance based component" of the development fee. 2. There followed, on Christmas Eve, an exchange of emails between Madison Marcus acting for Dyldam and the receiver and the receiver's solicitors, Gilbert+Tobin. Mr Weinberger at Gilbert+Tobin sent an email at 2:27pm on 24 December to Mr Carter (the receiver). One issue concerned a request that special condition 59, relating to proceedings against the vendor, be extended. Mr Weinberger wrote: "The purchaser has asked that period for trying to resolve a dispute preventing completion be extended from 3 months to 6 months. We previously advised them in the first round that this was acceptable." Mr Carter responded: "Probably ok, subject to PAG/SDS views (which is the case with all [of] these points)". At 10;04pm on 24 December Mr Dixon-Smith responded to Mr Carter and Mr Weinberger. He agreed with Mr Carter's comment as to the special condition. 1. Mr Dixon-Smith's email made two further points relevant to the present issues. First, he commented on a third party security interest registered on 31 October 2015 in favour of Anastasia Constantine (Mr Constantine's wife and accountant) on the personal property securities register, noting the difficulty in releasing a purchaser from the effect of such an interest but stating, "this is exactly why we are selling as mortgagee not receiver." 2. Secondly, Mr Dixon-Smith noted a query raised in respect of a term in the contract (cl 63) requiring consent of the "Vendor's Investment Committee". Its role was explained as follows: "Vendor's Investment Committee means the investment committee established by the Pacific Alliance group of companies ('PAG Group') responsible for approvals for significant transactions undertaken by PAG Group members and investment funds managed by PAG Group members." With respect to the composition and operation of the committee, Mr Dixon-Smith stated: "I understand the IC is made up of a combination of PAG Group executives and independent members. It operates as a body of review and approval to independently assess each proposal put before it and assess whether the proposal is in the best interest of the relevant PAG Group member or PAG Group managed fund and meets PAG Group policies, guidelines and standards and legal requirements. Its approval is required to any significant transaction or transaction that might expose the relevant PAG Group member or PAG Group managed fund to significant risk. This transaction, being a mortgagee sale with an acrimonious mortgagor, falls within its remit. … Because the vendor is a PAG Group member and manages the PAG Group fund which holds the mortgage over Parklea Markets, the IC will need to approve the sale of the Property by the vendor …." 1. There were further emails between Madison Marcus (for Dyldam) and Gilbert + Tobin (for the receiver) after Christmas and prior to the new year. In particular, Dyldam requested that the deposit be $1m to be paid on exchange of contracts, the balance of the deposit to be paid on 14 January 2016 and settlement to be on 28 January 2016. At that stage, it appeared that Madison Marcus believed that the receiver was conducting the sale. The request, initially sent to Mr Weinberger, was forwarded to Mr Dixon-Smith who stated that, there being no requirement that the contract be unconditional, the requests were acceptable, but needed the approval of Mr McMurdo or Woodhull at PAG. Mr Woodhull indicated his approval. 2. There are aspects of the foregoing communications which may be noted at this stage. First, although it is clear that PAG and Dyldam had entered into a joint venture in order for the latter to purchase the property, each was, at this stage, pursuing its own interests. Thus Dyldam, or at least its solicitors, were not fully informed about the role of the PAG investment committee, nor had they been told that the sale was to be a mortgagee sale. They were seeking to reduce the immediate payment (and amount) of the deposit. 3. Secondly, it is clear that PAG was dictating the terms of the purchase, including the form as a mortgagee sale and the need for a condition in the contract as to approval from its investment committee, although it was not the purchaser. Although Mr Dixon-Smith said that investment committee approval was needed by the vendor, the condition operated as a protection for PAG as the funder of the purchaser. SAP was to be paid an amount which more than covered its entitlements under the loan agreement; its interest was limited to its parent, PAG, making arrangements to fund the purchase. The effect of the purchase, however, was for PAG to substantially increase its financial commitment with respect to the land by investing in a major development with an Australian partner. Nevertheless, withholding the communication to the purchaser of investment committee consent allowed SAP to continue to book interest at penalty rates. 4. Thirdly, a representative of the receiver, Mr Carter, appointed by PAG's special purpose vehicle SAP, attended at least one meeting with PAG and Dyldam (the proposed purchaser and its funder) prior to the lodging of the final offers. It could be inferred that, either through SAP or Mr Carter, PAG and Dyldam were aware of the first round offers and the likely final offers before they were made. If so, there was an opportunity for Mr Fayad to learn of Wesco's bid and to speak with Mr Merhi before final bids were lodged. However, there was no evidence of any arrangement with Wesco or Mr Merhi. Accordingly, it is difficult to draw an inference from this material that Wesco reduced its bid by $13 million, resulting in an unsuccessful bid, on the basis of an arrangement with PAG or Dyldam. (b) Negotiations in 2016 1. Although the heading to emails from Madison Marcus refer to the transaction with SAP as vendor, being a mortgagee exercising power of sale, it continued to correspond with Gilbert + Tobin on behalf of the receivers. Parklea Corporation was incorporated on 4 January 2016. 2. On 8 January 2016 Madison Marcus requested that the top up of the deposit to 5% of the contract sum be conditional upon investment committee approval and be no later than 14 January 2016 or confirmation that the vendor has obtained investment committee approval; a similar request was made with respect to settlement, namely that it be "the later of 28 January 2016 or 14 days after the confirmation the vendor has obtained the investment committee approval". The contract as executed provided for investment committee approval to be communicated by 14 March 2016. Pending investment committee approval, the contract remained conditional. From 14 March 2016, if no investment committee approval had been communicated, either party could rescind. 3. After further minor changes to the agreement, contracts were exchanged on 13 January 2016. The following day Parklea Corporation lodged a caveat. Almona was provided with a copy of the caveat on 18 January 2016. 4. Throughout the period whilst the receiver was in possession, Mr Constantine had been attempting to obtain finance to repay SAP. Those efforts continued after 18 January, when Almona was formally notified of the caveat. Mr Dixon-Smith was kept informed of the requests on behalf of Mr Constantine for payout figures, the requests being made to Gilbert + Tobin initially. 5. As noted above, Mr Dixon-Smith (acting for PAG) prepared a profit distribution table based on an anticipated purchase by Dyldam and PAG, and attended a meeting with Dyldam in Hong Kong on 11 December 2015. On 23 December 2015 Mr Dixon-Smith prepared a draft Parklea "funding term sheets" and reviewed a "purchaser purchase structure". Then, on 17 February 2016 Mr Dixon-Smith prepared a "Parklea Markets funding heads of agreement", the drafting of which continued through to 22 February 2016 when a document was emailed to Mr McMurdo and Mr Woodhull at PAG. On 10 March 2016 Mr Dixon-Smith went to Hong Kong where he attended meetings concerning the funding arrangements for the acquisition of the property and the reviewing of the heads of agreement which he had been drafting. Before turning to the heads of agreement document, it is convenient to note an exchange of emails between Gilbert + Tobin and Madison Marcus on 8 March 2016, in the course of which Mr Weinberger advised Ms Carter at Madison Marcus that the purchaser had agreed to vary the sunset date from 14 March 2016 to 29 April 2016. A deed was prepared for that purpose by Gilbert + Tobin. In its amended form, cl 63 of the contract read: "63 Sale is subject to the approval of the vendor's investment committee (a) The vendor discloses that the vendor requires approval of the Investment Committee to sell the property under this contract. (b) The parties agree that completion of this contract is conditional on the vendor notifying the purchaser that the Investment Committee has approved the sale of the property under this contract by no later than 29 April 2016. (c) If the vendor has not notified the purchaser that the Investment Committee has approved the sale of the property under this contract by 29 April 2016, then either party may rescind this contract by notice in writing to the other, such notice given any time before the vendor notifies the purchaser that the Investment Committee has approved the sale of the sale of the property under this contract." 1. By 10 March 2016 Mr Dixon-Smith was in a position to send to Dyldam and to Mr McMurdo (PAG) a copy of Parklea Markets – Heads of Agreement "outlining the funding arrangements proposed for the Parklea Markets acquisition reflecting discussions with PAG and the proposed structure previously discussed. It is based very closely on the Wolli Creek document." The funding was to be undertaken pursuant to a Loan Note Subscription Agreement Parklea Markets (LNSA). A document identified as "Schedule 5 – Structure Chart" to the LNSA, dated 8 March 2016, bore the insignias of both Madison Marcus and KWM. The structure chart, following the pattern of earlier discussions, showed Parklea Corporation with two shareholders, Parklea Holdings 1 Pty Ltd and Parklea Holdings 2 Pty Ltd. The director, secretary and shareholder of each of the three corporations was Mr Fayad. Each of the Parklea Holdings 1 and 2 was identified as trustee for a unit trust. Each unit trust was divided into 1,000 units, of which 800 were held by Mr Fayad's family trust company. The remaining 200 units in each were held by two Visy companies, controlled by Mr Merhi, as trustees for Visy trusts. This was the first reference in the documents to Mr Merhi's interests. The chart showed the full detail of the ownership of Parklea Corporation. It did not involve PAG. 2. On 16 March 2016 Jessica Jordan, a solicitor with KWM, forwarded a copy of the LNSA to Madison Marcus. PAG was included in the email. Schedule 5 was blank. (c) Heads of agreement 1. The structure provided in the draft heads of agreement of 10 March 2016 had an ownership structure involving separate Holding Trusts 1 and 2 which held, respectively, 20% and 80% of the units in an intermediate holding trust. The property was owned immediately by an ownership trust. PAG was to supply mezzanine debt to the two holding trusts and senior debt to the ownership trust. The ultimate holding trust was to grant PAG an option to acquire its units in Holding Trust 2, which held an 80% interest in the property. Clause 2.1 stated: "2.1 Background The Landowner [undefined] has entered into the Land Acquisition Agreement [defined as the contract for sale between SAP and 'the Landowner'] following negotiations between members of the Dyldam Group and members of the PAG Group and based on discussions regarding the funding of the Project by members of the PAG Group." "Project" was defined to mean the acquisition, development and sale of the land. 1. Pursuant to cl 5, Trust 2 was given majority decision-making powers over the intermediate holding trust and the landowner, but PAG and the security trustee were given negative control over the affairs of Trust 2. Further, there was a call option: "5.2 Call Option In consideration of and reflecting the very high loan to value ratio of the facilities provided by PAG, the Ultimate Holding Trust will grant the Call Option to PAG." That call option was defined as an option over "all issued units in Trust 2 and all shares in the trustee of Trust 2 granted by Ultimate Holding Trust in favour of PAG and its nominee." 1. Other terms of the draft heads of agreement may be put to one side for present purposes. A final form of the heads of agreement was executed on 22 March 2016: it will be convenient to consider further details of the agreement at that stage. For present purposes the following features of the terms set out above may be noted. 2. First, although the solicitors for Dyldam were acting independently of PAG in questioning aspects of the contractual documentation, two factors suggest that the degree of independence was limited. Thus, it is clear that PAG and Dyldam had acted together on at least one earlier project as reflected in Mr Dixon-Smith's reference to using as a precedent, "Wolli Creek". There was also reference to discussions in Hong Kong between PAG and Dyldam in mid-March 2016 with respect to another venture. Importantly, there was no evidence that Dyldam had any alternative source of finance in the order of $90 million. 3. Secondly, the fact that SAP, under instruction from PAG it may be inferred, had inserted a condition in the sale contract requiring PAG investment committee consent, effectively allowed PAG to control the terms of the sale contract. Further, PAG had access to immediate advice as to the circumstances of Almona and the property through Almona's receiver, who attended a meeting in Hong Kong prior to the final round of offers. 4. This understanding is confirmed by the diary entry for Mr Dixon-Smith for 11 March 2016, reporting meetings with PAG senior executives in Hong Kong, "to discuss completion of sale of Parklea Markets, including comprehensive review of status of sale, including PAG's capacity to complete, purchaser funding arrangements, review of sale process to confirm PAG has complied with all duties of mortgagee exercising power of sale, status of receivership and vacant possession issues." The file note continued: "Recommendation to issue notice of IC Approval so as to trigger completion date." 1. On 14 March 2016 Mr Dixon-Smith reported to Gilbert + Tobin on his instructions from Hong Kong (PAG) and anticipated sending notice of approval from the IC. (d) final transaction documentation 1. A succinct statement of the scheme, as it existed on (or shortly before) 18 March 2016, is found in a document prepared by Perpetual as proposed security trustee, on instructions of Madison Marcus: "• Parklea Corporation Pty Ltd (the 'Customer') is a special purpose company owned by two trusts that are part of the Dyldam Group; • The Customer has exchanged contracts to acquire the Parklea Markets; • The sale is a mortgagee in possession and the sale price will be between $81-$85 million subject to certain requirements; • PAG (an independent alternative investment management group) will provide an $85m to $90m loan to the Customer (the 'Loan') to fund the acquisition; • PAG will use a British Virgin Islands special purpose vehicle as the lender entity for the Loan; • Perpetual has been requested to provide security trustee services; • Security to be provided to the security trustee will include: O First ranking registered GSA over all the assets and undertakings of the Customer and two other entities related to the Customer; O A mortgage over the Parklea Markets; O A mortgage over units owned by related parties of the Customer at George Street, Parramatta; and O A mortgage over units owned by related parties of the Customer at Merrylands. • Settlement is expected to take place on Monday 21 March 2016; • Stuart Dixon-Smith (Partner, King & Wood Mallesons) will act for PAG, Madison Marcus law firm will act for the Customer and Alex Mufford will act for Perpetual; • The Customer is negotiating with HSBC to refinance the Loan in three months time and Perpetual will continue to act as the security trustee for HSBC as the incoming financier; and • The refinance with HSBC will be used to construct a mixed use development, which will include the construction of apartments and retail shops." 1. In fact, the settlement took place on Tuesday, 22 March 2016, and the deed of variation providing that the price would be $81.1 million; otherwise the description of the proposed transaction set out above was followed, subject to the following additional elements. 2. The first document, critical to the appellant's case, was the call option with respect to the unit shares. As noted above, the shareholding in Parklea Corporation was divided between Parklea Holdings 1 (80 shares) and Parklea Holdings 2 (20 shares). Each was trustee for an eponymous unit trust. Thus, 80% of the value of Parklea Corporation was held by the Parklea Holdings 1 unit trust. 3. Of the purchase price of $81.1 million, $1 million was paid as a deposit, leaving a balance on settlement of $80.1 million payable on settlement. Of this amount, $79.1 million was paid by a PAG company, the identity of which appears to have changed very late in the hurried arrangements. The confusion is reflected in the judgment of the trial judge and should be identified in order to put it to rest. Thus, in the opening paragraphs of the judgment, the judge stated: "[18] Parklea's obligation to pay the purchase price under the Contract was substantially financed through another related special purpose vehicle of PAG, incorporated in the British Virgin Islands, named Lord Business Holdings VI Ltd (Lord VI). Another PAG special purpose vehicle, Lord Business Holdings VIII Ltd (Lord VIII), was given the opportunity to acquire 80% of the shares in Parklea by means of a call option that I will explain in more detail below." [22] 1. The final version of the "Parklea Markets – Heads of Agreement" was executed on 22 March 2016. There were five parties to the agreement, namely Parklea Corporation ("Landowner"), Quatro 88 Pty Ltd (a company associated with Dyldam) ("Development Manager"), Parklea Holdings 1 Pty Ltd ("Holding Trust 1"), Parklea Holdings 2 Pty Ltd ("Holding Trust 2") and Lord Business Holding VIII Ltd ("LBH"). Recital C noted: "LBH has agreed to provide funding to the Landowner Group along [sic] term senior debt credit wrap facility and long term mezzanine funding." Secondly, LBH was referred to in the definition of call option in the following terms: "Call Option means the call option to be granted by Holding Trust 1 over all issued shares and rights it holds in the Landowner granted in favour of LBH and its nominee." Clause 2.2 provided that the parties had agreed to enter into the following transactions including: "(h) Holding Trust 1 will grant the Call Option to LBH as part of the facilities provided by LBH to the Landowner Group". Clause 5.2 was as follows: "5.2 Call Option In consideration of and reflecting the very high loan to value ratio of the facilities provided by LBH, Holding Trust 1 will grant the Call Option to LBH as part of the facilities provided by LBH to the Landowner Group and in accordance with the terms stipulated at clause 8.6 of this heads of agreement." Clause 8.6 was in the following terms: "8.6 Call option The Call Option will allow LBH to acquire all issued shares and rights it [sic, Holding Trust 1] holds in the Landowner at any time for $100,000 plus 'First Ownership Group Tax' as defined in paragraph (d). The Call Option will: (a) be exercisable at any time; (b) be exercisable by any nominee nominated by LBH; …." 1. It is apparent from these provisions that the financier was to be the grantee of the call option: if the financier was LBH VIII, the call option must have been provided to LBH VIII. The Parklea Markets heads of agreement did not contemplate separation of the financier and the grantee, as suggested in the opening paragraphs of the judgment below. 2. In concluding his discussion of the head of agreement, the judge further noted: "[295] On 22 March 2016, Parklea Holdings 1 Pty Ltd, as trustee for the Parklea Holdings 1 Trust, granted a call option to Lord VIII to acquire the 80 shares in Parklea owned by the Grantor (as defined) at any time upon payment of $100,000 plus any tax attributable to any profit earned by the Parklea Holdings 1 Trust (Call Option)." 1. It should be noted that the copy of the heads of agreement not only bore the date 22 March 2016, but was signed by a director of the PAG, Jon Robert Lewis, for LBH VIII. Bearing the same date and signature, was a document entitled "Call Option to Purchase Shares". The grantor was identified as Parklea Holdings 1; but the grantee was LBH VI. 2. Finally, the Loan Note Subscription Agreement Parklea Markets, dated 22 March 2016 and executed by all the relevant parties, including Mr Roberts on behalf of the financier, identified the financier as LBH VI. 3. It is not easy to resolve the source of the confusion, which was not addressed by the parties on the appeal. However, it may be noted that at 5:36am on Monday, 21 March 2016, Mr Dixon-Smith emailed a set of documents to Peter Law at PAG. The documents, it was said, "were all signed by the relevant companies at our offices yesterday and are held in escrow pending your signoff." The documents included the loan notes subscription agreement, the call option and the heads of agreement. Mr Law emailed back, somewhat cryptically, at 9:37am, referring to the heads of agreement and the definition of "LBH" as Lord Business Holding VIII Ltd. He also stated that "[u]nder the Option Deed as drafted, it is granted to Lord Business Holding VIII Ltd." In response (the final email in the chain), Mr Dixon-Smith wrote at 9:52am: "I'm intending on getting a new call option to the new LBH under HoA, the one we get today covers us during the Bridge Facility only." 1. There appear to have been three drafts of the heads of agreement available on 20 March 2016, one having a reference only to PAG as the financier and two referring to LBH VIII. On any view, the funding came from a PAG company and the call option must properly have been in favour of the same company, pursuant to the transaction documents. Appellant's first claim of impropriety – mortgagor's right to repay loan 1. The appellant's first claim of impropriety was reflected in the proceedings instituted on 18 March 2016, being an attempt to prevent the settlement of the contract of sale to Parklea Corporation. The claim was based on the proposition that, at any time up to the transfer of title pursuant to a mortgagee sale, the mortgagor was entitled, on tender of the outstanding loan amount, to obtain a discharge of the mortgage. 2. The appellant relied on the failure of those representing SAP (including Mr Dixon-Smith acting for PAG) and the receiver, to inform Mr Constantine of what was happening, thus preventing him from organising funding to pay out the mortgage and recovering control of Almona. The argument had two limbs: first, the refusal to supply payout figures on request and, secondly, the non-disclosure of the terms of the sale contract entered into on 13 January 2016, together with the steps taken to accelerate settlement under that contract. 