SC1941
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 79 OF 2016

KIMB TAI
Appellant

V

BANK SOUTH PACIFIC
Respondent

Waigani:  Cannings J, Logan J, Miviri J
2020: 27th February, 1st May

MORTGAGES AND CHARGES GENERALLY – REMEDIES OF THE MORTGAGEE – Loan secured by registered mortgage – Failure by borrower to remedy default in payment of loan after notice – Sale of property by mortgagee – Land Registration Act 1981 – Nature of duty owed by mortgagee to mortgagor on exercise of power of sale – whether determined by reference to equitable principles of good faith or tort of negligence or both.
EVIDENCE, PRACTICE AND PROCEDURE – Judicial fact finding at trial – role of contemporaneous documents in relation to assessment of oral evidence
The appellant, T, borrowed money by two loans from the respondent, BSP, for the purchase of a rental property at Gordons (Gordons property) in the National Capital District (NCD). As security for the repayment of the loans, BSP took registered mortgages over the Gordons property and T’s residence at Tokarara in the NCD (Tokarara property). T engaged a firm of real estate agents to manage the Gordons property after its purchase. T subsequently failed to make loan repayments to BSP as and when required under his loan agreements. That failure continued following the service of a notice of demand by BSP and the default was not remedied by T after the service of a notice of default on him by BSP. BSP entered into possession of, and then sold, the Gordons property to an arm’s-length third party, following its public newspaper advertisement for sale by tender. The sale price was less than the amount then owing under the loans. BSP then exercised its power of sale in respect of the Tokarara property, again publicly advertising the property for sale by tender. It agreed to sell the Tokarara property to another arm’s-length third party and gave notice to T to vacate that property. Completion of the sale of the Tokarara property was enjoined by interlocutory injunction granted by the National Court in separate, originating summons proceedings. T subsequently commenced an action in the National Court in which he claimed that BSP had negligently misrepresented the competency of the real estate agent as a rental property manager and that it had been a term, made orally, of the loans that he engage a real estate agent to manage the Gordons property after he purchased it. He alleged that the real estate agent’s negligence continued after BSP took possession of the Gordons property and that BSP was responsible for the acts and omissions of the agent. T also alleged that BSP had negligently breached a duty of care owed to him in its exercise of its power of sale in respect of the Gordons property. He alleged that he had introduced eight potential buyers to BSP who had expressed interest in purchasing the Gordons property for more than the price for which BSP sold it.
The National Court dismissed T’s action, holding that he had failed to discharge his onus of proving each of his causes of action and that any cause of action T had in relation to the management of the Gordons property was against the real estate agent. T then appealed against the dismissal of his action to the Supreme Court. 
Held: 
(1)	The primary judge was entitled to find that it was not a term of the loan agreements that T engage a real estate agent to collect rents from and otherwise manage the Gordons property. The term said to have been reached orally between T and an officer of BSP was inconsistent with the terms of the loans as recorded in contemporaneous written loan agreements necessarily entered into after the alleged oral agreement concerning the alleged term.
(2)	The primary judge was correct to find that the real estate agent was, up until BSP took possession, T’s agent, not that of the BSP. Further, it had not been proved on the evidence whether BSP managed the Gordons property directly or via a real estate agent from the time it took possession of that property until its sale.
(3)	Further, and in any event, T had not proved negligence on the part of the real estate agent in the management of the Gordons property.
(4)	The duty of a mortgagee exercising a power of sale arises under equitable principles of good faith, not the law of negligence. No breach of that duty had been proved in relation to the exercise of the power of sale in respect of the Gordons property.
(5)	The appeal was accordingly dismissed with costs.

Cases Cited:
Papua New Guinea Cases

The following cases are cited in the judgment:  
Esther Torato v PNG Home Finance Ltd [2012] PGNC 4; N4583
Papua New Guinea Banking Corporation v Aruai [2002] PNGLR 159
The State v Pokia [1980] PNGLR 97
Torato v PNG Home Finance Ltd SCA No 16 of 2012
Westpac Bank-PNG-Limited v LareLake [2007] 1 PNGLR 182

Overseas Cases

Armagas Ltd v Mundogas SA (The “Ocean Frost”) [1985] 1 Lloyd’s Rep 1
China and South Sea Bank Ltd v Tan [1990] 1 AC 536
Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491
Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949
Downsview Nominees Ltd v First City Corporation Ltd (No. 1) [1993] AC 295
Farrar v Farrars Ltd (1888) 40 Ch D 395
Forsyth v Blundell (1973) 129 CLR 477 
Fox v Percy (2003) 214 CLR 118
Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560
Guirguis Pty Ltd v Michel’s Patisserie System Pty Ltd [2018] 1 Qd R 132
J & W Investments Ltd v Black (1963) 38 DLR (2d) 251
Kennedy v De Trafford [1897] AC 180
McHugh v Union Bank of Canada [1913] AC 299
Onassis and Calogeropoulos v Vergottis [1968] 2 Lloyd’s Rep 403
Parker-Tweedale v Dunbar Bank plc (No 1) [1991] Ch 12
Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676
Societe d’Avances Commerciales (Societe Anonyme Egyptienne) v Merchants’ Marine Insurance Co (“The “Palitana”) (1924) 20 Lloyd’s Reps 140
Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410

Counsel

E Parua, for the Appellant
H Masiria, for the Respondent

1st May, 2020 

1.	BY THE COURT: On 24 December 1997, the appellant, Mr Kimb Tai entered into an agreement with the respondent, Bank South Pacific (Bank) for the loan to him of K153,000.00. The purpose of the borrowing was to assist Mr Tai to purchase an investment property on land more particularly described as Section 70, Lot 13, Henao Drive, Gordons in the National Capital District (the Gordons property). Situated on the Gordons property was a unit block comprising one three-bedroom and three two-bedroom units. 
2.	It was a term of the loan agreement that Mr Tai provide registered security over two nominated properties for the borrowing. One of these was the Gordons property, when acquired; the other was a property already owned by Mr Tai. That was a residence situated on land more particularly described as Section 147, Lot 25, Tokarara Hohola in the National Capital District, being the whole of the land contained in State Lease Volume 71, Folio 29 (the Tokarara property).
3.	The purchase price in respect of the Gordons property was K170,000.00. 
4.	Settlement of the purchase of that property did not occur until 2 July 1998. 
5.	In the interval between 24 December 1997 and the date of settlement, Mr Tai encountered a need to borrow additional money from the Bank in order to purchase the Gordons property. On 1 July 1998, the Bank offered to loan him an additional K11,604.50. Of this additional K11,604.50, K1,912.50 was to be applied to the payment of a loan commitment fee already accrued by Mr Tai with the balance applied to cover a shortfall that had emerged in his ability otherwise to pay the balance of the purchase price. 
