New case on Subrogation
Posted on Thursday, 28th October 2010
In Anfield (UK) Limited v Bank of Scotland PLC and others [2010]EWHC 2374 (CH) the court held that a lender with an unregistered (equitable) charge may be subrogated to an earlier legal charge that was discharged from funds provided by the equitable chargee. This will mean that the equitable charge holder will rank ahead of a legal charge holder whose security was created after the creation of the equitable charge and registered.
The way the court looked at the matter was that the equitable charge holder had loaned the money to pay off the first charge holder.It had expected to be secured by its charge being registered and would have stood in the shoes i.e. been subrogated to the first legal charge holder. It was irrelevant that the failure to register the charge was a result of the equitable chargee's negligence; the intermediate legal charge owner had been enriched unjustly by the faliure of the equitable chargee to perfect its security by registration. In the judgment, the court stated that any unfairness on the consequences of this subrogation could be dealt with by way of a defence based on change of position.