Meah v GE Money Home Finance Ltd.

A mortgagee exercising its power of sale must take reasonable care to obtain the best price reasonably achievable at the date of sale. The duty is assessed broadly. A mortgagee is liable only if it is plainly on the wrong side of the line. Compensation is based on the price probably achievable had the duty been performed, not automatically on the difference between the sale price and an expert’s valuation. A residual development assessment may show what a property could be worth to a particular developer, but does not necessarily establish its market value. Where the property has been adequately exposed to the market and potential purchasers have had a fair opportunity to bid, the achieved price may establish both the best price reasonably achievable and the market value.

The claimant, a mortgagor, claimed compensation from the defendant mortgagee for allegedly selling his property at an undervalue. Possession had been obtained after mortgage default. The property was marketed through estate agents and sold for £221,500. The claimant relied on an expert residual development assessment valuing it at £325,000, based on its conversion into flats.

The issues were whether the mortgagee breached its duty in marketing and selling the property, whether any breach caused a lower price to be achieved, and what price would probably have been obtained had the duty been performed.

1. The claim was dismissed. The governing duty, recognised in Cuckmere Brick Co. v Mutual Finance Ltd [1971] 1 Ch. 949, was a duty to take reasonable care, or reasonable precautions, to obtain the best price reasonably achievable for the property at the date of sale. The facts must be assessed broadly, and the mortgagee is not in default unless plainly on the wrong side of the line.

2. The mortgagee’s reliance on several qualified valuers did not, by itself, establish that the duty had been discharged. Following the approach indicated in Raja v Austin Gray [2002] EWCA Civ 1965, a mortgagee cannot avoid its own duty merely by entrusting the sale to apparently competent professionals.

3. The property had been extensively advertised, particulars had been circulated to a mailing list including developers, and public notices had invited higher offers. Although aspects of the marketing were open to criticism, potential purchasers had been sufficiently alerted and given an opportunity to bid. The mortgagee was therefore not plainly on the wrong side of the line.

4. The residual development assessment did not establish the market value or the best price reasonably achievable. It depended on assumptions which potential purchasers might not share. A developer’s potential calculation would not necessarily become the price payable without competition from another bidder. The evidence that no purchaser had offered more than £221,500 strongly indicated that this was the best price reasonably achievable.

5. Compensation would not automatically be measured by the difference between the actual price and the expert valuation. It would be measured by the difference between the actual price and the price probably obtainable had the duty been performed. The claimant failed to prove that any higher price could have been achieved, so an inquiry into damages would have been pointless.

Not stated in the judgment.