New South Wales Court of Appeal CITATION : COMMONWEALTH BANK OF AUSTRALIA v HADFIELD [2004] NSWCA 350 revised - 30/05/2005 HEARING DATE(S) : 20-24/09/2004 JUDGMENT DATE : 22 April 2005 JUDGMENT OF : Giles JA at 1; Tobias JA at 2; Bryson JA at 6; DECISION : Appeal allowed with costs: directions to settle mortgage accounts in accordance with decision on appeal. CATCHWORDS : MORTGAGES - sale under power - remedies of mortgagor - mortgagor sued Bank in District Court to settle mortgage accounts and charge Bank with liabilities for alleged sale at undervalue and conversion of goods left on premises - District Court settled accounts charging Bank with liabilities as claimed - on appeal, held that in substance District Court had applied negligence test not good faith test - Bank had not converted goods left on premises by mortgagor and still there on completion of Bank's sale - on complex facts, consideration of Bank's supposed obligation to carry out mortgagor's subdivision project before sale, interaction of interests of mortgagor with Bank's pursuit of its own interest as mortgagee - large charges against Bank set aside and Court of Appeal to settle mortgage accounts without them. Conveyancing Act 1919 LEGISLATION CITED : Real Property Act 1900 Environmental Planning and Assessment Act 1979 Trade Practices Act 1974 ANZ Banking Group Ltd v. Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195 Bourke v. Beneficial Finance Corporation Ltd [1991] ANZ ConvR 473 Commonwealth Bank of Australia v. Hadfield (2001) 53 NSWLR 614 Hallifax Property Corp. Pty Ltd v. GIFC Limited (1987) 4 BPR 9708 CASES CITED : Hawkesbury Valley Developments P/L v. Custom Credit Corporation Ltd (1995) NSW ConvR 55-731 Jiwira Pty Ltd v. Primary Industry Bank of Australia Ltd [2000] NSWSC 1094 Lacey v. Bank of New Zealand (NSWCA unreported 5 December 1997) Pendlebury v. Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 Silven Properties Ltd and another v. Royal Bank of Scotland plc and others [2004] 1 WLR 997 PARTIES : Commonwealth Bank of Australia - Appellant Dennis Ronald Hadfield - Respondent FILE NUMBER(S) : CA 40557/03 COUNSEL : R.G. Forster SC and A. Henskens - Appellant D.J. Higgs SC and F. Assaf - Respondent SOLICITORS : J.K. O'Sullivan (A) Jackson Smith (R) LOWER COURT District Court JURISDICTION : LOWER COURT DC 1244 of 2000 FILE NUMBER(S) : LOWER COURT Balla J JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40557/03 GILES JA TOBIAS JA BRYSON JA FRIDAY 22 APRIL 2005 COMMONWEALTH BANK OF AUSTRALIA v. HADFIELD Judgment 1 GILES JA: The reasons of Bryson JA demonstrate that the trial judge was in error in holding that the Bank was in breach of its duty as mortgagee exercising its power of sale, and in further holding that it was liable for breach of duty as bailee of, or for conversion of, the deep litter. It is not necessary to consider whether her Honour was in error in her assessments of the amount to be charged against the Bank and damages, both of which were fairly open to challenge. I agree with the orders proposed by his Honour. 2 TOBIAS JA: I have had the benefit of reading in draft the reasons for judgment of Bryson JA. I agree with the orders proposed by his Honour and generally with his reasons. However, I would wish to add the following observations with respect to the trial judge's finding that the Bank had acted in bad faith when exercising its power of sale under the mortgage. 3 Bryson JA articulates the primary plank of the trial judge's decision on the bad faith issue in [108] of his reasons. As his Honour points out in other parts of those reasons, the Bank sold the property in its unsubdivided state as one lot but expressly with the benefit of the council's development consent to its subdivision into two lots. Accordingly, and as observed by Bryson JA in [137], its value to a purchaser would have been increased by its approved potential for subdivision into two lots which would have been reflected in its market price (including the price paid for it by Angreb Pty Limited). 4 In these circumstances, the finding of the trial judge that the Bank had breached its duty to act in good faith by wilfully, recklessly or otherwise sacrificing the interests of Mr Hadfield by failing to itself take the necessary steps to register the two lot plan of subdivision and then selling the lots separately, cannot possibly be sustained in the circumstances of Mr Hatfield's tortured and frustrating relationship with the Bank as exposed by Bryson JA in, for example, [109] to [111] of his reasons. 5 Accordingly, the conclusion reached by Bryson JA on this issue in [139] to [140] of his reasons was inevitable. 6 BRYSON JA: The appellant (the Bank) appeals from the judgment and orders of her Honour Judge Balla given in the District Court at Sydney. The learned Trial Judge published reasons for judgment on 20 December 2002 and further reasons dealing with accounts, set-off and costs on 27 June 2003. The orders of 27 June 2003 settled an account of the moneys due on the dealings between the parties under a mortgage over Mr Hadfield's rural property in the Yarramalong Valley. Judgment was entered for Mr Hadfield for $732,729.37 being the balance found due to him with interest. Her Honour also made orders relating to costs, some of which were to be assessed on the solicitor and client basis. 7 In settling the mortgage account the learned Trial Judge charged against the Bank $495,000 which her Honour determined was the true value of the mortgaged land at the time the Bank sold it. Her Honour also charged the Bank with damages of $271,000 for conversion of chattels being a quantity of worms in a bed of material referred to as a worm farm ($200,000) and vermicompost ($71,000); with interest. Her Honour credited the Bank with credits totalling $392,217.87. The principal credit item was the actual sale price of $295,000. Other credits were $37,717.87 as Item 6, the conceded deficiency on sale meaning the unpaid balance on Mr Hadfield's accounts with the Bank, and $60,000.00 as Item 8, the sum which the Bank paid to the plaintiff's ex-wife Mrs Gostelow, in circumstances relating to her claim under a Family Law settlement and her caveat, which she withdrew on settlement of the Bank's sale on 31 March 1994. 8 Her Honour noted (Red 94-95) that counsel for Mr Hadfield submitted that there were two formulations of the duty of a mortgagee exercising his power of sale: a duty of good faith and a duty to take reasonable care to obtain the true market value of the mortgaged property. The Trial Judge decided to apply the good faith test and said: (Red 95B) This duty clearly falls short of the duty in negligence where the defendant would be obliged to take reasonable care in selling the plaintiff's assets. Counsel formally submitted that the proper test was the reasonable care test, but conceded that the weight of authority favours the good faith test. A similar formal submission was made before the Court of Appeal, which is precluded by authority from upholding the reasonable care test. It was not contended on behalf of the Bank that the Trial Judge did not correctly direct herself as to the applicable test, but it was contended that in substance her Honour applied a test of negligence and not the orthodox test of liability. 9 The good faith test is the orthodox legal doctrine; see Commonwealth Bank of Australia v. Hadfield (2001) 53 NSWLR 614 per Beazley JA at 621 [40]. (That report relates to an interlocutory appeal in this litigation). The Trial Judge referred to authorities establishing the good faith test, principally to Pendlebury v. Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 and also to Lacey v. Bank of New Zealand (NSWCA unreported 5 December 1997), Hallifax Property Corp. Pty Ltd v. GIFC Limited (1987) 4 BPR 9708, ANZ Banking Group Ltd v. Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195 at 201, Bourke v. Beneficial Finance Corporation Ltd [1991] ANZ ConvR 473. 10 A sale in good faith would fall within the following formulations in judgments in the High Court of Australia, collected in Lacey v. Bank of New Zealand by Handley JA: There is a clear line of Australian authority on the duty of a mortgagee in exercising a power of sale. In Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676, the High Court held that the duty was to act in good faith and the mortgagee must not act wilfully or recklessly sacrifice the interests of the mortgagor. See per Griffith CJ at 680, per Barton J at 695, and per Isaacs J at 701-2. The matter was further considered by the High Court in Australian and New Zealand Banking Group v Bangadilly Pastoral Company Ltd (1977-78) 139 CLR 195, where Jacobs J said: "It is true that bona fides in this connection is not concerned with the motive for exercising the power of sale but, once a decision to sell has been made it is concerned with a genuine primary desire to obtain for the mortgaged property the best price consistently with the right of a mortgagee to realise his security". Ibid at 201. Aickin J, at 224, referred to the decision of the High Court in Forsyth v Blundell (1973) 129 CLR 477, where Menzies J said, at 481: "To take reasonable precautions to obtain a proper price is but a part of the duty to act in good faith. This duty to act in good faith falls far short of the Golden Rule and permits a mortgagee to sell a mortgaged property on terms which, as a shrewd property owner, he would be likely to refuse if the property were his own". The test as formulated by the High Court has been recently applied by Cole J (as he then was) in Westpac Banking Corporation v Kingsland (1991) 26 NSWLR 700, where his Honour reviewed the authorities and concluded, at 705: "... there is no obligation upon a mortgagee to exercise a power of sale if it does not wish to do so ... ... there is no duty owed by a mortgagee to a guarantor to exercise the power of sale at any point in time The mortgagee may exercise its power of sale ... when it so chooses". 11 In Hawkesbury Valley Developments P/L v. Custom Credit Corporation Ltd (1995) NSW ConvR 55-731 at 55,650 McLelland CJ in Eq said:- 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. 12 Compare Silven Properties Ltd and another v. Royal Bank of Scotland plc and others [2004] 1 WLR 997 at 1004G-1005B (English Court of Appeal): [16] The mortgagee is entitled to sell the mortgaged property as it is. He is under no obligation to improve it or increase its value. There is no obligation to take any such pre-marketing steps to increase the value of the property as is suggested by the claimants… [17] The mortgagee is free (in his own interest as well as that of the mortgagor) to investigate whether and how he can 'unlock' the potential for an increase in value of the property mortgaged (eg by an application for planning permission or the grant of a lease) and indeed (going further) he can proceed with such an application or grant. But he is likewise free at any time to halt his efforts and proceed instead immediately with a sale. 13 In Pendlebury v. Colonial Mutual Life Assurance Society Ltd at 701-702 Isaacs J made observations which bear on the position of the mortgagee with respect to outlaying money on the security property. The mortgagee, when the permitted time arrives, is not bound to wait for his money, merely because the mortgagor might profit by delay. And as ex hypothesi he is engaged in a lawful endeavour to get back money which is overdue, he cannot be expected to further increase the advances of the mortgagor by expending further sums for his sole possible benefit, in the shape of a higher surplus price. A prudent owner might well risk considerable outlay in order to secure a possibly enhanced return. But the mortgagee is not called upon to do this, without express stipulation to that effect. He would get no advantage from the outlay beyond the amount of his debt, and he might end in increasing that. But if a further outlay is in the circumstances reasonable, and apparently necessary and prudent to conserve the mortgagor's interest, and to prevent his residual property being sacrificed, and if, having regard to what a cautious man would consider the total selling value of the property, it is manifestly safe, the mortgagee is, in my opinion, not justified in refusing to make or incur it merely because he can get enough for himself without it. It must, however, be safe; if it is not, the mortgagee would be taking risks for the benefit of the mortgagor which he is not called upon to do; if it is, he is merely using part of the mortgagor's own property to preserve the rest. Neglect in such circumstances would be manifestly improvident and would afford cogent evidence upon which a tribunal would be at liberty to think, and probably would think, the neglect reckless or wilful. 14 Exercise of the power of sale is undertaken by a mortgagee in the interest of the mortgagee, although the mortgagee is confined to exercise of the power in good faith for the purpose for which it was conferred; the mortgagee cannot act for any extraneous purpose or bye-motive, and cannot sacrifice the interest of the mortgagor; to do so would be to depart from good-faith exercise of the power, and from the concept of a sale in the exercise of the power. The sale must bona fide be a sale, not a sacrifice, and the mortgagee cannot be indifferent to the price provided only that its debt is paid. In the pursuit of its own interest the mortgagee is entitled to choose the time at which it sells the property. Title and areas. 15 The mortgage related to a rural property known as RMB 1134 Yarramalong Road, Wyong Creek. Title particulars in the mortgage show that the land was acquired by Mr Hadfield by Conveyance dated 23 March 1978 registered Book 3317 No. 860. Mr Hadfield mortgaged his land to the Bank by Mortgage dated 30 June 1986 registered Book 3673 No.592. The terms of the mortgage show that Mr Hadfield was the sole mortgagor and proprietor and the mortgage was entered into to secure indebtedness of Mr Hadfield and his then wife Kerry-Anne Hadfield to the Bank. The land title was then under the general law or Old System and the mortgage conveyed the legal estate to the Bank, so Mr Hadfield was the owner of an equitable estate in the land. Power of sale was conferred on the mortgagee by the Conveyancing Act 1919 s.109. The land was brought under the Real Property Act 1900 with Qualified Title on 26 September 1986. Deposited Plan 736396, registered on 22 September 1986, was prepared for the purpose of identification when bringing the land under the Real Property Act 1900 with qualified title. DP 736396 does not purport to be a plan of survey and the boundaries shown on the Plan were not investigated by the Registrar General. The area shown on DP 736396 was 14.54 hectares. 16 Mr Hadfield caused the Plan of Subdivision which became DP788851 to be prepared by Everitt & Everitt Pty Ltd, Surveyors of Wyong. This was registered as a Deposited Plan on 15 May 1989 and divided the land into two lots. Lot 1 was shown to have an area of 4.88 hectares, which was certified to be accurate by Mr Surveyor I.G. Everitt, but the area of Lot 2 was shown (extending abbreviations) as "9.66 hectares excluding road by deduction" meaning that the area was not established by survey, but merely by deduction from earlier survey plans. Mr Hadfield sold and transferred Lot 1 to Mr Christopher J.A. Gainey for $189,000 by Transfer Y449557 dated 14 June 1989 and registered on 28 June 1989; he remained the registered proprietor of Lot 2. Lot 2 had frontage to Wyong Creek on the north-west, and was intersected by Yarramalong Road. The northern part with the creek boundary was ultimately established by survey and registration of Deposited Plan 872263 (in which it was Lot 22) to contain 4.796 hectares and the southern part (Lot 21) was ultimately established to contain 8.106 hectares. The homestead and farm sheds stood on the southern block and there were no buildings on the northern block. 17 Notifications in the Second Schedule of the Certificate of Title included reservations and conditions in the Crown Grant and an exception of the road, and also: 3. Qualified Title. Caution pursuant to s.28J of the Real Property Act, 1900. Entered 26.9.1986 4. Limited Title. Limitation pursuant to s.28T(4) of the Real Property Act, 1900. The boundaries of the land comprised herein have not been investigated by the Registrar General. 5. BK 3673 No. 592 Mortgage to Commonwealth Bank of Australia. 6. E 893841. Writ by National Australia Bank Limited. 7. E 973969. Caveat by Kerry-Anne Gostlow. 8. I 60498. Caveat by Garry William Chapman & Graham Sidney Herbert. 18 The Caution had the effect of warning persons dealing with the registered proprietor that the land was held subject to any subsisting interest, whether recorded in the qualified folio or not: see subs.28J(1). The effect of the Notification relating to limited title is shown by its terms: the description of the land comprised in the qualified folio had not been investigated by the Registrar General: see subs.28T(4). The notifications relating to the Writ and the two caveats were already on the register at the time of a search dated 7 October 1993. 19 On 21 February 1994, shortly before the Bank's auction was conducted, Mr Hadfield lodged Caveat U 046951 forbidding the recording of any dealing affecting his estate or interest and stating "Nature of the estate or interest in the land: REGISTERED PROPRIETOR TO PREVENT FRAUD" (BLUE 4/884). 20 The Bank agreed to sell the land to Angreb Pty Ltd for $285,000 on 26 February 1994 after conducting an auction; and completed the sale on 31 March 1994 by Transfer U166483, on the registration of which Mr Hadfield and the Bank ceased to have any interest in the land. 21 Mr Hadfield's subdivision in 1989 by DP788851 cannot have taken place without the Bank's consenting to the subdivision plan and releasing the land sold from its mortgage. Mr Hadfield had a further proposal for subdivision in which Lot 2 DP 788851 which he still owned was to be subdivided into two lots divided by the road. He obtained development consent for this subdivision from Wyong Shire Council on 23 December 1992. It had taken Mr Hadfield over a year to get this approval. He had a Plan of Subdivision prepared by a surveyor in Wyong, Mr Paul D. Hutcheon, of Everitt & Everitt Pty Ltd; this plan was completed and Mr Hutcheon signed the Surveyor's Certificate on 16 November 1993. Exhibit C, tendered by Mr Hadfield is this plan, or a copy of it. Endorsement on that plan of Council Clerk's Certificate of the Council's consent was necessary for the plan to be registered and should have been readily available, but Mr Hadfield did not obtain it. Mr Hadfield did not obtain the consent of the Bank as registered mortgagee, which was also necessary for registration, and he did not lodge the plan for registration. The circumstances in which this plan was not lodged for registration while Mr Hadfield remained the registered proprietor are important in this litigation. 22 The plan which Mr Hutcheon certified on 16 November 1993 was eventually lodged for registration in October 1997 with a Council Clerk's certificate dated 10 October 1996, and was registered DP872263 on 30 October 1997. However it was not lodged by Mr Hadfield or by the Bank, neither of which any longer had a registered interest in the land; it was lodged by Angreb Pty Ltd, the transferee from the Bank. The Deposited Plan as registered appears to be identical with Exhibit C, except that it has additional signatures, Council Clerk's certificate and notes relating to registration. 23 A Section 88B Instrument was lodged and registered with DP872263; this instrument was executed by Angreb Pty Ltd and related to creation of an easement to pump water over the new Lot 22 (which had frontage to Wyong Creek) in favour of Lot 21. The Development Approval did not require the easement for water supply. The first references to the easement for the water supply are provision for it in an Advance Copy enclosed with Mr Hutcheon's letter of 12 November 1993 and in the Plan of Subdivision of 16 November 1993. The creation of an easement required a s.88B Instrument to be executed by the registered proprietor and lodged with the plan when lodged for registration. There is no reference in evidence to preparation of a Section 88B Instrument by or on behalf of Mr Hadfield. Its preparation would have caused no great difficulty, but it required professional attention, by a surveyor or by a solicitor. 24 I set out a table in which areas in acres and in hectares are converted at the rate of one hectare equals 2.47 acres. All relevant Deposited Plans show areas in hectares, but witnesses almost always refer to acreages. 