Silven Properties Ltd. & Anor v Royal Bank of Scotland Plc & Ors

This is the judgment of the court prepared by Mr Justice Lightman.

This is an appeal brought with the permission of Chadwick LJ against part of the judgment of Patten J given on the 11^th October 2002. By his judgment, Patten J dismissed all the claims of Silven Properties Limited (“Silven”) and Chart Enterprises Incorporated (“Chart”), the claimants in this action (“the Claimants”) against the first defendant the Royal Bank of Scotland plc (“the Bank”) and the second and third defendants Nigel Vooght and Timothy Harris (“the Receivers”).

The Claimants mortgaged properties to the Bank to secure indebtedness. The Bank pursuant to the mortgages appointed the Receivers as receivers of the mortgaged properties and between them the Bank and the Receivers sold all the properties. The mortgages (as is common form) provided that the Receivers should be the agents of the Claimants.

In this action the Claimants as mortgagors claimed damages against the Bank as mortgagee and the Receivers as receivers (“the Defendants”) alleging that in breach of duty they sold the mortgaged properties at an undervalue. Patten J dismissed all the Claimants’ claims against all the Defendants and refused permission to appeal. Chadwick LJ gave the Claimants permission to appeal limited to the claims against the Receivers in respect of six of the properties. In the case of each of these sales it was conceded by the Claimants or established by evidence at the trial that the sales were at the best price reasonably obtainable at the dates of such sales for the properties in the condition in which they were. The relevant complaint made by the Claimants at the trial in respect of these sales was that the Receivers were under a duty not to sell the properties as they were. Instead they were under a duty before selling, in order to obtain the best price obtainable, to pursue planning applications for the development of the properties and (in the case of two of the properties, which were vacant or partially vacant, but in respect of which there were negotiations for grant of leases) to proceed with the grant of leases, and to defer a sale until these goals were achieved. Patten J dismissed these claims against the Receivers without determining whether the Receivers’ failure to take this course of action caused any damage or loss. He did so on the ground that as a matter of law the Receivers had no duty to delay the sale for the purposes suggested by the Claimants and were entitled, whether or not it was reasonable for them to do so, to sell the properties without delay as they were. The only issue on this appeal is whether the judge was correct. It is common ground that, if the judge was wrong, the case must be remitted to the judge (or some other judge) to decide whether any breaches by the Receivers of the duties established on this appeal by the Claimants in fact occasioned any damage or loss.

The issue of law raised on this appeal is of some considerable practical importance. Earlier authorities have expressed the view that the duties of receivers appointed by mortgagees are the same as the duties of the mortgagees themselves in respect of the sale of mortgaged property and that mortgagees do not have the duties for which the Claimants contend. But (as Chadwick LJ stated when granting permission to appeal), consideration is called for whether the express appointment in the mortgage of receivers as agents of the mortgagor leads to the assumption by receivers who accept such appointment of responsibilities and duties which differ from those owed by the mortgagees, and it is important that any doubt in this regard should be resolved in the interests of mortgagees, mortgagors and receivers.

The full history of events in this case is set out in the careful and detailed judgment of Patten J. Only a very brief summary is called for of the facts relevant to this appeal. But a detailed examination is called for of the relevant authorities and principles which throw light on the legal implications in this context of the appointment by a mortgagee of receivers as agents of the mortgagor.

The Claimants are property companies set up for the benefit of the Ezekiel family. They had large borrowings from the Bank secured by mortgages over some 34 properties which they owned. In May 1996 in accordance with the terms of the mortgages the Bank demanded repayment. According to the Bank the indebtedness at that date of Silven was £4,309,946 and of Chart was £620,891. In May and June 1996 the Bank appointed receivers over all the properties mortgaged to it. Save for one property (which is not relevant on this appeal) the receivers appointed were the Receivers. The Receivers set about selling the 33 properties in respect of which they had been appointed receivers and in the course of some 18 months all 34 mortgaged properties were sold. The gross realisation in respect of properties owned by Silven was £4,881,500 and in respect of properties owned by Chart was £366,500. The Receivers entered into the various contracts for sale of the 33 properties as agents for the Claimants. In the case of some of these properties, however, instead of the Receivers completing the sales, in order to make title overriding adverse registered interests, the Bank conveyed or transferred the properties as mortgagee. No point was taken before the judge or this court that in the cases where the Bank completed the sales those sales ceased to be sales by the Receivers and became sales by the Bank in respect of which no liability could attach to the Receivers. Accordingly it does not fall to us to express any view on that question.

