Marshalling: a Supreme Court-approved remedy for mortgagees

In Szepietowski v National Crime Agency (formerly the Serious Organised Crime Agency), the Supreme Court set out a clear test for when the remedy of marshalling should be available to a second mortgagee.

Marshalling is a principle for achieving fairness between two or more secured creditors of the same debtor. Where the first creditor enforces its security against assets over which both hold security but not against assets over which it alone holds security, the second creditor may be entitled to use the assets over which the former has security. Alternatively, the doctrine may require the former creditor to satisfy itself out of the asset over which the latter has no security.

In 2005, the Serious Organised Crime Agency (SOCA) brought proceedings to seize properties owned by Mr and Mrs Szepietowski on the basis that they were the proceeds of crime. Some of the properties, including the residential home, were registered in the name of Mrs Szepietowski and the Royal Bank of Scotland had a charge against them (and other properties) for a debt of £3.225m…

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