The House of Lords has reversed Siebe Gorman, the landmark case on establishing a fixed charge, meaning that there is no longer a simple way for a clearing bank to take an effective fixed charge on book debts. By Geoffrey Yeowart
The House of Lords has decided, in the test case of National Westminster Bank plc v Spectrum Plus Limited, that a general charge taken on a company's book debts by a clearing bank in a debenture is effective only as a floating charge, where the proceeds are paid into the company's current account with the bank. They concluded that the charge holder in Spectrum had not exercised enough control over the proceeds to sustain a fixed charge.
This overrules the unanimous decision of the Court of Appeal in Spectrum and the decision of Slade J in Siebe Gorman Limited v Barclays Bank Limited in 1979. The Siebe Gorman decision had been relied on for more than 25 years as authority that such a debenture was effective to create a fixed charge. The new decision is estimated to affect the way in which book debt proceeds will be distributed...
The rest of this article is available to subscribers only. Subscribe today for full access to this article.
Alternatively take a free trial, giving you access for 48 hours*.
If you are already a subscriber, please log in below to access the rest of this article.
*some articles may be excluded.