6.	No additional security was sought by the Bank in relation to this further borrowing. However, and materially, the Bank did impose an additional condition in return for its agreeing to loan these additional funds. That was:
All rental proceeds for the next six (6) months to be deposited direct to the credit of the Fully Drawn Loan Account number 294 016 238909 and the Periodical Payment Authority implemented for the normal repayment amount of K2,700.00 to commence in January 1999 and monthly thereafter.
7.	On 2 July 1998, Mr Tai countersigned the Bank’s letter of 1 July 1998, signifying his agreement to the Bank’s offer, on the terms specified, to loan him the additional funds.
8.	Also on 2 July 1998, the Bank performed the loan agreements and loaned Mr Tai a total of K164,604.50 (the originally agreed K153,000.00, plus the additional K11,604.50). The loan was applied by the Bank on his behalf in the part payment of the purchase price of the Gordons property, in outlays and in the payment of the outstanding commitment fee.
9.	In its letter of 7 July 1998 to Mr Tai advising him that the purchase of the Gordons property had settled on 2 July 1998 and of the application of the loan funds, the Bank also advised him:
Now that the loan is fully funded, your repayments of K2,700.00 per month will commence on the 2nd August 1998 and monthly thereafter. Please ensure that your repayments are received by the Bank on or before 2nd each month to avoid paying penalty interest which is 5.0% over the current rate charge to your account.
[sic]
10.	On 23 September 1998, the mortgage granted by Mr Tai to the Bank over the Tokarara property was registered (No S19422) by the Registrar of Titles. The Gordons property also became subject to a registered mortgage (No S19229) in favour of the Bank, although the title deed recording this is not in evidence.
11.	By 28 September 1999, Mr Tai had fallen into arrears in respect of his loan repayments. On that day, the Bank issued a letter of demand to him in respect of those arrears. A further letter of demand issued on 22 February 2000. This was (apparently) followed up by the Bank via a notice of default dated 3 March 2000, although that notice is not in evidence.
12.	By a letter dated 8 March 2000 to the Bank, Mr Tai acknowledged his receipt both of the letter of demand of 22 February 2000 and the notice of default of 3 March 2000. In the letter, he stated:
I therefore regret to inform you as I have verbally briefed you during our discussion of 8 March 2000 that it is the fault and negligence of the property management, ‘The Professionals’ who have failed to honour the Bank’s demand to pay the demanded rental rate of K2,700.00 on 2nd day of each calendar month commencing from 2 August 1998.
As a land lord I tried my best so many times by advice and instruction to the management from time to time both by written correspondence and verbal advice to the management to cease unnecessary maintenance work without my approval. The management has insisted my instruction and continued to heavily spent on unnecessary maintenance and repairs of my above property [the Gordons property].
…
As you have adviced I now terminate The Professionals from managing my property and wish to request [the Bank] to manage my property and receive the income from the rental until my loan is fully repaid. Attached is a copy of my termination letter to The Professionals dated 9 March 2000 for your information.
[Indecipherable] now as you have advised me I will try my best to sell the above property to repay my Bank loan while you manage the property. However, if the sale is not successful you (the Bank) will continue to rent and repay the loan from the rental collection.
…
[sic – emphasis added] 
13.	The Bank’s record copy of this letter is annotated, apparently by an officer of the Bank in the ordinary course of the Bank’s business, as follows:
At the foot of the first page – “Not correct. On service of the N/O/D [Notice of Demand] has entered into M/- [mortgagee] in possession … [Indecipherable]”
On the second page – “This letter is in response to the N/O/D served on the sec [security] properties. Mr Kimb Tai call on 8/3/2000 and held discussions with me on without prejudice basis.
[initials] 14/[3]/00”
[sic]
14.	In the result, the loan was not brought into compliance after March 2000. 
15.	Mr Tai wrote a further letter to the Bank (dated 2 August 2000), similar in terms to his March letter. That letter is annotated by an officer of the Bank, “There is no immediate workable solution for Mr Tai given the above … we will now proceed to advertise the Gordons property …” [ sic, emphasis added].
16.	On 27 October 2000, a further letter of demand (dated 26 October 2000) was served on behalf of the Bank on Mr Tai. That sought repayment of the then outstanding sum of K252,161.39, together with a specified daily accrual of interest, within 7 days. When that was not repaid, a notice of default (dated 3 November 2000) was issued by the Bank. That was served on Mr Tai on 6 November 2000. 
17.	Mr Tai sent a letter dated 22 February 2001 to the Bank in response to this notice of default. He requested the Bank “stop the sale of the [Gordons] property by withdrawing the Public Tender”. He again attributed fault to the managing agents for whom he was “taking the blame”. That request was not taken up by the Bank. In the letter, he also stated:
Because of my outstanding loan Mr Amos Pave [a Bank officer] has adviced me to sell my property at Gordons to repay my loan. I did my very best to sell it but unfortunately I have not been able to succeed in selling the property. The reason being that the bank has put the property on Public Tender for purchase plus a wide spread false rumour that someone has already bought the property, and have turned away my clients with good offers which became effective on 15th November 2000 when the Mortgage Sale Tender was advertised in the Post Courier.
[sic – emphasis added]
18.	If there were a response by the Bank to this letter, it was not in evidence.
19.	By 8 June 2001, the Bank had entered into possession of, and then sold, the Gordons property. It was sold for the sum of K170,000.00 to Johan 1 Limited pursuant to a contract of sale dated 21 February 2001. By a letter dated 8 June 2001, the Bank notified Mr Tai that the proceeds of the sale of the Gordons property had been “insufficient to totally clear off your debt” and that “the second mortgage property [the Tokarara property] will be advertised for sale commencing 13 June 2001 with Post Courier newspaper”. 
20.	In this letter, the Bank did not specify the sale price obtained, much less give Mr Tai a detailed breakdown as to how the sale proceeds had been applied. Though these failures are not determinative of the issues in this appeal, they should not have occurred and are hardly indicative of good banking practice. Such detail was available to the Bank, because it found its way into various credit and debit entries in the statement it issued in respect of the loan account. With an explanation in respect of these entries, it is possible to discern the application of the sale proceeds.
21.	Advertisements by the Bank for the sale by tender of the Tokarara property subsequently appeared in the Post Courier on 11, 12 and 16 July 2001.
22.	The Bank received a tender from a Mr M Kulimbao for the purchase of the Tokarara property for the sum of K70,000.00. By a letter dated 27 August 2001, the Bank advised Mr Kulimbao that his tender had been accepted, “subject to contracts being exchanged”. As a consequence, the Bank served a notice to vacate the Tokarara property on Mr Tai on 31 October 2001. 
23.	The chronology of events given above is consistent with, but more detailed than, findings of fact made by the learned primary judge. It draws upon contemporaneous documents which were in evidence and not in themselves controversial.
24.	On 1 November 2001, Mr Tai obtained in the National Court, on an originating application (OS 674 of 2001), an injunction restraining the Bank, until further order, from evicting him from and, by necessary implication, selling the Tokarara property. That restraint remains in place. It was apparently granted and continued on the basis that Mr Tai would institute an action in which a permanent injunction would be sought. 
