Mortgagee’s Duties in Portfolio Sales and the Centrality of Proving Loss: Commentary on Shortt v Bank of Ireland (UK) PLC [2025] NICA 65

1. Introduction

Shortt v Bank of Ireland (UK) PLC [2025] NICA 65 is a significant decision of the Court of Appeal in Northern Ireland on the duties owed by a mortgagee when exercising its power of sale, particularly where the mortgaged properties are disposed of as part of a large distressed-debt portfolio. The court (Keegan LCJ, Treacy LJ and Humphreys J, judgment delivered by Humphreys J) dismissed an appeal by the borrower, Noel Shortt, and affirmed the High Court judgment of Huddleston J.

The case sits at the intersection of:

the well-established duty of a mortgagee to take reasonable care to obtain the best price reasonably obtainable at the time of sale;
the relatively newer line of authority concerning portfolio sales, notably McDonagh v Bank of Scotland [2018] EWHC 3262 (Ch); and
procedural principles on appeals, bias, discovery, and fresh evidence (Ladd v Marshall, Porter v Magill, Locabail).

At trial, Mr Shortt claimed that the Bank had:

sold his Derry residential investment properties at a substantial undervalue;
wrongly under-attributed part of the overall portfolio consideration to his properties; and
failed to account for valuable fixtures, fittings and contents.

He also alleged bad faith, non-disclosure, and conflicts of interest. In the Court of Appeal he appeared as a litigant in person, challenging not only the substantive dismissal of his claim, but also the fairness of the trial process, the judge’s impartiality, and the quality of the expert evidence preferred by the court below.

The judgment is especially important in:

clarifying how the McDonagh “portfolio sale” analysis interacts with the duties of a mortgagee (as distinct from a receiver);
reaffirming that even if a duty is arguably breached, the borrower must prove actual loss – and cannot succeed where the realised price exceeds competent independent valuations; and
restating strict appellate controls on fresh evidence and on ex post facto recusal / bias challenges.

2. Factual and Procedural Background

2.1 The secured properties and Project Lanyon

Mr Noel Shortt, a businessman and property developer, owned (together with Seamus Campbell) a portfolio of 13 properties in Derry, comprising around 65 residential units. These were townhouses converted into one-bedroom flats, generating a rental income of approximately £320,000 per annum. The properties were charged to the Bank of Ireland (UK) PLC to secure lending advanced for their acquisition and improvement.

Following default and a demand for repayment, the Bank first appointed a fixed charge receiver and later chose to realise its security by selling as mortgagee in possession. The Derry properties were included within a much larger distressed loan and property portfolio, branded “Project Lanyon”, which was marketed to institutional investors.

The portfolio sale process was led by Savills for the Bank and KPMG. After a competitive two-stage bid process and “best and final offers” (BAFO), the successful bidder – Lanyon Jersey Propco Limited (part of the Lotus Group) – acquired the portfolio in 2015 for £44 million. Of that global price, £2,168,867 was apportioned to the Shortt properties.

2.2 The borrower’s claim in the High Court

In his statement of claim, Mr Shortt alleged that:

the Bank owed him fiduciary and other duties as mortgagee when selling the charged properties;
the Derry portfolio was sold at a substantial undervalue; he contended the true market value was approximately £4.25 million (later supported by his expert at around £4 million);
the Bank wrongly under-attributed the overall Project Lanyon consideration to his properties, despite their contributing roughly 8.5% of the portfolio’s rent roll; and
the Bank failed to account for fixtures, fittings and contents allegedly worth about £700,000.

He also pleaded bad faith on the part of the Bank. The Bank denied breach, contended that:

the sale process was professionally run and widely marketed to institutional investors;
bidders, not the Bank, attributed individual prices to properties within the portfolio, using bid templates that incorporated Savills’ Estimated Realisation Prices (ERPs) but required bidders to insert their own figures; and
independent “Red Book” valuations by chartered surveyor Trevor Dougan MRICS valued the Derry properties at £1,865,000 shortly before sale.

Huddleston J dismissed the claim, held that the Bank had complied with its duties as mortgagee, and granted judgment on the Bank’s counterclaim for £1,445,698.54 (unchallenged on appeal).

