Remedies of a Non-Recourse Lender

A non-recourse loan is one made on terms where the borrower has no personal obligation to pay except from an identified fund of assets. It is usual for all or most of the assets in the fund to be subject to a charge in favour of the lender. This article considers the nature of the relationship created by a non-recourse loan and whether the non-recourse character of the loan will be defeated by set-off or insolvency. Matthew v. Blackmore (1857) 1 H & N 762; 156 ER 1409 is one of the earliest cases to consider a non-recourse loan. The court held that no action for money lent would lie against the debtor. There has been some suggestion that the nature of non-recourse loans is thrown into doubt by the decision in Ensign Tankers (Leasing) Ltd v. Stokes [1992] 2 WLR 469. However, the ratio of Ensign Tankers is arguably confined to tax avoidance cases