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The recent Commercial Court decision in Shukla v St James Bank & Trust Company Ltd has brought renewed focus to the doctrine of equity of redemption and the extent of a lender’s responsibilities when a borrower seeks to repay a loan.
The equity of redemption is an established principle which entitles a borrower to recover assets given as security once all secured liabilities have been discharged in full. It also prevents lenders from relying on contractual provisions that would block or restrict this right, with such terms (often described as “clogs” on the equity of redemption) being treated as void.
St James Bank & Trust Company Ltd (the Bank) provided a loan to Mr Shukla which was secured against certain listed shares, with the understanding that the Bank’s only means of recovery in the event of non payment was through those shares. After several events of default, the obligations under the loan became immediately repayable. When Mr Shukla sought to repay the loan, he claimed that the Bank refused to provide a redemption figure and instead asserted that it was entitled to keep and sell the shares.
Mr Shukla maintained that he should still be able to repay the loan and recover the shares despite the defaults and brought a claim for US$15m to reflect the drop in their value.
The Bank disagreed, arguing that the loan terms removed any right for Mr Shukla to reclaim the shares after default, meaning it was entitled to retain them even if they were worth more than the outstanding debt. It also said that the transaction had been structured as a sale with an option to repurchase, rather than a standard secured loan, so the usual borrower protections did not apply. The Bank further argued that it was under no obligation to assist with repayment and therefore should not be responsible for any loss in value of the shares.
The judge found that the arrangement was a secured loan, invoking the equity of redemption, meaning the borrower’s usual rights to recover the shares applied.
Although the documents gave the Bank extensive control over the shares, they also included clear language typical of a loan transaction, such as repayment obligations and references to a loan and lender/ borrower. There was further evidence that the intention was to provide financing, and the ability to substitute the shares for other security reinforced this. The claimant was under an obligation to repay the loan on maturity or acceleration, even though enforcement was limited to the pledged shares. The Court also noted that non recourse lending is still a recognised type of loan and does not convert a transaction into a sale. Lastly, the agreement did not include any clear transfer of beneficial ownership of the shares to the Bank and it was held that the Bank could not exclude the borrower’s right to redeem the shares after default.
The Court also confirmed that the Bank was required to cooperate with the repayment process. This included providing a redemption statement and repayment instructions once the loan became due. The Court held that its failure to do so was a breach of contract, entitling the borrower to damages.
The Court awarded summary judgment in favour of the borrower, with the Bank ordered to make an interim payment of damages and disclose any profits or income derived from the secured shares since they had been held by the Bank.
Shukla v St James Bank & Trust Company Ltd and another [2026] EWHC 851 (Comm) (14 April 2026)
The High Court has considered whether a legal charge altered after execution by one party only remained valid and enforceable on the terms of the executed deed prior to the alteration.
A lender, Together Personal Finance Ltd, advanced a 12-month bridging loan to the borrower, Ms Boult, secured by a legal charge over her residential property. The borrower also owned a separate parcel of agricultural land adjoined to the west side of the house; however it was expressly agreed that the security would be limited to the house alone, and the legal charge was executed on that basis.
Following execution, the lender’s solicitor amended the charge by adding in manuscript the title number of the second property, on the assumption that both the house and the agricultural land formed the intended security. This amendment was made without the borrower’s knowledge or consent. The amended charge was subsequently registered against both titles at HM Land Registry.
Upon receipt of the title documentation, the borrower discovered the inclusion of the additional property and challenged the validity of the charge. Once the lender became aware of the issue, they arranged for the charge and the restriction to be removed from the title of the second property.
Despite this, the loan remained outstanding for a number of years, and the lender eventually commenced possession proceedings. In response, the borrower relied on Pigot’s Case (1614) 11 Co Rep 26, which provides that a material alteration to a deed or other instrument after execution by one party without the knowledge or consent of the other renders it void, to argue that the unauthorised amendment invalidated the charge. The County Court rejected this defence, finding that the amendment was an accident or mistake and also was not material and therefore did not result in the charge becoming void. The borrower appealed to the High Court, raising three principal issues: whether the alteration was deliberate, whether it was material, and the application of the rule in Pigot’s Case.
The High Court allowed the appeal. It confirmed that the rule in Pigot’s Case applied, and that the key questions were whether the alteration was ‘deliberate’ and ‘material’.
In relation to deliberateness, the Court held that the amendment could not be characterised as a mistake, as initially found by the County Court. The rule does not apply to inadvertent alterations, but it does extend to intentional changes, even where they are made under mistaken belief. The Court found that the lender’s solicitor deliberately added the second property to the charge with the intention of altering the legal effect of the security. This satisfied the requirement of deliberateness.