The Claimants complained in the action that many of the properties were sold at an undervalue. The appeal relates only to six of the properties. The particular complaint which is the subject of this appeal is that the undervalue is attributable to the decision of the Receivers to sell without first obtaining planning permission for development and without first letting a vacant property.

When they began their receivership, the Receivers adopted the strategy of investigating the possibility of adding value to some of the mortgaged properties by obtaining planning permission. This strategy was clearly set out in their First, Second and Third Reports to the Bank dated respectively the 13^th August, 17^th September and 5^th November 1996. In accordance with that strategy the Receivers obtained reports from planning consultants advising them as to the prospects of obtaining planning permission for various of the properties. On the 8^th November 1996 the Receivers obtained estimates for applying for planning permission. On the 30^th December 1996 the Receivers instructed planning consultants to make planning applications and at the same time asked the property consultants to give them advice as to the expected uplift in price which would be achieved by obtaining planning permission. By the end of February 1997, however, the Receivers had decided not to proceed with any planning application or to await the completion of negotiations for the grant of a lease of the vacant property and instead to proceed immediately with sales of the mortgaged properties as they were. The reasons for their decision are disputed. By so doing the Receivers decided to forego any potential increase in price obtainable on a sale if delayed until after the result of the planning applications and the grant of the leases in favour of the advantage to the Bank of saving the costs of those exercises and obtaining an immediate realisation and partial repayment of its secured indebtedness. The issue before this court is whether, for whatever the reason they decided on this course, the Receivers were free to do so.

The judge set out clearly in his judgment his reasons for dismissing the claim against the Receivers. The first relevant extract reads as follows:

“Underpinning the claims against the Coopers Receivers is the proposition that they owed a duty to the mortgagors to act in their best interests in determining when to sell the mortgaged property and that, as part of their duty to obtain the best or a proper price, they were obliged to take steps to improve the value of the properties by, for example, applying for planning permission, completing the grant of a lease or, in the case of Watney Street, of carrying into effect a land swap with the local authority. If this is correct, there is a fundamental difference between the legal duties owed by a mortgagee and those of any receiver he chooses to appoint. It is common ground that a mortgagee who exercises his power of sale owes a duty to take reasonable precautions to obtain the true market value or a proper price for the property at the time when he comes to sell: see Cuckmere.”

After citing passages from the judgment of Salmon LJ supporting these propositions, the judge went on to say:

“Whilst accepting these propositions, Mr Driscoll contends that they have no application to a receiver who is appointed by a mortgagee and then sells. He relies in particular on a decision of Millett J in Re Charnley Davies Ltd No 2 [1990] BCLC 760, who held that an administrator owed a duty to the company over which he was appointed to take reasonable care to obtain the best price that the circumstances, as he reasonably perceived them to be, permitted, including a duty to take reasonable care in choosing the time at which to sell the property. In reaching this decision, the Judge contrasted the position of the administrator with that of the mortgagee:

‘It was common ground that an administrator owed a duty to a company over which he is appointed to take reasonable steps to obtain a proper price for its assets. That is an obligation which the law imposes on anyone with a power, whether contractual or statutory, to sell property which does not belong to him. A mortgagee is bound to have regard to the interests of the mortgagor, but he is entitled to give priority to his own interests, and may insist on an immediate sale whether or not that is calculated to realise the best price; he must “take reasonable care to obtain the true value of the property at the moment he chooses to sell it”: see Cuckmere Brick Co Ltd v. Mutual Finance Ltd [1971] 2 All ER 633, [1971] Ch 949. An administrator, by contrast, like a liquidator, has no interest of his own to which he may give priority, and must take reasonable care in choosing the time at which to sell the property. His duty is “to take reasonable care to obtain the best price that the circumstances permit”: see Standard Chartered Bank v. Walker [1982] 3 All ER 938, [1982] 1 WLR 1410.’

