England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(MR JUSTICE BUCKLEY)

		Royal Courts of Justice Strand London, WC2
		19th December 2002

Thursday, 19 December 2002 J U D G M E N T
1. LORD JUSTICE PETER GIBSON: I will ask Clarke LJ to give the first judgment.
2. LORD JUSTICE CLARKE: INTRODUCTION

This is an appeal from a determination of a preliminary issue made by Buckley J on 31 July 2002 in which he held that the appellant valuers owed a duty of care to Mohammed Raja as the owner of some sixteen properties which they were valuing. The judge granted permission to appeal. The appeal raises the question whether and in what circumstances valuers appointed by administrative receivers of a company owe a duty of care to the owner of properties when the properties are charged to the company as a security for a loan and the valuers are appointed by the receivers for the purposes of valuing those properties.

BACKGROUND

3. I take the background principally from the judge's judgment. In 1994 Mr Raja was the legal and beneficial owner of various properties, some or all of which were occupied by tenants and sixteen of which he had charged to Development Finance Ltd ("DFL") as security for a series of loans. DFL had itself borrowed money from the Midland Bank ("Midland") secured by a debenture.
4. On 26 September 1994 Midland appointed joint administrative receivers in respect of DFL's assets. By that time, or shortly thereafter, DFL had become entitled to exercise a power of sale over the properties under the relevant charges, and in April 1995 the receivers instructed the appellants to carry out valuations and to act and assist generally in the sale of the properties. We have now seen a letter dated 5 April 1995 in which the receivers gave written instructions to the appellants to value the properties on a certain basis. The letter is entitled: "To DFL in administrative receivership and Mr Raja". The appellants carried out their instructions and the sales of the properties were finally completed in November 1995. The properties, or the majority of them, were sold for a total sum of about £245,000.
5. The receivers said that Mr Raja remained indebted to DFL. Mr Raja, however, alleged that the properties had been sold at an undervalue and commenced proceedings. He first commenced proceedings against the receivers (or, more accurately, one of them) and later added DFL as defendants. Those proceedings were settled in 1997 on terms which were unknown to the judge but a copy of which we have now seen. The settlement involved the action being stayed on various terms including the transfer of a particular property, unencumbered, to the defendants and the extinction of Mr Raja's debt to DFL. The settlement was also reached on the express basis that Mr Raja represented that his liabilities had exceeded his assets from 31 December 1994 and continued to do so and that he would be unable to satisfy any judgment against him. In this appeal we are not concerned with the detail of that settlement.
6. This action is now brought by Mrs Raja as administratrix of Mr Raja because he was tragically murdered in July 1999. Two men have recently been convicted of his murder and one of his manslaughter. This appeal is not, however, concerned with those events.
7. As the judge observed, the factual situation may be illustrated by this chain: Mr Raja mortgaged the properties to DFL as security for loans to him; DFL granted a debenture to Midland as security for a loan from Midland; Midland appointed receivers pursuant to its powers in the debenture; and the receivers instructed the appellants to value the properties and to assist in their sale. By the terms of the debenture, as is common, the receivers were appointed by Midland but were to act as DFL's agents. The sales were made by DFL pursuant to its powers under the various charges to which Mr Raja was a party as mortgagor.
8. The alleged duty of care is pleaded as follows in paragraph 11 of the particulars of claim, which were dated 18^_ January 2001:

"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."

On 27 April 2001 Master Rose ordered an issue to be tried separately as to whether the appellants owed Mr Raja a duty of care in those terms.

9. For the purposes of the preliminary issue, it was assumed that the appellants knew (i) that the properties were owned by Mr Raja or, as the judge put it, to be more precise that he was interested in the equity or redemption; (ii) that they were charged to DFL to secure Mr Raja's borrowing; (iii) that the receivers were selling the properties to discharge that borrowing; and (iv) that the sale proceeds would directly affect Mr Raja's interests. The judge expressly noted that the appellants in their defence do not admit that they knew precisely how Mr Raja's interests would be affected by the price realised on sale, since it appeared that Mr Raja himself may have expressed an interest in buying the properties through various agents.
10. The judge first set out the parties' contentions, to which I will return in a moment. He then said that he was (as he put it) readily satisfied that foreseeability and proximity were satisfied. He said that a professional instructed in such circumstances by a receiver could scarcely be closer to those interested in the equity or redemption or fail to foresee that the manner in which his duties were performed would affect them.
11. The judge then asked whether in all the circumstances it was fair, just and reasonable to impose a duty of care. He said (to my mind correctly) that the cases identify a legion of factors that can influence the answer to that question. He referred in particular to two decisions of the House of Lords, namely Spring v Guardian Assurance plc [1995] 2 AC 296 and Marc, Rich & Co v Bishop Rock Marine Company Ltd [1996] AC 211.
12. The judge expressed his conclusions thus in paragraph 12 of his judgment:

"It seems to me that it is reasonable and in the public interest to expect professionals, and indeed anyone else offering particular skills for reward, to exercise them with reasonable competence. The Defendant here knew that it was called in to use its expertise to assist in working out the rights of the parties under the two charges in question. To put it more bluntly to obtain what it could for the properties so that DFL would be repaid (in the circumstances largely for the benefit of Midland) any surplus going to Mr Raja. In view of these considerations it could well be said that to hold the Defendant liable, should its negligence have caused loss to Mr Raja, would satisfy the fair, just and reasonable test. I do not consider the spectre of double recovery or multiplicity of proceedings to be real problems; our legal procedures are well able to deal with such matters. As to whether the receiver's duties in and about the sale are the same as the Defendant's in these circumstances, that, in my judgment is more relevant to the scope of the duties in question than to their existence."

13. The judge then considered the position of the receivers and what he described as the contractual chain and their existing duties having regard to the approach of Lord Goff in Henderson v Merrett (1995) 2 AC 145 at 195 to 196 and to that of Sir Richard Scott, Vice Chancellor, in Medforth v Blake [2000] Ch 86 at 102, to which I will return in a moment.
14. The judge observed that the appellants are neither mortgagees nor receivers and that, unlike them, the appellants are not subject to any established equitable duty. He then said this:

"17. ... 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.

18. It is clear, on the authority of Medforth, that Midland and the receivers owed an equitable duty to DFL to obtain a proper price. The Defendant was called in to value the properties and assist in the selling process. It owed a common law duty in contract and tort to the receivers who instructed it. I do not consider that a common law duty of care imposed on the Defendant for Mr Raja's benefit would be contrary to the spirit of the identified equitable duties or interfere with the principles behind them in any way. Indeed, as I have held, the receivers owed a duty to Mr Raja to obtain a proper price for the properties, a similar duty on the Defendant would support rather than detract from the principles involved."

15. In paragraph 19 he answered the preliminary question "Yes", subject to some observations as to the scope of the duty. He recognised that the true scope of the duty would have to be determined at the trial of the action.

DISCUSSION

16. The following propositions are common ground:

(1) A mortgagee exercising a power of sale owes the mortgagor an equitable duty to take reasonable steps to obtain a proper price: Cuckmere Brick Company v Mutual Finance Ltd [1971] Ch 949.

(2) A receiver appointed by a mortgagee owes the mortgagor a similar equitable duty to take reasonable steps to obtain a proper price on the sale of the property subject to the receivership: Downsview Ltd v First City Corporation [1993] AC 295 per Lord Templeman at 315 and Medforth v Blake [2000] Ch 386.

17. Mr Patrick Lawrence QC correctly accepts on behalf of the appellants that in the light of Cuckmere and Medforth there is nothing exceptionable about an action in which a debtor complains that his property has been sold by a receiver at an undervalue. If want of care can be established, compensation may be recovered. However, he submits that there are two unusual features of the present case which differentiate it from the normal run of cases of this kind.
18. The first is that the person making the complaint (Mr Raja) was not a debtor whose assets were subject to the receivership. The primary debtor, so to speak, is not Mr Raja but DFL. The relevant assets were mortgages over Mr Raja's properties. If those assets were realised at an undervalue because the properties were sold at too low a price, DFL would have been out of pocket and entitled to compensation from the receivers if it were able to prove want of care. In other words, Mr Lawrence submits that DFL is the party which one would expect to complain if the properties were sold at too low a price. Mr Raja's complaint may be addressed to DFL, his mortgagee. He may invoke the Cuckmere principle in order to obtain an adjustment of his account with DFL. Indeed, Mr Lawrence submits that that is exactly what he did in the earlier action which has been settled. For my part, I agree that pursuant to proposition (1) above DFL owed Mr Raja a duty to take reasonable steps to obtain a proper price for the properties.
19. The second unusual feature identified by Mr Lawrence is that the target of the company, namely the appellants, are not the receivers, but professional valuers retained by the receivers to assist in the process of realising the relevant assets.
20. Mr Lawrence identifies two questions. The first is: did the receivers, who undoubtedly owed a duty to the principal debtor DFL, owe a duty also to Mr Raja? Mr Lawrence submits that if the answer to that question is "No", then it must follow that the professionals retained by the receivers also owed no duty to Mr Raja and the claim fails. If the answer is "Yes", then he submits that it is necessary to go on to consider the second question. The second question is: did the valuers owe a duty to anyone apart from their clients the receivers? The judge answered both questions in the affirmative. I shall consider each of the questions in turn.

