Insolvency Oracle

Developments in UK insolvency by Michelle Butler


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A Collection of Two Halves – Part 1: New Cases

0531 Caiman

It’s been a while since I blogged on case law, so I’ve divided my pile into two posts. In this one, I summarise some decisions that I’ve not seen covered widely elsewhere:

Re Coniston Hotel – an Administration challenge, which may have stoked Tomlinson’s embers, fails to ignite.
Holgate v Reid – more Administrators’ actions are challenged: dispute over a Para 52(1)(b) statement.
Shaw v Webb – post-petition dispositions persuade the court to choose winding-up over Administration.
Thomas v Edmondson – can an IPO be granted after a short IPA is completed?
Barnes v The Eastenders Group – Supreme Court decides CPS must pay Receiver after failed restraint order.

West Registrar case hits a wall

Re Coniston Hotel (Kent) LLP (In Liquidation) (8 April 2014) ([2014] EWHC 1100 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2014/1100.html
The long-running claims of the members of the LLP that the Administrators, RBS, and property agents, had conspired to defraud came to a head in this application brought by the former Administrators in which they sought the striking-out of the members’ proceedings.

The judge’s summary of the members’ claims leaves the reader in little doubt as to what the punchline might be: “The Members’ criticisms are not about professional negligence by the Administrators or by the valuers whom they instructed or by the agents whom they instructed to sell the Hotel, nor are there criticisms about the mode of sale, nor the handling and outcome of the negotiations for the sale. Instead the Members have pleaded a very different kind of challenge to the sale… [They] say that the marketing process was a sham. They do not identify the respects in which it was a sham, but they say it was a sham. They say it was a pretence and they say that it was pursuant to a conspiracy to defraud… All the conspirators knew, so it is alleged, that the Hotel was worth £7 million. It is quite clear that the Bank’s duty and the Administrators’ duty would have been to get the open market value for the Hotel and to achieve the market value. However, so it is alleged, the Bank was not prepared to see the Hotel sold for its full value and the debt owed to the Bank paid. What the Bank wanted instead was that the Hotel should be sold at around 50 per cent of its true value and not sold in the open market to a fortunate purchaser, but sold to an associated company of the Bank, West Register Limited. In order to carry this fraud to fruition, it was necessary to have Knight Frank place a value on the Hotel, which was about 50 per cent of what Knight Frank fully appreciated was the true value, about 50 per cent of £7 million. Armed with that fraudulent valuation from Knight Frank, the conspirators would then pretend to market the hotel, there would be a sham marketing process and the Hotel would be sold to the predetermined purchaser, West Register. I suppose one can see what was in it for West Register. They would acquire something at half its true value. It is less obvious what was in it for the Bank, because their debt, which exceeded the sale price that came about, would not be paid in full, but, perhaps, the Bank would be content that its associate had profited in that way. It is difficult to see what Knight Frank’s motive for this very serious act of dishonesty and wrongdoing would have been. It is submitted to me that they had motive enough: they wanted to please the Bank. It is also difficult to see what the Administrators’ motive would have been for participation in this fraud. This fraud is of the gravest and most serious character. However, it is submitted to me that I should see the force of the point, that the Administrators simply wanted to please the Bank” (paragraph 28).

Nevertheless Morgan J acknowledged that “it is a strong thing for a judge to strike out a case or give summary judgment, particularly in a case where there is an allegation of serious wrongdoing” (paragraph 33) and he also noted “a most disturbing report” (paragraph 25) written by Lawrence Tomlinson, by which he was “sufficiently disturbed… to give the Members a chance to take legal advice as to whether they had a properly pleadable case at an undervalue” (paragraph 50).

In relation to the allegation that the marketing was a sham, the judge stated that it was “utterly fanciful. It is an allegation put forward by someone (the Members) who simply refuse to face up to the reality of what has happened here” (paragraph 43). In dealing with the allegations that the prospective Administrators’ communications with the Bank were improper, the judge noted that the letter of instruction was “really very clear indeed” as regards the relationships between the parties and there was a “complete lack of material to indicate that [the IPs] were guilty of this very serious fraud”. In view of this, Morgan J also had strong words for counsel for the members: “his professional duty was to decline to plead the allegation which he did plead, alternatively, to withdraw from the case” (paragraph 49).