… I take the view that I am bound on the authorities as they stand to regard the receiver as under the same (but no greater) obligations to the mortgagor as the mortgagee. This does not mean that he is not entitled to exercise some judgment of his own in relation to the timing of any sale. They are his powers to exercise. But inevitably he is likely to give primacy to the interests and wishes of the mortgagee and if he does so, he is under no liability to the mortgagor unless he acts in bad faith or fails to take reasonable steps to obtain a proper price at the relevant time. That is, I think, made clear by the decision of the Privy Council in Downsview Nominees Ltd v. First City Corporation Ltd [1993] AC 295 at page 312, where Lord Templeman, delivering the opinion of the Board, said this:

‘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.’

Similarly in Medforth v. Blake [2000] Ch 86 Sir Richard Scott V-C, when considering the position of a receiver and manager appointed by a mortgagee to run a business, said this:

‘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. Knight v. Lawrence [1993] BCLC 215 is an example of this. But I am unconvinced that 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.”

The Claimants on this appeal advance three general propositions of law in support of their contention that the judge was wrong and that the Receivers were duty bound to proceed with the steps necessary to increase the market price of the properties charged before proceeding with a sale:

The Claimants’ submissions require an examination and comparison of the duties of mortgagees and receivers. We shall therefore first consider the relevant duties of mortgagees and then turn to the duties of receivers.

A mortgagee has no duty at any time to exercise his powers as mortgagee to sell, to take possession or to appoint a receiver and preserve the security or its value or to realise his security. He is entitled to remain totally passive. If the mortgagee takes possession, he becomes the manager of the charged property: see Kendle v. Melsom [1998] 139 CLR 46 at 64 (High Court of Australia). He thereby assumes a duty to take reasonable care of the property secured: see Downsview Nominees Ltd v. First City Corp [1993] AC 295 (“Downsview”) at 315A per Lord Templeman; and this requires him to be active in protecting and exploiting the security, maximising the return, but without taking undue risks: see Palk v. Mortgage Services Funding Plc [1993] Ch 330 at 338A per Nicholls V-C (“Palk”).

A mortgagee “is not a trustee of the power of sale for the mortgagor”. This time-honoured expression can be traced back at least as far as Sir George Jessel MR in Nash v. Eads (1880) 25 Sol. J. 95. In default of provision to the contrary in the mortgage, the power is conferred upon the mortgagee by way of bargain by the mortgagor for his own benefit and he has an unfettered discretion to sell when he likes to achieve repayment of the debt which he is owed: see Cuckmere Brick Co v. Mutual Finance Limited [1971] Ch 949 (“Cuckmere”) at 969G. A mortgagee is at all times free to consult his own interests alone whether and when to exercise his power of sale. The most recent authoritative restatement of this principle is to be found in Raja v. Austin Gray [2002] EWCA Civ 1965 paragraph 95 per Peter Gibson LJ (“Raja”). The mortgagee’s decision is not constrained by reason of the fact that the exercise or non-exercise of the power will occasion loss or damage to the mortgagor: see China and South Sea Bank Limited v. Tan Soon Gin [1990] 1 AC 536. It does not matter that the time may be unpropitious and that by waiting a higher price could be obtained: he is not bound to postpone in the hope of obtaining a better price: see Tse Kwong Lam v. Wong Chit Sen [1983] 1 WLR 1349 at 1355B.

The Claimants contend that a mortgagee is not entitled to ignore the fact that a short delay might result in a higher price. For this purpose they rely on certain obiter dicta of Lord Denning MR in Standard Chartered Bank v. Walker [1982] 1 WLR 1410 (“Standard Chartered”) at 1415G-H and 1416A. The mortgagee in that case, having obtained insufficient on the sale at auction of the property charged to recover the sum secured, applied for summary judgment against the mortgagor for that sum. The mortgagor resisted the application alleging that the mortgagee had sold at an undervalue on a variety of grounds one of which was that the sale took place at the wrong time of year. The Court of Appeal gave the mortgagor leave to defend on the ground that there was an arguable case that the sale had been negligently handled. It was common ground in that case that a mortgagee can choose his own time for sale: see Fox LJ at p.1418 F-G. Lord Denning accepted that there were dicta to this effect, but added that he did not think that this meant that the mortgagee could sell at the worst possible moment and that it was at least arguable that in choosing the time he must exercise a reasonable degree of care. The view expressed by Lord Denning cannot stand with the later authorities to which we have referred and which state quite categorically that the mortgagee is under no such duty of care to the mortgagor in respect of the timing of a sale and can act in his own interests in deciding whether and when he should exercise his power of sale.