1 ha = 2.47 ac Lot 1 DP736396 – land held at time of Mortgage and Qualified Folio. 14.54 ha = 35.9138 ac Lot 1 DP788851 – land sold to Mr Gainey in 1989. 4.88 ha by survey = 12.05 ac Lot 2 DP788851 – land retained by Mr Hadfield and sold by Bank 9.66 ha by deduction = 23.8 ac Lot 21 – southern lot in Ex. C referred to as Linen Plan and in DP872263 8.106 ha by survey = 20.02 ac. Lot 22 – northern lot 4.796 ha by survey = 11.84 ac. Total area of Lot 2 DP788851 as established by DP872263 12.902 ha = 31.86 ac. Area of land as stated by Mr Hadfield to Bank Officer Mr Smith on 5 October 1993 (i.e. House block approximately 15 ac. and a vacant block of approximately 12 ac.) 10.93 ha = 27 ac. Events and communications. 25 The substance of the Bank's written records relating to communications with Mr Hadfield, the Bank's decision to sell the property and the sale appear in a series of Bank records and letters from 29 August 1991 to 25 February 1994. Her Honour dealt with what these show (Red 62-63) and also set out the effect of the evidence of Mr Hadfield relating to these communications, (Red 73–76). Her Honour found (Red 88W-89C) to the effect that she accepted the history of the dealings set out in the Bank records, but that these generally only summarised the events; but further her Honour accepted Mr Hadfield's evidence as to oral conversations with Bank employees and preferred his evidence on one matter to a statement in a file note made by Mr Pearce, a Bank officer, relating to a conversation on 19 November 1993. I will set out a summary and not a complete narration of these communications. 26 In 1991 Mr Hadfield was indebted to the Bank on several accounts; he made his last payment on 1 May 1991 and thereafter was in default. Mr Hadfield made a re-financing arrangement with the National Australia Bank (NAB) in September 1991; NAB subsequently withdrew, and he continued to have a debt to NAB. National Australia Bank advanced him $10,000 on 27 September 1991. The National Australia Bank obtained judgment for $10,913.37 on 19 October 1992. Its writ of execution was registered on the title on 30 October 1992. 27 Findings by the Trial Judge establish that Mr Hadfield told the Bank on 29 August 1991 that the property would be subdivided into two lots and that Council approval in principle would be available within one month. The Bank advised him to proceed to voluntary sale. (Red 62 T – X). Mr Hadfield was told that a proposal for an increase in his loan had been rejected. The following day the Bank decided to issue letters of demand. 28 Family Law proceedings between Mr Hadfield and his former wife, now Mrs Gostelow were settled by Terms of Settlement and Orders on 17 October 1991 (Blue 1/59). Mr Hadfield was to pay Mrs Hadfield $60,000 within 28 days, with 18 percent interest if in default. Mrs Hadfield was to transfer the whole of her right, title and interest in the property to Mr Hadfield. If the money were not paid within six weeks the parties were to do whatever was necessary to effect a sale of the property and Mrs Hadfield was to receive $60,000 with interest from the net proceeds; Mr Hadfield was to receive the balance. The Terms of Settlement also dealt with disposition of personal property. Mr Hadfield did not ever make the payment. 29 Mrs Gostelow took some steps in the Family Court with the object of enforcing payment. The Bank obtained leave to intervene in the Family Law litigation. On 23 September 1992 the Family Court ordered, by consent of Mr Hadfield and Mrs Hadfield and the Bank in Terms of Settlement, to the effect that on payment of funds necessary to discharge liabilities under the mortgage the Bank was to deposit any funds left from the sale into a Commonwealth Bank account, withdrawals from which were to be under the control of Mr and Mrs Hadfield's solicitors. An injunction which Mrs Hadfield had obtained against the Bank relating to dealings with the property was discharged. These Terms of Settlement did not expressly confer a charge or security interest on Mrs Hadfield. The claim that she had an equitable interest which Mrs Hadfield later made in a caveat had little substance because the Family Court orders did not expressly confer an equitable interest on her, and her claim depended on a highly strained construction of the Family Court orders. She did not have priority over the Bank's registered mortgage, and was not in a position to resist the Bank's sale. In the circumstances there was unlikely to be any real difficulty in removing Mrs Hadfield's caveat. She withdrew the caveat on settlement of the Bank's sale on 31 March 1994, and later the Bank paid her $60,000, which the Trial Judge charged against Mr Hadfield and in favour of the Bank when settling the mortgage accounts. The payment of $60,000 was not made at the time of withdrawal of the caveat or at the time of settlement, but later, after she had made a complaint to the Banking Ombudsman. Evidence does not show what arrangements, if there were any arrangements, existed in connection with her withdrawal of her caveat. 30 The Bank took steps to exert its right to take possession of the property and sell it. On 2 February 1992 the Bank issued a Notice under s.111(2)(b) of the Conveyancing Act 1919 of its intended exercise of the power of sale. The notice was served soon after its date. When Mr Hadfield received the first notice he attempted to re-finance, but without success. He believed that he could reduce the debt if he sub-divided the property. Communications during 1992 included references by Mr Hadfield to his subdivision application. In several communications during 1992 bank officers told Mr Hadfield to the effect that the Bank was looking for a voluntary sale at a reasonable price, and that possession proceedings would be continued. 31 Notice under the Conveyancing Act 1919 was, or was thought by the Bank to be a necessary precondition to exercise of the power of sale. As the Certificate of Title showing qualified and limited title had been issued before then, a notice under the Conveyancing Act 1919 may not have been appropriate. Whether or not the Notice was effective, the Notice was a clear indication of the Bank's intentions, and opened the period of exercise of the power of sale and of the Bank's obligation to exercise that power in good faith. Sale by the Bank was clearly contemplated by the Terms of Settlement in the Family Court on 23 September 1992. The Trial Judge was of the view that the Bank was under a duty of good faith from September 1993 at the latest – (Red 99D). In my view the Bank came under that duty much earlier. At later times the Bank acted under provisions of the Real Property Act 1900 conferring on it a right to possession and a power of sale, and it was not disputed that this was appropriate. As both notices were given, it is not necessary to understand which of the two notices was effective; they both showed the Bank's intentions. 32 The Bank commenced proceedings for recovery of debt and possession in the Common Law Division on 16 June 1992, and on 29 October 1992 Registrar Irwin gave judgment for possession, with leave to issue a Writ of Possession. Counsel instructed by Mr Hadfield opposed leave to issue a Writ of Possession and put forward Mr Hadfield's intentions to obtain consent of Wyong Council to subdivision, to sell off a portion of the property to reduce the mortgage and to refinance the balance. Registrar Irwin decided to grant leave to issue the Writ after 1 January 1993. Mr Hadfield did not surrender possession, and he was ejected on 18 August 1993 by the Sheriff in execution of a Writ of Possession. After that the Bank issued a notice of its intended exercise of its power of sale under s.57(2)(b) of the Real Property Act 1900, which Mr Hadfield received on 26 October 1993; the amount shown in the notice was $190,577.48. 33 A memorandum of 31 July 1992 by Mr David Smith, the Bank's Wyong Branch Manager records that Mr Hadfield proposed deferral of sale of the property for a further twelve months to enable him to rejuvenate his businesses; and that the subdivision application had been prepared and Council officers had indicated approval in principle. Internal bank records show that this was considered and that a further proposal would be considered, that the Bank was unlikely to provide further funds and regarded a satisfactory proposal as unlikely. The Bank officers considered the implications of a possible improvement in Mr Hadfield's business and of his pending litigation in the Family Court. It was decided that recovery action was to continue. 34 On 23 December 1992 Wyong Shire Council gave Mr Hadfield development approval for a two-lot rural subdivision. 35 In January 1993 Mr Hadfield contacted Mr David Smith, Manager of the Wyong Branch of the Bank and told Mr Smith that he had development approval for the subdivision, that he had a financier to provide him with finance and he believed that he needed the Bank's consent before the property could be subdivided; and Mr Smith told him it was too late as the Bank was to proceed with the power of sale. Mr Hadfield saw Mr Smith later on the same day at the Wyong Branch, gave him the original Council approval and was again told that the Bank would proceed with the power of sale. 36 Shortly afterwards Mr Hadfield spoke to someone at the Bank's Head Office and said that the Wyong Manager was not letting him complete his subdivision. He was told that they would look into it and get back to him. It appears that the Trial Judge accepted Mr Hadfield's denial of the Bank's evidence about a response. 37 Mr Hadfield made attempts to sell part of his land, and later all of the land, in the course of 1993, although he had not then acted on the Development Approval or had a Plan of Subdivision prepared, and so did not have separate titles available with which to complete any sales. Mr Hadfield received Notice to Vacate from the Sheriff on 23 January 1993 and a second notice to vacate in March or April 1993. In March 1993 he listed the northern side of the property for sale with Mr Gainey of Rural Property Centre for $154,000. Mr Gainey, a Real Estate Agent, was the neighbour who had bought Lot 1 DP 788851 in 1989. A Bank memorandum of 12 March 1993 records a decision to allow Mr Hadfield to arrange sale of the subdivided land or refinance of his debt. This led to cancellation of some arrangements to take possession of the property. Mr Hadfield obtained an offer of $300,000 re-finance on 16 March 1993 from Moreland Finance, which did not proceed after a shortfall in valuation. Mr Hadfield spoke to David Smith in April 1993 and told him what he had done and asked for more time. Mr Smith told him that the Bank was not really interested and suggested that Mr Hadfield find other finance. (Red 74R–U) 38 A memorandum of 4 May 1993 records that Mr Hadfield communicated with a Bank officer and asked that the Bank allow him to sell part of the security property with the balance of a loan to be refinanced. He said that his divorce had been completed. He was asked to place a proposition to Mr Smith the Wyong Manager. Mr Smith recorded that he had just found out from Mr Hadfield that the subdivision had been approved by Council but not registered and that an auction was set down for Saturday 8 May 1993. In another conversation on 4 May Mr Hadfield told Mr Smith that he would have his solicitor forward relevant documents confirming full clearance arrangements. 39 An auction by Mr Gainey of the northern lot was scheduled for 8 May 1993. (The auction is sometimes spoken of as taking place in March.) Mr David Smith told Mr Hadfield a few days before the auction of 8 May 1993 that Mr Hadfield did not have the Bank's permission to conduct the auction. However the Bank took no steps to prevent it, and a Bank officer attended at the auction and observed events. It was Mr Hadfield's evidence that the property was passed in at $110,000. Mr Hadfield knew that he could not sell the northern lot without the sub-division being registered. A memorandum of 12 May 1993 records that Mr Hadfield stated that the property was passed in at auction with only one 'outside' bid at $80,000, that the bidder was keen but Mr Hadfield was looking for $125,000 and not $110,000. This memorandum was followed by a decision to proceed with the Writ of Possession. 40 A memorandum of 29 July 1993 records that Mr Hadfield had asked whether the Bank would accept part payment and move to a second mortgagee position with a residual debt between $50,000 and $70,000. This related to some re-financing proposal. His request was declined. 41 Mr Hadfield retained Mr Gainey again to sell the two lots on 22 July 1993; and gave him further retainers on 7 October 1993 and in November 1993. Mr Gainey continued endeavours to sell the land, and he prepared two Sales Advice Notices, one dated 7 October 1993 (Blue 2/275) for a proposed sale to Gregory Allen and Marilyn Norma Waller of the land to the south of Yarramalong Road (which later became Lot 22) and one dated 11 November 1993 for a sale to John Alexander Codrington of the northern lot which became Lot 21 for $97,500; this Sales Advice noted these conditions: 1. Subdivision must be registered [sic] 2. D.A. for turfing to be instated [sic] (Blue 2/274) 42 Two versions of the Waller Sales Advice Notice are in evidence, one exhibited by Mr Hadfield to his principal affidavit (Blue 192) and one sent to Messrs Abbott Tout by his solicitors (Blue 2/275). Both give the area as "approx 15 acres, (6.07 hectares)"; the one produced with the affidavit shows the contract price as $245,000, the one forwarded by his solicitors shows the contract price as $237,500 and this discrepancy was not explained. Mr Waller gave evidence that the price in the sale was to be $245,000, and that figure is shown on the copy of the Sales Advice Note which Mr Waller produced. Contracts of sale were not entered into. 43 The Trial Judge found (Red 734-741, 74R-75O) as follows: After receiving a second notice to vacate in March or April 1993, he said that he spoke again to David Smith in April 1993 and informed him that he was still trying to obtain finance, advised him of a valuation he had obtained of $400,000 and asked for more time. The plaintiff claims that Mr Smith advised him that the defendant was not really interested and he suggested that the plaintiff find other finance. The plaintiff said that he had his next conversation with Mr Smith on 4 May 1993 when he told Mr Smith that he wanted to sell the northern portion. He was told that the Bank would not support the proposal. An auction for the north side was scheduled for 8 May 1993. The plaintiff said that he knew that he could not sell the northern block without the subdivision being registered. A few days before the auction he said that he was told by Mr Smith that the defendant would not give him permission to auction the land and that at the auction the property was passed in at $110,000. He denied bidding at the auction. On 3 June 1993 the plaintiff received a third Notice to Vacate and said that the defendant delayed enforcing the notice because of intervention from the Rural Protection Assistance Board. On 10 August 1993 the plaintiff received a fourth notice to vacate the property. When the Sheriff arrived on 18 August 1993 he said he spoke to Mr. Hutchinson at the head office of the Bank who thought his plan to either sell the property as a going concern or in two lots sounded feasible. However, after Mr. Hutchinson spoke to Mr. Smith, who was present on the property, Mr. Smith told the Sheriff to proceed. The locks on the doors were then changed and the plaintiff was led off the property. He denied that he had been given an opportunity to telephone a financier as set out in one of the defendant's memos dated 18 August 1993. The plaintiff said that he then entered into an arrangement with Mr. Smith to be permitted to enter the property, supervised by a bank employee, to look after his livestock. This arrangement continued for one week after which the padlock was removed completely and he started letting himself into the property daily. He agreed that he had an opportunity to remove his personal property in this period. The plaintiff camped on Council property adjacent to the land and started winding up both the goat farming and turf business. He said that he continued to tend to his animals going on to the property every day up until the date of the auction. Both businesses were closed by October 1993. 44 A bank diary note of 18 August 1993, the date of execution of the Writ of Possession records conversations with Mr Hadfield that day about a stay of action. Mr Hadfield asked for a stay so that he could arrange refinance and was told that when the Bank received a full pay-out the Bank would hand back possession. Bank officers decided to proceed to take possession of the house property but to allow Mr Hadfield to have access to the rural property to tend "the livestock (goats, geese etc)". Mr Smith made a diary note of an arrangement to allow Mr Hadfield access for the purpose of caring for animals which were Mr Hadfield's responsibility, and to allow Mr Hadfield to have access to the house the following day 19 August 1993 to remove furniture: in this arrangement the animals were to be removed within a week. Mr Hadfield disputed some details of the Bank's evidence about communications on that day, but these details are not important. 45 On the following day 19 August 1993 some further arrangement was made for Mr Hadfield to continue to have access to remove small items, to milk goats and do other chores, and he was to remove all livestock by 31 August 1993. After execution of the writ of possession Mr Hadfield camped on Council property adjacent to the land and started winding up the goat farming and turf business. The goat farming business and the turf business were both closed by October 1993 (Red 75R). He continued to tend to animals and went on to the property every day up until the date of the auction on 26 February 1994 (Red 75 L-N). 46 An internal memorandum by the Bank's Legal Department of 1 October 1993 shows that it was then known that there was a development approval for subdivision into two titles. An internal bank memorandum of 5 October 1993 (Blue 2/269) shows that the Bank then proposed to auction the property in one line, and a decision was made to proceed in this way although Mr Hadfield had stated that he had Council approval to subdivide the property into two lots, was having a linen plan drawn up by a surveyor and had a buyer for the house block for $245,000 and wanted to know if he should get contracts drawn up. Mr Hadfield probably referred to the prospective sale of the southern lot to Waller. (See Red 75 O-Q). The Trial Judge found (Red 76O-P) that Mr Smith replied "No, the Bank has taken the property in one line and will be selling it in one line." The memorandum says: He also claims he is arranging for registration of the linen plan for sub division of the property and will proceed again to auction for the lower portion of the property. 47 On this occasion Mr Hadfield told Mr Smith that the house block was approximately 15 acres and there was a vacant block of approximately 12 acres and "He is having the linen plan drawn up by a surveyor now." Mr Smith reported: (Red 68D-K) There are several detracting features to this scenario viz; i) To allow this to happen subdivision would need to be finalised and costs met by CBA. ii) For Hadfield to issue a contract CBA would have to cede possession. iii) There would be an approximate residual debt of $5,000.00 and a separate sale for the other lot would have to be arranged. In view of the above it is recommended that CBA continue with proposed auction of property "in one line". This report is endorsed: "Yes – Hadfield had plenty of opportunities and blew them. Proceed as proposed." 48 A memorandum of 6 October 1993 records that Mr Warwick Hadfield, Mr Hadfield's brother, had complained about the Bank's response to his proposed sale. 49 On 26 October 1993 Mr Hadfield received the s 57(2)(b) Notice (which again notified the intention of the Bank to sell the property). (Red 75R). 