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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Serious Organised Crime Agency v Szepietowski & Ors [2010] EWHC 2570 (Ch) (15 October 2010) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2010/2570.html Cite as: [2010] EWHC 2570 (Ch), [2011] Lloyd's Rep FC 81, [2010] NPC 101 |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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THE SERIOUS ORGANISED CRIME AGENCY |
Claimant |
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- and - |
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(1) SUSAN ANN SZEPIETOWSKI (2) NATIONAL WESTMINSTER BANK PLC (3) JOHN SZEPIETOWSKI |
Defendants |
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Mr Andrew Mitchell QC and Ms Linda Saunt (instructed by Devonshires) for the First Defendant
Ms Georgina Peters (instructed by Addleshaw Goddard LLP) for the Second Defendant
The Third Defendant appeared in person
Hearing date: 20 July 2010
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Crown Copyright ©
Mr Justice Henderson:
Introduction and background
"This is a principle for doing equity between two or more creditors, each of whom are owed debts by the same debtor, but one of whom can enforce his claim against more than one security or fund and the other can resort to only one. It gives the latter an equity to require that the first creditor satisfy himself (or be treated as having satisfied himself) so far as possible out of the security or fund to which the latter has no claim."
SOCA submits that the basic requirements for application of the principle are satisfied, because there is a single debtor (Mrs Szepietowski) who owed debts to two creditors (the Bank and SOCA), but the Bank was able to enforce its claim against (relevantly) two securities, namely the Claygate Properties and Ashford House, whereas SOCA was confined to its security on the Claygate Properties. In those circumstances, says SOCA, it has an equity to require the Bank to be treated as having satisfied itself so far as possible out of Ashford House, and by a process akin to subrogation SOCA should be entitled to enforce the Bank's second charge against Ashford House to the extent of the shortfall.
The position of Ashford House under the compromise
"4.5 If the Trustee wishes to sell [the Remaining RBS Properties] before [the Claygate Properties] are sold then the Respondents agree that, if the [Bank] consents, the combined charge over these properties and [the Claygate Properties] in favour of the [Bank] (amounting to £3,398,507.18 as at 14 January 2008) (the "Charge") shall be transferred to [the Claygate Properties] only. If the [Bank] does not so consent then Susan Szepietowski will grant a charge to the Trustee or the Director, as directed by the Director, for the sums paid by the Trustee or the Director to the [Bank] from the sale proceeds of the Remaining RBS Properties.
4.6 The Respondents and the Trustee agree that the total funds from the sale of [the Claygate Properties] shall be used in priority to the funds from the sale of the Remaining RBS Properties in satisfaction of the Charge."
"It is common ground that what the parties must have meant by this rather inaccurate language is that Thames Street and Church Street would be released from the RBS charge and not that the RBS charge should thenceforth be secured on the Additional Properties alone, to the exclusion of Ashford House."
In my view this must indeed be the correct interpretation, because the transfer of the charge was expressly predicated on the Bank's consent to it. Whatever the parties may have agreed between themselves, they cannot sensibly have contemplated the Bank being asked, and agreeing, to give up not only its security on the properties to be sold, but also its security on Ashford House. The Bank was not, after all, a party to the compromise, and although it may well have regarded its second charge over Ashford House as a long-stop or back-up security for Mrs Szepietowski's business debts, it must have had good reason for requiring the charge to be given. It is improbable enough that the Bank should have been thought willing to contemplate giving up its security over the Remaining RBS Properties, which were valued for the purposes of the compromise at £1.355 million. The suggestion that the Bank might have been thought willing also to give up its security over Ashford House, valued at £2.3 million, I find simply incredible.
"On a fair construction of this document I cannot conclude that the parties intended to provide for the release of rights and the surrender of claims which they could never have had in contemplation at all. If the parties had sought to achieve so extravagant a result they should in my opinion have used language which left no room for doubt …"
See too the speech of Lord Nicholls at [35]. The present case is not, of course, on all fours, but application of the principle laid down by the House in that case satisfies me that the wording of paragraph 2.1 was not wide or clear enough to embrace a future marshalling claim by SOCA in relation to Ashford House.
Marshalling: application of the principle
"But it is the ordinary case to say a person having two funds shall not by his election disappoint the party having only one fund; and equity, to satisfy both, will throw him, who has two funds, upon that, which can be affected by him only; to the intent that the only fund, to which the other has access, may remain clear to him."
"The submission is completely misconceived. The doctrine of marshalling applies where there are two creditors of the same debtor, each owed a different debt, one creditor (A) having two or more securities for the debt due to him and the other (B) having only one. B has the right to have the two securities marshalled so that both he and A are paid so far as possible. Thus if a debtor has two estates (Blackacre and Whiteacre) and mortgages both to A and afterwards mortgages Whiteacre only to B, B can have the two mortgages marshalled so that Blackacre can be made available to him if A chooses to enforce his security against Whiteacre.
For the doctrine to apply there must be two debts owed by the same debtor to two different creditors. It has no application in a case such as the present, where there is only one debt, even though there are two debtors liable in respect of it. The surety's right to be indemnified by the principal debtor, which arises only after the surety has paid the debt in full, make[s] him a creditor of the principal debtor in respect of the same debt as that for which the principal debtor was formally liable to the creditor.
But in any case the doctrine would not help [the depositors]. It is never allowed to delay or defeat the creditor with several securities in the collection of his debt and the enforcement of his securities. He is allowed to realise his securities as he pleases. The doctrine goes no further than this: that if the creditor (A) with several securities (Blackacre and Whiteacre) chooses to resort to the only security (Whiteacre) which is available to another creditor (B), as he is entitled to do, B may have resort to Blackacre. In the present case, therefore, the doctrine, even if applicable, would not enable the depositor to compel the bank to have resort to the deposits; it would merely allow him recourse to the deposits if the bank resorted to the mortgages."
"For the avoidance of doubt, clause 7.1 of this Charge does not constitute a covenant by the Chargor to pay the Secured Amount to the Chargee."
Furthermore, in a letter dated 18 June 2009 to Mrs Szepietowski's solicitors SOCA expressly confirmed "that it does not assert that the Charge creates any new freestanding obligation on your client which had not … arisen already".
"A proprietary interest provided by way of security entitles the holder to resort to the property only for the purpose of satisfying some liability due to him (whether on the person providing the security or a third party) and, whatever the form of the transaction, the owner of the property retains an equity of redemption to have the property restored to him when the liability has been discharged."