2.3 The appeal

On appeal, Mr Shortt advanced a lengthy and diffuse set of grounds, which, in essence, alleged:

error of law in the application of McDonagh v Bank of Scotland to portfolio sales;
unfair trial due to non-disclosure of key bid sheets and attribution documents;
apparent bias and a failure to recuse by the trial judge, based on alleged historic professional connections;
improper handling of conflict-of-interest allegations concerning Mr Dick Milliken (a non-executive director within the Lotus Group and a non-executive director within the Bank of Ireland group);
error in preferring the expert valuation of Mr Christopher Callan (for the Bank) over that of Mr Dara Furey (for the appellant);
that the Bank, rather than Lotus, determined the final price allocations among portfolio assets;
that the Bank asked valuer Mr Dougan to fabricate evidence; and
that the sales process was “rigged” in favour of Lotus and that a portfolio sale should not have been used at all.

The Court of Appeal rejected all grounds and dismissed the appeal.

3. Summary of the Judgment

3.1 The appellate framework

At the outset, the court reminded itself of the limits of appellate intervention:

it reviews for errors of law or unfairness;
on findings of fact it shows deference to the trial judge, who had the benefit of hearing and seeing witnesses; intervention is justified only where a finding is plainly unsustainable or relevant evidence was ignored; and
fresh evidence is admitted only under the well-known Ladd v Marshall [1954] 1 WLR 1489 conditions: (1) due diligence, (2) likely influence on outcome, (3) credibility.

3.2 Duties of a mortgagee and portfolio sales

The court endorsed the High Court’s formulation of the mortgagee’s basic duties:

a mortgagee, when the debt is due, may act in its own interests in deciding whether and when to sell;
but once the decision to sell is made, the mortgagee must take reasonable steps to achieve the best price reasonably obtainable at the time, or the true market value at that time;
the mortgagee must act in good faith and for a proper purpose.

Applying these principles in a portfolio context, and referring to McDonagh v Bank of Scotland, the court held that the Bank’s decision to pursue a portfolio sale of Project Lanyon was within the range of reasonable options open to it. The Bank properly engaged independent valuers and agents, followed a structured competitive tender, and ultimately achieved a price for the Derry properties that was significantly above expert valuations.

The Court of Appeal chose not to decide definitively whether the specific McDonagh duty (requiring a receiver to ask whether a portfolio sale is in the best interests of the particular mortgagor) applies in terms to a mortgagee. Instead, it held that even if a similar obligation existed and was breached, the appellant could not demonstrate loss, because:

independent valuations of the Derry properties (Dougan: £1.865m, Callan: £1.86175m) were far below the apportioned sale price of £2.168m; and
a post-sale “cross-check” (Lotus’s ultimate resale realisations of £1.877m) confirmed the Bank’s valuations rather than the appellant’s £4m–£4.25m case.

3.3 Valuation and expert evidence

The core dispute turned on conflicting expert valuations:

Valuer	Role	Valuation of Derry properties
O’Connor Kennedy Turtle (OKT)	Valuer for the Bank (2013)	£1,810,500
Trevor Dougan MRICS	Independent Red Book valuation for Bank (Oct 2015)	£1,865,000
Christopher Callan	Expert for Bank at trial	£1,861,750
Dara Furey	Expert for appellant at trial	c. £4,012,100 (rounded to £4m)
Lotus realisations	Actual resale prices (2016–2019)	£1,877,000
Portfolio apportioned price	Price allocated to Derry properties in Lotus purchase	£2,168,867

The trial judge preferred Mr Callan’s methodology and conclusions over those of Mr Furey, and the Court of Appeal found no basis to disturb that preference. The Bank’s achieved price (£2.168m) exceeded each serious valuation benchmark. On that footing, the appellant could not prove that he lost anything as a result of the method of sale or any alleged missteps.