25.	Mr Tai did institute such an action, albeit not promptly. On 8 October 2004, he instituted an action in the National Court in which he alleged that the Bank had breached duties of care said to be owed to him in relation to advising him as to the competency of The Professionals as a manager for the Gordons property and in the Bank’s own management of the rental of that property, with the consequence that the loan had fallen into arrears. He also alleged that, notwithstanding that he advised the Bank that he had buyers who were interested in the purchase of the Gordons property for a greater sum than that for which it sold, the Bank had, in breach of an alleged agreement to sell to buyers procured by him and of the duty, as mortgagee in possession, it owed to him as the holder of an equity of redemption in that property, sold that property for K170,000.00. He claimed damages, together with an injunction permanently restraining the Bank from evicting him and selling the Tokarara property. 
26.	The Bank denied the breach of any duty of care and also of its duty as mortgagee in possession, as well as denying the existence of any agreement as alleged. 
27.	The action eventually came to trial in August 2010. Judgement was reserved. It was not delivered by the learned primary judge until May 2016. The delay in delivery of judgement is, of course, unfortunate. However, lest it be thought it has escaped notice, it should be recorded, in fairness to the learned primary judge, that his Honour’s attention must, necessarily, have been distracted not just by the particularly heavy demands that attended judicial office prior to the enlargement, since judgement was reserved, of the number of National Court judges but also by tumultuous local events during 2011 and 2012, which directly affected his Honour.
28.	In the result, the National Court dismissed Mr Tai’s claim entirely. 
29.	The learned primary judge found that Mr Tai had failed to discharge his onus of proving, on the balance of probabilities, that the Bank, as opposed to The Professionals, had agreed with him to manage the Gordons property. His Honour found (at paragraph 20) that Mr Tai appeared “to have misconstrued [the Bank’s] taking possession of the property as taking over management of the property from the Professionals when in fact that was the evidence of the Defendant Bank taking possession of the property as a step towards foreclosing on the mortgage following [his] default after giving him several default notices” [sic]. 
30.	As to the alleged breach of the duty owed by a mortgagee in possession, the learned primary judge found (at paragraph 26) that there was “no clear evidence of the manner and circumstances he actually brought to the attention of the [Bank], one or more of these intending buyers, so that the Defendant Bank could have done its own due diligence enquiry to ascertain financial viability of the potential buyer or buyers before making any commitment”. His Honour also found, “The names given in the list are real estate companies who manage properties belonging to clients”.
31.	The notice of appeal pleads the following grounds of alleged error by the National Court:
A.	finding that there was lack of pleadings & evidence to alleged negligence against the defendant [sic];
B.	finding that the failure of Professionals Real Estate led to the appellant defaulting;
C.	finding that the respondent did not err in foreclosing on the mortgage;
D.	finding that the respondent did not err in foreclosing on the mortgage & selling the property [sic]; and
E.	finding that the respondent was fair when it selling the property for less value then the amount owing to the respondent. 
[sic]
32.	To deal with these grounds, it is necessary to elaborate on the evidence before the court at trial and on some features of the way in which the trial was conducted by each party. 
33.	At trial, the evidence for Mr Tai consisted, as the learned primary judge correctly recited in his reasons for judgement, of two affidavits sworn by him, together with their annexures. In addition, Mr Tai gave oral evidence in response to a requirement to attend for cross-examination. The Bank relied on affidavit evidence. That was given by Mr Paul Miamel, its Manager, Recoveries (two affidavits) and an affidavit made by its lawyer, Mr Michael Koimo, together with the annexures to those affidavits. Of these deponents, only Mr Miamel was required for cross-examination.
34.	In his affidavit (at paragraphs 19 to 21), Mr Tai stated, in relation to the Gordons property:
19. 	As a result the Defendant’s Bank exercising the power of mortgage to sell the property, the Defendant Bank requested me to find a buyer who can purchase the property to enable the full or otherwise substantial settlement of the debt. Accordingly, I did secure eight (8) buyers who will be able to purchase the property for an amount that could enable full settlement of my debt to the Defendant.
20. 	Among the various potential buyers I secured were the following whose purchase price as also listed below and forwarded the list to the Defendant.
a)	Budget Real Estate (Mr Kunjil)	K240,000.00
b)	Ray White Real Estate (Mr Barry Lei)	K255,00.00
c)	Park Lane Real Estate (Mrs Bodo)	K255,000.00
d)	Babes Real Estate (Mr Boris)	K250,000.00
e)	Home Real Estate (Mr Rati)	K250,000.00
f)	Rosell Trading Limited (Mr Stanley Mongi)	K300,000.00
g)	DAC Real Estate (Mrs Lani)	K190,000.00
h)	Puritau Real Estate (Mr Puritau)	K250,000.00

21.	However, the defendant did not sell the property to the purchasers secured by me but instead sold the property for a much lesser amount than offered by my list. I have no idea how much they sold the property for.
[sic – emphasis added] 
35.	Mr Tai’s confessed ignorance of the sale price of the Gordons property is consistent with the absence of reference to the sale price in the Bank’s letter advising him of the sale of that property, and the related lapse in good banking practice already mentioned.
36.	In the course of his oral evidence, Mr Tai again made reference to having advised the Bank of the existence of eight potential purchasers for the Gordons property. He stated that he had “physically brought” some of them to the Bank. It was not put to him that this was untrue.
37.	Mr Tai again stated in oral evidence that he was unaware (in context, at the time of sale) of the amount for which that property had been sold. With reference to the sale price of K170,000.00, he stated that it was the same as the amount for which he had bought it but that he had made improvements to the property since his purchase of it. He also stated that the Gordons property had been for sale for K230,000.00 but that he had been able to purchase it for K170,000.00.
38.	Also in his oral evidence, Mr Tai stated that The Professionals had acted on the sale of the Gordons property to him and had offered to manage it for him. He stated that, before he entered into the initial loan agreement to fund the purchase, the Bank had required that the Gordons property be managed by an agent and represented to him that either The Professionals or Century 21 were reputable. He did not nominate which officers of the Bank had made such representations. Indeed, this was not particularised in the statement of claim. It was put to him in cross-examination that such a representation was not made by officers of the Bank. He insisted that there was such a representation made orally but agreed that the Bank’s letter of offer for the initial loan contained no such requirement.
39.	In the course of his oral evidence, the Bank’s officer, Mr Miamel was queried as to the Bank’s practice after the service of a notice of default. He replied:
“When the customer does not come good we advertise the property and enter for sale.”
40.	Mr Miamel denied in oral evidence in chief that the Bank had ever managed the Gordons property, stating that what the Bank had done was to [proceed] to sell the property. It was not put to him in cross-examination, either that an officer of the Bank had required Mr Tai to have the Gordons property managed by an agent as a condition of obtaining the initial loan, that the Bank had been appraised by Mr Tai prior to the sale of the Gordons property of eight potential buyers, some of whom had been physically brought to the Bank by him, had agreed with Mr Tai to sell to some such person or, for that matter, that the Bank had, at some stage, managed the Gordons property. 
