In HSBC Bank Australia Ltd v Wang & Ors [2021] QSC 58 the Court considered whether a mortgagee had breached their duty of good faith when exercising the power of sale during the pandemic. In 2019, the mortgagee, HSBC, obtained a default judgement for recovery of possession of the mortgaged property and they obtained a valuation and estimate of the property’s value.  In 2020, the property was marketed extensively but an unsuccessful auction occurred during the period in which state and international borders were closed. Later in September 2020, the mortgagee accepted a bid which was significantly below the assessed market value.

A few days before settlement, the mortgagors lodged a caveat claiming an equitable interest in the property as registered proprietors, that the mortgagee failed to act in good faith in the exercise of its power of sale by failing to properly market the property and selling it at an under value. The Court summarised the mortgagees duty as a duty to not act ‘recklessly or wilfully against’ the interest of the mortgagor. 

The mortgagee’s representative accepted the sale price based on the property market’s uncertain long-term focus, and because the offer was significantly better than the offer at the attempted auction. 

The mortgagors argued that the bank should have waited until the borders reopened to achieve a better price, but the Court disagreed and held that at the time there was no reason to suspect that any improvement in the market was imminent. 

Moreover, the Court held that the mere fact of a sale at an undervalue does not demonstrate a lack of good faith. Instead, the mortgagors would have had to demonstrate that the mortgagee failed to take reasonable steps to obtain a proper price that amounted to unconscionable conduct. 

This case is an illustrative example of the way in which a NSW Court might deal with similar issues arising in our jurisdiction, and the impact which the pandemic and border closures will have on the ability to sell property.

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