3. Following Almona replacing Westpac with SAP as its financier, on 31 May 2013, it was clear in early 2014 that Mr Constantine either needed to persuade SAP to extend the twelve-month period of the loan or needed to refinance with another lender. His attempts to extend the period of the loan failed: on 5 June 2014 SAP rejected the request for an extension and noted that the amount outstanding (as at 31 May) was $58,911,301. On 9 July 2014 Bartier Perry advised SAP's solicitor, Clayton Utz, that Almona would be in a position to secure refinancing within three months. On 28 November 2014 the outstanding figure was confirmed as $60,649,040. Whilst a period of forbearance was provided, by 2 February 2015 the amount outstanding was $65,566,970. SAP appointed receivers on 17 April 2015. 4. On 30 July 2015 Bartier Perry assured Mr McMurdo (PAG) that refinancing was expected within four weeks. On 3 August 2015 KWM advised Bartier Perry that the amount owning as at 31 July 2015 was $70,989,568. A notice pursuant to s 57(2)(b) dated 7 August 2015 identified the outstanding amount as $71,262,096. Bartier Perry notified a target date for refinancing as 31 August 2015. KWM and Gilbert+Tobin prepared documents required for settlement of the loan repayment, including discharges of mortgage. Settlement was not achieved on 30 August and a new date was fixed for 4 September 2015. Settlement did not occur on that date but Bartier Perry sent an email on 11 September advising that the refinancing would occur on 18 September. The financier, International Corporate Funders, advised Bartier Perry that settlement could not occur on that date as relevant documents had not been provided. (On 16 September a proposed purchaser, Abacus Property Group, withdrew.) On 17 September 2015 KWM advised that the payout figure was $75,615,868 as at 18 September. Settlement did not occur and was rescheduled for 23 September 2015. Settlement did not occur by 30 September 2015. 5. In the meantime, SAP was preparing for a sale of the property. It is clear from a letter dated 11 September 2015 from PPB Advisory (the receiver) to Mr Constantine that he was being kept informed of the steps being taken by the receiver to sell various properties and pay down the mortgage, whilst noting that Mr Constantine's proposed refinancing had not eventuated. 6. It appears that by October 2015 Mr Constantine was attempting to raise funds through the sale of his shares in Almona. To that end, he signed an agreement with a company known as Australian International Investment Holdings Group Pty Ltd, described as "the agent". The deed said that the agent was to be paid a commission of $5 million for the sale of the shares in Almona. It was followed by a deed between Mr Merhi, Mr Constantine and the agent, agreeing that they had been introduced by the agent and that if a sale eventuated, Almona would be obliged to pay the commission. A copy of the agreement signed by Mr Constantine was dated 27 October 2015. 7. The background to these documents was obscure. Mr Constantine gave evidence and was cross-examined about them in some detail. He agreed that he had met Mr Merhi on one occasion at his office. He denied he had reached any agreement with him, and denied that he had ever sold, or attempted to sell, shares in Almona, or any other company. He denied any recollection of the document bearing his signature when it was shown to him. [23] Mr Constantine also denied knowing that Mr Merhi had put in a bid on 30 October 2015 in an amount of $92 million. [24] 8. Whatever is to be made of Mr Constantine's evidence, there can be little doubt that Mr Merhi was, in October 2015, exploring means of obtaining an interest in Parklea Markets. On 8 October 2015 he had incorporated Wesco Ventures Pty Ltd. 9. There was one final attempt by Mr Constantine to obtain the finance to pay out the SAP mortgage. By 18 January 2016, Mr Constantine was aware that a caveat had been lodged over the land by the purchaser under the contract of sale exchanged on 13 January. He stated in his affidavit that during the period "December 2015 to March 2016" he attempted to obtain payout figures from the receiver on a number of occasions. During the same period he stated that he had "numerous conversations with Michael Hercus … from Mackycorp Pty Ltd." He said he had been dealing with Mr Hercus "since about November 2015 in an attempt to negotiate a deal to repay Almona's loan facility". [25] He further stated that on 11 March 2016 Mr Hercus had told him that he needed to obtain a payout figure and that Mackycorp was negotiating on behalf of an entity associated with Angela Bennett. He also stated that on 14 March 2016 he advised the receiver that he had obtained funding to pay out the loan and needed a payout figure as soon as possible. On the same day, he signed heads of agreement with the prospective funder, AMB Capital Partners. 10. The appellant's contention is that from 14 March 2016 PAG (mainly through its solicitor, Mr Dixon-Smith) stalled in providing payout figures to allow time for PAG to settle the sale to Parklea Corporation. Evidence in support of that contention was to be found in Mr Dixon-Smith's "action plan" prepared on 15 March 2016. On 17 March 2016 the purchaser was notified of investment committee approval, rendering the sale contract unconditional. 11. However, at no stage was the agreement with AMB Capital an unconditional offer. It remained subject to the receiver providing an exclusive three week period for due diligence, and not completing the sale to any other party. 12. It is convenient to explain the attempts by Mr Constantine and his solicitor, Norman Donato of Bartier Perry, to abort the sale process by arranging independent finance to pay out the debt to SAP. On 11 March 2016 at 6:52pm Bartier Perry requested an up to date payout figure. At that time, Mr Constantine had been negotiating for a payout funded by AMB Capital Partners. On 15 March, AMB Capital provided a letter to Mr Constantine noting that the debt owed was "in the vicinity of $65 million" but that he did not have a recent payout figure. The letter further stated that AMB Capital was in a position to provide finance "for the purpose of refinancing the Facility in full, subject to completion of a three (3) week exclusive due diligence period to review the further information and finalise the necessary documentation". The letter further stated that AMB Capital "has liquid funds available to complete this transaction at or above the amount stated above and can provide support if required." 13. However, AMB Capital required "written confirmation from PPB Advisory that during the Due Diligence Period … they will not enter into or complete any agreement for the sale of any assets of Almona (including Parklea Markets) … over which security has been granted to secure Almona's obligations under the facility." On 15 March 2016 Mr Dixon-Smith was provided with a copy of the letter from AMB Capital. He wrote to Mr Woodhull and Mr McMurdo at 1:34pm stating "as envisaged by you, those involved on the proposed refinancing do actually have the firepower to fund this if Con can make it stack up." The email continued: "The good news is they are asking for 3 weeks exclusive DD to get it done, so any refinancing can't be closed by the time it is anticipated that the buyer completes the contract." 1. Earlier in the day, Mr Dixon-Smith had sent Mr Woodhull and Mr McMurdo a lengthy email outlining an "action plan" for the Parklea Markets' sale. It proposed a settlement, commencing as follows: "I propose that we settle the sale ASAP (target say Thursday) on the basis that the existing PAG fund holding the Almona debt provides vendor finance to the purchaser to enable an accelerated settlement. To this end I propose we have Gilbert + Tobin send the purchaser notice saying the Investment Committee approved the contract in January 2016 and giving notice requiring settlement in 14 days (as the contract provides). Sending this notice is very important, because it makes the contract unconditional and unquestionably shuts down any right that Almona has to refinance the facility. Notwithstanding this formal notice, we would separately agree to settle on Thursday based on amended terms discussed below." 1. After some further explanation as to the amount payable on settlement (to which further reference will be made below), the action plan continued: "I propose the vendor finance be provided to the purchaser at the rate that is anticipated to have been payable under the proposed Senior Debt arrangements we discussed on Friday, namely BBSW plus the Senior Debt margin plus PAG's Credit Wrap Bank Guarantee fee. This interest is accountable to Almona as recoveries from the mortgagee sale, but interest at the default rate under the existing facility continues to run against the outstanding amount because no cash has been received by the vendor, so PAG gets the dual benefit of the higher rate, it books a sale and stops Almona from being able to repay the mortgage. I propose that the vendor finance be repayable on 29 April or such later date as PAG agrees, enough time to put in place the HASBC credit wrapped facility and the mezzanine pieces we discussed on Friday. The key reason why I have structured the funding as a 'vendor finance' arrangement in this manner is stamp duty and optics. I think it is important that the security back to PAG gets registered and for reasons discussed, as well as the lack of time for you to progress a new fund in PAG to cash fund the arrangements, means this really has to be genuine vendor funding from the mortgagee (although that is a very novel concept). However, there are two key advantages in this structure. Firstly, there is no suggestion in this that PAG is in any way permanently funding the acquisition, it appears like short term funding to assist the buyer and is beneficial to Almona in that it generates interest income on the sale. Secondly, one very important advantage [is] that genuine vendor funding is liable to nominal mortgage stamp duty. Any other structure where another PAG fund funds the purchaser will attract $308,000 in stamp duty. If PAG can arrange cash funding from a new fund to cash out the old fund before 29 April, we can do this once that cash is available by a sub-participation or substitution in a way that would not be visible to Almona." 1. Mr Dixon-Smith concluded with a proposal for dealing with Mr Constantine: "I haven't replied to Norman's letter last night, I'll let the clock tick a bit. This afternoon I'll send a short reply saying my earlier email was entirely clear and I don't propose to elaborate, but saying I do not propose to take any action until I receive written confirmation from a financier's lawyer that funding has been committed, with copies of a binding term sheet, draft financing documents and a realistic timetable for financial close, at which stage I will respond to all parties. Hopefully that all takes until Thursday, at which stage I can write to confirm the sale of the property has completed." 1. The appellant placed significant weight on Mr Dixon-Smith's emails as demonstrating that PAG, as mortgagee in possession through SAP, was not exercising its power of sale in good faith, but rather to ensure that the party it was funding and with which it had a joint development venture would acquire the land at the expense of the mortgagor. Mr Dixon-Smith, the appellant submitted, had put forward a proposal suggesting that extraordinary steps should be taken to ensure that the sale went ahead before a sufficient sum was proffered to SAP, which it would be obliged to accept. Mr Dixon-Smith appears to have thought that this might be so until a transfer occurred. 2. That view may have derived from s 59 of the Real Property Act, providing that the estate or interest of the mortgagor shall pass to and vest in the purchaser "by transfer", recorded in the register. Dealing with related (though not identical) provisions in the Real Property Ordinance 1925-1961 (ACT), Walsh J in Forsyth v Blundell [26] stated: "The right of the mortgagor was not merely an equity of redemption. The mortgages did not operate as transfers of his title to the land …. His title could be divested by a transfer in pursuance of a contract of sale made by the mortgagee in the exercise of the power of sale. But until that occurred, he retained a legal interest in the land." 1. However, Walsh J went a little further, stating: [27] "If a contract of sale had been made which was not affected by any impropriety, it would not have been open to the mortgagor to claim that until the contract had been completed his right to redeem the mortgage continued notwithstanding the contract and was superior to the right of the purchaser. Although he retained his title to the land this was subject to the power of sale as defined in the Ordinance and as incorporated into the mortgage instruments. In my opinion, a contract of sale properly made in the course of the exercise of that power is binding upon the mortgagor, not because the mortgagee contracts as agent for the mortgagor, but because by entering into a mortgage to which the Ordinance applies the mortgagor makes his own rights subject to its provisions, including those which confer and regulate the power of sale, and, therefore, subject to any action which is properly taken in good faith by the mortgagee." 1. It is not entirely clear whether the mortgagor loses the right to tender the full amount owing where a mortgagee contract of sale is subject to an unfulfilled condition. [28] Nevertheless, Mr Dixon-Smith appeared to be acting on the basis that a registered transfer was at least the desirable outcome to resolve the issue. 2. There are two other matters to be noted in relation to the action plan. First, the suggestion of "vendor finance" by PAG, as a result of which SAP got no cash immediately, was intended to gain time for PAG to arrange the financing: there was no suggestion that Dyldam should (or could) contribute. Secondly, it is clear from the discussion of vacant possession that Mr Dixon-Smith was still of the view that Mr Constantine should be offered an opportunity to vacate the premises, so that a further payment would be made in favour of Almona of $4.25 million. (a) accelerated settlement 1. Although there appears to have been no file note indicating confirmation of the proposal to notify the purchaser that the investment committee had approved the contract in January 2016, on 17 March 2016 at 9:15am Mr Dixon-Smith emailed Mr Weinberger at Gilbert + Tobin to give him notice confirming that fact and setting the completion date of which the purchaser should be notified. On the same day, Ms Hempel (Gilbert + Tobin) advised Madison Marcus that the vendor had obtained the approval of its investment committee and that the date for completion was Friday, 1 April 2016. The contract thereby became unconditional. 2. There were clearly undocumented conversations between Mr Hall of Madison Marcus, Ms Hempel at Gilbert + Tobin and Mr Dixon-Smith at KWM. Further, it is likely that all parties obtained instructions from their clients in the course of Thursday, 17 March 2016. There is, however, no documentary record of the telephone calls or the instructions. However, at 5:05pm Mr Hall sent Ms Hempel an email referring to recent telephone calls, and the letter advising that the investment committee had given approval. He further noted the contemplation of the parties that the completion would take place on Monday, 21 March 2016 (providing only one full working day and the weekend to ensure that both finance and the documentation for the transactions were in place). This was, potentially, three days faster than the accelerated settlement and registration of the transfer proposed by Mr Dixon-Smith. Further, Mr Hall proposed that "[t]o reflect the discussions between the parties" a deed of variation should be entered into with a new front page of the contract showing the purchase price as $81.1 million. That was an abandonment of the proposal to allow Mr Constantine an opportunity to vacate the home on the land and thereby obtain the higher price under the original offer by Dyldam. 3. At the same time, that is, in the course of Thursday 17 March, Mr Jarrett (on behalf of Dyldam) made arrangements with Mr Greg White of Perpetual to undertake a role as trustee of the mortgages to be entered into by Parklea Corporation for the funding of the purchase. 4. The events of the following three days may be briefly summarised. On Saturday 18 March 2016 KWM produced a further version of the Parklea Markets – Heads of Agreement. Also on 18 March 2016 Mr Constantine, dissatisfied with the responses which his solicitor had obtained from KWM, commenced proceedings seeking to injunct the settlement of the contract. However, those proceedings were abandoned the following Monday, 21 March 2016. 5. Although aspects of Mr Dixon-Smith's "action plan" were not adopted, it may be inferred that his message of urgency was accepted by PAG, and, by inference, accepted by the other parties at the instigation of PAG. Given that PAG controlled the vendor and was providing the bulk of the finance for the purchase, it should be inferred that it dictated the timing of the settlement. Thus, KWM, acting for PAG, prepared the heads of agreement, the call option deed, the security trust deed, the general security agreement, the loan note deed poll, utilisation notices, compliance certificate, verification certificate and mortgages, as well as the loan note security agreement. [29] (b) conclusions 1. Treating the complaint that Mr Constantine had been denied an opportunity to pay out the mortgage in isolation from the appellant's other complaints, it would not be possible to find in the circumstances set out above a breach of the mortgagee's duty to the mortgagor. There had been a considerable period of forbearance before the receiver was appointed, and a further period during which Mr Constantine had opportunities to refinance and was unable to do so. If there were indeed a third party willing to put up the necessary funds it had every opportunity to do so in the course of the expression of interest process undertaken by Colliers. Although Mr Constantine said he was negotiating with Mackycorp in November 2015, it is clear that Mackycorp did not engage with Colliers at any stage. Once contracts had been exchanged on 13 January 2016, whether conditional or otherwise, the mortgagee was entitled to pursue that arrangement and, indeed, may have been liable in damages if it had reneged. In fact the investment committee of its funder had approved the contract of sale in January and it is proper to infer that delay occurred in advising the purchaser of the satisfaction of that condition only because time was required to make the necessary arrangements to fund the purchase, a matter which was also ultimately under the control of PAG. 2. While it is true that Mr Dixon-Smith was anxious to render the sale contract unconditional, by notifying the purchaser of investment committee approval, the effect was, in his view, to make the contract "unconditional and unquestionably shuts down any right that Almona has to refinance the facility." 3. There was little consideration given in the course of the appeal to the possibility that Almona might have a right to refinance the mortgage after the sale contract had been entered into, but before settlement. The submissions, particularly before the trial judge, were formulated in terms of Almona's right to "redeem", a right which would presumably be protected in equity. However, that language was inapt: Almona was the registered proprietor of the land under the Real Property Act, but as explained in Bangadilly Pastoral, its rights as owner were subject to the power of sale vested in the mortgagee. The question was, therefore, whether Almona had any power to prevent the mortgagee, which had exercised the power of sale by exchanging contracts, from carrying out its obligations under the contract. There was also a live issue as to the extent to which Mr Constantine, as a director of Almona, could properly institute proceedings to prevent the sale, whilst the receiver was managing the company. 4. Ultimately, there were two reasons, one legal and one factual, why the appellant's claim based on a failure to allow repayment of the loan failed. First, whilst the mortgagor remained the registered landowner, its rights were subject to the power of sale vested in the mortgagee. It follows that, unless the power were otherwise challenged as involving a breach of its obligation to the mortgagor, the conclusion by the mortgagee of a contract with a purchaser terminated, or at least suspended, the right of the mortgagor to insist on settlement of its debt with the mortgagee so as to remove the qualification of its title effected by the power of sale. (It might be proper to refer to the effect of the contract as suspending the mortgagor's right in the sense that it might revive if the contract did not proceed to settlement.) In the present case the contract was conditional until the vendor notified the purchaser of its investment committee's approval. That occurred on 17 March 2016. However, even before that time, it is arguable that the purchaser would have been entitled to insist upon notification once the investment committee had given approval. In any event, until the period within which approval could be given expired, the mortgagee had no right to rescind the contract. Once approval was given within the period, the contingent right of rescission fell away. Accordingly, it is at least doubtful that the appellant had a right to tender payment to SAP at any time after 13 January 2016 when contracts were exchanged. 5. Secondly, as a matter of fact, the appellant did not at any stage tender payment of the outstanding amount under the loan agreement secured by the mortgage. Had a tender of such an amount been made and refused, the appropriate course would have been to pay the amount into court. That did not happen. It did not happen because, even at 18 March 2016 when proceedings were commenced, the appellant did not have finance available to it. AMB Capital had made a conditional offer, on the basis of a payout figure well below the amount owing under the loan agreement with SAP, and subject to a condition requiring three weeks exclusive due diligence. The mortgagee was not required to comply with such a condition. It was entitled to settle the sale to Parklea Corporation. 