Consequently, the judge dismissed the conspiracy to defraud or, alternatively, the undervalue claim, along with the members’ Para 75 claim, which was quickly dismissed on the basis that the members did not have a pecuniary interest in the relief sought.

(UPDATE: the judgment on the appeals was given on 13/10/2015 ([2015] EWCA Civ 1001).  The involvement of West Registrar made Lady Justice Arden “scrutinise what happened with scepticism, but at the end of the day it is impossible for the appellants to get round the evidence as to the way the respondents marketed the hotel”.  The appeals were dismissed.)

Another challenge of Administrators’ actions

Holgate & Holgate v Reid & Dawson (20 February 2013) ([2013] EWHC 4630 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/4630.html
This is a fairly old judgment, but it has only recently been published on BAILII.

The Holgates are creditors and members of a company over which Joint Administrators were appointed by the QFCH. The Administrators included a Para 52(1)(b) statement in their Proposals. Mr Holgate requisitioned a creditors’ meeting, but then withdrew his request, having received the Administrators’ request for an indemnity to cover the costs of convening a meeting, estimated at £21,900. Shortly thereafter, the Administrators issued notice that the Proposals were deemed to have been approved.

Some time later, the Holgates applied to court under Para 74 to order the Administrators not to sell the company’s business and assets as they planned; to revoke the deemed approval of the Proposals and the basis of the Administrators’ fees as fixed under R2.106(5A); and to require a Para 51 creditors’ meeting to be held. The Holgates submitted that the company could, and should, be rescued as a going concern by means of a CVA and thus the Administrators should not have made a Para 52(1)(b) statement. They also submitted that there had been a fundamental change of circumstances since the Administrators’ Proposals, because since then the FSA had announced that the major banks had agreed to provide redress on mis-sold interest rate hedging products and that such redress may well negate the bank’s claim against the company. The Administrators countered that the business had been trading at a loss both before and after Administration and that, whilst they had instructed solicitors to investigate the mis-selling claim, they were not in funds to pursue it. They were also keen to conclude the business sale for fear that it would otherwise fall away.

The Holgates failed to persuade Hodge HHJ that the Administrators’ evidence that the company could not be traded profitably was wrong. Thus the judge concluded that, on the evidence, it could not be said that the Administrators did not genuinely hold the opinion that the company had insufficient property to enable a distribution to be made to unsecured creditors other than out of the prescribed part and therefore they acted properly in dispensing with a creditors’ meeting by reason of the Para 52(1)(b) statement in their Proposals.

The judge found that the costs within the estimate of £21,900 in relation to a requisitioned meeting “may well have proved exaggerated; but I am not satisfied that they were deliberately exaggerated by the administrators with a view to deterring Mr Holgate from pursuing his requisition of a meeting. In my judgment, the administrators were acting cautiously in looking at a worst case scenario for the costs” (paragraph 38) and, in any event, the creditors’ meeting could have resolved that these costs be paid from the estate.

Hodge HHJ also considered the Holgates’ application in relation to Para 74(6)(c), i.e. that no order may be made if it would impede or prevent the implementation of proposals approved more than 28 days earlier. The judge felt that this applied as much to deemed approved proposals and that, as the Holgates were asking the court to resist the business sale, which was “the whole tenor of the proposals” (paragraph 44), he should dismiss the application. As an alternative, he was also not inclined to exercise the court’s discretion, as he felt that Mr Holgate had acted unreasonably in not pursuing the requisition for an initial creditors’ meeting and he pointed out that Mr Holgate had the right even then, under Para 56, to requisition a meeting given the apparent level of his claim as creditor.

As regards the suggestion that the FSA announcement supported a change in circumstances that might persuade the court to make a direction under Para 68, Hodge HHJ did not agree: “the existence of the FSA review merely relates to the means by which the mis-selling claim may be pursued. It is not clear whether it applies in the present case, or will secure sufficient satisfaction for the company even if it does. In any event, because I am not satisfied that the rescue of the company as a going concern is a viable proposition, it does not seem to me that there is any proper basis for the court to give any directions under paragraph 68 with regard to the holding by the administrators of a meeting of creditors” (paragraph 51).