50 It was Mr Hadfield's evidence that about late October 1993 (and he was not sure when) he rang Mr McQuiggan a Bank officer at the Sydney office of the Bank and in a conversation said: Two prospective purchasers have approached me in relation to the property. The Bank officer replied: We're not bloody real estate agents. We hold the property as one. We'll sell it as one. 51 It was anomalous that this conversation was attributed to Mr McQuiggan who was not dealing with Mr Hadfield's business with the Bank at that time, and in cross-examination Mr Hadfield acknowledged that he was uncertain about who it was he spoke to. The Trial Judge referred to this alleged conversation in her judgment (Red 76 Q-R) and it seems that she accepted that there was such a conversation (88Z-89B). The Trial Judge did not advert to other evidence in which Mr Hadfield accepted that it was not Mr McQuiggan to whom he spoke but someone else. Her Honour's omitting to note that it was someone other than Mr McQuiggan to whom Mr Hadfield then spoke is not a significant error; what the unidentified bank officer told Mr Hadfield accorded with the decision that the Bank had then made. 52 The Bank's known unwillingness to consent to subdivision or to separate sale of the southern lot (with the house) did not deflect Mr Hadfield from giving instructions to the surveyor to prepare a plan of subdivision. In late October 1993 Mr Hadfield instructed Everitt and Everitt Pty limited Surveyors to prepare a subdivision plan, and they then surveyed the property for subdivision. Mr Hadfield received an Advance Copy of the Plan of Subdivision on 12 November 1993 and the Advance Copy showed a greater area for the land than was shown in the earlier Deposited Plan (Red 75 R – T). The Advance Copy was stamped with a Disclaimer and accompanied by a letter from the Surveyors to the Registrar General commenting in detail on the plan. There is no evidence and there is no finding that Everitt & Everitt's letter or the accompanying Advance Plan were in fact ever sent to the Land Titles Office. Nor is there any evidence about any response. 53 In Mr Hadfield's affidavit (Blue 1/19 T – V) he said: "Immediately after I got the survey I went to the Wyong branch of the Bank and spoke to David Harold Smith: I said: "Here is an advance copy of the survey. It shows that there is extra acreage." He said: Okay, I'll let head office know." 54 There are no diary notes by Mr Smith or otherwise which confirm that the copy was delivered by Mr Hadfield to Mr Smith or that Mr Smith was told by Mr Hadfield that there was "extra acreage". There is no record that a linen plan was delivered or shown to Mr Smith. Mr Smith died before Mr Hadfield issued proceedings and before there was any known controversy. The Bank came to have in its files an Advance Copy of the Plan of Survey and of Everitt and Everitt's letter to the Registrar General commenting on it. The Trial Judge accepted Mr Hadfield's evidence that he delivered a copy of the survey to Mr Smith immediately after receiving it; this finding must refer to the Advance Copy (Red 75 T-U). What Mr Hadfield says he told Mr Smith appears to fall within the Trial Judge's acceptance of Mr Hadfield's evidence as to oral conversations with Bank employees. 55 A letter from Aubrey Brown Partners, Solicitors of Wyong, on behalf of Mr Hadfield to Messrs Abbott Tout Russell Kennedy, solicitors on behalf of the Bank dated 12 November 1993 (Blue 2/273) referred to the Sales Advices and said: "Each sale is subject to a subdivision consent which, we are instructed, should be obtained shortly. Please advise as a matter of urgency whether or not your client will consent to the sales proceeding." This letter is not a request for the Bank to consent to registration of a subdivision plan. It seems to have been written without the solicitors' knowing that Council's consent to subdivision had been given on 23 December 1992. The date of the letter is the date of the Advance Copy and of the surveyor's letter to the Registrar General; the survey plan was not signed by the surveyor until later, 16 November. 56 Her Honour found, in relation to Aubrey Brown Partners' letter of 12 November 1993 (Red 89N – O) "I am satisfied that the defendant became aware that the plaintiff's solicitors were taking steps to obtain consents to the subdivision by [their letter] dated 12 November 1993." This was a misunderstanding on the part of Mr Hadfield's solicitors, and also of her Honour, as Council's consent had been obtained on 23 December 1992; her Honour referred to this elsewhere. 57 On 15 November 1993 Abbott Tout by letter advised the Bank, referring to this correspondence: (Blue 2/272) It is our experience that subdivision is a very lengthy and difficult process in these circumstances we recommend that the Bank refuses the Defendant's suggestion. 58 Her Honour found (Red 89Q-S) of Messrs Abbott Tout's letter of advice of 15 November 1993 (Blue 2/272): "It is likely that the solicitor writing the letter of advice was unaware that Council approval had been obtained as conceded by Mr McQuiggan." This is indeed likely, but the misunderstanding was caused by Mr Hadfield's solicitors' not stating, and apparently not knowing, that there actually had been development approval the previous year. 59 The Trial Judge found (Red 89W – 90E): For these reasons I am satisfied that the defendant had formed the view by mid 1993 that there was no point in assisting the plaintiff as set out for example in the memo dated 4 May 1993. On 5 October 1993 Mr Smith was told that the linen plan was being drawn up, but the defendant expressly decided to proceed with the sale in one line. That view was reinforced by the misleading letter received from the defendant's solicitors. Mr McQuiggan after taking over the day to day management of the plaintiff's loan file did not review the previous decision to proceed with the sale in one line despite the provision of the survey plan to the defendant shortly before he took over the file. I am satisfied that that this was an additional matter from which the defendant should have appreciated that the completion of the subdivision was merely a formality. Some parts of this passage call for observations. When Mr Smith was told on 5 October 1993 that the linen plan was being drawn up Mr Hadfield had not yet given instructions to the surveyor; he did so late in October. The misleading letter from Messrs. Abbott Tout was misleading because it was based on what Aubrey Brown Partners had told Abbott Tout. The survey plan provided was marked "Advance Copy", it was stamped with a disclaimer and was heavily qualified by the accompanying letter from which it appeared that completion of the subdivision might not be a formality. If this finding means or implies that delivery of the Advance Copy and the Everitt & Everitt letter of 12 November 1993 should have made the Bank change its decision to proceed to sale in one line, there was no reasonable basis for that conclusion. 60 On 18 November 1993 Mr Pearce of the Bank wrote to Messrs Abbott Tout and among other things stated: (Blue 2/276) At this time the Bank has no intention of subdividing the subject land which is in one lot. The debtor applied for, and had approved, a development application which we believe is current. It is the Bank's intention to sell the property with the approved DA current. In the meantime, offers to purchase, whether in one or two lots, are not being considered as it is the Bank's firm intention to proceed to public auction as soon as possible. 61 Mr Pearce made a note, on a file copy of his letter to Abbott Tout of a conversation with Mr Hadfield on 19 November 1993. Mr Pearce's file note is as follows: (BLUE 2/247-248) Dennis Hadfield rang - said he is nearly in a position to register the subdivision and asked whether we would agree to sale of one lot if that would pay the Bank out in full. I explained the Bank's position (again) and suggested he place all of the facts and information about progress with the subdivision with his solicitors together with details of the proposed sale. The Bank will listen to a feasible proposal provided it is done in the short term. 62 Mr Hadfield disputed some of the contents of this file note and the Trial Judge preferred his evidence to the file note; Mr Pearce did not give evidence. (See evidence at Blue 2/247-248). The Trial Judge found that the invitation to place facts and information about progress of the subdivision and details of the proposed sale was not made. Mr Hadfield's evidence on this subject was hard to follow and not altogether consistent, but ultimately he accepted the contents of the file note, except for the part which the Trial Judge rejected. The conversation of 19 November 1983 with Mr Pearce was not an occasion when Mr Hadfield asked the Bank to consent to the subdivision or gave the Bank an opportunity to endorse its consent on a registrable linen plan. The remainder of Mr Pearce's file note, omitting the passage which the Trial Judge rejected, does not record a refusal of consent to registration of a subdivision plan. 63 On 24 February 1994 solicitors representing Mr Hadfield sent the Bank a letter by FAX referring to the auction of the property which was to take place two days later on 26 February 1994 and calling on the Bank to put off the auction, failing which there would be an application to the Supreme Court for an injunction on Friday 25 February 1994. The letter referred to the development approval of subdivision and asserted that if the land were sold as separate lots it would net Mr Hadfield at least $40,000 more that if sold in one line. The letter also alleged that an extra 8 acres of land in the triangular lot (the northern lot) had not been disclosed to potential purchasers. The letter said "Our client is ready, willing and able to comply, at his cost, with all outstanding requirements of the Wyong Shire Council …". This letter is as close an approach as was ever made to a call on Mr Hadfield's part on the Bank to facilitate registration of the Plan of Subdivision, and it did not ask the Bank to assist him to meet the cost. The Bank refused to comply. On 25 February 1994 Mr Hadfield applied to the Common Law Division, by an application in the possession proceedings which the Bank had commenced in 1992, for an injunction to restrain the sale which was to take place on the following day; the Court (Colin Allen J) refused an injunction. 64 The auction proceeded on 26 February 1994. Accounts of events at the auction differ slightly; bids closed at $280,000 (or $285,000) and the property was passed in, but was sold later that day after negotiations. The purchaser was Angreb Pty Ltd and its principal was Mr Theo Onisforou, barrister. The Bank completed the sale by Transfer U166483 dated 31 March 1994 for consideration of $285,000. Survey uncertainties. 65 If Mr Hadfield had undertaken the project of registering the plan of sub-division in a purposeful and well-considered way it is probable, as the Trial Judge found, that the plan would have been registered by about mid-January 1994. Registration by that time was no more than probable; there were significant uncertainties. One uncertainty related to areas and boundaries stated and indicated by the Advance Copy of the plan and commented on by Everitt and Everitt Pty Limited in their letter of 12 November 1993, (Red 95) a copy of which Mr Hadfield gave to Mr Smith. Everitt and Everitt's letter (Blue 1/95) is addressed to "Land Titles Office Investigation Branch", marked "Attention: Investigating Drafts Person" and headed "Report to Accompany Linen Plan." From its terms the letter was intended to be lodged with the Land Titles Office for an advance ruling or when the linen plan itself was lodged for registration. So far as appears the letter never was delivered to the Land Titles Office. The letter noted that there was a substantial variation between the area stated in the survey and the area ascertained by deduction in Deposit Plan 78851, and set out four points to explain the variation. These points were: (Blue 1/95) i) The base plan (N97 1503) is 138 years old and it is apparent that the course of Wyong Creek has altered substantially over this period of time. There is no evidence to suggest that this movement had been other than "imperceptible" and "gradual." ii) Surveys performed in this era often did not measure to the "true" bank as defined by s.235 (A) Crowns Lands Consolidation Act 1913. iii) There has been no complete re-survey of Portion 9 until now. iv) Various registered plans have redefined the external boundaries of Portion 9, in position and bearing, that differ substantially from P. O. in N97 1503. 66 The explanations which the surveyor gave potentially could have raised large difficulties for the registration of the Deposited Plan, which would involve adoption by the Land Titles Office of the plan's indications of the creek boundary and areas, and acceptance of a creek boundary which had altered substantially since the survey for Parish Portion 9, which apparently took place about 1855, and could involve adverse effects on the neighbouring landowner whose land was also bounded by Wyong Creek. Descriptions and statements of areas and boundaries, particularly in Nineteenth Century surveys, by reference to banks or streams have been a recurring source of difficulties for measurement of area and establishment of boundaries. Whether any actual difficulties and delay in registration of the plan were encountered because of survey difficulties would depend upon the view taken by the Investigating Draftsperson and on other survey information available in the Land Titles Office, and possibly on the attitude of the neighbouring landowner. The terms of Everitt and Everitt's letter show, on any reasonable view, that there was significant risk that some survey difficulty might cause delay in registration. 67 When what is in substance the same plan was registered DP 872263 on 30 October 1997 there was little delay in the process of registration, which appears to have taken about 17 days from lodgement at the Land Titles Office. No reason appears for the year's interval between the Council Clerk's certificate on 10 October 1996 and lodgement of the plan for registration in October 1997. Mr Hadfield's Senior Counsel pointed to this experience as an indication that the apparent survey difficulties caused no difficulty or delay in obtaining registration of the plan. However the actual experience some three or four years later is an uncertain indication of what the outcome would have been, and no indication at all of what would have been reasonably foreseen, in November and December 1993 and January 1994. The Registrar General's papers relating to registration in 1997 were subpoenaed but could not be produced as they had been destroyed. Registration of the plan did not take place on the application of any of the present parties, and it is not known whether the survey difficulties pointed out in Everitt and Everitt's letter of 12 November 1993 were pointed out to the Registrar General in 1997, or whether the application was supported by some documents which facilitated acceptance of the areas and boundaries. Conceivably it might have been supported by other survey information, consents of neighbouring owners or otherwise. From the point of view of the Bank, if it had been called upon to consider the matter in November or December 1993 or January 1994, there should have appeared to be considerable risks of difficulty and delay in registering the plan because of survey difficulties. Bases of findings on breach of mortgagee's duty. 68 The Trial Judge in expressing conclusions adverse to the Bank said: (Red 96Q to S): The plaintiff asserts that the defendant breached that duty of good faith by: 1. Failing to complete the subdivision of the property; 2. Undertaking inadequate and improper advertising. The Trial Judge also said: (Red 99Q) "On the basis of all of my findings I am satisfied that that the defendant, consistently with its duty of good faith, should have consented to the subdivision and assisted the plaintiff in effecting the subdivision." As her Honour does not expressly refer to anything else which the Bank was to do it should be understood that apart from producing the Certificate of Title for registration of the Plan, paying the registration fee to be charged by the Land Titles Office of $410 to $510 was all the assistance to Mr Hadfield referred to. There was no finding and it seems no evidence that Mr Hadfield asked the Bank to pay the registration fee. The judgment was not based on the view that the Bank should have taken up the project of subdividing the property and seen to registration of the plan. It is based on the view that lack of good faith is shown by the Bank's not assisting Mr Hadfield while leaving the project in his hands. The judgment was not based on the view that there was a sale at an undervalue and that that showed that the power of sale was not exercised in good faith, or that there was a sacrifice of Mr Hadfield's interests. Consideration of the value of the land took place in the context of assessing compensation. 69 The Judge's contemplation that the project of registering the subdivision plan would have been carried out by Mr Hadfield is exemplified by her treatment of the likely course of events in registration (Red 97K-M) where the findings relate to what Mr Hadfield would have done, and it was found that he would have pursued the subdivision in a timely manner if he had obtained the consent of the Bank. 70 Her Honour found that the Bank: (98K-L) … was, as at November 1993, well aware that it was likely that the property, if subdivided, would achieve a higher sale price. There were also findings to the following effects. On 5 October 1993, when Mr Smith the Wyong Manager had been told that the Plan of Subdivision was being drawn up, the Bank expressly decided to proceed with the sale in one line. (Red 98S-T). The decision to sell the property in one lot had been made prior to Mr McQuiggin a bank officer taking over management of Mr Hadfield's loan file about mid-December 1993, and Mr McQuiggin did not consider that it was appropriate for him to revisit this decision, and continued to act on the decision of the Bank to sell the land as one property. The Bank did not actively take steps to ensure that it did comply with its duty to Mr Hadfield in this period. (98S-W). The Bank, consistently with its duty of good faith, should have consented to the subdivision and assisted Mr Hadfield in effecting the subdivision. (Red 99P-R). The only concrete assistance referred to was providing a registration fee of $410 to $510. Involved in her Honour's view, although not expressly stated, is that the Bank should have been confident that Mr Hadfield would carry though the project and obtained registration of the deposited plan in a timely way, that it was appropriate for the Bank to shape its arrangements to exercise its power of sale on that confidence, and that lack of good faith appears in the Bank's not having done so. The Trial Judge's reasons do not spell out circumstances in which the Bank should have been confident of these outcomes. 71 The Trial Judge found (Red 98C-H) to the effect that the only expense still to be incurred prior to registration was a registration fee in the order of $410 to $510, and that that modest sum was properly characterised as an amount appropriate to prevent the property being sacrificed, and not as a considerable outlay. It appears to have been her Honour's view that the Bank should have made that money available to Mr Hadfield. This view is deficient in that it does not accommodate itself to Mr Hadfield's never having asked the Bank for any such assistance, and it does not address the possibility that there may have been other professional attendances and expenditure required to deal with survey problems and potential difficulties relating to the caveators. If the Bank had started financing the Plan of Subdivision the probabilities are that only a modest sum would have been required but there was no certainty that other needs for expenditure would not have presented themselves. It appears to have been her Honour's view that the Bank should have taken the initiative and embarked on expending whatever moneys proved to be necessary, without being asked. Hadfield seeking assistance and execution of plan. 72 An adverse finding based on the Bank's not having given Mr Hadfield assistance of some kind needs a base in some distinct request from Mr Hadfield or opportunity offered by him to give the assistance; if Mr Hadfield distinctly gave the Bank an opportunity to take some course, consideration whether a lack of good faith were shown by not taking that course could begin. It would be a necessary basis for any adverse finding based on the Bank's deciding to sell the property in one line and adhering to that decision that the Bank should have been distinctly given an opportunity by Mr Hadfield to consent to his plan of subdivision so as to enable him to subdivide it, and should have been distinctly asked to sell it in two lines. Selling in two lots could foreseeably involve the Bank in some further difficulty, such as a need to meet some unpaid part of its debt after the sale of the first lot by endeavours to sell a relatively less saleable second lot. It was reasonable to be wary of the possibility of being left with the northern lot after selling off the southern lot; Mr Hadfield had not been able to sell it at his auction. Concern was expressed about the possibility that the Bank would sell the more valuable southern lot and be left with the less valuable northern lot, which was unimproved, had no house, building or other significant improvement, no building permit and was subject at least in large part to one in one-hundred year flooding. (See Red 68H). Mr Codrington made a condition in the Sales Advice about a Development Approval for turf farming. Reluctance of the Bank to involve itself in subdivision and separate sale, and deliberate adherence to its intention to sell in one line, while not the only conceivable outcome of bona fide consideration, are reasonable attitudes, and a case would have to be made that the Bank turned aside from a concrete and realistic opportunity to take some other course before the conclusion could be reached that adherence to the project of selling in one line showed a lack of good faith. 