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 the unrestricted right to deal with the proceeds of any of the relevant book debts paid into its account, so long as that account remained in credit . . the charge on such book debts could be no more than a floating charge.’ The debenture in this case: ‘creat[ed] in equity a specific charge on the proceeds of [the book debts] as soon as they are received and consequently prevents the mortgagor from disposing of an unencumbered title to the subject matter of such charge without the mortgagee’s consent, even before the mortgagee has taken steps to enforce its security’.
 2 LL Rep 142
England and Wales
Applied – 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 . .
Doubted – 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 . .
Questioned – 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 . .
Applied – Re Armagh Shoes Ltd 1984
Applied – In Re Keenan Bros Ltd 1986
(Supreme Court of the Republic of Ireland) A debenture conferred a fixed charge on book debts. It specifically provided that withdrawals from the account to which the proceeds of the book debts had to be credited might only be made with the prior . .
Applied – Barclays Bank plc v Willowbrook International Ltd 1987
Applied – Re Permanent Houses (Holdings) Ltd 1988
Applied – Re Sperrin Textiles Ltd 1992
Applied – 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 . .
Applied – William Gaskell Ltd v Highley 1994
Applied – Chalk v Kahn 2000
Distinguished – 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 . .
Considered – Re: A Company (No. 005009 of 1987), ex parte Copp ChD 1988
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 . .
Not Followed – Supercool Refrigeration and Air Conditioning v Hoverd Industries Ltd 1994
(New Zealand) The court noted a greater reluctance in Australia and Ireland than in England to accept the creation of a fixed charge over present and future book debts.
Tompkins J said:’ a requirement to pay the proceeds of the book debts . .
Cited – National Westminster Bank Plc v Spectrum Plus Ltd; In re Spectrum Plus CA 26-May-2004
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 . .
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. . .
Overruled – 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 . .
Applied – In re A Company (No 005009 of 1987); Ex parte Copp 1989
Knox J declined to look at evidence about an agreed overdraft limit, regarding it as a ‘collateral arrangement’. He said: ‘this is a type of transaction in respect of which judicial precedent is a particularly valuable guide to the commercial . .
Applied – 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 . .
Lists of cited by and citing cases may be incomplete.
Updated: 13 December 2021; Ref: scu.191951