Loans & Security - Case Law

Question 1

Re Spectrum Plus Ltd [2005]

Answer 1

The case established that a charge over book debts will only be a fixed charge if the creditor has sufficient control over both the debts and the proceeds (receivables) of those debts. If the company is free to use the proceeds in its ordinary course of business (e.g., pay into and draw from a bank account), the charge is floating, not fixed.

Question 2

A fixed equitable charge can either:

Answer 2

be in ownership of chargor at time of execution of charge Illingworth v Houldsworth [1904]

OR

come into ownership of chargor at some time after execution of charge Independent Automatic Sales v Knowles and Foster [1962):

Question 3

Re Yorkshire Woolcombers

Answer 3

• It “floats” over charged assets, allowing the chargor to deal with them in the ordinary course of business.

Question 4

Re Benjamin Cope & Sons [1914]

Answer 4

company cannot grant second floating charge ranking equally with first floating charge, unless permitted to do so by first charge document