¹ Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339 (HL Sc) 353 (Lord Keith), 354 (Lord Jauncey): ‘A right in security is a right over property given by a debtor to a creditor whereby the latter in the event of the debtor’s failure, acquires priority over the property against the general body of creditors of the debtor. It is of the essence of a right in security that the debtor possesses in relation to the property a right which he can transfer to the creditor, which right must be retransferred to him upon payment of the debt’ (emphasis added); and Herington, M and Kessel, C, ‘Retention of title in English law’ (1994) 5 ICCLR 335 Google Scholar, 336 under ‘Armour v Thyssen Edelstahlwerke AG’.

² Lipe v Leyland DAF Ltd (in administrative receivership) [1993] BCC 385 (CA) 386 (Hoffmann LJ): ‘The purpose of a retention of title clause is to give the supplier the security of being able to repossess the goods rather than prove in the liquidation of the company and receive a dividend.’

³ Goode, R, Legal problems of credit and security (3rd edn, London, Sweet & Maxwell, 2003) 1–03 Google Scholar; and Ferran, E, Company law and corporate finance (Oxford, Oxford University Press, 1999) 492-4Google Scholar.

⁴ These are also known as ‘proceeds of sale’ or ‘tracing’ clauses. On this and other types of retention of title clauses, see McCormack, G, ‘Title Retention and the Company Charge Registration System’ in Palmer, N and McKendrick, E (eds), Interests in Goods (2nd edn, London and Hong Kong, Lloyd’s of London Press, 1998) 728, 742–51Google Scholar; and Bülow, P, Recht der Kreditsicherheiten (7th edn, Heidelberg, CF Müller, 2007) paras 1459a-85Google Scholar.

⁵ For an example, see Royal Trust Bank v Nat West Bank [1996] BCC 613 (CA) 614, and the discussion of the clause by Millett LJ at 618 ff.

⁶ That is, excluding retention of title and other types of ‘title finance’; see the text by nn 2 and 3 above. Other mechanisms of security in a wider sense might be added, such as hirepurchase or the (misnamed) banker’s lien.

⁷ Cosslett (Contractors) Ltd, Re [1998] Ch 495 (CA) 508 (Millett LJ); see also the definition in the Financial Collateral Arrangements (No 2) Regulations 2003 (SI 2003/3226), para 3 under ‘security interest’; and Ferran, above n 3, 500–6.

⁸ Goode, above n 3, 1-43ff and 1-49.

⁹ Bond Worth Ltd, Re [1980] Ch 228 (Ch) 250 (Slade J).

¹⁰ Equitable interests, such as a right under a trust, are transferred in accordance with LPA 1925 s 53(1)(c); notice is not required, but determines the priority among competing assignees: s 137(3), codifying the rule in Dearle v Hall (1828) 3 Russ 1, 38 ER 475.

¹¹ Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 (CA) 594 (Buckley LJ): ‘An equitable charge may, it is said, take the form either of an equitable mortgage or of an equitable charge not by way of mortgage.’ The reverse, however, is not true: Ferran, above n 3, 505 ff. Thus, in the case of a charge and unlike in the case of an equitable mortgage, the security provider’s equitable estate in the property serving as security is not transferred: Ali, P, The Law of Secured Finance: An international survey of security interests over personal property (Oxford, Oxford University Press, 2002) 4.96-9Google Scholar. See also Bridge, M, Personal Property Law (3rd edn, Oxford, Oxford University Press, 2002) 184 ff Google Scholar.

¹² Goode, above n 3, 1-05; and Ferran, above n 3, 506. The sole exception is the charge by way of legal mortgage, LPA 1925 s 87, which can only be taken over land.

¹³ See also the comparative analysis by Röver, JH, Secured Lending in Eastern Europe (Oxford 2007) paras 6.02-13 and 6.22-9Google Scholar; and Röver, JH, ‘Realsicherheiten und Direktverein barungen’ in Siebel, U, Röver, JH and Knütel, C (eds), Rechtshandbuch Projektfinanzierung und PPP (Cologne, Munich, 2008) ch 4.8, paras 19–22 and 63–9Google Scholar.

¹⁴ BGB §§ 1273–96.

¹⁵ BGB §§ 1204–59.

¹⁶ BGB § 1274(1).

¹⁷ BGB § 1280; until notice is given, the pledge is ineffective, Reichsgericht, II 416/01 of 14 March 1902, 51 RGZ [the RG’s official reports of civil cases] 83, 86; Bundesgerichtshof, IX ZR 341/95 of 11 December 1997, 137 BGHZ [the BGH’s official reports of civil cases] 267, 268.

