Fixed or floating charge on book debts?

National Westminster Bank v Spectrum Plus Ltd [2005] UKHL 41; NLJ 9 September

The House of Lords unanimously held that the decision in Siebe Gorman v Barclays [1979] 2 Lloyd’s Rep 142 was wrong and should be overruled. The standard form bank debenture does not create a fixed but only a floating charge over book debts. A fixed charge over book debts is only created to the extent that the borrower does not have ‘freedom to deal’ with the book debts, for example if there is a contractual obligation on the chargor to cause those debts to be paid into a blocked account. In a two-page article considering the decision in the New Law Journal of 9 September Gregory Mitchell QC and Angharad Start observed that hundreds of litigations put on hold awaiting the decision of the House of Lords can now proceed, and banks will recover substantially less.