Shukla v St James Bank: equity of redemption survives non-recourse securities pledge

In a significant Commercial Court judgement handed down on 14 April 2026, Mr Nigel Cooper KC, sitting as a Deputy High Court Judge, granted summary judgement to the claimant in Rajiv Shukla v St James Bank & Trust Company Ltd & Omega & Corinth Group Ltd [2026] EWHC 851 (Comm), ruling that the defendants had breached an implied contractual duty to cooperate with repayment of a securities-backed loan. The judgement is a timely reminder that dressing a secured loan in the language of a sale will not strip the borrower of equitable rights.

In October 2023, Mr Shukla, an experienced US businessman, entered a non-recourse loan agreement with the Bahamian bank St James Bank & Trust (SJB). SJB advanced approximately USD 2.05 million against a pledge of 1.8 million shares in Humacyte Inc, a NASDAQ-listed biotech. The loan agreement stated that on an event of default, SJB could realise the pledged shares as absolute owner, and it purported to extinguish the borrower's equity of redemption entirely.

Events of default — triggered by a fall in trading volume — occurred between November 2023 and January 2024. Neither party was aware of this at the time. When Mr Shukla sought to repay the loan in July 2024, SJB refused to provide a redemption figure, declined to accept repayment, and asserted the right to retain the shares permanently. SJB also offered to waive the defaults for a fee, conditional on the borrower surrendering his contractual rights to early repayment and securities substitution — an offer Mr Shukla rejected.

Characterisation of the loan agreement

The defendants argued that the agreement was in substance a sale of the pledged shares combined with a repurchase option — a form of quasi-security falling outside mortgage law. The court disagreed. Applying the internal-route analysis established in Welsh Development Agency v Export Finance Co Ltd [1992] and the three-limb test from Re George Inglefield [1933], the judge found that the language and structure of the agreement — including obligations to repay principal, provisions for re-delivery of the shares on repayment, and covenants framed in terms of security — were overwhelmingly consistent with a secured loan. The non-recourse character of the lending did not alter that conclusion; English law has long recognised non-recourse loans as genuine loan transactions.

Significantly, the judge held that the very existence of specific clauses granting the defendants control over the pledged shares — rights to rehypothecate, receive dividends, and vote — indicated a security arrangement rather than an outright transfer, since such express grants would be unnecessary if absolute ownership had already passed.

Clogs on the equity of redemption

Having characterised the transaction as a secured loan, the court found that three contractual provisions — Articles 2.3(b), 4.4(f), and 6.2(a) — were void as clogs on the equity of redemption. Article 6.2(a), which expressly stated that the borrower "irrevocably forfeits the equity of redemption" on an event of default, fell squarely within the principle in Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914]. The judge noted, with some candour, a degree of unease about applying a doctrine widely criticised in modern commercial contexts, but confirmed that it remains binding English law.

Breach and implied duty to cooperate

The defendants' refusal to accept repayment or provide a settlement figure was held to constitute a breach of an implied duty to cooperate. Drawing on Swallowfalls Ltd v Monaco Yachting & Technologies SAM [2014] and the recent Houssein v London Credit Ltd [2025], the judge concluded that, once the obligations became due and payable, the lender was impliedly required to furnish a redemption statement, provide account details, and release the security on full repayment. The entire agreement clause in the loan agreement was insufficient to exclude those implied obligations.

Notably, the court held that a valid tender of repayment was not a precondition to establishing breach, given that the defendants had made it impossible for any such tender to be perfected by withholding the necessary information.

Relief

Summary judgement was entered with damages to be assessed. An interim payment of USD 5 million was provisionally ordered, subject to further submissions. The defendants were required to account for any profit or income derived from the pledged and unpledged securities from October 2023. Both SJB and Omega remain liable; the participation agreement under which SJB assigned economic interest to Omega did not amount to a novation releasing SJB from its obligations.

The case stands as an important authority on the resilience of the equity of redemption in commercial lending structures — including non-recourse arrangements — and on the scope of the implied duty to cooperate with repayment where loan obligations have been accelerated.