73 In November 1993 Mr Hadfield's proposal was that Mr Hadfield would subdivide the land and sell the two lots separately to Messrs Codrington and Waller, to whom Mr Gainey had issued Sales Advices, while the Bank's proposal was to exercise its power of sale and sell the property in one line in the state in which the title then was. There was no point at which Mr Hadfield told the Bank that it was his wish that the property be subdivided and that the Bank offer it for sale in two separate lots. For the Bank to proceed to prepare for a sale in two lots on the basis that Mr Hadfield would bring titles for two lots into existence by registering his plan would be a departure from anything that either of them expressly proposed at any time. It is much more than a point of formality that Mr Hadfield did not in a clear way offer the Bank an opportunity to endorse its consent to registration on a registrable plan of subdivision and call on it to do so. If he had given evidence of any such event the basis on which Mr Hadfield was acting, and whether he was willing to go ahead with the subdivision so that the Bank could conduct its own sale, and whether he was willing and able to do so in a prompt and timely way, and to deal with any difficulties that might emerge such as those relating to survey, requisitions or caveats, would have come to the surface. As there was no such event and he did not give evidence of one, no point ever emerged in the adduction of evidence where it was appropriate to investigate what his attitude would have been. 74 In cross-examining Mr Hadfield directed to what he proposed to a bank officer on 5 October 1993 it did not prove possible, although counsel persisted, to induce him to say clearly whether he then did or did not intend to sell off the whole of his property – see Black 1/112S – 113L. Elsewhere in his cross-examination he said to the effect that at the time of the injunction application on 25 February 1994 it was his approach that he wanted to be able to retain the southern lot and sell the northern lot; but that the state of his mind changed day to day. (Black 1/187R-V). Mr Hadfield did not have a clear intention to sell to Messrs Codrington and Waller in two lots: (Black 1/130D-L). Q. Mr Hadfield, I suggest that within days of a sale notice issue to Codrington and Waller, you were speaking to the bank about only selling part of the property paying out the bank and retaining the rest of it, weren't you? A. Well, there was the feasibility there, yes, because the Codrington side, it was a give away and if there was enough the other way, that gave me enough to have some sort of restructure to regroup but it wasn't for me to agree to do, it was a compromise and it wouldn't work this way, it was going the other way. That's all I have ever all the way have tried to do, is to settle this. Executing the linen plan. 75 There was no finding and no evidence of any event in which Mr Hadfield asked the Bank to consent to the subdivision by executing a registrable copy or linen plan as mortgagee and placing its seal in the panel for consents, or that he delivered a linen plan to the Bank for that purpose, or called on the Bank to execute one. It follows that there was no refusal to execute a linen plan. Signature by the registered proprietor and every mortgagee was required for registration by s.195D(1)(e) of the Conveyancing Act 1919. Production of the Certificate of Title at the Land Titles Office was also essential for registration of the plan. There is no finding and there is no evidence that Mr Hadfield at any time asked the Bank to provide him with any assistance in registering the linen plan as a Deposited Plan, such as by advancing money to him or paying registration fees or any other money in relation to the project, or by producing the Certificate of Title or in any other way. 76 So far as Mr Hadfield's evidence can be understood, it does not seem that he claimed in evidence that there was any occasion on which Mr Hadfield presented the linen plan to the Bank and expressly asked the Bank to consent to it, or otherwise gave the Bank the opportunity to consent to it. There is no finding in the judgment that a linen plan was delivered to the Bank. Among the findings in the judgment are these: (Red 89M-N) I am satisfied from the defendant's file note dated 5 October 1993 that the defendant was aware that the plaintiff was having the linen plan drawn up. The Trial Judge also found (Red 75R-U): In late October 1993 the plaintiff attended at surveyors, Everitt & Everitt Pty Ltd who then surveyed the property. The plaintiff received an advance copy of the survey on 12 November 1993 which confirmed that there was extra land which was not disclosed in the original Deposited Plan. The plaintiff said that he delivered a copy of this survey to Mr Smith immediately afterwards. It was the evidence of the plaintiff that he obtain a copy of the linen plan on 16 November 1993. From the Trial Judge's general acceptance of the plaintiff's evidence I understand that this passage should be treated as findings of fact. 77 The Judge accepted Mr Hadfield's evidence about the delivery of the survey plan to the Bank in November 1993; (Red 89C-D): this is not a reference to the linen plan, but to the Advance Copy. In evidence referred to in the judgment (Red 75STU) Mr Hadfield said that he received an Advance Copy of the survey on 12 November 1993 and that he delivered a copy of the survey to Mr Smith immediately afterwards; that is, before the date of the linen plan 16 November 1993. The Trial Judge said (Red 96U-W): I have found that the defendant had been told that the linen plan was being prepared and had been prepared by 23 November 1993 and that this was brought to the attention of the defendant. The significance of the date 23 November 1993 does not appear. The Surveyor's Certificate on the plan is dated 16 November 1993 which is the date on which Mr Hadfield said that he obtained a copy of the linen plan. 78 While Mr Hadfield was being cross-examined about his conversation with Mr Pearce on 19 November 1993 he spoke at length, not in response to a question but quite inconsequentially, (Black 1/126W-127G) and in the course of so doing said: "… I'd already been to David Harold Smith with the linen plan and they weren't going to sign it." This was not treated by the Trial Judge as a foundation for a finding that the linen plan had been delivered to the Bank, if that is what it was intended to mean. It could not reasonably have been the basis of a finding that the Bank was called on or given an opportunity to execute the linen plan and it is unremarkable that the Judge did not so treat it. Mr Hadfield also said (Black 1/189J-N) in cross-examination and unresponsively, to the effect that he took the linen plan in with him and asked Mr Smith "could we get a signature," and the Bank was not prepared to sign the linen. No finding of a refusal by the Bank was made on the basis of this evidence, and such a finding could not reasonably have been made. Mr Hadfield did not claim to have left the linen plan with Mr Smith. Mr Hadfield's unresponsive answer (Black 1/126W-127G) suggests, if it is to be taken literally, that he took the linen plan to Mr D.H. Smith at some time between 16 and 19 November 1993, that he showed Mr Smith the linen plan and Mr Smith said that the Bank would not consent to it. If it really was Mr Hadfield's position and his evidence that there had been some such event, he would certainly have made it part of his case in chief and given evidence of it in a clear way; his passing references in unresponsive answers while cross-examined could not be the basis of any finding; and were not the basis for any finding. 79 Counsel for Mr Hadfield contended "It is immaterial whether a linen plan was ever presented to the Bank" and also "The submission that 'no linen plan in registrable form was ever presented by [Mr Hadfield] to the Bank for its consent does not need to be dignified with a response. It is manifestly absurd and flies in the face of the evidence." Quite to the contrary it is simply the case that Mr Hadfield did not give evidence that he ever presented a linen plan to the Bank for its consent and the Trial Judge did not find that he did. After years of unsatisfactory dealings with Mr Hadfield, and with the elapse of about a year after obtaining Council's consent, only a highly concrete approach to the Bank for its consent to a plan of subdivision could ever have a part in a demonstration that, acting in good faith, the Bank should have turned aside from its own chosen course. In practicality, more was required than that the Bank should endorse its consent on the registration copy and produce the Certificate of Title at the Land Titles Office; either the Bank or Mr Hadfield had to undertake the management of registration and in association with it, dealing with any survey or other requisitions on the plan, and dealing with the caveats. It would be unrealistic to act on the basis that the Bank should have relied on Mr Hadfield to negotiate a way through these difficulties and wait on him to do so, in view of his performance in the previous years; if the difficulties (whatever they were) over the caveats could be cleared away, it was for Mr Hadfield to do so, but he had not done so; it seems that he did not ever do so. If the Bank had undertaken the project of registering the plan it would have risked becoming a suitor to Mr Hadfield for his attention and co-operation in a project in his own interest to which he had not attended himself. The case put to the Trial Judge and decided by her was not a claim that the Bank should have taken the initiative to embark on managing this part of Mr Hadfield's affairs. It was incautious of Mr Hadfield's counsel to say that this part of the Bank's case was manifestly absurd; the expression could well be employed against counsel's own submission. 80 The findings in the judgment include these: (Red 89L-O) It is clear even from the defendant's records that the plaintiff contacted the defendant on a number of occasions in relation to his plans to subdivide. I am satisfied from the defendant's file note dated 5 October 1993 that the defendant was aware that the plaintiff was having the linen plan drawn up. I am satisfied that the defendant became aware that the plaintiff's solicitors were taking steps to obtain consents to the subdivision by letter their dated 12 November 1993. However it is clear on his evidence that on 5 October 1993 Mr Hadfield was not having a linen plan drawn up, and that he gave the surveyor instructions late in October 1993. 81 Her Honour also found: (Red 75S-U) The plaintiff received an advance copy of the survey on 12 November 1993 which confirmed that there was extra land which was not disclosed in the original Deposited Plan. The plaintiff said that he delivered a copy of the survey to Mr Smith immediately afterwards. This finding, and the finding (Red 88 W – 89 C) that the Trial Judge accepted the evidence of Mr Hadfield as to a number of matters including "the delivery of the survey plan to the defendant in November 1993" can only refer to the Advance Copy which Mr Hadfield distinctly said, in chief, he delivered to Mr Smith: and was later in the Bank's files. On any reasonable reading these findings cannot refer to two deliveries of two different plans. 82 Her Honour also said: (Red 75U) It was the evidence of the plaintiff that he obtained a copy of the linen plan on 16 November 1993. In my understanding of the findings overall, the Trial Judge accepted that this happened. Her Honour also found: (Red 88Y-89C) In addition to these records I accept the evidence of the plaintiff as to his oral conversations with the defendant's employees in particular the conversation with Mr Smith in January 1993 in which he asked for the defendant's consent to registration of the subdivision, the complaint shortly afterwards to Mr Pearce or Mr Green and the delivery of the survey plan to the defendant in November 1993. 83 The Trial Judge found (Red 96 T – X): I have already found that the Council had approved the subdivision of the property into two lots on 23 December 1992. I have found that the defendant had been told that the linen plan was being prepared and had been prepared by 23 November 1993 and that this was brought to the attention of the defendant. In arriving at these findings I accept the evidence of the plaintiff and take into account the correspondence from Messrs. Everitt & Everitt Pty Ltd and the defendant's file note dated 31 December 1993. Plainly this is not a finding that the linen plan had been shown to Mr Smith or to the Bank and if her Honour intended to find that it had been, that finding would have appeared at this point. 84 There was then no finding of any event in which the project of getting the Bank to consent to the Plan of Subdivision was made concrete by an application or request to the Bank to execute the Plan, or for any other assistance towards registration. Although the Trial Judge's reasons do not say this, in my understanding her Honour's view that the Bank was in breach of its duty of good faith must have depended on the view that the Bank was obliged in good faith to take the initiative to complete the project of subdivision, to take the initiative to engage co-operatively with Mr Hadfield in managing the steps necessary to bring about subdivision, and to take the initiative in ascertaining what needs for money he had, and in meeting them. In view of the history of the parties' relationship, if the Trial Judge was of the view that the Bank was obliged to act in some such way, that view was entirely unrealistic. Excursus on the linen plan. 85 At this point I make an excursus into a subject which received much attention during the hearing of the appeal. Mr Hadfield stated in his principal affidavit that he gave the Advance Copy to Mr Smith (Blue 1/19 [51]) but did not say that he gave Mr Smith or any Bank officer the Linen Plan. When Mr Hadfield gave evidence in chief on the third hearing day a survey plan was referred to (Black 1/64-66,67). The evidence is not completely clear but its effect appears to be that a copy of the plan which Mr Hadfield had in the witness box was "a linen", that "I picked it up directly off the surveyor as soon as it was ready to be picked up" around 16 November 1993; that he obtained the Advance Copy on the same day as he obtained the larger plan (referring to the "linen") on 16 November 1993; he had had the "linen" since 16 November 1993; the linen was the subdivision survey plan; he had stated in an affidavit that he did not have it because he could not find it, but he found it only a week or so before giving oral evidence. The document he referred to as "a linen" was probably Marked for Identification 3 at about this point; the transcript does not show. On the following day (Black 1/96) Mr Hadfield's counsel tendered this document without objection by the Bank and it became Exhibit C described as "Final Linen Plan". A copy of Exhibit C appears in the Appeal Book (Blue 3/629); unfortunately the exhibit itself could not be located when the appeal was heard and counsel were unable to tell the Court of Appeal whether Exhibit C literally was, as described, a Linen Plan. As Exhibit C was given the description "Final Linen Plan" at the trial, it was spoken of by Mr Hadfield in evidence as "a linen" and there was no challenge or discussion of this description I accept that what Mr Hadfield produced while giving his oral evidence literally was a linen plan. The copy in the Appeal Book appears to be exactly the same as DP872263, except for markings associated with certification and registration; DP872263 must also be a linen plan but I see no improbability at all about there being two exactly similar linen plans, one handed out by the surveyor to Mr Hadfield and found again after many years, and one used to register a Deposited Plan. 86 While under cross-examination (Black 1/126-127) about a conversation with Mr Pearce, a Bank officer on 19 March 1993, it was put to Mr Hadfield to the effect that Mr Pearce said to Mr Hadfield that Mr Hadfield should put all facts and information about progress with the subdivision to his solicitors, and should give the solicitors details of the proposed sale and that the Bank would consider any feasible proposal to discharge the debt so long as it was done on the short term. Mr Hadfield replied: No. One of the points where I can feel in that conversation around that time is that – I've lost my point there again, sorry, just – okay now I'm getting the feel of it back, thank you for bearing with me, is, the point where I was pushing at that point was I'd already been to David Harold Smith with the linen plan and they weren't going to sign it. Logically what I was trying to say there then was that the surveyor explained to me, because I told him I had people that were interested and that, and he said, well, look, it will only take three to four weeks to have this linen official, it would take six weeks for a sales contract to go through so if contracts were drawn up by the time they were ready to be exchanged the other was done so no-one's time was held up at all. I was speeding it up, I would be doing it quicker than the bank. 87 On behalf of Mr Hadfield it was contended that his reference to a linen plan showed that he had shown the linen plan to Mr Smith. In my view it would not have been reasonable to make a finding to that effect on the basis of this passage in the evidence, intruded obscurely and unresponsively in answer to a question on another subject, after Mr Hadfield had stated what he wished his case to be at great length on affidavit; Mr Smith being dead. The Trial Judge did not do so. But even if it were established that the linen plan was shown to Mr Smith, that would not be a test of the Bank's good faith. The six-week finding, caveats, delays and the northern lot. 88 There were a number of matters to be attended to if the linen plan was to be registered. The Wyong Shire Council Clerk's Certificate had to be endorsed on the plan: this required formal steps but offered no real difficulty. So far as appears, Mr Hadfield did not take any steps to obtain this certificate, and he did not ask the Bank to do so. The Bank's consent to registration of the plan had to be signified by the Bank's execution of the plan. The Trial Judge addressed in detail and made findings on the steps which it would have been necessary to take. It was found that the Bank was told by 23 November 1993 that the linen plan (which was required for registration) had been prepared (Red 96). The Trial Judge found: (Red 97 U-W) … registration [of the Plan of Subdivision] could have been achieved, on the balance of probabilities, within a period of around six weeks from 23 November 1993 (when the linen plan was prepared) or mid-January 1994 taking into account the Christmas period. 