¹⁸ BGB §§ 398–413.

¹⁹ BGB § 407(1).

²⁰ See the comparative overview in Röver, above n 13, paras 82, 83 and 87–9.

²¹ BGB §§ 1273(2), 1210(1), 1252.

²² See below in and by n 58.

²³ BGB § 1250(1), 401(1).

²⁴ Bülow, above n 4, paras 26a, 30 and 31.

²⁵ Which in this situation follows from BGB § 812(1), 1st sentence, 2nd alternative.

²⁶ BGH GS 1, 2/97 of 27 November 1997, 137 BGHZ 212, 218 ff—‘GS’ stands for Großer Senat or grand panel, a formation of the BGH which is specifically convened to decide when one panel plans to deviate from another’s jurisprudence, and the latter is unwilling, on a query in limine by the former, to revise its position. The grand panel’s position is thenceforth binding on both. This judgment settled a controversy between the IX (insolvency) and XI (banking) panels.

²⁷ Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676 (CA) 687 ff, 690 (Roskill LJ), 692 ff (Goff LJ).

²⁸ In the same sense, Borden (UK) Ltd v Scottish Timber Prods [1979] 2 Lloyd’s Rep 168 (Ch) 172 (Rubin J); and Clough Mill v Martin [1984] 1 WLR 111 (CA) 123 (Oliver LJ).

²⁹ See, eg, Bond Worth, Re, above n 9, 263; and Peachdart, Re [1984] Ch 131 (Ch) 138 (Vinelott J). A notable exception is Borden, above n 28, 172, which was, however, reversed on appeal: [1981] Ch 25 (CA). For summaries of the case law, see Tatung (UK) Ltd v Galex Telesure Ltd [1989] BCC 325 (QB) 328 ff, 332 (Phillips J); Compaq Computer Ltd v Abercorn Group Ltd (t/a Osiris) [1991] BCC 484 (Ch) 492–4 (Mummery J); and Chaigley Farms Ltd v Crawford, Kaye & Grayshire Ltd (t/a Leylands) [1996] BCC 957 (QB) 961 (Garland J), all with exhaustive references.

³⁰ Borden (UK) Ltd v Scottish Timber Prods [1981] Ch 25 (CA) 42 (Bridge LJ), 44 (Templeman LJ); and Compaq v Abercorn, above n 29, 494 sub (4); see also Hallett’s estate, Knatchbull v Hallett, Re (1879-80) LR 13 ChD 696 (CA) 719 (Jessel MR).

³¹ Borden, above n 30, 46 (Buckley LJ).

³² Tatung v Galex, above n 29, 333; and Weldtech Equipment Ltd, Re [1991] BCC 16 (Ch) 17 (Hoffmann J).

³³ Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick Ltd [1984] 1 WLR 485 (QB) 499 (Staughton J); Andrabell Ltd (in liq), Airborne Accessories v Goodman, Re [1984] 3 All ER 407 (Ch) 416 (Peter Gibson J); and Modelboard Ltd v Outer Box Ltd (in liq) [1992] BCC 945 (Ch) 948–50 (Hart QC).

³⁴ Bristol and West Building Society v Mothew [1998] Ch 1 (CA) 18: ‘A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the singleminded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations.’

³⁵ National Provincial and Union Bank of England v Charnley [1924] KB 431 (CA) 449 (Atkin LJ); and Bridge, above n 11, 181 ff.

³⁶ E Pfeiffer Weinkellerei-Weineinkauf GmbH & Co v Arbuthnott Factors Ltd [1988] 1 WLR 150 (QB) 161 (Phillips J); and Compaq v Abercorn, above n 29, 495 & 496.

³⁷ Companies Act 2006 s 860(1), (7)(f), formerly Company Act 1985 ss 395(1), 396(1)(e).

³⁸ BGB § 455, now § 449: ‘(1) If the vendor of a chattel has reserved property until the price is paid, in case of any doubt it has to be presumed that property is transferred on the condition precedent of full payment of the price.’

³⁹ Heck, P, Grundriß des Sachenrechts (Tübingen, Verlag Mohr-Siebeck, 1930) 231: ‘Alltags vorkommen’Google Scholar.

⁴⁰ Clough Mill v Martin, above n 28, 120 (Goff LJ).

⁴¹ BGB § 950.

