Chess Pieces
wig and book pic

January 2018

stay one step ahead...

for a printer friendly pdf

Contents C
Midtown Acquisitions LP v Essar Global Fund Ltd (unrep QBD 16 Jan 2018) Charging orders - priorities - 'first past the post principle'
Case name Neutral citation Legal points Case summary Facts Held Comment Midtown Acquisitions LP v Essar Global Fund Ltd (Unrep QBD 16 January 2018) Charging orders – priorities – ‘first past the post’ principle In deciding which of two charging order applications to grant first, the court would seek an equitable result having regard to all the circumstances. ‘First past the post’ was not a rule or principle. Two separate creditors each obtained substantial money judgments against the defendant company which they sought to secure by charging orders. C1 obtained an interim charging order six weeks before C2. They then both applied for final charging orders. C1 claimed that its charging order should rank first on the basis of the ‘first past the post’ principle. C2 claimed they should rank equally. ‘First past the post’ was not a rule or principle, but an observation of what could happen. It would also be inconsistent with the Charging Orders Act 1979 which gave the court a discretion whether to grant a charging order or make it final. The correct approach was to seek to achieve an equitable result having regard to all the circumstances of the case. The court had regard to a number of factors: that Cs 1 and 2 were significant commercial parties, well able to look after their own interests; that C1’s interim charging order had not been engineered by D; that C2 was not seeking pari passu treatment for all creditors; that C2 had not been delayed by any conduct on the part of D; and that the court had no reason to question the diligence of the other, and concluded that it was not inequitable to prefer one party over the other on the basis of ‘first past the post’. Accordingly, C1 should enjoy priority. A charging order takes effect and is enforceable in the same manner as an equitable charge (Charging Orders Act 1979, s 3(4)). A charging order in respect of the legal title to registered land can be protected, and priority obtained, by registration of an agreed or unilateral notice (no priority can be obtained in respect of a charging order over a beneficial interest, save for limited protection by way of a Form K restriction). The effect of the priority rules in ss 28-30 Land Registration Act 2002 is that the priority of competing equitable charges is governed by their date of creation, not the date of registration. See generally HM Land Registry Practice Guide 76: Charging Orders. Hence the significance of the court determining which of two competing applications for charging orders to grant first. There are some notes on the ‘first past the post’ principle in the White Book 2017, Volume 1 at 73.10.4. Prior to this case, the general rule was that in the absence of an applicable insolvency or statutory regime, the first creditor to obtain a charging order takes priority over later charging orders and unsecured creditors (James Bibby Ltd v Woods [1949] 2 KB 449; FG Hemisphere Associates LLC v Democratic Republic of Congo [2005] EWHC 3103 (QB)), subject to the discretionary powers of the court under s 1 Charging Orders Act 1979 (British Arab Commercial Bank Plc v Ahmad Hamad Algosaibi and Brothers Co [2011] EWHC 244 (Comm)).