“What is the basis of the doctrine of subrogation? It is simply that, where A's money is used to pay off the claim of B, who is a secured creditor, A is entitled to be regarded in equity as having had an assignment to him of B's rights as a secured creditor. There are other cases of subrogation where B is not secured, but the ordinary and typical example is as I have stated. It finds one of its chief uses in the situation where one person advances money on the understanding that he is to have certain security for the money he has advanced, and, for one reason or another, he does not receive the promised security. In such a case he is nevertheless to be subrogated to the rights of any other person who at the relevant time had any security over the same property and whose debts have been discharged, in whole or in part, by the money so provided by him, but of course only to the extent to which his money has, in fact, discharged their claims.” [Emphasis added.]
“Subrogation, therefore, is a remedy, not a cause of action: see Goff & Jones Law of Restitution 4th. Ed. pp. 589 et seq.Orakpo v Manson Investments Ltd.[1978] AC 95 at p.104 per Lord Diplock; Re T.H.Knitwear (Wholesale) Ltd.[1988] Ch. 275 , 284 CA. It is available in a wide variety of different factual situations in which it is required in order to reverse the defendant's unjust enrichment. Equity lawyers speak of a right of subrogation, or of an equity of subrogation, but this merely reflects the fact that it is not a remedy which the court has a general discretion to impose whenever it thinks it just to do so. The equity arises from the conduct of the parties on well-settled principles and in defined circumstances which make it unconscionable for the defendant to deny the proprietary interest claimed by the plaintiff. A constructive trust arises in the same way. Once the equity is established the court satisfies it by declaring that the property in question is subject to a charge by way of subrogation in the one case or a constructive trust in the other. ”
“These cases seem to me to show is that it is a mistake to regard the availability of subrogation as a remedy to prevent unjust enrichment as turning entirely upon the question of intention, whether common or unilateral. Such an analysis has inevitably to be propped up by presumptions which can verge upon outright fictions, more appropriate to a less developed legal system than we now have. I would venture to suggest that the reason why intention has played so prominent a part in the earlier cases is because of the influence of cases on contractual subrogation. But I think it should be recognised that one is here concerned with a restitutionary remedy and that the appropriate questions are therefore, first, whether the defendant would be enriched at the plaintiff's expense; secondly, whether such enrichment would be unjust and thirdly, whether there are nevertheless reasons of policy for denying a remedy. An example of a case which failed on the third ground is Orakpo v. Manson Investments Ltd. [1978] A.C. 95, in which it was considered that restitution would be contrary to the terms and policy of the Moneylenders Acts.”
“30. The issues raised on behalf of the Appleyards require consideration and analysis of the law relating to subrogation. We have been referred to a number of cases, from which we have concluded that the following propositions can be derived. We acknowledge that there is a limit to the extent to which one can extract any general rules applicable to equitable subrogation, bearing in mind that “the remedy of subrogation 'may vary with the circumstances of the case, the object being to effect a fair and just balance between the rights and interests of the parties concerned'“: see Goff & Jones on The Law of Restitution 6th Edition, 2002 at paragraph 3-003, citing Lord Clyde at 231D in Banque Financiere at 237D (and see also the observations of Millett LJ in Boscawen -v- Bajwa[1996] 1 WLR 328 at 338H-339B). …… 33. Secondly, subrogation is a remedy primarily aimed at preventing unjust enrichment. That is clear from what was said by Lord Diplock in Orakpo -v- Manson Investments Limited[1978] AC 95 at 104C-D, and it has been recently repeated by Millett LJ in Boscawen at 335C, and by Lord Hoffmann and by Lord Clyde in Banque Financiere respectively at 231G-H, and 237D-E. 34. Thirdly, subrogation is a flexible remedy, which nonetheless must be applied in a principled fashion. That was made clear by Millett LJ in Boscawen at 338G - 339C relying in part on what was said by Lord Diplock in Orakpo at 104, and by Lord Clyde in Banque Financiere at 237D-E. ……. 37. Sixthly, the fact that a lender of money gets some security does not prevent him from claiming to be subrogated to another security: see Banque Financiere, perhaps most clearly per Lord Hutton at 241C-D. In that case, the lender anticipated two forms of protection, one of which (a pledge of shares) was provided as agreed. Although this was “the principal security” (see at 229G), it did not prevent the lender obtaining a subrogated right owing to the failure of the other form of protection. 38. Seventhly, a lender cannot claim subrogation if he obtains all the security which he bargained for, as in Burston Finance (applying Capital Finance Co Limited -v- Stokes[1969] 1 Ch 261 ) or where he has specifically bargained on the basis that he would receive no security as in Paul -v- Speirway Limited (in liquidation)[1976] 1 WLR 220 . ……… 41. Tenthly, subrogation cannot be invoked so as to put the lender in a better position than that in which would have been if he had obtained all the rights for which he bargained: see Banque Financiere at 235D and 236G-273B per Lord Hoffmann. This point was also made by Lindley MR in Wrexham at 447. 