(1) Did the receivers owe a duty in equity to Mr Raja as well as to DFL?

21. As I have indicated, Mr Lawrence submits that the answer is "No", whereas Mr Douthwaite submits that the answer is "Yes".
22. I note in passing that the question is formulated in terms of a duty in equity and not a duty at common law, because the cases show that the duty is an equitable duty or a duty in equity: see the discussion in the judgment of Sir Richard Scott, VC (with whom Swinton-Thomas and Tuckey LJJ agreed) in Medforth v Blake at pages 96 to 102, with particular reference to the decision of the Privy Council in Downsview Nominees Ltd v First City Corporation [1993] AC 295 per Lord Templeman at 315 and Yorkshire Bank plc v Hall [1999] 1 WLR 1713 per Robert Walker LJ at 1728. The Vice Chancellor said at page 99 in Medforth v Blake that the principle established in the Cuckmere case that a mortgagee when exercising his power of sale owed a duty to the mortgagor "to take reasonable precautions to obtain the true market value of the mortgaged property at the date on which he decided to sell it" is now firmly established in equity. However, of the relationship between equity and the common law, he said at page 102:

"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."

Like the Vice Chancellor, I too shall continue to refer to the duty as a duty in equity.

23. The Vice Chancellor summarised the position as follows, also at page 102:

"In my judgment, in principle and on the authorities, the following propositions can be stated. (1) A receiver managing mortgaged properties owes duties to the mortgagor and anyone else with an interest in the equity of the redemption. (2) The duties include, but are not necessarily confined to, a duty of good faith. (3) The extent and scope of any duty additional to that of good faith will depend on the facts and circumstances of the particular case."

The remaining propositions relate in particular to the receiver managing mortgaged property, which the receivers were not of course doing on the facts of the instant case.

24. A little earlier the Vice Chancellor had said of the duties owed by a receiver to the mortgagor:

"They 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 properties."

25. Mr Lawrence submits that the Vice Chancellor's view that a receiver owes duties to the mortgagor and anyone else with an interest in equity of redemption does not assist Mr Raja, essentially because the relevant equity of redemption on the facts here is the equity of redemption in the mortgage or debenture under which Midland is the mortgagee and DFL is the mortgagor. Mr Lawrence submits that Mr Raja is not the holder or owner of any relevant equity of redemption as contemplated by the Vice Chancellor in Medforth v Blake.
26. Mr Lawrence's submissions may be summarised as follows:

(1) The mortgaged property which came into the receiver's hands was not the various tenanted houses belonging to Mr Raja, but was instead the rights conferred on DFL under the mortgages of the houses granted by Mr Raja. The only person interested in the equity of redemption in this mortgaged property was DFL. If DFL were granted a second debenture to another lender, ranking after the Midland, then that lender would have had an interest in the equity of redemption, and would be able to sue the receiver.

(2) Mr Raja's position is simply that of a mortgagor whose property was sold by his mortgagee, DFL. His redress in the event of a sale at an undervalue is a Cuckmere action against his mortgagee. In that action he will be able to obtain the appropriate adjustment of his account with DFL. If he can show that a sale at a market value would have yielded a surplus in the mortgagee's hands, he will be entitled to compensation from DFL to that extent. In the first action Mr Raja exercised those rights, and obtained a substantial benefit in that his subsisting debt to DFL was released.

(3) DFL's position is that of a mortgagor whose property (the mortgages granted by Mr Raja) has been realised by receivers appointed by its mortgagee, the Midland. Its redress in the event of a sale at an undervalue would be a Medforth action against the receiver. Probably, it could not obtain an adjustment of its account with the Midland, but it could obtain compensation from the receiver by reference to the additional sum which should have been obtained by a sale at market value. That sum would include the whole amount of the undervalue. DFL would owe a duty to account for any surplus after its liability to Midland and Mr Raja's liability to it had been discharged to Mr Raja: see for a similar class of case Lord Napier and Ettrick v Hunter [1993] AC 713.

(4) In these circumstances Mr Raja should be left to recover any loss from DFL. He is properly protected in that way. There is no need to impose a duty on the receiver owed directly to him. If the receiver owes duties both to DFL and to Mr Raja, there are potentially serious problems of double recovery.

