In Mclean v Trustees of the Bankruptcy Estate of Dent [2016] EWHC 2650, the High Court considered the application of the equitable doctrines of marshalling and subrogation in relation to a fixed charge over (among other things) a dog.

A company and partnership borrowed funds from two sources – Barclays Bank and Lady Morrison. Barclays held, among other things, charges over farms owned by individual partners and an agricultural charge under the Agricultural Credits Act 1928 (UK), including a charge over a dog. Lady Morrison only held charges over the farms.

The company and partnership entered administration and bankruptcy orders were made against individual partners. Barclays had multiple sources from which to recover its debt but only sold the farms. The proceeds covered Barclays' full debt and the majority of that owed to Lady Morrison.

The Court held that Lady Morrison could use the equitable doctrine of marshalling to access funds through the agricultural charge, effectively claiming the surplus proceeds available to Barclays. It did not matter that, as an individual, Lady Morrison could not create an agricultural charge; the security was capable of assignment and therefore capable of being marshalled.

The Court noted that a contract between creditors may affect the application of the doctrine. Here the deed of priority between Barclays and Lady Morrison promoted rather than excluded the possibility of marshalling.

A second issue considered by the Court was whether the trustees in bankruptcy of the partners were entitled to claim in the administration of the partnership by operation of the doctrine of subrogation. The trustees claimed that the creditors of the partnership were unjustly enriched at the expense of the creditors of the partners when the farms owned by the partners were sold to satisfy the claims of the creditors of the partnership. The Court rejected the trustees' claim and held that the trustees in bankruptcy were not entitled to prove in the administration of the partnership.

The judgment does not record the fate of the dog.

See Court decision here.