89 The six-weeks finding was a conclusion based on a series of findings (Red 97) to the effect that the Council Clerk's Certificate on the linen plan could have been obtained in two days if the Council accepted that there were circumstances of urgency, but otherwise in 1.5 weeks; that the caveators and National Australia Bank would have consented to registration of the subdivision as the subdivision was likely to achieve a higher sale price and the repayment of their respective debts: and that Mr Hadfield would have pursued the subdivision in a timely manner if he had obtained the consent of the Bank. There were also findings to the following effects: that Wyong Council would have granted building approval for the northern lot; that the most significant hurdle in achieving a subdivision is obtaining Council approval after which registration is a mere formality; that registration of the subdivision would not have caused any delay in the sale of the property (Red 97-98): that the Surveyor's contingency arrangement required payment of the surveyor's fees after registration (Red 98); that the only expense still to be incurred prior to registration was the registration fee to be charged by the Land Titles Office, $410 to $510 (Red 98). The Trial Judge found: (98H-K) While a mortgagor is not required to expend considerable outlay … this modest sum is more properly characterised as being an amount appropriate to prevent the residual property being sacrificed … In addition the expense would be covered by the increase in the value of the security … 90 The Trial Judge (Red 97Q-R) based the view that after Council approval registration was a mere formality in part on concessions in evidence by Mr McQuiggan and Mr Gainey. In my view it was not reasonable or correct to base this finding on concessions by those witnesses, and a conclusion was to be reached on the basis of expert knowledge of the process of registering plans of subdivision, and of inference from difficulties which were obvious from the material in evidence. Although registration would probably not have been very difficult, it was a considerable overstatement to speak of registration as a mere formality. There were difficulties and potential difficulties which might not be overcome or might not be overcome easily, and there were significant possibilities of complexity and delay. 91 The Trial Judge found (Red 101D): "I am not satisfied that the defendant has established that the plan of subdivision could not be registered without the consent of the caveators and the National Australia Bank." In this expression the onus of proof was reversed. The plaintiff called the evidence of an expert, Mr Surveyor Linker, who said that it was the practice of the Registrar General at that time not to register linen plans creating a subdivision unless the consents of caveators were obtained. (Black 3/561Q-T). The caveators were (Blue 2/322) Mrs Gostelow and (Blue 2/324) Messrs Chapman and Herbert who claimed to have a written mortgage. Mr Chapman had been Mr Hadley's accountant. The action prohibited by the caveats excepted recording a plan from what was prohibited, so the caveats presented no real difficulty for registering a plan. Although the Registrar General had discretionary power to require the consents of caveators to registration of a plan, it appears to me to be very unlikely that any difficulty would have arisen; there was no apparent conflict between registration of the plan and the interests claimed in the caveats. The Writ of Execution was not affected by registration of a subdivision plan. The probabilities are that any difficulties relating to the caveats and the Writ could be overcome; Mr Linker's estimate was 3 to 6 weeks after lodgement of the Plan, subject to prompt attendance to any requisitions raised by the Registrar General. (Red 87G, J, S-U). The process might require communications with the caveators and with NAB. 92 Notwithstanding that the Trial Judge found, on the balance of probabilities, that registration could have been achieved within a period of around six weeks, there was a significant possibility that this would not be the actual outcome. The survey plan involved a redefinition of the creek boundary, as explained in the surveyor's letter of 12 November 1993, and there was at least a possibility of dispute or litigation with an adjoining owner. There was also a prospect of conflict or litigation with Mrs Gostelow. It was the business of Mr Hadfield, not of the Bank, to deal with people who had claims against him and were lodging caveats for that reason, and to solve any problems in the way of registering his plan of subdivision. It was just as open to him to solve them before lodging the plan for registration as afterwards; yet he did not do so at any time. It was clearly foreseeable that there might be delays longer than 3 to 6 weeks, and that the Registrar General might raise survey requisitions which were difficult to comply with. 93 The Trial Judge said (Red 97N) "The Council would have granted building approval for the northern lot." This finding appears in a context which suggests that it was in her Honour's mind that Mr Hadfield needed the building approval in connection with registering the subdivision plan, and could obtain it readily. No reason appears why this was necessary. Obtaining building approval was not, on the Trial Judge's findings or on any view, something which the Bank should have done, or should have attempted. 94 The possibility of difficulty was obvious. Her Honour's finding "I am satisfied that the registration of the subdivision would not have caused any delay in the sale of the property" (Red 97Y-98B) can be seen with hindsight to state what would probably have happened, but does not address the point of view of the Bank in deciding, in the context of Mr Hadfield's past dealings with the Bank and of his rights, whether to proceed with its intention to auction the property in one line in February 1994 or to take a different course involving the outcome of Mr Hadfield's proposed Plan of Subdivision. From the point of view of December 1993 and January 1994, it can be seen now that Mr Hadfield had had a Plan of Subdivision since November and that he had not done anything constructive about getting the Bank to sign it or about getting the Council Clerk to sign it, and he had not done anything constructive about getting the caveators and execution creditor to say whether they consented or refused to consent to registration or about obtaining consideration by the Registrar General of the survey problems. The Bank had even less information then than is available now about the likely outcome of awaiting Mr Hadfield's attention to the Plan of Subdivision, and in my opinion the Trial Judge's conclusions are not appropriately accommodated to the actual position at the time, or to the Bank's entitlement to pursue its own interests. From the point of view of the Bank at the time, it would not have been reasonable to assume that Mr Hadfield would pursue the subdivision in a timely manner if he obtained the consent of the Bank. Timely conduct of Mr Hadfield. 95 The basis expressed for the finding at (Red 97K-L) that: "The plaintiff would have pursued the subdivision in a timely manner if he had obtained the consent of the defendant" is: "His commitment to achieving the subdivision is evidenced by the obtaining of Council approval and a linen plan, the defendant's file notes and his own attempts to sell the property." With respect, these matters in no way support a finding that Mr Hadfield would have pursued the subdivision in a timely manner. The steps which he took to obtain Council approval, to have the linen plan prepared and to attempt to sell the property could in no way be found to be timely. 96 In January 1993, if not earlier, Mr Hadfield was aware that he needed the Bank's consent to subdivide the land, and he was aware that he needed to comply with the law regulating subdivisions and registration of plans. Mr Hadfield's own attempt to sell part of the land at auction in May 1993 had provided him with what objectively seems a very strong motivation for having a subdivision plan prepared and registering it; or attempting to have it registered; but he did not instruct the surveyor until much later in 1993. Mr Hadfield had had years to act on any wish he had to sell his land or subdivide it. He had been in default since 1991, he had an obligation to Mrs Gostelow to sell the property since 6 weeks after 17 October 1991, he had notice of the Bank's intention to exercise power of sale on 27 February 1992, he was sued by the Bank for possession in June 1992, judgment was given against him on 29 October 1992, he was a party to Terms of Settlement in the Family Court on 23 September 1992 which contemplated sale by the Bank, he could not sell the northern lot or raise finance: years had passed. On any reasonably available view he had a long history of breach of obligations to the Bank and of dilatory performance, of which the interval of 11 months between obtaining Council approval and obtaining a linen plan is a striking example. 97 The opportunity to sell or refinance had been before Mr Hadfield for some years. He had also had a full opportunity to dispose of or remove chattels, and to make any improvements or modifications which might have maximised the value of the property. If subdivision is a measure which would have maximised the value of the property, he had full opportunities to subdivide long before the Bank sold the property. The period of time from his default and from indications of the Bank's intention until the actual sale was unusually long, and there was no precipitancy. 98 Mr Hadfield referred to his wish to subdivide the property and sell one lot, or to sell the two lots separately, several times in communications with the Bank, listed the northern side of the property for sale in March 1993, conducted an unsuccessful auction of the northern lot in May 1993 and continued endeavours to find buyers, but did not take constructive steps to subdivide by instructing a surveyor to prepare a plan until late October 1993. It is not surprising that his communications did not ever awaken interest on the part of the Bank in the project of subdivision and separate sales. The Bank heard much of this project from Mr Hadfield over an extended period, but not in the context of any concrete constructive action. When Mr Hadfield did produce surveyor's work in mid-November 1993 the Bank did not respond by treating subdivision as a serious project, and in view of the past history of the relationship, the Bank's lack of any such response was reasonable. 99 The Bank made many concessions to Mr Hadfield about time, access and the care of animals. Mr Hadfield showed no respect for the Bank's right to possession, remained on the property although warned of enforcement of the Writ, had to be led off the property by the Sheriff's officer, and continually went back in after that. He kept animals on the property long after the Bank's concessions, which related to the care of animals, had ended. It was Mr Hadfield's evidence that he moved most of the goat herd off the land around September 1993, and that he wound up his goat farming and turf businesses and closed the businesses by October 1993. The Trial Judge accepted that the businesses were closed by October 1993. Mr Hadfield also said to the effect that the last of the goat herd was removed early in November 1993; yet elsewhere in evidence he says that later than then he had two goats, five dogs, a rooster and two cats on the property, which he constantly fed and looked after. 100 It is objectively clear that co-operation with Mr Hadfield was not possible. It is in no way surprising that the Bank did not make any constructive arrangements with him about the subdivision, as he was not reliable in keeping arrangements, or in observing the Bank's rights. He was years in default and had given indications of various refinancing projects over many months without any outcome. In my opinion there could be nothing of reality about a supposed good-faith obligation of the Bank to enter into an arrangement with Mr Hadfield of any complexity at all, let alone into co-operative endeavours to clear away difficulties and register the Plan of Subdivision. Even so, the Bank was obliged to exercise its power of sale in good faith and without sacrificing his interests, however difficult a person he was to deal with. There is no interdependent mutuality about the Bank's obligation. Decision to sell in one line. 101 There are findings to the effect that the Bank had decided to sell the property in one line on or by 5 October 1993 (Red 68A) and that by 5 October 1993 the Bank had expressly decided to proceed with the sale in one line (Red 89X) that Mr McQuiggan (who came to manage part of the Bank's affairs dealing with Mr Hadfield in December 1993) did not review the earlier decision to sell in one line; and the Trial Judge regarded this as a failing in the Bank's duty. 102 The Trial Judge found that the Bank had formed the view by mid-1993 that there was no point in assisting Mr Hadfield; and that this was set out in a memorandum of 4 May 1993 (Blue 2/256). That memorandum relates to a decision not to delay execution of the Writ of Possession in response to a request by Mr Hadfield to be allowed to sell part of the security property with the balance of the loan to be refinanced; only very indirectly does it have any bearing on the Bank's attitude to subdivision. 103 The Trial Judge found that on 5 October 1993 Mr Smith was told that the Linen Plan was being drawn up, but the Bank expressly decided to proceed with the sale in one line. It was also found that after Mr McQuiggan took over management of the loan file he did not review the previous decision to proceed with the sale in one line despite the provision of the survey plan; and it was found that provision of the survey plan was an additional matter from which the Bank should have appreciated that completion of the subdivision was merely a formality. The Linen Plan was not in fact being drawn up on 5 October 1993, although Mr Hadfield told Mr Smith that it was. The Advance Copy and accompanying surveyor's letter could not reasonably have shown Mr McQuiggan or the Bank that the completion of the subdivision was merely a formality, as the Advance Copy bore a disclaimer and the letter set out significant difficulties. In my view this passage (Red 89-90) shows that the Trial Judge made an altogether wrong appreciation of the implications of the facts as found for what influence the proposed subdivision should have had upon the Bank's consideration of exercise of its power of sale. 104 The Bank decided, by various decisions the latest of which occurred on 13 January 1994, that the Bank would itself sell the property under its power of sale and sell it in one line, and that it would advertise the fact that development approval had been given for sub-division into two lots. Delivery of a registrable Linen Plan for execution would have required reconsideration of these decisions, and would have been a practical test of the Bank's attitude to registering a Plan of Subdivision, in a way which the Bank's responses to Mr Hadfield's various oral references to his wish to subdivide, or to his delivery of an Advance Copy accompanied by the surveyor's disclaimer and list of difficulties, could not. Such an event would have been the emergence, for the Bank, of Mr Hadfield's subdivision project into the realm of reality. 105 Mr McQuiggan made the final decision to proceed to sale on 13 January 1994. (See Blue 5/981-982, Red 71W-72M). The contract drafting was then complete. External legal advice of 15 November 1993 was against participating in the subdivision. Before he made this decision Mr McQuiggan obtained advice from the Bank's Legal Department. A memorandum from Mr B.D. Walker, legal officer, dated 31 December 1993 reviewed the Bank's options, including selling the property as it was as one lot or consenting to subdivision into two lots, and matters for decision in relation to that, said (Blue 5/980) In making this decision you should bear in mind that the Bank is under no obligation whatsoever to sell the property as two separate subdivided lots, even if this method of realisation may yield a higher overall sale price. 106 For the Bank to decide to sell in subdivision would have involved turning aside from its wish to proceed to sell the property for whatever time it took for Mr Hadfield to complete the project of registering the subdivision. That could have been a short time of a few weeks; but from the Bank's point of view in November and December 1993 and January 1994 there was really no way of knowing whether registration would have been as simple an exercise as in retrospect it now appears it would have been, and there were significant possible sources of difficulty. Carrying out the project would have been in the hands of Mr Hadfield who had not shown respect for the Bank's rights, had been led off the property by the Sheriff 11 months after judgment had been obtained, had been in default since May 1991, and had Council approval for subdivision since 22 December 1992 but had not instructed his surveyor until late October 1993. The conclusion that the Bank showed itself not to be acting in good faith by failing to consent to subdivision, and by not turning aside from its entitlement and its preparations to sell the land and realise its security and awaiting an outcome of something which Mr Hadfield was to do, is not a conclusion which it was reasonably open to the Trial Judge to reach. 107 It was contended on behalf of Mr Hadfield on appeal, at length and in many forms, that the Bank had closed its mind to the possibility of selling the property in a subdivided state and did not give appropriate consideration to whether or not it should take that course. This was put forward as showing absence of good faith in the exercise of the power of sale. It was an entitlement of the Bank as mortgagee to decide when it would sell the property, and whether it would sell it in one line or arrange for it to be subdivided, or (it may be) await the completion of Mr Hadfield's proposals to subdivide it. There was no concrete test of whether the Bank's conduct was in good faith by presenting the Bank with some requirement or proposal from Mr Hadfield that it join in the subdivision by executing a registration copy of the plan, by giving him financial assistance or in some other way; there was no such event. There is no reasonable basis for seeing the Bank's not having taken an initiative towards subdivision and created an opportunity or it may be taken over Mr Hadfield's subdivision proposal as a test of its good faith. 108 Although the terms of the Judge's reasons do not in detail state this, the overall impression which the reasons convey is that the Bank was liable because it did not sell the property in two lots; and involved in that is that the Bank should have done whatever was necessary to obtain subdivision into two lots. This overall view is assisted by a passage in the judgment (Red 98S-W) where the Trial Judge refers to Mr McQuiggan's continuing to act on the decision of the Bank to sell the land as one property, leading to her Honour saying "I accordingly find that the defendant did not actively take steps to ensure that it did comply with its duty to the plaintiff in this period." In assessing compensation her Honour compared the amount obtained on the sale in one line with the amount which her Honour determined should have been obtained by sale in subdivision. Overall, the judgment appears to me to convey the understanding that the liability of the Bank was based on the view that it was the duty of the Bank to sell in subdivision, to do whatever was necessary to make separate titles available; and also on the view that if the Bank had consented to the subdivision and given Mr Hadfield assistance in obtaining separate title, that would not have caused significant difficulty or delay. 109 There was a long history of difficulty in getting Mr Hadfield to comply with obligations to the Bank, and ineffectual action and great delay in Mr Hadfield's attending to any business at all relating to subdividing the property, selling the land or meeting his obligations to the Bank. Any assumption that the Bank should have conducted affairs on the basis that it could rely on endeavours by Mr Hadfield to get his plan registered, and his continued co-operation, and should have accommodated the Bank's plans to exercise its power of sale with his proposed subdivision, could have no connection, in reality, with the past experience of dealings between Mr Hadfield and the Bank. Her Honour did not expressly make such an assumption, but it seems that such an assumption is involved in her Honour's view of what should have happened, and the assumption could not have a reasonable basis. 