Practical guidance for receivers when exercising their power of sale
The Supreme Court of Victoria case Manda Capital Holdings Pty Ltd v PEC Portfolio Springvale Pty Ltd  VSC 381 (Manda v PEC) determined a secured party took reasonable care to sell the secured property for not less than its market value pursuant to the receiver's obligations under s 420A of the Corporations Act 2001 (Cth) (Act).
Manda Capital Holdings Pty Ltd (Manda) loaned $6.39 million (Loan) to PEC Portfolio Springvale Pty Ltd (PEC), which was secured by a mortgage over PEC’s commercial premises (Property). PEC defaulted on the Loan, and Manda took possession of the Property. Manda then sold the Property in December 2020 for $7 million, which was less than the total amount owed, and demanded PEC pay the $974,037 balance of the Loan.
PEC led expert evidence that the Property should have sold for $7.8 million, while Manda led evidence that the Property was instead valued much lower at between $6.2 million and $6.7 million. The Court was therefore faced with competing valuations of the Property and determined that while the Property was sold at the lower end of the recommended range, nothing Manda did in the course of the sale was unreasonable under s 420A of the Act.
Receivers should continue taking a commercial approach to their power of sale duties to maximise the amount recovered from the sale as the Courts remain sensitive to 'fire sales'.
Read the original article on ARITA: Practical guidance for receivers when exercising their power of sale
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