3.4 Attribution of prices in the portfolio

A central plank of the appeal was that the Bank itself had manipulated the apportionment of the global portfolio price, under-attributing value to the appellant’s properties. The Court of Appeal, after reviewing bid sheets and correspondence, held:

the bid pro forma sent to bidders contained Savills’ ERPs and blank columns for bidders to insert their own price for each asset;
bidders (including Fitzwilliam and Lotus) indeed put their own figures into those columns at Phase 2 and BAFO stages, sometimes by applying a percentage adjustment to ERPs;
email traffic showed the Bank querying apportionments to increase the figures allocated to the Shortt properties (e.g. Mr Mussen’s concern that Savills’ valuations were too low and would cause “problems with that borrower”);
the final apportionment adopted by Lotus resulted in an allocation to the Shortt properties that was over £350,000 higher than in Lotus’s Phase 2 bid and around £292,000 more than Lotus subsequently realised on resale.

The court therefore concluded that any negotiation over apportionment worked in the appellant’s favour, not against him. In any event, attribution did not alter the key fact that the total price received comfortably exceeded competent valuations.

3.5 Alleged non-disclosure and procedural unfairness

The appellant contended that the Bank failed to disclose critical documents – especially bid sheets and apportionment data – depriving him of a fair trial. The Court of Appeal found:

the Bank had provided a detailed amended list of documents following a discovery application in 2019; the appellant’s solicitors inspected and copied relevant material;
a further letter seeking documents in 2022 did not result in a renewed discovery application or adjournment request; at trial, counsel did not assert prejudice from missing documents;
the allegedly missing bid sheets had in fact been disclosed and were within the trial bundles;
the Bank’s evidence on attribution went substantially unchallenged at trial.

Reviewing the full disclosure, the Court of Appeal found no unfairness in the discovery process or the conduct of the trial, and emphasised that any arguable omission did not affect the outcome on the core valuation issue.

3.6 Recusal, apparent bias and conflict of interest

The appellant argued that Huddleston J ought to have recused himself due to past or indirect professional connections with:

Mr Dick Milliken (non-executive director of an Irish Bank of Ireland entity and of the Lotus Group); and
Mr Christopher Callan (the Bank’s valuation expert).

No recusal application was made before or during the trial. On appeal, the court applied the test in Porter v Magill [2001] UKHL 67 – whether the fair‑minded and informed observer, knowing the facts, would conclude that there was a real possibility of bias – and drew on Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451.

The “connections” consisted essentially of:

the judge and Mr Callan both being directors of separate residential management companies sharing a registered office; and
historical overlap between the judge’s former firm (L’Estrange & Brett) and companies within the Almac Group where Mr Milliken had been a director, including a period when both were directors of a charitable corporate trustee associated with Almac’s founder.

The Court of Appeal held that such limited, historic and indirect links could not, in light of Porter and Locabail, give rise to an appearance of bias. The fair‑minded and informed observer would understand that judges, particularly with prior practice backgrounds, will often have professional associations and that these, without more, do not disqualify them. The bias allegation was “wholly without basis”.

3.7 Fresh evidence on appeal

The appellant sought to adduce fresh evidence, including:

affidavits from Mr Furey (his expert) and Mr Edmund Simpson; and
an unsworn statement from Mr Duffy (his IVA supervisor in 2013).

Applying Ladd v Marshall, the court refused admission:

the evidence could have been obtained with reasonable diligence for use at trial;
it would not probably have had an important influence on the outcome, which turned on the expert valuation contest already fully ventilated; and
in the case of unsworn material, form and reliability were also problematic.

3.8 Overall conclusion

The Court of Appeal held that the appeal failed to engage with the “key legal issue”: whether, on the valuation evidence, the Bank had taken reasonable steps and achieved the best price reasonably obtainable at the relevant time. Given that:

the achieved price substantially exceeded reputable valuations;
the portfolio method and marketing were professionally executed; and
the apportionment to the appellant’s properties was, if anything, generous,

the Bank complied with its duties as mortgagee, and the appellant proved no loss. All grounds of appeal were dismissed, and the High Court’s order was affirmed.

4. Detailed Analysis

4.1 Precedents and authorities cited

4.1.1 McDonagh v Bank of Scotland [2018] EWHC 3262 (Ch)

McDonagh concerned the duties of receivers selling mortgaged property as part of a portfolio. Morgan J accepted that portfolio sales can offer advantages such as:

higher aggregate price;
certainty of sale of all properties;
shorter timescales and reduced costs.