Despite a consenting winding-up petitioner, the court declines to make an administration order and instead appoints a provisional liquidator

Shaw v Webb & Ors (10 April 2014) ([2014] EWHC 1132 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2014/1132.html
HHJ Simon Barker QC acknowledged that, “on paper the criteria or preconditions for making an administration order, which are set out at paragraph 11 of Schedule B1, are made out: (a) there is no question but that [the company] is unable to pay its debts, and (b) the evidence of Mr Webb points to it being reasonably likely that the purpose of administration (in this case a better result for the creditors than would be likely on liquidation) will be achieved if an administration order is made” (paragraph 18). In addition, neither the petitioning creditor nor the QFCH opposed the making of an administration order. Therefore, why did the judge decline to make the administration order, but instead appointed Mr Webb as provisional liquidator, allowing the winding-up petition to proceed?

The judge felt that the payment of £115,000 that occurred post-petition “cries out for satisfactory explanation and justification” (paragraph 23); he felt similarly concerning the purchase of the company’s sole share post-petition; and he wondered whether there were other dispositions that may be unjustifiable, expressing surprise that the bank statements for the post-petition period were not in evidence (another item to add to the administration order application shopping list?)

Consequently, in view of the fact that the making of an administration order would neutralise the effect of S127 in relation to post-winding up petition dispositions, Simon Barker HHJ felt that it was appropriate to call the winding-up petition on for hearing. A winding-up order has since been granted.

Can an Income Payments Order be made after a short Income Payments Agreement is completed?

Thomas & O’Reilly v Edmondson (12 May 2014) ([2014] EWHC 1494 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2014/1494.html

A bankrupt had entered into an Income Payments Agreement (“IPA”) with the Official Receiver, which effectively gave the OR the benefit of the bankrupt’s NT tax code up to the end of the tax year in which the debtor had been made bankrupt.

Later, Joint Trustees were appointed and, after failing to agree a further IPA with the debtor, they applied for an IPO in the amount of £10,000 per month for three years from the date of the IPO. The District Judge concluded that the Trustees were not entitled to an IPO on the basis that there had already been an IPA. The Trustees appealed.

Mrs Justice Aplin considered at length the effect of the introduction of S310A by means of the Enterprise Act 2002: were the intentions to limit the period of income payments to a maximum of three years and to provide that either an IPA is agreed or an IPO is sought?

The judge’s conclusion was that the court remains entitled to grant an IPO notwithstanding the previous IPA. She said: “It seems to me that the plain and ordinary meaning of section 310 is clear and that there is no reason to go beyond it. Furthermore, had the legislature intended that jurisdiction be limited in the way which is suggested, it seems to me that it would have said so at the time of the express amendments made by sections 259 and 260 of the Enterprise Act 2002” (paragraph 25).

As regards the issue of whether the combined maximum of income payments is three years, the judge said: “It seems to me that even if the Respondent is correct and it was Parliament’s intention that a bankrupt should not be required to pay part of his income to his trustee in bankruptcy for more than 3 years, the potential for an anomaly if there is jurisdiction to make an Income Payments Order despite an Income Payments Agreement having already been entered into is met by the existence of the discretion of the judge when exercising the jurisdiction whether to make the subsequent order and if so, the length of the order in question” (paragraph 28)… so I guess it remains to be seen whether the Trustees will be granted a full 3-year IPO on top of the 5-month IPA.

The Supreme Court upholds a Receiver’s right to be paid notwithstanding a quashed restraint order

Barnes v The Eastenders Group & Anor (8 May 2014) ([2014] UKSC 26)

http://www.bailii.org/uk/cases/UKSC/2014/26.html
I summarised the lead up to this Supreme Court appeal in an earlier post (http://wp.me/p2FU2Z-1H). Briefly, a Receiver was appointed over third party assets along with the CPS’ application for a POCA restraint order, which subsequently was set aside. The outcome of earlier court decisions was that the Receiver was not permitted to draw his fees and costs from the third party assets on the basis that the party’s right to peaceful enjoyment of its possessions under Article 1 of Protocol 1 of the European Convention of Human Rights (“A1P1”) took precedence, but also there was no basis under the POCA or the Human Rights Act 1998 for the CPS to be required to pay the Receiver’s fees and costs. The Receiver appealed to the Supreme Court.

