Bell v Long & Ors

A mortgagee or receiver exercising a power of sale may choose the timing and method of sale, having regard to the mortgagee’s legitimate interests. The duty is to obtain a proper price, but the phrase “best price reasonably obtainable” is not an absolute retrospective test. A reasonable degree of latitude applies where the chosen sale method is genuine and properly conducted.

In assessing alleged negligence, the court considers whether a competent valuer, possessing the information available at the time, could reasonably have recommended the strategy adopted. A higher price revealed by hindsight, or a viable alternative strategy, does not establish breach. A portfolio sale may be justified by certainty, cost savings and market uncertainty, even where separate sales might ultimately have produced a greater return.

The claimant was a director and majority shareholder of Dimple Property Limited. He brought proceedings personally and as assignee of the company’s equitable claim against administrative receivers appointed over the company’s assets.

The receivers sold four freehold properties to Peninsula & Century Properties Limited for £775,000. The claimant alleged that the receivers had negligently abandoned an individual-sales strategy in favour of a portfolio sale, causing the properties to be sold at an undervalue. A conspiracy claim was effectively abandoned during the trial. The remaining questions were whether the receivers had breached their duty to obtain a proper price and, if so, what price the properties would probably have achieved.

1. The claim against the receivers was dismissed. The receivers owed the company an equitable duty to obtain a proper price for the properties. That duty applied equally to an administrative receiver and an LPA receiver. The receivers were not trustees of the power of sale and could choose when to sell, even if postponement might have produced a higher price.

2. The expression “best price reasonably obtainable” had to be understood in that context. It did not impose an absolute retrospective requirement to pursue the strategy which ultimately would have produced the greatest return. The receivers were entitled to a degree of latitude as to both timing and method of sale. Once a method was chosen, the properties had to be marketed properly in a manner appropriate to that method.

3. The relevant question was whether, at the time of the advice, no competent valuer in the position of the selling agent, with the information then available, could reasonably have recommended the proposed strategy. Evidence that a different strategy might later have achieved more was insufficient.

4. The recommendation to pursue a portfolio sale was a genuine reassessment of the market. It took account of limited interest in some properties, uncertainty concerning the tenancies, anticipated vacant office space and the advantages of a prompt sale, reduced receivership costs and certainty of disposal. The expert evidence accepted that a portfolio discount was usual and that the proposed strategy was reasonable in the circumstances.

5. The receivers were not legally required to hold competitive portfolio bids in abeyance for an indefinite period while waiting for potentially higher individual offers. No better individual offer had been received by the time of contract, despite the properties remaining on the market. The receivers therefore acted within their duty in progressing the portfolio sale.