Raja v Lloyds TSB Bank plc

Raja v Lloyds TSB Bank plc (2001) Lloyds Rep Bank 113

CHARGES – IMPLIED TERMS – LIMITATIONS – MORTGAGEES’ POWERS AND DUTIES – POSSESSION

Facts

In 1986 the Appellant (R) was granted overdraft facilities which were secured by legal charges over four properties he owned. Having fallen into arrears the respondent lender (L) obtained orders for possession with respect to three of the four properties, which were sold between 1987 and 1991 for a cumulative total of £356,732 after expenses. R initiated proceedings against L alleging that they were in breach of their duties as mortgagee to obtain the best price reasonably available for the properties and to incur no more expenses than reasonable for the purposes of marketing and sale.

Issues

The primary issue before the Court of Appeal was the nature of the duties owed by a mortgagee in possession, namely whether the duty to obtain the best price reasonably available was an implied term of the contract between lender/borrower or was instead a general duty imposed by equity. If the latter then R’s cause of action would be time-barred pursuant to the Limitation Act 1980.

Decision/Outcome

The Court of Appeal found in favour of L: The relevant duties did not arise from any implied contractual obligation, as the same duty was also owed by L to any subsequent mortgagee of the properties and would also be owed by receivers, being in the nature of a general obligation in equity to take reasonable care to obtain a proper price.