In a unanimous judgment, the Supreme Court supported the previous decision that, as in this case there was no reasonable cause to regard the third party’s assets as the defendant’s at the time of the order, it would be a disproportionate interference with the third party’s A1P1 rights for the Receiver’s fees to be drawn from that party’s assets.

However, the judges felt that to leave the Receiver without a remedy would be to substitute one injustice for another and violate the Receiver’s A1P1 rights: “a receiver who accepts appointment by a court is entitled to know that the terms of his appointment will not be changed retrospectively. Moreover it is an ordinary part of receivership law that a receiver has a lien for his proper remuneration and expenses over the receivership property. To take away that right without compensating him would violate the receiver’s rights under A1P1” (paragraph 96). However, Lord Toulson agreed that there was no power in the POCA to order the CPS to pay the Receiver’s fees and costs.

The judge considered that the solution lay in the concept of unjust enrichment. The IP had agreed to act as Receiver on the basis that his agreement with the CPS provided for him to be paid from the defendant’s assets over which he would be entitled to a lien. The enrichment arose from the CPS’ perception that there would be a benefit to the public in the party’s assets being removed from its control and placed in the hands of the Receiver whilst its investigations were proceeding, but it was unjust enrichment as there was a total failure of consideration in relation to the Receiver’s rights over the assets, which was fundamental to the basis on which he was to act. Thus, the Receiver was entitled to look to the CPS for payment of his fees and costs.

Lord Toulson had some “lessons for the future” for the CPS. He noted that in the Court of Appeal judgment, the judge had “deplored the fact that the original application was made at short notice to a judge who was in the middle of conducting a heavy trial with only a limited time available for considering it” (paragraph 118) and stressed that, in view of the fact that such serious applications are made ex parte, the CPS had a special burden of candour and, because of the potential to cause serious harm, a material failure to observe the duty of candour could be regarded as serious misconduct.


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Three cases: (1) Marketing failures did not amount to breach of duty to take reasonable care; (2) CVA no protection for persistent non-payer of rent; and (3) marshalling across two debtors

Kayrul Meah v GE Home Finance Ltd – the court decided that the best price reasonably achievable for a property was obtained, despite flaws in the marketing process
Shah Din & Sons Ltd (CVA) v Dargan Properties Management Ltd – a Northern Ireland case, which I think demonstrates the need to consider the context of a company’s activity before presenting a CVA proposal
Highbury Pension Fund Management Company & Anor v Zirfin Investments Ltd & Ors – a case for insolvency geeks: an example of marshalling security over a second debtor

Shortcomings in marketing a property not considered fatal to discharging duty to take reasonable care to obtain the best price reasonably achievable

Kayrul Meah v GE Money Home Finance Limited ([2013] EWHC 20 (Ch)) (18 January 2013)

http://www.bailii.org/ew/cases/EWHC/Ch/2013/20.html

Summary: The claimant sought compensation from his mortgagee for allegedly selling a property at an undervalue. Whilst there was no formal insolvency or IP involved – the sale was conducted by the mortgagee in possession – I thought it provided some useful pointers on how the court views the duty to take reasonable care to obtain the best price reasonably achievable for a property. The judge levelled some criticisms at the marketing process, but ultimately decided that the property had been sufficiently exposed to the market.

The Detail: The property was put on the market at the beginning of 2006 for £185,000 through a local agent who had valued the property between £165,000 and £185,000. Within a matter of days, offers were received at and then above this asking price. Meah complained that the asking price had been set too low and in February 2006 GE consulted another agent who valued the property at £235,000 and suggested raising the asking price to £245,000. The local agent reluctantly did this and the property was sold in March 2006 to a developer for £221,500. Based on the value of the property post-development, Meah’s expert assessed the “true market value” of the property at the time of the sale having regard to the obvious development potential at £325,000.