41.	The focus of Mr Miamel’s initial cross-examination on 2 August 2010, which was abbreviated, was on for how much the Gordons property had been sold. Mr Miamel was unable to answer this from memory. This sale price of K170,000.00 became readily apparent from the contract of sale, for the Gordons property dated 21 February 2001, later received in evidence without objection as an annexure to Mr Koimo’s affidavit. Mr Miamel was stood down from the witness box for the purpose of obtaining and giving evidence of the Gordons property sale price and its application. This Mr Miamel did, explaining by reference to the sale contract and a statement of account by the Bank in respect of the loans to Mr Tai, that an entry in the statement of account showing a credit of K164,066.27 to the amount outstanding referred to the application of the net proceeds of sale of the Gordons property. 
42.	A further affidavit of Mr Miamel was made, filed and served after the trial adjourned for further hearing. Mr Miamel was again required for cross-examination when the trial resumed. On resumption, Mr Miamel was asked in the course of his further cross-examination about the contract for the sale of the Gordons property. He confirmed that the sale price was K170,000.00 and that this was the same price for which Mr Tai had purchased that property. The following exchange then occurred between Mr Tai’s lawyer and Mr Miamel:
Q.	My final question is that you can say you did not sell the property at any other price just at that, same price?
A. 	The property was advertised in the usual way, advertised openly on the market, put on tender in the newspaper and people applied through the tender. 
Q. 	And probably one more question leading from that. Would you say that that is a fair price that you sold the property at that time?
A. 	That is correct.
It was not put to him that, as at the time of sale, he personally, or at least the Bank, knew that there were other buyers ready, willing and able to pay a higher price for the Gordons property. Once again, it was not put to Mr Miamel that, before 21 February 2001 (the date of the contract for the sale of the Gordons property by the Bank), Mr Tai had informed the Bank of eight real estate agents who had potential buyers for greater than that amount, much less was it put that Mr Tai had physically brought some of these agents or potential buyers to the Bank.
43.	We now turn to a consideration of the grounds of appeal. For that purpose, it is convenient to group them under particular subject headings.
Pleadings, evidence of negligence and the role of The Professionals
44.	The learned primary judge, unremarkably but accurately, approached the question of whether there had ever been any agreement by the Bank to manage the Gordons property as a matter for Mr Tai clearly to allege and then to prove by evidence and on the balance of probabilities. His Honour concluded (at paragraph 18):
[W]ithout clear evidence of the specific terms of management agreement that the Defendant allegedly breached resulting in the Plaintiff’s default, the Plaintiff has failed to establish any fault on the part of the Defendant. If anyone is at fault, he defaulted in his loan repayments thus at the mercy of the Defendant to make good his default.
Reference has already been made to a conclusion by the primary judge (at paragraph 20 of his Honour’s reasons or judgement) as to Mr Tai’s misconstruction of events. His Honour further concluded (at paragraph 21):
… Again the Plaintiff had not demonstrated in his pleading which specific clauses in any agreement that he alleges that the Defendant breached thus his allegation remains superfluous and unsubstantiated. It is arguable that he took his fight to the wrong party.
45.	The statement of claim endorsed on the writ is indeed confused. It is alleged (at paragraph 7) that, as part of its condition for obtaining the loan, the Bank insisted that Mr Tai secure the services of a professional real estate agent to manage the property for him. It is also alleged that the Bank recommended that Mr Tai approach either The Professionals or Century 21, which were reputable real estate managers which the Bank could accept. It is then alleged (at (at paragraphs 8 to 10) that, relying on the representations made to Mr Tai by The Professionals as to property management competency, he appointed them as his managing agents and notified the Bank of this upon which the Bank approved the initial loan. 
46.	It is then alleged (at paragraph 11) that, contrary to its representations, The Professionals did not professionally manage the Gordons property, resulting in Mr Tai’s default in the servicing of the loan. That allegation and the preceding allegation as to representations made by The Professionals would have had their place in an action for breach of a property management contract or breach of duty of care against the entity conducting The Professionals business, but Mr Tai never instituted any such action. It is apparent from his oral evidence that he was aware that he could have taken such a course but chose instead to sue the Bank.
47.	Neither in his statement of claim, much less in his oral evidence, did Mr Tai condescend to particularity as to which officer of the Bank had insisted, orally but as a condition of the approval of the initial loan to him, that he obtain the services of a real estate agent to manage the Gordons property on and from his purchase of it.  The same applies in relation to any representation as to the competency of The Professionals. 
48.	The Bank’s letter of offer dated 26 November 1997 (less its annexure) in respect of the initial loan is in evidence. It states that the loan is offered “subject to the Bank’s usual terms and conditions” set out on the Bank’s application and which are expressed to be attached. Particulars of at least some of these usual terms are expressed to be specified in this letter. There is no reference in the letter to any requirement that the Gordons property be managed by a real estate agent.
49.	For whatever reason, Mr Tai, who introduced this letter into evidence as an annexure to his affidavit (Ex. B), did not include the attachment. He did, however, also include in his affidavit (as Ex. A) what appears to be the first, but not only, page of the Bank’s application form, inferentially that referred to in its letter of 26 November 1997. Again, there is no reference in that part of the application form in evidence to any requirement that the Gordons property or any security property be managed by a real estate agent. If there was otherwise any such reference in the form, it was obviously in Mr Tai’s interest to introduce that into evidence.
50.	The Bank’s letter of 1 July 1998, offering to make an additional advance to Mr Tai for the purchase of the Gordons property, also makes no reference to any requirement that the property be managed by a real estate agent, only that the rental proceeds be paid to the credit of the Bank.
51.	Only the mortgage in respect of the Tokarara property is in evidence and even that does not reproduce all of the terms and conditions. The mortgage in respect of the Gordons property is not in evidence. Of the mortgage terms which were in evidence, none made any reference to a requirement that the security property be managed by a real estate agent.
52.	In short then, there was no support in any contemporaneous loan or even security documentation in evidence for the existence of a requirement that the Gordons property be managed by a real estate agent or even that this was a usual requirement of the Bank in relation to loans for income producing properties. 
53.	Of course, Mr Tai said the requirement was made orally. But nonetheless it was, on his evidence, a condition precedent to his obtaining a loan. In those circumstances, one might have expected the requirement to have been taken up by the Bank in its letter of offer, if indeed it was important to the Bank. 
54.	In these circumstances, given the challenge made on appeal by Mr Tai to the effective rejection by the learned primary judge of his oral evidence that the Bank had imposed a requirement that the Gordons property be managed by a real estate agent, and the absence of any such requirement in contemporaneous documents, it is opportune to reflect on the role that contemporaneous documents or other evidence may play in judicial fact finding when assessing oral evidence.
