Respondent charging properties to third party as security — Appellant receiver for third party overseeing sale of respondent’s properties — Respondent alleging sale at undervalue — Whether appellant owing respondent a duty of care — Appeal allowed
The respondent owned properties that he had charged to a third party as security on loans. The third party went into receivership and exercised a power of sale over the respondent’s properties. The receiver appointed the appellant to value and generally assist in the sale of the properties, which were eventually sold at a price that was insufficient to cover the respondent’s debt to the third party. The respondent alleged that the properties had been sold at an undervalue and commenced proceedings against the appellant for negligence. At first instance, the judge found that the appellant owed the respondent a duty of care. He found that the appellant’s admitted knowledge that the respondent was the owner of the properties satisfied the tests of proximity and foreseeability, and that, in the circumstances, it was fair, just, and reasonable to hold the appellant liable for losses caused by its negligence. The appellant appealed.
Held: The appeal was allowed.
Equity imposed a duty to ensure that the receiver took account of the interests of a mortgagor and any others with an interest in a mortgaged property. In the instant case, the respondent had had a remedy, since he could have recovered from the receiver and the third party in respect of any negligent valuation by the appellant, so that the absence of a duty owed by the appellant would not leave him devoid of remedy. In any event, any duty owed by the appellant would have been limited by the scope of its instructions from the receiver, thus giving it a defence. The appellant had not assumed any responsibility towards the respondent. There was therefore insufficient proximity of relationship between the parties to impose a duty of care upon the appellant.
Patrick Lawrence QC (instructed by Brown Jacobson, of Nottingham) appeared for the appellant; Charles Douthwaite (instructed by Healys) appeared for the respondent.
Vivienne Lane, barrister