The claimant’s counsel argued that the low asking price depressed offers from potential purchasers and that the low asking price had been set because the agents had failed to appreciate the property’s development potential. GE’s agent argued that the asking prices needed to be set to attract a good level of interest and that many of the recipients of the sales particulars were property developers to whom the development potential would have been obvious. The judge was not wholly convinced that putting a grossly inadequate asking price on a property to generate interest was sensible and he observed that the agent had valued the property at less than the asking price, so clearly the agent had been mistaken as to the value. Neither was the judge entirely convinced that it was sensible not even to mention the development potential in the sales particulars, although he also was not convinced that, as the claimant had argued, the agent should have gone to the length of commissioning a residual development assessment, noting that potential purchasers would carry out their own assessments. GE’s agent also came in for criticism when the court learned that he had expressed to the then front-runners who had offered £218,500 his view that the revised asking price, which he had been instructed by his clients to seek, was unrealistic. The judge referred to the principle in Raja v Austin Gray that, if the valuers were negligent, the borrower had a good claim against the receiver who did not discharge his duty of care to the borrower by entrusting the sale to apparently competent professionals.

However, notwithstanding these shortcomings, the judge concluded that the property had been sufficiently exposed to the market to enable all potential purchasers to bid for it if they so wished. With regard to the expert’s valuation of £325,000, the judge stated: “unless a bidding war developed between two or more such developers who had made similar calculations, this sum cannot be said to represent the best price reasonably achievable for the Property at that time” (paragraph 23). The judge used a phrase that IPs know well: “The market value of a property is the price which a willing purchaser is prepared to pay for the property to a willing vendor after the property has been exposed to the market for a reasonable period of time”.

It should be noted that the accepted practice of sales by mortgagee involves the advertising by so-called “public notice” in a local newspaper inviting further offers above the price accepted subject to contract. It appears that GE’s agent relied on this process to flush out the best offer, rather than seeking sealed bids.

N Ireland: CVA no protection for persistent non-payer of rent

Shah Din & Sons Limited (CVA) v Dargan Properties Management Limited ([2012] NICh 34) (5 December 2012)

http://www.bailii.org/nie/cases/NIHC/Ch/2012/34.html

Summary: Although this is a Northern Ireland case, I feel that it serves as a reminder to take care to consider the context of a company’s pursuit of a CVA, whether it is fair and whether the company’s past behaviour supports the case for its protection.

In refusing to grant relief from forfeiture in this case, the court considered “the backdrop of culpable and wilful non observance of [the company’s] obligations” (paragraph 22).

The Detail: The company in CVA applied for relief from forfeiture. The only asset in the CVA was a lease on a property that the company had vacated some six years earlier, but which the landlord had only re-entered and recovered possession of shortly before the proposal was put together. After exploring the chronology of events, the court found that the company had wilfully failed to pay rent over a number of years; Burgess J stated that the company had “to all intents and purposes taken a free ride from the outset” (paragraph 21) and he found that “the plaintiff’s attitude towards its responsibilities in the face of legal proceedings and warnings has been culpable to the highest degree” (paragraph 22). The judge also had difficulty with the terms of the arrangement, which introduced an uncertainty as to what would happen if the lease had not been assigned in the CVA’s 18-month period, noting that the landlord would continue to have to meet its obligations to the Council and to maintain the property during that time. Relief from forfeiture was refused.

A case for insolvency geeks: marshalling across two debtors

Highbury Pension Fund Management Company & Anor v Zirfin Investments Limited & Ors ([2013] EWHC 238 (Ch)) (14 February 2013)

http://www.bailii.org/ew/cases/EWHC/Ch/2013/238.html

Summary: This is a complex case, with which, to be honest, I only persevered out of a sense of stubbornness that I would not be beaten! It demonstrates the exception to the general rule that there must be a single debtor for marshalling. If marshalling holds no interest for you, then you might want to stop reading now… but if ever you do want to explore the principles of marshalling, this summary might come in handy.

The Detail: Barclays Bank Plc loaned monies to Zirfin Investments Limited and to four associated companies, “the Affiliates”. The loans were secured by means of legal charges over a property owned by Zirfin, “No. 31”, and properties owned by the Affiliates. As additional security for the loans to the Affiliates, Barclays also had the benefit of a guarantee from Zirfin, secured by means of the same charge over No. 31. Subsequent to Barclays’ charge, two other charges were granted over No. 31, in favour of Highbury Pension Fund Management Company and Cezanne Trading (described collectively as “Highbury”).