⁴² The leading case of the BGH is IV ZR 334/55 of 3 March 1956, 20 BGHZ 159, 163; this view was already espoused by P Heck, above n 39, 262; doubting Füller, M in Kommentar, Münchener, BGB (4th edn, Munich, CH Beck, 2004) § 950 no 19Google Scholar; contra Ebbing, F in Erman, , BGB (12th edn, Münster, Aschendorff Rechtsverlag, 2008) § 950 no 10Google Scholar; and Bassenge, P in Palandt, , BGB (67th edn, Munich, CH Beck, 2008) § 950 no 9, all with further referencesGoogle Scholar.

⁴³ BGH, VII ZR 70/80 of 20 November 1980, 79 BGHZ 16, 23.

⁴⁴ BGH, VIII ZR 152/64 of 10 October 1966, 46 BGHZ 117, 122.

⁴⁵ HGB § 366(1), (2).

⁴⁶ BGH, IX ZR 30/07 of 29 November 2007, [2008] Neue Juristische Wochenschrift 430, para 34.

⁴⁷ Foley v Hill (1848) 13 LJ Ch 182, 9 ER 1002 (HL) 1005 (Lord Lyndhurst LC), 1008 (Lord Brougham); Garnett v M’Kewan (1872–3) LR 8 Exch 10 (Ex Ct) 13, 14; Joachimson v Swiss Bank Corp [1921] 3 KB 110 (CA) 127 (Atkin LJ); and Foskett v McKeown [2001] 1 AC 102 (HL) 128 (Lord Millett).

⁴⁸ Goode, above n 3, 3–12.

⁴⁹ Charge Card Services Ltd, Re [1987] Ch 150 (Ch) 175, 176 (Millett J); and Morris v Agrichemicals [1996] Ch 245 (CA) 257–62 (Rose LJ), with an extensive review of the case law and literature.

⁵⁰ Bank of Credit and Commerce International SA (No 8), Re [1998] AC 214 (HL) 226 ff: ‘The depositor’s right to claim payment of his deposit is a chose in action which the law has always recognised as property. There is no dispute that a charge over such a chose in action can validly be granted to a third party. In which respects would the fact that the beneficiary of the charge was the debtor himself be inconsistent with the transaction having some or all of the various features which I have enumerated? The method by which the property would be realised would differ slightly: instead of the beneficiary of the charge having to claim payment from the debtor, the realisation would take the form of a book entry.’ For a critical discussion, see Ali, above n 11, 9.09–9.12, with further references.

⁵¹ Most recently BGH, IX ZR 98/03 of 12 February 2004, [2004] Betriebs-Berater 732, 733 with further references.

⁵² III 166/87 of 11 November 1887, 20 RGZ 365, 371–4 (even before the coming into force of the BGB); VI 511/03 of 7 March 1904, 57 RGZ 358, 363; II 342/26 of 22 February 1927, 116 RGZ 198, 207.

⁵³ Habersack, M in Soergel, , BGB (13th edn, Stuttgart, Kohlhammer, 2001) § 1279 no 2Google Scholar, with seve ral references to academic literature, calls this the ‘unanimous opinion’ and points to the apparently most recent in-depth discussion of the topic: Thal, A, Vereinigung von Recht und Verbindlichkeit beim Pfandrecht an Forderungen (Breslau, 1905)Google Scholar. In other leading commentaries on the code, the same statement is reiterated but not explained either: H Damrau in Münchener Kommentar, above n 42, § 1273 no 5; Erman and Michalski, above n 42, § 1273 no 1; and Palandt and Bassenge, above n 42, § 1273 no 1.

⁵⁴ M Habersack in Soergel, above n 53, § 1280 no 5; H Damrau in Münchener Kommentar, above n 51, § 1280 no 7; and L Michalski in Erman, above n 42, § 1280 no 2.

⁵⁵ Court of Appeal, Düsseldorf, [1992] Wertpapier-Mitteilungen 1937, 1939; H Damrau in Münchener Kommentar, above n 42, § 1282 no 4; and L Michalski in Erman, above n 42, § 1282 no 1.

⁵⁶ L Michalski in Erman, above n 42, § 1282 no 5; and P Bassenge in Palandt, above n 42, § 1282 no 3.

⁵⁷ This occurs once the secured debt is due, no default being required, BGB §§ 1282(1), 1228.

⁵⁸ ‘[N]ur insoweit, als sie zur Befriedigung seiner Forderung erforderlich ist’, BGB § 1282(1). The pledgee’s claim is deemed fulfilled pro tanto (‘gilt die Forderung des Pfandgläubigers, soweit ihm der eingezogene Betrag zu seiner Befriedigung gebührt, als von dem Gläubiger [ie the pledgor] berichtigt’), §1288(2).