6. The appellant sought to make much of the accelerated settlement proposed in Mr Dixon-Smith's action plan and ultimately undertaken, partly in accordance with that plan. Whatever Mr Dixon-Smith's concerns were, they did not affect the analysis set out above. Indeed, it seems likely that Mr Dixon-Smith did not consider that the mortgagor had any right to pay out the loan agreement; had he taken that view he might have referred to it in his advice, which he did not. Rather, his primary concern appears to have been to avoid the possibility of litigation (which in fact eventuated) with the accompanying likely delay (avoided only by the withdrawal of the litigation). 7. The first basis of the appellant's case was properly rejected by the trial judge. Appellant's second claim of impropriety – sale transaction not independent 1. The appellant's second claim was that the funding of the purchase by PAG, the owner of the mortgagee, prevented the sale being an independent transaction undertaken by the mortgagee. Accordingly, the sale could not be upheld as a good faith exercise of the power of sale, unless the mortgagee demonstrated that the best available price had been obtained by a fair process. It is convenient at this stage to identify the findings of the trial judge with respect to these matters. The conclusions were as follows: "[585] As has been considered above in connection with the burden of proof, there is no absolute prohibition on a mortgagee selling the security property to a company in which the mortgagee has an interest, provided, in respect of the price obtained, the transaction is a proper and independent one. The circumstances may have the effect that the interest obtained by the mortgagee switches the burden of proof and imposes it upon the mortgagee or the entity through which the mortgagee obtains its interest. [586] It has not been necessary for SAP or Parklea in this case to prove that the contract price for the Land was struck by a proper and independent process or that the price represented the market value. All of the evidence concerning the participation by the receivers and Colliers, and the implementation of the expression of interest campaign, supports a finding that the process was proper and independent. As I have recorded, the case was conducted on the basis, as initially conceded by Almona, that the contract price was a proper one. Although Almona's belated introduction of a fraud claim against SAP and Parklea based upon the joint venture negotiations in late 2015 may imply that the sale was at an undervalue, Almona did not lead evidence to establish such a claim. [587] Once it is established that the price in the Contract is a proper one, and that the interest acquired by PAG through Lord VI and Lord VIII has not led to any diminution in the amount received by Almona following the sale of the Land, no obligation of good faith was imposed upon SAP to provide any information to Almona concerning that interest." It will be necessary to return to this reasoning. The analysis will appear in addressing the appellant's "wider fraud" case at [225]ff below. In short, the evidence did not establish that it was PAG's intention to acquire a contingent interest in the property when the contract of sale was signed. Even had there been such an intention in the days before the contract was signed, it did not cast a sufficient doubt on the independence of the sale process, as the trial judge found, to place a burden on the mortgagee to justify its conduct of the sale. Appellant's third claim of impropriety: accommodation condition (a) finding on opportunity to vacate premises 1. The circumstances underpinning the third basis upon which the appellant sought to challenge the exercise of the power of sale involved the failure to inform Mr Constantine of the opportunity to increase the sale price by $4.25 million by vacating the premises, in accordance with the occupation condition. 2. The trial judge upheld this complaint, requiring the payment to Almona of the additional amount of $4.25 million, together with interest. Although challenged by way of a cross-appeal by Parklea Corporation, that aspect of the judgment should be upheld. The complaint by Almona is that the finding of impropriety should have resulted in the setting aside of the contract of sale, rather than an adjustment to the sale price. The issues will be addressed in considering the consequences of the finding that there was no independent transaction. The cross-appeal by Parklea Corporation should be addressed here. (b) Cross-appeal – Parklea Corporation 1. Parklea Corporation challenged its liability to Almona in the amount of $4.25 million plus interest. That entitlement arose from its involvement in the reduction of the agreed price of the land to $81.1 million, thereby depriving Almona of the opportunity to obtain the additional $4.25 million. The substance of the cross-appeal was that the judge ought not to have inferred, in the absence of evidence, that Parklea Corporation was aware that Almona had not been informed of the occupation condition. 2. As there was no challenge to the finding of fraud on the part of SAP in this respect, it is convenient to set out the reasoning of the trial judge before identifying the process by which Parklea was found to be complici: "[673] In my view, the evidence establishes that SAP's conduct in this regard was relevantly dishonest. [674] First, the statement made by Mr Dixon-Smith on behalf of SAP in his 21 March 2016 letter to Mr Creais of Bartier Perry that 'our client exchanged a contract for sale of the property known as Parklea Markets on 13 January 2016 for a sale price of $81.1 million plus GST and adjustments' was plainly and objectively false. 'The sense in which a representation would be understood by a reasonable person in the position of the representee is prima facie the sense relevant to the question whether the representation is false': Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68 (Krakowski) at 576-577 per Brennan, Deane, Gaudron and McHugh JJ. The representation so clearly stated that the contract price was $81.1 million on 13 January 2016 that it cannot be construed as a representation concerning only the price that it was intended that Parklea would be required to pay on completion. Although 'the sense in which the representor intended the representation to be understood is relevant to the question whether the representation was made fraudulently' (Krakowski at 577), Mr Dixon-Smith did not give any evidence that he intended the representation to have a different meaning than the sense in which it would be understood by a reasonable person. It is obvious that Mr Dixon-Smith was personally aware of the Occupation Condition in the Contract. As the representation was made by Mr Dixon-Smith knowing it to be false, or being recklessly indifferent as to its truth, the representation was fraudulent according to the statement of the elements of the tort of deceit in Derry v Peek (1889) 14 App Cas 337 at 374. [675] However, the statement made by Ms Hempel of Gilbert + Tobin in her email to Bartier Perry on 21 March 2016 was not fraudulent in the same manner, as it was a true statement of what was then intended by the parties to the Contract for Parklea to pay on completion. By omission, the email obscured critical information that Almona was entitled to know, but nonetheless the representation was not on its proper construction false. $81.1 million was at that time the amount that Parklea intended to pay on completion, subject to adjustments and GST. [676] Secondly, I consider that it was dishonest of SAP not to inform Almona of the terms of the Occupation Condition in sufficient time to permit Mr Constantine to vacate the Residence before completion, so that Almona could gain the benefit of the additional $4.25 million in purchase price. [677] This second basis for SAP's dishonesty must be judged in the context that SAP, as a mortgagee exercising a power of sale, had a duty to Almona as mortgagor to act in good faith to obtain the highest purchase price that was available from a sale process that was consistent with the somewhat limited content of the duty imposed upon the mortgagee. SAP had properly exercised its power of sale and achieved a price that was governed by the Occupation Condition. The source of that condition was the final expression of interest made by Dyldam." 1. Turning to the decision to accelerate settlement of the contract, the trial judge's reasoning as to the knowledge and intentions of both SAP and Parklea Corporation were as follows: "[679] Also relevant to the context in which the question of dishonesty must be determined, is the decision of PAG, and thus SAP, to accelerate the completion of the Contract. That, by itself, was not a breach of mortgagee's duty by SAP. Mr Dixon-Smith initially apparently appreciated that proper conduct might require that the Contract be varied, so that it could be completed on the basis that Mr Constantine would have a month after completion in which to give vacant possession of the Residence, in which case Parklea would be required to pay the additional purchase price of $4.25 million. Mr Dixon-Smith gave advice to PAG to that effect in his 15 March 2016 action plan. As mentioned above, the evidence does not disclose whether Mr Dixon-Smith, or anyone else on behalf of SAP, suggested this variation of the contract to Parklea. Nor does the evidence explain what happened in the meetings or telephone conversations between the parties to the Contract that led to them deciding to vary the Contract by omitting the Occupation Condition and creating the appearance that the price had always been $81.1 million. In the absence of any explanation to the contrary, it is proper for the Court to infer that, by some unknown process, SAP and Parklea addressed the consequences of the Occupation Condition, the fact that Almona and Mr Constantine had not apparently acted in a manner that would gain the higher price, the apparent ignorance of Almona of the terms of the Occupation Condition, and the potential jeopardy to the highly accelerated completion of the contract if Almona was informed of the Occupation Condition at the last moment. Although the precise terms of the agreement between SAP and Parklea are not disclosed by the evidence, I am satisfied that they must have mutually decided that it was in their collective interests to formally reduce the price to $81.1 million, and to deprive Almona of the opportunity to gain the additional $4.25 million. [680] On balance, I am satisfied that the conduct of SAP and Parklea in entering into the Second Deed of Variation, containing as it did terms that deleted the Occupation Condition, and thereby creating the appearance that the purchase price had always been $81.1 million, was conduct that assists the Court in drawing the conclusion that this aspect of SAP's conduct was dishonest. The replacement of the front page of the contract with a new page that suggested the price had always been $81.1 million, and the insertion of a page in the new special conditions that suggested that special condition 61 was 'Not Used', were clearly capable of concealing the fact of the reduction in the purchase price. Neither SAP nor Parklea gave any evidence that could constitute an innocent explanation for this conduct. It may be imagined, for example, that the variation to specify a single purchase price might simplify the process of establishing the correct amount of stamp duty, but it is not clear that the variation would provide any real advantage in this regard, as it should have been a simple matter to explain to what was then called the Office of State Revenue that the condition for the payment of the higher price had not been satisfied. As the parties to the Contract had the opportunity to give an innocent explanation, but did not do so, the Court should not find an innocent explanation based on speculation." 1. Having concluded that the "failure of SAP to inform Almona of the occupation condition in a timely manner was dishonest", [30] the judge returned to the question of whether Parklea was a party to SAP's dishonesty. He rejected the proposition that it was party to the statement by Mr Dixon-Smith, and continued: "[692] Parklea's position was different to that occupied by SAP. Parklea, as a purchaser under a Contract made by a mortgagee in exercise of its power of sale, did not owe any duty of good faith personally to Almona. However, Parklea must be taken to have known that the vendor, SAP, owed such a duty to Almona. Parklea was at all times represented by competent lawyers. Parklea knew that, by the terms of Dyldam's second expression of interest, and the fact that the Contract included the Occupation Condition, Almona's property was worth $85.35 million to Almona, subject only to Mr Constantine giving vacant possession of the Residence before completion. In that way, Parklea knew that, under the terms of the Contract, Almona had a proprietary right that was worth an additional $4.25 million to it, subject only to the satisfaction of the condition. Parklea had a self-interest in reducing the purchase price to $81.1 million, as that would save it $4.25 million, subject only to the inconvenience of taking the steps necessary to eject Mr Constantine. It may be that Parklea had genuinely valued the cost of having to eject Mr Constantine at $4.25 million. However, in my view, an honest approach to the application of the Occupation Condition would require that Almona be given the choice of whether to realise the additional $4.25 million in the price. Payment of the price of $81.1 million would be of advantage to Parklea provided its cost of ejecting Mr Constantine was less than $4.25 million. When the decision was made by SAP to accelerate the completion of the Contract, it must have been obvious, as soon as SAP raised the issue of the Occupation Condition, that it was probable that Mr Constantine would not vacate the Residence before completion. [693] As neither SAP nor Parklea gave evidence concerning the genesis of the Second Deed of Variation, in so far as it related to the Occupation Condition, or how the agreement was reached on that issue, the Court is not able to make precise findings on this subject. SAP may have suggested Mr Dixon-Smith's solution of varying the Contract to give Almona a month for Mr Constantine to vacate the Residence. If that happened, Parklea must have declined to agree with that variation. Alternatively, SAP may simply not have raised the fact that the acceleration of the date for completion would not in practical terms give Mr Constantine time to vacate the Residence. It is proper to infer, if this were the case, that the parties to the Contract must have addressed the practical difficulties involved in effecting an accelerated completion, if Almona were advised of the terms of the Occupation Condition. In the absence of evidence from Parklea, I would not infer that it had grounds for understanding, and did understand, that Almona had been told of the Occupation Condition, and had decided not to avail itself of the benefit of the higher price. The evidence does not establish when the discussions by which the agreement was made that led to the deletion of the Occupation Condition occurred. Mr Hall's email to Ms Hempel sent at 5:05 PM on 17 March 2016, which is set out above, simply referred to 'the discussions between the parties', which led Parklea to require the Second Deed of Variation. All in all, the inference is justified that Parklea was aware that Almona did not know of the terms of the Occupation Condition when it agreed to vary the Contract. Parklea must have been as aware as SAP of the capacity of the replacement of the first page of the Contract, and the deletion of the Occupation Condition in a way that would disguise the fact that it had ever existed, to mislead Almona. [694] In these circumstances, I find that Parklea's agreement to enter into the Second Deed of Variation containing the terms that it did as to the price payable under the Contract was dishonest. It involved conduct that knowingly deprived Almona of $4.25 million of the value of the Land, which was set by Parklea's own conduct in agreeing to that price. Parklea stood to gain $4.25 million, even though that gain must be offset by the inconvenience of obtaining vacant possession from Mr Constantine." 1. In addition to this reasoning, it is convenient to refer to the discussions which occurred with Madison Marcus, the solicitors for Parklea Corporation, on or about 17 March 2016 and referred to by the judge: "[223] At 11:31 AM on 17 March 2016, Madison Marcus sent a copy of the Gilbert + Tobin letter to Dyldam advising that Gilbert + Tobin had advised that the Investment Committee had approved the sale and that completion was due to take place on 1 April 2015 (which must have been a typographical error), together with the comment: 'We are working towards completion next Monday 21 March 2016'. [224] Mr Hall, of Madison Marcus, sent an email at 5:05 PM on 17 March 2016 to Ms Hempel of Gilbert + Tobin. The email referred to 'our recent telephone conversation', and confirmed being advised that the investment review committee had approved the sale and that it was contemplated that completion would take place on Monday 21 March 2016. The email then continued: To reflect the discussions between the parties we require a Deed of Variation of Contract to be entered into which reflects the following: a. Front page of Contract: reinstate 'input taxed because the sale is of eligible residential premises (sections 40-65, 40-75(2) and 195-1)' and insert after this 'refer to special condition 50'; b. Front page of the Contract: purchase price is to be amended to $81,100,000.00 and the balance of the purchase price is to be amended to $76,832,500.00; c. Clause 35.3 – Delete and insert a provision whereby the Vendor agrees to maintain insurances for the benefit of the Purchaser for a reasonable time following settlement; d. Clause 50.2(a) – the table: insertion in the column of component 'Residential premises', insertion to the column of description of component 'being the area with residential premises and reasonable curtilage referred to in special condition 51' and insertion to the column of proportion of purchase price (as advised by the Vendor's solicitor); e. Insertion of an additional special condition which deals with residential premises being input taxed; f. Clause 50.8(a): Deletion of the words 'as soon as possible after the date' and substitute with 'after the date of completion'. Insert the words 'as approved by the Vendor' after the words 'ruling'; g. Clause 50.8(b), (c) and (d): Delete; h. Clause 55.1" [sic] delete the words 'house and garden' and replace with 'residence and reasonable curtilage' wherever appearing. Delete the words 'as at the date of this contract' and substitute with 'as at the date of completion'; i. Clause 61 – Delete; and j. Clause 64.2(b) – Delete." It should be noted that the first email from Mr Hall of 17 March at 11:31am was copied to Mr Fayad and to Mr Qutami, who was also working at Madison Marcus on the transaction. Mr Fayad was the sole director of Parklea Corporation and therefore the person responsible for giving instructions. 1. Further, as Almona submitted in response to the cross-appeal, it is clear from the extensive survey of material by the trial judge [31] "that the communications between KWM, G+T and MM were constant, frequent and at all times well-informed. That is, whilst there are matters which arise in the communications which are unexplained due to a gap in the documentary record, it is a striking feature of the communications that the parties appear always to ad idem despite the rapid pace at which the events were moving." [32] 2. As the person responsible for the development of the site, as well as for the payment of the purchase price, it is entirely likely that Mr Fayad, who had lodged the bid which was accepted with its dual pricing component, was well aware of Mr Constantine's situation and therefore whether or not he had been informed of the occupation condition. That inference is given added weight by the failure of Parklea Corporation to call evidence to the contrary. 3. It may be noted that, in contrast to the next matter, the relevant steps involved in this conduct all occurred after the incorporation of Parklea Corporation. (c) Conclusion – cross-appeal 1. The cross-appeal by Parklea Corporation should be dismissed. Appellant's fourth claim of impropriety: involvement of Wesco (a) factual background 1. The fourth claim concerned the involvement of Mr Merhi. It is necessary to outline the factual background. As noted above, the sale of the land was organised by the receiver, which appointed Colliers International as the agent for the sale of the land. Colliers undertook a comprehensive exercise of canvassing interested parties and obtaining expressions of interest. The result was the obtaining of 14 expressions of interest, described by Colliers as "highly creditable". [33] The highest expression of interest was that of Wesco Capital Pty Ltd, a company owned and directed by Mr Tony Merhi, for an amount of $92 million. The bids were lodged on 30 October 2015. The first report by Colliers International to the receivers was dated 11 November 2015. Two days later, Colliers suggested that the six highest expressions of interest should be invited to participate in a second round, with time to allow for two weeks due diligence, with offers to be provided by 30 November 2015. [34] 2. On 12 November 2015 Mr Merhi incorporated two companies, Visy Group Holdings Pty Ltd and Visy Projects Pty Ltd. The shares in both were held by Wesco Ventures Pty Ltd on trust for Mr Merhi. 3. Colliers did not obtain final instructions until 27 November 2015. Evidence as to the activities over that fortnight is limited. The entries in the KWM fee invoice included the following entries for Mr Dixon-Smith: "10-Nov-2015 Meeting with Pacific Alliance … 11-Nov-2015 Meeting with Pacific Alliance re sale process … 13-Nov-2015 Review of funding arrangements required for buyers seeking funding on acquisition of assets, advice to PAG … 27-Nov-2015 meeting at Pacific Alliance with Woody, James, Miles, Phil [Carter] and Colliers". The last entry referred to a meeting between Mr Dixon-Smith, Mr Woodhull and Mr McMurdo (PAG), Messrs Miles and Carter (the receiver, PPB Advisory) and the sales agent, Colliers. 1. On 24 November 2015 the receiver wrote to Messrs Fayad and Jarrett at Dyldam Developments, inviting a resubmitted offer, with clarification as to "headline purchase price, due diligence period and settlement terms." An amount of $25,000 was offered towards due diligence costs if the offer was unsuccessful. It is not known if similar letters were sent to Wesco and other bidders, but that may be inferred. However, on 27 November at 5:34pm, Mr Carter emailed Colliers, referring to recent conversations and consultation with SAP, giving instructions to proceed with a second round of expressions of interest on the basis that the four top bidders would be advised that there would be a second round to be completed at midday on Friday 18 December 2015. A revised contract was to be circulated, although not expected until the week commencing 7 December. The receivers were to contribute "a maximum of $20k" to each party for due diligence costs. On the same day, a letter was sent to Dyldam (and presumably the other three nominated parties, being Wesco, Toplace and Billbergia). 