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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Raja v Austin Gray (a firm) [2002] EWHC 1607 (QB) (31 July 2002) URL: https://www.bailii.org/ew/cases/EWHC/QB/2002/1607.html Cite as: [2002] EWHC 1607 (QB) |
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QUEENS BENCH DIVISION
Strand, London, WC2A 2LL | ||
B e f o r e :
____________________
Mrs. STARBIBI RAJA (Administratrix of The Estate of MOHAMMED SABIR RAJA (Deceased) | Claimant | |
- and - | ||
AUSTIN GRAY (A Firm) | Defendant |
____________________
Patrick Lawrence QC (instructed by Browne Jacobson) for the Defendant
Hearing dates : 12th and 13th June 2002
____________________
Crown Copyright ©
Mr Justice BUCKLEY :
“In the position of valuing the properties for the Receivers, in seeking offers for the properties and negotiating thereon, in considering the most suitable method of sale and in advising the Receivers, the Defendant owed the Deceased a duty of care at common law to exercise the skill and care of a reasonably competent chartered surveyor.”
Background
Mr. Raja mortgaged the properties to DFL as security for loans;
DFL granted a debenture to Midland as security for a loan;
Midland appointed receivers;
Receivers instructed the Defendant.
It is also admitted, and for present purposes must be assumed, that the Defendant knew that the properties were owned by Mr. Raja (to be more precise that he was interested in the equity of redemption); were charged to DFL to secure Mr. Raja’s borrowing; the receivers were selling the properties to discharge that borrowing and that the sale proceeds would directly affect Mr. Raja’s interests. I should note that the Defendant in its Defence does not admit that it knew precisely how Mr. Raja’s interests would be affected by the price realised on sale, since it appears that Mr. Raja may himself have expressed interest in buying the properties through various agents.
The Parties Contentions
First, the analogy should be that DFL was the mortgagor not Mr. Raja. Mr. Raja’s remedy, if any, was for an adjustment of his account with DFL.
Second, the Defendant was not the receiver or mortgagee but a professional engaged by the receiver.
He submitted there were two issues and the Claimant must succeed on both:
i. Did the receiver, who undoubtedly owed a duty to the principal debtor DFL, owe a duty also to Mr. Raja?
ii. Did Austin Gray owe a duty to any one apart from its client, the receiver?
“There are duties in equity imposed in order to ensure that a receiver, while discharging his duties to manage the property with a view to repayment of the secured debt, nonetheless in doing so takes account of the interests of the mortgagor and others interested in the mortgaged property.”
He sought to exclude Mr. Raja from “others interested in the mortgaged property” by again emphasising that the relevant “mortgaged property” in the receiver’s hands here was DFL’s contractual rights under its charge; not Mr. Raja’s equity of redemption. He submitted that in the circumstances of the present case the receiver’s duty of care was to DFL and Medforth was not authority for extending it to Mr. Raja. He submitted that the wrong Claimant was suing the wrong Defendant. DFL could sue the receivers and Mr. Raja could adjust his account with DFL.
“In such circumstances it may be that nowadays the law would allow the mortgagor to recover damages directly from the agent although not in contractual relations with him; but that was certainly not so a hundred years ago when Wolff v. Vanderzee (1869) 20 LT 353 was decided. In those days the only way to achieve justice between the parties was to say that the mortgagee was liable to the mortgagor for any damage which the latter suffered by the agent’s negligence and to leave the mortgagee to recover such damages, and also any damage which he had suffered himself, from the agent. I do not think that we can say that the mortgagee used to be liable to the mortgagor for the negligence of his agent but that that liability disappeared at an unspecified moment of time when the law had developed enough to allow the mortgagor to sue the agent himself.
In my judgment, therefore, if either the (mortgagee) or (the mortgagee’s agent) were guilty of negligence in connection with the sale, (the mortgagee is) liable.”
The Duty of Care
The Receivers
Contractual Chain and Existing Duties
“Equity is at least as flexible as the common law in adjusting the duties owed so as to make them fit the requirements of the time.”
“I do not accept that there is any difference between the answer that would be given by the common law to the question what duties are owed by a receiver managing a mortgaged property to those interested in the equity of redemption and the answer that would be given by equity to that question. I do not, for my part, think it matters one jot whether the duty is expressed as a common law duty or as a duty in equity. The result is the same. The origin of the receiver’s duty, like the mortgagee’s duty, lies, however, in equity and we might as well continue to refer to it as a duty in equity.”
The then Vice-Chancellor went on to identify the duties owed. In particular, that the extent and scope of any duty additional to that of good faith would depend on the facts and circumstances of the particular case. He also pointed out that in exercising his powers of management the primary duty of the receiver is try and bring about a situation in which the interest on the secured debt can be paid and the debt itself repaid. If a mortgagee or receiver is to be regarded as owing a common law duty to the mortgagor and others interested in the equity of redemption that statement which is based on the nature of the underlying security must be kept clearly in mind in defining the scope of such a duty. However, cogent arguments against such an approach and in favour of regarding the duties as arising in equity have been deployed. I do not believe I am here called upon to contribute to this interesting debate, because the Defendant is neither a mortgagee nor a receiver. It is not directly subject to any established equitable duty to which I have been referred. It may well be that equity could provide an answer just as well as the common law. However, I am only asked to answer the question whether there is a common law duty in the particular circumstances of this case. Unless it has been shown that to hold the Defendant subject to a common law duty of care to Mr. Raja would adversely interfere with the recognised equitable duties of mortgagees and receivers, I would hold such a common law duty to exist in this case.