27. I see the force of those submissions, but I for my part would hold that Mr Raja is within the principle identified by the Vice Chancellor (and thus by this court) in Medforth v Blake. Equity imposes duties to ensure that a receiver whilst discharging his duties, in this case to sell the properties, in doing so takes account of the interests of "the mortgagor and others interested in the mortgaged properties", which, as he says a little later, include "anyone else with an interest in the equity of redemption". To my mind Mr Raja was just such a person here. He was the legal and beneficial owner of the properties. He was not just the beneficial owner of the kind to whom no duty is owed, as for example in Burgess v Auger [1998] 2 BCLC 478, a decision of Lightman J, and Parker-Tweedale v Dunbar Bank Plc [1991] Ch 12, a decision of this court dismissing an appeal from Peter Gibson J, as he then was.
28. The crucial point to my mind is that receivers were not selling only DFL's interest in the properties. Indeed, they were not selling DFL's interest in the properties at all: they were selling the properties themselves. As the legal and beneficial owner of the properties, Mr Raja had an interest in the equity of redemption. He should be protected in equity by imposing a duty on those who are selling the properties as receivers. For my part, I would hold that the receivers owed him a duty in equity of the kind identified in Medforth. In these circumstances, I would answer the first question "Yes", and hold that the receivers did owe a duty in equity to Mr Raja as well as to DFL.
29. I turn to question (2), which is, of course, the essential question in this case: did the appellants owe a duty to anyone other than their clients, the receivers? I agree with Mr Lawrence that in answering this question it is or may be important to consider a further question, namely whether (assuming my answer to question one is correct) it is a defence for the receivers to say, "we entrusted the sale to apparently competent professionals and if they were negligent it is not our fault." It seems to me that if the answer to that question is "Yes", the receivers would not be in breach of duty owed to Mr Raja. The grounds for imposing a separate duty on the appellants in such circumstances would be much greater because, absent such a duty, Mr Raja would be left without a remedy. Both DFL and the receiver would be able to say that they discharged their duty by procuring the appointment of competent professionals.
30. There is no binding authority on this question, but to my mind the answer is "No". Indeed, Mr Douthwaite has (in my view correctly) accepted that the answer is "No".
31. In Cuckmere Cross LJ expressed the clear conclusion at page 973 that a mortgagee or receiver accused of allowing a sale at an undervalue cannot avoid liability by saying that he retained a competent professional. He said:

"In my judgment, therefore, if either [the mortgagees] or [the mortgagees' agents] were guilty of negligence in connection with the sale, [the mortgagees] are liable to compensate the plaintiffs for any damage which they have suffered by reason of that negligence."

32. Those observations were obiter because the mortgagees had conceded the point at first instance and were not permitted to take it in this court. But Salmon LJ said at page 969 that the argument against liability

"... certainly [could not] be squared with Cotton LJ's judgment in Tomlin v Luce (1889) 43 Ch D 191"

and Cairns LJ said at page 980 that if the point were open to the defendants,

"I should need more argument to satisfy me that Kekewich J and Cotton LJ [in Tomlin v Luce] were wrong".

Kekewich J had held at first instance, reported at [1888] Ch D 573, that a first mortgagee was liable to account for the loss occasioned to the second mortgagee by the auctioneer misdescribing the roads on the property as completely curved, which led to the allowance of compensation to the purchaser. In the Court of Appeal the issue was not liability but quantum, but the court proceeded on the basis that the finding of liability was correct.

33. Those conclusions are supported by the reasoning of the High Court of Australia in Commercial and General Acceptance v Nixon (1982) 152 CLR 491, although the question for decision in that case was the true construction of a statute, see per Gibbs CJ at page 496 to 497, Mason LJ at 503, Aickin J at 508 to 516, Wilson J at 518 to 521 and Brennan J at 525 to 526. See also, to the same effect, the views of Lightman and Moss, "The Law of Receivers and Administrators of Companies", Third Edition paragraphs 7-040 to 7-043, and Meggarry and Wade, "The Law of Real Property", Sixth Edition at 1196. See also the decision of His Honour Judge Raymond Jack QC in Huish v Ellis [1995] BCC 462.
34. In paragraph 7-043 the editors of Lightman and Moss provide what to my mind are convincing reasons for adopting Cross LJ's approach:

"The approach adopted by Cross LJ creates a form of strict liability on the mortgagee. His duty of care to sell at the best price reasonably obtainable is not delegable in the sense that he can avoid or perform his duty merely by appointing a reputable agent to conduct the sale, but extends to ensuring that reasonable care is taken by any agent or professional adviser employed by him in the sale. The extension of his duty may be an accident of history, but it promotes justice for the mortgagor who is thereby saved from the invidious, and often difficult, task of apportioning blame between the mortgagee and his agents and can also claim credit for any loss when settling accounts with the mortgagee. Moreover, the mortgagee can be assumed to be better placed to know the facts relating to a claim against the agent, is frequently in a better financial position to pursue the claim, and ultimately it must be remembered that it was the mortgagee who chose the agent who was later negligent. Once the special rule applicable to mortgagees is accepted, there is no sufficient reason to distinguish the position of the mortgagee and the receiver, and it would therefore appear that a receiver is subject to a like strict liability in respect of disposals. After Medforth it remains to be seen whether similarly strict principles will be applied to the negligence of agents in situations other than disposals of the charged property."

35. I agree.
36. In all the circumstances I would hold that if the appellants valued the properties negligently, they thereby put both DFL and the receivers in breach of their duty in equity to Mr Raja. In these circumstances it is of interest to note that in one of the cases which has touched on the problem raised by question (2), namely Routestone Ltd v Minories Finance Ltd and another [1997] 1 EGLR 123, Jacob J said this:

"Concessions of law.

It is, of course, settled law that in exercising a power of sale a mortgagee or receiver owes a duty to the mortgagor to take reasonable care to obtain a proper price: Downsview ... per Lord Templeman. On the pleadings two unsettled points of law emerge. First, is it a defence for a mortgagee or receiver to say `I instructed a competent estate agent'? Second, does any such agent owe a direct duty to the mortgagor, either as a result of an equitable duty or as a duty of care for the purpose of the tort of negligence? The second point raises a subpoint, `Is any duty of care of the agent wider than the duty of care of the mortgagee'.

There is no settled authority on the first point. It was conceded at first instance in Cuckmere ... that the defence did not run. The Court of Appeal would not consider it because the evidence might have turned out differently if the point had been alive. The point has a long history (going back at least to Tomlin v Luce ... and has been the subject of considerable debate in Commonwealth decisions, particularly Commercial and General Acceptance Ltd v Nixon ... in the High Court of Australia. The second point may be related to the first, for if the mortgagee is not liable for the agent's negligence and the agent himself owes no duty of care then the mortgagor would be without any remedy against anyone when his property is sold at an undervalue through an agent's negligence."

37. I turn finally to the second question itself. No-one, I think, suggests that a duty is owed in equity by the appellant valuers to Mr Raja. The question is whether they owe such a duty at common law. The correct approach to such questions has been considered in a vast number of cases. In BCCI (Overseas) Ltd v Price Waterhouse (No.2) [1998] PNLR 564, Sir Brian Neill said at page 583 B that the search for a principle or test has followed three separate but parallel paths. The first is what has been called the threefold test which was succinctly stated by Lord Griffiths in Smith v Eric S Bush [1990] 1 AC 831 at 864, where he said:

" ... In what circumstances should a duty of care be owed by the adviser to those who act on his advice? I would answer -- only if it is foreseeable that if the advice is negligent the recipient is likely to suffer damage, and there is a sufficiently proximate relationship between the parties and that it is just and reasonable to impose the liability."

That statement of principle was, of course, made in the context of a specific case. Sir Brian Neill then identified some of the reservations to such a test, but said at page 584 that, notwithstanding such reservations,

"... the threefold test has retained its value because it focuses attention on three essential questions:

(a) Was it reasonably foreseeable that the plaintiff would suffer the kind of damages which occurred;

(b) Was there sufficient proximity between the parties;

(c) Was it just and reasonable that the defendant should owe a duty of care of the scope asserted by the plaintiff?"

38. The second path uses an assumption of responsibility test: see pages 584 and 585, and, in the context of the Hedley Byrne principle in the references to the speeches of Lord Goff in Henderson v Merrett and White v Jones [1995] 2 AC 207. Sir Brian Neil also expressly referred to a passage in the speech of Lord Browne-Wilkinson in White v Jones at page 273 at G, where he said:

" ... the assumption of responsibility referred to is the defendants' assumption of responsibility for the task not the assumption of legal liability. Even in cases of ad hoc relationships, it is the undertaking to answer the question posed which creates the relationship. If the responsibility for the task is assumed by the defendant he thereby creates a special relationship between himself and the plaintiff in relation to which the law (not the defendant) attaches a duty to carry out the task so assumed ..."

The third path has been to adopt an incremental approach: see page 586 B.

