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Re Spectrum Plus: Difference between revisions
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{{cn}}{{Cite1|Re Spectrum Plus|2005|UKHL|41}} | {{cn}}{{Cite1|Re Spectrum Plus|2005|UKHL|41}}<ref>[https://publications.parliament.uk/pa/ld200506/ldjudgmt/jd050630/nat-1.htm click here for transcript].</ref> is an important case about [[fixed charge]]s and the [[doctrine of precedent]], that [[Golden thread|golden stream]]<ref>Did I say stream? I meant ''thread''</ref> of precedent that warmly nourishes the [[common law]]. | ||
===Issues=== | |||
*'''[[Fixed charge|Fixed]] and [[Floating charge|floating]] [[charges]]''': If you call it a [[fixed charge]], you know, ''is it''? | |||
*'''[[Stare decisis]]''': Does a “newly decided”<ref>''Invented'', though by the lights of the conventional jurisprudence of the English [[common law]], the law was always there like energy, from the birth of the universe, in the same way that David was always in that marble block, just waiting for Michaelangelo LJ to uncover it.</ref> strand of [[common law]] apply to contracts pre-dating its development, which were concluded on the assumption of contrary rules? | |||
===In a {{nutshell}}=== | ===In a {{nutshell}}=== | ||
Yes, you can take a {{tag|fixed charge}} over [[book debts]], but if you want to it to be enforceable, you must have practical control of the item, and a legal right to stop the [[chargor]] walking off with it. | *'''[[Fixed charge|Fixed]] and [[Floating charge|floating]] [[charges]]''': Yes, you can take a {{tag|fixed charge}} over [[book debts]], but if you want to it to be enforceable, you must have practical control of the item, and a legal right to stop the [[chargor]] walking off with it. | ||
*'''[[Stare decisis]]''': Yes, newly decided cases which overturn old ones do apply retrospectively. By the jurisprudence of the law, the old one was always wrong, even when the law said it was right. So if you organised your affairs in reliance on a tributary of the golden stream that later turns out to have been piss and wind, well that’s tough. But you therefore you can’t rely on ''this'' statement of the law either, because it might turn out to be wrong later. Which means you ''can'' rely on the old precedent, as it might turn out ''not'' to have been piss and wind after all. But at long as ''this'' ruling isn’t considered to be piss and wind, you can’t. ''O tempora! O mores! O {{t|paradox}}!'' | |||
*[[Stare decisis]]: | |||
==[[Stare decisis]] and the possibility of [[prospective overruling]]== | |||
{{casenote1|Re Spectrum Plus}} overruled the earlier decision of {{cite|Siebe Gorman & Co Ltd|Barclays Bank Ltd|1979|2 Lloyd’s Rep|142}}. This meant charges drafted as fixed charges on honest reliance on that principle — that it didn’t matter so much if you didn’t have practical control — were suddenly questionable. Given the “time value” of charge registration — the first-in-time prevails, so if you have to re-take your [[charge]] you are going right to the back of the queue — this potentially invalidated — or at least ''weakened'' — a whole lot of security documents. So could the court apply “[[prospective overruling]]” such that existing charges entered into in good faith in reliance on ''Siebe Gorman'' would be upheld? | {{casenote1|Re Spectrum Plus}} overruled the earlier decision of {{cite|Siebe Gorman & Co Ltd|Barclays Bank Ltd|1979|2 Lloyd’s Rep|142}}. This meant charges drafted as fixed charges on honest reliance on that principle — that it didn’t matter so much if you didn’t have practical control — were suddenly questionable. Given the “time value” of charge registration — the first-in-time prevails, so if you have to re-take your [[charge]] you are going right to the back of the queue — this potentially invalidated — or at least ''weakened'' — a whole lot of security documents. So could the court apply “[[prospective overruling]]” such that existing charges entered into in good faith in reliance on ''Siebe Gorman'' would be upheld? | ||
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So no, fellas. Natwest, you are shit out of luck.<ref>Being shit out of luck is something of a habit of Natwest’s — see [[Greenclose v National Westminster Bank plc - Case Note|Greenclose]]</ref> | So no, fellas. Natwest, you are shit out of luck.<ref>Being shit out of luck is something of a habit of Natwest’s — see [[Greenclose v National Westminster Bank plc - Case Note|Greenclose]]</ref> | ||
==[[Fixed charge|Fixed]] and [[Floating charge|floating]] [[charges]]== | |||
Whether a {{tag|charge}} over present and future [[book debts]], where: | Whether a {{tag|charge}} over present and future [[book debts]], where: | ||
*the chargor cannot dispose of or charge the uncollected book debts but | *the chargor cannot dispose of or charge the uncollected book debts but | ||
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is capable in law of being a {{tag|fixed charge}}. | is capable in law of being a {{tag|fixed charge}}. | ||
==The facts== | |||
*Spectrum had an overdraft with the [[NatWest]]. | *Spectrum had an overdraft with the [[NatWest]]. | ||
*NatWest took a fixed charge over its book debts to secure the overdraft. it required Spectrum to pay the debts into the overdraft account. It did not prevent Spectrum withdrawing them. | *NatWest took a fixed charge over its book debts to secure the overdraft. it required Spectrum to pay the debts into the overdraft account. It did not prevent Spectrum withdrawing them. | ||
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So ...? | So ...? | ||
===Choice snippets=== | |||
'''Lord Hope of Craighead''': <br> | '''Lord Hope of Craighead''': <br> | ||
:“An account from which the customer is entitled to withdraw funds whenever it wishes within the agreed limits of any overdraft is not a blocked account. In ''Agnew v Commissioners of Inland Revenue'' [2001] 2 AC 710, 722, para 22 Lord Millett said that the critical feature which led the Irish Supreme Court in ''In re Keenan Bros Ltd'' [1986] BCLC 242 to characterise the charge on book debts as a fixed charge was that their proceeds were to be segregated in a blocked account where they would be frozen and ''unusable by the company without the bank’s written consent''<ref>Emphasis added.</ref>. I respectfully agree.” | :“An account from which the customer is entitled to withdraw funds whenever it wishes within the agreed limits of any overdraft is not a blocked account. In ''Agnew v Commissioners of Inland Revenue'' [2001] 2 AC 710, 722, para 22 Lord Millett said that the critical feature which led the Irish Supreme Court in ''In re Keenan Bros Ltd'' [1986] BCLC 242 to characterise the charge on book debts as a fixed charge was that their proceeds were to be segregated in a blocked account where they would be frozen and ''unusable by the company without the bank’s written consent''<ref>Emphasis added.</ref>. I respectfully agree.” | ||
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This hypothetical example assumes the chargor can withdraw all the assets from the account in the meantime. But what if the withdrawal is conditional on substitution with other assets? | This hypothetical example assumes the chargor can withdraw all the assets from the account in the meantime. But what if the withdrawal is conditional on substitution with other assets? | ||
==Ruling== | |||
“The correct conclusion, in my opinion, is that the debenture, although expressed to grant the bank a {{tag|fixed charge}} over Spectrum’s [[book debts]], in law granted only a {{tag|floating charge}}. | “The correct conclusion, in my opinion, is that the debenture, although expressed to grant the bank a {{tag|fixed charge}} over Spectrum’s [[book debts]], in law granted only a {{tag|floating charge}}. | ||
===Relevance to [[stock lending]]=== | ===Relevance to [[stock lending]]=== | ||