This article discusses how far it is possible to take a fixed charge over book debts and, in particular, whether it is possible to take a fixed charge over uncollected book debts while leaving the debtor company free to collect those debts and use them on its own behalf. The article gives a qualified welcome to the recent Privy Council decision in Re Brumark, which indicates that this split charge phenomenon is not possible, and considers what further implications this decision might have. If reform of the law is considered desirable, the article indicates the author’s preferred way of doing this.

The advice of the Privy Council in Agnew v. I.R.C. (Re Brumark Investments Ltd), 1 delivered by Lord Millett, represents a decisive rejection of the proposition that a charge over book debts can be divided into a fixed charge over uncollected book debts and a floating charge over the proceeds of collection. In the final paragraph of his opinion, Lord Millett specifically stated that their Lordships considered Re New Bullas Trading Ltd, 2 where the Court of Appeal gave its blessing to this kind of security, to have been wrongly decided. One of the curious features of Brumark is that the appeal’s significance in the United Kingdom is likely to be very much greater than in its country of origin, New Zealand, because of the passage in that country of the Personal Property Act 1999. Lord Millett said that this Act was likely to make the distinction between fixed and floating charges disappear in New Zealand.3 There are no plans to do this in the United Kingdom as yet, although one very learned commentator has suggested that it might be no bad thing if this happened.4 In rejecting New Bullas the Privy Council has gone back to basics to a large extent, although the decision still leaves some questions unanswered as to how far back and what precisely has to be done to take a successful fixed charge over book debts.