Silven Properties Ltd v Royal Bank of Scotland Plc

JurisdictionEngland & Wales
Judgment Date21 October 2003
Neutral Citation[2003] EWCA Civ 1409
Docket NumberCase No: A3/2002/2296, A3/2002/2300
CourtCourt of Appeal (Civil Division)
Date21 October 2003
Between:
(1) Silven Properties Limited
(2) Chart Enterprises Incorporated
Appellants
and
(1) Royal Bank of Scotland Plc
(2) Nigel Vooght
(3) Timothy Richard Harris
Respondents

[2003] EWCA Civ 1409

Before:

Lord Justice Aldous

Lord Justice Tuckey and

Mr Justice Lightman

Case No: A3/2002/2296, A3/2002/2300

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE CHANCERY DIVISION (Mr Justice Patten)

Royal Courts of Justice

Strand,

London, WC2A 2LL

Mr Michael Driscoll QC & Mr Michael Michell (instructed by Kenneth Elliott & Rowe, 162–166 South Street, Romford RM1 1SX) for the Appellants

Mr Christopher Nugee QC & Mr Daniel Bayfield (instructed by Linklaters, One Silk Street, London EC2Y 8HQ) for the Respondent Receivers

1

This is the judgment of the court prepared by Mr Justice Lightman.

INTRODUCTION

2

This is an appeal brought with the permission of Chadwick LJ against part of the judgment of Patten J given on the 11 th October 200By his judgment, Patten J dismissed all the claims of Silven Properties Limited ("Silven") and Chart Enterprises Incorporated ("Chart"), the claimants in this action ("the Claimants") against the first defendant the Royal Bank of Scotland plc ("the Bank") and the second and third defendants Nigel Vooght and Timothy Harris ("the Receivers").

3

The Claimants mortgaged properties to the Bank to secure indebtedness. The Bank pursuant to the mortgages appointed the Receivers as receivers of the mortgaged properties and between them the Bank and the Receivers sold all the properties. The mortgages (as is common form) provided that the Receivers should be the agents of the Claimants.

4

In this action the Claimants as mortgagors claimed damages against the Bank as mortgagee and the Receivers as receivers ("the Defendants") alleging that in breach of duty they sold the mortgaged properties at an undervalue. Patten J dismissed all the Claimants' claims against all the Defendants and refused permission to appeal. Chadwick LJ gave the Claimants permission to appeal limited to the claims against the Receivers in respect of six of the properties. In the case of each of these sales it was conceded by the Claimants or established by evidence at the trial that the sales were at the best price reasonably obtainable at the dates of such sales for the properties in the condition in which they were. The relevant complaint made by the Claimants at the trial in respect of these sales was that the Receivers were under a duty not to sell the properties as they were. Instead they were under a duty before selling, in order to obtain the best price obtainable, to pursue planning applications for the development of the properties and (in the case of two of the properties, which were vacant or partially vacant, but in respect of which there were negotiations for grant of leases) to proceed with the grant of leases, and to defer a sale until these goals were achieved. Patten J dismissed these claims against the Receivers without determining whether the Receivers' failure to take this course of action caused any damage or loss. He did so on the ground that as a matter of law the Receivers had no duty to delay the sale for the purposes suggested by the Claimants and were entitled, whether or not it was reasonable for them to do so, to sell the properties without delay as they were. The only issue on this appeal is whether the judge was correct. It is common ground that, if the judge was wrong, the case must be remitted to the judge (or some other judge) to decide whether any breaches by the Receivers of the duties established on this appeal by the Claimants in fact occasioned any damage or loss.

5

The issue of law raised on this appeal is of some considerable practical importance. Earlier authorities have expressed the view that the duties of receivers appointed by mortgagees are the same as the duties of the mortgagees themselves in respect of the sale of mortgaged property and that mortgagees do not have the duties for which the Claimants contend. But (as Chadwick LJ stated when granting permission to appeal), consideration is called for whether the express appointment in the mortgage of receivers as agents of the mortgagor leads to the assumption by receivers who accept such appointment of responsibilities and duties which differ from those owed by the mortgagees, and it is important that any doubt in this regard should be resolved in the interests of mortgagees, mortgagors and receivers.

6

The full history of events in this case is set out in the careful and detailed judgment of Patten J. Only a very brief summary is called for of the facts relevant to this appeal. But a detailed examination is called for of the relevant authorities and principles which throw light on the legal implications in this context of the appointment by a mortgagee of receivers as agents of the mortgagor.

