III. When does the doctrine of asset pooling work and when does it not? 1. The pledged property belongs to two or more persons. Therefore, the Court of Appeal ruled that (although this did not affect Barlcay`s previous ranking on the securities), there was no impediment for Highbury to assert its assembly rights on the affiliates` properties without first awaiting a decision from Barclays. The Marshalling doctrine is therefore based on the principle that a creditor who has the means to pay his debts from several funds cannot, in exercising his right, discriminate against another creditor whose guarantee consists of only one of those funds. In Nova Scotia Savings & Loans v. O`Hara et al.[3], whose doctrine is to ensure fairness, does not apply to the prejudice of the third party. These cases – and many others not cited here – show that the doctrine of asset pooling is complex, can be unpredictable, and evolves during this uncertain time. Believers must be aware of the doctrine and know how it could be applied in each of their cases. Creditors may also want to keep the doctrine in mind when analyzing loans to be renewed. Proactive thinking will help protect a creditor`s interests. Section 56 of the Transfer of Ownership Act, 1882 refers to assembly by subsequent purchasers, while the rule deals with sale rather than mortgage. It was decided that triage applies to all forms of secured debt, including liens.

[3] [4] The contribution rule refers to the collective contribution of mortgage debtors to a mortgage debt. It gives a mortgage debtor the right to have the other`s property contribute to the release of the mortgage debt. If a creditor has a single claim against several debtors, he can realize the debt of one of them, but according to the deposit rule, he can require a contribution to the debts of the other debtors, so that the burden can fall on everyone equally. The rule is summarized in Article 82 of the TOPA and can be subdivided as follows: In the case of Devatha Pullaya v. Jaldu Manikyala Rao[1], where a puisne hypothecary creditor has expressly contracted the mortgage on condition that he releases a certain amount due for the previous mortgage but does not respect it, he cannot exercise the right of marshal. In certain circumstances, that case-law has also held that, while subrogation may, as a general rule, have the effect of settling a debt by a guarantor outside the framework of triage, equitable subordination may make the guarantor`s assets within its reach. [8] Marshalling is a just doctrine applied in the context of lending. It has been described by Lord Hoffmann as follows: Scottish law has the corresponding doctrine of „Catholic titles“, and Lord Reed, in a 2013 judgment of the Supreme Court of the United Kingdom, described its effect as similar to marshalling: when the owner of two or more properties pledges them to at least one person and then sells one or more of the properties to another person, Unless otherwise agreed, the buyer is entitled to the satisfaction of the hypothecary debt arising from the property or immovable property sold to him, to the extent that this extends, but not to the rights of the hypothecary creditor or persons who make a claim under him, or of any other person who has acquired an interest in one of the goods for consideration, to impair faculties. Most of the doctrines governing the right to transfer property have been largely derived from the law of justice, justice and good conscience. The purpose of this doctrine is to ensure that justice has been done to the subsequent hypothecary creditor and buyer without causing prejudice to previous mortgageees.

In short, the triage rule in the above case gives the buyer the right to require the owner that the property be free of any charge before the buyer buys the property. The courts often play a balancing act of fairness to all parties. In a bankruptcy case that applies Ohio law, the court concluded that even if the interests of the second creditor were not perfected, the imperfect interests would still be entitled to secured status based on the facts of the case. The first creditor had a significant debt of approximately $31.7 million. It was secured by both immovable property and collateral shared with the second creditor. The court found that the value of the property is $32.5 million. Therefore, the court concluded that it would be unfair to allow the first creditor to pursue the common security, since its interests were fully satisfied by the value of the asset. Under this section, the subsequent or puisne hypothecary creditor was given the power to request the previous hypothecary creditor to settle its debts from properties that are not pledged to the puisne hypothecary creditor. This right is granted against the mortgage debtor. If the previous mortgagee wants to pay off their mortgage debt, this is the essential time to exercise the right to assembly. Contribution means providing money for the common fund.

Article 82 of the Transfer of Ownership Act deals with the rules relating to the contribution of money to mortgage debts. A person who has discharged joint responsibility has the right to claim a reasonable share from others. Contribution theory requires that persons with common liabilities be fair to liabilities. The main issue in Szepietowski was whether or not the doctrine is applicable in a situation where the debtor has no personal liability to the subordinate creditor (with the exception of the obligation to apply the proceeds of the sale of the security to the amount claimed by the subordinate creditor). The doctrine of asset pooling is not an absolute right. This is a fair remedy, which means that the court controls it on a case-by-case basis to „promote justice“. Because it is fair, the court considers all parties, including other non-assertive creditors and the debtor. The doctrine cannot be used to achieve an unfair result or to significantly harm a party with an interest (including the debtor). In other words, the court reviews all the evidence in its possession and makes its decision based on what it considers „fair“ to all. The onus is on the party requesting the combination to demonstrate that it will not unreasonably prejudice the older creditors.

In the present case, Ms Szepietowski had no debt to SOCA, at least after the sale of the additional immovable property and the payment of the balance to SOCA. As a result, Lord Neuberger (with whom The Lords Sumption and Reed agreed on this point) argued that „there is simply nothing, in particular no debt of the mortgage debtor, from which the right of marshal may arise once the common property has been sold and the proceeds of the sale have been distributed according to legal priorities“ [50]. The court ruled that he could not exercise his right to maneuver in this case. Marshalling means organizing something. Section 81 of the Transfer of Ownership Act provides that if the owner of two or more properties pledges them to one person and other immovable hypothecs to other persons, the new hypothecary creditor has the right, in the absence of a contract to the contrary, to settle the mortgage debt from the immovable property that has not been pledged to him. to the extent that this will extend, but does not affect, the rights of the former hypothecary creditor or persons making a claim under him or another person who has acquired an interest in one of the property for consideration. The right granted to the subsequent hypothecary creditor under this section provides for a situation where a hypothecary debtor pledges more than two or more assets first to a hypothecary creditor and then some of those assets to the other person. Already at the time of the award, it was clear to the parties that the levy itself would not be worth much, as there would probably be little sales proceeds after the settlement of the RBS fee. It was therefore clear that the indictment had been filed by SOCA as a precursor to the next maneuver claim.

The argument would be that RBS was the main creditor, SOCA the junior creditor, and the additional features were a common security right. SOCA would try to reach out to the other security which is Ashford House. Lord Neuberger described in his judgment the basis of the order of precedence between [32] and [38]. On the basis of existing cases, it agrees with the assertion that „triage is neutral in its impact on the arrears available to the debtor after the settlement of the claims of its creditors“. In the usual situation where there is personal liability for which the burden has been imposed on the subordinated creditor, the debtor does not really lose through triage. If the subordinate creditor could not enter into the principal creditor`s other security right, the subordinate creditor would simply have the additional difficulty of having to apply for an indictment order against that security. This is not a real disadvantage for the debtor. Lords Carnwath and Hughes disagreed with this approach. For them, the reason for the combination is the arbitrariness of the decision of the senior creditor, it brings natural justice between the senior and subordinated creditors and not between the subordinated creditor and the debtor or his unsecured creditors [101] and [107].

Apart from construction issues, the existence or non-existence of the debtor`s personal liability has no bearing on the injustice between lead and subordinated creditors resulting from the arbitrary decision. On this basis, neither Lord Carnwath nor Lord Hughes were prepared to accept that the absence of personal liability on the part of the debtor alone would exclude the doctrine of assembly.