The court was asked: ‘a) Does the doctrine of marshalling permit the marshalling of securities held over property that does not belong to the common debtor? In particular, is a creditor of a guarantor entitled to marshal (or be subrogated to) securities which have been granted to another creditor of the guarantor by the primary debtor liable under the guaranteed debt?
b) Does the answer depend in any way on the rights which the guarantor has as against the holder of the guarantee or as against the primary debtor?
c) Does any such claim to marshalling or subrogation take precedence over prohibitions contained in the Restraint Order, either as of right or by virtue of the exercise of some discretion of the Crown Court?’
Held: The equitable principle applied. Lady Morrison may claim the proceeds of the assets subject to the Agricultural Charge by the application of the principle of marshalling, and is entitled to prove as an unsecured creditor in the administration for any shortfall.
Norris J said: ‘The principle of marshalling is an equitable principle. In its classic form it applies where two creditors are owed debts by the same debtor, one of whom can enforce his claim against more than one security but the other can resort to only one. In those circumstances the principle gives the second creditor a right in equity to require that the first creditor be treated as having satisfied himself as far as possible out of the security to which the latter has no claim.’
Judges:
Norris J
Citations:
[2013] EWHC 238 (Ch), [2013] WLR(D) 71, [2014] 2 WLR 1129, [2014] 1 CH 359
Links:
Statutes:
Agricultural Credits Act 1928, Partnership Act 1890 39
Jurisdiction:
England and Wales
Citing:
Cited – Highbury Pension Fund Management Company and Another v Zirfin Investments Management Ltd and Others CA 3-Oct-2013
Lewison LJ discussed the operation of the principle of marshalling: ‘One consequence of the application of the principle is that if the first mortgagee with more than one security satisfies his debt out of the property over which the second . .
Cited – In Re Ritson ChD 1898
. .
Cited – In Re Ritson, Ritson v Ritson CA 1899
The joint debts of a partnership are payable out of the joint assets if sufficient even though secured on the separate property of one partner.
Chitty LJ said of a deceased partner that his ‘interest in the joint assets [of the partnership] . .
Lists of cited by and citing cases may be incomplete.
Equity, Company
Updated: 14 November 2022; Ref: scu.470996