⁵⁹ BGB § 1282(2).

⁶⁰ This was pointed out but not elaborated by Lord Hoffmann, above n 50, 227: ‘There would be no merger of interests because the depositor would retain title to the deposit subject only to the bank’s charge.’

⁶¹ Similarly, Gosling v Gaskell [1897] AC 575 (HL) 583 (Lord Halsbury LC): ‘The company is still the person solely interested in the profits, save only that it has mortgaged them to its creditors. It receives the benefit of the profits as they accrue, though it has precluded itself from applying them to any other purpose than the discharge of its debts’ (emphasis added).

⁶² See the overviews by Lord Scott in Nat West Bank Plc v Spectrum Plus [2005] UKHL 41, [2005] 2 AC 680, paras 95–107; and by Millett, Lord in Agnew v Commissioner of Inland Revenue [2001] UKPC 28, [2001] 2 AC 710, paras 5–17Google Scholar; see also Pennington, R, ‘The Genesis of the Floating Charge’ (1960) 23 MLR 630-46, passim CrossRefGoogle Scholar; Gough, W, Company charges (2nd edn, London et al, Butterworths, 1996), 102 ff Google Scholar; and Goode, above n 3, 4-02.

⁶³ The earliest case was Panama, New Zealand, and Australian Royal Mail Co, Re (1869–70) LR 5 Ch App 318 (CA in Chancery) 322 ff (Giffard LJ); the other early authorities are listed in Pennington, above n 62, fn 1. The expression ‘floating security’ appears to have first been used by MR, Jessel in Colonial Trusts Corp, ex p Bradshaw, Re (1880) LR 15 ChD 465 (Ch) 469Google Scholar.

⁶⁴ This designation is found in, for instance, Insolvency Act 1986 s 29(2) and Companies Act 2006 s 871(1), (2).

⁶⁵ Technically, a ‘receiver’ is appointed over part only of a company’s property, a ‘receiver or manager’ over all of it: Insolvency Act 1986 s 29(1)(a). Also, the court can appoint a ‘special manager’ of the business or property of the company: Insolvency Act 1986 s 177. Nevertheless, every receiver will have some management tasks among others.

⁶⁶ According to Insolvency Act 1986 s 44(1)(a), the administrative receiver is deemed to be the company’s agent, not the chargee’s. The same is true of today’s administrator: Insolvency Act 1986 s 8 with Sch B1 para 69.

⁶⁷ By contrast, Gregory, R and Walton, P, ‘Fixed and floating charges—a revelation’ [2001] LMCLQ 123, 146Google Scholar argue that ‘the mortgage covering present and future porperty with an express or implied dealing power is, quite simply, vastly superior to the floating charge in satisfying the current commercial needs of both borrowers and lenders’. The authors’ argument is enticing, but it appears a safe prediction that the floating charge is going to be around a while yet: see the text by nn 83 and 84 below.

⁶⁸ Pennington, above n 62, 638–42.

⁶⁹ Aron Salomon v A Salomon & Co [1897] AC 22 (HL) 53 (Lord Macnaghten): ‘Everybody knows that when there is a winding-up debenture-holders generally step in and sweep off everything; and a great scandal it is.’

⁷⁰ Registration is today governed by Companies Act 2006 s 860(7)(g).

⁷¹ Companies Act 2006 s 874(1)(c); also as against a liquidator or administrator of the company: (a), (b).

⁷² Insolvency Act 1986 ss 175(2)(a), 386 with Sch 6. The same applies if the company is not at the time in course of being wound up and assets of the company come to the hands of the receiver (Insolvency Act 1986 s 40(2)), or of the chargee himor herself (Companies Act 2006 s 754(2), formerly Company Act 1985 s 196).

⁷³ Insolvency Act 1986 ss 72B–GA.

⁷⁴ Insolvency Act 1986 s 72A.

⁷⁵ Insolvency Act 1986 s 8 with Sch B1 para 14(1).

⁷⁶ Insolvency Act 1986 s 8 with Sch B1 paras 5 and 3(2).

⁷⁷ Insolvency Act 1986 s 8 with Sch B1 paras 70(1) and 71(1).

⁷⁸ Insolvency Act 1986 s 176ZA, abrogating the ‘two funds’ solution expounded by the House of Lords in Buchler v Talbot [2004] UKHL 9, [2004] 2 AC 298.

⁷⁹ Insolvency Act 1986 s 176A and Insolvency Act 1986 (Prescribed Part) Order 2003 (SI 2003/2097): 50% of the minimum value of a company’s property, ie £10 000; 50% of the next £10 000; 20% for any sum in excess of these, up to a maximum of £600,000.

