Q&As

When might a lender find the remedy of subrogation open to it?

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Produced in partnership with Richard Hanke of 3 Verulam Buildings (3VB)
Published on: 10 January 2017

When a lender (A) discharges the liability of a borrower to a secured lender (B), A may be entitled to revive and take the benefit of the security formerly held by B, along with any priority enjoyed by that security. This is referred to as being subrogated to that security interest.

Subrogation is frequently sought in the mortgage lending context when there has been some defect in the security acquired by A, or where A failed to obtain any security at all (for example because of a fraud). It is, however, of potential application outside this context.

The predominant modern analysis is that subrogation is available as a remedy for unjust enrichment. The lender must therefore fulfil the usual requirements of such a claim, establishing that:

  1. the borrower has been enriched

  2. the enrichment was unjust (in this context the most common grounds of restitution are failure of consideration or mistake)

  3. the enrichment was at the expense of the lender

This

Richard Hanke
Richard Hanke chambers

Richard is a specialist in complex litigation, with a particular focus on banking, commercial fraud, general commercial disputes, financial services regulation and insolvency. He is described in the directories as ‘very approachable, user-friendly and a pleasure to work with, as well as extremely knowledgeable’ and ‘a capable and consistent performer’. He has been highly commended in Legal Week's list of up and coming ‘Stars of the Bar'.

A focus of Richard’s practice is retail and investment banking disputes. He regularly acts for retail banks in interest rate risk protection product disputes and was sole counsel in Bailey v Barclays Bank Plc [2014] EWHC 2882 (QB), which remains one of the principal reported decisions in the field. He also has extensive experience of litigation relating to derivatives more generally as well as acting as sole counsel and as part of a larger team in proceedings relating to complex financial products and arrangements.

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Remedy definition
What does Remedy mean?

The means by which a court enforces a right or orders redress for a wrong. It can include damages (whether compensatory or restitutionary), injunctive relief (whether interim or final) and specific performance (of outstanding obligations).

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