42. Eleventhly, it is difficult, and may be impossible, for a lender who has obtained security to invoke subrogation where the security he has obtained gives him all the rights and remedies of security to which he claims to be subrogated (see Burston Finance at 1653D-E), or is a security in which the original security would naturally merge (see Burston Finance at 1653C and per Lord Diplock in Orakpo at 105B-C). ……….. 44. Finally, normal equitable principles apply to subrogated rights. Thus, the familiar equitable defences can be raised against a claim for subrogation, and priority as between the person with the subrogated right and other parties are to be determined in accordance with normal equitable principles: see Halifax -v- Omar, at paragraphs 81-83 per Jonathan Parker LJ.”
“Connaught Income Funds – Suspected Major Fraud”
“The founder members of the Connaught Action Group suspect either gross negligence or more likely widespread fraud and criminality in respect of the Connaught Income Fund Series … There has been much speculation that the Fund is part of a wider ‘ponzi scheme’ involving Tiuta plc and its subsidiaries”
“130. I turn next to the submission made by Mr Zelin in his written skeleton argument (and adopted by Mrs Hedworth) that there is no room for subrogation where, as Mr Zelin puts it, "the claimant actually gets a valid security that is subsequently rendered ineffective", and that "a voidable transaction is good until it is set aside.” 131. In my judgment, however, a security which is voidable ab initio – that is to say which is, from its inception, liable to be set aside – cannot sensibly be described as "a valid security that is subsequently rendered ineffective". A security which is voidable ab initio is, by definition, unenforceable from its inception as against the party having the right to set it aside. Hence it is, from its inception, ineffective as a security. In my judgment, nothing that was said by Walton J in Burston Finance v. Speirway, or by Harman J in Capital Finance v. Stokes casts any doubt on these (to my mind) uncontentious propositions. Indeed, the passages in those judgments on which Mr Zelin relies seem to me positively to endorse them. Thus, Walton J's reference in Burston Finance v. Speirway (at p.1652H-1653A) to "a security which is, from its inception, either wholly void or otherwise completely unenforceable" seems to me plainly to include voidable, as well as void, securities. Likewise, when saying in Capital Finance v. Stokes (at p.279E) that the vendor had "obtained all that he bargained for" since he had been granted "the stipulated legal charge", Harman LJ was referring to a legal charge which was void against a liquidator or creditors for non-registration: that is to say a charge which was fully enforceable when made. At p.279G Harman LJ said: "It was argued for the vendor that what he contracted to get was a valid legal charge, and that he has not received because the company in default of its obligation under section 95 [of theCompanies Act 1948 ] did not register the charge with the result that it became ineffective on winding up. I do not accept this argument. The charge was effective when made and, although it was the purchaser's duty to register, it was open to the vendor himself to remedy the defect at the purchaser's expense.” 132. In my judgment, there is a clear distinction for present purposes between a charge which is voidable from its inception and one which is valid (i.e. fully enforceable) when made but which may become void at some future date unless registered. The charge in Capital Finance v. Stokes was in the latter category. Plainly, a lender who has bargained for a valid security and has received only a security which is voidable from its inception has not obtained all that he bargained for. By contrast, as Harman LJ held, where such a lender receives a security which is valid (i.e. fully enforceable) when made and will remain so if registered, he has obtained all that he bargained for.” "It was argued for the vendor that what he contracted to get was a valid legal charge, and that he has not received because the company in default of its obligation under section 95 [of theCompanies Act 1948 ] did not register the charge with the result that it became ineffective on winding up. I do not accept this argument. The charge was effective when made and, although it was the purchaser's duty to register, it was open to the vendor himself to remedy the defect at the purchaser's expense.” 132. In my judgment, there is a clear distinction for present purposes between a charge which is voidable from its inception and one which is valid (i.e. fully enforceable) when made but which may become void at some future date unless registered. The charge in Capital Finance v. Stokes was in the latter category. Plainly, a lender who has bargained for a valid security and has received only a security which is voidable from its inception has not obtained all that he bargained for. By contrast, as Harman LJ held, where such a lender receives a security which is valid (i.e. fully enforceable) when made and will remain so if registered, he has obtained all that he bargained for.”