⁸⁰ Walters, A, ‘Floating charges and liquidation expenses: Re Leyland Daf and beyond’ (2006) 27 Company Lawyer 193 Google Scholar.

⁸¹ Companies Act 2006 s 860(7)(f) captures any charge on book debts, whereas s 860(7)(g) is applicable only to a ‘floating charge on the company’s property or undertaking’.

⁸² F Oditah, ‘Lightweight floating charges’ [1991] JBL 49–56, passim.

⁸³ The Law Commission, Consultation Paper No 164, ‘Registration of security interests: company charges and property other than land. A consultation paper’ (London, The Stationery Office, 2002)Google Scholar; Consultation Paper No 176, ‘Company security interests. A consultative report’ (London, The Stationery Office, 2004); and Consultation Paper No 296, ‘Company security interests’, Cm 6654 (London, The Stationery Office, 2005).

⁸⁴ For this reason, the wider question of personal property law reform is left aside here.

⁸⁵ Thus the definition in Insolvency Act 1986 s 251; Berg, A, ‘Fixed charges over book debts: Spectrum ’ (2004) 17 Insolvency Intelligence 33, 36 sub 5Google Scholar.

⁸⁶ Insolvency Act 1986 s 214(1), (2), (7).

⁸⁷ Hubbuck v Helms [1887] LT 232 (Ch) 234 (Stirling J); and Woodroffes (Musical Instruments) Ltd, Re [1986] Ch 366 (Ch) 377 f (Nourse J).

⁸⁸ Panama, New Zealand, and Australian Royal Mail Co, Re, above n 63, 322.

⁸⁹ The nature of the chargee’s interest prior to crystallisation is controversial: see Ali, above n 11, 4.113–29; Nolan, RC, ‘Property in a fund’ (2004) 120 LQR 108, 117–30Google Scholar; Davis, C, ‘Floating Rights’ [2002] CLJ 423, 431–5Google Scholar; S Worthington, ‘Floating charges—an alternative theory’ [1994] CLJ 81–103, passim; E Ferran, ‘Floating charges—the nature of the security’

⁹⁰ Spectrum Plus Ltd, Nat West Bank Plc v Spectrum Plus, Re [2005] UKHL 41, [2005] 2 AC 680, para 138 (Lord Walker).

⁹¹ Evans v Rival Granite Quarries Ltd [1910] 2 KB 979 (CA) 999 (Buckley LJ).

⁹² See Cosslett (Contractors) Ltd, Re [1998] Ch 495 (CA) 510 (Millett LJ): ‘The question is not whether the chargor has complete freedom to carry on his business as he chooses, but whether the chargee is in control of the charged assets.’

⁹³ An early example of the use of patents as security can be found in Hubbuck v Helms, above n 87.

⁹⁴ See the definition in Companies Act 2006 s 861(4)(a), (b) of the term ‘intellectual property’ in s 860(7)(i).

⁹⁵ Siebe Gorman & Co Ltd v Barclays Bank Ltd [1979] 2 Lloyd’s Rep 142 (Ch) 159.

⁹⁶ See, eg: Armagh Shoes Ltd, Re [1984] BCLC 405 (Ch) 418 (Hutton J): ‘[W]here there is a floating charge the company has a contractual right or licence to carry on its business and to deal with its assets until it goes into liquidation or a receiver is appointed or some event happens upon which the charge is to become a fi xed charge. … [A] floating charge, and not a fixed charge, is created if the deed contemplates that the company may carry on its business in the ordinary way in relation to the assets charged and if this intention is a necessary implication from the deed.’ What is phrased as a distinction by the judge is in reality the assertion of a different principle. In a similar vein is Brightlife Ltd, Re [1987] Ch 200 (Ch) 209 (Hoffmann J): ‘[A] right to deal … with the charged assets for its own account is a badge of a floating charge and is inconsistent with a fixed charge.’ Siebe Gorman was followed, however, in Keenan Bros Ltd, Re [1986] BCLC 242 (Supreme Court of Ireland) 245, where the company was expressly prohibited ‘without the prior consent of the bank in writing [to] make any withdrawals or direct any payment from the [charged] account’, and by J, Knox in A company (No 005009 of 1987), ex p Copp, Re [1989] BCLC 13 (Ch)Google Scholar, essentially in order to preserve the reliability of precedent in regard to property transactions. For further references to judgments following and rejecting Siebe Gorman, see Ali, above n 11, 9.30 with fn 49.

