Early Birds and Charging Orders

It is clear that the Court has discretion as to whether it will make a charging Order in any given case, but how should that discretion be exercised? Should it take into account the interests of other creditors?

In British Arab Commercial Bank plc v Algosaibi [2011]All ER (D) 147 Sep, HSBC was one of several creditors who had obtained significant money judgments against the Defendant.

HSBC quickly applied for a number of interim charging orders over the alleged interests of the Defendant in 5 flats in Mayfair and a shareholding.

Alerted by this, the other banks applied for similar.

Trouble arose when HSBC applied to make its orders final.

The other banks resisted and argued that this would be prejudicial to their interests and any monies should be distributed equally or pro rata.

In turn, HSBC argued that there was no authority for such a position and the ‘first past the post’ principle should be applied.

The Court agreed that, where there was no statutory regime arising out of insolvency in place, this was the correct position.

The discretion afforded to the Court is not a general or unfettered one but one which guards against ‘undue’ prejudice usually arising from some unconscionable or ‘sharp’ conduct by the judgement creditor, such as an attempt to put other creditors off the scent.

Here, the other banks were not ‘unduly’ prejudiced; there would inevitably be some prejudice to other creditors if one was given a final charging Order but there was nothing ‘undue’ about it.

The case illustrates that there is no room for delay in seeking, and seeking to enforce, judgements in cases such as these.

It is crystal clear that the Courts will not ordinarily seek to assist creditors who delay enforcement action and, unless there are exceptional circumstances, a creditor seeking an Order can expect it to be granted putting him at an advantage compared to those who come later.

Tom Seabrook, Associate Solicitor, Manchester