But he stressed that a receiver cannot include a given mortgaged property in a portfolio sale purely to benefit the mortgagee or other owners; the receiver must:

actually ask himself whether including that particular property in the portfolio sale is likely to be in the best interests of the mortgagor of that property; and
if he fails to ask that question, there is a breach of duty (though loss must still be proved).

Morgan J further explained that even where there is such a breach, the mortgagor only recovers if the correctly apportioned part of the portfolio proceeds is less than the price which would likely have been achieved on a separate sale; the court must then determine, by valuation evidence, the likely separate-sale value.

In Shortt, Huddleston J relied on McDonagh for the analysis of portfolio sales, and the Court of Appeal approved his overall approach while carefully framing the issue: McDonagh was a receivership case; Shortt involved a direct exercise of a mortgagee’s power of sale.

The Court of Appeal noted:

it had not been asked to rule on whether the specific McDonagh duty (to ask the “best interests of mortgagor” question) applies identically to mortgagees; and
even if such a duty did apply and had been breached, any such breach was academic because the judge had found that no loss was suffered, and that finding was unassailable on appeal.

Thus, Shortt does not extend or reject McDonagh as a matter of principle, but demonstrates how its loss-based analysis applies: the court emphasised that without proof of financial loss, a mortgagor cannot obtain relief even if a portfolio decision were technically flawed.

4.1.2 Ladd v Marshall [1954] 1 WLR 1489

The Court of Appeal reaffirmed the classic three‑limb test for admission of fresh evidence on appeal:

Reasonable diligence: the evidence could not have been obtained with reasonable diligence for use at trial;
Potential influence: the evidence would probably have had an important influence on the result of the case, though not necessarily decisive;
Credibility: the evidence must be credible, though not necessarily incontrovertible.

The court found that the appellant’s proposed new material did not clear the first two hurdles. This underscores that litigants cannot use appeals to “have another go” on valuation evidence that could and should have been adduced at trial.

4.1.3 Apparent bias: Porter v Magill, Locabail and Re Medicaments

The court applied:

Porter v Magill [2001] UKHL 67: Would the fair‑minded and informed observer, having considered the facts, conclude there was a real possibility that the judge was biased?
Re Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 700 at [68]: the observer appreciates the professional discipline and training of judges to act impartially despite prior connections.
Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451, which cautions that, ordinarily, background such as a judge’s previous employment, social or charitable memberships, or historic professional contacts, does not justify recusal.

Shortt firmly situates Northern Irish practice within this mainstream UK jurisprudence: modest or historic professional overlaps will rarely, if ever, support a recusal.

4.2 Legal reasoning: why the appeal failed

4.2.1 The nature and scope of the mortgagee’s duty

The case reaffirms the classic two-stage understanding of a mortgagee’s discretion:

Whether and when to sell: the mortgagee is entitled to act in its own interests. It can choose timing and method (e.g. portfolio vs stand-alone sale) to suit its commercial objectives, subject to overarching duties of good faith.
How the sale is conducted: once the decision to sell is taken, the mortgagee must:
- act in good faith and for a proper purpose (realising its security); and
- take reasonable steps to obtain the best price reasonably obtainable at the time, which is often equated to true market value.

This is consistent with established English and Northern Irish authority (e.g. Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949), although those cases are not expressly cited here. The key emphasis in Shortt is that a mortgagee’s obligation is one of reasonable care, not perfection. An error of commercial judgment is not, without more, a breach of duty.

4.2.2 The portfolio sale and the “McDonagh question”

The appellant argued that, following McDonagh, the trial judge was required to ask and answer whether including the Derry properties in a portfolio sale was likely to be in his best interests, and that failure to do so was an error of law.