39. In considering statements of principle of that kind it is, of course, important to note that each case depends upon its own circumstances. Thus, for example, Mr Raja cannot fairly describe himself here as an advisee. Moreover, unlike in cases like Smith v Bush, he was not relying in any sense upon or indeed expected to rely upon the appellants' valuations. He simply suffered, or potentially suffered, loss if the valuations were negligent. It seems to me to be very difficult to see how it could possibly be held that the appellant, as valuers engaged by the receivers, assumed a responsibility to Mr Raja however broadly the assumption of responsibility test is described.
40. The judge answered this question in favour of Mr Raja because he formed the view that it was just and reasonable to do so. However, no doubt with the benefit of much more detailed analysis and submissions than the judge heard, and indeed with the benefit of the decision of His Honour Judge Jack in the Huish case, which was not put before the judge, I have reached a different conclusion.
41. As to the first path, it is conceded that it was reasonably foreseeable that Mr Raja would or might suffer loss if the appellants were negligent. However, Mr Lawrence submits that there was not sufficient proximity between the parties and that it would not be fair, just and or reasonable to impose the duty. Those two questions seem to me to be very closely related.
42. It is certainly reasonable that Mr Raja should have (or have had) a remedy if he suffered loss as a result of the appellants' negligence. But the answer to the question which I have just considered and which is, as I have indicated, conceded shows that he does indeed have such a remedy. He can in principle recover from both DFL and the receivers (subject of course to the principle of double recovery) in respect of any negligence on the part of the appellants. This is thus not the case feared by Jacob J in Routestone, because the absence of a duty of care owed by the plaintiffs to Mr Raja will not leave Mr Raja or his estate without a remedy. Moreover, this is not a case in which it is necessary to fill the gap in order to remedy what might otherwise be an injustice, as in White v Jones. There was no close or indeed to my mind really any relationship between the appellants and Mr Raja.
43. Given that Mr Raja has an adequate remedy against DFL and (on my view of the case) the receivers, I can see no reason why he should also have a remedy against the appellant valuers. I do not subscribe to the principle: "the more the merrier". Valuers in their position perform their services under a contract with the receivers which may contain limitations and restrictions of different kinds which may not be at all easy to fit into the concept of a duty of care in tort. I recognise Mr Douthwaite's point that the scope of any duty owed by the valuers would be limited by the scope of their instructions from their principals, the receivers, and that it would be likely to be a defence to valuers that they acted in accordance with the scope of their instructions. For that reason, I would not, for my part, regard problems of conflict as a conclusive consideration; but they do seem to me to be relevant factors.
44. Apart from the instant case, there are two conflicting decisions at first instance. The first is the decision of His Honour Judge Jack, to which I have referred, in Huish v Ellis, where he held that no duty of care was owed by valuers to a plaintiff mortgagor who advised a bank as mortgagee in possession and receivers appointed by the bank in relation to the sale of a farm and milk quota. Judge Jack concluded that it would not be fair, just and reasonable to impose such a duty. He identified six particular points at pages 472 to 473. They are as follows, omitting the irrelevant parts:

"(1) Any balance from proceeds of realisation held by the bank after the satisfaction of secured creditors was held for Mr Huish. Therefore, if John Francis [the agent] gave negligent advice to, for example, the bank, as to the realisation of its security, and the bank acted on it, that balance due to Mr Huish might be diminished.

(2) It was the bank's reliance on the advice which might injure Mr Huish and not his own reliance ...

(3) John Francis were employed to give advice to the security holders. They owed a duty in contract to advise them as to their best interests in the situation.

(4) The interests of the security holders might not be the same as those of Mr Huish. It was submitted that there was an identity of interest, namely to raise as much money from the security as possible. In very broad terms that is true. But it is notorious that creditors and debtors are frequently in conflict as to what should be done with regard to security, as to what should be sold and how and when. The reason is that there are often conflicts of interest between the two ...

(5) If the duty of the security holders and Mr Huish may conflict and duty of John Francis is as to the security interests, how can they also owe a duty to Mr Huish? The only answer which can be given is that they owe a duty to him when their primary duty to the security holders permits. That can be met by limiting the ambit to what I have called the Cuckmere duty, namely the duty to take reasonable care to obtain a proper price. It would then be a similar duty owed to both security holder and owner. Such a concept, however, presents a problem. In my view John Francis either owned a duty of care to Mr Huish when they were advising the security holders or they did not. A duty limited in the way suggested is not consistent with the concept of duty of care as developed in English law.

