Parliamentary Speeches
Real Property and Conveyancing Legislation Amendment Bill 2009 (01/04/2009)
Mr DONALD PAGE (Ballina) [1.02 p.m.]: I wish to make a contribution to debate on the Real Property and Conveyancing Legislation Amendment Bill 2009, especially relating to proposed section 111A, which is the section that concerns the behaviour of mortgagees in possession in exercising their power of sale. Specifically, it is the section that requires a mortgagee in exercising a power of sale in respect of mortgaged land to take reasonable care to ensure that the land is sold for not less than its market value. I point out to the House that this proposed section of the bill is almost identical to legislation that I introduced originally in 2000 and identical to the legislation that I then reintroduced in 2007.
After the introduction of my original legislation in 2000, the then Minister responsible, Kim Yeadon, saw the merit of the bill and ordered a discussion paper to be drafted, printed and put out for public comment. All stakeholders responded and there was overwhelming support for the legislation—except, predictably, from the banks. Subsequently a couple of minor amendments were made and the legislation passed this House with bipartisan support in September 2001. Unfortunately, that legislation never passed the Legislative Council due to the prorogation of Parliament for the 2003 election. So the legislation lapsed.
Subsequently, in 2007, and in response to rising interest rates at the time and the revelation by the Reserve Bank that 40,000 people in New South Wales were suffering mortgage stress, I reintroduced the legislation, which had already passed this House with bipartisan support. Members can imagine my surprise, disappointment and anger when the Government said in debate that it was not going to support the legislation. I doubt there has ever been such a clear example of a Government turning its back on good legislation for petty party political reasons. This Government voted down my legislation simply because it had been introduced by a member of the Coalition and not the Government. That legislation would have assisted thousands of borrowers to get market price for their homes when they were being sold by the banks or other financiers.
In other words, thousands of homeowners have been denied protection they should have received. Thanks to this Government playing petty party politics, thousands of homeowners who should have had a guarantee that they would receive market price when their homes were subject to a forced sale have been denied that protection. In many cases the borrower's equity has been sacrificed when it should not have been, and they can thank this Labor Government for their lost equity. The loss of that equity means that those people do not have the money they should have had to use as a deposit on their next home.
Proposed section 111A of the bill is identical to my 2007 bill apart from subsection (2). Subsection (2) extends the duties of a mortgagee and chargee to include an agent, but in every other respect the subsections are the same, albeit with different numbers. Proposed section 111A provides that where a mortgagee is in possession, the borrower's equity will be protected because the property will be sold at market price. This legislation will give them more protection than they have under New South Wales case law. Common ways for financiers or mortgagees not to fulfil their duty of care include failing to advertise the property at all or failing to advertise for a sufficient period, incorrectly describing the size of the property, failing to pursue prospective buyers interested in purchasing the property at a higher price and generally failing to promote the property to obtain the best possible price. Queensland and Northern Territory legislation adopts the approach contained in this legislation. Under common law, the decision as to the timing of the sale is entirely within a mortgagee's discretion. Mortgagees can choose when to sell the property and it cannot be alleged against them that they would have obtained a higher market price had they sold sooner or delayed the sale. This legislation does not change that position.
There is a difference between the Federal and State law regarding the duty of care for financiers concerning the disposal of assets when they become mortgagees in possession. In New South Wales case law the only requirement is that a selling mortgagee act with good faith and not wilfully or recklessly. This relatively low duty of care can have the effect of sacrificing the mortgagor's interests when the property is sold. However, under Federal Corporations Law, when exercising a power of sale in respect of property the selling mortgagee must take all reasonable care to sell the property at not less than its market value or otherwise the best price that is obtainable in view of the circumstances in which the property is being sold. The temptation for financiers in New South Wales is to sell the assets with a view to ensuring that their own debt is covered, with little regard for any remaining equity held by the borrower.
An example is a property worth, say, $1 million with a $500,000 mortgage. The way the law currently operates in New South Wales means that the only requirement of the financier is to act in good faith and not wilfully or recklessly. This means, effectively, that provided the financier gets their $500,000, potentially they can sacrifice the equity held by the property owner. There is no requirement to obtain market price. I thank Mr Peter Jackson from Jackson Smith Solicitors for drawing my attention to the weakness in the New South Wales situation in 2000. He also provided me with case studies and circumstances in which mortgagors have been disadvantaged by the relatively low duty of care that prevails in New South Wales compared with the Federal jurisdiction, where litigation has often ensued. I thank him for his valued input. I believe this legislation is morally and legally the correct approach to take in relation to a mortgagee or chargee's duty of care.
I am pleased that the Government has adopted my legislation as part of its legislative package. The inclusion of my bill gives the lie to the claim that the Coalition does not have any policies! This legislation should have been law eight years ago and it certainly should have been law in 2007. Thousands of property owners have not had the protection they deserve by ensuring their properties were sold at market value. It is important that we protect homeowners. Given the history of this legislation—in particular proposed section 111A, which was supported by the Government in 2001, with strong support from The Nationals and the Liberal Party—I strongly support the bill before the House.