55.	In Armagas Ltd v Mundogas SA (The “Ocean Frost”) [1985] 1 Lloyd’s Rep 1, at 57Robert Goff LJ stated:
Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence 
56.	This statement was made with particular reference to a case where fraud was alleged, but the importance of contemporaneous transactional documents as a yardstick against which to measure the credibility of oral evidence given years after the event is by no means confined to cases of fraud. Contemporaneous documents may, and very often do, play such a role in judicial fact finding generally.
57.	A similar point was made by Leggatt J in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (at paragraph 22), after a critique (at paragraphs 15 to 21), of oral evidence based on memory:
In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.  This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.
58.	The importance of contemporaneous documents in judicial fact finding is no new subject. Almost a century ago now, in Societe d’Avances Commerciales (Societe Anonyme Egyptienne) v Merchants’ Marine Insurance Co (The “Palitana”), Atkin LJ (as his Lordship then was) observed:
[T]he existence of a lynx-eyed Judge who is capable at a glance of ascertaining whether a witness is telling the truth or not is more common in works of fiction than in fact on the Bench, and, for my part, I think that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour.
59.	Of course due allowance must be made for the possibility that, as in Armagas Ltd v Mundogas SA, a contemporaneous document is a forgery or created by one party for self-serving reasons. However, where there is no reason to suspect such matters because, for example, litigation or even a dispute is not at the time in prospect, and especially where a document is a record of an agreement reached between parties dealing at arm’s length with one another, the preferment of oral evidence given years later over what is recorded in, or a necessary inference from, such a document is fraught and always requires a detailed justification. 
60.	None of this is to suggest that Mr Tai gave deliberately false evidence at the trial and the learned primary judge was careful not to make any such finding. But Mr Tai had suffered great disappointment in a business venture. Further, it is obvious from his contemporaneous correspondence with the Bank that he felt badly let down by the management of the Gordons property by The Professionals and had a most imperfect understanding, hardly unusual for a layman, of the powers exercisable on a loan default by a mortgagee such as the Bank. The learned primary judge adverted to each of these considerations in his reasons for judgement. 
61.	In these circumstances, it is worth recalling some observations about credibility made by Lord Pearce in Onassis and Calogeropoulos v Vergottis, which lose none of their force for having been made in his Lordship’s dissenting speech in that case:
“Credibility” involves wider problems than mere “demeanour” which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person, telling something less than the truth on this issue, or, though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so, has his memory correctly retained them? Also, has his recollection been subsequently altered by unconscious bias or wishful thinking or by overmuch discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.
62.	It is by no means impossible that an officer of the Bank may, before the formal letter of offer was sent to Mr Tai in 1997, have suggested that he might consider having the Gordons property managed by a real estate agent and even suggested that he approach The Professionals or Century 21. But the proposition that it was a term of the loan that the property be managed by a real estate agent is quite at odds with the Bank’s contemporaneous letter of offer. It is also at odds with the version of events given to the Bank by Mr Tai in his letter of 8 March 2000. He makes no suggestion in that letter that management by a real estate agent was a term of his loans, or that the Bank was negligent in recommending The Professionals, only that he has been let down by that firm. It appears that he engaged The Professionals on the strength of representations which that firm made to him as to its competencies.
63.	In these circumstances, and contrary to the submissions made on Mr Tai’s behalf, the learned primary judge was entitled to conclude that Mr Tai had failed to prove the existence of any representation by an officer of the Bank of the competency of The Professionals, much less that his loans carried a term that a real estate agent manage the Gordons property.
64.	Even if such a representation had been made, or the loan agreements carried such a term, it was still incumbent on Mr Tai to prove, on the balance of probabilities, negligent performance by The Professionals of the management of the properties. This he did not do. 
65.	Further, even if the loan agreements did have a term that the Gordons property be managed by a real estate agent, that term was fulfilled by Mr Tai’s engagement of The Professionals. Yet further, there could be no logical, causative connection between a breach of any such term and the making of a default in loan repayment.  
66.	Mr Tai tendered in evidence an owner statement of 28 February 2000, provided to him by The Professionals, and 1998, 1999 and 2000 (to 30 April only) financial reports in respect of the management of that property, also apparently furnished to him by The Professionals. These show that rent was collected and disbursed and outlays incurred and paid, including, apparently, sums in respect either of repairs or property improvements (payments to Pacific Foam and Lae Builders). They do not prove any mismanagement of the Gordons property either in the collection of rent or the incurring of outlays. 
67.	Further, there was at trial, and on the appeal, an inherent contradiction, unless explained by detailed evidence never led in his case, between Mr Tai’s contending on the one hand that he had made improvements to the Gordons property such that the price obtained by the Bank on its sale was at an undervalue and the alleged improper incurring of expenses by The Professionals as his managing agents in respect of improvements to that property.
68.	The learned primary judge was entitled to find that no case for a breach of duty by the Bank grounded in earlier negligent misstatement as to competency or of a term of a loan agreement had been made out.
69.	It is a matter of elementary contract law that the Bank loaned funds to Mr Tai, not to The Professionals. In relation to the Bank, the responsibility of making repayments under the loans as and when they fell due was always that of Mr Tai, not of The Professionals. The Professionals were Mr Tai’s agents in respect of the management of the property, not the agents of the Bank.  If, indeed, The Professionals were negligent in the performance of a property management agreement with Mr Tai in respect of the Gordons property, he had, as the learned primary judge patently appreciated, remedies against the entity trading as The Professionals. Any such negligence did not mean that a failure by Mr Tai to make a loan repayment as and when it fell due was not an event of default giving rise to a penalty rate of interest and to an entitlement by the Bank to avail itself of rights it had under the mortgages it held over the Gordons property and the Tokarara property.
No right of foreclosure?
70.	Though he made no such allegation in his statement of claim, which would be reason enough not to allow the issue to be raised in the appeal, one of Mr Tai’s grounds (ground D(i)(a)) contended that the primary judge was in error in concluding that the Bank had a right of foreclosure, because it had failed to inform him of its intention to foreclose. 
71.	Perhaps because the point was not one raised at trial, the full terms of each mortgage were not in evidence. However, in addition to whatever rights were conferred under the mortgage contract, there were terms implied by the Land Registration Act Chapter 191. Further, that Act regulated the exercise by the Bank of a power of sale.
72.	By s 64(a) of the Land Registration Act, there was implied in the mortgage, an obligation on the part of Mr Tai as mortgagor, “that he will pay the principal money and interest secured by the mortgage at the rate and times specified in the mortgage without deduction”. 
73.	There is no doubt on the evidence (and Mr Tai admitted as much in his letter to the Bank of 8 March 2000) that Mr Tai had, by 22 February 2000, failed to make payments as and when due under the loans secured by the mortgages. The learned primary judge’s conclusion to that effect is unremarkable.
