ANFIELD (UK) LTD V BANK OF SCOTLAND PLC

[2010] EWHC 2374 (Ch), Chancery Division, Mrs Justice Proudman, 24 September 2010

Subrogation - Defendant making loan to discharge earlier secured loan - Whether defendant subrogated to earlier lender's security

Loans were made to S by Halifax Building Society, and a charge on his property was registered in September 2000. In 2006 BS loaned sums to S which enabled S to pay off the loan from HBS, and S granted BS a charge. However, BS failed to register the charge. The question was whether RS was subrogated to HBS's charge. The court accepted the principle that a lender who made advances to discharge a secured debt was entitled to step into the shoes of the creditor and to take priority over intermediate lenders who themselves had a security on the property. The court held that subrogation applied in the present case. BS had received no more than it had bargained for, and the fact that it had neglected to register the charge did not deprive BS of its right to a security. If BS was to be deprived of its security, lenders who had loaned on the basis that there was a valid charge would be unjustly enriched.