⁹⁷ New Bullas Trading Ltd, Re [1994] BCC 36 (CA) 41 (Nourse LJ): ‘[T]he asset does not cease to be subject to the fixed charge at the will of the company. It ceases to be such because both parties, not the company alone, have determined that if the proceeds of a book debt are paid into the specified account at a time when no directions have been given it shall thereupon be released.’

⁹⁸ See, in particular, the disagreement between Goode, R, ‘Charges over book debts: a missed opportunity’ (1994) 110 LQR 592–606 Google Scholar; and A Berg, ‘Charges over book debts: a reply’ [1995] JBL 433–71.

⁹⁹ Agnew v Commissioner of Inland Revenue [2001] UKPC 28, [2001] 2 AC 710, paras 27–36 and 43–50 (Lord Millett).

¹⁰⁰ Spectrum Plus Ltd, Nat West Bank Plc v Spectrum Plus, Re [2004] EWCA Civ 670, [2004] Ch 337, para 86 (Lord Phillips MR): ‘But for the obstacle of the decision in Re New Bullas … the decision of the Privy Council in Agnew’s case … would surely lead this court to the conclusion that an unrestricted freedom on the part of a chargor to use the proceeds of book debts charged necessarily means that the charge cannot properly be described as a fixed charge.’ For a critical discussion of this and other reasons given by Lord Phillips, see Oditah, F, ‘Fixed charges and the recycling of proceeds of receivables’ (2004) 120 LQR 533, 535–8Google Scholar.

¹⁰¹ [2005] UKHL 41, [2005] 2 AC 680, paras 112–20 (Lord Scott), 152–5 (Lord Walker).

¹⁰² ‘Zession’ and ‘Abtretung’ both mean ‘assignment’.

¹⁰³ Palandt, and Grüneberg, , BGB (67th edn, Munich, CH Beck, 2008) § 398 nos 14 & 17Google Scholar.

¹⁰⁴ A floating mortgage is conceptually possible in English law: Goode, above n 3, 1-10, but only few traces of it can be found in the case law and, presumably, in practice. Armour, J and Walters, A, ‘Funding Liquidation: a functional view’ (2006) 122 LQR 295, 303 with fn 39, call it ‘common’, but muster only two cases by way of referenceGoogle Scholar.

¹⁰⁵ Ian Chisholm Textiles Ltd v Griffiths [1994] BCC 96 (Ch) 103 (Neuberger QC).

¹⁰⁶ Orion Finance Ltd. v Crown Financial Management Ltd [1996] BCC 621 (CA) 628 (Millett LJ).

¹⁰⁷ Compaq v Abercorn, above n 29, 495: ‘Abercorn was entitled to redeem the charge in favour of Compaq by payment of the outstanding debts. Compaq was not entitled to retain out of the proceeds a sum more than sufficient to pay those debts’; 496: ‘It is implicit in Compaq’s acceptance of the defeasible nature of its interest that Abercorn had even on that analysis a residual interest in the proceeds of sale surplus to Compaq’s claims for the unpaid purchase price of the Compaq products and other sums owing to it.’ In the same sense, Modelboard v Outer Box, above n 33, 949; Highway Foods International Ltd, Re [1995] BCC 271 (Ch).

¹⁰⁸ Portbase Clothing, Re [1993] Ch 388 (Ch) 397 (Chadwick J).

¹⁰⁹ Oakdale (Richmond) Ltd v Nat West Bank Plc [1997] 3 CMLR 815 (CA) 818 (Millett LJ); Fire Nymph Products Ltd v The Heating Centre Pty Ltd (1992) 7 ACSR 365 (Supreme Court of New South Wales—Court of Appeal) (Gleeson CJ); and English and Scottish Mercantile Investment Co, Ltd v Brunton [1892] 2 QB 700 (CA) 712 f (Bowen LJ). The effectiveness in property law of such clauses was doubted by J, Morritt in Griffiths v Yorkshire Bank Plc [1994] 1 WLR 1427 (Ch) 1435Google Scholar, but the better reasons militate in favour of their effectiveness: Goode, above n 3, 5-40; and Ferran, above n 3, 535 with fn 287. For a critical view of Morritt J’s position, see also Walters, A, ‘Priority of the floating charge in corporate insolvency: Griffiths v Yorkshire Bank plc ’ (1995) 16 Company Lawyer 291, 292 ff Google Scholar.

¹¹⁰ The limitation of the charge to the amount of the outstanding indebtedness in Pfeiffer v Arbuthnott, above n 36, 160 & 161, is due to the fact that the plaintiff, Pfeiffer, used its (awkwardly translated) German general contract terms; as to the reasons for that limitation, see section IV.C below.