2. By letter dated 14 December 2015, the closing date for resubmission of expressions of interest was brought back to 4pm on Wednesday, 16 December 2015. However, before that step was taken other events had occurred, which have been noted above. In brief, they included the meeting in Hong Kong on 11 December 2015 between Mr Dixon-Smith and representatives of PAG and Dyldam, suggesting that Dyldam was the preferred bidder. This inference is confirmed by the fact that on 14 December 2015, shortly after sending the emails updating the closing date for expressions of interest, Mr Meynell (Colliers) sent a copy to Mr Carter advising: "As discussed I will be flying up tomorrow morning and flying out of Hong Kong on Wednesday evening. I am having a meeting at Dyldam's office today at 2.30pm." No explanation appeared as to why the sales agent was flying to Hong Kong a day before the final bids were due to speak, it may be inferred, with Dyldam's funder PAG. 1. At 4:11pm on Monday 14 December, Mr Meynell emailed the receiver noting: "There were three main items of discussion in our today [sic]: • Caltex – First right (maybe worth addressing KFC as well) • Market Licences – Retail leases act, are there any options, when could they achieve VP • VP for Constantine – they understand the contract is no longer VP and Constantine is not on a lease but could there be a special condition following exchange that they could commence the process to obtain VP." It may be inferred that this report related to the meeting with Dyldam scheduled for 2.30pm. 1. In the final round of expressions of interest, Dyldam maintained its offer of $85,350,000, but provided the lower offer of $81.1 million on the basis that Mr Constantine remained in his premises. Billbergia reduced its offer from $83m to $80 million, subject to vacant possession, or $60m without vacant possession. Toplace did not engage in the second round. Significantly for present purposes, Wesco reduced its offer from $92 million to $79 million. 2. The second, and arguably critical, factor upon which the appellant relied was that when the contract was finalised, Visy Group Holdings owned 20% of Parklea Holdings 1 Unit Trust and Visy Projects owned 20% of Parklea Holdings 2 Unit Trust. The former holding was subject to the call option in favour of the PAG funding company, LBH VI (or VIII); the 20% holding in the second trust was not. Thus, depending upon whether the call option were to be exercised, Visy (and Mr Merhi beneficially) would have an interest in Parklea Corporation of between 20% and 4%. There was no evidence that either Visy company contributed any part of the funding for the sale contract or the development. Accordingly, the appellant submitted that, in the absence of any explanation from Parklea Corporation or its controllers, the Court should infer that the price paid by Wesco for an ownership interest in the development was the reduction of its bid so that it would not be successful. (b) available inferences 1. The reduction in the Wesco bid by the large amount of $13 million cleared the way for the Dyldam bid to be the highest offer. That in itself might not have required explanation, but for two further circumstances. The first was that steps were taken prior to the final offers which suggested confidence that Dyldam would be the successful offeree without varying its original bid. Although the evidence did not reveal the contents of the discussions in Hong Kong on 11 December 2015, some five days before final bids were due, the fact that there was a meeting between PAG and Dyldam representatives in Hong Kong, together with the heads of agreement which later emerged, demonstrates a basis for inferring that those parties believed Dyldam would succeed. Further, for the sales agent to travel to Hong Kong, after meeting with Dyldam in Sydney, a day before the final bids were due provides support for that inference. 2. No doubt there may have been other explanations for the lowering of the Wesco bid, but taken in combination with its interest in the final purchase arrangement, the inference that the bid was lowered so as to allow Dyldam's offer to succeed was available. For example, an alternative explanation may have been that Mr Merhi did not have the finance available to complete at $92 million, but that was an explanation which could have been demonstrated by evidence, had the respondents sought to do so. Mr Merhi, through his ownership interest in Parklea Corporation, was squarely in their camp. No such evidence was called. 3. It was not shown that $81 million was not fair value for the land, the valuations obtained by the receiver having varied from $48 million to $115 million. If there were an offer of $92 million available, then the price accepted was not the best price reasonably available to the mortgagee. 4. There were further factors which supported the inference that the sale process did not result in a truly independent bargain, in the sense considered by Aickin J in Bangadilly Pastoral. Thus, although the corporate identities of the purchaser and the mortgagee were separate, and the primary ownership interest in the purchaser was a third party, Dyldam, nevertheless both mortgagee and purchaser were subject to financial control by the one entity, PAG. PAG therefore had the power to control the sale process. It exercised that control, first, by including in the contract for sale a requirement that the sale be approved by its investment committee, and thus ultimately controlled the terms on which the sale would take place. Further, it is clear that as funder it was closely involved with the structuring of the successful bid. Mr Dixon-Smith noted in his email to Mr Qutami of Madison Marcus of 23 December 2015: "As you know, we act for Pacific Alliance in connection with the proposed funding of Dyldam's acquisition of Parklea Markets, as discussed in our recent meetings on this issue. For ease of reference I have prepared the below diagram which depicts the proposed 'Diamond Entity Structure' (based on a total funding of $90m, with $51m from the senior debt facility) discussed at those meetings." 1. It is true that there was no paper trail revealing how the Visy companies came to be participants in the ownership of Parklea Corporation. It is also true that no lawyer representing Mr Merhi or the Visy companies appears to have participated in the lengthy process of settling contractual documentation in the two months from 13 January 2016 until 21 March 2016. On the other hand, the resulting ownership structure cannot have been created without discussion between the affected parties. Few notes were taken (or retained) setting out the matters discussed at various meetings; a number of emails exchanged between solicitors for the respective parties in the period immediately following 13 January 2016 were redacted, primarily by Parklea Corporation. 2. There is, taking the circumstantial evidence as a whole, a sufficient case to establish, in the absence of evidence to the contrary, that the mortgagee failed to obtain the best bargain available, both by reference to the $4.25 million option based on vacant possession being abandoned and because Wesco did not maintain its position as the highest bidder. (c) challenge to findings of trial judge 1. The trial judge did not reach that conclusion with respect to the involvement of Wesco. The reasoning by which he rejected that conclusion was the subject of a number of grounds of appeal. However, the thrust of the appellant's case lay, not in what the trial judge affirmatively found, but in the finding which was not made. Thus, the complaints about the reasoning of the trial judge were complaints of omission rather than commission. Nevertheless, it is appropriate to explain those aspects of the grounds of appeal which should be accepted. (i) appellant's "wider fraud" case – grounds 1 and 2 1. Almona contended that the primary error made by the trial judge lay in failing to consider the conduct of the respondents "holistically, as an overall pattern of conduct". [35] The appellant asserted in ground 2 that, "from at least 10 December 2015, the evidence." [36] That plan was said to be reflected in Mr Dixon-Smith's "action plan", formulated in March 2016 when it appeared possible that Mr Constantine might raise the necessary funds to pay out the mortgage. This was the thrust of ground 3. 2. With respect, these criticisms cannot be accepted. First, there was no evidence to support the view that PAG intended to purchase the land, directly or indirectly, prior to 10 December 2015. There was passing reference to PAG and Dyldam being involved in other joint ventures, but no evidence that they had an established relationship prior to 30 October 2015. Although, in developing the transaction documents in March 2016, Mr Dixon-Smith referred to a precedent involving a development at Wolli Creek, there was no evidence as to when that development was undertaken, nor as to the structure of the venture. Further, there was no evidence that the steps taken by the receiver and its sales agent, Colliers International, were part of some preconceived plan. Rather, what may be inferred from the evidence is that when Dyldam emerged as a serious contender in October 2015, either Dyldam sought out PAG as a financier, or PAG developed a plan which resulted in the heads of agreement. 3. Secondly, the evidence did not demonstrate that the opportunity for Almona to receive the higher price offered by Dyldam would be subverted arose until a matter of days before settlement, when the second deed of variation was prepared. It will be recalled that when, on 15 March 2016, Mr Dixon-Smith developed his "action plan" to hasten settlement, he envisaged that the vendor would be given until 17 April 2016 to obtain vacant possession, "giving a month for Con to vacate after settlement." The subversion of the occupation condition may well be viewed as a fraud on Almona, but it was separate from the arrangements made in the week prior to the final offers lodged on 16 December 2015. 4. Thirdly, although his personal motivation was to ensure that PAG's business arrangements were effected, if those arrangements were not in themselves unlawful and if the process proposed were not unlawful, there was nothing sinister in the action plan, nor did it demonstrate any form of fraud or breach of SAP's obligations as mortgagee exercising its power of sale. 5. There was one aspect of the action plan which might, if adopted, have demonstrated a lack of independent process underlying the sale, namely the proposal that the settlement be effected on the basis of "vendor funding", that is, by the mortgagee in possession funding the purchaser for the purpose of settling the transaction. However, it is not necessary to pursue the significance of that element of the plan, as it was not adopted by PAG. Nor indeed was the highly expedited settlement process proposed by Mr Dixon-Smith adopted; settlement did not in fact take place until the week after his proposal, rather than two days later. The extended time appears to have allowed PAG to put in place the appropriate financial arrangements for Parklea Corporation to settle the purchase with cash. 6. Finally, for the reasons set out above, Almona's refinancing proposal, whilst it provided the incentive to settle the contract hastily, did not itself constitute a basis for alleging a breach of the mortgagee's duty to the mortgagor, if for no other reason than that it required the suspension and possible abandonment of the existing contract of sale before the proposal itself became unconditional. 7. For these reasons, grounds 3, 4 and 10, should be rejected. (ii) Inference of fraud in withdrawal of Wesco bid 1. The remaining question is whether the appellant's case with respect to the Wesco bid should be accepted. As the primary judge declined to draw an inference of fraud in that regard it is necessary to examine the underlying reasoning for that conclusion. 2. In recounting the second round expressions of interest, the judge noted that Wesco's price offer had been reduced by $13 million. He also noted that Toplace, which had originally proposed a price of $84.25 million did not submit an expression of interest in the second round. The analysis concluded as follows: "[106] Almona sought to make a claim that Wesco's $79,000,000 offer was a result of the alleged collusion between SAP, Dyldam and Mr Merhi on behalf of Wesco. It may be observed that, if there had been the collusion alleged, Wesco would have been much better served by not submitting any second round expression of interest, in the same way that Toplace did not do so. Making an offer $13,000,000 less than the original offer only served to invite suspicion. [107] In an email dated 17 December 2015, Brett Schofield of PPB Advisory sent a summary of the second round expressions of interest to Gilbert + Tobin, with the instruction that the receivers would be proceeding with the offer from Dyldam. The email included an instruction that the 'contract will be signed as MIP', which the evidence establishes meant mortgagee in possession. There is a statement that 'PAG requires exchange early next week'." 1. It was no doubt true that the reduction of $13 million "only served to invite suspicion"; however the difference between the Wesco offer and the failure of Toplace to make an offer was that Wesco ended up with a 20% interest in the successful purchaser, which was the critical element in Almona's case. 2. The trial judge was concerned at the inadequacy of the pleading in relation to the Wesco transaction. He noted that the "second statement of further particulars", served on 6 March 2019, had failed to allege a causal connection (collusion) between the reduction of the offer and the negotiations between SAP, PAG and Dyldam. [37] The particulars were as follows: "1. By reason of commercial arrangements documented either in whole or in part in the Loan Note Subscription Agreement (LNSA), the Parklea Markets Heads of Agreement (HOA) and the Call Option Deed (COD) dated 22 March 2016, Dyldam through its nominees (including [Parklea Corporation], Quatro 88 Pty Ltd, Collrea Pty Ltd) and the PAG Group through its nominees (including Lord Business Holdings VI Limited and Lord Business Holdings VIII Limited) and companies associated with Mr Tony Merhi (namely Visy Group Holdings Pty Ltd, Visy Projects Pty Ltd, Wesco Ventures Pty Ltd, Wesco Capital Pty Ltd and Praise Group Pty Ltd) are involved in a joint venture to develop and purchase the Land through their interests in [Parklea Corporation] or its shareholders. 2. Those interests are not apparent to third parties who do not have access to the LNSA, POA and COD. 3. The plaintiff first obtained access to the COD and the POA when documents were produced following contests about the Notices to Produce on the evening of Thursday 28 February 2019. 4. The sale by [SAP] to [Parklea Corporation] was not an arm's length transaction. 5. Mr Tony Merhi had through another company controlled by him, Wesco Capital Pty Ltd (Wesco) been the highest first round bidder in the expression of interest process for the sale of the Land conducted by the Receivers of [Almona]. 6. At or about the time of the closing of the second round of expressions of interest, Wesco reduced its offer from $92,000,000 to $79,000,000 thereby placing [Parklea Corporation] in the position that it was the highest bidder in the second round expression of interest process. 7. At or about that time, arrangements of the nature that came to be reflected in the LNSA, HOA and COD were discussed or negotiated by representatives of the PAG, Dyldam and companies associated with Mr Merhi." 1. As the judge noted, and as SAP submitted in the course of the appeal, the particulars did not allege that SAP, PAG or Dyldam engaged in bid-rigging. However, the defendants at the trial did not object to the reliance on the further statement of particulars, nor did the trial judge ultimately decline to consider what was in substance an allegation that Wesco had reduced its bid in exchange for a share of the ownership of the purchaser. But, in considering what he described as "the course of the pleadings", [38] the judge concluded that "Almona should not be permitted to introduce this new claim of fraud involving collusion between SAP, Dyldam and Mr Merhi's companies." [39] 2. Nevertheless, the judge returned to the issue in dealing with the closing submissions, noting SAP's submission that "Almona now alleges that the alleged fraud goes back to the point in time of entering into the Sale Contract by alleging that there was collusion involving SAP/PAG that resulted in the Wesco bid being lowered in the second round of the EOI, thereby guaranteeing that Dyldam/Parklea Corp was selected as the highest bidder." [40] The judge accepted SAP's submission. [41] 3. Putting the Wesco matter to one side, the judge addressed the contention that SAP and PAG had otherwise acted in breach of SAP's obligation to Almona. He held that the "accelerated completion of the contract" was undertaken "to avoid being caught up in legal proceedings threatened by Almona." [42] That conclusion, for reasons set out above, cannot in my view be impeached. However, the judge continued: "[649] In the light of this narrative, which I have found was in substance the real one, there is no basis for any finding by the Court that SAP acted fraudulently or dishonestly, or that Parklea was a party to that fraud or dishonesty, except possibly in respect of the two matters that I will identify shortly. [650] Nor, in my view, is there any basis for Almona's submission that the objective facts gave rise to a forensic imperative that SAP and Parklea call evidence from witnesses to avert the Court drawing inferences that either defendant had acted dishonestly." 1. The first of the "two matters" was the alleged fraud based on the joint venture with Mr Merhi. In short, the trial judge continued by addressing the claim which he had earlier found was not available to Almona. As explained shortly, he rejected it. The second of the "two matters" was the finding of fraud based on non-disclosure of the occupation condition, which he upheld and which has already been addressed. 2. The reasons for rejecting the inference of fraud based on the change in the Wesco bid were in effect threefold. First, the judge held that the reduction in Wesco's initial bid was plausible for innocent reasons, namely (i) that the initial bid was an "outlier", [43] and (ii) that Wesco did not engage with Colliers in relation to the process. [44] Secondly, he relied on (i) the absence of any suggestion of collusion with other final round bidders, [45] (ii) the absence of reference to Wesco or Visy in the exchanges between Mr Dixon-Smith and Mr Qutami on 24 December 2015, [46] and (iii) the fact that "there was no assurance that Dyldam's second round expression of interest would be accepted". [47] Thirdly, he noted that a finding of bid-rigging is sufficiently serious to require clear evidence. 3. In response it should be said in relation to the first set of arguments that although it was the highest of the bids received in the first round of offers, Wesco's bid was below the highest valuation which the receivers had obtained, and was only $2 million above Colliers' estimated range of value. In relation to the second point, it appears that Mr Merhi was sufficiently serious about his bid to have incorporated two companies between the first round and the final offers. Those were the companies which ultimately obtained ownership interests in the purchaser, through the unit trust arrangement. 4. As to the second set of arguments, it is true that there was no suggestion of collusion with other bidders, but none ended up with a share in the ownership of Parklea Corporation. It may also be accepted that Mr Dixon-Smith and Mr Qutami did not discuss Wesco or Visy on 24 December 2015, but the fact remains that the Visy companies appeared in the ownership structure in March 2016. The available inference is that the principals must have known how that arose, even if the lawyers did not. As to the third point, Mr Dixon-Smith acted with confidence that Dyldam would be successful, prior to 16 December 2015. In fact, PAG, through either SAP or its investment committee, could have ensured that result. 5. Were it not for the pleading point, the circumstances invited an explanation from Dyldam or PAG. The trial judge considered that the late (and inadequate) pleading precluded the drawing of any adverse inference from the absence of explanation. Further, he found on the evidence that there had been an established link between Mr Merhi and Mr Constantine which Mr Constantine and Almona had not been able or willing to explain. [48] He therefore concluded that it may well have been open to Almona to call further evidence from Mr Merhi, although that would, on Almona's case, have involved Mr Merhi admitting his involvement in bid-rigging. 6. There was a further objection that the Visy companies were not party to the proceedings and, accordingly, not in a position to defend themselves against such allegations, in which they must have been inculpated. However, if the parties to the bid-rigging were Mr Fayad and Mr Merhi, Mr Fayad as the sole director of Parklea Corporation was available to give evidence had he wished to. 7. After noting that there was "no basis in the evidence" to find that the receiver did not obtain the best market price available, the trial judge continued: "[670] Almona accepted that conclusion, save for the allegation made late in the hearing based upon the fact that the joint venture negotiations had taken place between PAG and Dyldam, and that Wesco reduced its second round bid by $13,000,000, after the Visy companies that ultimately acquired interests in Parklea had been incorporated. In my view, given the seriousness of a finding of fraud, these coincidences were not, in the circumstances in which the allegation was raised, sufficient to impose an onus on SAP and Parklea to dispel an inference that PAG and Dyldam had caused Wesco to reduce its bid. In any event, collusion is different to coincidence, and I do not consider that Almona even belatedly alleged collusion. [671] This conclusion does not ignore the fact that Wesco reduced its expression of interest by $13,000,000 and that it has ultimately been discovered that Mr Merhi, through his Visy companies, acquired a 20% interest in Parklea at the time the Contract was completed. The acquisition of the 20% interest must have followed an agreement between representatives of Dyldam and Mr Merhi. However, the case that Almona pleaded was that SAP had acted fraudulently and Parklea was aware of and was a party to that fraud. As there is simply no evidence that any representative of PAG was involved in the reduction of Wesco's expression of interest, or knew or even had reason to suspect that Dyldam had agreed to share its interest with Mr Merhi, it would not be proper for the Court to speculate and to treat a ground for suspicion as a proper basis for a finding of fraud by PAG on behalf of SAP, even in the absence of an explanation by SAP." 1. The last sentence in [670] suggests that coincidence was established, but not collusion, and then states that Almona did not allege collusion. The earlier finding was that Almona had alleged it in closing submissions, but had not pleaded it. The precise conclusion at [670] is unclear but must have involved reliance on the lack of an express pleading. 