The Court of Appeal’s reasoning was twofold:

Do the specific “McDonagh duties” apply to a mortgagee?
The court noted that McDonagh concerned receivers, who stand in a different legal position from mortgagees. Receivers act as agents of the mortgagor and mortgagee with more tightly defined fiduciary-like constraints. Mortgagees, by contrast, are largely entitled to prioritise their own interests, subject to good faith and the duty as to price.
“We were not asked to adjudicate as to whether the specific duties imposed on receivers in a portfolio sale and referred to in McDonagh apply equally to a mortgagee exercising a power of sale.” ([57])
The court therefore left this doctrinal question open.
Even if such a duty existed, no loss was proven.
The more decisive point was that, on the valuation evidence accepted by the High Court:
- the Derry properties’ best estimate of market value was around £1.86–£1.87 million; and
- the sale achieved £2.168 million as the apportioned price.
Thus, even if the Bank had failed to ask the “McDonagh question” about the relative merits of portfolio vs standalone sale, the appellant suffered no financial loss. Any breach would be purely technical.

The Court of Appeal therefore rejected the alleged error of law. This underscores a central substantive point: in portfolio sale challenges, proof of loss is as important as proof of breach.

4.2.3 Why the Bank’s valuation evidence prevailed

The High Court found, and the Court of Appeal accepted, that the Bank’s expert, Mr Callan, was “greatly to be preferred” to the appellant’s expert, Mr Furey. Several reasons were identified:

Rental input: Callan used actual cash rents and top-ups received, while Furey used a maximum theoretical rent, effectively including rents not collected.
Operating expenditure (opex): Callan adopted a 30% deduction, described as a normal figure in such investment appraisals. Furey used lower opex percentages (11–15%), based on Donegal comparators, which the court considered artificially optimistic for these distressed Derry properties.
Capitalisation / yield: Callan used yields of 12.5% and 10% (equivalent to 8 and 10 years’ purchase) reflecting the risk profile of the portfolio and market conditions. Furey relied on comparables derived from individual apartment sales, which typically command higher unit prices than whole-building investment sales.
Vacant / development properties: For uninhabited units and development sites, Furey adopted a “developed value less costs” approach which Callan considered too speculative given planning and other uncertainties. The judge agreed with Callan.

Taking these points together, the court saw Furey’s £4m valuation as “overly generous” and remote from reality, while Callan’s £1.86175m was corroborated by Dougan’s Red Book valuation and the subsequent Lotus resale data. This multi‑point consistency made the Bank’s valuation evidence far more persuasive.

4.2.4 The role of Lotus’s subsequent resale prices

The Court of Appeal stressed that Lotus’s resale prices (totalling £1.877m) were not evidence of market value as at the date of the Bank’s sale. However, they provided a valuable cross-check:

The Bank’s sale apportioned £2.168m to the Derry properties – about £290k more than Lotus ultimately achieved.
The Bank’s achieved price was therefore:
- higher than the independent Red Book valuation (Dougan) and trial valuation (Callan); and
- higher than the ex post realisations in an improving market.

This strongly undermined the claim of a bargain-basement sale and the allegation of a “rigged” process, and supported the conclusion that the Bank had obtained – if anything – a very favourable price for the mortgagor.

4.2.5 Apportionment mechanics and the bidder-driven process

The court carefully analysed the evidence on how the portfolio price was broken down. Key findings:

Bid templates sent to investors (including Lotus and Fitzwilliam) set out for each property:
- its address; and
- Savills’ Estimated Realisation Price (ERP);
and then left a blank column for the bidder’s own price for that property.
Many bidders produced prices by applying a uniform percentage discount to Savills’ ERPs, but the numbers in the bid sheets were their prices, not the Bank’s.
Emails post‑BAFO show the Bank scrutinising apportionments, in particular challenging what it saw as too-low allocations to the Shortt properties, and seeking to persuade Lotus to increase them.
Lotus’s final allocation to the Derry assets – £2.168m – was indeed higher than their Phase 2 figure and higher than Lotus’s eventual resale receipts.

The Court of Appeal endorsed the judge’s finding that the individual prices were attributed by the purchaser, not by the Bank, subject only to negotiations which helped, not harmed, the appellant. The appellant’s under-attribution theory therefore collapsed on the documents.

4.2.6 Discovery, trial conduct and fairness

The appellant’s non-disclosure arguments faced several obstacles:

Extensive discovery was made in 2019, following a specific discovery application.
The appellant’s professional legal team inspected the documents and did not seek further orders or adjournments on discovery grounds at or before trial.
The bid sheets that underpinned the attribution arguments were, in fact, within the trial bundles originating from the appellant’s own solicitors.