110 In appraising the Bank's conduct in not consenting to subdivision or in some way making subdivision a project of its own, the question to ask is what reasonably would have been in the mind of the Bank, looking forward, about the likely course of events and outcome. Whether the Bank acted recklessly is not to be determined by a retrospective view of what in fact happened. The circumstances in which the Bank acted included that the Bank had been seeking re-payment of its loan, if necessary by sale by Mr Hadfield of all or part of his land, for well over two years, that he had been engaged in steps towards sub-division for over two years, that development approval had been obtained on 23 December 1992; and he had not instructed the surveyor to prepare the plan until late October 1993, two months after he had been ejected from the property by the Sheriff. Mr Hadfield had had and had informed the Bank of various proposals for sales by himself, he had conducted an unsuccessful auction, he had been ejected by the Sheriff about eleven months after the Bank had obtained judgment and after he had been allowed a number of extensions of time. After being evicted by the Sheriff Mr Hadfield greatly exceeded what had been allowed to him both as to the time he remained there and the intensity of his activities; and this led to the Bank taking further proceedings against him in March 1994. Mr Hadfield was not in a position to obtain extended tolerant consideration by bank officers of whatever he proposed. His own conduct did not respect the rights of the Bank, and there were elements of defiance. 111 Nothing had been achieved in dealings with Mr Hadfield in many communications over a long time. The project of registering a plan of sub-division could well not be completed or to make progress within the time within which the Bank wished to sell the property. These circumstances are very adverse to a conclusion that it was a breach of good faith towards Mr Hadfield that the Bank did not desist from the course that it had decided on and rely on him, or take it on itself, to bring about registration of the plan of subdivision. The Bank was entitled to act in its own interest in realising its long-overdue secured debt. In my opinion it could not reasonably be concluded that it was a breach of good faith or a sacrifice of Mr Hadfield's interests for the Bank to take this course in its own interest and to try to sell the property in one line un-subdivided, which was the state to which Mr Hadfield's activities had brought it. 112 The legal officer's memorandum of 31 December 1993 reviewed the matters which the Bank would need to consider before finally making a decision about whether to sell in one line or in separate lots. The memorandum refers to "consent to a subdivision of property into two lots" as one of the Bank's options, but not the Bank's present intention. The legal officer stated the Bank's duty in an excessively simple way: (Blue 5/980C-D). … The Bank is under no obligation whatsoever to sell the property as two separate subdivided lots, even if this method of realisation may yield a higher overall sale price. In the context of the terms of the advertisements the Trial Judge said: (Red 102B) Counsel for the defendants submitted that the defendant had acted on legal advice. However this was an advice from the defendant's own in house solicitor for which the defendant remains liable. The Trial Judge did not find that the legal advice was negligent or that there were identifiable shortcomings in it. 113 Whether or not the Bank would be liable for advice from its in-house solicitor is a concept drawn from negligence law and was extraneous to what her Honour had under consideration. In any event there is no reason to think that the in-house lawyer was negligent or that any liability of the Bank was incurred vicariously. If lack of good faith had appeared from advice or conduct of an in-house lawyer the Bank would be responsible for it, in the same way as for any lack of good faith appearing from conduct of Mr McQuiggin, or anyone else in whose hands the Bank left the conduct of this part of its affairs. Mr McQuiggin's obtaining and the legal officer's giving legal advice, which from its own terms appears to have been properly motivated and well considered, whether or not it was completely correct, tends to confirm strongly that those conducting this part of the Bank's affairs were acting in good faith and that Mr McQuiggan did not act recklessly or irresponsibly. The Bank also obtained some advice from its external solicitor. 114 The Bank did not ever depart from its intention to sell the property in one line. This was a considered position. There were considerations which objectively favoured it strongly. There is no basis for characterising the Bank's position as a refusal to think about whether or not the property should be sold in the one line. Appraisal of the Bank's conduct has to have regard to several other considerations. It was the entitlement of the Bank as mortgagee to choose the time of conducting its sale, and to decide whether it should sell the property in one line, or should arrange for subdivision and sell the property in two lots. The Bank was entitled to pursue the object of selling the property for a sufficient amount, and to avoid courses which would or could leave the Bank with a residual debt and one lot unsold at the auction and, it may be, difficult to sell. The Bank was free to exercise its powers including its powers of sale for the purpose for which those powers existed, that is, for realising its security, with the qualification that the Bank was required to proceed in good faith for that purpose and not to sacrifice the interests of the mortgagor while so doing. There is no basis for any view that the Bank proceeded in bad faith for any improper purpose or bye-motive. 115 It is important to be aware of the rate of accrual of interest at those times. Interest charged by the Bank was in the order of 18%, and on $285,000 the amount for which the property was sold this represents interest at almost $1000 per week, which gave some urgency to the passage of time. Mortgage Clause C. 116 Mr Hadfield was aware of cl. C of the mortgage, which so far as relevant is in these terms: (Blue 1/46G) C. The Mortgagor further covenants with the Bank that the Mortgagor will not without the consent in writing of the Bank (which consent may be subject to such terms and conditions as the Bank thinks fit):- 1. Transfer convey assign surrender mortgage charge or otherwise deal with or dispose of the mortgaged premises or any part thereof. . . . The Bank contended to the effect that cl. C relieved it of any obligation to consent to any subdivision unless the Bank chose to consent. In my opinion, if good faith required the Bank to give consent to a subdivision, the need of Mr Hadfield to comply with cl. C would not alter the Bank's position or improve it. Mortgagee's duty – advertising area. 117 Mr Hadfield put in evidence (Blue 1/98) a number of press advertisements which typically described the property as: 9.06 HA (23.87 acres) – zone 1A – rural cottage – large farm shed – brick dairy house – DA approved for two titles – nearly all arable – frontage to permanent creek, 6 klms to town – 7.5 klms to expressway. There were small variations, not referring to goat dairying or turf farming, or to development approval or existing use rights for those uses. 118 Her Honour found that the Bank included a material misdescription in the advertising material for the sale in that the advertising material referred to the area as 23 acres and the market was not informed that the property comprised 32 acres. (Red 105-O-Q). It was also found that the material misdescription was a breach of the Bank's duty of good faith to Mr Hadfield (Red 103E). Her Honour also found that the Bank, despite the advice of Mr Gainey the selling agent, elected to deal with the issue of the area by inserting a special condition into the contract rather than by informing the market that the property comprised 32 acres rather than 23 acres (Red 101 L-N). The Special Condition itself did not refer to 32 acres, and the area of 32 acres was only ascertainable by referring to annexures to the contract. Her Honour found that if the property had been advertised at 32 rather 23 acres it probably would have been sold for a higher price. (Red 102 E). Mr Gainey the Bank's selling agent strongly suggested to the Bank that the size of the land should be ratified before sale (Red 102 E). The size of the property was relevant for the response of persons seeing the advertisement (Red 102 E-N). The advertisement failed to attract some purchasers who would have paid a higher price for the property. (Red 102 Q). The Trial Judge's reasons do not state why, in her Honour's view, it was so clear that the area was 32 acres that it was a breach of the Bank's duty of good faith not so to state in advertisements. 119 On 27 September 1993 Mr Gainey and his firm asked the Bank to give the firm a retainer to act for the Bank as selling agent, and forwarded a form of auction selling agency agreement. Mr Gainey's letter (Blue 3/517-522) said: Our opinion of current market selling price for the property after due consideration is approximately $295,000… If the property were offered as two separate titles we would expect a slightly high realisation. Mr Gainey enclosed a draft advertisement for a sale on 6 November 1993 with this letter. A draft advertisement submitted by Mr Gainey in December 1993 included statements about the use to which the property could be put: (Blue 3/519) Suitable for variety of agricultural uses. Turf farm – cattle stud – horse spelling. This draft advertisement did not mention goat farming. Mr Gainey signed the auction agency agreement with the Bank on 24 January 1994, but there were communications in the meantime, and in some informal way he acted in the Bank's interest as prospectively its selling agent before 24 January 1994. 120 At the time of the sale the Register identified the land as Lot 2 DP788851, and that Deposited Plan showed the area as 9.66 hectares by deduction (equalling 23.8 acres). The Register Folio also contained a caution indicating that the Registrar General took no responsibility for the statement of area. Mr Hadfield had recently given an oral indication to a Bank officer that the northern lot was approximately 12 acres (which corresponded to the area 4.796 hectares or 11.84 acres determined by survey by Everitt & Everitt Pty Ltd) and the southern lot was approximately 15 acres (which was significantly different to the area 8.106 hectares or 20.02 acres determined by the surveyor). Areas by survey appeared in the Advance Copy enclosed with Everitt & Everitt Pty Ltd's letter of 12 November 1993, but the Advance Copy had a prominent disclaimer "Advance Copy no compensation given by Everitt & Everitt Pty Ltd" and was accompanied by the letter to the Registrar General which explained variations from the earlier plans. 121 The Trial Judge's reasons appear to accept that it was certain that the area was 32 acres, and reasons for so accepting were not articulated in the judgment. The reasons may well have included a retrospective view based on the ultimate registration of the Plan of Subdivision in 1997; this view was not available to the Bank when it advertised the sale. In my view it would have been plainly imprudent for the Bank to adopt the areas as shown in the Advance Copy, which totalled 12.902 hectares or 31.6 acres, in advertising for the sale, in view of their departure from the indication in the Register Folio, the disclaimer and the uncertainty about whether, if the Plan of Subdivision were registered, its boundaries, areas and dimensions as explained by Everitt & Everitt Pty Ltd would be adopted by the Registrar General. 122 What the Bank in fact did, when it did refer to area in advertisements, was to refer to 23 acres, which was close to the information on the Deposited Plan. Mr Hadfield saw published advertisements in newspapers over a four week period, and also saw a signboard displayed on the property; he obscured part of the signboard, and protested to Mr Gainey about references in the signboard and advertisements to the area as 23 acres. In the Contract of Sale, which was available for interested parties to see before the auction, and was also available at the auction, there was no explicit statement of the area of the land and Special Condition 39 was in these terms: (Blue 1/123) 39. Survey – Area Discrepancy 39.1 The purchaser acknowledges that the purchaser has inspected the following documents which are annexed to this Contract. - Copy letter dated 12 November 1993 from Everitt and Everitt Pty Limited, Registered Surveyor to the Land Titles Office; - Copy draft Plan of Subdivision of Lot 2 in Deposited Plan 788851. 39.2 The purchaser acknowledges that the purchaser shall not be entitled to make a claim, objection or requisition, delay completion or rescind or terminate as a result of any matter disclosed pursuant to this clause. 123 A copy of Deposited Plan 788851 (which showed the area at 9.66 hectares by deduction, equivalent to 23.8 acres) was annexed to the contract, and copies of Everitt & Everitt Pty Ltd's letter to the Land Titles Officer 12 November 1993 and the enclosed Advance Copy which showed areas totalling 12.982 hectares or 31.86 acres were also annexed, and were referred to in Special Condition 39. Another annexure was a certificate by Wyong Shire Council dated 31 August 1993 under s.149(2) and (5) of the Environmental Planning and Assessment Act 1979 which showed that the development approval dated 23 December 1992 for a two lot rural subdivision was current. Mr Gainey directed the attention of prospective purchasers to these annexures, and announced them at the auction. 124 In the circumstances in which the Bank stood, the Bank could potentially incur liability for misleading and deceptive conduct under s.52 of the Trade Practices Act 1974, or contractual liability, if it gave any contractual undertaking or otherwise represented any particular position about the area of the land. In my opinion it would have been imprudent for the Bank to deal with the area of the land in its advertising, or in its contract, in any more specific way that it in fact did. 125 To adopt the area as stated in the survey plan of 16 November 1993 would have been to adopt the Surveyor's opinion of what the area was, notwithstanding the difficulties of that opinion which appeared from the Surveyor's letter of 12 November 1993. This would have obviously been an imprudent thing to do; there would be a plain prospect of the Bank's incurring liability for misrepresentation or misleading and deceptive conduct, and the Bank would be in the hands of the surveyor, whom it had not retained, to defend its position. Without resolving the difficulties mentioned in the letter of 12 November 1993 the true area was not ascertainable, by survey or otherwise. 126 Her Honour found, in relation to treatment of area in advertising (Red 102 O-Q): I am, accordingly, persuaded that the defendant included a material misdescription in the advertising material as a consequence of which it is likely that the pool of purchasers was restricted. As the price was likely to be higher for a larger block, I am satisfied that it is likely that the advertisement failed to attract some purchasers who would have paid a higher price for the property. And (Red 103 E): I am satisfied that the material misdescription was a breach of the defendants' duty of good faith to the plaintiff. In my opinion these conclusions are erroneous. Only with a hindsight view after acceptance and registration in 1997 of the subdivision plan can it be clearly known that the boundaries and area shown in that plan can reasonably be relied on. The course taken of advertising the area then shown on the plan referred to in the title register, and making all available information known to persons making inquiries and annexing it to the contract, in my view, shows that it is incorrect to conclude that there was a lack of good faith in this respect. Mortgagee's duty – advertising turf farm, goat dairy. 127 The Trial Judge found that there was an established Turf Farm (Red 77-78) see Blue 1/8, Blue 1/9 [8]. A description of the Turf Farm in the valuation of Herron Todd White (Blue 1/82 and 85) speaks of Turf farming activities on both lots. The turf farm of which Mr Hadfield spoke in his evidence was on the northern lot. 128 The Trial Judge made findings relating to the history of Turf farming and goat farming. It was found that between 1977 and 1978 Mr Hadfield established a turf farm and a goat farm. There were detailed findings about the operation of the goat dairy: at times the dairy was very successful, but was not successful from 1989 to 1992 when Mr Hadfield experienced flooding, drought and a theft of goats, which impacted on the financial viability of his farm so that he was unable to keep up with his mortgage payments. 129 Her Honour found that Mr Hadfield conducted turf farming on the northern lot. Her Honour found (Red 75) that Mr Hadfield started winding up the goat farming and turf businesses when he was evicted on 18 August 1993 and that both businesses were closed by October 1993. 130 The goat dairy was very successful at one time, but this period ended about 5 years before the advertisements were published. The Bank disputed that the turf farming business was still being carried on at all in 1993, and it is clear from Mr Hadfield's evidence that turf farming was never profitable, and that he had not made any significant income from turf farming since 1988. Mr Hadfield's claim in evidence that there was half a million dollars worth of turf on the property when sold can only be regarded as wild talk and has no serious claim to be the basis of a finding. There were powerful bases in the evidence for contending that the turf farming operation was no longer continuing in 1993; on the other hand Mr Hadfield maintained in evidence that it continued until he was evicted. Her Honour made no explicit finding on whether the turf farming operation continued but it is implied from her finding that both businesses were wound-up by October 1993 that it continued until then. Continuance of the turf farming was supported by an acknowledgement in a letter dated 22 January 1991 by Wyong Shire Council (Blue 1/44) that part of the northern lot had been used continually for turf farming since before gazettal of relevant regulations in 1980 and that hence turf farming on part of the land indicated in a plan prepared by Council would not require development consent for the purpose of turf farming, but the operation could not be extended, and would not be discontinued for more than 12 months without a development application. There had never been a development application for turf farming. The enclosed plan was not tendered with Council's letter, so the area to which it referred was not exactly identified. 131 Mr Hadfield put in evidence a valuation made by Herron Todd White, Valuers on 2 April 1993 (Blue 1/74) for Morlend Finance Corporation (Vic.) Pty Ltd relating to a loan to Mr Hadfield under consideration. The valuation of $400,000 was a valuation as two parcels and was subject to survey. This valuation described the property (Blue 1/75) as "a small, goat dairy and former turf farm" and said "The property is run as a specialist goat dairy and is currently in a rundown state." The Valuer said that the plan showed 8.4 hectares which could be used as a turf farm. The report said: (Blue 1/82). The entire property save buildings, yards and tracks is mainly Kikuyu grass pasture. The area on the proposed lot north of Yarramalong Road is currently overgrown, weed infested, and grossly understocked. Although much of this area is suitable for turf faming it will require at least one and may be 2 seasons before it can be brought into a readily saleable and manageable state. This will require, weed control, continuous topping to improve the sward density, and organic or artificial fertilisers to improve colour and vigour. The flat area on the south side of Yarramalong road has approximately 25% of the Kikuyu pasture, slashed for future turf production, however will require almost a seasons work to bring this up to a saleable commodity. The balance is in better order than land north of Yarramalong Road but will require considerable work to improve it also. The hillside area is grass dominated grazing pasture only. Current grazing by the dairy goat herd is not keeping up with pasture growth. 132 At (Blue 1/85) the report said: General The whole property presents in a "tired" and rundown appearance with no recent turf farming having been carried out. The property has considerable deferred maintenance requirements to all buildings and fences. 