The mortgagee is entitled to sell the mortgaged property as it is. He is under no obligation to improve it or increase its value. There is no obligation to take any such pre-marketing steps to increase the value of the property as is suggested by the Claimants. The Claimants submitted that this principle could not stand with the decision of the Privy Council in McHugh v. Union Bank of Canada [1913] AC 299. Lord Moulton in that case (at p.312) held that, if a mortgagee does proceed with a sale of property which is unsaleable as it stands, a duty of care may be imposed on him when taking the necessary steps to render the mortgaged property saleable. The mortgage in that case was of horses, which the mortgagee needed to drive to market if he was to sell them. The mortgagee was held to owe to the mortgagor a duty to take proper care of them whilst driving them to market. The duty imposed on the mortgagee was to take care to preserve, not increase, the value of the security. The decision accordingly affords no support for the Claimants' case

The mortgagee is free (in his own interest as well as that of the mortgagor) to investigate whether and how he can “unlock” the potential for an increase in value of the property mortgaged (e.g. by an application for planning permission or the grant of a lease) and indeed (going further) he can proceed with such an application or grant. But he is likewise free at any time to halt his efforts and proceed instead immediately with a sale. By commencing on this path the mortgagee does not in any way preclude himself from calling a halt at will: he does not assume any such obligation of care to the mortgagor in respect of its continuance as the Claimants contend. If however the mortgagee is to seek to charge to the mortgagor the costs of the exercise which he has undertaken of obtaining planning permission or a lessee, subject to any applicable terms of the mortgage, the mortgagee may only be entitled to do so if he acted reasonably in incurring those costs and fairly balanced the costs of the exercise against the potential benefits taking fully into account the possibility that he might at any moment “pull the plug” on these efforts and the consequences for the mortgagor if he did so.

If the mortgagor requires protection in any of these respects, whether by imposing further duties on the mortgagee or limitations on his rights and powers, he must insist upon them when the bargain is made and upon the inclusion of protective provisions in the mortgage. In the absence of such protective provisions, the mortgagee is entitled to rest on the terms of the mortgage and (save where statute otherwise requires) the court must give effect to them. The one method available to the mortgagor to prevent the mortgagee exercising the rights conferred upon him by the mortgagee is to redeem the mortgage. If he redeems, there can be no need or justification for recourse by the mortgagee to the power of sale to achieve repayment of the debt due to him secured by the mortgage.

When and if the mortgagee does exercise the power of sale, he comes under a duty in equity (and not tort) to the mortgagor (and all others interested in the equity of redemption) to take reasonable precautions to obtain “the fair” or “the true market” value of or the “ proper price” for the mortgaged property at the date of the sale, and not (as the Claimants submitted) the date of the decision to sell. If the period of time between the dates of the decision to sell and of the sale is short, there may be no difference in value between the two dates and indeed in many (if not most cases) this may be readily assumed. But where there is a period of delay, the difference in date could prove significant. The mortgagee is not entitled to act in a way which unfairly prejudices the mortgagor by selling hastily at a knock-down price sufficient to pay off his debt: Palk at 337-8 per Nicholls V-C. He must take proper care whether by fairly and properly exposing the property to the market or otherwise to obtain the best price reasonably obtainable at the date of sale. The remedy for breach of this equitable duty is not common law damages, but an order that the mortgagee account to the mortgagor and all others interested in the equity of redemption, not just for what he actually received, but for what he should have received: see Standard Chartered at 1416B.

In our judgment there can accordingly be no duty on the part of a mortgagee, as suggested by the Claimants, to postpone exercising the power of sale until after the further pursuit (let alone the outcome) of an application for planning permission or the grant of a lease of the mortgaged property, though the outcome of the application and the effect of the grant of the lease may be to increase the market value of the mortgaged property and price obtained on sale. A mortgagee is entitled to sell the property in the condition in which it stands without investing money or time in increasing its likely sale value. He is entitled to discontinue efforts already undertaken to increase their likely sale value in favour of such a sale. A mortgagee is under a duty to take reasonable care to obtain a sale price which reflects the added value available on the grant of planning permission and the grant of a lease of a vacant property and (as a means of achieving this end) to ensure that the potential is brought to the notice of prospective purchasers and accordingly taken into account in their offers: see Cuckmere. But that is the limit of his duty.

