The Chancery Division has recently issued a judgment which will be interesting for any lender with buy to let properties or more generally an interest in receiverships.

In McDonagh v Bank of Scotland, a receiver had an opportunity to include a mortgaged property in a portfolio sale and duly did so. The customer claimed that he had been disadvantaged by the fact that the property had not been sold separately and claimed damages from the bank.

The judge held that the evidence on how much analysis had been undertaken by the receiver around how the properties should be sold could have been more substantial. In particular, Mr Justice Morgan noted that if a receiver were to do the comparison required in order to assess the best interests of the mortgagor, one might expect to see something which set out the detail of his reasoning. One would expect to see an assessment of the likely result on one basis and the likely result on another basis and the reasons for any differences. This was not present here.

However, the court found on 30 November 2018 that it was not automatically a breach of a receiver’s duty to consider whether to proceed in this way, provided that the receiver could only include a mortgaged property in a portfolio sale where satisfied that course was likely to be in the best interests of the mortgagor of the property. No breach of this duty was established in this matter.

The court also dealt with a number of other arguments made by the customer relating to the construction of the loan agreement and whether there had been any duress on the part of the bank in relation to a second loan agreement. All of these various claims against the bank failed and as such the customer’s claims were dismissed.

To some extent, this decision restates the existing law and regulatory framework by reminding that disposal of a property, by whatever means, should be done with the customer’s interests in mind.

Usually this is expressed as a requirement to ensure that the best price reasonably obtainable (or a similar form of words and outcome) is achieved. This decision looks at the situation from a slightly different angle but effectively reaches the same conclusion.