74.	By s 68 of the Land Registration Act, a right of sale of the mortgaged property was conferred on the Bank as mortgagee but that right was conditioned not just on default having occurred but on notice of that default having been given to the mortgagor (here, Mr Tai) under s 67 of that Act, and the default continuing for a further month. As noted above, the Bank served a notice of default on Mr Tai; indeed it served more than one specifying as an event of default the failure to pay, as required, the money owed under the loans. The notice of default was the notice ordained by the Land Registration Act of what Mr Tai, has termed a “notice of intention to foreclose”.
75.	The evidence disclosed that the default continued for more than a month after the service of each notice of default. In the circumstances, the Bank had a right to sell each of the mortgaged properties. Mr Tai’s contention that the Bank had no right to foreclose because of absence of notice is specious. 
76.	The Land Registration Act, by s 74, also conferred on the Bank a right to “enter into possession of the mortgaged or charged land by receiving the rents and profits of the land” in the event “default is made in payment of any secured money”. Inferentially, having regard to the Bank’s statement in respect of the loans and to the annotation at the foot of Mr Tai’s letter of 8 March 2000, the Bank had entered into the possession of the Gordons property in February. By his own admission in that letter, Mr Tai had by then made default in payment of monies due under the loans. The Bank statement in respect of the loan account discloses periodic “recovery cost” debits as well as periodic payments to the credit of the loan account. Once again, there was no evidence that, after the Bank entered into possession of the Gordons property, any managing agent, be that The Professionals or otherwise (if there was an agent), was negligent in their management of the Gordons property over the period between when the Bank took possession and the completion of its sale.
77.	It might also be usefully noted that, by s 74(2)(b) of the Land Registration Act, the Bank’s right to enter into possession of the Gordons property could be exercised before exercising its remedy of selling that property. 
A breach of duty by the Bank in the exercise of its power of sale?
78.	The focus of this ground (ground E) was apparently on the sale of the Gordons property, rather than on the agreement to sell the Tokarara property, completion of which was prevented by the interlocutory injunction. 
79.	The learned primary judge set out (at paragraph 24) the list of potential buyers given by Mr Tai in evidence (excerpted above). He then referred to Mr Tai’s contention that there had been a sale at an undervalue in breach of the duty owed by the Bank as mortgagee to him. Having done this, his Honour stated:
26.	The difficulty with the Plaintiff’s above contention is that there is no clear evidence of the manner and circumstances he actually brought to the attention of the Defendant, one or more of these intending buyers, so that the Defendant Bank could have done its own due diligence enquiry to ascertain financial viability of the potential buyer or buyers before making any commitment. Obviously that sale would have been preceded by several days of advertisement of Mortgagee Sale after which tenders would have been received and considered. It must be appreciated that at the time the property was placed on Mortgagee Sale, the Plaintiff’s outstanding balance had soared to K295,000.00 and climbing daily as daily interest rate also increased daily. What evidence of commitment did any of those potential buyers demonstrate to the Plaintiff that he conveyed to the Defendant of the sincerity of those buyers who were anxious to buy the property. The names given in the list are real estate companies who manage properties belonging to clients.
27.	The Defendant through its authorized officers denied engaging in any discussion with the Plaintiff on selling the property to someone with highest amount to settle the loan. It would seem that this was the Plaintiff's own figment of imagination after making some enquiries with named persons on the value of his property based on the person’s opinion.
80.	As to the denial to which his Honour refers (at paragraph 27), it is true that an allegation that the list had been drawn to the Bank’s attention was denied in the Bank’s defence. However, the only officer of the Bank who gave evidence was Mr Miamel. Neither in his affidavit evidence nor in his oral evidence did he deny that such a list was put to the Bank prior to the sale of the Gordons property. Nor did he deny in his evidence in chief that some, at least, of those mentioned on the list had been physically brought to the Bank by Mr Tai. Further, it had not been put on behalf of the Bank to Mr Tai in the course of his evidence that none of these events in relation to the list, or those mentioned on it, had occurred. In these circumstances, it was not, with respect, open to the learned primary judge to reject the occurrence of these events, unless he otherwise had reason to doubt Mr Tai’s credibility on this point. It is though correct, as his Honour concluded (at paragraph 26), that there was, “no clear evidence of the manner and circumstances he actually brought to the attention of the Defendant, one or more of these intending buyers”. In truth, Mr Tai’s evidence never rose beyond such persons being possible buyers. He adduced no evidence from any of the persons named that they had made an offer to the Bank for the purchase of the Gordons property for the amount against that person’s name on the list. Once again, there was no support in contemporaneous transactional documents in evidence that the Bank agreed to sell the Gordons property only to a person introduced by Mr Tai.
81.	All that was put to Mr Miamel in cross-examination as to the price obtained on the sale of the Gordons property was whether he agreed that the price was fair. As noted above, his reply was that it was fair. 
82.	The Bank’s statement in respect of the loan account discloses a debit entry on 16 January 2001 for K300.00 in respect of “Valuation Fee Forced Sale”. Given the date of the entry, this debit entry relates, inferentially, to the forthcoming sale of the Gordons property. 
83.	Obtaining a check valuation in respect of the forthcoming realisation by a mortgagee of a mortgaged property after a default is a prudent course for a mortgagee to take. If cast, as it should be, by reference to a sale on the then current market within a reasonable but not extended time, such a valuation provides a benchmark for a mortgagee against which to measure offers in respect of the mortgaged property.  If the property is sold for a price at or about that specified in the check valuation, that valuation can later provide evidence that there was no breach by the mortgagee of its duties.
84.	Even though it apparently took this prudent course, the Bank’s evidence at trial did not include the calling of the author of the valuation or even an endeavour to tender as a business record the valuation report. That is one feature of the generally unsatisfactory evidence by each party in relation to whether there was any breach of a mortgagee’s duties on the sale of the Gordon’s property. 
85.	Another unsatisfactory feature was that one, at least, of the persons on the list, Mr Puritau of Puritau Real Estate was, inferentially, a real estate agent rather than a third party buyer being introduced by a nominated real estate agency. Perhaps the others were, too, but this was neither put to Mr Tai in cross-examination nor evidenced in the Bank’s case. Mr Tai described them in his affidavit (at paragraph 20) as “potential buyers”. In the circumstances, and again with respect, it was not open to the learned primary judge to find, as he apparently did in the last sentence of paragraph 27 of his reasons for judgement, that the prices on the list were just opinions given to Mr Tai by real estate agents.
86.	However this may be, as with the other causes of action which he pleaded, the onus of proving such a breach was on Mr Tai, not on the Bank. 
87.	It is both necessary and desirable to commence consideration of whether the learned primary judge was correct in concluding that he had not discharged his onus, by identifying exactly what is the duty of a mortgagee exercising a power of sale?
