An English Court decides a bank selling security need not wait to see if there is a chance of a potentially higher bidder making a firm offer where that party is yet to conduct inspections of the relevant asset.
The claimants borrowed $127m from the defendant bank to refinance the indebtedness of a portfolio company that owned an oil field. The loan was to be repaid by the sale of the oil field and, as part of the security for the refinancing, the claimants gave the bank the right to force a sale if it was not completed by a long-stop date. The bank used this right to effect a sale at US$ 245m and the claimants claimed that the price was too low as a third party had expressed interest at US$400m, breaching an implied obligation on behalf of the bank to achieve the best price reasonably obtainable.
The bank was not liable. It was not obliged to take reasonable precautions and exercise reasonable care to obtain the best price reasonably obtainable for the oil field by waiting until the higher bid crystallised and due diligence was conducted.
A bank selling assets of another party does not owe duties, akin to that of a mortgagee to mortgagor, to achieve the best price reasonably obtainable. The Court will not readily imply such an obligation into a commercial document which has been fairly, albeit toughly, negotiated between a bank and its customer absent special factors, such a relationship of agent and principal.