In those circumstances, and having itself reviewed the disclosed material, the Court of Appeal found no procedural unfairness. It stressed that the crucial issue – whether the Bank obtained the best price reasonably obtainable – was fully ventilated, and any alleged minor discovery imperfections would not have altered the outcome.

4.2.7 Bias and recusal

The court rejected the bias argument decisively:

No recusal application had been made at trial – an important contextual factor, as parties are expected to raise concerns promptly rather than “keep them in reserve” for an appeal.
The alleged connections were:
- shared registered office addresses for separate management companies (judge and Callan); and
- historic professional association in relation to a charitable corporate trustee linked to Almac (judge and Milliken).
Such connections fell squarely within the types of background and association that Locabail identifies as ordinarily insufficient for apparent bias.

The court reiterated that a “fair‑minded and informed observer” is assumed to know how the legal profession operates, including:

that judges commonly have wide-ranging former professional ties; and
that those ties do not, without particularised risk, undermine their ability to act impartially.

Accordingly, there was no basis for impugning the trial judge’s impartiality.

4.2.8 Unpleaded serious allegations (fabrication, rigging)

The appellant alleged on appeal that:

valuer Mr Dougan had been asked by the Bank to fabricate valuations; and
the sale process was “rigged” in favour of Lotus.

The Court of Appeal highlighted two fundamental problems:

Pleading: such grave allegations were never pleaded as part of the case at trial.
Cross-examination: they were not put to the relevant witnesses (Dougan, Mussen, or others), depriving them of the chance to respond and the judge of the chance to assess credibility.

Appellate courts are rightly reluctant to entertain serious accusations of impropriety raised for the first time on appeal, especially when they contradict the contemporaneous documents and were not tested at trial. The court therefore dismissed these allegations as wholly unsupported.

4.2.9 Sekhon’s £2 million offer

The appellant also relied on an earlier offer via the Sekhon Group to buy back the Derry properties for £2 million. The evidence was that:

KPMG indicated to the appellant that the Bank would be minded to sell to Sekhon at £2m provided they could complete within about 21 days; and
after this, no further engagement was received from Sekhon or their lawyers.

As a result, the Bank reasonably proceeded to complete the portfolio sale. In retrospect, the Sekhon offer does not assist the appellant:

£2m was less than the £2.168m ultimately allocated under the portfolio sale; and
the failure of Sekhon to perform (or even pursue) the purchase justified the Bank’s decision to prefer a certain, higher, and professionally run portfolio transaction.

4.2.10 Fixtures, fittings and contents

On the alleged £700,000 of furniture and fittings, the judge found – and the Court of Appeal agreed – that:

no cogent evidence was led at trial to substantiate such a valuation;
fixtures would in any event be covered by the mortgage security; and
movable furniture could have been removed by the borrower, but again there was no concrete evidence of specific items or separate realisable value.

Even if some marginal value was not separately accounted for, this could not conceivably have altered the outcome in light of the much larger valuation gap in the appellant’s case.

4.3 Impact and significance

4.3.1 Portfolio sales: reassurance for lenders, clarity for borrowers

Shortt provides practical reassurance for banks and institutional lenders engaged in large-scale portfolio disposals of distressed assets in Northern Ireland:

A professionally managed portfolio sale to institutional investors, with:
- independent pre-sale valuations;
- a structured, competitive bid process; and
- clear documentation of bid and attribution mechanics,
will generally satisfy a mortgagee’s duty to take reasonable care to obtain the best price.
If the apportioned price for a given mortgagor’s property exceeds the range of competent market valuations, it will be very difficult for that mortgagor to establish loss, regardless of theoretical controversies about portfolio vs standalone sale.

For borrowers, the decision clarifies that:

objections to the “method” of sale (e.g. disliking a portfolio strategy) are unlikely to succeed without robust valuation evidence showing that another method would probably have produced a materially higher price; and
even arguable technical breaches of duty are insufficient without quantifiable financial loss.

