The court was asked whether a charge given over book debts in a debenture was floating or fixed.
Held: Since the charge asserted some control over receipt of the payments, it was a fixed charge. Upon payment into the account, title to the proceeds passed immediately to the bank, subject to its contract with the customer. The duty to pay over the balance held in an account was contractual not proprietary. It was not satisfactory that the question of whether a charge was fixed or floating should turn upon the precise and particular relationship between the bank and its customer. Payment of sums into the bank account counted as a part repayment of the company’s borrowings.
Judges:
Lord Phillips of Worth Matravers, Mr Lord Justice Jonathan Parker and Lord Justice Jacob
Citations:
[2005] 2 All ER 1000, [2004] All ER (D) 390, Times 04-Jun-2004, Gazette 10-Jun-2004, [2004] EWCA Civ 670
Links:
Jurisdiction:
England and Wales
Citing:
Appeal from – National Westminster Bank Plc v Spectrum Plus Ltd and others ChD 15-Jan-2004
The company granted a debenture to the claimant purporting to secure its book debts. The company went into liquidation. The liquidator challenged the bank’s charge.
Held: Siebe was wrongly decided. The charge was ineffective over the book . .
Cited – Siebe Gorman and Co Ltd v Barclays Bank Ltd ChD 1979
It was possible to create a fixed charge over present and future book debts and on its true construction, the debenture granted to Barclays Bank Ltd in this case had done so. If the chargor of book debts, having collected the book debts, ‘[had] had . .
Cited – Agnew and Kevin James Bearsley v The Commissioner of Inland Revenue, and Official Assignee for the Estate In Bankruptcy of Bruce William Birtwhistle and Mark Leslie Birtwhistle PC 5-Jun-2001
(New Zealand) A charge had been given by a company over its book debts. The charge was expressed to create a fixed charge over debts uncollected when a receiver was appointed, so that on collection they became payable to the bank. Until the receiver . .
Cited – In Re New Bullas Trading Ltd CA 12-Jan-1994
A company debenture, which purported to create a fixed charge on book debts, and a second floating charge over the proceeds when paid, was valid and effective to create a fixed charge. The chargee was not a bank, and therefore no facility could be . .
Cited – Robson v Smith 1895
The court approved the statement that floating charges ‘constitute a charge but give a licence to the company to carry on its business’. . .
Cited – Evans v Rival Granite Quarries Ltd CA 1910
The court discussed the nature of a floating charge, Buckley LJ describing it as: ‘A floating security is not a future security; it is a present security, which presently affects all the assets of the company expressed to be included in it. On the . .
Cited – Illingworth v Houldsworth HL 1904
A clause in a floating charge allowing a company to continue to trade in the assets charged: ‘contemplates not only that it should carry with it the book debts which were then existing, but it contemplates also the possibility of those book debts . .
Cited – In re Yorkshire Woolcombers Association Ltd CA 2-Jan-1903
Nature of Company’s Debenture Charge
The court considered the nature of a debenture charge. Romer LJ said: ‘I certainly do not intend to attempt to give an exact definition of the term ‘floating charge’, nor am I prepared to say that there will not be a floating charge within the . .
Cited – In re Brightlife Ltd ChD 1987
Parties contractual freedom to be respected
A clause in a debenture gave a charge which provided that the chargor should not: ‘deal with its book or other debts or securities for money otherwise than in the ordinary course of getting in and realising the same which expression shall not . .
Cited – Griffiths and Another v Yorkshire Bank Plc and Others ChD 7-Oct-1994
The court considered the application of a company’s assets as between debenture holders and other chargees upon the insolvency of the company. It was the essence of a floating charge that the company could create a prior fixed charge over the asset. . .
Cited – In Re Portbase Clothing Ltd; Mould v Taylor 1993
The company had given two debentures, one fixed and one floating. Their priority was fixed by a deed of priority. On insolvency the liquidator sought direction as to the application of the assets.
Held: The deed made the bank’s floating charge . .
Cited – Tailby v Official Receiver HL 1888
A creditor can create, for good consideration an equitable charge over book debts which will attach to them as soon as they come into existence.
Lord Macnaghten said: ‘It was admitted by the learned counsel for the respondent, that a trader . .
Cited – English and Scottish Mercantile Investment Co Ltd v Brunton CA 1892
A debenture contained provisions that would normally have created a simple floating charge but which included a restriction on the chargor company from granting any prior charge on the assets in question. The chargor subsequently granted a charge . .
Cited – Re Atlantic Medical Ltd 1992
A charge was granted over hire-purchase agreements, sub-leases and rentals of leased equipment. The charge extended to such agreements as the chargor might enter into in the future.
Held: Applying Atlantic computers, the charge was a fixed . .
Cited – In re Atlantic Computer Systems Plc CA 1992
The chargor was a company which arranged with the chargee, a funding bank, that it should purchase equipment and let it on hire purchase to the chargor with permission to sub-lease to end users. The chargor charged to the chargee by way of security . .
Cited – In Re ASRS Establishment Ltd (In Administrative Receivership and Liquidation) ChD 17-Nov-1999
Although the parties should be free to make the agreement they wanted to, and the court should listen, that would not mean that assets which were incapable of being made subject to a fixed charge could be made so by the joint intention of the . .
Cited – Royal Trust v National Westminster Bank plc CA 1996
A charge was given over the benefits of hire purchase and leasing agreements. The terms of the charge entitled the chargee to require payments under the agreements to be paid into a special account, but the chargee never in fact did so and the . .
Cited – Re: New Bullas Trading Ltd ChD 5-Apr-1993
A fixed charge in a debenture without restrictions on dealing with monies received must be a floating charge. . .
Cited by:
Cited – Quickson (South and West) Limited v Stephen Mark Katz, John Stephen Kelmanson (As Joint Liquidators of Buildlead Limited) ChD 25-Aug-2004
Various applications were made in the insolvency, including for removal of the liquidators and declarations that certain payments were a fraudulent preference on the creditors.
Held: No prejudice had been shown by any procedural irregularity. . .
Appeal from – National Westminster Bank plc v Spectrum Plus Limited and others HL 30-Jun-2005
Former HL decision in Siebe Gorman overruled
The company had become insolvent. The bank had a debenture and claimed that its charge over the book debts had become a fixed charge. The preferential creditors said that the charge was a floating charge and that they took priority.
Held: The . .
Lists of cited by and citing cases may be incomplete.
Banking, Insolvency
Updated: 11 June 2022; Ref: scu.197967