D – Duties of mortgagee realising assets
21/12/15
PK AIRFINANCE SARL v ALPSTREAM AG [2015] EWCA Civ 1318
In realising security on aircraft, a mortgagee arranged an auction at which it was the only bidder present and purchased the aircraft through an intermediary trustee. Proceedings claiming various breaches of the mortgagee’s duties were brought by an unsecured creditor which stood to benefit from the realisation of the mortgaged assets under a contractual waterfall structure. The claims failed. The mortgagee had not sold to itself so the sales were not void. Nor was any duty owed to the creditor because the creditor had no interest in the equity of redemption. As a connected purchaser, the mortgagee would have had the burden of proving that the sale was at a proper price. But on the evidence the sale had been at the best price reasonably obtainable. Alternative claims of conspiracy to injure and procuring a breach of contract also failed in the absence of any breach of duty or loss.
21/8/14
THE CO-OPERATIVE BANK PLC v PHILLIPS [2014] EWHC 2862 (Ch)
A bank with a second charge discontinued possession proceedings in circumstances where there was no equity in the mortgaged property after the first charge. The mortgagor applied for the bank to pay his costs on the indemnity basis arguing that the bank had brought the proceedings for an improper purpose. The court reviewed the principles relating to the exercise of a mortgagee’s power for proper purposes [38] and held that it was not improper or an abuse of process for the bank to take proceedings to put pressure on the mortgagor to make payments to the bank. But on the true construction of the charge, the bank was not entitled to payment by the mortgagor of costs which were unreasonably incurred. On the evidence the bank’s costs of the proceedings had been unreasonably incurred and the bank had no right to seek to set them off against liabilities of the mortgagor to the bank.
31/7/13
ALPSTREAM AG v PK AIRFINANCE SARL[2013] EWHC 2370 (Comm)
Considers the duties of a mortgagee selling mortgaged property to a connected party. The mortgagee bore the burden of proving the sale was at the best price and had failed to discharge the burden. It knowingly took a risk setting up a minimalist auction. The duty extended to the residual beneficiary of the proceeds of sale. A company associated with the mortgagee was also liable for procuring the breach of duty and both were liable for conspiring to cause economic loss to the mortgagor by unlawful means.
5/3/13
COMMONWEALTH BANK OF AUSTRALIA v THOMPSON [2013] NSWSC 159 (Supreme Court of New South Wales)
A bank which had taken possession of mortgaged property had been dilatory in taking steps to rent out or sell the property. Had the bank not been prepared to waive its claim for interest which accrued during the period of the delay, the court might have found the bank had acted in breach of the duty (in Palk v Mortgage Services Funding) to act fairly.
30/1/13
CUKUROVA FINANCE INTERNATIONAL LTD v ALFA TELECOM TURKEY LTD [2013] UKPC 2
The defendant had been entitled in its discretion to conclude that events had occurred having a material adverse effect in the claimant’s financial conduct, thereby triggering an event of default and giving the defendant the right to enforce a charge on shares. In doing so the defendant had a duty to act for a proper purpose. It had done so by appropriating the shares for the proper purpose of satisfying the debt. The fact that the defendant also wished to use the shares to obtain control of a company was a collateral purpose and did not cause the purpose of enforcement to be improper. But the court’s power to grant relief from forfeiture is not limited to mortgages of land and relief would be allowed on terms to be determined by the court.
18/1/13
MEAH v GE MONEY HOME FINANCE LTD [2013] EWHC 20 (Ch)
A property had not been properly marketed by a mortgagee and had been advertised at too low an asking price. But the price for which the property had been sold was a proper market price so a claim against the mortgagee for selling at an undervalue failed.
7/11/12
SALTRI III LTD v MD MEZZANINE SA SICAR [2012] EWHC 3025 (Comm)
A security trustee under an inter-creditor deed whose obligation was expressed to be that of a mortgagee, was required to take reasonable care when selling the assets to obtain their true market value. The fact that the sale was to a connected person did not place the trustee under an absolute obligation to take independent expert advice or to carry out marketing. On the facts the publicity from marketing would have depressed the price. In the absence of evidence that a higher price could have been achieved, no loss had been established and no actionable breach of duty had occurred.