When Zirfin and the Affiliates defaulted on the loans, receivers were appointed over No. 31 and the eventual sale proceeds were applied to settle Zirfin’s debt to Barclays and to settle in part the Affiliates’ debt to Barclays by reason of Zirfin’s guarantee. The immediate consequence, therefore, appeared to be that Highbury had lost the benefit of their charges over No. 31 and sat as unsecured creditors in relation to the monies owed to them by Zirfin. However, this would not have been the case had Barclays looked to the Affiliates’ properties to discharge their debt, rather than calling on Zirfin’s guarantee.

To further complicate matters, the Serious Fraud Office obtained a Restraint Order over the assets of Mr Kallakis (consultant to a shareholder of Zirfin and the Affiliates) and the SFO regarded the assets held by Zirfin (including No. 31) and the Affiliates as subject to the Restraint Order.

The questions for the court were: (i) 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 and (ii) does any such claim to marshalling or subrogation take precedence over prohibitions contained in the Restraint Order?

The principle of marshalling “operates where a debtor (D) owes money to two creditors (C1 and C2), and where C1 has security over two properties (or some other call on two funds) (S1 and S2) but C2 has security over (or a right of resort to) only one (S1). In those circumstances C1 has a choice of recovering his money out of either S1 or S2. If C1 chooses to enforce the security over (or resort to) S2, then that leaves S1 available for C2. But if C1 chooses to enforce security over (or resort to) S1, then C2 has nothing to look to, and the security over S2 is not relied on at all, and becomes available to unsecured creditors (amongst whom C2 is now numbered). In that situation, in order to do justice equity applies a principle of maximum distribution and by a process akin to subrogation in effect gives C2 the benefit of C1’s unused security over S2, thereby ensuring that both C1 and C2 are paid by D as far as possible” (paragraph 15).

In this usual application of the principle, the debtor, D, is common to both creditors, C1 and C2. However, in this case, the Affiliates were debtors only to Barclays, not also to Highbury. Counsel for Highbury submitted that “although the general rule is that two or more creditors must be able to resort to two funds belonging to the debtor, this general rule is subject to an exception where… there is a common debtor who owes money to both creditors and he has a right, as between himself and a debtor who owes money to only one creditor, to ensure that the latter bears the ultimate liability” (paragraph 25). Counsel for Highbury acknowledged that there was no decided case in England and Wales that applied this principle, but relied on statements in text books and decisions in other jurisdictions.

In Norris J’s view, the doctrine of marshalling applied in this case: “Barclays has a claim against Zirfin as surety. It can look to two funds to satisfy that indebtedness. The first is the Zirfin Charge. The second is the Affiliates’ Charge. As regards Highbury’s claim to marshal, the Affiliates’ Charges can be bought into account (even though they are not over property belonging to Zirfin) because in equity Zirfin could call on the Affiliates to bear the burden of the debt and the Affiliates had the Affiliates’ Properties to enable them to do so” (paragraph 45). A limitation that Norris J noted regarding the rights acquired by Highbury on marshalling was that, “if Zirfin would not be subrogated to Barclays’ rights until such time as the Barclays debt had been entirely repaid, then Highbury cannot by a process akin to subrogation become entitled to any greater right” (paragraph 50).

Then the judge considered the SFO’s argument that Highbury has no “interest” in the Affiliates’ properties subject to the Restraint Order. Norris J did not believe that the Proceeds of Crime Act 2002 should be construed so as to “enrich the Crown by depriving Highbury of the right it otherwise would have had to marshal the securities” (paragraph 68). He therefore held “that the actions of Barclays have not deprived Highbury of the ‘interest’ which was previously recognised by the Restraint Order, and that if Highbury were to seek to bring itself within paragraph 25 of the Restraint Order or to seek a variation of the Restraint Order so as to make clear that it (rather than Barclays) was now contingently entitled to enforce the Affiliates’ Charges, the discretion given to the court ought to be exercised to permit that variation” (paragraph 70).

[UPDATE 26/11/2013: On 03/10/2013, Highbury’s appeal was allowed in relation to an element of the earlier decision that Highbury was not entitled to realise the securities until Barclays had been paid out in full (http://www.bailii.org/ew/cases/EWCA/Civ/2013/1283.html). In a more recent post, http://wp.me/p2FU2Z-4I, I summarise the appeal decision, which highlighted the difference between rights of subrogation and equity of exoneration.]