342.This section imposes a duty on the secured creditor of a statutory pledge to apply under section 96 of the Act for the correction of the RSP where the pledge is extinguished by any of the enforcement of the pledge, enforcement of any other secured right, or the enforcement of diligence.
Example
Adam grants a statutory pledge for a debt of £10,000 to Eve over machinery. Adam then grants a second-ranking statutory pledge to Cain for a debt of £5,000 over the same machinery. Adam subsequently defaults on his secured obligation to Cain.
Eve consents to Cain enforcing the second pledge subject to Eve, as higher ranking creditor, being paid from the proceeds. The plant and machinery is sold for £20,000. Cain divides the proceeds so that Eve is paid £10,000, Cain keeps £5,000, and the remaining £5,000 is paid to Adam.
Eve and Cain are both subject to a duty to remove their pledges from the statutory pledges record.