Jurisdiction(s):
United Kingdom

Surety’s subrogation to security not defeated by debtor company’s dissolution: EWHC confirms assignment right (Leon v Kensington Mortgage Company Ltd) – England and Wales

Published on: 10 February 2023

Published by a LexisNexis Property Disputes expert

Legal News

Article summary

Leon v Kensington Mortgage Company Ltd [2023] EWHC 121 (Ch)

What are the practical implications of this case?

This decision offers reassurance to those who guarantee corporate borrowings. The court held that when an individual acts as surety for a company and elects to discharge the debt, the subsequent dissolution of that company does not bar the surety from stepping into the benefit of any security that was taken for the debt. Had the court ruled the opposite—that dissolution deprives the surety of access to the security—it would have placed sureties in an invidious position: anyone guaranteeing a company’s obligations would run a material risk that, if the company were later dissolved, the surety could be compelled to satisfy the liability yet be unable to recoup their outlay even where the company’s indebtedness had been secured against property. Such a result could have had serious commercial ramifications, as it might have substantially deterred individuals from acting as surety for a company’s debt. The court’s ruling upholds...

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