Receivers’ duties, conflicts of interest and the meaning of bad faith (Devon Commercial Property Ltd v Barnett and another)

Receivers’ duties, conflicts of interest and the meaning of bad faith (Devon Commercial Property Ltd v Barnett and another)
Simon Davenport QC, joint head of chambers, and Daniel Lewis, barrister, at 3 Hare Court, advise that the judgment in Devon Commercial Property Ltd v Barnett and another is significant both for its consideration of the substantive law as to the duties owed by receivers, as well as practical questions as to the evidence used to bring and defend these claims.
 
Devon Commercial Property Ltd v Barnett and another [2019] EWHC 700 (Ch), [2019] All ER (D) 135 (Mar)
 

What are the practical implications of this case?

The judgment of His Honour Judge Paul Matthews (sitting as a judge of the High Court) in Devon Commercial Property Ltd v Barnett and another is significant both for his consideration of the substantive law as to the duties owed by receivers, as well as practical questions regarding the evidence used to bring and defend these claims.

The key findings of practical significance were as follows:
 
  • a breach of the duty of good faith owed by a receiver to the mortgagor must involve intentional conduct amounting to more than mere negligence and encompassing either an improper motive or an element of bad faith, but it need not amount to dishonesty
  • the claimant’s argument that the burden of proof should be reversed so as to require the receivers to show that they had acted in good faith were rejected—where bad faith was alleged, even where the sale was to the receivers’ appointor, the burden of proof remained on the claimant
  • the use of expert evidence in a case of this nature was not of assistance֫—not only did the judge doubt that acting as a receiver was a recognised field of expertise, but also that assessing the ‘management function’ of a receiver was something the court was quite capable of doing without expert evidence

What was the background?

The defendant receivers had been appointed over a Devon cider factory by an assignee of the mortgagee, which was also one of the

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About the author:

Anna joined the Restructuring and Insolvency team at Lexis®PSL in August 2013 from Berwin Leighton Paisner where she was a senior associate in the Restructuring Team.

Anna has worked on a number of large scale restructurings primarily in the UK market acting on behalf of lending institutions.

Recent transactions include the restructuring of a UK hotel chain and the administration sale of part of the Connaught group. Anna has also spent time on secondment at The Royal Bank of Scotland and trained at Clifford Chance qualifying in 2007.