FACTS

7

The Claimants are property companies set up for the benefit of the Ezekiel family. They had large borrowings from the Bank secured by mortgages over some 34 properties which they owned. In May 1996 in accordance with the terms of the mortgages the Bank demanded repayment. According to the Bank the indebtedness at that date of Silven was £4,309,946 and of Chart was £620,891. In May and June 1996 the Bank appointed receivers over all the properties mortgaged to it. Save for one property (which is not relevant on this appeal) the receivers appointed were the Receivers. The Receivers set about selling the 33 properties in respect of which they had been appointed receivers and in the course of some 18 months all 34 mortgaged properties were sold. The gross realisation in respect of properties owned by Silven was £4,881,500 and in respect of properties owned by Chart was £366,500. The Receivers entered into the various contracts for sale of the 33 properties as agents for the Claimants. In the case of some of these properties, however, instead of the Receivers completing the sales, in order to make title overriding adverse registered interests, the Bank conveyed or transferred the properties as mortgagee. No point was taken before the judge or this court that in the cases where the Bank completed the sales those sales ceased to be sales by the Receivers and became sales by the Bank in respect of which no liability could attach to the Receivers. Accordingly it does not fall to us to express any view on that question.

8

The Claimants complained in the action that many of the properties were sold at an undervalue. The appeal relates only to six of the properties. The particular complaint which is the subject of this appeal is that the undervalue is attributable to the decision of the Receivers to sell without first obtaining planning permission for development and without first letting a vacant property.

9

When they began their receivership, the Receivers adopted the strategy of investigating the possibility of adding value to some of the mortgaged properties by obtaining planning permission. This strategy was clearly set out in their First, Second and Third Reports to the Bank dated respectively the 13 th August, 17 th September and 5 th November 1996. In accordance with that strategy the Receivers obtained reports from planning consultants advising them as to the prospects of obtaining planning permission for various of the properties. On the 8 th November 1996 the Receivers obtained estimates for applying for planning permission. On the 30 th December 1996 the Receivers instructed planning consultants to make planning applications and at the same time asked the property consultants to give them advice as to the expected uplift in price which would be achieved by obtaining planning permission. By the end of February 1997, however, the Receivers had decided not to proceed with any planning application or to await the completion of negotiations for the grant of a lease of the vacant property and instead to proceed immediately with sales of the mortgaged properties as they were. The reasons for their decision are disputed. By so doing the Receivers decided to forego any potential increase in price obtainable on a sale if delayed until after the result of the planning applications and the grant of the leases in favour of the advantage to the Bank of saving the costs of those exercises and obtaining an immediate realisation and partial repayment of its secured indebtedness. The issue before this court is whether, for whatever the reason they decided on this course, the Receivers were free to do so.

JUDGMENT BELOW

10

The judge set out clearly in his judgment his reasons for dismissing the claim against the Receivers. The first relevant extract reads as follows:

"Underpinning the claims against the Coopers Receivers is the proposition that they owed a duty to the mortgagors to act in their best interests in determining when to sell the mortgaged property and that, as part of their duty to obtain the best or a proper price, they were obliged to take steps to improve the value of the properties by, for example, applying for planning permission, completing the grant of a lease or, in the case of Watney Street, of carrying into effect a land swap with the local authority. If this is correct, there is a fundamental difference between the legal duties owed by a mortgagee and those of any receiver he chooses to appoint. It is common ground that a mortgagee who exercises his power of sale owes a duty to take reasonable precautions to obtain the true market value or a proper price for the property at the time when he comes to sell: see Cuckmere."

After citing passages from the judgment of Salmon LJ supporting these propositions, the judge...

