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23 Cards in this Set

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Re Clare Textiles Ltd High Court 1 February, 1993 unrep.

Costello J.: “ the term ‘charge’ relates to a contract under the terms of which certain property is available as security to meet the performance of a liability, usually the payment of money.”Charge defined in section 408(1) of the Companies Act 2014 as:“a mortgage or a charge, in an agreement (written or oral), that is created over an interest in any property to the company”.

Illingworth v Houldsworth [1904] AC 355

Lord Macnaughten:“a specific charge, I think, is one that without more fastens on ascertained or definite property or property capable of being ascertained and defined.”

Welch v Bowmaker (Ireland) Ltd. [1980] IR 251

Approved of Illingworth in Ireland

Illingworth v Houldsworth [1904] AC 355, Lord Macnaughten :

“A floating charge is ambulatory and shifting in its nature, hovering over and so to speak floating with the property which it is intended to affect until some event occurs or some act is done which causes it to settle and fasten on the subject of the charge within its reach and grasp.” Illingsworth was never meant to be an exhaustive list detailing the traits of a floating charge as evidenced in Welch v Bowmaker

Re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284

Romer LJ : “It is a charge on a class of assets of a company present and future; That class of assets is one, which in the ordinary course of the business of the company, would be changing from time to time; and By the charge it is contemplated that, until some future step is taken by or on behalf of those interested in the charge, the company may carry on its business in the ordinary way so far as concerns the particular class of assets.”

Re Tullow Engineering (Holding) Ltd [1990] 1 IR 452

Blayney J: held that the debenture which contained a floating charge over shares in another company constituted a present security which was unaffected by the granting of an option to buy those shares Quoting Evans v Rival granite ‘A floating security is a present, not a future security’Ie all shares remain within the ambit of the charge which did not crystallise until a receiver was appointed

Evans v Rival Granite Quarries Ltd [1910] 2 KB 979, Buckley LJ:

“A floating charge is not a future security; it is a present security, which presently affects all the assets of the company expressed to be included in it. A floating charge is not a specific mortgage of the assets... but is a floating mortgage applying to every item comprised in the security but not specifically affecting any item until some event occurs or some act on the part of the mortgagee is done which causes it to crystallise into a fixed security”

Re Tullow Engineering (Holding) Ltd [1990] 1 IR 452

Taking steps to appoint a receiver doesn’t count they have to be appointed

Re Crompton & Co. Ltd [1914] 1 Ch 954

winding up - WArrington J - puts an end to the suspension and stops the floating nature of the securtiy

Re Woodruffes (Musical Instruments) Ltd [1986] Ch 366 - cessation of business

Company created a debenture in favor of a bank which contained a first fixed charge over certain property and also a floating, charge on all the undertakings and assets of the company which weren’t affected by the fixed charge. Allowed bank to convert (with notice) fixed to floating charges. Then another debenture holder was created in violation of an NPC. Both the bank (crystallizing but didn’t give notice for the floating charge) and the debenture holder (chaging assets from floating to fixed charges) demanded the money at the same time. As a result the directors asked the abnk to appoint a receiver and then liquidation. Net question was whose floating harge took priority because there wans’t enough for both.

Re Brightlife Ltd. [1987] 2 WLR 197 Service of notice of crystallisation by the debenture holder

INconvenience of an automatic crystallisation gives rise to a strong presumption that automatic crystallisation was not in fact intended and thta accordingly very celar language will be required to show that an intention to AC was intended

Re J.D. Brian Ltd [2011] 3 I.R. 244, [2015] 2 ILRM 44 (express crystallization clauses)

Also sides with charges being present and not future Recognition by High Court and Supreme Court of contractual possibility of creating an automatic crystallisation on occurrence of stipulated event.