(6) The bank owed Mr Huish a duty to take reasonable care to obtain a proper price. It is submitted that there is no need to place John Francis under a like duty in order to provide Mr Huish with a remedy: compare Parker-Tweedale v Dunbar Bank and Marc Rich v Bishops Rock Marine. This was met with the submission that it might well be an answer for the bank to say that they had taken advice from a reputable firm and they were not responsible if the advice turned out to be negligent."

45. Judge Jack then expressed the same view as I have above, namely that the weight of authority supports the view that the mortgagee is liable where he employees a reputable agent but the agent is negligent. He concluded his point (6) thus:

"If that is right, to place John Francis under a duty to Mr Huish would be to duplicate a remedy already available against the bank."

Finally, His Honour Judge Jack said that the question has to be looked at in the round, but the factors which he found particularly persuasive were a combination of points (5) and (6).

46. For my part, I agree that the matter has to be looked at in the round, and, although I would not go so far as to say that English law does not permit the limiting of the scope of the duty of care, as he suggests in point (5) -- and indeed point (5) strikes me as a less compelling consideration than point (6) -- point (6) is, as I have already indicated, to my mind a strong consideration and I agree with Judge Jack's overall conclusions.
47. The second case is the much more recent decision of Peter Smith J in Asif v The City (Europe) Ltd (unreported) 25^__ June 2002. In that case Peter Smith J first placed some reliance upon some statements of Nicholls J in Garland v Ralph Pay & Ransom [1984] 2 EGLR 147 at page 151 J. However, in Garland the question which we are called upon to decide did not fall for decision, and in my view Mr Douthwaite was right to recognise that anything said there was therefore of limited, if any, real assistance.
48. In Asif Smith J described the "true test" as that contained in the passage I have already quoted from the speech of Lord Griffiths in Smith v Eric S Bush at page 568 A. However, the judge continued:

"There is no express reliance, I accept, but that was equally a case in many building society cases before the Smith v Eric Bush case."

49. The statement of Lord Griffiths involves asking the question: should a duty of care be owed by the adviser to those who act on his advice? It is common ground that in the instant case, as to my mind was the case in Asif, this is not a case in which Mr Raja acted on the appellants' advice in any sensible way.
50. Peter Smith J held that the reasonable foreseeability and proximity tests were established and said that in his view it was plainly just to impose liability because, "the primary loss actually falls on the mortgagor rather than the mortgagee". However, he gave no other convincing, or indeed any real, reasons for supporting that conclusion. Although he reached a different conclusion from Judge Jack in disagreement with him, I for my part prefer the reasoning in Huish set out by Judge Jack to that set out in Asif by Peter Smith J.
51. In all these circumstances, I have reached the conclusion that it would not be fair and just to impose a duty of care on the appellant valuers owed to Mr Raja. Moreover, I would hold that there was no sufficient relationship of proximity between them, although I recognise that the reasonable foreseeability test was satisfied. I have already indicated my view that there was no relevant assumption of responsibility on the facts here. Finally, it seems to me that the third path, namely to proceed by incremental steps, does not require this step to be taken.
52. For all these reasons, I would allow the appeal.
53. LORD JUSTICE KEENE: I agree.
54. LORD JUSTICE PETER GIBSON: I also agree, but as we are differing from the judge, I will add a few words of my own.
55. The following propositions are well established:

(1) A mortgagee with the power of sale is not a trustee of that power, the power being given to the mortgagee for his own benefit.

(2) A mortgagee is not under a general duty of care to the mortgagor and can act in his own interests in deciding whether and when he should exercise his power of sale.

(3) A mortgagee, however, is subject to an equitable duty to act in good faith and to obtain the best price reasonably obtainable at the time he decides to sell. That duty is owed to those interested in the equity of redemption. They include the mortgagor, other mortgagees and a guarantor of the mortgage debt, but they do not include a tenant at will of the mortgaged property, nor, where the mortgagor is a trustee, a beneficiary of the trust.

(4) A receiver appointed by the mortgagee is subject to the same duties as are owed by the mortgagee.