2. The further reasoning at [671] is also puzzling. The suggestion of an agreement between Dyldam and Mr Merhi without the involvement of PAG is inconsistent with the direct evidence in the documents. It is of course possible that an arrangement was made between Mr Merhi and Mr Fayad, but it is implausible that PAG had no knowledge of it. Given that PAG owned and controlled SAP, the proper inference should have been that SAP's knowledge with respect to the first round offers and offerors, and the identity of the purchaser was that of PAG. Further, the effect of the call option, if exercised, would have been to deprive Visy Group Holdings of a 20% interest in Parklea Holdings 1 Unit Trust and leave it with a 4% interest in the joint venture. It is to be recalled that the ownership structure document dated 8 March 2016 bore the insignias of both KWM and Madison Marcus. Thus, the inference that the acquisition of the 20% interest must have followed an agreement between Dyldam and Mr Merhi, whilst correct, ignores the fact that PAG and SAP probably knew of the arrangement and, in the case of PAG, consented to it. 3. Accordingly, the documentary evidence gave rise to a level of suspicion as to whether the mortgagee obtained the best available price which called for an answer. The appellant should succeed unless its failure to plead collusion, or seek to articulate such a case until final submissions would render reliance on such an inference, in the absence of explanation, unfair to the respondents. 4. Before resolving that issue, it is convenient to turn to the submissions on the appeal. (d) submissions on appeal 1. In order to succeed on the appeal with respect to this aspect of its claim, Almona needed to demonstrate error in the finding that it should not be entitled to allege fraud of a kind not clearly pleaded. Its response was that it had "encountered significant resistance from the defendants" in obtaining the documentation upon which this aspect of the claim was based. It stated that numerous notices to produce had been issued, but had been challenged either on the basis of their formulation or by claims for privilege. Its pleadings, it asserted, were reformulated promptly when relevant material was produced, and, in particular, no objection was taken by the defendants to the three statements of particulars filed and served on 19 February, 1 March and 6 March 2019. [49] An example of the late production of an essential document was the release of Mr Dixon-Smith's email of 17 March 2016 setting out the "action plan", following the rejection of a privilege claim only on 17 May 2019, that is, between the two tranches of the trial which occurred in March and August 2019. 2. This example did not, however, address the problem raised by the late pleading of the fraud claim. There was nothing in the email from Mr Dixon-Smith of 15 March 2019 which supported that claim. Indeed, the reference to it reveals the true thrust of the case as run at trial (and to which the action plan was highly material), namely that SAP and Parklea Corporation, under instruction from PAG, had disregarded the interests of the mortgagor by undermining or thwarting attempts by Mr Constantine to make arrangements to pay back the loan to SAP and thus clear Almona of that debt and retain the property. On the other hand, the critical elements of the case against Dyldam and Mr Merhi lay in the ownership structure of Parklea Corporation. That was documented in annexure A to the Parklea Markets – Heads of Agreement, a document headed "Structure of the Landowner's corporate group". However, as late as 20 March 2016, the draft of that document did not identify the unitholders of the two unit trusts. Nor, indeed, did the annexure to the executed heads of agreement signed on 22 March 2016. 3. The second place in which the document was to be found was as schedule 5 to the loan note subscription agreement, which had, since a draft of 8 March 2016, identified the unitholders of the two unit trusts as including 80% of each held by the trustee of Mr Fayad's family trust No 2 and, as to 20% of each, by Visy Group Holdings and Visy Projects as trustee for two Visy trusts. In particular, the document appeared in that form in the final version of the loan note subscription agreement. There was no indication before this Court that there had been undue delay in obtaining copies of the final executed transaction documents which appeared in the plaintiff's tender volume (other than the call option). Similarly, there was no suggestion that there had been difficulty in obtaining access to the expressions of interest, both at the first round and in the final offers, which were contained in the tender bundle provided by Parklea Corporation. Accordingly, to the extent the pleadings were inadequate, the submission that the difficulty arose from the late production of relevant material by either Parklea Corporation or SAP appears to be without foundation. 4. The second issue concerns the adequacy of the pleading. The trial judge, as noted above, considered there should have been an express pleading of fraudulent manipulation of the bidding process. It is necessary, therefore, to turn to the "Plaintiff's second statement of further particulars of fraud, breach of duty and unconscionability" filed and served on 6 March 2019 and set out above at [235]. First, it should be noted that there is no allegation of late access to the LNSA. Secondly, the generality of the statement that the sale was not "an arm's length transaction" had been raised in other parts of the statement of claim, and turned on the funding of the purchase by Parklea Corporation. For present purposes, the relevant detail came in clauses 5, 6 and 7. Clauses 5 and 6 were purely factual and are not in dispute. The closest that the pleading came to an allegation of collusion was in clause 7, which alleged that at about the time Wesco reduced its second round bid, "arrangements of the nature that came to be reflected in the LNSA, HOA and COD were discussed or negotiated by representatives of the PAG, Dyldam and companies associated with Mr Merhi." As noted, the ownership structure of the purchaser was reflected in Sch 5 to the LNSA and Annexure A to the HoA. 5. There is no doubt that the trial judge was correct to conclude that Almona, deliberately or otherwise, had eschewed an express pleading of bid-rigging involving the representatives of PAG, Dyldam and Mr Merhi's companies. The appellant submitted, however, that what had been pleaded was sufficient to place an onus on the mortgagee and Parklea Corporation to satisfy the Court that the transaction was an arm's length transaction and that it did not involve an agreement between Dyldam and Mr Merhi as a result of which he lowered his bid to an unsuccessful level, but, in exchange, obtained a 20% interest (possibly reducible to 4% if the call option were exercised) in exchange. 6. Although, in principle, there is an obligation on the mortgagee to satisfy the Court that the mortgagor's interests have been properly pursued if an issue is raised in that regard, there are two potential limitations to that principle which are presently relevant. (That is not to say that there will not be a range of issues relevant to the transfer of the onus and the weight of the burden cast on the mortgagee, as discussed in some detail by the trial judge at [455]-[483].) 7. The first issue of present relevance is the circumstance which may trigger the shifting of the onus. In Bangadilly Pastoral, "a case where the same two people are directing the activities of two companies, one the vendor and the other the purchaser, so the vendor knows what is in the mind of the purchaser and vice versa", [50] it was conceded by the defendants that the connection between the vendor and associated company "was such that the onus lay on the purchaser to prove the bona fides of the sale." [51] In the present case, the documents proved a sufficient similarity and circumstances to warrant the same conclusion as to the onus of proof. However, the level of scrutiny, and hence the burden of rebuttal imposed on the mortgagee, will depend on the particular circumstances of the case. 8. Secondly, the scope of the burden of rebuttal will depend upon the nature of the circumstances raised by the mortgagor. Thus, a mortgagee will not be required to call evidence to rebut a claim of collusive bidding unless it can be seen, from the pleadings and the material relied upon by the mortgagor, that such a claim arises. 9. In the present case, there was sufficient material to raise an issue as to the independence of the process. Thus, it could be inferred that, at least from 10 December 2015, PAG was negotiating an agreement with the prospective purchaser, Dyldam Developments. A principal of PAG, Mr Jon Lewis, was the authorised signatory for SAP and for the Lord companies, one of which funded the purchase and was the grantee of the call option over 80% of the unit holdings of the majority shareholder of Parklea Corporation. Through its receiver, SAP was aware of the progress of the sale of the property, information which, it could be inferred, was known to Mr Lewis and hence to the entities in PAG involved in funding the purchase. Although the added level of complexity created by the incorporation of Parklea Corporation and the ownership through unit trusts, which were subject to the call option, differed from the circumstances in Bangadilly Pastoral, the situation was analogous. However, subject to the clear breach of the mortgagee's obligation to the mortgagor created by the acceptance and then removal of the occupation condition in the contract of sale, there was no reason to think that the price obtained by SAP was other than a full and fair price, reflecting the market value of the property. At least that was so, unless there was a collusive arrangement by which a higher bidder lowered its bid in exchange for a share in the ownership of the property. 10. The reduction of Wesco's bid in the course of the process, leaving it an unsuccessful bidder, by itself gave rise to no inference of collusive dealing. It was only the appearance of Wesco Group entities as minority unit holders in the owners of Parklea Corporation that gave rise to such a suspicion. However, that suspicion by itself was insufficient to warrant a finding of collusive bidding, unless the failure of either SAP or Parklea Corporation to call evidence to rebut the suspicion could be relied upon to support the necessary inference. There are two reasons to reject the appellant's claim in that respect. 11. First, as noted above, collusion was not clearly pleaded. Secondly, on the evidence, it was not clear that a relevant inference could be drawn in any event. Although it must be inferred that at some stage PAG (and therefore SAP) had knowledge that the Wesco Group was to have a minority ownership in Parklea Corporation, there was no evidence to suggest that knowledge arose before 13 January 2016, a month after the final bids were made. If there were an inference of collusive conduct it must have arisen prior to the final bids on 16 December 2015. An arrangement at that stage must have been made between Dyldam and Wesco, through Messrs Fayad and Merhi. However, even if that were so, it did not of itself infect the sale process undertaken by the mortgagee. 12. The foregoing discussion illustrates the difficulties which arise from the failure of the appellant to plead precisely what inference of collusive dealing it sought to allege. In the absence of an allegation of sufficient precision, no inference can be drawn from the failure of SAP to respond. Accordingly, the judge was correct to dismiss that aspect of the appellant's case. 13. Absent reliance on the removal of Wesco as the highest bidder, and putting to one side the removal of the occupation condition, there was no basis for concluding that the lack of independence in the sale process resulted in a sale at under value. That is because the sale process itself was undertaken by an independent sales agent, Colliers International, which engaged in a process of soliciting bids which tested the market and in fact obtained a significant level of responses. There was no evidence to doubt the good faith or competence of the marketing campaign. 14. For these reasons, the appeal should be dismissed. Other matters 1. It follows that it is unnecessary to consider whether, if there were a finding that the mortgagee failed to exercise its power of sale having proper regard to the interests of the mortgagor, the sale should be set aside or whether the appropriate relief would be an order for payment of compensation. However, if such a matter required consideration two difficulties would immediately face the appellant. The primary relief sought was the setting aside of the transaction. To obtain such relief it would be necessary to consider whether it would be appropriate to set aside the transaction, some seven years after the breach of the loan agreement and five years after the sale of the property was completed. Although Mr Constantine originally sought to prevent the settlement of the sale contract, that application was withdrawn. It is true that, at that time, he had no knowledge of the bases upon which his challenge was ultimately able to be pursued in the name of Almona (after retirement of the receiver), but the fact remains that it would, in practical terms, be difficult to reinstate the loan agreement, running at penalty interest rates, over the last five years. 2. Further, there are the legal issues relating to the mortgages securing the current funding of Parklea Corporation. They are held by PT Ltd, as trustee of the securities. There was no suggestion, as the trial judge noted, that PT was infected by any misconduct of SAP or Parklea Corporation. Nevertheless, the indefeasibility of its interests depended upon it being a bona fide holder of the mortgages, having provided valuable consideration. Whether it had provided valuable consideration, or merely fees for services in administering the securities was hotly contested. Those issues do not need to be resolved, but PT was properly joined as a party entitled to resist the claims of Almona to unwind the current ownership arrangements. What steps if any to pursue the development of the land and thus what costs may have been incurred, are not revealed on the evidence. 3. On the other hand, if the appropriate relief were a payment calculated by reference to the failure to permit an unimpeded testing of the market, on the basis of the available evidence, it is not possible to know what final bid Wesco would have made, assuming it would have exceeded the higher of the two bids made by Dyldam, namely $85.35 million. 4. In the circumstances, these issues do not need to be resolved. Challenges by Almona and SAP to costs order 1. The principal judgment was delivered by the trial judge on 20 December 2019. It was necessary for the parties to consider what orders should be made in the light of that judgment. However, the matter did not come back before the Court until 9 April 2020, when a significant number of further issues were addressed, leading to a further judgment on 12 May 2020. [52] In the course of that judgment the trial judge noted that the parties had "proposed fundamentally different costs orders". [53] The final order was that, as between Almona and SAP, each party should bear its own costs. [54] 2. As was noted in the course of the appeal, there was a degree of awkwardness in Almona resisting the application for leave to appeal by SAP, given that it had raised as a ground of its appeal, the ruling on costs which it said was manifestly unfair to it. 3. In the event, neither party addressed in relation to the question of costs, each relying on its written submissions. The different approaches adopted by the parties, however, had been addressed in great detail by the trial judge. Almona's position was that, having been successful on a claim of fraud and unconscionable conduct and on a claim of misleading or deceptive conduct against SAP, and obtained a substantial judgment in its favour, although it had not obtained the other relief it had sought, the offending party should not be exempt from paying costs. Almona accepted the finding of the trial judge that the case did not lend itself to apportionment between issues, but submitted that the consequence of non-apportionment should have been that costs followed the event, and it had been the successful party. 4. SAP contended otherwise as to apportionment. It noted findings by the trial judge that the focus of Almona's claim had been to recover title to the land, as to which it failed. [55] The judge had, correctly, rejected the proposition that findings in Almona's favour with respect to the occupation condition should have resulted in any form of relief beyond the claim for damages. Further, although the amount awarded (with interest) exceeded $5 million, that was a small proportion of the total value of the land and did not involve any commercial disruption of the kind which would have ensued had an order been made by which Almona recovered title to the land. 5. The trial judge noted that Almona's costs amounted to almost one-half of the judgment it obtained; the total costs of all parties exceeded Almona's judgment. Having noted the ramifications of the various orders sought, the judge noted that the Court was "required to determine the costs orders that should be made in these proceedings, when those costs in aggregate involve amounts comparable to the amount of the judgment in the proceedings, but to do so on a relatively rudimentary basis." [56] The judge then set out, in terms which are not challenged, the relevant legal principles to be applied. [57] Although he proceeded to analyse the pleadings and particulars, and made some observations as to the conduct of the proceedings, he introduced that analysis with the following observation: "[163] In reality, the issue of what is fair and just between the parties in a particular case concerning the costs orders that should be made is a collateral issue to the process involved in the determination by the Court of the issues that arise in the proceedings. Depending upon the nature of the issues, and the manner in which the case is prepared by the parties and heard and determined by the Court, the facts that are relevant to the determination of the costs orders that are fair and just may be more or less obvious to the judge who has heard the case. In many cases, particularly those with factual complexity and a multiplicity of issues, the judge may actually have little knowledge of the manner in which the parties have incurred costs, and how the costs are related to particular issues." 1. Although SAP submitted that the failure to assess the extent to which Almona had been unsuccessful was "unreasonable" conduct on the part of the trial judge, that proposition is not self-evidently correct. While different orders may reasonably have been available, the result reached by the trial judge was by no means unreasonable. In the absence of any issue of principle, the appropriate course is to dismiss ground 18 of Almona's appeal, challenging the costs order at trial, and refuse leave to SAP to agitate the same matter by way of a cross-appeal. Orders 1. For these reasons, the Court should make the following orders: 1. Dismiss the further amended notice of appeal of Almona Pty Ltd. 2. Order that the appellant pay the costs of each respondent to the appeal. 3. Dismiss the cross-appeal by Parklea Corporation Pty Ltd. 4. Order that Parklea Corporation pay the costs of Almona Pty Ltd of the cross-appeal. 5. Dismiss the summons filed by Secured Asset Portfolio III Ltd (in liq) seeking leave to cross-appeal from the costs order made by the trial judge. 6. Order that Secured Asset Portfolio III pay Almona's costs of the summons seeking leave to cross-appeal. 1. WHITE JA: The facts giving rise to this appeal are described in the reasons for judgment of Basten JA, as supplemented in the reasons of Bathurst CJ. Subject to one unimportant qualification (at [289] below) I agree with Basten JA's conclusions as to the inferences that can be drawn from the documents tendered at trial that were obtained by compulsory process, in the light of the respondent's choosing not to adduce evidence. 2. I conclude that SAP did not exercise its power of sale for the purpose of obtaining repayment of the secured debt but for the purpose of enabling its associate, LBH VIII (another subsidiary of PAG), to acquire an 80% economic interest in Parklea through its option to acquire the shares and rights which Holding Trust 1 held in Parklea. The sale to Parklea was not by way of independent bargain. For each of these reasons Almona would have been entitled to set aside the sale had the facts been known before the sale was completed and Parklea became registered as the new registered proprietor. The fact that it was accepted that the sale price of $85.35 million was a fair market price does not mean that SAP exercised its power of sale in good faith. 3. I also conclude that Parklea was registered by fraud and its title is defeasible. 4. Almona did not allege that the mortgage to PT Limited ("PT") was registered by fraud. Instead Almona submitted that it was entitled to a re-transfer of the land from Parklea Corporation free of PT's mortgage by reason of s 118(1)(d)(ii) of the Real Property Act 1900 (NSW). I reject that submission. Consequently, irrespective of other objections there may be to Almona's taking a re-transfer of the land (which have not been determined), given the amount now secured by PT's mortgage, Almona's remedy appears to be confined to a claim for equitable compensation (or arguably damages) on the taking of accounts. 5. I would invite the parties to provide written submissions as to what orders should be made in accordance with these reasons. Facts 1. The essential facts can be distilled as follows by reference to Basten JA's analysis. 2. The mortgagee, SAP, was a special purpose vehicle that was a member of the Pacific Alliance Group (PAG). Particulars provided by Almona of the Pacific Alliance Group by way of a chart reveals a bewildering web of companies incorporated in Hong Kong, Australia, the British Virgin Island and the Cayman Islands. Sitting near the top of the chart is a Hong Kong Company, Pacific Alliance Group Limited. After Almona defaulted under its mortgage to SAP, SAP appointed a receiver and manager. The receiver appointed Colliers International to act as selling agent. 