88.	A convenient starting point is Esther Torato v PNG Home Finance Ltd (2012) PGNC 4; N4583 in which Hartshorn J cited with approval the discussion in the English case, Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949, as to the duty of a mortgagee exercising a power of sale, noting (at paragraph 13), that this discussion had earlier been so cited in numerous earlier decisions of the National Court. That observation was, with respect, accurate in relation to cases decided in the National Court: see, for example Papua New Guinea Banking Corporation v Aruaiand Westpac Bank-PNG-Limited v LareLake.Cuckmere Brick and its local acceptance in the original jurisdiction grounded Mr Tai’s submissions as to the nature of the duty owed to him by the Bank.
89.	Three separate judgements rehearsing numerous earlier authorities were delivered in the Court of Appeal in Cuckmere Brick. Though there were dissents as to the outcome on the evidence, each of Salmon, Cross and Cairns LJJ was agreed that, when exercising a power of sale, a mortgagee owed a duty to the mortgagor to take reasonable care to obtain a proper price or, as Salmon LJ preferentially put it, (at page 966), the true market value for the property.
90.	A subsequent appeal from the judgement of Hartshorn J in Torato v PNG Home Finance was dismissed by this Court. In its judgement, the Supreme Court noted that, apart from the formulation of the duty in Cuckmere Brick, there was another line of authority, of which Pendlebury v Colonial Mutual Life Assurance Society Ltd is the root authority in Australia, which holds that any liability of a mortgagee to the mortgagor in relation to the price at which the secured property is sold is to be determined by reference to equitable principles of good faith. The Supreme Court further noted that more recent Australian caseshad acknowledged but not resolved for Australia the conflicting lines of authority. The Court found it unnecessary to determine whether the preference in the National Court for the Cuckmere Brick formulation of the duty was misplaced as, on the facts, however the duty was formulated, it had not been breached.
91.	Pendlebury is not an Australian idiosyncrasy. It is quite clear that each of the judgesin Pendlebury conceived the relevant law to be as stated in the English case, Kennedy v De Trafford.The following passage from the speech of Lord Herschell LC in Kennedy v De Traffordwas regarded as authoritative:
My Lords, I am myself disposed to think that if a mortgagee in exercising his power of sale exercises it in good faith, without any intention of dealing unfairly by his mortgagor, it would be very difficult indeed, if not impossible, to establish that he had been guilty of any breach of duty towards the mortgagor. Lindley L.J., in the Court below, says that “it is not right or proper or legal for him either fraudulently or wilfully or recklessly to sacrifice the property of the mortgagor”. Well, I think that is all covered really by his exercising the power committed to him in good faith. It is very difficult to define exhaustively all that would be included in the words “good faith,” but I think it would be unreasonable to require the mortgagee to do more than exercise his power of sale in that fashion. Of course, if he wilfully and recklessly deals with the property in such a manner that the interests of the mortgagor are sacrificed, I should say that he had not been exercising his power of sale in good faith.
92.	Prior to Kennedy v De Trafford in England was Farrar v Farrars Ltd. In that case, the trial judge, Chitty J, stated that a mortgagee “is bound to sell fairly, and to take reasonable steps to obtain a proper price”.His Lordship continued:
The mortgagor has no right after the power has arisen to insist that the mortgagee shall wait for better times before selling … He [the mortgagee] cannot be required to run any risk in postponing the sale, or to speculate for the mortgagor’s benefit.
93.	In dismissing a subsequent appeal in Farrar v Farrars, the Court of Appeal stated:
But every mortgage confers upon the mortgagee the right to realize his security and to find a purchaser if he can, and if in exercise of his power has acts bona fide and takes reasonable precautions to obtain a proper price, the mortgagor has no re-dress, even although more might have been obtained for the property if the sale had been postponed:  Cholmondeley v. Clinton; Warner v. Jacob.
[footnote references omitted]
94.	In neither Kennedy v De Trafford nor in Farrar v Farrars is the duty of a mortgagee to a mortgagor when exercising a power of sale formulated by reference to the tort of negligence but rather by reference to equitable principles of good faith.
95.	Cases concerning the duty of a mortgagee exercising a power of sale, decided both before and after Kennedy v De Trafford, are rehearsed in Cuckmere Brick. As Salmon LJ points out in Cuckmere Brick,next after Kennedy v De Trafford came McHugh v Union Bank of Canada, in which Kennedy v De Trafford was not cited. In McHugh v Union Bank of Canada, the Judicial Committee stated:
It is well settled law that it is the duty of a mortgagee when realizing the mortgaged property by sale to behave in conducting such realization as a reasonable man would behave in the realization of his own property, so that the mortgagor may receive credit for the fair value of the property sold.
96.	Lord Macnaghten, who had sat in the House of Lords in deciding Kennedy v De Trafford, also sat, as a member of the Judicial Committee, in the hearing of McHugh v Union Bank of Canada. However, Lord Macnaghten died on the very day that the Board’s advice was delivered by Lord Moulton, so it is impossible to say that he agreed with the duty as formulated in that case. This unhappy coincidence is not just of historic interest, because in Kennedy v De Trafford, in expressing agreement with Lord Herschell’s formulation of the duty of a mortgagee exercising a power of sale, Lord Macnaghten had stated:
I agree with what has fallen from [Lord Herschell] if a mortgagee selling under a power of sale in his mortgage takes pains to comply with the provisions of that power and acts in good faith, I do not think his conduct in regard to the sale can be impeached.
Also in those days, it was not the practice of the Judicial Committee for dissenting judgements to be given. Like that of Lord Herschell, Lord Macnaghten’s statement in Kennedy v De Trafford is not at all consistent with the existence of a mortgagee owing a general duty of care to a mortgagor in the exercise of a power of sale.
97.	McHugh v Union Bank of Canada was decided in the year following Pendlebury.
98.	The formulation in McHugh v Union Bank of Canada of the mortgagee’s duty has proved enduringly controversial in common law jurisdictions. 
99.	In the Canadian case, J & W Investments Ltd v Black,Tysoe JA said of the McHugh v Union Bank of Canada formulation:
With respect, these words must be read as applicable to the particular facts of the case … I do not believe that he [Lord Moulton] intended to set up a new and different standard of duty on the mortgagee to that enunciated by the eminent Judges in the earlier cases. In my respectful opinion his words must be regarded as having application only to the limited subject being considered, namely, the care and treatment of the mortgaged property while in the possession of the mortgagee after seizure.
100.	In Cuckmere Brick itself, Salmon LJ acknowledged that, “It is impossible to pretend that the state of the authorities on this branch of the law is entirely satisfactory” but in the end concluded that, “The proposition that the mortgagee owes both duties … represents the true view of the law”.