56. On the first question, to which Clarke LJ has referred, the circumstances of the present case are unusual in that DFL's assets of which the receivers were appointed receivers did not include the assets which the receivers sold, that is to say the properties owned by Mr Raja: the relevant asset of DFL was its rights under Mr Raja's charge to it of his properties. But it is common ground that the receivers exercised the power of sale of DFL as mortgagee of those properties. DFL's asset, consisting of its rights under Mr Raja's mortgage to it, was never sold.
57. Equity intervenes to ensure that proper account is taken of the interests of the mortgagor and others interested in the equity of redemption. The mortgagee is only interested in the discharge of the debt owed to him, but equity makes sure that the mortgagee acts fairly to those interested in the equity of redemption when the mortgagee exercises the power of sale. In a case such as the present, the sale being an exercise of the power of sale of DFL as mortgagee, it seems to me that the relevant person to be treated as interested in the equity of redemption must include the mortgagor who has mortgaged the properties in question to DFL in circumstances where DFL's power of sale is being exercised by the receivers. I would therefore hold that the receivers did owe a duty of care to Mr Raja when they exercised DFL's power of sale of the properties, even though the receivers were appointed by the mortgagee of DFL.
58. On the second question, whether Austin Gray owed a common law duty of care directly to Mr Raja, there is only little direct authority on whether a selling agent of the mortgagee or a receiver owes a direct duty to those interested in the equity of redemption.
59. In Cuckmere Brick Company Ltd v Mutual Finance Ltd [1971] Ch 949 at page 973 C, Cross LJ said this:

"Of course, in many cases the mortgagee may suffer no damage himself by reason of the agent's negligence because the purchase price, though less than it should have been, exceeds what is owing to the mortgagee. 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."

That was, of course, only a tentative comment by Cross LJ on a point that was not necessary for decision in that case.

60. Then there are the two cases, Garland v Ralph Pay & Ransom [1984] 2 EGLR 147 and Routestone Ltd v Minories Finance Ltd [1987] 1 EGLR 123, in each of which it was conceded by the agent of the mortgagee or receiver, for the purposes of the particular proceedings only, that a duty was owed to the mortgagor. Those cases therefore do not take the matter very far.
61. Commenting on those three authorities and the decisions which establish the persons to whom a mortgagee owes the equitable duty, the editor of Meggarry & Wade: The Law of Real Property, 6th edition (2000), at page 1196 paragraph 19-061, says this:

"Suggestions that a mortgagee is selling agent owes a duty of care in tort to the mortgagor must now be doubted."

62. Finally, come the two cases of Huish v Ellis [1995] BCC 462 and Asif v City (Europe) Limited the unreported decision on 25^__ June 2002 of Peter Smith J. I agree with what Clarke LJ has said about those two cases. His Honour Judge Jack QC in the Huish case seems to me, with one qualification, to have expressed cogent reasons why it would not be fair, just and reasonable that an agent employed by a mortgagee to advise him should be under a duty of care to the mortgagor in giving that advice. The one qualification is as to a comment which that judge made on the point about conflicts of duty. In my judgment he went too far to say that a duty limiting the ambit of the agent's duty is not consistent with the concept of duty of care as developed in English law. But, like my Lord, I regard the final point which that judge takes as being the one which carries most weight.
63. The case of Asif is one which, with all respect to the learned judge who decided it, I have found of some difficulty. The judge's reasoning is not altogether easy to follow. He was referred to the Huish case, but he attempts no analysis or criticism of the reasons given by Judge Jack for that decision, save where he disagrees with the point taken by Judge Jack as to conflicts of duty if the agent owes a duty to the mortgagor as well as to the mortgagee or the receiver. Peter Smith J appears to regard the Garland case as being authoritative on the point in question, when to my mind, because of the concession, it plainly was not. What Peter Smith J regards as the true test to be applied -- that is to say that set out in Smith v Eric S Bush -- seems to me not to have been in point, given the absence of any reliance in the Asif case case. That judge referred to a number of other factors. He said:

"66. For example if the mortgagee employed an in-house surveyor, there would be no doubt that the in-house surveyor would probably be liable in tort directly as well as the mortgagee for his negligence."

That is one of a number of assertions the correctness of which seems to me to be highly questionable. The mortgagee would be directly liable in tort, but why would his employee, the in-house surveyor? The judge also takes the view that there was plainly an assumption of responsibility because the valuer was valuing a property which was to be sold and knew that it was being sold to discharge a liability of the mortgagor to the mortgagee. Again, it is not to my mind at all clear why there should be such an assumption of responsibility by the valuer to the mortgagor given that the valuer has his own contract with the mortgagee who appointed him.

64. In my judgment the decision in the Huish case is to be preferred as containing the more cogent reasons. I too reach the clear conclusion that this is not a case where it would be fair, just and reasonable to treat the agent of the receiver as owing a duty of care directly to the mortgagor. Buckley J did not have the benefit of the Huish case when the present case was argued before him. I respectfully disagree with the conclusion which he has reached, for the reasons given by my Lord and those which I have added. I too would allow this appeal.

Order: Appeal allowed. The Appellants' costs of the action to be paid by the Respondent on the standard basis to be assessed if not agreed. Application to appeal to the House of Lords refused.