3. Valuations of the Parklea Markets ranged from $45 million to $115 million with lower valuations assuming a continuation of existing uses rather than a redevelopment. Colliers embarked on a program of first seeking expressions of interest from identified companies that might be interested in acquiring the mortgaged property. Twelve expressions of interest were lodged, ranging from $40 million to $92 million. Wesco Capital lodged an expression of interest in the sum of $92 million and Dyldam lodged an expression of interest in the sum of $85,350,000. Colliers suggested that the top six parties be invited to lodge a second expression of interest. 4. On the second round of expressions of interest, Dyldam lodged the highest bid, again of $85.35 million, subject to vacant possession, or $81.1 million if Mr Constantine remained in occupation. 5. There is no criticism of the marketing of the property for sale. 6. Parklea was incorporated as a special purpose vehicle to acquire the mortgaged property. The price obtained by SAP was a fair price reflecting the market value of the property, unless it should be inferred that Wesco had lowered its bid in exchange for a share in the ownership of the property. 7. I return to that question below at [333] – [336]. 8. Leaving aside for the present possible bid-rigging by collusive arrangements between Dyldam and Wesco, there would be no reason to impugn the sale to Parklea on the basis of the price of $85.35 million. 9. The contract of sale between SAP and Parklea was entered into on 13 January 2016. It was subject to a condition (cl 63) that completion was conditional on SAP notifying Parklea that the "Investment Committee" had approved the sale of the property by 14 March 2016. The "Investment Committee" was defined as: "Investment Committee means the investment committee established by the Pacific Alliance Group of companies ("PAG Group") responsible for approvals for significant transactions undertaken by PAG Group members and investment funds managed by PAG Group members." 1. A PAG company (LBH VI or LBH VIII) provided $79.1 million of the $80.1 million payable on settlement of the purchase. The fact that LBH VI was identified as the financier in the Loan Note Subscription Agreement suggests that it provided the finance. The call option was granted to LBH VIII. The call option was exercisable on the payment of $100,000, to acquire an 80% economic interest in Parklea. The draft heads of agreement of 10 March 2016 contemplated that the call option would be given to PAG in consideration of PAG's providing the loan facility for the purchase. It is consistent with the Heads of Agreement that PAG would nominate one of its subsidiaries to provide the facility and another to hold the call option. It makes no difference whether, as the primary judge found, the loan to Parklea was provided by LBH VI and the call option was granted to LBH VIII, or whether the loan was provided by and the call option was granted to LBH VIII. All scenarios are consistent with PAG's directing all aspects of its subsidiaries' involvement. 2. The director, secretary and shareholder of each of Parklea, and its two shareholders, Parklea Holdings 1 Pty Ltd and Parklea Holdings 2 Pty Ltd, was Mr Fayad. Each of the shareholders was a trustee of a unit trust. LBH VIII's option to acquire "all issued shares and rights [Holding Trust 1] holds in Parklea Corporation for $100,000" was not visible to Almona or to any third party conducting a company search. 3. PAG dictated the terms of the sale, including that the sale be a mortgagee sale and not a sale by the receiver. It required that the contract of sale include a term that the contract was conditional on approval from its investment committee. As Basten JA observes, that condition operated as a protection for PAG as the funder of the purchaser. The directing mind of the entire transaction was the PAG Investment Committee. I agree with the Chief Justice that Mr Dixon-Smith's email of 11 December 2015 demonstrates that PAG was confident that Dyldam would be the preferred bidder even though second round bids had not come in and Dyldam and PAG were in discussions in connection with the proposal. Those discussions concerned how the anticipated profits from a redevelopment would be shared between them. 4. Thus one subsidiary of PAG was the vendor as mortgagee exercising its power of sale. Another subsidiary of PAG provided all but $1 million of the finance necessary for Parklea to purchase the property. Either it or another subsidiary of PAG acquired an option, exercisable on payment of $100,000, to acquire an 80% economic interest in the purchaser. 5. Basten JA has described Mr Dixon-Smith's "Action Plan" that was proposed when Mr Constantine had made it known that he was attempting to raise finance to repay the mortgage debt. 6. The primary judge found (at [570]) that SAP understood that the persons who stood behind AMB Capital Partners (Almona's proposed refinancier) had the financial strength to fund the redemption of Almona's mortgage. 7. Basten JA concludes that although aspects of Mr Dixon-Smith's plan were not adopted, it can be inferred that his message of urgency was accepted by PAG, and by inference, by the other parties at the instigation of PAG, and this dictated the timing of the settlement. I agree. The haste in settling was such that SAP as vendor and Parklea as purchaser did not give themselves time to calculate usual statutory adjustments such as rates, water charges and the like. The haste in settling indicates that PAG's (and SAP's) purpose was not to obtain repayment of the secured debt, but to ensure that the sale to Parklea in which another PAG company had an indirect 80% economic interest went ahead. Duty of good faith 1. The appeal raises a question of principle. Is the only duty of a mortgagee in exercising its power of sale to act reasonably to obtain not less than the market value of the property (in substance the statutory duty imposed on receivers and other controllers having a power of sale (Corporations Act 2001 (Cth) s 420A)), or must the mortgagee's power of sale be exercised for the purpose of obtaining payment of the secured debt and not for a collateral purpose? Must it be exercised without collusion with the purchaser, but by way of independent bargain? 2. Whatever the position might be in England (see [314] below), High Court authority in this country establishes that the mortgagee's duty to exercise the power of sale in good faith does not merely require that the price be fair, but that the power be exercised for the purpose for which it was conferred, that is, to recover payment of the secured debt, and to do so through an independent bargain with the purchaser. 3. The purpose for which a mortgage is given is that the mortgage be security for repayment of the mortgage debt. This is fundamental. It is the basis of the mortgagor's equity of redemption. As a corollary, the purpose for which the mortgagee is given a power of sale is that the mortgagee obtain repayment of that debt. This was explained succinctly by Stuart VC in Robertson v Norris (1858) 1 Giff 421; 65 ER 983, but his Lordship introduced questions of motive that led to later criticism. In Robertson v Norris, Stuart VC said: "…the power being given to enable him to recover the mortgage money, this Court requires that he shall exercise the power of sale in a provident way, with a due regard to the rights and interests of the mortgagor in the surplus money to be produced by the sale. The legitimate purpose being to secure repayment of his mortgage money, if he uses the power for another purpose – from any ill motive to affect other purposes of his own, or to serve the purposes of other individuals – the Court considers that to be a fraud in the exercise of the power, because it is using the power for purposes foreign to that for which it was intended." 1. It was Stuart VC's reference to "ill motive" that was later criticised. In Nash v Eads, reported only in (1880) 25 Sol J 95, the mortgagor impugned the mortgagee's exercise of his power of sale because, so it was alleged, the power of sale was not exercised because the mortgagee wanted his money, but because his solicitor desired to obtain payment of some costs he could not obtain in any other way. Sir George Jessel MR was reported to have said that: "…the mortgagee was not a trustee of the power of sale for the mortgagor, and if he was entitled to exercise the power, the court could not look into his motives for so doing. If he had a right to sell on the 1st of June, and he then said, The mortgagor is a member of an old county family and I don't wish to turn him out of his property, and will not sell it at present, and then on the 1st of July he said, I have had a quarrel with the mortgagor and he has insulted me; I will show him no more mercy but will sell him up at once – if all this was proved, the court could not restrain the mortgagee from exercising his power of sale, except on the terms of payment of the mortgage debt. The court could not look at the mortgagee's motives for exercising his power. Lord Eldon had never said anything of the kind which, Stuart V.C., supposed him to have said. The Vice-Chancellor was entirely mistaken, and must have been citing the judgments to which he referred from his recollection, without looking at the reports. Of course there were some limits to the powers of the mortgagee. He, like a pledgee, must conduct the sale properly, and must sell at a fair value, and he could not sell to himself. But he was not bound to abstain from selling because he was not in urgent want of his money, or because he had a spite against the mortgagor." 1. Professor Waters correctly said (Waters, The Constructive Trust, University of London (1964) at 182), that but for Stuart VC's unfortunate discussion of motive, his reasoning might well have passed without question. The substance of Stuart VC's judgment in Robertson v Norris was adopted by the High Court in Barns v Queensland National Bank Limited (1906) 3 CLR 925. 2. In Barns v Queensland National Bank Limited, Griffiths CJ, giving the judgment of the Court, said (at 943-944): "The motive of the mortgagee, as distinguished from his intention, is not material. A lawful act does not become unlawful merely because the doer was actuated in doing it by an evil motive. But if a mortgagee exercises a power of sale, not for the purpose of obtaining payment of the mortgage debt (although that is a necessary consequence in whole or part), but for the purpose of depriving the mortgagor of the opportunity of retaining the property by redemption, and, to use the words of Lord Herschell, 'if he wilfully and recklessly deals with the property in such a manner that the interests of the mortgagor are sacrificed,' we should say that he had not been exercising his power of sale in good faith. It was not contested that a power of sale under a mortgage, like any other power, must be exercised honestly for the purposes of the power, or, as expressed by Lord Westbury in Duke of Portland v Topham (11 HLC 32 at 54) 'that the donee, the appointor under the power, shall, at the time of the exercise of that power, and for any purpose for which it is used, act with good faith and sincerity, and with an entire and single view to the real purpose and object of the power, and not for the purpose of accomplishing or carrying into effect any bye or sinister object; (I mean sinister in the sense of its being beyond the purpose and intent of the power which he may desire to effect in the exercise of the power).' In the same case Lord St. Leonards said (11 HLC 32 at 55): 'A party having a power like this must fairly and honestly execute it without having any ulterior object to be accomplished. He cannot carry into execution any indirect object, or acquire any benefit for himself, directly or indirectly'." 1. In Warner v Jacob (1881) 20 Ch D 220 at 221, Kay J said (at 224): "The result seems to be that a mortgagee is strictly speaking not a trustee of the power of sale. It is a power given to him for his own benefit, to enable him the better to realise his debt. If he exercises it bona fide for that purpose, without corruption or collusion with the purchaser, the court will not interfere even though the sale be very disadvantageous, unless indeed the price is so low is in itself to be evidence of fraud." (Emphasis added) 1. In Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676, Isaacs J said (at 699): "A mortgagee of land is always in equity, and under the Transfer of Land Act 1890, sec. 114, at law also, merely the holder of a security. The power of sale is given to him entirely for his own benefit, and its purpose is to enable him to realize enough to satisfy his claim, if the property will produce it, and to return whatever balance may remain to the mortgagor. It is undoubted law that so long as he observes specified formalities and acts in good faith his conduct cannot be challenged." 1. In Forsyth v Blundell (1973) 129 CLR 477, Walsh J (at 496) acknowledged that a mortgagee's exercise of its power of sale could be impugned if the mortgagee acted in fraud on the power, although not in the sense of an actual fraud. 2. In Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195, Stephen J referred (at 200) to the mortgagee's having sought "…some collateral advantage being activated by considerations extraneous to the relationship of mortgagee and mortgagor". 3. The mere fact that a mortgagee finances a purchaser, as in this case, is not sufficient to demonstrate that the sale was made in fraud of the power (Davey v Durrant (1857) 1 De G & J 535 at 553; (1858) 44 ER 1086; Farrar v Farrars Ltd (1888) 40 Ch D 395 at 413-414; Belton v Bass, Ratcliff and Gretton Ltd [1922] 2 Ch 449 at 462-463; Sewell v Agricultural Bank of Western Australia (1930) 44 CLR 104 at 109). No inference of a lack of good faith can be drawn from a mortgagee's substituting a solvent debtor for an insolvent debtor. 4. In Farrar v Farrars Ltd, one of three mortgagees, Mr Farrar, was a solicitor. The mortgagees had advanced monies to stone merchants on security that included a quarry. The quarry was put up for sale by auction but received no bid and the mortgagees were advised that there was no prospect of being able to sell the quarry by auction (at 396). Mr Farrar promoted the formation of a company to acquire and work the quarry. The other principals in the formation of the company negotiated with the mortgagees as to the price to be paid by the intended company for the property. There were arm's length negotiations between Mr Farrar for the mortgagees and the accountant for the company to be formed. An offer was made, not by Mr Farrar, but by a Mr Turner who was involved in the formation of the company, which was not suggested to be at an undervalue. 5. The company was in due course formed and Mr Farrar acted as its solicitor and took up a minority shareholding in the company, as did another of the mortgagees (at 396). The purchase was negotiated at arm's length between the other promoters and shareholders of the company and Mr Farrar and the mortgagees notwithstanding that Mr Farrar was himself a shareholder and acted as solicitor for the company. His shareholding represented one tenth of the company's subscribed capital (at 397-398). The trial judge (Chitty J) held that there was "…an honest and independent bargain between [Mr Farrar] acting for the mortgagees on the one hand and Mr Riley and Mr Cockcroft acting for the intended company on the other hand and that this bargaining resulted in the price being fixed...conditionally on a company being formed and at this time [Mr Farrar] had no thought of joining the intended company or taking shares in it." (at 403). It was not practicable to sell the quarries by auction (at 402). The property was sold at the best price that could be reasonably obtained in the circumstances (at 404). 6. Chitty J held that "the material terms of the bargain were honestly and independently settled, and…were not in any degree affected by the circumstance that [Mr Farrar] subsequently agreed to become a member of and act as solicitor for the company". Chitty J refused to set aside the sale. 7. That decision was affirmed on appeal. Lindley LJ, who delivered the judgment of the court, said: "A sale by a person to a corporation of which he is a member is not, either in form or in substance, a sale by a person to himself. To hold that it is, would be to ignore the principle which lies at the root of the legal idea of a corporate body, and that idea is that the corporate body is distinct from the persons composing it. A sale by a member of a corporation to the corporation itself is in every sense a sale valid in equity as well as at law. There is no authority for saying that such a sale is not warranted by an ordinary power of sale, and in our opinion, such a sale is warranted by such a power, and does not fall within the rule to which we have at present referred. But although this is true, it is obvious that a sale by a person to an incorporated company of which he is a member may be invalid upon various grounds, although it may not be reached by the rule which prevents a man from selling to himself or to a trustee for himself. Such a sale may, for example, be fraudulent and at an undervalue or it may be made under circumstances which throw upon the purchasing company the burden of proving the validity of the transaction, and the company may be unable to prove it. Fraud in the present case is not now alleged; it was alleged in the Court below, and was then clearly disproved. But, for reasons which will appear presently, the circumstances attending the sale were such as, in our opinion, throw upon the company the burden of sustaining the transaction." (at 409-410). 1. His Lordship referred to its being a suspicious circumstance that Mr Farrar was a solicitor and one of the three mortgagees with the power of sale and that the property was sold to a company which he promoted and in which he had a substantial interest as a shareholder and for whom he acted as solicitor. His Lordship said: "A mortgagee with the power of sale, though often called a trustee, is in a very different position from a trustee for sale. A mortgagee is under obligations to the mortgagor, but he has right of his own which he is entitled to exercise adversely to the mortgagor. A trustee for sale has no business to place himself in such a position as to give rise to a conflict of interest and duty. But every mortgage confers upon the mortgagee the right to realize his security and to find a purchaser if he can, and if in exercise of his power he acts bona fide and takes reasonable precautions to obtain a proper price, the mortgagor has no redress, even although more might have been obtained for the property if the sale had been postponed: Cholmondeley v Clinton (1); Warner v Jacob (2)." (at 410-411). 1. Farrar v Farrars Ltd raised no issue of fraud on the power. There was no question but that the mortgagees were selling in order to raise monies to satisfy their mortgage debt. Although two of the mortgagees took up minority shareholdings in the purchasing company, the mortgagees were not selling in order to acquire the property for themselves. In contrast, in Robertson v Norris, the mortgagee sold the property to his brother and later took a conveyance of the property from his brother for nominal consideration. 2. Kennedy v De Trafford [1897] AC 180 establishes that the mortgagee's obligation in exercising the power of sale is to exercise the power of sale in good faith "without any intention of dealing unfairly by his mortgagor" (at 185). The facts of Kennedy v De Trafford raised no issue concerning fraud in the exercise of the power. 3. In Belton v Bass, Ratcliff and Gretton Ltd, Russell J said that the mortgagee's sale was impugned not on the ground that it was at an undervalue, nor on the position occupied by the purchaser (at 460), but on the ground that the power was exercised with an indirect motive (at 464). In fact the ground of complaint was that the power of sale was exercised for a purpose outside the legitimate purpose of the power, not to obtain repayment of the mortgage debt but to confer on the purchaser an option to acquire the property (being shares in a brewing company of which he was managing director). Russell J treated Nash v Eads as having decided that a mortgagee's exercise of its power of sale could not be impugned on the ground of "indirect motive" (by which his Lordship meant collateral purpose) provided the price obtained was fair (at 464, 466). 4. Belton v Bass, Ratcliff and Gretton Ltd was cited with approval by the High Court in Sewell v Agricultural Bank of Western Australia only for the proposition that the mortgagee did not go beyond its power of sale by financing and taking a mortgage from the purchaser (at 109). 5. In Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd, the mortgagee relied on Belton v Bass, Ratcliff and Gretton Ltd in submitting that there was no bar to a person such as a director who owes a fiduciary duty to the mortgagee in connexion with the auction purchasing the mortgaged property (at 198). But Aickin J, with whose reasons Stephen J agreed, held that the critical issue was whether there was an independent bargain. In that case proper steps for advertising the sale and scheduling the auction were not taken and it could not be said that the sale was for the best obtainable price. But that was an additional reason for setting aside the sale. Aickin J said (at 227) that the absence of an independent bargain was itself enough to require that the sale be set aside. 6. Belton v Bass, Ratcliff and Gretton Ltd cannot be reconciled with the observations of Kay J in Warner v Jacob quoted at [302] (which were not cited by Russell J), nor the High Court's decisions referred to in these reasons. 7. The High Court has insisted that the sale by the mortgagee to a purchaser be an independent bargain, a concept that Chitty J called in aid in Farrar v Farrars Ltd quoted at [308] above. 8. In Latec Investments Pty Ltd v Hotel Terrigal Investments Pty Ltd (In Liq) (1965) 113 CLR 265 the mortgagee sale was not set aside on the ground that the price was not a fair market price, but because the sale to a subsidiary was made to preclude the mortgagor's redeeming the mortgage. The sale was a conscious misuse of the power. Kitto J said (at 274): "In the present case it is all very well to say that the directors had reason to think that on a genuine sale they would not have got more than 60,000 pounds for the property. The fact remains - I see no escape from concluding that it is a fact - that the reason why there was only a pretence of attempting to get a better price was simply that the object in view was not really to effect a sale, but was to destroy the mortgagor's interest and get the hotel for the mortgagee's group of companies, without allowing the mortgagor the opportunities to pay off the mortgage which the procedure for foreclosure would have afforded. It is impossible to regard the case as only one of constructive or equitable fraud - there was much more in it than a mere fraud upon the power, as it is sometimes called. There was pretence and collusion in the conscious misuse of a power." 