Cuckmere Brick Co Ltd v Mutual Finance Ltd

Cuckmere Brick Co v Mutual Finance
Court Court of Appeal of England and Wales
Decided 25 February 1971
Citation(s) [1971] EWCA Civ 9, [1971] Ch 949
Transcript(s) Salmon LJ, Cross LJ, Cairns LJ
Court membership
Judge(s) sitting 3
Case opinions
Decision by Cross LJ
Concurrence Cairns LJ
Dissent Salmon LJ (in part)
Keywords
Mortgage

Cuckmere Brick Co v Mutual Finance [1971] EWCA Civ 9 is an English land law case, concerning mortgages.

Facts

In 1961, Cuckmere Brick Co had received planning permission to build 100 flats on a site near Maidstone, and received mortgage financing from Mutual Finance. By 1964, due to cash flow problems arising from other developments in which Cuckmere was involved, planning permission was subsequently received (with Mutual's approval) to build 35 houses, which would have incurred lower construction costs. Construction had still not commenced by 1966, and Mutual exercised power of sale under the mortgage, putting the land up for auction, and advertising that the property had planning permission for the houses, but not the flats. Cuckmere advised Mutual of the oversight, and the latter told the auctioneer to mention it. They got £44,000 at the auction, and Cuckmere argued that it should have been closer to £75,000 had the planning permission been mentioned properly in the advertisements.

Cuckmere sued, asking for an account to be taken on the basis that the defendants should be debited with the price which they could and should have obtained for the site. Mutual counter-claimed for the balance of all moneys due under the mortgage with interest after crediting the plaintiffs with the proceeds of the sale. Plowman J found for the plaintiffs on the claim and counterclaim, considering that £65,000 was the price that could and should have been obtained for it but for the defendants' default or failure to take reasonable precautions in relation to the sale.

Both parties appealed to the Court of Appeal.

Judgment

The appeal was allowed in part. Although generally agreeing on the state of the law, by 2-1 the case was returned for an inquiry as to damages, on the basis that the price at which the land could probably have been sold was still at large.

Salmon LJ held that Mutual Finance had breached its duty of care to Cuckmere. The duty is not to get the best or proper price, whatever that means, but ‘the true market value.’[1]

“ It is well settled that a mortgagee is not a trustee of the power of sale for the mortgagor. Once the power has accrued, the mortgagee is entitled to exercise it for his own purposes whenever he chooses to do so. It matters not that the moment may be unpropitious and that by waiting a higher price could be obtained. He has the right to realise his security by turning it into money when he likes. Nor, in my view, is there anything to prevent a mortgagee from accepting the best bid he can get at an auction, even though the auction is badly attended and the bidding exceptionally low, Providing none of those adverse factors is due to any fault of the mortgagee, he can do as he likes. If the mortgagee's interests, as he sees them, conflict with those of the mortgagor, the mortgagee can give preference to his own interests, which of course he could not do were he a trustee of the power of sale for the mortgagor.

[...]

The mortgagor is vitally affected by the result of the sale but its preparation and conduct is left entirely in the hands of the mortgagee. The proximity between them could scarcely be closer. Surely they are "neighbours".

 ”

Cross LJ discussed that Mutual Finance was also responsible for the conduct of its agent, the auctioneer:

“ ...Counsel for the appellants further submitted that even if we should be of opinion that a mortgagee was liable to account to the mortgagee for loss occasioned by his own negligence in the exercise of his power of sale, it was not right that he should be liable for the negligence of an agent reasonably employed by him. It may well be that this point is not open to him in view of the way the argument proceeded below - but in any case I do not accept the submission. In support of it, counsel pointed out that a trustee is not liable for the default of an agent whom it is reasonable for him to employ. But the position of a mortgagee is quite different from that of a trustee. A trustee has not, qua trustee, any interest in the trust property, and if an agent employed by him is negligent his right of action against the agent is an asset of the trust. A mortgagee, on the other hand, is not a trustee and if he sues the agent for negligence any damages which he can recover belong to him.... ”

See also

Notes

  1. ↑ Cuckmere [1971] Ch 949, 965

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