Kautto v La Trobe Capital & Mortgage [2015] WASC 58

The borrowers claimed that the lender sold his property at under value. The property was sold by public auction. The lender sold the property ‘as is’ rather than subdivide it, on the basis that the costs of doing so were not such as to justify any higher price that might be obtained. 

The court held that the duty of a mortgagee is to act in good faith and not to act in wilful disregard of the interests of the borrowers. If the sale is by auction, this requires marketing to bring the property to the notice of likely buyers and induce competition likely to secure a fair price. The court noted there was no evidence led by the borrowers as to how a different marketing strategy would have led to a higher price. The court said:

In short the plaintiffs did not reach first base, let alone the home plate.

The court found that the evidence of the lender established without any doubt that the best possible price was obtained. The method of selling was appropriate, the agents engaged were arm’s length, the marketing campaign was reasonable and when the property failed to sell at auction, the agent was able to negotiate the best possible price. 

The court gave the lender judgment for the shortfall since the sale price of the property was not sufficient to satisfy the debt.

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