1. Taylor J agreed in this respect with Kitto J (at 280). 2. Menzies J said (at 288): "The auction could well be regarded as nothing but a piece of camouflage to hide Latec's plan for a private sale to a subsidiary company and to provide a not-too-high figure as the minimum at which that sale might, with some measure of safety, be made. It was argued by Mr. Mahoney for the appellant that the price of 60,000 pounds was in fact a fair price, but the evidence does not warrant this Court in making such a finding. There was evidence for and against such a conclusion but, without making any finding as to the value of the Terrigal Hotel in November 1958, Else-Mitchell J. found that the sale was not made in good faith, and this was a finding open upon the evidence. Furthermore, as the learned judge thought, it is the character of the transaction as a virtual foreclosure, rather than the particular price fixed, that warranted the intervention of the Court." 1. In Bangadilly Pastoral Co, Aickin J (in the passages quoted by Basten JA at [110]-[112]) referred to the need for an independent bargain. 2. Hawkesbury Valley Developments Pty Ltd v Custom Credit Ltd (1994) 8 BPR 15,581 raised no issue about the mortgagee's sale being made in fraud of the power. There was no question of Custom Credit selling to an associate. The question was whether the sale was adequately advertised and whether the mortgagee's selling agent properly dealt with a potential purchaser who expressed interest in buying. McLelland CJ in Eq's discussion of the equitable obligations of a mortgagee exercising its power of sale was wholly directed to the manner in which the power is to be exercised. His Honour said: "The powers of sale exercised by Custom Credit were stator powers conferred by s 58 of the Real Property Act. That section empowers a mortgagee to 'sell the land mortgaged … or any part thereof … either altogether or in lots by public auction or by private contract, or both such modes of sale, subject to such conditions as he thinks fit…'. In exercising the power thus conferred the mortgagee is, however, subject to obligations arising from the application of equitable principles equivalent in nature and extent to the obligations similarly arising in respect of legal or equitable mortgages under the general law: as is implicit in the decision in Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; 18 ALR 124; BC120006. Those obligations apply to the exclusion of any duty of care arising from the principles of the law of negligence: Coroneo v Australian Provincial Assurance Association (1935) 35 SR (NSW) 391, Colin D Young Pty Ltd v Commercial and General Acceptance Ltd (1982) NSW Conv R 55-097, Downsview Nominees Ltd v First City Corp Ltd (1993) AC 295; [1993] 3 All ER 626. The content and scope of the relevant equitable obligations were considered by the High Court in Pendlebury. That case is authority for the proposition that in exercising its power of sale, a mortgagee must act in good faith, which involves an obligation to deal fairly with the interests of the mortgagor, which in turn involves an obligation to refrain from acting in wilful or reckless disregard of those interests. Subsequent discussion of the question in the High Court (particularly in Forsyth v Blundell (1973) 129 CLR 477; 1 ALR 68; BC7300015, Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co (1978) 139 CLR 195; 19 ALR 519; BC7800044 and Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491; 38 ALR 225; BC8100133) has not displaced the authority of the decision in Pendlebury, to the mortgagor where there was 'a serious departure from accepted standards in seeking to obtain the best price then available' (at CLR 228; ALR 544). This is an area of the law where particular phrases used in judgments should not be construed and applied as if embodied in an Act of Parliament: compare Australian Apple and Pear Marketing Board v Tanking (1942) 66 CLR 77 at 110; [1942] ALR 265 at __(sic). What matters is the underlying equitable principle, which in the modern idiom usually finds expression in terms of unconscionability. The mortgagee is not answerable for what Isaacs J in Pendlebury describes (at 700) as 'mere negligence or carelessness in carrying out the sale'. Any departure from reasonable standards must be so serious as to be properly characterised as unconscionable, in order to render the mortgagee accountable. If a failure by a mortgagee to take reasonable steps to obtain a proper price is sufficiently serious to be characterised as unconscionable as that expression is understood in equity, then in the taking of accounts between the mortgagee and the mortgagor, the mortgagee will be accountable on the basis of wilful default for the price which would have been obtained if the mortgagee had not been guilty of unconscionable conduct." 1. I agree with Bathurst CJ that notification of PAG's Investment Committee's approval was a condition subsequent and not a condition precedent to a binding contract between SAP and Parklea. But the directing mind of the sale was that of PAG's Investment Committee. If PAG's purpose in causing its subsidiary, SAP, to exercise its power of sale was to enable its other subsidiary, LBH VIII, to acquire an 80% economic interest in Parklea, classification of the condition as a condition precedent to the existence of a contract or a condition subsequent is irrelevant. What is significant is that it was for PAG through its Investment Committee to decide whether the sale would proceed. 2. Statute aside, the obligations of a mortgagee in exercising a power of sale are not onerous. But the obligation to act in good faith does not only require that the mortgagee not unconscionably disregard (ie sacrifice) the interests of the mortgagor in how the power is exercised. The obligation to act in good faith also requires the mortgagee to exercise the power for the purpose for which it is conferred, that is, to obtain repayment of the secured debt and to do so without collusion with the purchaser but by independent bargain. Statute has augmented but not supplanted the mortgagee's equitable duty. Where the power is not exercised for the purpose of obtaining repayment of the mortgage debt but to obtain, directly or indirectly, a collateral benefit to the mortgagee, the exercise of the power cannot stand even though a fair market price is received. 3. Applying those standards, SAP did not exercise its power of sale in good faith. Neither Bathurst CJ nor Basten JA holds that PAG's (or SAP's) purpose was not to enable LBH VIII to acquire an 80% economic interest in Parklea, nor that the sale to Parklea was an independent bargain. 4. In rejecting Almona's submission that SAP did not exercise its power of sale in good faith the primary judge held that: 1. the significance of whether the sale was an independent bargain was reduced by Almona's acceptance that the contract price was a proper one (subject to its submissions concerning the joint venture negotiations) (PJ [500]), that is, the price represented the market value of the land (PJ [530]); 2. the fact that the sale process was conducted independently by the receivers and Colliers was a crucial factor in the determination of whether the outcome of the sale process was the result of a proper exercise of SAP's power of sale (PJ [533]); 3. the insertion of the condition requiring the approval of PAG's Investment Committee raised no adverse inference against SAP as it was reasonable for PAG to have time to satisfy itself that it had satisfactory time to finance the purchase (PJ [549]-[550]); 4. SAP and Parklea Corporation's decision to accelerate completion of the contract was made to crystallise the consequences of the course taken by SAP to enter into the contract and to avoid becoming embroiled by litigation threatened by Almona (PJ [578]); 5. Mr Dixon-Smith's Action Plan contained candid advice to PAG as to how to advance SAP's private interests but the pursuit of those interests did not constitute a failure to act in good faith (PJ [579]); and 6. crucially: "[585] As has been considered above in connection with the burden of proof, there is no absolute prohibition on a mortgagee selling the security property to a company in which the mortgagee has an interest, provided, in respect of the price obtained, the transaction is a proper and independent one. The circumstances may have the effect that the interest obtained by the mortgagee switches the burden of proof and imposes it upon the mortgagee or the entity through which the mortgagee obtains its interest. [586] It has not been necessary for SAP or Parklea in this case to prove that the contract price for the Land was struck by a proper and independent process or that the price represented the market value. All of the evidence concerning the participation by the receivers and Colliers, and the implementation of the expression of interest campaign, supports a finding that the process was proper and independent. As I have recorded, the case was conducted on the basis, as initially conceded by Almona, that the contract price was a proper one. Although Almona's belated introduction of a fraud claim against SAP and Parklea based upon the joint venture negotiations in late 2015 may imply that the sale was at an undervalue, Almona did not lead evidence to establish such a claim." 1. But the question is not merely whether the price obtained was a fair market price but whether the power of sale was exercised for the purpose of obtaining repayment of the mortgage debt, without collusion with the purchaser. 2. Both Bathurst CJ's and Basten JA's analyses of the facts show that it should be concluded that the power of sale was exercised not for the purpose of recovering payment of the mortgage debt but to ensure a sale to Parklea in which another PAG company had an indirect 80% economic interest. It was a collusive bargain (to use the expression of Kay J in Warner v Jacob) and not an independent bargain (to use the expression of Aickin J in Bangadilly Pastoral Co). 3. In any event, it cannot be assumed that a fair market price was the best price obtainable. In Bangadilly Pastoral Co, Jacobs J said (at 201-202): "It is true that bona fides in this connexion is not concerned with the motive for exercising the power of sale but, once the decision to sell has been made, it is concerned with a genuine primary desire to obtain for the mortgaged property the best price obtainable consistently with the right of a mortgagee to realize his security. At the same time the mortgagee is concerned with his own interests and not with the interests of the mortgagor or subsequent incumbrancers, and therefore a wide latitude has been allowed to him in his manner of exercising his power of sale. However, when there is a possible conflict between that desire and a desire that an associate should obtain the best possible bargain the facts must show that the desire to obtain the best price was given absolute preference over any desire that an associate should obtain a good bargain." 1. That is an aspect of the mortgagee's obligation to act in good faith. 2. It is evident that PAG, Dyldam and Wesco saw significant development potential in the site, and in the case of at least PAG and Dyldam, that they saw a development potential that could increase the value of the mortgaged property significantly above the $85.35 million that Dyldam bid. In these circumstances, it cannot be assumed from the fact that Colliers properly marketed the property for sale that the best price was obtained. The clear inference is that SAP's duty to obtain the best price consistently with its right to realise its security was not given absolute preference over PAG's desire that its other associate should obtain a good bargain. Wesco's involvement: onus of proof 1. I agree with Basten JA that there is an available inference that Wesco's bid was lowered so as to allow Dyldam's offer to succeed ([219]). That inference arises from the fact that other companies of Visy acquired call options to obtain an economic interest in Parklea. 2. The Chief Justice and Basten JA have quoted the Second Statement of Further Particulars ([51], [235]). Their Honours observe and the primary judge found that those particulars do not allege bid-rigging or fraud involving collusion between SAP, Dyldam and Mr Merhi's companies. But they do allege matters that raise the suspicion of bid-rigging. 3. It is understandable that bid-rigging was not alleged. Rule 65 of the Legal Profession Uniform Conduct (Barristers) Rules 2015 provides that a barrister must not allege any matter of fact amounting to criminality, fraud or other serious misconduct against any person unless the barrister believes on reasonable grounds that available material by which the allegation could be supported provides a proper basis for it. It is at least doubtful that Almona's legal representatives would have been entitled to allege fraud where there could have been other explanations for the lowering of the Wesco bid (as Basten JA explains at [219]). 4. Almona did not need to allege fraud in order to throw upon SAP and Parklea the onus of proving the validity of the transaction (Farrar v Farrars Ltd at 409-410; Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349 at 1358). As is clear from Farrar v Farrars Ltd, in the passage quoted at [310] above, the burden of proving the validity of a mortgagee's sale may be thrown not only upon the mortgagee but on the purchaser. That will be so where collusion between the mortgagee and the purchaser is established as it is in this case. Parklea Corporation did not acquire an indefeasible title 1. It does not follow that because the power of sale was not exercised in good faith that Parklea did not acquire an indefeasible title. It did unless it was registered by fraud (Real Property Act 1900 (NSW), s 42). 2. It should be inferred that Dyldam (and through Dyldam, Parklea) was aware of the facts that showed that SAP was not exercising its power of sale for the purpose for which that power was given but to enable another PAG subsidiary to acquire an 80% economic interest in Parklea. It should also be inferred that Dyldam, and through Dyldam, Parklea, knew that the accelerated steps for settlement arising from the adoption of Mr Dixon-Smith's Action Plan were for the purpose of preventing Almona's redeeming the mortgage. 3. I refer again to Mr Dixon-Smith's Action Plan of 15 March 2016 after he had been provided with a copy of a letter from AMB Capital and had advised that "those involved on the proposed refinancing do actually have the firepower to fund this if Con can make it stack up" (see J [99]). 4. Mr Dixon-Smith's email of 15 March 2016 is substantially quoted by Basten JA at [178] – [180]. In addition to the matters quoted by Basten JA, Mr Dixon-Smith stated that: "It is highly desirable that we not only settle SAP, but also get the purchaser registered." 1. In the passage from the email quoted by Basten JA at [179], it should be noted that Mr Dixon-Smith stated that if the funding were vendor funding from the mortgagee it would have the advantage of making it appear that the funding provided was short-term funding to assist the buyer which could be considered as beneficial to Almona in generating interest income on the sale. 2. On 11 March 2016, Gilbert & Tobin (acting for the receivers) had proposed an extension to the date for receiving PAG's Investment Committee's approval to 29 April 2016. That date was varied by a deed executed for SAP on 22 March 2016. The counterpart executed by Parklea Corporation is undated (J [190]). On 11 March 2016 Gilbert & Tobin attached a deed providing for the extension of the sunset date to be executed under the vendor's power of attorney stating that it had been signed by Mr Fayad (for the purchaser). Mr Dixon-Smith replied on 11 March 2016 saying that he could hand a counterpart to Maddison Marcus (for Parklea). On 11 March the parties were proposing to extend the sunset date to 29 April. But when PAG learned that Almona might be able to redeem the mortgage, it moved with what Almona accurately described as "breakneck speed". Almona submitted that PAG was determined to ensure that Almona did not impede its transaction with Parklea because it saw great profit potential in the venture. Mr Dixon-Smith's spreadsheet of 11 December 2015 referred to by Basten JA at [124] calculated net profits for PAG from some unidentified proposed ventures ranging from $40 million to $445.375 million. 3. Almona submitted that PAG set out to ensure that Almona did not impede its transaction through a dishonest scheme. 4. Almona correctly submitted that Mr Dixon-Smith's Action Plan could only have been implemented with the cooperation of the receivers, Dyldam and Parklea. The essence of Mr Dixon-Smith's plan was to accelerate completion in order to obtain registration of the transfer to Parklea whilst keeping Almona ignorant of that strategy. I accept Almona's submission that in the absence of evidence to the contrary, it should be inferred that Parklea through Dyldam knew of all of the essential elements of Mr Dixon-Smith's Action Plan. That inference can be drawn from the speed with which the plan was activated, which the primary judge described at length. 5. As Almona submitted, in contrast to the speed with which Almona and Parklea moved to completion, Mr Dixon-Smith delayed his response to Almona's request for a payout figure (most recently repeated on 14 March 2016) until 17 March 2016. His response did not provide a payout figure. Rather, he stated that SAP, together with the receiver, had commenced the preparation of a statement of amounts owing and that information would be available the following week. Mr Dixon-Smith did not disclose that the parties intended to complete the sale contract as soon as possible. 6. The contract between SAP and Parklea Corporation was entered into on 13 January 2016. It included a special condition 61 that provided that the purchase price would be $85.35 million if the residence were not occupied as at completion but would be $81.1 million if the residence were occupied. 7. As part of the arrangements for completion, SAP and Parklea entered into the Second Deed of Variation on 22 March 2016 that provided a substitute contract which specified the price as being $81.1 million and removed the reference to the higher price of $85.35 million which would have been payable if the property were not occupied as at completion. This gave rise to the primary judge's limited finding of fraud that SAP did not challenge on appeal. I agree with Basten JA that Parklea's challenge to the primary judge's finding as to its liability for the amount of $4.25 million plus interest on the basis of its involvement with the fraud should be dismissed. 8. That aspect of the transaction and Parklea's involvement in it cannot be divorced from the other aspects of the transaction when considering whether Parklea became registered as a proprietor through fraud. 9. As Almona submitted, the effect of the Second Deed of Variation was to vary the sale contract so as to give it a façade of regularity. It should be inferred that the purpose of the Second Deed of Variation was to disguise from Almona and others the fact that the occupation condition had ever existed. 10. Almona submitted: 3.23 When understood in the light of the foregoing facts, SAP's actions in destroying Almona's registered interest in the Land were motivated, not by any real concern to recover the sums outstanding under the SAP Mortgage, but instead by a commercial opportunity for the PAG Group to acquire a controlling interest in the registered proprietor of the Land (and therefore the Land itself) and to position itself such that it might derive extraordinary profits from the Project, which it intended to undertake and oversee as part of its joint venture with the Dyldam Group. That opportunity was the subject of negotiations prior to the close of the expressions of interest campaign. It was also the subject of the discussions recorded in clauses 2.I and 2.2 of the HOA, which continued up to the date of the transfer of title. In that sense, as in Tse Kwong Lam, the effect of the sale was to '[transfer] from [Almona] to [a company effectively controlled by PAG] ... the chance of making a profit which [SAP] could not acquire for [itself].' 3.24 Conscious of the scrutiny to which it was being subjected by Almona during the period of its exercise of its power of sale (a matter demonstrated by the Action Plan), SAP sought to cover its tracks and gloss over matters which on their face would appear unorthodox. The PAG Group did not take any units in the underlying trusts or shares in either Parklea or its subsidiaries, yet achieved the equivalent level of control through the rights and obligations established in the transaction documents that it would have had if it were a majority shareholder or unitholder. To avoid potential scrutiny and to avoid disclosing the prior existence of the Occupation Condition, SAP and Parklea entered into the second deed of variation, on the date of transfer, to omit this clause from the Sale Contract and to replace its front pages (PJ [680]). Finally, when it was apparent that Almona had found a potential financier with the 'firepower' to complete the refinancing transaction, SAP, with the cooperation of Parklea, drastically accelerated the transfer of title (PJ [204], [238]). The Action Plan reveals that SAP did so for the express purpose of destroying Almona's interest and rights to refinance and to secure for itself the Land through the Joint Venture (PJ [238]). 3.25 When viewed in this light, the primary judge ought to have found that SAP engaged in a fraudulent exercise of its power of sale and resultant transfer of title, which fraud was brought home to Parklea through its participation in its essential integers. The primary judge ought to have approached the fact finding process by drawing inferences from the cumulative strength of the individual facts, rather than by asking whether dishonesty was separately present in each fact (cf PJ [636]). The actions of SAP in pursuing with Dyldam the joint venture, through the vehicle of Parklea, together with its conduct in concealing its involvement in that enterprise and impeding Almona's efforts to refinance, ought properly be characterised as dishonest and fraudulent, whether that be described as 'a conscious misuse of power' (PJ [618]), 'a designed cheating', 'an underhand scheme' or a 'collusive and colourable sale'. Those inferences ought be drawn on the existing evidence. They can be even more comfortably drawn in light of the decision of SAP and Parklea not to call any witnesses to dispel them. The primary judge erred in rejecting the essential core of the underlying narrative to Almona's fraud claim (PJ [640])." 