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 in...