Yesterday (14th April 2026) the Commercial Court handed down judgment in the case of Shukla v St James Bank & Trust Company Ltd [2026] EWHC 851 (Comm). The case concerned a claim by a borrower against a bank for wrongly refusing to accept repayment of a loan, which was secured by certain listed shares. The claimant claimed damages of US$15m caused by a fall in the value of the security after the bank had refused to allow him to repay the loan and redeem his security. The Bank argued that the terms of the loan excluded the equity of redemption and that there was no duty on a lender to cooperate in the repayment of a loan in any event. The Bank’s case was based on the assertion that the loan documentation amounted to a sale and repurchase agreement as opposed to a loan supported by security.

The importance of the points were significant: the Bank’s stance, if correct, would mean that it would have been entitled to retain full ownership of shares worth around $18m as security for a loan of around $2m, without having to account for the surplus. This is the first of a number of cases before the Courts at the moment which raise the efficacy of loan structures that limit or exclude the equity of redemption.

The Judge, Mr Nigel Cooper KC (sitting as a Deputy High Court Judge), found that the bank was liable because the agreement was, on its true construction, a loan supported by security as opposed to a ‘Repo’. In this case the doctrine of clogs on the equity of redemption applied and thus the Bank’s terms which purported to exclude those rights were void. The Judge further held that there was an implied duty on the bank to cooperate in the repayment of the loan explaining the apparent tension in the authorities concerning this point and its interrelationship between the doctrine of tender and a redemption action (Bank of New South Wales v O’Connor (1889) 14 App Cas 273; Shearer & Ors v Spring Capital Ltd [2013] EWHC 3148 (Ch); Swallowfalls Limited v Monaco Yachting & Technologies S.A.M. & Anor [2014] 2 Lloyd’s Rep. 50; Çukurova Finance Ltd v Alfa Telecom Ltd (No. 4) (PC) [2016] AC 923; St. Vincent European General Partner Ltd v. Bruce Robinson & Ors [2018] EWHC 1230 (Comm); and Houssein v London Credit Ltd [2025] EWHC 2749 (Ch)).

This case is important in dealing with the distinction between a traditional loan and a sale and repurchase agreement, the doctrine of clogs on the equity of redemption, what will and will not amount to a valid tender in repayment of a loan, and the implied terms regarding repayment of a loan.

This seminar will explain the case and the state of the current law regarding the distinction between loans and sale/repurchase agreements, as well as asking where the law will go next in relation to the clogs doctrine.