Plaintiff mortgaged many companies to bank Defendant. Upon defaulting, Defendant and the receivers sold the companies.
Plaintiff sued Defendant 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.
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.
Since 2010, Oxbridge Notes has been a trusted education marketplace, supplying high-quality materials from top achievers at universities like Oxford, Cambridge, LSE, Harvard, and Yale.
We offer free case summaries, sample notes, and award-winning content, all curated and approved by our editorial team. Our reputation for excellence has led to features in The Guardian, Wikipedia, and the National Council for Law Reporting (Kenya Law).
Every year, millions of students utilize our free and premium notes to aid their studies.