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Silven Properties v Royal Bank of Scotland

[2004] 4 All ER 484

Case summary last updated at 09/01/2020 17:48 by the Oxbridge Notes in-house law team.

Judgement for the case Silven Properties v Royal Bank of Scotland

P mortgaged many companies to bank D. Upon defaulting, D and the receivers sold the companies. P sued D and receivers for selling at an undervalue. CA denied the claim. It said that mortgagees, unless the contract so states, do not have a duty to increase the value of the mortgaged property, even when in possession. 
Lightman J: “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 and assumes a duty to take reasonable care of the property secured: This requires him to be active in protecting and exploiting the security, maximising the return, but without taking undue risks.” The mortgagee has no duty to increase the property’s value and may sell it as it is. The mortgagee only has a duty to preserve the value of the house at the time that he takes it. When the mortgagee decides to effect the sale, he has an equitable (not a tortious) duty to attain a “fair” or “market value” price for the property. Hence there is no duty to postpone selling in order to get a higher price. 

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