National Westminster Bank PLC v Spectrum Plus Ltd (In Creditors’ Voluntary Liquidation) (2004)


Application for relief pursuant to Insolvency Act 1986 s.112 for a declaration that a debenture created a fixed charge over a company's book debts and the proceeds thereof, and an order on the liquidators to account to the Bank in respect of them.


The respondent company (S) opened an account with National Westminster Bank Plc (the bank) with an overdraft facility of GBP250,000 and granted the bank a debenture, in the standard form, to secure all moneys due from S to the bank. The bank advanced S GBP200,000 and debited its new account. The overdraft facility varied from time to time but S's account was never in credit. S went into voluntary liquidation and appointed the second and third respondents as liquidators. The liquidators collected book debts to the value of GBP113,484 but refused to account for them to the bank. The bank applied for relief under s.112 Insolvency Act 1986. The Customs and Excise Commissioners, Commissioners of Inland Revenue and Secretary of State for Trade and Industry were joined as respondents (the crown). The crown conceded that the application had to be allowed if they failed to convince the instant judge that the conclusion of Slade J in Siebe Gorman & Co Ltd v Barclays Bank Ltd 2 ~Lloyd's 142(1979) was wrong.


(application refused) (1) There was no distinction to be drawn between the operation of an account which was in credit and the operation of one which was in debit but within the overdraft facilities agreed with the bank. (2) There was no ground in the instant case on which Siebe Gorman could be distinguished. (3) The conclusion of Slade J in Siebe Gorman was wrong. That decision sought to give effect to the intention of the parties that the charge over the book debt should be a first fixed charge and looked to see if that intention was negatived by the restrictions imposed by a clause in the debenture. However, as indicated in Agnew & anr v Commissioner of Inland Revenue & anr [2001] UKPC 28, [2002] 1 A.C. 710, the real question was whether the rights and obligations conferred and imposed by that clause disclosed an intention that the company should be free to deal with the book debts and withdraw them from the security without the consent of the bank. The source of the fetter on the operation of the bank account on which Slade J relied was the description or label of the transaction as a 'fixed first charge'. Once that part of the debenture was recognised as the categorisation of the parties which, as a matter of law, might be wrong then there was nothing from which the fetter could be implied.