“What is the basis of the doctrine of subrogation? It is simply that, where A’s money is used to pay off the claim of B, who is a secured creditor, A is entitled to be regarded in equity as having had an assignment to him of B’s rights as a secured creditor. There are other cases of subrogation where B is not secured, but the ordinary and typical example is as I have stated. It finds one of its chief uses in the situation where one person advances money on the understanding that he is to have certain security for the money he has advanced, and, for one reason or another, he does not receive the promised security. In such a case he is nevertheless to be subrogated to the rights of any other person who at the relevant time had any security over the same property, and whose debts have been discharged, in whole or in part, by the money so provided by him, but of course only to the extent to which his money has, in fact, discharged their claims.”
“Once the equity is established, the court satisfies it by declaring that the property in question is subject to a charge by way of subrogation ...” 82. See also p.342C, where Millett LJ said: “The order merely satisfied a pre-existing equity.” 83. On that approach, the issue in the instant case becomes a straightforward issue of priority as between competing equitable interests in real property. So formulated, the issue is, on authority, capable of only one answer, viz. that where the equities are equal (as they must be assumed to be in the instant case) the earlier in time will prevail (see Snell’s Equity, 30th edition, at para 4-38). 84. I add for completeness that although in his written skeleton argument Mr Hill-Smith advanced an argument that if it came to a question of priorities the equity of the respondent should be regarded as, in effect, a “mere equity” not susceptible of conferring priority over a subsequent purchaser of an equitable interest without notice, he did not develop that argument in his oral submissions. In my judgment he was right not to do so, since the argument is a bad one. As the authorities to which I have referred make clear, a claimant who is subrogated to a security right is treated in equity as if had that security: thus in a case such as the instant case, where the security takes the form of an unpaid vendor’s lien, he is, as the judge correctly concluded, an equitable chargee to the extent that his money was used to pay the purchase price for the property.”
