A mortgagee is at all times free to consult his own interests alone as to whether and when to exercise his power of sale. The relationship and duties owed by the receiver are equitable only. Peter Gibson LJ said: ‘(1) A mortgagee with the power of sale is not a trustee of that power, the power being given to the mortgagee for his own benefit.
(2) A mortgagee is not under a general duty of care to the mortgagor and can act in his own interests in deciding whether and when he should exercise his power of sale.
(3) A mortgagee, however, is subject to an equitable duty to act in good faith and to obtain the best price reasonably obtainable at the time he decides to sell. That duty is owed to those interested in the equity of redemption. They include the mortgagor, other mortgagees and a guarantor of the mortgage debt, but they do not include a tenant at will of the mortgaged property, nor, where the mortgagor is a trustee, a beneficiary of the trust.’
Peter Gibson LJ
[2002] EWCA Civ 1965, [2003] 1 EGLR 91, [2003] BPIR 725, [2003] 13 EG 117, [2003] 4 EGCS 151, [2003] Lloyd’s Rep PN 126
Bailii
England and Wales
Citing:
Appeal from – 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 – Cuckmere Brick Co Ltd v Mutual Finance Ltd CA 1971
A mortgagee selling as mortagee in possession must ‘take reasonable care to obtain the true value of the property at the moment he chooses to sell it’ and obtain the best price for the property reasonably obtainable on the open market. However, . .
Cited by:
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 – Bell v Long and others ChD 16-Jun-2008
Land had been sold by administrative receivers appointed under a charge. The owner said that the lands had been sold at an undervalue.
Held: The action failed. The claimant could not show any breach of duty or that the assessments made were . .
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.
Land, Professional Negligence
Leading Case
Updated: 01 November 2021; Ref: scu.189022