SECURITY AND SUBROGATION Stuart Adair READ THE ARTICLES
SECURITY AND SUBROGATION Stuart Adair
READ THE ARTICLES OF ASSOCIATION!
LIENS
Regulation 8 of Table A 1985 “The company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) payable at a fixed time or called in respect of that share. . . ”
The Company’s bespoke Articles of Association “The lien conferred by Regulation 8 of Table A shall attach to all shares whether fully paid or not and to all shares registered in the name of any person indebted or under liability to the Company whether he be the sole holder thereof or one of two or more holders. The Company shall have a first and paramount lien on every share (not being fully paid) for all moneys… called or payable at a fixed time in respect of that share and the Company shall also have a first and paramount lien on all shares (including fully paid shares) registered in the name of any person indebted or under a liability to the Company…”
SUBROGATION
When a Claimant is subrogated to the rights of A: RESTITUTIONARY REMEDY • The Claimant steps into A’s shoes; and • Is able to pursue the remedies and rights that A would have otherwise had against the Defendant
Four Key Questions 1. Whether the Defendant has been enriched 2. Whether that enrichment was at the Claimant’s expense 3. Whether that enrichment was unjust 4. Whethere any defences available to the Defendant
Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221 “Subrogation is … an equitable remedy against a party who would otherwise be unjustly enriched. It is a means by which the court regulates the legal relationships between a plaintiff and a defendant or defendants in order to prevent unjust enrichment. ”
Subrogation to the Rights of a Charge Holder • The Claimant steps into the shoes of the charge holder • Thereby acquires a charge over the property subject to the charge • Is able to seek the sale of the property in the usual way
Unpaid Vendor’s Lien • A lien on the property • Arises on exchange of contracts to purchase a property • Secures the vendor’s right to receive the full purchase price
Menalaou v Bank of Cyprus UK Ltd [2016] AC 176 Supreme Court held that as a remedy for unjust enrichment, a third party: • Who provided some or all of the purchase money for a purchaser, and • Thereby discharged the purchaser’s obligations to the vendor, • Could claim the benefit of the unpaid vendor’s lien by way of subrogation
D’s CASE – SUB-SUBROGATION
The co-directors were subrogated to: D’s Case • The Company’s money claim for £ 2 million against D’s estate • The Company’s lien over its shares in respect of the £ 2 million • The Company’s right of subrogation in respect of a legal charge over a property forming part of the estate • The Company’s right of subrogation to the unpaid vendor’s lien in respect of another property forming part of the estate
Maxim of “Clean Hands” • Grobbelaar v News Group Newspapers – Lord Millett • “equity does not demand that its suitors have led blameless lives” • Rathere must be “an immediate and necessary relation to the equity sued for”.
• Always read the Articles and check that there isn’t a provision granting a lien over the shares of the person responsible for the wrongdoing Points to take away • Consider whether the Company is entitled to be subrogated to the rights of any charge holder or to an unpaid vendor’s lien • Be aware of potential arguments relating to “clean hands”, but understand that they are far more nuanced in their application than is often appreciated • Appreciate that subrogation can have advantages over tracing
SECURITY AND SUBROGATION Stuart Adair
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