¹¹¹ See Jessel MR’s remark in Yorkshire Railway Wagon Co v Maclure (1882) LR 21 ChD 309 (CA) 315: ‘You may buy an equity of redemption if you are foolish enough to do so.’

¹¹² Agnew, above n 99, para 48: ‘[I]t is not enough to provide in the debenture that the account is a blocked account if it is not operated as one in fact.’ On the relevance of postcontractual conduct, see also Atherton, S and Mokal, R, ‘Charges over chattels: issues in the fixed/floating jurisprudence’ (2005) 26 Company Lawyer 10, 15–8Google Scholar; and Ferran, above n 3, 522 ff.

¹¹³ A Berg, ‘The Cuckoo in the nest of corporate insolvency: some aspects of the Spectrum Case’ [2006] JBL 22, 25 sub (5).

¹¹⁴ Other than with the chargee bank, see the next paragraph of the main text.

¹¹⁵ Barclays Bank Plc v Willowbrook International Ltd (CA 4 Feb 1987), [1987] BCLC 717 (Note) (Dillon LJ): ‘as the outstanding debt due to [the chargor] from [a third company] had been specifically charged to [the chargee] and [the chargor] had … expressly agreed to pay into its account with [the chargee] all moneys which it might receive from that or any other charged book debt, [the chargor] did hold each tranche of the … moneys [received but not paid into the account] on a constructive trust for [the chargee]’.

¹¹⁶ See Hallett’s estate, Knatchbull v Hallett, Re (1879-80) LR 13 ChD 696 (CA) 708 f (Jessel MR): ‘You can, if the sale was rightful, take the proceeds of the sale, if you can identify them. If the sale was wrongful, you can still take the proceeds of the sale, in a sense adopting the sale for the purpose of taking the proceeds, if you can identify them. There is no distinction, therefore, between a rightful and a wrongful disposition of the property, so far as regards the right of the beneficial owner to follow the proceeds’; affirmed (and refined in respects immaterial here) in Foskett v McKeown [2001] 1 AC 102 (HL) 130–1 (Lord Millett).

¹¹⁷ Breslin, J, ‘Tracing into an overdrawn bank account: when does the money cease to exist?’ (1995) 16 Company Lawyer 307, 307–10Google Scholar; we can, for present purposes, leave aside the nuances added by Breslin.

¹¹⁸ Kent & Sussex Sawmills Ltd, Re [1947] Ch 177 (Ch) 182.

¹¹⁹ Similarly Berg, above n 98, 441: ‘[E]ven … an express prohibition [on the company withdrawing the book debts’ proceeds] would be construed as subject to an implied right of withdrawal once the build-up of proceeds equals the amount of the loan.’

¹²⁰ Keenan Bros Ltd, Re [1985] BCLC 302 (Irish HC) 305 (Keane J), reversed [1986] BCLC 242 (Supreme Court of Ireland). The blocked account envisaged in the original deed was in fact only opened another five weeks after the supplemental agreement.

¹²¹ Queen’s Moat Houses Plc v Capita IRG Trustees Ltd [2004] EWHC 868 (Ch), [2005] BCC 347 (Ch), para 27.

¹²² Berg, above n 113, 32, citing Spectrum Plus, above n 101, para 138.

¹²³ Oditah, above n 100, 549 sub (f).

¹²⁴ 137 BGHZ 212, above n 26, 219.

¹²⁵ Insolvenzordnung (German Insolvency Code of 1994, ‘InsO’ for short) §§ 166(2), 171(1), (2).

¹²⁶ BGB § 237 provides that movables may only be deposited in security (eg paid into court) at two-thirds of their estimated value.

¹²⁷ 137 BGHZ 212, above n 26, 224 ff, 227, 233 & 235.

¹²⁸ 137 BGHZ 212, above n 26, 222ff & 219.

¹²⁹ This standard is provided for, but not defined, in BGB § 138.

¹³⁰ BGH, IX ZR 74/95 of 12 March 1998, [1998] Neue Juristische Wochenschrift 2047, 2047 ff.

¹³¹ In casu, security worth c DM 2.8m for a debt of DM 1.35m.

¹³² Clough Mill v Martin [1984] 1 WLR 111 (CA) 120 (Goff LJ); see the text by n 40 above.

¹³³ H Beale, ‘Reform of the law of security—another view’, [2004] JIBFL 117, 120 right col.

¹³⁴ Insolvency Act 1986 ss 126(1) & 128(1).

