The guarantor’s company installed the energy upgrades under the NSW greenhouse gas reduction scheme and obtained funding from the bank secured on its assets and a guarantee from the company’s director. The company defaulted and receivers were appointed by the bank. The receivers sold the company’s assets and sued the guarantor. The guarantor claimed that the bank failed to obtain the best price reasonably obtainable for the company’s assets, being lamps, showerheads and batts, and settled an insurance claim at undervalue. The guarantor’s other claims were abandoned during the trial.
The general law duties of a receiver in exercising a power of sale are analogous to those of a mortgagee. A receiver has a duty to act in good faith without willfully or recklessly sacrificing the interests of the mortgagor. The principal remedy which a mortgagor has where a mortgagee or receiver breaches these duties is an equitable set off against the debt owed to the mortgagee of the amount of the undervalue. A guarantor is then entitled to have this brought into account in determining his liability.
The court found no breach of the receiver’s duties because the receivers had sought advice as to the most effective means of sale of the company’s assets and then followed that advice in the sale process. The court gave judgement for the bank.