133 In relation to the use to which the property could be put her Honour said (Red 103 G-Q): The initial advertisement suggested by the agent read "Suitable for variety of agricultural uses. Turf farm – cattle stud – horse spelling". There is no explanation for the omission of these words from the final advertising by the agent at the direction of the defendant. The final advertisement did not refer to the uses of and permits for the use of the property as a turf farm and goat dairy. It was the evidence of Mr. Levick that he would have referred to the property's use for turf faming and goat milk production in the advertising of the property. He added that these factors would have been of interest to some potential purchasers. Mr Gainey agreed that as the advertisements had not mentioned goat farming they were not directed towards arousing the interest of the market that would secure its best and highest use. I accept the evidence of Mr Levick and Mr Gainey. I am satisfied that the material misdescription was a breach of the defendants' duty of good faith to the plaintiff. 134 It was, with respect, quite incorrect to say that there was no explanation of the omission. The Bank's case included explanations by reference to its internal legal advice and its policy on advertising, to which her Honour did not refer at this point. There were obvious perils in advertising suitably for turf farming, and for goat farming, which could only be made good of challenged by relying on experience and evidence of Mr Hadfield. The evidence of Mr Levick and Mr Gainey to which her Honour referred does not overcome these strong considerations. There was in my opinion no reasonable basis on which to conclude that there was a breach of the Bank's duty of good faith in this respect. 135 In view of the state of the evidence and the severity of the findings about the advertisements it is unfortunate that her Honour did not make findings in detail relating to the turf farming operation as it was in 1993 and at the time of advertisement. In the light of the description in the Herron Todd White valuation it is glaringly improbable that a turf farm business was conducted in or after April 1993, or up to October 1993 as the Trial Judge appears by implication to have found. 136 Any claim in advertising that land was available for turf farming would have involved the Bank potentially in showing that turf farming had continued since 1991 and that there had not been any interval in excess of 12 months during that period. It would not at all have been simple to establish that that was so, and it would not have been prudent for the Bank to rely on Mr Hadfield to furnish or find evidence that it was. The Bank's advertising stated the then current zoning without reliance on any existing use right as established in January 1991, the continued availability of which depended on events since then. 137 The advertising stated accurately that there was development approval for subdivision. This made it known to proposing purchasers that they could carry out the subdivision if they wished to. In valuation principle, this should affect value in that the purchaser would make some allowance for the cost, time and trouble of actually carrying out the development approval and obtaining separate titles. Persons who were interested only in buying one lot but not the two together would, in principle, be excluded from the prospective purchasers to be reached by the advertising. 138 There were perils in stating, directly or indirectly that the property was suitable for any particular use, and especially for uses which appeared to have been discontinued the recent success of which was doubtful. Treatment of the area in the contract and advertising was the subject of legal advice and accorded with that advice. The Bank had a settled policy recorded in its internal instructions against advertising suitability of property for a particular use. The Bank decided on legal advice that advertisements should not include references to the quality of the property or to the use to which the property could be put. (Blue 5/973-975). There is no sound basis for the view which the Judge appears to have taken that the Bank should not have departed from Mr Gainey's draft advertisement. (Red 103G-Q). In these circumstances there was no reasonable basis for her Honour to take the view that there was any material misdescription in these respects in the advertising. Conclusions on liability for mortgage sale. 139 The Trial Judge's conclusions overall convey fairly clearly that her Honour actually acted on a view that the Bank should have taken reasonable steps to maximise advantages for the mortgagor from the sale and that those steps included consenting to a subdivision, giving the mortgagor assistance to see that subdivision actually took place, and following the mortgagor's wish to sell the property in subdivision and not in one line. 140 Notwithstanding the expressions found in the judgment and the terms in which her Honour directed herself on the applicable law, her Honour actually disposed of the case according to an unexpressed requirement for the use of reasonable care in carrying out the sale, at a quite stringent standard which in practical terms extended to requiring the mortgagee to modify its own plans so as to incorporate the mortgagor's inentions. This was not a correct application of the law which relates the exercise of the power of sale to a duty to act in good faith. The decision was one which could not be reached on the law which was applicable. The Trial Judge's conclusions are affected by a number of significant conclusions on facts which were wrong. No ground was shown for making charges against the Bank in the mortgage accounts on the basis of any wrong exercise of the power of sale. Her Honour's conclusions on the mortgage accounts must be set aside, the accounts must be re-opened and the balance due must be re-determined. Bailment and Conversion – deep litter and worm farm. 141 The Bank also appeals against the award by the Trial Judge of damages to Mr Hadfield for the loss of a quantity of worms and vermicompost. Damages were assessed at $200,000 for the worms and worm farm and $71,000 for the vermicompost, and interest was allowed. The claim relating to Bailment and Conversion of Chattels proceeded on the basis of causes of action arising after 24 February 1994, within the limitation period of 6 years before commencement of proceedings. Her Honour said (Red 94 Q – R) "The causes of action, which arose no earlier than 10 March 1994 are within time." 142 Mr Hadfield conducted the worm farm on the Windrow System in which worms are grown in beds directly on the ground. This differs from the In-Vessel system in which worms are grown in a closed vessel. Mr Hadfield was engaged in vermicomposting which is the transformation by the worms of organic waste into compost which is marketable or otherwise useable. He was not engaged in vermiculture which is the breeding of worms for sale. He commenced his Windrow System in September 1989 with 50 kilograms of Tiger Worms in worm beds in two sheds. The area of one shed was 158.6 sq metres and of the other 196 sq metres, in total 354.6 sq metres. Each worm bed was prepared by scraping the shed floor flat with a slightly downhill slope, and placing 10 to 15 centimetres of sand on the ground for drainage. Hay was then put down and sprinkled with lime and water. The worms were added. The worms were covered by a layer of straw. The sheds were used for feeding a herd of about 250 goats. The goats would move on top of the worm bed while feeding from racks suspended from the roof. Manure would fall onto the worm bed. After feeding, the goats were taken either into the paddocks or into the milking barn. The goat manure was supplemented with feed falling from the goat feeders, mainly sorghum hay but also lucerne hay, wheat and chaff, straw, green waste wattle, soy/linseed meal, peanut meal, split lupins, oats and apple pulp. 143 By March 1994 the height of the worm farms had built up to approximately one metre. The beds had to be kept moist and kept at the right temperature, and a neutral pH level had to be maintained by adding lime. Mr Hadfield initially measured temperature but soon became a good judge of temperature generated by worm activity and decomposition. When the worm beds became acidic they were occasionally sprinkled with lime. The worm beds were physically aerated daily by lifting with a rake fork and tractor. Mr Hadfield monitored moisture levels and if necessary applied water from a sprinkler system. Mr Hadfield continued to maintain the worm beds in this manner until at least four months before the auction, that is until October 1993 when the goat herd was removed. He continued to attend to the worms, and when he eventually left the farm he watered all the worm beds and left the hose running. He estimated that there were about 500 tons of deep litter in both sheds and about 25 tons of worms in each shed. 144 There were issues as to: § whether Mr Hadfield considered the deep litter and the worms to be very valuable. § whether the Bank knew that the deep litter and the worms were valuable. § whether Mr Hadfield truly was conducting a worm farm. The Trial Judge found: (Red 90K-Q) I am satisfied that the plaintiff has shown that he had two areas where he had established a worm bed as he described and which he continued to maintain essentially in the manner that he described until at least four months before the auction. This finding includes the manner and quantity in which he fed the worms and managed the temperature, aeration and moisture levels. I am satisfied that a casual observer may not have appreciated that the layer of straw was the top layer of a worm farm. I accept that the plaintiff's use of the expression "deep litter" was intended to refer to the same eco system which has been described in these proceedings as a worm farm. I accept that he did not consider it a business venture and was using it to enhance his other organic ventures. That is to say, the Trial Judge accepted that as a matter of fact Mr Hadfield did conduct a worm farm. The Trial Judge also accepted Mr Hadfield's evidence: (Red 90T-U) … that he only appreciated the monetary value of the asset after he had lost the worm farm and was preparing his evidence for these proceedings. 145 The Trial Judge in making these findings reviewed evidence relating to whether a worm farm was carried on, including evidence relating to information furnished by Mr Hadfield, or observed by valuers, about the activities on the farm, and statements by him as to his affairs and as to the goods which he had on the property. There was no evidence and there was no finding that Mr Hadfield ever in any way informed the Bank or that the Bank knew that Mr Hadfield was conducting a worm farm, or that the deep litter in the sheds was a worm farm or was otherwise valuable. No written material from the relevant time referred to in evidence, from any source whether originating from Mr Hadfield or not, referred to the deep litter as a worm farm, or referred to the conduct of a worm farm on the property. Mr Hadfield did not ever sell any worms or vermicompost, or otherwise obtain any income from them, and his evidence was that he did not intend to, and that he wished to produce vermicompost for his own use for organic farming. 146 It appears to me to be highly doubtful whether any activity which could fairly and correctly be called a worm farm was in fact taking place. The Trial Judge found that there was, and placed a high value on the worm farm. These findings seem to me to be most unlikely to be correct, as no one but Mr Hadfield knew or was told by him of worm farming as an economic activity, and he did not reveal it as an asset on many occasions when he could well have done so if it was an asset or if it had value. Examples of these occasions are an application to the Commonwealth Development Bank for refinance; and other applications for finance, including at least one prepared by his accountant on his instructions. Mr Gainey, who was retained by Mr Hadfield to sell the property over many months and conducted an auction for him, gave evidence that he was not told that there was a worm farm, and that he did not know there was. Mr Hadfield's evidence was that he had no intention of selling worms. The worm farm was not referred to by valuers or by selling agents, and was not referred to among the chattels which Mr Hadfield obtained the Bank's permission to remove after he was evicted, or among the excluded chattels in sale advices for Mr Hadfield's proposed sale to the Wallers. The removal of most of the animals including the goats had implications against the continuance of the worm farm and of its value. As I determine elsewhere that there is no liability on the Bank for conversion or negligence as a bailee in respect of assets which were alleged to have comprised a worm farm, I do not find it necessary to come to a conclusion on whether the Trial Judge's finding should be overturned. 147 Mr Hadfield's evidence showed that he attended at the property practically every day until the time of the auction; and that he removed some of his goods later than that. There is no evidence that the Bank or anyone representing the Bank handled the deep litter in any way, moved it or touched it. On 31 March 1994 when the Bank's sale was settled the deep litter and anything else that might be thought of as a worm farm remained in position as Mr Hadfield had left them. Some time later the deep litter worms and vermicompost were removed from the sheds by a contractor for Angreb Pty Ltd the new owner. Mr Hadfield put in evidence a short statement dated May 1999 by Mr Brett Smith of Smith Brothers Bobcat Hire, which said "Smith Bros Bobcat Hire excavated and trucked a substantial amount of goat manure from goat sheds to adjacent property. Work authorised and paid in full by Mr Theo Onisferou" (Blue 1/171). The date of removal is unknown, except that it probably occurred during Angreb's ownership. 148 In finding that there was in fact a worm farm her Honour said the following: (Red 90V) In making these findings I have also accepted the evidence of Mr Gainey as to his seeing an area teeming with worms, which he later explained meant that he had seen a lot of worms … The Trial Judge found that Mr Gainey was aware that the manure was teeming with worms, that Mr Gainey was the agent of the Bank and that Mr Gainey's knowledge was the knowledge of the Bank (Red 109N). On appeal it was contended on behalf of Mr Hadfield to the effect that as Mr Gainey was the Bank's selling agent, knowledge of the presence of worms and (it would seem the submission was intended to mean) of the worm farm should be attributed to the Bank on the basis of Mr Gainey's observations. Mr Gainey's observation was made of one small area, and he spoke in evidence only of one occasion when he observed an area teeming with worms; his evidence does not show that he interpreted his observations as meaning there was a worm farm in operation. The time of his observation is not shown by evidence, it is not shown whether he was acting in the course of any agency for the Bank at the time of the observation, and it is not shown that he ever had any agency from the Bank which was so wide as to mean that his knowledge about whether there were worms in the deep litter should be attributed to the Bank. There was no reasonable ground on which to treat Mr Gainey as knowing of the existence of a worm farm, or of anything valuable, and there was no reasonable ground on which to attribute any knowledge of Mr Gainey to the Bank. In my opinion the Trial Judge made an erroneous interpretation of the significance of Mr Gainey's observations. 149 The Trial Judge held to the effect that Mr Hadfield had property in the worms (Red 106) and that the worm farm was a chattel and not a fixture (Red 106-107). These conclusions were challenged on appeal, leading to argument on whether farmed worms are domesticated animals which can be subject to ownership rights (mansuetae naturae) or wild animals (ferae naturae). My consideration proceeds on the assumption that these conclusions were correct, although it is not necessary to reach a conclusion on whether they were. 150 The judgment shows that the Trial Judge awarded damages on the basis of obligations relating to bailment, and also on the basis of obligations relating to the tort of Conversion. The Trial Judge's conclusions with respect to bailment were: (Red 108 and Red 109E-F) Bailment arises when one person (the bailee) is voluntarily and knowingly in possession of the goods of another (the bailor)… I am satisfied that as at the date of settlement with the purchaser the defendant was aware that the plaintiff was demanding the return of the manure or deep litter. 151 The Trial Judge stated the evidence upon which this finding was based as follows: (Red 109G-O) 1. The defendant's file note dated 10 March 1994 noting an agreement for the plaintiff to remove 500 tonnes of manure. 2. The reference to the substantial quantity of deep litter or manure in the Terms of Settlement dated 10 March 1994. 3. The subsequent correspondence between the defendant and the purchaser in which the plaintiff's entitlement to the manure was debated. 4. The letter from the solicitor for the defendant to the plaintiff dated 15 March 1994 informing him of the reason, at that time, for the defendant's refusal to permit the plaintiff to remove the manure. 5. I have found that Mr Gainey was aware that the manure was teeming with worms. I accept the submission made by counsel for the plaintiff that Mr Gainey was the agent of the defendant and his knowledge was the knowledge of the defendant. 152 Her Honour said: (Red 109P-R) I am satisfied that the defendant was aware that it was in possession of the contents of the two sheds and that the plaintiff was claiming those contents as his own property and that this is sufficient to give rise to a bailment of those contents. Accordingly I am satisfied that the defendant was voluntarily and knowingly in possession of the worm farm owned by the plaintiff. The normal obligation owned by gratuitous bailee to the bailor is that of reasonable care. I am satisfied that that obligation was breached by the defendant. The defendant was aware that the plaintiff was asserting his right to the deep litter when the defendant elected to assert to the purchaser that it formed part of the sale as evidenced by the letter of advice from the defendant's solicitors dated 3 May 1994. I make this finding based on the relevant correspondence and notes in around March 1994 and the concession made by Mr McQuiggan as to his conscious decision to come down on the side of the purchaser and expose the defendant to a claim for damages by the plaintiff. The worm farm was removed, as evidenced by the bob cat driver. Counsel for the defendant submitted that the plaintiff and the defendant had entered into a regime set out in the consent orders in March 1994 whereby the plaintiff as required to expeditiously bring forward any disputes. Accordingly the defendant was entitled to assume there was no dispute after failing to receive a reply to the letter dated 15 March 1994. I reject the submission. I am satisfied that the defendant was aware that the plaintiff disputed its right to ownership of the deep litter as evidenced in the contemporaneous correspondence, that the defendant was aware that the plaintiff had limited resources with which to continue his dispute with the defendant and that in any event an insufficient time had elapsed between the defendant's letter and the settlement on 31 March 1994 to be able to make any such assumption. The submission also overlooks the discussion between the parties at Court on 26 April 1994 and the letter from the defendant's solicitor to the plaintiff dated 28 April 1994. Further I am not persuaded that those orders displace any remedy in bailment. The relevant test is whether the defendant was the bailee of the chattels and failed to exercise reasonable care in relation to the chattels. I am accordingly satisfied that the defendant breached its obligation to the plaintiff in bailment in relation to the worm farm. 153 With respect to conversion the Trial Judge said: (Red 110N-111N) Conversion Counsel for the plaintiff submitted that conversion involves dealing with goods or chattels in a manner repugnant to the immediate right of possession of the person who has the property or the special property in them ( Penfolds Wines Pty Limited v Elliott [1946] 74CLR at p229). The defendant's act must constitute a denial of the plaintiff's right – the defendant must have intentionally dealt with the goods or chattels and that dealing should constitute a denial of the plaintiff's right. Counsel for the plaintiff relied on the decision in Jiwara Pty Limited v Piba [2000] NSW SC 1094 as illustrating how the present fact situation involves a conversion. At paragraph 250 Austin J held "In my opinion the evidence establishes that Mr Baker had an immediate right to the possession of the items. He was the owner of the two silos and the office block. The pump had been lent to him but he was entitled to protect his possession as bailee. The evidence also establishes that the Bank refused to return them, by asserting (by inference from the letters of 15 and 29 January 1993) that the items were fixtures which had been sold to the purchasers of the Jiwira land. Therefore Mr Baker is entitled to recover damages for conversion unless the items were fixtures rather than chattels". Counsel for the defendant described the cause of action as misconceived. He relied on the terms of the contract with the purchaser pursuant to which the plaintiff must have retained title if the deep litter was a chattel. He submitted that any sale of the goods by the purchaser may be a conversion which would only give the plaintiff a cause of action against the purchaser and not the defendant. Counsel for the plaintiff submitted, in reply, that the Bank converted the chattels by allowing possession of them to pass to the incoming purchaser who subsequently disposed of them. The submission in reply made by counsel for the plaintiff is consistent with the finding in Jiwara (supra) . I accept the submission made by counsel for the plaintiff that the fact that the plaintiff may have had a right to assert his right to possession of the worm farm as against the purchaser is entirely beside the point and in no way detracts from the entitlement of the plaintiff to claim against the defendant for conversion. I am satisfied that the evidence establishes that the plaintiff had an immediate right to possession of the worm farm. The defendant refused to permit the plaintiff to remove the worm farm and agreed to deliver it to the purchaser. I accordingly find that the defendant converted the worm farm and the plaintiff is entitled to damages. 