Is a ship mortgage inherently different from a mortgage over land?

Sukhninder Panesar, International Company and Commercial law Review, Volume 15, Issue 8, August 2004

This article considers whether the duty owed by a mortgagee to a mortgagor is any different when dealing with mortgaged land and mortgaged property that is a ship, and concludes that it is not.

While this article is written from an English perspective, the issues raised and conclusion reached are applicable in a New Zealand context.

It is settled law that a mortgagee that exercises its power of sale owes a duty of care to the mortgagor to act in good faith and to take reasonable care to obtain the best price obtainable. A court will not hold a sale of mortgaged land to be improper unless it is proved that the mortgagee acted in bad faith and, as a consequence, failed to obtain the best price.

The onus is on the mortgagor to prove bad faith. If it can’t, the fact that sale proceeds may be lower than if the property was sold at a different time does not matter.

Enquiries and information

For more information on any of the cases, articles and features in Financial Services Quarterly, please email Rachel Gowing or call on 64 9 916 8825.