4.3.2 The status of McDonagh in Northern Ireland

Although the court did not squarely decide whether McDonagh’s specific duties on receivers apply to mortgagees, Shortt is important for how it uses McDonagh:

It accepts that portfolio sales are not inherently problematic; they may be consistent with both the lender’s and the borrower’s interests.
It emphasises that even where a McDonagh-type breach is found (failure to ask the right question about best interests), the mortgagor must still prove that a separate sale would probably have produced a higher outcome.

In practice, this reduces the litigation risk for lenders using portfolio disposals, provided they can show:

a rational commercial basis for including particular properties; and
that achieved prices compare favourably with independent valuations.

4.3.3 Bias, recusal and judicial background

Shortt also contributes to the developing jurisprudence on judicial impartiality in smaller jurisdictions, where overlapping professional networks are common. The decision confirms:

historic professional connections or shared institutional affiliations will not easily be seen as compromising impartiality;
the “fair‑minded and informed observer” is assumed to have realistic knowledge about how the legal and business communities operate; and
parties should raise recusal issues promptly; post‑judgment attempts to mine public records for tenuous connections are unlikely to succeed.

4.3.4 Litigation practice: experts, pleadings and appeals

The case offers several lessons for litigators:

Expert evidence: where a case “turns on” competing valuations, as here, the choice of expert, rigour of methodology, and proper testing of the other side’s expert in cross-examination are crucial. An appellant will struggle to overturn a reasoned judicial preference between experts.
Pleading serious allegations: allegations of fabrication, dishonesty or rigging must be:
- clearly pleaded;
- put to relevant witnesses; and
- supported by cogent evidence.
Failure on any of these will be fatal, especially on appeal.
Discovery and fairness: parties who have had representation and an opportunity to litigate discovery issues at trial rarely persuade an appellate court that the process was unfair if they did not seek adjournments or complain at the time.
Fresh evidence: Ladd v Marshall remains a high hurdle. Appeals are not vehicles to re-run or augment expert cases that could have been advanced at trial.

5. Simplifying Complex Concepts

5.1 Mortgagee’s power of sale and duty as to price

A mortgagee is the lender who holds a legal charge over property. When the borrower defaults and the debt is due, the mortgagee can exercise a power of sale – sell the property to recover what is owed.

The mortgagee:

does not become a trustee of the property for the borrower; it can act in its own financial interests; but
must:
- act in good faith (no fraud, no ulterior purpose); and
- take reasonable care to obtain the best price reasonably obtainable at the time of sale.

This does not mean:

the absolute highest price anyone might pay in some idealised scenario; or
that every conceivable marketing method must be used.

It means the mortgagee must behave as a reasonably prudent seller, usually by:

obtaining professional valuations;
marketing through appropriate channels; and
allowing sufficient exposure to the market.

5.2 Portfolio sale

A portfolio sale is when multiple properties or loans are sold together as a package to a single buyer, often an institutional investor. This is common in distressed-debt situations.

Advantages may include:

certainty – all assets are sold in one transaction;
speed – quicker exit from non-performing loans;
pricing – investors may pay more for scale or diversification.

The concern for borrowers is that some individual properties might have achieved higher prices if sold separately. The law therefore requires those running the sale (receivers, mortgagees) to consider the impact of portfolio inclusion on each mortgagor and to ensure that they still obtain a fair price.

5.3 Equity of redemption and accounting

The equity of redemption is the borrower’s residual interest in the mortgaged property – essentially whatever is left after the mortgage debt and costs are paid. When a mortgagee sells:

if the sale price exceeds the debt and costs, the surplus belongs to the borrower;
if the sale price is less, the borrower remains liable for the shortfall (unless otherwise agreed).

Where a borrower alleges breach of duty (for example, selling too cheaply), the usual remedy is not “damages” in the abstract, but an account: the mortgagee must show that it obtained the proper price, and if it did not, the borrower may be treated as if the property had sold for the proper (higher) amount when calculating any shortfall or surplus.

5.4 Red Book valuation

A “Red Book” valuation is a valuation carried out according to the RICS Valuation – Global Standards, published by the Royal Institution of Chartered Surveyors. It is a formal, regulated valuation, with strict requirements on methodology, independence and reporting. Courts often treat Red Book valuations as a robust benchmark for market value.

