R (on the application of Glatt) v Sinclair

Sale of property – Valuation – Estate agent – Respondent court-appointed receiver having power to sell assets of appellant – Respondent obtaining valuation of property and achieving that price – Purchasers selling off property at higher price — Appellant seeking permission to commence proceedings against respondent for breach of duty – Whether court erring in refusing permission to proceed — Appeal allowedThe respondent was a receiver appointed by order of the court following the appellant’s conviction for money laundering. The order conferred on the respondent the power of sale of the assets of the appellant over which he was appointed. The court subsequently authorised the sale of a property owned by the appellant and the respondent instructed experienced and reputable chartered surveyors who reported that the property had an open market value of £330,000. An estate agent was then instructed to sell the property. A sale was agreed at that price and the valuation was confirmed by another valuer who inspected the property for mortgage purposes.Four months later, the purchasers sold the property for £445,000. Since he received no satisfactory explanation for the difference between the price at which the property was sold by the respondent and the price at which it was sold on by the purchasers, the appellant wished to commence proceedings against the respondent for negligence or breach of duty.Since the respondent was a court-appointed receiver, the court’s permission was required for the claim to proceed. The court refused to grant permission on the basis that the claim had no realistic prospect of success, was doomed to fail and should not be allowed to proceed. The appellant appealed against the refusal of permission and the decision that the respondent’s costs of the application should be paid as an expense of the receivership.Held: The appeal was allowed. The respondent receiver was under a duty to those interested in the property over which he was appointed to act in good faith and to take reasonable steps to obtain the best price reasonably obtainable at the time. A court-appointed receiver was similar to a trustee in that he had no interest in the property. However, in general he was under the same fiduciary duty and owed the same duty of care as a receiver appointed out of court. The court would not grant an application to bring a claim against a receiver unless the applicant could satisfy the court that his claim was genuine in the sense that the allegations he sought to make were such as to call for an answer from the receiver. Although a receiver should not be subjected to vexatious or harassing claims, the court had to see that justice was done: McGowan v Chadwick [2002] EWCA Civ 1758 applied. Medforth v Blake [2000] Ch 86; [1999] 2 EGLR 75; [1999] 29 EG 119, Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 and Mortgage Express v Mardner [2004] EWCA Civ 1859 considered.In the instant case, although the respondent had obtained a reputable valuation of the open market price and had achieved that price, concerns had been raised, in the light of the speed at which the property had changed hands for a significant profit so soon after the sale by the respondent, that he had proceeded with unnecessary haste and without sufficiently testing the market to ensure that the price was the best reasonably obtainable. Thus the low threshold laid down in McGowan for granting permission for the action to proceed had been met.Even though the respondent had been entitled to rely on the valuation received, so far as it went, the fact of having that valuation did not necessarily dispense with the need for the respondent to obtain further advice as to the marketing of the property, when the decision was taken that it should be sold. It was at least arguable that the respondent was under a duty at that stage to take advice as to the asking price or guide price, the appropriate method of selling, including advertising, and, when offers were received, as to whether the best offer should be accepted or whether to wait in the hope of a better offer. It was striking that the estate agent had reported the offers received in an e-mail without offering any advice as to whether that was the best that could be expected. In all the circumstances, the appellant had raised questions that called for answers from the respondent and permission would be granted for him to proceed.Since the judge had erred in refusing the appellant’s application for permission, it followed that the costs order made by the judge had to be set aside.Geoffrey Zelin (instructed by Edwards Hayes LLP) appeared for the appellant; Andrew Mitchell QC and Edmund Cullen (instructed by SNR Denton UK LLP) appeared for the respondent.Eileen O’Grady, barrister