Raja v Austin Gray (a firm) [2002] EWCA Civ 1965

ADMINISTRATIVE RECEIVERS – DUTY OF CARE – EQUITY OF REDEMPTION – MORTAGGEES’ POWERS AND DUTIES – POWER OF SALE - VALUATION

Facts

D had secured borrowings from a bank by a debenture, under the terms of which administrative receivers of D's assets were appointed. D became entitled to exercise its power of sale over the properties, and the receivers instructed A to value them and assist in their sale. The proceeds did not discharge R's debt to D, and R brought an action against the receivers and D alleging the sale had been at an undervalue. R's debt to D was extinguished by settlement of the action, and R then began the claim against A.

Issue

The primary issue raised on appeal was whether, and in what circumstances, valuers appointed by administrative receivers of a company owe a duty of care to the owner of properties when those properties are charged to the company as a security for a loan and the valuers are appointed by the receivers for the purposes of valuing those properties

Held

In finding for [A] the Court of Appeal held that the receivers did in fact owe a duty in equity to R as the legal and beneficial owner of the properties and as somebody with an interest in the equity of redemption; Medforth v Blake [1999] EWCA Civ 1482 applied. Moreover, if V had been negligent in valuing the properties, R and D would have been in breach of their duty to [A] to take reasonable care to obtain the best possible price; A receiver or mortgagee could not escape such liability by asserting that he had retained a competent professional to assist in exercising the power of sale.