5.5 ERP (Estimated Realisation Price)

ERP stands for Estimated Realisation Price. It is an internal estimate produced by agents like Savills of what they think a property might realistically sell for in the circumstances of a particular portfolio disposal. ERPs:

are not formal Red Book valuations;
are used to guide marketing and bid evaluation; and
can be adjusted as more information emerges about condition, demand, and due diligence findings.

5.6 Opex, capitalisation rate and years’ purchase

In income-based property valuation:

Gross rent is the total annual rent receivable from tenants.
Operating expenditure (Opex) covers all costs of running the property – repairs, insurance, management fees, voids, etc. Net income = gross rent minus opex.
Capitalisation rate (yield) is the rate (e.g. 10%) at which net income is “capitalised” to obtain a capital value. Value ≈ Net Income ÷ Yield.
Years’ purchase is the reciprocal of the yield: a 10% yield = 10 years’ purchase; a 12.5% yield = 8 years’ purchase.

Higher risk properties typically require higher yields (lower years’ purchase), leading to lower capital values for a given income stream.

5.7 Apparent bias

Apparent bias arises where, even if a judge is in fact impartial, the circumstances give rise to a perception of a real possibility of bias. The test from Porter v Magill is:

“Whether the fair‑minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”

The observer is:

fair‑minded – not unduly suspicious or naive; and
informed – aware of how the legal system and professions work.

Mere historic professional contact, common membership of organisations, or shared offices will rarely meet this threshold.

5.8 Fresh evidence on appeal

Courts are very slow to admit new evidence on appeal. Under Ladd v Marshall, the appellant must show that:

the evidence could not, with reasonable diligence, have been obtained for the trial;
the evidence would probably have had an important influence on the result; and
the evidence is credible.

This preserves the finality of litigation and encourages parties to put their best case forward at trial, not to “improve” it later.

6. Conclusion: Key Takeaways and Broader Legal Significance

Shortt v Bank of Ireland (UK) PLC [2025] NICA 65 is a robust reaffirmation of established mortgagee principles in the modern environment of distressed portfolio sales. Its principal lessons can be summarised as follows:

Portfolio sale is a legitimate method: A mortgagee may properly choose to sell charged properties as part of a portfolio, provided the sale is professionally conducted and targeted to appropriate buyers. The method of sale lies within the mortgagee’s commercial discretion.
Reasonable care, not perfection: The mortgagee’s duty is to take reasonable steps to obtain the best price reasonably obtainable at the time. Errors of judgment or hindsight dissatisfaction by the borrower do not amount to breach if the core process and pricing are sound.
Proof of loss is essential: Even if there were some technical breach (for example, failure to ask the “McDonagh question”), the mortgagor must show that a different approach would have produced a higher price. Where the achieved price exceeds competent independent valuations, loss is impossible to prove.
Bidder-driven apportionment is acceptable: Where purchasers in a portfolio sale supply individual property prices via structured bid sheets, and the mortgagee’s interventions only improve a particular mortgagor’s allocation, there is no breach in the apportionment process.
Appellate restraint on fact and expert preference: Decisions heavily dependent on evaluation of expert valuation evidence will rarely be reversed on appeal, absent clear error or misdirection. The choice between credible experts is quintessentially a matter for the trial judge.
Bias challenges face a high bar: Historic and limited professional connections with parties or witnesses are insufficient, without more, to justify recusal. The fair‑minded and informed observer standard remains demanding and realistic.
Fresh evidence and procedural fairness: Ladd v Marshall continues to set a strict threshold for new evidence; alleged discovery shortfalls must be raised and addressed at trial, not saved as appeal points, especially where counsel did not seek adjournments or further orders.

For lenders, the judgment provides a measure of comfort that carefully structured portfolio disposals will withstand post hoc challenge, particularly where independent valuations and competition between institutional bidders can be demonstrated. For borrowers, it serves as a caution that successful challenges to enforcement sales require:

clear, properly pleaded allegations;
coherent and realistic valuation evidence; and
proof of actual financial loss.

In the wider legal landscape, Shortt cements the principle that in portfolio sales, as in all mortgagee sales, commercial reality and evidential rigour – not suspicion or hindsight – will determine whether a mortgagee has discharged its duty to the mortgagor.