¹³⁵ Insolvency Act 1986 s 107.

¹³⁶ Safe, in the case of a floating charge, for the rights of preferential creditors, the contribution to the costs of winding up, and the share of assets to be set aside for unsecured creditors: Insolvency Act 1986 ss 175, 176ZA & 176A.

¹³⁷ Insolvency Rules 1986 r 4.97(1), (4).

¹³⁸ Insolvency Act 1986 s 8 with Sch B1 para 43(2).

¹³⁹ Insolvency Act 1986 s 8 with Sch B1 para 3(1).

¹⁴⁰ This is the heading before Insolvency Act 1986 ss 238–46.

¹⁴¹ That is, the re-vesting of transferred property, payment of the proceeds of sale of such property, transfer of property acquired with monies paid by the company, and release or discharge of securities given by the company: Insolvency Act 1986 s 241(1)(a)–(c).

¹⁴² The relevant time is defined in Insolvency Act 1986 s 240.

¹⁴³ Insolvency Act 1986 ss 239, 238 & 245.

¹⁴⁴ MC Bacon (No 1), Re [1990] BCC 78 (Ch) 92 (Millett J): ‘By charging its assets the company appropriates them to meet the liabilities due to the secured creditor and adversely affects the rights of other creditors in the event of insolvency. But it does not deplete its assets or diminish their value.’

¹⁴⁵ Insolvency Act 1986 s 239(4)(b); that the giving of security can amount to a preference is clear from s 241(1)(c).

¹⁴⁶ Insolvency Act 1986 s 245.

¹⁴⁷ Goode, R, Principles of Corporate Insolvency Law (3rd edn, London, Sweet & Maxwell, 2004) paras 11-80 & 11-87: ‘S 239 is aimed at transactions which disturb the statutory order of distribution.’Google Scholar

¹⁴⁸ See in and by nn 97–101 above.

¹⁴⁹ Equally, after the commencement of winding-up, there is no ‘disposition’ by the company in the sense of Insolvency Act 1986 s 127 when an existing charge attaches to newly acquired book debts: Ferran, above n 3, 499.

¹⁵⁰ This is required by Insolvency Act 1986 s 239(5).

¹⁵¹ Similarly MC Bacon, above n 144, 87: ‘[I]t would be virtually impossible to uphold the validity of a security taken in exchange for the injection of fresh funds into a company in financial difficulties.’

¹⁵² Walters, A, ‘Preferences’ in Armour, J and Bennett, H (eds), Vulnerable Transactions in Corporate Insolvency (Oxford and Portland/Oregon, Hart, 2003) para 4.38.Google Scholar

¹⁵³ Goode, R, Commercial Law (3rd edn, London, Penguin, 2004) 634: ‘[W]hen all the ingredients of attachment come together then, unless otherwise agreed, the security interest attaches as from the date of the security agreement Google Scholar.’

¹⁵⁴ Insolvency Act 1986 s 245(2)(a).

¹⁵⁵ InsO §§ 80 & 81.

¹⁵⁶ InsO §§ 89 & 91.

¹⁵⁷ InsO § 131(1).

¹⁵⁸ InsO §§ 129 & 35.

¹⁵⁹ InsO § 130(1).

¹⁶⁰ InsO § 142.

¹⁶¹ BGH, IX ZR 223/01 of 7 March 2002, 150 BGHZ 122, 130; Eickmann, D, Flessner, A et al, Heidelberger Kommentar zur Insolvenzordnung (4th edn, Heidelberg, CF Müller, 2006) InsO § 142 no 9, § 129 no 46, 47 (Kreft)Google Scholar.

¹⁶² InsO § 131(1) nos 1, 2, (2).

¹⁶³ InsO § 130(1) no 1, (2).

¹⁶⁴ Kreditwesengesetz (Banking Supervision Act) § 10(1).

¹⁶⁵ This is true if the account is in credit; if it is not but the overdraft limit is not exhausted, so that further drawings up to that limit are permissible, the right to draw is in principle caught by the mortgage but it has no monetary value.

¹⁶⁶ BGH, above n 161, 126.

¹⁶⁷ BGH, IX ZR 30/07 of 29 November 2007, [2008] Neue Juristische Wochenschrift 430, paras 17, 26 & 27.

¹⁶⁸ BGH, above n 167, paras 40–3. Note that forebearance does not amount to consideration under Insolvency Act 1986 s 245 either: H Bennett, ‘Late Floating Charges’ in Armour and Bennett, above n 152, para 5.51.

¹⁶⁹ BGH, above n 161, 129.