We turn to the question of the duties regarding mortgaged properties of receivers and in particular of receivers who under the term of the mortgage under which they are appointed are designated as agents of the mortgagor.

There is binding authority for the proposition that (again in default of agreement to the contrary) in the exercise of the power of sale receivers owe the same equitable duty to the mortgagor and others interested in the equity of redemption as is owed by the mortgagee: they are both obliged to take care to obtain the best price reasonably obtainable: see e.g. Cuckmere; Downsview; Yorkshire Bank plc v. Hall [1999] 1 WLR 1713 at 1728E-F; Medforth v. Blake [2000] Ch 86 at 98H-99A (“Medforth”); and Raja at paragraph 55. The critical issue however is whether the receiver (unlike the mortgagee) is under a duty of care in regard to the date of sale and to ensure that steps are taken (in particular in respect of planning and the grant of leases) to realise the full potential of the secured property before sale by obtaining permission or granting the leases.

In a number of respects it is clear that a receiver is in a very different position from a mortgagee. Whilst a mortgagee has no duty at any time to exercise his powers to enforce his security, a receiver has no right to remain passive if that course would be damaging to the interests of the mortgagor or mortgagee. In the absence of a provision to the contrary in the mortgage or his appointment, the receiver must be active in the protection and preservation of the charged property over which he is appointed: see Lightman & Moss, Law of Receivers and Administrators 3^rd ed para 7.030. Thus if the mortgaged property is let, the receiver is duty bound to inspect the lease and, if the lease contains an upwards only rent review, to trigger that rent review in due time: see Knight v. Lawrence [1991] BCC 411. His management duties will ordinarily impose on him no general duty to exercise the power of sale: see Routestone Ltd v. Minories Finance Ltd [1997] BCC 180 at 187G. But a duty may arise if e.g. the goods are perishable and a failure to do so would cause loss to the mortgagee and mortgagor.

The critical issue raised is whether (as contended by the Claimants) the wider management duties imposed on a receiver (but not on a mortgagee) may require a receiver (and in particular a receiver appointed the agent of the mortgagor) to postpone a sale until after steps have been taken (in this case proceeding with an application for planning permission and with the grant of a lease) calculated to increase the price obtainable in a sum greater than the cost of taking those steps plus the sum representing accrued interest over the period whilst those steps are being taken.

The existence and scope of the duties of an agent, fiduciary and otherwise, depend on the terms on which they are acting: see Kelly v. Cooper [1993] AC 205 at 214. In the case of an agent appointed to manage his principal's property on his behalf alone, general agency principles will apply. The agent will be obliged to pursue single-mindedly the interests of his principal and he will owe the duties to his principal for which the Claimants contend. This is reflected in the passage in the judgment of Millett J in the case of Re Charnley v. Davies Ltd (No 2) [1990] BCLC 760 cited by Patten J. The administrator as agent for the company owes a duty of care to the company in the choice of the time to sell and (by parity of reasoning) in the decision whether to take the appropriate available advantageous pre-marketing steps which are calculated to achieve the best price. The issue raised is whether receivers who are appointed by a mortgagee to act as agents of the mortgagor are in a like legal position and owe a like duty to the mortgagor.

The character and incidents of such receivers’ agency has been the subject of judicial and extra-judicial consideration. Mr Peter Millett QC (as he then was) in “The Conveyancing Powers of Receivers After Liquidation” (1977) 41 Conv. (NS) 83 at 88 wrote: “The so called ‘agency of the [receivers]’ is not a true agency, but merely a formula for making the company rather than the [mortgagee] liable for his acts”. But this agency of the receivers is a real one, even though it has some peculiar incidents: see Re Offshore Ventilation (1989) 5 BCC 160 at 166A-B. Its reality is reflected in the continuity after the appointment of receivers of the rateable occupation of the mortgagor through the agency of the receivers (see Ratford v. Northavon RDC [1987] QB 357) and in the absence of personal liability of the receivers for tax in respect of receipts which come to the hands of the receivers as agents: see In re Piacentini [2003] 3 WLR 354.