101.	In the decade or so after Cuckmere Brick was decided, the “both duties” conception, equitable principles of good faith and a duty of care under the law of negligence, did enjoy support in England, notably in Standard Chartered Bank Ltd v Walker, where Lord Denning MR remarked:
So far as mortgages are concerned the law is set out in Cuckmere Brick Co. Ltd. v Mutual Finance Ltd. [1971] Ch. 949. If a mortgagee enters into possession and realises a mortgaged property; it is his duty to use reasonable care to obtain the best possible price which the circumstances of the case permit. He owes this duty not only to himself, to clear off as much of the debt as he can, but also to the mortgagor so as to reduce the balance owing as much as possible, and also to the guarantor so that he is made liable for as little as possible on the guarantee. This duty is only a particular application of the general duty of care to your neighbour which was stated by Lord Atkin in Donoghue v. Stevenson [1932] A.C. 562 and applied in many cases since … The mortgagor and the guarantor are clearly in very close “proximity” to those who conduct the sale. The duty of care is owing to them - if not to the general body of creditors of the mortgagor.
102.	However, that support has not proved enduring. The weight of Judicial Committee and English authority is now firmly against a “both duties” view being correct. Thus, in China and South Sea Bank Ltd v Tan, the Judicial Committee the Privy Council overturned a judgement of the Court of Appeal of Hong Kong, which held that a mortgagee owed a surety a duty of care in negligence stating that:
[T]he tort of negligence has not yet subsumed all torts and does not supplant the principles of equity or contradict contractual promises or complement the remedy of judicial review or supplement statutory rights.
103.	In Parker-Tweedale v Dunbar Bank plc(No 1), Nourse LJ quite plainly did not regard the duty owed by a mortgagee when exercising a power of sale as arising under the tort of negligence, although he did not expressly treat Cuckmere Brick as per incuriam. His Lordship stated:
In my respectful opinion it is both unnecessary and confusing for the duties owed by a mortgagee to the mortgagor and the surety, if there is one, to be expressed in terms of the tort of negligence. The authorities which were considered in the careful judgements of this court in Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd. [1971 Ch. 949 demonstrate that the duty owed by the mortgagee to the mortgagor was recognised by equity as arising out of the particular relationship between them. Thus Salmon L.J. himself said, at p. 967:
“It would seem, therefore, that many years before the modern development of the law of negligence, the courts of equity had laid down a doctrine in relation to mortgages which is entirely consonant with the general principles later evolved by the common law.”
104.	In Downsview Nominees Ltd v First City Corporation Ltd (No. 1) [1993] AC 295, Lord Templeman, in delivering the unanimous advice of the Judicial Committee in a New Zealand appeal, stated:
The general duty of care said to be owed by a mortgagee to subsequent encumbrancers and the mortgagor in negligence is inconsistent with the right of the mortgagee and the duties which the courts applying equitable principles have imposed on the mortgagee. If a mortgagee enters into possession he is liable to account for rent on the basis of wilful default; he must keep mortgage premises in repair; he is liable for waste. Those duties were imposed to ensure that a mortgagee is diligent in discharging his mortgage and returning the property to the mortgagor. If a mortgagee exercises his power of sale in good faith for the purpose of protecting his security, he is not liable to the mortgagor even though he might have obtained a higher price and even though the terms might be regarded as disadvantageous to the mortgagor. Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd. [1971] Ch. 949 is Court of Appeal authority for the proposition that, if the mortgagee decides to sell, he must take reasonable care to obtain a proper price but is no authority for any wider proposition.
[Emphasis added]
105.	In The State v Pokia, Kapi J (as his Honour then was), sitting in the National Court, stated that: 
When the Constitution of the Independent State of Papua New Guinea adopted the common law as at immediately before Independence it froze the common law of England as at 15th September, 1975, and any further progress or development of the common law in the sense I have described above did not and does not become part of the underlying law of Papua New Guinea.
However, this does not mean that if a competent court in England after 15th September, 1975, as in Wong Kam-ming, declares that a certain principle of common law decided in 1941, as in the case of Hammond’s case, is wrong law, then the principle to be applied is in the latter case. The latter decision of a competent court in England after 15th September, 1975, will have a retrospective effect and all cases following the former principle would be regarded as wrongly decided. 
[Footnote references omitted – emphasis added]
The Underlying Law Act 2000 does not require that any different approach be taken to English common law to that described by Kapi J.
106.	The weight of the authorities, discussed above, decided both before and after Cuckmere Brick, does not, with respect, support the formulation in that case of the duty of a mortgagee exercising a power of sale. The subject of the correctness of that formulation is not one which was necessary to explore in any of the earlier cases in the National Court, which merely described the duty by reference to Cuckmere Brick. In the present case, the learned primary judge, doubtless reacting to the way in which the case was presented for Mr Tai, decided the point by reference to negligence (see paragraph 29 of the reasons for judgement) but did not find it necessary to refer to any authority. As mentioned above, the point was expressly left open in this Court in Torato v PNG Home Finance, where the existence of differing lines of authority was noted. In these circumstances, Cuckmere Brick should be treated in the same manner as it was by the Judicial Committee in Downsview Nominees and the duty of a mortgagee exercising a power of sale taken to be as formulated by the Judicial Committee in the passage excerpted. 
107.	Mr Tai’s evidence never rose above the level of there being potential buyers. There was no evidence that any one of these had ever made an offer at the price to which he made reference. Had there ever been such an offer, it was in the Bank’s interests, as much as those of Mr Tai, to accept an offer of greater than K170,000.00 for the purchase of the Gordon’s property. That the Bank would choose to recover less than as much as possible of the outstanding loan balance, if not even more than that, attributes to it a form of commercial masochism that defies common sense. Fraud by collusion might explain such behaviour but there was no evidence of that.
108.	The Land Registration Act (s 68(3)) permitted the property to be sold “by public auction or by private contract or partly by public auction and partly by private contract”. The evidence, described above, indicates that the Gordons property was sold in a permissible manner. It was publicly advertised with a resultant offer of K170,000.00 from a buyer, not shown to be other than acting at arm’s length from the Bank, being attracted. 
109.	True it is that the sale price was identical to that which Mr Tai paid some three years beforehand. But his own evidence was that the asking price even then had been K230,000.00 but that he was able to obtain the property for a significantly lesser sum. Further, his own evidence as to “potential buyers” disclosed wildly differing potential purchase prices. And no such potential manifested itself in a sale on the open market. 
110.	It is a strong thing to find an absence of good faith. Mr Tai’s evidence did not, for the reasons given, come close to proving the same on the balance of probabilities. For that matter, for those same reasons, his evidence also fell well short even of demonstrating negligence. The learned primary judge was correct to conclude that he failed to discharge his onus of proof. 
111.	For completeness, it should be added that there was no evidence that the Bank breached its duty to Mr Tai in agreeing to sell the Tokarara property for K70,000.00.
112.	It necessarily follows that the appeal should be dismissed, with costs. 
Orders:
113: It is ordered that:
1.	The appeal be dismissed.
2.	The appellant pay the respondent’s costs, of and incidental to the appeal, to be taxed if not agreed.
_______________________________________________________________
Leahy Lewin Lowing Sullivan Lawyer: Lawyers for the Appellant
Bank of South Pacific Limited Legal Services: Lawyers for the Respondent