MC Bacon Ltd had borrowed money from a bank. The loan was unsecured. The company got into financial difficulty. The bank commissioned a report on the company’s financial affairs; and insisted on the grant of a debenture to secure the company’s borrowings. The report made various recommendations, which the company implemented. The company subsequently went into liquidation; and the liquidator alleged that the fact that the board of directors had acted on the bank’s recommendations, led to the conclusion that the bank had become a shadow director of the company, and was consequently liable for wrongful trading. The bank applied to strike out the claim on the ground that it was obviously unsustainable. Knox J refused the application and allowed the claim to go to trial. However, Knox J declined to give any reasons for his conclusion on the ground that to do so would embarrass the trial judge. It was contended that a debenture in Siebe Gorman form did not create a fixed charge and a declaration to that effect was sought. The bank relied upon Siebe Gorman and Re Brightlife Ltd. The judge concluded that the latter did not cast any doubt on the correctness of the former and rejected both grounds for distinguishing Siebe Gorman suggested by counsel for the liquidator. The contention was rejected: ‘It seems to me that the indications are to the contrary effect, because this is a type of transaction in respect of which judicial precedent is a particularly valuable guide to the commercial adviser. It is one of the main justifications for the doctrine of precedent that the adviser can, if he can rely on precedent, give reliable advice to his clients and it is trite law that is a particularly cogent consideration in regard to property transactions of one sort or another. The inference I draw from the very close correspondence between the phrases used in the Siebe Gorman case and those used in the document in the present case is that the parties intended to produce the same known result. I therefore see no strength in the first point of distinction between the two cases.’ and ‘Although . . . Siebe Gorman is a decision of a judge at first instance and is therefore technically not absolutely binding on me, the views which I have expressed about the value of precedents in this particular class of work make it clear that it would be quite wrong for me, even if I thought (as I do not) that there was some error or flaw in the reasoning in the Siebe Gorman case, to decline to follow it.’
 BCLC 13, (1988) 4 BCC 424
England and Wales
Considered – 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 . .
Considered – 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 – 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 – 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 . .
At trial – In re M C Bacon Ltd ChD 1990
A liquidator claimed that the costs of an unsuccessful attempt to set a floating charge aside should be paid out of the assets subject to the charge in priority to the claims of the charge holder.
Held: The rule was a complete statement of the . .
Cited – Ultraframe (UK) Ltd v Fielding and others ChD 27-Jul-2005
The parties had engaged in a bitter 95 day trial in which allegations of forgery, theft, false accounting, blackmail and arson. A company owning patents and other rights had become insolvent, and the real concern was the destination and ownership of . .
Lists of cited by and citing cases may be incomplete.
Updated: 13 December 2021; Ref: scu.191965