The peculiar incidents of the agency are significant. In particular: (1) the agency is one where the principal, the mortgagor, has no say in the appointment or identity of the receiver and is not entitled to give any instructions to the receiver or to dismiss the receiver. In the words of Rigby LJ in Gaskell v. Gosling [1896] 1 QB 669 at 692: “For valuable consideration he has committed the management of his property to an attorney whose appointment he cannot interfere with”; (2) there is no contractual relationship or duty owed in tort by the receiver to the mortgagor: the relationship and duties owed by the receiver are equitable only: see Medforth and Raja; (3) the equitable duty is owed to the mortgagee as well as the mortgagor. The relationship created by the mortgage is tripartite involving the mortgagor, the mortgagee and the receiver; (4) the duty owed by the receiver (like the duty owed by a mortgagee) to the mortgagor is not owed to him individually but to him as one of the persons interested in the equity of redemption. The class character of the right is reflected in the class character of the relief to be granted in case of a breach of this duty. That relief is an order that the receiver account to the persons interested in the equity of redemption for what he would have held as receiver but for his default; (5) not merely does the receiver owe a duty of care to the mortgagee as well as the mortgagor, but his primary duty in exercising his powers of management is to try and bring about a situation in which the secured debt is repaid: see Medforth at p86; and (6) the receiver 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: see Re B Johnson & Co (Builders) Ltd [1953] Ch 634 per Jenkins LJ at 661 cited with approval by Lord Templeman in Downsview at 331B and at p646 per Evershed MR cited with approval by Scott V-C in Medforth at p95H to 96A. His powers of management are really ancillary to that duty: Gomba Holdings v. Homan [1986] 1 WLR 1301 at 1305 per Hoffmann J.

In the context of a relationship such at the present, which is no ordinary agency and is primarily a device to protect the mortgagee, general agency principles are of limited assistance in identifying the duties owed by the receiver to the mortgagor: see Gomba Holdings v. Homan [1986] 1 WLR 1301 at 1305 B-D (Hoffmann J); [1988] 1 WLR 1231 at 1233 D-H (Fox LJ). The core duty of the receiver to account to the mortgagor subsists, but (for example) the mortgagor has no unrestricted right of access to receivership documents. The mortgage confers upon the mortgagee a direct and indirect means of securing a sale in order to achieve repayment of his secured debt. The mortgagee can sell as mortgagee and the mortgagee can appoint a receiver who likewise can sell in the name of the mortgagor. Having regard to the fact that the receiver's primary duty is to bring about a situation where the secured debt is repaid, as a matter of principle the receiver must be entitled (like the mortgagee) to sell the property in the condition in which it is in the same way as the mortgagee can and in particular without awaiting or effecting any increase in value or improvement in the property. This accords with the repeated statements in the authorities that the duties in respect of the exercise of the power of sale by mortgagees and receivers are the same and with the holding in a series of decisions at first instance that receivers are not obliged before sale to spend money on repairs (see Meftah v. Lloyds TSB Bank [2001] 2 All ER (Comm) 741 at 744 and 766 per Lawrence Collins J), to make the property more attractive before marketing it (Garland v. Ralph Pay & Ransom [1984] 2 EGLR 147 at 151 per Nicholls J) or to “work” an estate by refurbishing it (Routestone Ltd v. Minories Finance Ltd [1997] 1 EGLR 123 at 130D per Jacob J).

In summary, by accepting office as receivers of the Claimants’ properties the Receivers assumed a fiduciary duty of care to the Bank, the Claimants and all (if any) others interested in the equity of redemption. This accords with the statement of principle to this effect of Lord Browne-Wilkinson in Henderson v. Merrett Syndicates Limited [1995] 2 AC 145 at 205 E-H relied on by the Claimants. The appointment of the Receivers as agents of the Claimants having regard to the special character of the agency does not affect the scope or the content of the fiduciary duty. The scope or content of the duty must depend on and reflect the special nature of the relationship between the Bank, the Claimants and the Receivers arising under the terms of the mortgages and the appointments of the Receivers, and in particular the role of the Receivers in securing repayment of the secured debt and the primacy of their obligations in this regard to the Bank. These circumstances preclude the assumption by, or imposition on, the Receivers of the obligation to take the pre-marketing steps for which the Claimants contend in this action. Further no such obligation could arise in their case (any more than in the case of the Bank) from the steps which they took to investigate and (for a period) to proceed with applications for planning permission. The Receivers were at all times free (as was the Bank) to halt those steps and exercise their right to proceed with an immediate sale of the mortgaged properties as they were.

For these reasons this appeal should be dismissed.