Mortgaged property is sold at an undervalue: Who can the mortgagor sue for damages?
The question posed above serves as a convenient umbrella for four interrelated questions addressed by the Court of Appeal in Raja (administratrix of the estate of Raja (deceased)) v Austin Gray (a firm) [2002] EWCA Civ 1965; [2003] 13 EG 117, the third being of the greatest interest to surveyors. We shall put them into the mouth of the aggrieved mortgagor.
Mortgaged property is sold at an undervalue: Who can the mortgagor sue for damages?
The question posed above serves as a convenient umbrella for four interrelated questions addressed by the Court of Appeal in Raja (administratrix of the estate of Raja (deceased)) v Austin Gray (a firm) [2002] EWCA Civ 1965; [2003] 13 EG 117, the third being of the greatest interest to surveyors. We shall put them into the mouth of the aggrieved mortgagor.
Q1 The sale was effected by a receiver appointed by my mortgagee. Can I proceed against the receiver?
A1 Yes. It was common ground in Raja that a receiver is under a similar (equitable) duty to obtain the best price reasonably achievable.
Q2 Is it a defence for the mortgagee or the receiver to show that they relied upon a valuation obtained from a reputable firm of surveyors?
A2 No. Unless the appeal goes higher, this point must taken to be finally settled in Raja.
Q3 If I can show that the valuation had been carelessly undertaken, would I have a negligence action against the surveyors?
A3 No, for reasons largely lying in the answer to the previous question.
Q4 The sale was in fact triggered by the insolvency of my mortgagee and the appointment of a receiver to realise his assets (including the benefit of his mortgage over my property). If I were to sue that receiver, would your answer to my first question still apply?
A4 Yes. The fact that the asset to be realised was the mortgage as distinct from the property secured was held in Raja to be immaterial – a ruling likely to be hotly debated by property law theorists.
