Re Spectrum Plus
Re Spectrum Plus [2005] UKHL 41[1] is an important case about fixed charges.
Issue
Whether a charge over present and future book debts, where:
- the chargor cannot dispose of or charge the uncollected book debts but
- the charger can deal with debtors and collect the debts and
- the chargor must deposit collected debts in a designated account with the charge, but
- the chargor can then freely draw on the account as long as it doesn't exceed the overdraft
is capable in law of being a fixed charge.
The facts
- 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.
- The bank never sought to exercise any control over Spectrum’s withdrawals from the account.
- Spectrum never exceeded its overdraft. Nor did Spectrum ever go into credit.
You can see where this is going, can’t you.
When Spectrum, inevitably, went bust, it owed NatWest £165,407 on the account. Its 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 ...?
Ruling
“The correct conclusion, in my opinion, is that the debenture, although expressed to grant the bank a fixed charge over Spectrum's book debts, in law granted only a floating charge.