The mortgagee's duty on exercising the power of sale

Peter Devonshire, New Zealand Business Law Quarterly, November 2003

This article discusses the Privy Council's consideration of a mortgagee's duty in New Zealand to take reasonable care to obtain the best price reasonably obtainable, by reference to its decision in the Apple Fields1 case (summarised in the Spring 2003 issue of Financial Services Quarterly.

The Privy Council dismissed the mortgagor's appeal, affirming the New Zealand Court of Appeal's decision, concluding that there is no general rule that a company in which a mortgagee is interested cannot purchase the property at mortgagee sale.

The sale will be effective if the mortgagee complies with:

• its statutory obligation under section 103A of the Property Law Act 1952 to take reasonable care to obtain the best price reasonably obtainable; and
  
  
• its equitable duty to act in good faith.
  

1 Apple Fields Limited V Damesh Holdings Limited [2001] 2 NZLR 586

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