Close Brothers Ltd v AIS (Marine) 2 Ltd (in liquidation) and another

Bank – Guarantee. The claimant bank succeeded, against the second defendant guarantor, in its claim to recover the shortfall, following the sale of a vessel, arising out of a marine loan and mortgage taken out by the first defendant company, which had been backed by a personal guarantee provided by the guarantor. The first defendant had defaulted on the loan and proceedings against it had been stayed after it had gone into court-ordered compulsory liquidation. The guarantor contended that the bank had breached its obligations by selling the vessel at an undervalue. The Admiralty Court, in applying principles relevant to the relationship between a mortgagee and mortgagor with respect to the sale of property of which a mortgagee had taken possession in the exercise of its rights under the mortgage deed, ruled that the guarantor had failed to show that the vessel had been sold at an undervalue, as he had been required to do, and that the claimant was entitled to judgment in a sum to be assessed on consideration of any further submissions to be made as to the appropriate deductions from the sale price.

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