To continue reading

Request your trial
112 cases
  • Kotonou v National Westminster Bank Plc
    • United Kingdom
    • Chancery Division
    • July 5, 2010
    ...Mortgage Services Funding plc [1993] Ch 330 at 337G. The position as between mortgagor and mortgagee was considered in Silven Properties Ltd v Royal Bank of Scotland plc [2003] BPIR 1429, a decision of the Court of Appeal. It was said by Lightman J at [14] that a mortgagee was at all times ......
  • Socimer International Bank Ltd ((in Liquidation)) v Standard Bank London Ltd
    • United Kingdom
    • Court of Appeal (Civil Division)
    • February 22, 2008
    ...a similar restatement of the mortgagee's duties in equity taken from para 19 of Lightman J's judgment in this court in Silven Properties Ltd v. Royal Bank of Scotland [2003] EWCA Civ 1409, [2004] 1 BCLC 359. Gloster J then ended this passage of her judgment by restating her implied term i......
  • Edenwest Ltd v CMS Cameron McKenna (A Firm)
    • United Kingdom
    • Chancery Division
    • May 14, 2012
    ...between a receiver and the company in receivership has unusual features. 62 As clarified by the Court of Appeal in Silven Properties Ltd v Royal Bank of Scotland plc [2004] 1 WLR 997 at 1007, the agency of receivers so appointed is a real one (so that, for example, there is continuity of th......
  • Dato Seri Dr Kok Mew Soon v Mustapha bin Mohamed
    • Malaysia
    • Federal Court (Malaysia)
    • Invalid date
  • Request a trial to view additional results
6 firm's commentaries
  • McDonagh v Bank Of Scotland & Others [2018] EWHC 3262 (Ch)
    • United Kingdom
    • Mondaq UK
    • January 9, 2019
    ...an account and did not seek permission to amend his case to pursue one. Morgan J considered Silven Properties v Royal Bank of Scotland [2004] 1 W.L.R. 997, in which the Court of Appeal discussed the duties owed by a fixed charge receiver when exercising a power of sale, and concluded at [14......
  • COVID-19: Will Borrower Defaults Increase?
    • United Kingdom
    • JD Supra United Kingdom
    • March 18, 2020
    ...1 WLR 1410), and the duty to obtain the best price reasonably obtainable for the asset (Silven Properties Ltd v Royal Bank of Scotland [2003] EWCA Civ 1409). 1 The coronavirus crisis is evolving daily. This article is current to the best of our knowledge as of publication on 17 March 2020. ......
  • IFI Update London, August/Octber 2008 - Part 1
    • United Kingdom
    • Mondaq United Kingdom
    • October 9, 2008
    ...Cuckmere Brick Co. Ltd v. Mutual Finance Ltd [1971] Ch 949 and Silven Properties Ltd v. Royal Bank of Scotland plc [2003] EWCA Civ 1409, [2004] 1 WLR 997. For a recent discussion of this in the context of a receivership see Bell v. Long [2008] EWHC 1273 (Ch)). See also the duty upon a legal......
  • Harneys Corporate Recovery Services Guides to The Insolvency Act 2003 - Part 2
    • British Virgin Islands
    • Mondaq Virgin Islands
    • August 4, 2004
    ...Ltd. v. First City Corporation Ltd.†[1993] A.C. 295 157 Medforth v Blake [2000] Ch 86 158 Silven Properties Ltd v Royal Bank of Scotland [2004] 1 WLR 997 159 Section 91 160 Section 92(1) 161 Re Atlantic Computers [1992 Ch 505; Barclays Mercantile Business Finance Ltd v Sibec†Developments Lt......
  • Request a trial to view additional results
4 books & journal articles
  • Can Complex Contracts Effectively Replace Bankruptcy Principles? Why Interpretation Matters.
    • United States
    • American Bankruptcy Law Journal Vol. 92 No. 4, September 2018
    • September 22, 2018
    ...for lack of legal certainty. See BEALE, et al. supra note 55, [section] 17-38, at 629; Silven Prop. Ltd v. Royal Bank of Scotland plc [2003] EWCA Civ 1409 [14], [2004] 1 WLR 997, (59) See BEALE et al., supra note 55, [section] 17.50, at 635. In the U.S., see U.C.C. [section] 9-610 (b). (60)......
  • Table of Cases
    • United Kingdom
    • Wildy Simmonds & Hill Law of Insolvent Partnerships and Limited Liability Partnerships Contents
    • August 29, 2015
    ...Mercantile Business Finance Ltd v Sibec Developments ltd, Re [1992] 1 WLR 1253 125 Silven Properties Ltd v Royal Bank of Scotland plc [2003] EWCA Civ 1409, [2004] 1 WLR 997 210, 213, 214 Sinai Securities Ltd v Hooper [2003] EWHC 910 (Ch), [2004] BCC 973 129, 131 Singla v Hedman and Others [......
  • Receivership
    • United Kingdom
    • Wildy Simmonds & Hill Law of Insolvent Partnerships and Limited Liability Partnerships Contents
    • August 29, 2015
    ...Bacal Contracting Ltd v Modern Engineering (Bristol) Ltd [1980] 2 All ER 655, and Gough’s Garages Ltd v Pugsley [1930] 1 KB 615. 109 [2003] EWCA Civ 1409, [2004] 1 WLR 997. 110 [2003] EWCA Civ 1409, [2004] 1 WLR 997 at [27] per Lightman J. 111 IA 1986, s 44(1)(b) (administrative receivers) ......
  • DUTIES OF A MORTGAGEE AND A RECEIVER: WHERE SINGAPORE SHOULD AND SHOULD NOT FOLLOW ENGLISH LAW
    • Singapore
    • Singapore Academy of Law Journal No. 2008, December 2008
    • December 1, 2008
    ...A Second Chance (Cm 5234) [2.1]—[2.3]. 14 Medforth v Blake [2000] Ch 86 (CA) at 102; Silven Properties Ltd v Royal Bank of Scotland plc[2003] EWCA Civ 1409; [2004] 1 WLR 997 (CA) at [27]—[29]. 15 Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295 (PC) at 314—315. 16 Id, at 315; Medf......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT