Receiver - mortgaged property - receivers appointed by lender - properties sold in current condition - receivers under no duty to try to increase market price

Silven Properties Ltd and Another v Royal Bank of Scotland plc and Others: CA (Lord Justice Tuckey, Mr Justice Lightman and Sir William Aldous): 21 October 2003

The borrowers, S Ltd and C Ltd, were property companies.

They had large borrowings from the bank secured by mortgages over 34 properties.

In May 1996, in accordance with the terms of the mortgages, the bank demanded repayment.

According to the bank the indebtedness of S Ltd was 4,309,946 and that of C Ltd 620,891.

In May and June 1996, the receivers were appointed and they started selling 33 of the properties.

In the course of 18 months all the properties were sold.

The gross realisation of the properties owned by S Ltd was 4,881,500 and by C Ltd was 366,500.

The receivers entered into the various contracts for the sale of the properties as agents for the borrowers.

The borrowers complained in the action that many of the properties were sold at an undervalue.

Mr Justice Patten dismissed their claim.

The borrowers appealed.

Michael Driscoll QC and Michael Michell (Kenneth Elliott & Rowe, Romford) for the borrowers; Christopher Nugee QC and Daniel Bayfield (Linklaters) for the receivers.

Held, dismissing the appeal, that the critical issue was whether the receiver, unlike the lender, was under a duty of care in regard to the date of sale and to ensure that steps were taken to realise the full potential of the secured property before sale by obtaining permission or granting the leases; that the core duty of the receiver to account to the borrower subsisted; that since the receiver's primary duty was to bring about a situation where the secured debt was repaid, as a matter of principle the receiver had to be entitled to sell the property in the condition in which it was in; and that, accordingly, the receivers were at all times free, as was the bank, to exercise their right to proceed with an immediate sale of the mortgaged properties.

(WLR)