“ This brings me to the fifth reason relied upon by the Court of Appeal and what I regard as the main question in the case, namely the fact that "keeping the charge alive" for the benefit of BFC would give it more than it was entitled to expect. The transaction contemplated that BFC would be an unsecured creditor of Parc; "keeping the charge alive" would give it the benefit of a first charge. This makes it necessary, as I earlier foreshadowed, to examine more closely what is involved in subrogation to a security. In my view, the phrase "keeping the charge alive" needs to be handled with some care. It is not a literal truth but rather a metaphor or analogy: see Professor Birks's An Introduction to the Law of Restitution, (1985) pp. 93-97. In a case in which the whole of the secured debt is repaid, the charge is not kept alive at all. It is discharged and ceases to exist. In a case like the present, in which part of the secured debt is repaid, the charge remains alive only to secure the remainder of the debt for the benefit of the original chargee. Nothing can affect his rights and there is no question of competition between him and the party claiming subrogation. It is important to remember that, as Millett L.J. pointed out in Boscawenv.Bajwa[1996] 1 W.L.R. 328, 335, subrogation is not a right or a cause of action but 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. When judges say that the charge is "kept alive" for the benefit of the plaintiff, what they mean is that his legal relations with a defendant who would otherwise be unjustly enriched are regulated as if the benefit of the charge had been assigned to him. It does not by any means follow that the plaintiff must for all purposes be treated as an actual assignee of the benefit of the charge and, in particular, that he would be so treated in relation to someone who would not be unjustly enriched.” ii) the statement of Jonathan Parker LJ at paragraph 84 of Halifax plc v Omar cited above; iii) the statement of May LJ (with whom the other members of the court agreed) in Filby v Mortgage Express (No 2) Ltd[2004] EWCA Civ 759 at paragraph 63: “The essence of the remedy is that the court declares the claimant to have a right having characteristics and content identical to that enjoyed, in this instance, by Midland Bank (see Birks, at page 95), subject to any modification (for example as to rates of interest) necessary to ensure that the claimant does not get more than he bargained for.”; iv) dicta of Moore Bick J in Niru Battery Manufacturing Co v Milestone Trading Ltd (No 2) [2003] EW H C 1032, at paragraphs 32-37, where, when holding that the subrogated claimant did not need to join as a party the discharged creditor, he said: “32. Mr. Bloch's next submission was that a claim for relief by way of subrogation cannot be made in the absence of the party to whose rights the claimant seeks to be subrogated. Neither Niru nor Bank Sepah, of course, has ever been a party to the contribution proceedings. 33. This submission was based on the decision of the House of Lords in Esso Petroleum Co. Ltd v Hall, Russell & Co. Ltd (The 'Esso Bernicia') [1989] 1 A.C. 643. In that case the vessel Esso Bernicia was involved in an accident while berthing at Sullom Voe terminal under the control of tugs. The failure of a piece of equipment on board one of the tugs caused the vessel to come into contact with the jetty as a result of which both the vessel and the jetty sustained damage and the foreshore in the area of the terminal was contaminated by fuel oil. Esso paid compensation to the owners of the jetty and to crofters whose sheep had been injured by the pollution of the foreshore and sought to recover from the builders of the tug, Hall, Russell & Co., on the grounds that they had been negligent in its design and construction. Esso contended that it was entitled to be subrogated to the claims of the jetty owners and the crofters against Hall Russell in tort and could pursue those claims in its own name. 34. The House rejected Esso's argument, holding that it could pursue the claims of the jetty owners and the crofters only in their names. The reason for that, as Lord Goff pointed out at page 663A-C, was that Esso's payment did not discharge Hall Russell's liability, and for the same reason Esso could not make a claim in restitution because Hall Russell had not been enriched at its expense. Lord Jauncey reached the same conclusion after a lengthy analysis of the authorities in the field of insurance. He regarded it as a general rule of both English and Scots law that an indemnifier who is subrogated to the rights of someone whom he has indemnified can only pursue those rights in the name of that person, but his comments must be read in the context of the case then before the House in which Esso was seeking to bring proceedings in its own name to enforce the rights of those whom they had indemnified. It is apparent from Banque Financière de la Cité v Parc (Battersea) Ltd, however, that the pursuit of claims against third parties is not the only manner in which the remedy of subrogation operates and I do not think that his remarks can be understood as applying to every case in which the remedy of subrogation is available, regardless of the manner in which it takes effect. 