Re Lakeglen Construction Co Ltd [1990] IR 347

Question arose whether a clause in the debenture in favour of some of the company's creditors created a fixed Or floating charge. In charge in the assets (book debts) of the company the debenture made certain asset subject to a fixed charge, but at the time company was insolvent hence was the charge fixed or floating?Costello J: it would be a floating charge if it was to remain dormant until some future date and that the company was permitted to go on receiving book debts. The chargor company was a trading company and the parties had agreed they would go on with business as normal hence it would be very strange if they were to keep handing over the book debts so he applied Illingsworth and found it to be a floating charge

Siebe Gorman v Barclays Bank [1979] 2 Lloyd’s Reports 142 Judicial Recognition of Charges over Book Debts

Facts: A company created a debenture in four of barclays secured by way of legal mortgage over all its leasehold and freehold properties and machinery and then ‘by way of first fixed charge all book debts and other debts now and from time to time due or owing to the company’ Construction is important - this meant that they had created a restriction on the rights of the chargor company to deal with its collected book debts meaning that Slade J found it to be a fixed charge and not a floating one


NB: it's a fixed charge because it was made that way. A floating charge can’t become a fixed charge

Re Armagh Shoes Ltd. [1986] BCLC 418

Debenture provided for no restrictions, the court will not imply restrictions and the charge will be deemed a floating charge.

Re Brightlife Ltd [1986] BCLC 418

Similar to armagh shoes. There was a prohibitions on the chargor company selling, factoring or discounting the book debts in question, the absence of the positive requirement that the monies be paid into a separate bank account meant that it could only be a floating charge

Re Keenan Bros Ltd [1985] IR 401

“The company shall pay into an account with the Bank designated for that purpose all moneys which it may receive in respect of the book debts and other debts hereby charged and shall not without the prior consent of the Bank in writing make any withdrawals or direct any payment from the said account.”SC reversed HC judgement that it had been a floating charge . Mere terminology will not make a floating charge into a fixed charge nor will declared intention of parties Restrictions on the rights of the chargor company were essential in determining what the charge was - because they were required to put all the book debts into a separate account it was a fixed charge

Re Wogan’s (Drogheda) Ltd High Court (Denham J) 9 February 1993 unrep., [1993] 1 IR 157 (SC)

The requirement to put the debts in a separate account is the important bit, not whether the chargor company actually did it or not. The issuing company allowed them to not adhere so strictly to the terms of the fixed charge but this doesn’t deprive them of their rights originally agreed on.

Re Holidair Ltd [1994] 1 ILRM 481

SC decision - virtually impossible to reconcile with WogansKentz group of companies were placed into examinership. Companies main creditors got into a dispute with the examiner and the question was whether they were holders of a fixed or floating charge. The HC said it was a fixed charge over the book debts. SC, Blayney J - said it was a floating charge in spite of a clause requiring the debts’ proceeds be put in a separate bank account . Said that just calling something a fixed charge didn’t make it so and it had the 3 traits of a floating charge laid out in Re Yorkshire Woolcombers and there were no out and out restrictions on using the proceeds from the debtThe UK eventually followed suit requiring substance over form. HOL in Re Spectrum Plus overruled the AC in Re Spectrum Plus and also Siebe

Re New Bullas Trading Ltd [1994] BCC 36

Broke new ground wrt hybrid charges over book debtsFixed charges for so long as the debts remained uncollected but as soon as they were paid into the designated bank account they became a floating charge. This allowed the chargee to give instructions as to how the company dealt with book debts, directions as to the operation of the account and if the chargee failed to give instructions in relation to the money in the account then the moneys were freed from the fixed charge and came under a floating charge instead allowing the company to deal with it in the ordinary course of business This caused a bit of consternation harking back to the 80s fixed vs floating debate. How could it be fixed if the company was still allowed access to the security moneys?

Re Brumark Investments Ltd [2000] 1 BCLC 354

Declined to follow RE New Bullas and held that the charge identical to the one in the other case was a floating charge. Trial judge drew a distinction between the company's freedom to receive debts, thereby extinguishing the charge on the one hand and disposing of the debt to a third party on the other. (splitting these two things in half was the bit that was new)COA disagree - by excluding the purported fixed charge created by the debenture until intervention by the bank, the bank was emphasizing the company’s freedom to collect debt on its own account. That's not doing anything different to how a normal floating charge works

Welch v Bowmaker (Ireland) Ltd [1980] IR 251 Negative Pledge Clauses

Does constructive or actual notice count?Constructive notice wouldn’t be fair, would require obliging banks to go seek out info as to whether the clause existed. SC, Henchy J - only actual notice of the clause In practice a lot of these subsequent chargees will have actual notice of the NPC

Re Salthill Properties Ltd High Court (Laffoy J) 30 July 2004 unrep., Supreme Court 29 May 2006 (affirming)

Question of priority of chargees depends on whether they had notice of the clause. If you knew the chargor was bound by an NPC, the secondary chargee is bound in equity to take heed of the restriction