Question 1

Harry purchased a holiday home in Port Douglas for $2,000,000 and later mortgaged the property to Tom. The income from Harry’s chicken hairdressing businessfalls off due to COVID and Harry defaults on the mortgage.  Tom as mortgagee wanted to sell the land to recover the debt and exercise remedies available to the mortgagee. 

In due course the land is put up for a mortgagee’s sale by auction.  Tom appoints his friend Jerry, a real estate agent based in Sydney to conduct the auction.  The sale is advertised over two weekends in a local newspaper and the auction is held on Australia Day.  The auction is attended by a number of people and is sold to Honest John Motors.  The sale price is below what would be expected for equivalent properties in the area. Tom is a director of Honest John Motors.

Harry approaches you as he is unsure of the legality of the proceeding and is concerned that the proceeds may not repay the mortgage. Advise Harry, making reference to suitable legislation, if any relief is available to him.

Readings