Australia: Perils In Exercising Power Of Sale

In Sablebrook P/L v. Credit Union Australia [2008] QSC 242 the mortgagee breached section 85 of the Property Law Act 1974 by failing to take reasonable care to ensure the mortgage property was sold at market value.


The mortgagee did not advertise the property for sale or list it with a real estate agent. The property was sold for $240,000. The mortgagee relied upon a valuation of $225,000 which was approximately 4˝ months old at the date of the contract. At the time of the sale there was a rise in the market. No updated valuation opinion was obtained at the time of the sale.

There were issues concerning whether the swimming pool on the property encroached onto adjoining land. There was also a dispute involving the adjoining property owner who claimed a right of easement in respect of the swimming pool.

The Decision

The approach taken by the Court in respect of section 85 involved two steps. The first issue for determination was whether the mortgagee took reasonable care to ensure that the property was sold at its market value ("the breach of duty issue"). If the mortgagee breached its duty, the issue then was whether the mortgagor suffered any loss as a result of the breach of duty and the measure of any loss.
It is significant that the first issue for determination is whether the duty was breached and not the measure of any loss.

Applying earlier judicial authority the Court said the duty of reasonable care under section 85 was to make sure, and to assure oneself that the price at which the property is proposed to be sold is the best price that can reasonably be obtained.

The mortgagee argued it was reasonable to rely on the valuation and to sell the land by private treaty and that there were a number of aspects that made this an appropriate method of sale. It was contended that the land had limited development potential which would limit its appeal to prospective purchasers.

The Court said that the mortgagee's submissions were misplaced as they relate to the market value of the land and not whether it was reasonable not to take the land to the market.

Upon the facts each of the following matters were found to constitute a breach of the duty:

  • Failing to obtain an up to date market valuation and not making any enquiries about the change in the market;
  • Not obtaining any opinion from any local real estate agents as to value;
  • Not taking steps to attract potential buyers by advertising the property, listing with agents or by other means.
  • Failing to investigate the factual basis or obtaining legal advice concerning the merits of the threatened claim relating to the swimming pool.

The Court endorsed earlier legal authority that the duty "extends to the steps to be taken to attract potential buyers to the property, the negotiations for sale, and the settling of the terms of sale". It was also noted that "certainly, in the ordinary case, the mortgagee must be expected to advertise and otherwise make efforts to find a buyer at a good price, not merely to take the first offer which comes along".

The Court concluded that the decision to sell was made for the simple reason that the price on offer exceeded the valuation and was treated by the mortgagee as representing a "premium" of $15,000.

If the mortgagee had a concern about the potential legal issues which featured in its decision to sell, then the mortgagee was obliged to make some enquiries into the dispute and the extent of its likely impact upon market value.

Tellingly, the Court said there was no reasonable justification for the mortgagee not adopting its usual practice of listing a property for sale after contacting a number of local agents and appointing an agent who was considered would do the best job in selling the property.

Although the mortgagor had the onus of establishing that the purchase price obtained was less than the market value it was not necessary for the mortgagor to prove that some identifiable individuals would have purchased the property at the market value.

Damages were assessed by calculating the difference between the market value and the sale price and then making an adjustment for the marketing costs and commission that would have been incurred by the mortgagee as an incident of a sale at market value.

In arriving at a market value of approximately $293,000 on the valuation evidence, the Court allowed a discount of $30,000 as being appropriate in the circumstances due to the threat of litigation relating to the swimming pool.

Damages against the mortgagee were assessed in the amount of $44,000 after taking into account the hypothetical marketing costs and commission. Interest was also awarded.

What it means for mortgagees

In Sablebrook there are warnings for a mortgage seeking to exercise power of sale.

The mortgagee's duty is to make sure that the property is sold at the best price that can reasonably be obtained. If the Court finds that the mortgagee has failed to comply with the breach of duty issue then the mortgagee will be exposed to the uncertainties associated with the determination of market value. In this dispute, the litigation costs most likely exceeded the amount of the judgment.

In Queensland, a mortgagee must also now be aware of the Property Law (Mortgagor Protection) Amendment Act 2008 which was assented to on 4 December 2008.The amendments made to section 85 of Property Law Act stipulate the steps that are required to be taken when exercising power of sale under a prescribed mortgage, unless the mortgagee has a reasonable excuse. The definition of mortgagee includes the attorney for a mortgagor and a receiver acting under a power delegated to the receiver by a mortgagee.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.