On materiality, the Court said that the correct test is whether the alteration was capable of prejudicing the promisor’s rights or obligations at the time it was made. The County Court had focused on the absence of the actual prejudice and on subsequent events, including the later removal of the charge and the restriction from the title of the additional property. In fact, at the point of alteration and registration, the borrower was exposed to a genuine risk of enforcement against that additional property, which amounted to clear potential prejudice. The alteration, therefore, affected the legal effect of the instrument and was properly characterised as material. The Court also emphasised that materiality must be assessed at the time of the alteration itself, reflecting the rule’s purpose as a deterrent against fraud.
As a result, the legal charge was rendered void and unenforceable, and the possession order was set aside. However, the money judgment was not overturned as the borrower’s underlying liability to repay the loan was not challenged by the appeal.
HM Treasury has published its findings from the Ring-Fencing Review, identifying meaningful reforms to support economic growth, developed in close collaboration with the Bank of England. Following the review, the Government has proposed a comprehensive package of changes, including:
Ring-fencing was introduced in the UK following the recommendations of the Independent Commission on Banking in 2011 with a view to improving the stability of the banking sector following the 2008 financial crisis. It was implemented through the Financial Services (Banking Reform) Act 2013 and is set out in the Financial Services and Markets Act 2000. The regime required banks holding more than £25bn in retail deposits to separate their core retail banking activities into an independent entity (the ring-fenced body), isolated from investment banking activities (non-ring-fenced entities).
Following the Skeoch Review into the operation of the regime in 2022, HM Treasury implemented the “Smarter Ring-Fencing Reforms” through the Financial Services and Markets Act 2000 (Ring-Fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2025, which came into force on 4 February 2025. These reforms aimed to improve the regime’s efficiency and proportionality by introducing exemptions for retail-focused banks with limited trading activity, while also enabling banks to engage more easily in trade finance and SME lending through updated technical requirements. However, these reforms did not address all of Skeoch’s observations, including that the regime is inflexible and does not fully align with post-crisis prudential and resolution frameworks.
The latest review also considered additional measures, including allowing greater flexibility in firms’ ability to share resources and services across the ring-fence, and consulting on a proposed “New Growth Allowance” which would allow ring-fenced banks (RFBs) to undertake activities otherwise prohibited by the regime up to 10% of their risk-weighted assets. The review concluded that permitting sharing of financial resources between RFBs and non-ring-fenced bodies (NRFBs) would risk undermining the core objective of ring-fencing, namely maintaining financial stability, so no changes will be made in this area at present. However, the PRA will consult on allowing firms flexibility to share operational resources across the ring-fence. The New Growth Allowance remains subject to consultation.
Separately, while the Government has already increased the ring-fencing threshold from £25bn to £35bn under the 2025 Smart Ring-Fencing Reforms, the review found that conditions have not changed sufficiently to justify any further adjustment to the threshold at this stage.
Detailed next steps are outlined in the report, with amendments to primary legislation expected through the forthcoming Financial Services and Markets Bill 2026–27. Once enacted, additional reforms will be implemented through secondary legislation and updates to the PRA Rulebook.
The High Court has granted a lender an order for possession of a property, holding that the borrower’s designation under sanctions legislation did not suspend their obligation to repay a loan. The judge therefore granted the possession claim on the grounds of breach of the repayment obligations under the loan.
The borrower sought to rely on section 44 of the Sanctions and Anti-Money Laundering Act 2018, which protects a person acting in the reasonable belief that they are complying with sanctions legislation from liability in civil proceedings. The judge rejected this argument, relying on the Court of Appeal’s obiter comments in Celestial Aviation Services Ltd v UniCredit Bank AG [2024] EWCA Civ 628, that section 44 protects against something done (or not done) in the reasonable belief that it is in compliance with a sanctions regulation, but not against pre-existing liabilities. However, the judge did not refer to UniCredit Bank GmbH, London Branch v Constitution Aircraft Leasing (Ireland) 3 Ltd [2026] UKSC 10, the appeal from Celestial, in which the Supreme Court disagreed with the Court of Appeal’s comments on section 44. The Supreme Court's judgment was handed down after the hearing of this case but before the judgment was issued.
The judge rejected the lender’s claims that two further events of default had occurred: illegality and a MAC event of default (which required the lender to form a reasonable opinion that a MAC had occurred). The Lender had failed to prove by admissible evidence that such an opinion had been formed. However, the judge agreed that the possession order could be granted on the grounds of a breach of a repeating representation that there was no material adverse change (MAC) in the borrower’s business or financial condition.
West One Loan Ltd v Okroyan [2026] EWHC 1428 (Ch) (11 June 2026)
A recent High Court case has considered two key issues: whether a company signatory had validly executed a contract for the sale of land and whether receivers were validly appointed under a debenture where there was a clear mistake in the appointment documentation.
The claimants were two companies which owned development land. The companies formed part of a wider group which had obtained financing through a loan made to another group company, AIL. As security for the loan, the companies, AIL and their parent entities had granted intercompany guarantees and debentures to the lender, including a charge over the land owned by the claimants. The debentures allowed for the appointment of receivers if an event of default occurred.
