Where a mortgagor company is deregistered, a mortgagee
exercising power of sale still owes a duty of care.
In Golden Mile Property Investments Pty Ltd (In Liq) v
Cudgegong Australia Pty Ltd  NSWCA100 the mortgagor
company was deregistered when the mortgagee exercised power of
sale. One of the issues considered by the Court was whether the
duty of care under section 420A of the Corporations Act still
Section 420A provides that when exercising power of sale in
respect of property of a corporation that has a market value, a
controller (which includes a mortgagee) must take all reasonable
care to sell the property for not less than the market value.
Under the deregistration provisions in the Corporations Act:
a company ceases to exist on deregistration;
on deregistration all of the company's property vests in
ASIC has all of the powers of an owner in respect of the vested
If a company is reinstated, the company is taken to have
continued in existence as if it had not been deregistered and any
property of the company that is still vested in ASIC re-vests in
The Court's decision
The Court held:
because the mortgagor was deregistered it did not mean:
there was no mortgagor to whom a relevant duty could be owed;
there was no entity that could seek to restrain an improper
exercise of the power of sale; and
during the period of deregistration, ASIC has the capacity and
can enforce the rights of the deregistered mortgagor.
Implications for mortgagees
When exercising power of sale, a mortgagee should always proceed
on the basis that it must comply with the duty of care owed to the
In addition to the duty under section 420A, a mortgagee
exercising power of sale also has a duty of care under the law of
the applicable state where the property is situated.
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