The practice of taking a fixed charge over the present and future book debts of a company is being adopted by financial institutions with mounting regularity. This trend is partly a result of the decision of Slade, J. (as he then was) in Siebe Gorman v. Barclays Bank 1, where it was held that such a fixed charge was legally possible. It is to be regretted that this decision was not followed by Keane, J., of the Republic of Ireland’s High Court in Re Keenan Bros.2

In the two cases of Siebe Gorman and Re Keenan Bros., a company, as beneficial owner, charged to its bank by way of a fixed charge all present and future book debts and undertook not to charge or assign the debts to any other person without the written consent of the bank, and further agreed to pay all such debts into the company’s account with the bank (hereafter called the payment in clause). In both cases the banks claimed the validity of the fixed charge; in Siebe Gorman in order to claim priority over a subsequent purchaser of certain debts who had notice of the charge, and in Re Keenan Bros. in order to claim priority over preferential creditors.

Slade, J., in Siebe Gorman, held that the company had created a valid fixed charge on all future book debts which attached in equity as soon as the proceeds were paid. The undertaking not to charge or assign and the payment in clause were sufficient restrictions on the company in their dealing with the book debts. However, Keane, J., believed that the payment in clause negated the existence of a fixed charge. Three reasons may be gleaned from his judgment—(i) the payment in clause was meaningless; (ii) it did not prevent the company from dealing with the book debts in the ordinary course of business; and (iii) it did not prevent a debtor to the company extinguishing the debt by way of set off.

It is submitted that these reasons cannot be supported and result from a possible confusion between an equitable charge and an equitable assignment. The reasons will be discussed in turn.

(i) Keane, J., declared3 that if a fixed charge was intended, “the effect of the deeds was to vest the debts in the bank at the moment they came into existence and to give the bank the right to collect them (on giving notice to the debtors); and the company at the date of the execution of the deeds ceased to have any interest in the debts whatsoever”. On this view, the payment in clause was “wholly unnecessary and indeed virtually meaningless”, since the company “had no business collecting any debts once the securities had been executed”. This view must be erroneous and the error may stem from the reliance by Keane, J., on the ambiguous dicta of Farwell, J., in Re Yorkshire Woolcombers Association 4, who declared5 that: “The very essence of a specific charge is that the assignee takes possession and is the person entitled to receive the book debts