Swiss Bank Corp v Lloyds Bank [1979] 3 WLR 201

Plaintiff lent IFT money to buy shares in FIBI. It then borrowed money from Defendant, in return for which it gave Defendant charge over the FIBI shares. Since IFT was unable to repay Plaintiff, Plaintiff instead demanded the FIBI shares as equitable charge.

CA held that “an equitable charge . . . is said to be created when property is expressly or constructively made liable, or specially appropriated, to the discharge of a debt or some other obligation, and confers on the chargee a right of realization by judicial process, that is to say, by the appointment of a receiver or an order for sale.”

However, where there is no intention by the debtor to allow the object to be substituted for payment, as here, there is no charge. Also there is no requirement that the debt should be paid from FIBI shares. (Buckley LJ). 

This was reversing BW J’s judgment that: injunctions in the interests of equity will be granted to stop A (new owner) from acting so as to cause B (original owner) to breach his agreement with C (borrower/hirer/charter party etc) where:

1. A had knowledge of the contract between B and C at the time of purchase, and

2. It is still possible for B to perform (or the fault will obviously lie with B).

However NB that CA didn’t directly contradict this section.