Raja v Lloyds TSB Bank plc (2001) Lloyds Rep Bank 113
CHARGES – IMPLIED TERMS – LIMITATIONS – MORTGAGEES’ POWERS AND DUTIES – POSSESSION
Facts
In 1986 the Appellant (R) was granted overdraft facilities which were secured by legal charges over four properties he owned. Having fallen into arrears the respondent lender (L) obtained orders for possession with respect to three of the four properties, which were sold between 1987 and 1991 for a cumulative total of £356,732 after expenses. R initiated proceedings against L alleging that they were in breach of their duties as mortgagee to obtain the best price reasonably available for the properties and to incur no more expenses than reasonable for the purposes of marketing and sale.
Issues
The primary issue before the Court of Appeal was the nature of the duties owed by a mortgagee in possession, namely whether the duty to obtain the best price reasonably available was an implied term of the contract between lender/borrower or was instead a general duty imposed by equity. If the latter then R’s cause of action would be time-barred pursuant to the Limitation Act 1980.
Decision/Outcome
The Court of Appeal found in favour of L: The relevant duties did not arise from any implied contractual obligation, as the same duty was also owed by L to any subsequent mortgagee of the properties and would also be owed by receivers, being in the nature of a general obligation in equity to take reasonable care to obtain a proper price.
Updated 20 March 2026
This case summary accurately reflects the decision in Raja v Lloyds TSB Bank plc [2001] Lloyd’s Rep Bank 113, in which the Court of Appeal confirmed that a mortgagee’s duty to obtain the best price reasonably available when exercising a power of sale is an equitable duty, not an implied contractual term, with the consequence that the Limitation Act 1980 provisions applicable to claims in equity (rather than contract) governed the limitation period. This remains an accurate statement of the legal position. The equitable duty on a mortgagee to take reasonable care to obtain a proper price when selling mortgaged property is well established and has been consistently affirmed in subsequent case law, including in the Supreme Court’s consideration of mortgagee duties in Ipsos SA v Dentsu Aegis Network Ltd and related authorities. There have been no statutory amendments that alter the core principle described. The article is therefore still broadly accurate and useful as a summary of this authority, though readers should be aware that it does not address subsequent judicial elaboration on the precise scope and application of the mortgagee’s equitable duty of care in sale contexts.
