A receiver appointed to manage a business had duties over and above those of mere good faith. A receiver who failed to obtain discounts normally obtainable for supplies to the business might be liable for that failure. when considering the position of a receiver and manager appointed by a mortgagee to run a business, ‘The proposition that, in managing and carrying on the mortgaged business, the receiver owed the mortgagor no duty other than that of good faith offends, in my opinion commercial sense. The receiver is not obliged to carry on the business. He can decide not to do so. He can decide to close it down. In taking these decisions he is entitled, and perhaps bound, to have regard to the interests of the mortgagee in obtaining repayment of the secured debt. Provided he acts in good faith, he is entitled to sacrifice the interests of the mortgagor in pursuit of that end.
The mortgagee or receiver, when exercising the power of sale, must therefore act in good faith with a view to securing repayment of the debt by the conversion of the security into money. The timing of the sale will be a matter for them, unaffected by the wishes of the mortgagor. But the preparation for and the method of sale to be adopted will be matters in respect of which there is no conflict between the interests of the mortgagor and the mortgagee, and where the mortgagee or receiver will be potentially liable to the mortgagor if he fails to act with reasonable care so as to obtain a proper price. In this context it is clear that the property must be fairly and properly exposed to the market, absent perhaps cases of real urgency. Similarly, as part of this duty of care, the receiver may be required to take positive steps to maintain the value of the property. . . . the mortgagee or a receiver appointed by him is required to incur expense in the improvement of the security in order to sell it at a higher price or to embark on making applications for planning permission, granting leases or the like, which, however well-founded, are likely to delay a sale beyond the normal period of marketing.’
Judges:
Sir Richard Scott V-C
Citations:
Gazette 16-Jun-1999, [1999] EWCA Civ 1482, [2000] Ch 86, [1999] 3 All ER 97, [1999] 2 EGLR 75, [1999] 3 WLR 922, [1999] 2 BCLC 221, [1999] BCC 771, [1999] 29 EG 119, [1999] EG 81, [1999] Lloyd’s Rep PN 844, [1999] PNLR 920, [1999] BPIR 712
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Knight v Lawrence 1993
As part of his duty of care, a receiver may be required to take positive steps to maintain the value of the property. . .
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 – The Estate of Mohammed Sabir Raja (Deceased) v Austin Gray (A Firm) QBD 31-Jul-2002
The claimant sought damages for negligent valuation of properties belonging to the deceased, but taken into receivership under charges taken by a company who in turn charged its assets to a bank. When the debenture was enforced, the charges were . .
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 . .
Followed – Kenneth Starling v Lloyds TSB Bank plc CA 10-Nov-1999
The setting aside of the statutory power of a mortgagor in possession to grant a lease, by the mortgage itself did not create in the lender a duty of good faith properly to consider a request from the mortgagor for permission to let the property. It . .
Cited – Niru Battery Manufacturing Company, Bank Sepah Iran v Milestone Trading Limited CA 23-Oct-2003
The claimant had contracted to purchase lead from some of the defendants. There were delays in payment but when funds were made available they should have been repaid. An incorrect bill of lading was presented. The bill certified that the goods had . .
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 . .
Lists of cited by and citing cases may be incomplete.
Equity, Insolvency
Updated: 09 December 2022; Ref: scu.146397