The key shareholder of the group was declared bankrupt and the lender demanded repayment of the loan. The shareholder ceased to be a director of the claimant companies and the other directors resigned, following which a new director was appointed. The new director signed a contract for the sale of the land which included provision for repayment of the sum charged over the land to the lender.
The lender then purported to appoint receivers under the debenture. The appointment documents
referred to AIL but the schedules attached identified the land held by the claimant companies. The receivers accepted this appointment and later filed notices against AIL, rather than the claimant companies. The receivers then purported to transfer the property to a transferee who then made a further purported transfer for a much higher price.
A dispute then arose regarding the validity of the original sale contract and whether the receivers had been validly appointed.
The claimants argued that the original sale contract signed by the new director did not comply with the formal requirements for signature of a contract by a company having been signed by a sole director without the presence of a witness. The Court distinguished between section 43 of the Companies Act 2006 (CA 2006), which deals with the formation of contracts, and section 44 CA 2006, which governs the formal execution of documents. Section 43 CA 2006 provides that a contract may be made by a company under its common seal or on behalf of a company by a person acting under its authority. Section 44 CA 2006 provides that a document is executed by a company by the affixing of its common seal or if it is signed by two authorised signatories or a director in the presence of a witness.
The Court held that the contract had been validly executed. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 requires that a contract for the disposition of an interest in land must be in writing signed by or on behalf of the parties to the contract, therefore compliance with section 43 CA 2006 was sufficient. The Court rejected the claimants’ argument that, because the signature block referred to the contract being “signed by” each seller with the director’s signature next to those words, the contract had to comply with the requirements of section 44 CA 2006. The judge said that it was clear that the intention was that the director would sign on behalf of each of the companies and the misplacing of the signature should not negate that intention.
However, the Court found that the receivers’ appointments were not valid. The letters of appointment and acceptance of the receivership contained an obvious mistake, referring to AIL (and AIL’s company number) but specifying property belonging to the claimant companies. For the Court to construe the contract to amend an obvious mistake requires for it to be clear that something has gone wrong with the language of a document, and what a reasonable person would have understood the parties to have meant. Rectification, which would require consideration of evidence as to the intentions of the parties at the time of the appointment of the receivers, had not been pleaded here. Although the mistake was obvious here, the correction was not. There were two possibilities: that receivers were intended to be appointed over the claimant companies’ property, or they were intended to be appointed over AIL’s assets. Therefore the Court could not correct the mistake.
BLCP Eden 1 Ltd (in administration) v Rooksmead Securities Ltd [2026] EWHC 1268 (Ch)
The Commercial Court has dismissed competing applications arising from parallel English and Singapore proceedings under finance documents. The Court held that an asymmetric jurisdiction clause in a loan agreement gave the borrowers the right to sue the lender in England, while also giving the lender the right to sue in any other court of competent jurisdiction, and did not prevent parallel proceedings from being brought.
The claimants (the Borrowers) were borrowers under ship finance arrangements with the defendant lender (the Lender) and the parties had entered into various finance documents including a loan agreement and a Liberian ship mortgage. The Lender made claims under the finance documents and the ship was arrested in Singapore. The Lender commenced proceedings in Singapore and the Borrower entered a defence and counterclaim to those proceedings.
The Borrowers then commenced a claim in England, seeking rescission of all the finance documents, reimbursement of all expenditure and losses incurred by the Borrowers as a result of entering into those documents and damages resulting from alleged misrepresentations. The Lender applied for an order for the English court to decline jurisdiction and stay the English proceedings, arguing that England was not the natural forum, that a stay was the best way to avoid duplicate proceedings, and that the jurisdiction provisions in the loan agreement were consistent with this. The Borrowers argued that the loan agreement gave them a contractual right to bring claims in England and that the Singapore proceedings should in fact be stayed.
The loan agreement contained an asymmetric jurisdiction clause which provided that the Borrowers could only sue the Lender in England, whereas the Lender could sue the Borrowers in England but also in any other court of competent jurisdiction. However, the parties disagreed on the effect of this clause on issues of parallel proceedings: whether the Borrower could still sue in England if the Lender had commenced proceedings elsewhere, or whether the Lender could sue elsewhere if the Borrowers had commenced proceedings in England.
The Court considered the terms of the jurisdiction clause and found that the Borrowers’ English claim was permitted and the Lender’s Singapore proceedings were also contractually permitted if Singapore had competent jurisdiction. The judge noted that the clause contemplated and sanctioned the possibility of parallel proceedings in more than one jurisdiction. The fact that this could lead to inconsistent decisions was a feature of the parties’ bargain, but this was an entirely foreseeable risk that both parties must be taken to have accepted.
Spec 1 Ltd and other companies v The Export-Import Bank of China [2026] EWHC 1162 (Comm)
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