Standard Chartered Bank Ltd v Walker

Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938

MORTGAGEES – SALE OF LAND – SALE BY MORTGAGEE – DUTY TO GUARANTOR – EXTENT OF LIABILITY

Facts

A company issued to P, a bank, a debenture giving P a charge over the company’s assets in respect of any sums then or in future owing to P. The debenture empowered P to appoint a receiver with a provision that any receiver so appointed was to be deemed the company’s agent and that the company alone would be responsible for his acts or defaults. In November 1980 P appointed a receiver who engaged auctioneers to hold a sale of the company’s stock. As the auction was held on a cold day in February the proceeds of sale was entirely absorbed by the expenses of realisation and preferential debts other than that of P. P claimed the sums guaranteed by D and D subsequently brought an action against P, alleging the sale was poorly organised and realised at a gross undervalue.

Issues

Whether a receiver realising assets under a debenture owed a duty to both the borrower and the guarantor of the debt to exercise reasonable care and judgement to obtain the best price available for those assets; Whether the holder of a debenture could be liable for the actions of a receiver if the process of receivership was interfered with.

Decision/Outcome

A receiver realising assets under a debenture owed a duty both to the borrower and to a guarantor of the debt to take reasonable care to obtain the best price that circumstances permitted, and that a duty was also owed to exercise reasonable care in choosing the time for the sale. Despite the receiver being deemed the company’s agent, P, as holder of the debenture, might have responsibility for the receiver’s actions if it were shown that it interfered with the conduct of the receivership. As these were triable issues D would be granted unconditional leave to defend.