35. In Banque Financière de la Cité v Parc (Battersea) Ltd Lord Hoffmann emphasised that subrogation is a means by which the court regulates the legal relationships between parties in order to avoid unjust enrichment and the precise manner in which it operates may vary according to the circumstances of the case. Similar statements of principle can be found in the speeches of Lord Clyde and Lord Hutton. The position in The 'Esso Bernicia' was essentially indistinguishable from that which arises when an insurer provides an indemnity under a contract of insurance, save for the fact that there was in that case no contract between Esso and the jetty owners or crofters. The payment of compensation did not discharge their claims against Hall Russell which, in the absence of an assignment, could be enforced only in their name. The situation in Banque Financière de la Cité v Parc (Battersea) Ltd was quite different. In that case money advanced by the claimant was used to discharge in part the original loan and the effect of allowing the claimant to be subrogated to the security as against the defendant (though not as against other parties involved) was to regulate the relationship between the two of them in a manner that avoided unjust enrichment. There was no question of pursuing a claim of any kind and it does not appear that the holder of the security to whose rights the claimant was entitled to be subrogated was a party to the proceedings. 36. It is convenient to digress briefly at this point to deal with Mr. Bloch's submission that CAI's liability has not been discharged in the present case because the matter is going to appeal and because Niru has made it quite clear that, if SGS is successful in having the judgment against it set aside, it will seek to recover from the bank. The fact that the judgment is under appeal is in my view irrelevant to the question now under consideration. Unless and until it is set aside or varied by the Court of Appeal it establishes with complete finality the parties' respective positions in law. This is an elementary principle that provides the foundation for the rule of estoppel by record. Accordingly, SGS's right to relief must be determined solely by reference to the position as it now stands. Whether steps should be taken to protect the position of CAI in the event of a successful appeal is another matter entirely, but both parties to the contribution proceedings are substantial companies and it has not yet been suggested that there is any practical need for such protection. 37. In my view the fact that Niru has obtained judgment against both CAI and SGS and that the judgment has been satisfied by the payment made by SGS provides an important distinction between this case and The 'Esso Bernicia'. Niru 's rights against CAI merged in the judgment and the satisfaction of the judgment is a bar to any further claim by Niru. It would be impossible, therefore, for SGS now to pursue a claim against CAI in the name of Niru. It does not necessarily follow, on the other hand, that the legal relationship between CAI and SGS cannot be regulated in a way that prevents unjust enrichment. If subrogation is available as a remedy, this is a case in which, in the words of Romer J. in Chetwynd v Allen[1899] 1 Ch. 353 , Niru's claim against CAI is "kept alive in equity" in favour of SGS. In other words, as Lord Hoffmann explained in Banque Financière de la Cité v Parc (Battersea) Ltd , the legal relations between SGS and CAI can be regulated as if the benefit of Niru's judgment against CAI had been assigned to SGS. I am unable, therefore, to accept that the claim for subrogation must fail simply because Niru is not a party to the contribution proceedings.”
“at any time after the Lender shall have demanded payment of any of the Secured Liabilities or after any breach by the Chargor of any of the provisions of this Charge or the occurrence of an Event of Default… ”
“he who seeks equity must do equity” and “he who seeks equity must come with clean hands”
“' Certainly the concept that the appropriation of an unliquidated claim to pay mortgage debt by the mortgagor will effect a discharge nisi of that debt seems both novel and awkward. Unless and until the mortgage in this case is discharged in the appropriate way on actual payment and acceptance of the sum due, I think that the mortgage remains a mortgage, and that the mortgagee is entitled to any surplus proceeds of sale in the hands of the bank up to the amount properly due under the mortgage. A doctrine of the discharge of a mortgage debt by the existence of unilateral appropriation of an unliquidated claim is one to which I gave no countenance; I regard it as neither convenient nor just. Even where there is a claim which is both liquidated and admitted, and it exceeds the mortgage debt in amount, it may be to the interest of one party or the other, or both, that the mortgage and the mortgage debt should continue in existence. The rate of interest may be attractively high or seductively low; there may be fiscal advantages in keeping the mortgage alive; there may be new projects to be financed which make liquid cash preferable to the satisfaction of mortgage debts; and so on. Nor have I heard any reason why it should be the mortgagor who is to have a unilateral power to discharge the mortgage debt by appropriation without payment.” [Emphasis supplied.]
“I entirely agree with what he there says and, accordingly, I uphold the decision of the judge not to stay the action against the bank.”
“For the defence of unclean hands to operate at all, the impropriety complained of “must have an immediate and necessary relation to the equity sued for”