1. I agree. The steps taken by SAP and Parklea involved more than a mere fraud on a power. They were marked by haste, secrecy, deception and the intention to prevent Almona from redeeming the mortgage. Fraud for the purposes of s 42 of the Real Property Act 1900 (NSW) requires dishonesty, an intention to cheat, or moral turpitude (Assets Co Ltd v Mere Roihi [1905] AC 176; Butler v Fairclough (1917) 23 CLR 78; [1917] HCA 9; Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1926] AC 101). Just as in Latec Investments Pty Ltd v Hotel Terrigal Pty Ltd, the mortgagee sale in which Parklea knowingly participated was marked by a conscious misuse of the power of sale and constituted fraud within the meaning of s 42. Parklea did not acquire an indefeasible title. PT's Mortgage 1. Before considering questions of remedy, it is necessary to consider the position of the second respondent, PT. PT is a professional security trustee. On 22 March 2016 it took mortgages from Parklea of the land. Those mortgages were duly registered. The mortgages secured Parklea's agreement to pay the "Secured Money" in accordance with the terms of the "Finance Documents". 2. "Secured Money" was widely defined as including any monies payable or owing to "the Beneficiary". "Beneficiary" meant the Mortgagee (PT) either for its own account or for the account of a Financier and each Financier. "Financier" had the same meaning as it had in a Loan Note Subscription Agreement dated on or about the date of the mortgage between Parklea, PT and LBH VI (as financier) and others. "Finance Documents" also had the meaning given to that term in the Loan Note Subscription Agreement. 3. In the Loan Note Subscription Agreement there was an elaborate definition of "Finance Documents" that included loan notes to be issued under that agreement. LBH VI was named as "Financier". Although the agreement was structured in a way that would have accommodated the provision of financial accommodation by multiple financiers, LBH VI was the only named financier. It agreed to provide $84.4 million of financial accommodation to Parklea by subscribing for loan notes to be issued by Parklea. The Loan Note Subscription Agreement was entered into on 22 March 2016. 4. Clause 21.2 provided that LBH VI: "…irrevocably authorises…the…Security Trustee to: (a) enter into the Transaction Documents; and (b) take action on the Financier's behalf in accordance with this agreement; and (c) exercise [its] respective rights expressly set out in the Transaction Documents…" 1. Clause 21.4 provided that LBH VI could direct PT to act or not to act in connection with a Transaction Document as it determined. 2. It is at least seriously arguable that PT holds the benefit of the mortgages, not merely as trustee for LBH VI, but as agent for LBH VI. 3. Almona did not allege that PT's mortgage was defeasible on the ground that LBH VI had knowledge of and participated in the fraud of SAP and Parklea. LBH VI was not joined as a party to the proceedings. 4. Instead, Almona contended that PT's interest was defeasible by reason of s 118(1)(d)(ii) of the Real Property Act as explained by the High Court in Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425; [2015] HCA 2 at [59]-[60] per French CJ, Hayne and Gageler JJ. 5. Section 118(1)(d) of the Real Property Act provides: (1) Proceedings for the possession or recovery of land do not lie against the registered proprietor of the land, except as follows-- … (d) proceedings brought by a person deprived of land by fraud against-- (i) a person who has been registered as proprietor of the land through fraud, or (ii) a person deriving (otherwise than as a transferee bona fide for valuable consideration) from or through a person registered as proprietor of the land through fraud, 1. Section 45 of the Real Property Act relevantly provides: 45 Bona fide purchasers and mortgagees protected in relation to fraudulent and other transactions (1) Except to the extent to which this Act otherwise expressly provides, nothing in this Act is to be construed so as to deprive any purchaser or mortgagee bona fide for valuable consideration of any estate or interest in land under the provisions of this Act in respect of which the person is the registered proprietor. (2) Despite any other provision of this Act, proceedings for the recovery of damages, or for the possession or recovery of land, do not lie against a purchaser or mortgagee bona fide for valuable consideration of land under the provisions of this Act merely because the vendor or mortgagor of the land-- (a) may have been registered as proprietor through fraud or error, or by means of a void or voidable instrument, or (b) may have procured the registration of the relevant transfer or mortgage to the purchaser or mortgagee through fraud or error, or by means of a void or voidable instrument, or (c) may have derived his or her right to registration as proprietor from or through a person who has been registered as proprietor through fraud or error, or by means of a void or voidable instrument. 1. In Cassegrain v Gerard Cassegrain & Co Pty Ltd, French CJ, Hayne, Bell and Gageler JJ said: "[59] …Neither s 118 generally nor s 118(1)(d)(ii) in particular should be read as directed only to fraud in the process of registration. Exactly what would fall within fraud 'in the process' of registration may be open to debate. But it is not a debate that need be had, because s 118 should be construed in a way which is consonant with the operation of s 42(1). In particular, s 118 must not be read in a way which would preclude action to recover the land in a case where the fraud exception to s 42(1) applies. Hence, the reference in s 118(1)(d)(i) to proceedings brought by a person deprived of land by fraud against a person who has been registered as proprietor of the land through fraud must be read as embracing every kind of fraud which falls within the relevant exception to s 42(1). If actual fraud is brought home to the registered proprietor, s 118(1)(d)(i) is engaged and the general bar to proceedings for the possession or recovery of land against that registered proprietor is lifted. [60] Conversely, but equally importantly, if the fraud exception to s 42(1) does not apply to the person who is registered as proprietor, the general bar to proceedings for the possession or recovery of land against the registered proprietor will apply and the exception provided by s 118(1)(d)(i) will not be engaged. That is, the exception for which s 118(1)(d)(i) provides does not diminish the protection given by s 42(1). It does not enlarge the rights which a person deprived of land by fraud has against the registered proprietor. [61] By contrast, the exception provided by s 118(1)(d)(ii) does enlarge the rights which a person deprived of land by fraud has against a registered proprietor. Unless the registered proprietor is a transferee bona fide for valuable consideration, a person deprived of land by fraud may bring proceedings for the possession or recovery of the land against a person deriving from or through a person registered as proprietor of the land through fraud. But as with s 118(1)(d)(i), the expression 'registered as proprietor of the land through fraud' must be read in a manner consonant with s 42(1)." 1. Without deciding the issue, the primary judge expressed a preference for the view that a liberal interpretation should be given to the expression "proceedings for the … recovery of land" in s 118(1)(d)(ii) so that the section applied to a proceeding to establish that the plaintiff was entitled to a re-transfer of the title to the land free of a registered mortgage if the mortgage were obtained otherwise than bona fide for valuable consideration from or through a person registered as proprietor of the land through fraud ([906]). PT submitted that this construction was erroneous. It submitted that the language of "recovery" is inapt to describe Almona's claim to set aside the PT mortgage. 2. PT contended that the primary judge ought to have found that Almona's claim was not a proceeding for the possession or recovery of land within the meaning of s 118(1) of the Real Property Act. Almona's claim against Parklea was undoubtedly a claim for the recovery of land as it sought orders setting aside the sale and for re-transfer of the property from Parklea to it, but that was not the nature of its proceeding against PT. "Land" is defined in s 3 as meaning land and any estate or interest therein. PT submitted that the proceeding against it was neither for the recovery or possession of land nor for the recovery of PT's estate or interest in the land. There is no dispute that PT's mortgages, that operate as a statutory charge, are an estate or interest in the land (Provident Capital Ltd v Printy [2008] NSWCA 131; (2008) 13 BPR 25, 199 at [23]-[27]). 3. By ground 2 of the notice of contention, PT submitted that proceedings permitted by s 118(1)(d)(ii) require an identity between the interests sought to be recovered and the interest of the registered proprietor against whom the proceedings are brought. It submitted that the interest in the land sought to be recovered by the appellant being the fee simple was not the interest of PT being the registered mortgagee. 4. The use of the definite article ("the registered proprietor of the land") in the chapeau to s 118(1) shows that "land" in the chapeau has the same sense on both occasions on which it is used. If the proceedings are proceedings for the recovery of land in the physical sense, then the "registered proprietor of the land" is not the mortgagee who holds an estate or interest in the land but the registered proprietor of the land, in this case Parklea. In the present case, proceedings are also brought against PT as the registered mortgagee of the land. Although PT is a registered proprietor of an estate or interest in the land, the proceedings against it are not for the possession or recovery of the physical land, nor for possession or recovery of the mortgage estate or interest. I would uphold grounds 1 and 2 of the notice of contention. 5. It is therefore unnecessary to decide whether PT derives its interest as mortgagee as a transferee from Parklea bona fide for valuable consideration. Almona contended that PT was not a transferee and therefore did not fall within the bracketed words in s 118(1)(d)(ii). I agree. PT did not take a transfer of any estate or interest of Parklea. That is consistent with the proceeding against PT not being one for the possession or recovery of land from it. As this court said in Sahab Holdings Pty Ltd v Registrar General (No 2) [2012] NSWCA 42; (2012) 16 BPR 30, 353 at [32]: "…s 118(1)(d)(ii) permits an action for repossession or recovery of land to be brought against a registered proprietor to whom someone, who themselves became registered through fraud, has transferred the land (not being a transferee bona fide for valuable consideration) and whether by way of testamentary devise or by a gift inter vivos. The action for repossession or recovery can be brought even though the donee from the fraudster acquires his or her own title by registration." 1. In any event PT is entitled to the protection of s 45. There is no issue as to PT's bona fides. Almona did not allege that LBH VI did not act bona fide. It disputed that PT was a mortgagee for valuable consideration within the meaning of either s 45 or s 118(1)(d)(ii). In my view the mortgage was given for valuable consideration. That consideration consisted of the monies advanced by LBH VI on security of the mortgage. The primary judge considered that it would be necessary to identify a consideration provided by PT to Parklea for the grant of the mortgage and considered that on the basis on which the matter had been argued, it was not open to his Honour to base his judgment on an interpretation of the sections that allowed value to be provided by a party other than the holder of the title (J [913] and [914]). His Honour concluded that PT provided valuable consideration to Parklea by its fee agreement with Parklea whereby PT agreed to undertake potentially onerous responsibilities as security trustee set out in the Loan Notes Subscription Agreement (J [919]). 2. The fee agreement between PT and Parklea provided for Parklea to pay an establishment fee of $10,000 and an annual fee of 0.01% of the outstanding debt balance at the beginning of each fee period. PT undertook to hold and deal with the security for the benefit of the beneficiaries and to undertake the responsibilities of the Security Trustee as set out in the Finance Document. 3. The primary judge held: "[919] By means of its fee agreement with Parklea, PT agreed to hold the PT Mortgages on trust for the identified beneficiaries, and to deal with the mortgages for their benefit. PT also agreed to undertake the potentially onerous responsibilities of the Security Trustee set out in the Loan Notes Subscription Agreement. The obligations that PT assumed were not the obligations of a trustee created by the fee agreement. They were obligations accepted by PT at the request of Parklea, as a party who could only achieve the benefit of the financial accommodation if PT agreed with it to accept those obligations. [920] It is trite law that consideration may take the form of a benefit bestowed by the promisee on the promisor. The effect of PT assuming the obligations to Parklea created by the fee agreement was that it enabled Parklea to satisfy the pre-condition in the Loan Notes Subscription Agreement to the obligation upon Lord VI to subscribe for any Loan Notes issued by Parklea. PT conferred that benefit on Parklea partially in return for the grant of the PT Mortgages to PT, as that step was necessary to enable PT to perform the duties necessary to enable it to earn its fees. In my view, PT did provide valuable consideration to Parklea for the grant of the PT Mortgages, notwithstanding that it was Lord VI who ultimately became bound to provide the financial accommodation to Parklea. That consideration took the form, first, of the obligations assumed by PT under the fee agreement, which were commercial and not trustee obligations as between PT and Parklea. Secondly, in accepting the grant of the PT Mortgages, and the obligations that arose out of its role of Security Trustee, PT enabled Parklea to satisfy the essential pre-condition to its receipt of the financial accommodation from Lord VI." 1. Even if valuable consideration for the PT mortgages were not given by the advances made by LBH VI to Parklea, I agree with the primary judge, for the reasons his Honour gave, that valuable consideration was given by PT itself by its agreeing to assume the position of security trustee and undertaking the duties which it assumed. 2. Almona submitted that the PT mortgages were only indefeasible to the extent they secured consideration that PT provided for its becoming the registered mortgagee. That submission was rightly rejected. In the absence of a claim that the mortgage was defeasible for fraud, it was indefeasible for the debts that it was expressed to secure. The primary judge noted that at the time of the hearing it was said that PT's mortgages secured a debt of the magnitude of about $158 million (J [841]). As his Honour said, it is unlikely that there would be any benefit to Almona to recover the land from Parklea if PT's mortgages nonetheless secured a debt of that magnitude. 3. Almona submitted that it would be an odd result if parties involved in a fraud could avoid a consequence of that fraud by the interposition of a nominee as registered mortgagee. That is true. But the submission assumes that a mortgage registered in the name of the nominee could not be set aside on the ground of fraud by the principal for whom the nominee held the mortgage. That assumption is not self-evident. It is at least equally incongruous that a lender or lenders guilty of no fraud should lose the benefit of indefeasibility because they placed the mortgage in the name of a security trustee who holds the mortgage on trust for them if the security trustee itself does not provide consideration to the mortgagor for the mortgage. 4. It is at least seriously arguable that these complexities disappear if the relationship between the registered mortgagee and the lender is not just that of trustee and beneficiary but that of agent and principal. But in this case no claim was made against LBH VI that it was a party to a fraud. Remedy 1. Almona sought declarations that SAP breached its duties as mortgagee in the exercise of its power of sale, that Parklea was an accessory to those breaches, that the registration of Parklea as registered proprietor was procured by fraud and that Parklea was an accessory to that fraud. Those declarations should be made. 2. Almona also sought an order that the contract for sale and the transfer of the land by SAP to Parklea should be set aside. It sought the taking of accounts in which there would be an inquiry into the amount payable by it pursuant to the mortgage (this is on the assumption that on the setting aside of the contract of sale, the mortgage debt would be reinstated), and that on the taking of accounts there be an allowance for damages or equitable compensation payable by either SAP or Parklea to it. Presumably on the taking of accounts, if the contract of sale were set aside, account would also need to be taken of the rents and profits received by Parklea Corporation since 2016 and allowance would need to be made for improvements made by Parklea and for expenditure towards the obtaining of whatever development approvals have been sought or obtained, that may have improved the value of the land. 3. The primary judge did not rule on Parklea's submission that an order setting aside the transfer is barred by Almona's laches. Almona did not commence proceedings until 17 October 2018. His Honour observed that neither party had satisfactorily addressed the issue of laches. 4. Apart from the unresolved issue of laches it appears unlikely that the sale would be set aside where third parties' rights will have intervened, and where the mortgage debt to LBH VI which remains secured over the land is in the order of $158 million or more. That debt would not be discharged except, presumably, to the extent Almona was required to discharge its liability to SAP in order to obtain a re-transfer of the property. 5. That does not mean that Almona is necessarily without remedy. It claimed damages or equitable compensation in the taking of an account. 6. In Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; [2001] NSWCA 440, this court held that an account is the appropriate form of relief where a mortgagee is alleged to have sold the mortgaged property at an undervalue or otherwise in breach of its duty (at [41]). Whether the claim be properly characterised as one for equitable compensation or damages need not be determined now (Commonwealth Bank of Australia v Hadfield at [36]-[40], [45]-[46], [63]-[64]). On the inquiry on the taking of accounts it will be open to Almona to investigate the circumstances in which Wesco reduced its offer and to investigate whether $85.35 million was a true market price. It may be open to Almona to argue that even if $85.35 million were a fair market price, that did not represent the real value of the land (Potts v Miller (1940) 64 CLR 282 at 299-300) or the value of the land to it. Whether it would be entitled to compensation for any such additional value over the market price, where SAP was entitled to sell as mortgagee, could depend on whether Almona could have redeemed the mortgage if SAP had not been determined to sell to an associate. These are issues that could only be determined on an inquiry. 7. Although it seems unlikely that Almona would press its claim for a re-transfer of the property which remains subject to PT's mortgages, Almona should be given the opportunity to make submissions on that question. If Almona persists in seeking that order the proceedings will in any event need to be remitted in order for Parklea's defence of laches to be determined. 8. The orders I would make are: 1. Appeal allowed in part. 2. Direct the parties within 21 days to provide written submission as to the orders they contend should be made consistently with these reasons, including as to costs. ********** Endnotes 1. Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868. 2. See, eg, further amended notice of appeal, filed 17 November 2020, ground 1. 3. J D Heydon, M J Leeming and P J Turner, Meagher, Gummow and Lehane's Equity – Doctrines and Remedies (5th ed, LexisNexis, 2015) at [12-040] – [12-055]. 4. This term was loosely used to describe the paying out of the mortgage which, under the Real Property Act, s 74, did not transfer title to the mortgagee. 5. (1751) 2 Ves Sen 125 at 156; 28 ER 82 at 100. 6. Further amended notice of appeal, ground 6(e)(vii). 7. Within the meaning of Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 at 273 per Kitto J and Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd [1978] HCA 21; 139 CLR 195 at [51] per Aickin J (with whom Stephen and Jacobs JJ agreed). 8. Conveyancing Act 1919 (NSW), s 109; mortgage, cl 6.1(a). 9. Nash v Eads (1880) 25 Sol Jo 95 (Jessel MR), quoted in Belton v Bass, Ratcliffe and Gretton Ltd [1922] 2 Ch 449 at 466 (Russell J). 10. (1973) 129 CLR 477 at 506; [1973] HCA 20. 11. See also Corporations Act 2001 (Cth), s 420A. 12. (1978) 139 CLR 195; [1978] HCA 21. 13. Bangadilly at 227 (Aickin J). 14. (1888) 40 Ch D 395 at 409; Bangadilly at 225. 15. Farrar at 403. 16. Bangadilly at 227. 17. Bangadilly at 227-228. 18. Bangadilly at 228. 19. (1965) 113 CLR 265; [1965] HCA 17. 20. Latec at 271-272. 21. Latec at 273. 22. See Judgment at [25]. 23. Tcpt, 08/03/19, pp 249(47)-250(28), 252(1)-260(40), 262(30)-267(22). 24. Tcpt, p 267(10)-(15). 25. Affidavit, 11 January 2019, par 4. 26. Forsyth at 498. 27. Forsyth at 499. 28. In relation to the general law, see Croft and Hay, The Mortgagee's Power of Sale (4th ed, LexisNexis, 2019) at [11.2]. 29. See time entry narrations on KWM invoice 10052727. 30. Judgment at [683]. 31. Judgment at [191]-[272]. 32. Written submissions of cross-respondent, 30 October 2020, p 5. 33. Expressions of Interest Report to receivers, 11 November 2015, p 2. 34. Letter to receivers, 13 November 2015. 35. Appellant's written submissions, par 3.1. 36. Amended notice of appeal, 7 October 2020, par 2. 37. Judgment at [406]. 38. Judgment at [329]. 39. Judgment at [411]. 40. Judgment at [417]. 41. Judgment at [428]. 42. Judgment at [648]. 43. Judgment at [663]. 44. Judgment at [664]. 45. Judgment at [665]. 46. Judgment at [666]. 47. Judgment at [669]. 48. Judgment at [668]. 49. Appellant's written submissions, pars 5.5–5.6. 50. Bangadilly Pastoral at 227.5 (Aickin J). 51. Ibid at 228.5. 52. Almona Pty Ltd v Parklea Corporation Pty Ltd (No 4) [2020] NSWSC 553. 53. Almona (No 4) at [93]. 54. Almona (No 4) at [230] and [233]. 55. Almona (No 4) at [160]-[161]. 56. Almona (No 4) at [108]. 57. Almona (No 4) at [109]-[134]. 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