154 The Trial Judge's conclusions both on bailment and on conversion depend on events between the auction sale on 26 February 1994 and completion of the sale on 31 March 1994. It was her Honour's view that the causes of action arose no earlier than 10 March 1994. 155 The Bank had a mortgage only over the land and had no interest in any chattels. Clause E6 of the mortgage gave the Bank the power to remove and store chattels but this power was not exercised. The Sheriff delivered four Notices to Vacate, the last on 10 August 1993. The notices were entirely clear in their warning that all occupants must vacate the premises without delay, and that otherwise action to evict would proceed. At the time of the auction sale and of completion the presence of Mr Hadfield and of any chattels which he owned on the property was a breach by him of his obligation to give possession to the Bank on default. That obligation had been made known to him in a number of ways over two years, by the notices under the Conveyancing Act and the Real Property Act, again by the possession proceedings including the decision on leave to issue a Writ of Possession, notices to vacate and execution by the Sheriff and by the arrangements Mr Hadfield made with the Bank which gave him opportunities to remove his property including his animals after execution. The Bank's intention to sell the mortgaged land was fully known to him. By the time of the auction sale Mr Hadfield had had as full an opportunity to remove his chattels as could well be imagined. Thereafter he had further opportunities. Repeated opportunities were given to him and all his difficulties in removing goods were of his own making: there was no shortage of time or of warnings. 156 Mr Hadfield applied to the Supreme Court on 25 February 1994 to restrain the Bank from exercising its power of sale by conducting the auction. He did not bring any other litigation against the Bank until he commenced the present proceedings. On 7 March 2004 the Bank commenced proceedings 1628 of 1994 in the Equity Division for an order that Mr Hadfield withdraw his caveat and for interlocutory and permanent injunctions restraining him from entering or remaining on the property and from dealing with goods, chattels or fixtures on the property; and also an order for specific delivery of a windmill previously located on the land and other fixtures. The Bank also sought damages and other relief. Mr Hadfield appeared in person on the return of the Summons on 10 March 1994, and after negotiations with the Bank's counsel orders were made by consent upon Short Minutes (Blue 1/152). The Short Minutes provided among other things for an order for withdrawal of his caveat, an undertaking by Mr Hadfield to the Court to vacate the land by 5 pm on Monday 21 March 1994 and not to re-enter thereafter except with prior written consent, an undertaking not to interfere with the land or any fixtures and an agreement relating to removal of items from the property. There was also an adjournment to 26 April 1994 with liberty to apply on 24 hours' notice, and provision for service of process on him. 157 The Short Minutes recorded an agreement for the removal of property in these terms: (Blue 1/153-155) 4. Notes the agreement between the parties as follows: (a) The Defendant wishes to remove certain items from the said land, which the Defendant claims are not fixtures, but are his own personal chattels. These items include a substantial quantity of "deep litter," or manure, a milking machine and a coolroom. (b) The Plaintiff shall, by 5pm on Tuesday 15 March, 1994, and earlier if it is able to do so, inform the Defendant of the items to whose removal it consents. (c) The Defendant shall by 5pm on Monday 21 March 1994 remove from the said land all of the items to whose removal the Plaintiff has so consented. (d) In relation to any items which the Defendant wishes to remove, but to whose removal the Plaintiff has not consented, the undertaking recorded in paragraph 3 above shall continue to apply. (e) If there [are] any items which the Defendant wishes to remove, but to whose removal the Plaintiff has not consented, the parties will seek to have their rights determined at the earliest possible opportunity, and shall cause these proceedings to be relisted for the said purpose. (f) Even if there are any items which the Defendant wishes to remove, but to whose removal the Plaintiff has not consented, the undertaking recorded in paragraph 2 shall remain in full force and effect, and binding upon the Defendant. … 8. Notes further that the Plaintiff hereby consents to the Defendant removing from the said land the following items: (a) The "deep litter" or manure (b) The sulky (c) Handtools (d) "T" model – rear axle and wheels The other items which the Defendant wishes to remove shall be dealt with in the manner referred to in paragraph 4 hereof. 158 Mr Hadfield said that the reference to deep litter in the Terms of Settlement and orders of 10 March 1994 was a reference to the worm farm. Mr Hadfield gave evidence that he removed items 8(b) the sulky, 8(c) hand tools and 8(d) the T Model rear axle and wheels. Mr Hadfield did not ask the Bank for consent or for extension of time to remove any further item and there was no application to the Court about removal of further items by 31 March 1994 or at any time. 159 These orders were entered on 15 March 1994 and the agreement was set out in them, but the words "or manure" in cl.8(a) were omitted for some reason which has not been explained by evidence. The order has never been amended so as to cure this slip. There were a number of other relevant events on that day. 160 On 15 March 1994 the Bank's Chief Legal Officer sent a fax message and letter to the solicitors acting for Angreb Pty Ltd the purchaser informing them of the Short Minutes and saying "As part of the Short Minutes the mortgagor has sought consent to remove the following items from the property which he considers to be chattels. These are: (Blue 1/161R) 1. A quantity of manure; 2. A sulky; 3. Various hand tools; 4. T-Model Ford rear axel wheels; 5. Cool room. 161 The letter went on to comment on the Cool Room and on the removal of the Windmill. The purchaser's solicitors were requested to advise urgently whether the purchaser raised any objection to removal of the five listed items. This letter did not mention deep litter. 162 On the same day 15 March Mr Theo Onisforou replied by fax message and letter to the Bank's Legal Officer and said: (Blue 2/468) As a director of Angreb Pty Limited I have decided to reply to you direct. Let there be no doubt in your mind that I consider: 1. The manure; 2. The cool rooms; 3. The windmill (and attached piping); 4. The diesel pump located on Wyong Creek (which is now no longer there); to be fixtures of the aforesaid property. I make the following further observations: 1. The manure is located where it has 'fallen'. That is it has nor been delivered or collected in any area. It is simply where it has fallen. 2… 163 Mr Onisferou went on to make other comments on other items of property and asked to see the draft orders. Mr Onisforou wrote to the Bank again on 16 March asking, among other things, whether the Bank intended to allow Mr Hadfield to remove the animal droppings. In a second letter also of 16 March 1994 he asked for confirmation that the deep litter would not be removed. In reply on 17 March the Bank's Chief Legal Officer informed Mr Onisferou that the Bank had told Mr Hadfield that it disputed his rights to remove the deep litter. 164 Also on 15 March 1994 Messrs Abbott Tout solicitors acting for the Bank sent a letter by express post to Mr Hadfield in care of Mr Hadfield's brother at Richmond, referred to the consent orders and said: (163P-T) We advise that the Bank does not consent to the removal of the milking equipment. Furthermore, contrary to your prior advice, it appears that the manure is not in a shed or on the property as alleged by you. Accordingly the prior agreement does not encompass the manure on the property. Furthermore, our instructions are that the manure is not even in piles on the property. Accordingly our client does not consent to the removal of any such manure from the property. 165 Mr Hadfield received the letter, he says "On or about 15 March 1994." In his affidavit he said: (Blue 1/29Q -30D) I did not understand why the Bank did not consent to the removal of the deep litter from the property. As mentioned above, I thought that when I consented to the Short Minutes of Order with Robert Forster that the Bank agreed to allow me to take the deep litter … 84. I knew for a fact that the manure (or deep litter) referred to in the Abbott Tout letter was definitely in piles and definitely in sheds located on the property. The deep litter was located in two tin sheds on the property. It simply did not make sense to say that the deep litter was not in piles. On or about 21 March 1994 I took photos of one of the deep litter sheds. This photo shows that the deep litter was in fact in the shed. There was another shed in which there was deep litter but I did not take a photo of this shed. Only a small portion of the deep litter overflowed out of the sheds. Mr Hadfield went on to refer to photographs which he took about 21 March 1994 which confirmed that this was so. 166 There seem to have been many unfortunate events on the Ides of March. The order as entered did not exactly accord with the Short Minutes of Order. Plainly the Bank's affairs were not well considered or well handled in respect of the terms in which the order was settled, and in respect of the terms of the correspondence sent to Mr Hadfield and engaged in with Mr Onisferou; but these shortcomings had no effect on the outcome. 167 When the correspondence opened the Bank asked the purchaser whether there was any objection to Mr Hadfield removing "a quantity of manure" Mr Onisforou's first letter of 15 March 1994 stated that he considered that the manure was a fixture: in this he appears to have been correct, as it is one of the more obscure aspects of the law of Fixtures that manure scattered where it was naturally deposited is a fixture. However there was no threat of removal of any such material. On 16 March 1994 Mr Onisferou at first referred to "The animal droppings" but in his second message of that day took the position that the deep litter should not be removed. 168 Also on 15 March 1994 Messrs Abbott Tout on behalf of the Bank told Mr Hadfield to the effect that manure which was not in a shed and was not even in a pile was not the subject of a consent to its removal. The Bank did not by that letter and did not ever tell Mr Hadfield that the Bank would not comply with the Terms of Settlement, or that the Bank would resist or would not consent to removal of the deep litter in the sheds. Abbott Tout's letter stated that there was no consent to removal of manure which was not in a shed and was not even in piles. That is to say, the reference was to manure scattered on the property where it had been deposited by animals. The Short Minutes according to their terms gave Mr Hadfield the Bank's consent to the removal of manure, in terms which would literally extend to manure scattered on the property; but it has never been his complaint that he wanted to do so or that he was prevented from doing so; his complaints in this litigation relate to the deep litter in the sheds and the worms in it. 169 Mr Hadfield had a contractual right under the Terms of Settlement to remove the deep litter, and a contractual licence entitling him to go on to the property for that purpose until 21 March 1994. Mr Hadfield knew facts which showed that the manure which Abbott Tout's letter of 15 March 1994 said there was no consent to remove was not the deep litter in the sheds to which his complaint now relates. Although his affidavit attributes a different meaning to Messrs Abbott Tout's letter, he knew facts which showed that the manure referred to by Messrs Abbott Tout was not the deep litter and manure which he had a contractual licence to remove. Mr Hadfield's affidavit at para 84 shows that he understood that the deep litter was not manure as described by Messrs Abbott Tout. If the Bank had told him that the Bank did not consent to his removing the deep litter, he would still have had those contractual rights, unless he treated what the Bank said as a repudiation of the Short Minutes and accepted the repudiation, which he did not do. 170 Throughout these events the Bank and its agents did nothing to the deep litter. It was left in position where Mr Hadfield left it, and remained in that position untouched on 31 March 1994 on settlement of the sale. 171 Mr Hadfield did not give evidence of any measures which he intended or proposed to take to remove the deep litter in accordance with the consent in the Short Minutes, and did not give any evidence that Abbott Tout's letter of 15 March 1994, or any other steps taken by the Bank prevented him from removing the deep litter. In my opinion the circumstances relating to the Short Minutes, the order and the correspondence of March do not show that in any respect the Bank prevented Mr Hadfield from removing the deep litter during the opportunity to do so from 10 to 21 March 1994 given to him by the agreement in the Short Minutes, or interfered with or had any effect on his opportunity to remove the deep litter at any time. No application to the Court was made although leave to apply on 24 hours' notice was reserved. In my opinion it was open to Mr Hadfield to continue with any measures he ever proposed to take to remove the deep litter and the worms and vermicompost in it from the sheds in accordance with the Short Minutes. If there was any breach of the agreement in the Short Minutes (and that has not been shown), breach of that agreement was not the ground on which damages were claimed and awarded. 172 Mr McQuiggan's state of mind about what the Bank should do about Mr Onisforou's claim did not lead to any action resisting or impeding Mr Hadfield from removing the deep litter and the worms. Positions taken by the Bank in its dealings with the purchaser in the months after the purchase cannot establish the character of the events up to and at settlement on 31 March 1994. The decision of Austin J in Jiwira Pty Ltd v. Primary Industry Bank of Australia Ltd [2000] NSWSC 1094 turned on a finding that there was a refusal to return the chattels in question: there is no basis for a corresponding finding. The Trial Judge's finding "The defendant refused to permit the plaintiff to remove the worm farm …" is contrary to the Terms of Settlement and does not have a reasonable basis in the correspondence later than the Terms of Settlement. Mr Hadfield made no attempt at removal and made no gesture towards removal. 173 The Trial Judge's reasons do not express clearly the basis on which her Honour determined that the Bank incurred liability as a bailee. In my opinion there is upon the facts no reasonable basis for so determining. There is no basis on which it could be concluded that the Bank damaged the deep litter and the worms, by negligence or in any other way, and no basis on which it could be concluded that the Bank prevented Mr Hadfield from taking them away. There was no basis for the finding that the Bank "… was voluntarily and knowingly in possession of the worm farm owned by the plaintiff." A low standard of care is required of a Bailee in the circumstances in which the Bank stood, in which Mr Hadfield had left chattels on the land when he was ejected, and continued to leave chattels there during the following months when he had opportunities to remove them, and that there was no indication that it was valuable, or that Mr Hadfield thought it was. The Bank's duty of care required it to do no more than it did, that is, to leave the deep litter alone, so that it was still in position where Mr Hadfield chose to leave it when the Bank parted with title to the land. 174 There is no doubt that the Bank was entitled to sell the land and part with title, and there is no room for a conclusion that a duty of care relating to the deep litter required the Bank not to sell the land, or having sold it not to comply with its obligation to give title to the purchaser. The Bank did nothing to assign the deep litter to the purchaser, or to deal with rights to possession or ownership of the deep litter in any way. The Bank simply left the deep litter where Mr Hadfield left it. If the purchaser had wished to assert title to the deep litter it could not point to any assignment or assurance from the Bank, or to any conduct of the Bank at all in support of such a claim. In my opinion there was no basis for a finding of breach of duty as a bailee, by negligence or in any other way. In my opinion there was no basis for the Trial Judge's conclusion that the Bank was liable for the tort of Conversion. The Bank incurred no liability to Mr Hadfield and it was an error to award damages and to bring damages into the mortgage account. Conclusion 175 In my opinion the Court of Appeal should allow the appeal, set aside the orders of the District Court and give directions for the mortgage accounts to be settled without the charges against the Bank which are erroneous. The Court of Appeal should attempt to settle the mortgage accounts: there should not now be any substantial matter in dispute; I know of none. It should be possible to establish the amount payable on taking the mortgage accounts in all respects except that costs of litigation can be left to enforcement under costs orders. If some contentious matter appears the Court of Appeal should take under consideration whether to decide that matter itself or to remit it to the District court. I propose that the Court of Appeal should make these orders and directions: (1) Appeal allowed with costs: judgment and orders of the District Court set aside. (2) Within 14 days the Appellant is to bring in its proposed Mortgage Accounts in accordance with the decision on appeal. (3) Within 28 days the Respondent is to bring in his objections to the Appellant's proposed Mortgage Accounts. (4) Thereafter the Appellant is to obtain an appointment for directions before Bryson JA. ********** Last Modified: 07/16/2007 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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