(New Zealand) The holder of a second debenture appointed receivers to the assets. The first debenture holder then also appointed receivers not to obtain repayment of its debt, but to disrupt the work of the first appointed receivers and in order to reinstate the managing director who had been removed by the second debenture holders’ receivers.
Held: The debenture holder’s appointment of a receiver was not a proper exercise of the power of appointment where it was no part of the debenture holder’s purpose to recover the debt secured by the debenture. The second appointed receiver having acted in bad faith, became liable in equity to a subsequent chargee. The measure of the compensation was the difference between what would have been recovered had the original receivership proceeded undisturbed, and the amount actually recovered under the subsequent receivership.
Lord Templeman said: ‘The next question is the nature and extent of the duties owed by a mortgagee and a receiver and manager respectively to subsequent encumbrancers and the mortgagor. . . Several centuries ago equity evolved principles for the enforcement of mortgages and the protection of borrowers. The most basic principles were, first, that a mortgage is security for the repayment of a debt and, secondly, that a security for repayment of a debt is only a mortgage. From these principles flowed two rules, first, that powers conferred on a mortgagee must be exercised in good faith for the purpose of obtaining repayment and secondly that, subject to the first rule, powers conferred on a mortgagee may be exercised although the consequences may be disadvantageous to the borrower. These principles and rules apply also to a receiver and manager appointed by the mortgagee.’ and ‘Their Lordships consider that it is not possible to measure a duty of care in relation to a primary objective which is quite inconsistent with the duty of care.’
Judges:
Lord Templeman, Salmon LJ
Citations:
Gazette 09-Dec-1992, [1993] AC 295, Times 15-Dec-1992, [1992] UKPC 34
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Re B Johnson and Co (Builders) Ltd CA 1953
A receiver of property is not managing the mortgagor’s property for the benefit of the mortgagor, but the security, the property of the mortgagee, for the benefit of the mortgagee. Section 333 was a procedural section which created no new cause of . .
Cited – Quennell v Maltby CA 15-Nov-1978
A house was mortgaged to a bank. The house was then let to tenants at an annual rate of pounds 1,000. The tenants were protected as against the mortgagor by the Rent Acts. The tenancy was not binding on the bank. The mortgagor’s wife took a transfer . .
Cited by:
Cited – Freeguard v Royal Bank of Scotland plc ChD 26-Mar-2002
The applicant had an option to purchase land, but neither the option, nor the subsequent charge were registered. The land was sold by the respondent under a power of sale, and the claimant sought damages for the respondent having negligently failed . .
Cited – Silven Properties Limited, Chart Enterprises Incorporated v Royal Bank of Scotland Plc, Vooght, Harris CA 21-Oct-2003
The claimants sought damages from mortgagees who had sold their charged properties as receivers. They said they had failed to sell at a proper value. They asked whether the express appointment in the mortgage of receivers as agents of the mortgagor . .
Cited – Den Norske Bank Asa v Acemex Management Company Ltd CA 7-Nov-2003
Money had been loaned for the purchase of three ships,and mortgages over the ships had been given given. The borrowers were in default, and the lender sought to arrest the vessels. The defendant argued that the way the arrest had been undertaken . .
Cited – Roger Michael and others v Douglas Henry Miller and Another ChD 22-Mar-2004
Property had been sold by the respondents as mortgagees in possession. The claimants said the judge had failed to award the value of the property as found to be valued, and had not given a proper value to a crop of lavender.
Held: In . .
Cited – Anton Durbeck Gmbh v Den Norske Bank Asa ComC 11-Nov-2005
The defendant bank arrested a ship carrying the claimant’s load of bananas. The cargo deteriorated while under arrest and was lost. It was not insured. The consignee sought damages from the arresting bank on the ground that it wrongfully interfered . .
Cited – Meretz Investments Nv and Another v ACP Ltd and others ChD 30-Jan-2006
The applicant challenged the exercise of a power of sale under a mortgage, saying that the mortgagee’s purposes included purposes not those under the mortgage. The parties had been involved in an attempted development of a penthouse.
Held: The . .
Cited – Silven Properties Ltd and Another v Royal Bank of Scotland Plc and Others CA 21-Oct-2003
The claimants complained that the receivers appointed by the bank had failed to get the best price for properties charged to the bank and sold, in that they had failed to obtain planning permissions which would have increased the values of the . .
Cited – The Co-Operative Bank Plc v Phillips ChD 21-Aug-2014
The bank had brought possession proceedings against the defendant under two legal charges securing personal guarantees. The proceedings had been abandoned, but the court now was asked whether costs for the defendant should be on the standard or . .
Lists of cited by and citing cases may be incomplete.
Company, Commonwealth, Equity, Land
Updated: 19 May 2022; Ref: scu.80112