Mortgagees and Receivers—A Duty of Care Resurrected and Extended

Extract

When a chargee (a term which we can take for present purposes to include a mortgagee) appoints a receiver or takes other steps to enforce his security, the general rule is that self-interest prevails, so that neither he nor his receiver is required by the law to have any great concern for the interests of the chargor or any other person interested in the equity of redemption (such as the holder of a junior-ranking security) or a guarantor of the chargor's obligations. This is well illustrated by Shamji v. Johnson Matthey Bankers Ltd. [1991] B.C.L.C. 36, C.A. (a chargee is under no duty towards the chargor in deciding whether to appoint a receiver), and Gomba Holdings U.K. Ltd. v. Homan [1986] 1 W.L.R. 1301 (a receiver's duty of confidentiality vis-à-vis the chargee prevails over his duty to give information to the chargor).