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Re Spectrum Plus: Difference between revisions
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*[[Fixed charge|Fixed]] and [[Floating charge|floating]] [[charges]]: If you call it a [[fixed charge]], you know, ''is it''? | *[[Fixed charge|Fixed]] and [[Floating charge|floating]] [[charges]]: If you call it a [[fixed charge]], you know, ''is it''? | ||
====[[Stare decisis]] and the possibility of [[prospective overruling]]==== | ====[[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| | {{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? | ||
For one thing, that would be a real bummer from Spectrum Plus’s point of view — fancy winning a landmark House of Lords case but — well, hard lines fellas. But [[Little old ladies make bad law|Little old book-debt securitisers make bad law]], right? | For one thing, that would be a real bummer from Spectrum Plus’s point of view — fancy winning a landmark House of Lords case but — well, hard lines fellas. But [[Little old ladies make bad law|Little old book-debt securitisers make bad law]], right? | ||
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You can see where this is going, can’t you. | You can see where this is going, can’t you. | ||
When Spectrum, inevitably, went bust, it owed NatWest £165,407 on the account. | When Spectrum, inevitably, went bust, it owed NatWest £165,407 on the account. Spectrum’s uncollected book debts had a face value of £291,293, and a likely collection value of £156,544. You know, like roughly. Other unsecured creditors wanted a piece of the action. | ||
So ...? | So ...? | ||
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====Ruling==== | ====Ruling==== | ||
“The correct conclusion, in my opinion, is that the debenture, although expressed to grant the bank a {{tag|fixed charge}} over | “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]]=== | ||
Can a [[Borrower]] create a fixed charge over collateral you have pledged to a [[Lender]] under a [[Pledge GMSLA]], if the Borrower retains a right to substitute and replace collateral it has posted with other collateral. Conservative souls suggest {{casenote1|Re Spectrum Plus}} calls this into question. | Can a [[Borrower]] create a fixed charge over collateral you have pledged to a [[Lender]] under a [[Pledge GMSLA]], if the Borrower retains a right to substitute and replace collateral it has posted with other collateral. Conservative souls suggest {{casenote1|Re Spectrum Plus}} calls this into question. | ||