Charge Over Book Debts: The Question of Control

Abstract

In Agnew v Commissioner of Inland Revenue, the Privy Council decided that for a fixed charge to be created over a company's present and future book debts, the chargee must exercise control over both the uncollected book debts and their realised proceeds. Agnew has thus cast doubt upon the correctness of Siebe Gorman v Barclays Bank Limited, where the debenture in question did not specifically restrict the chargor's freedom to draw on the proceeds after they were paid into a designated account with the chargee. Recently, a Siebe Gorman-type debenture came under judicial scrutiny in National Westminster Bank plc v Spectrum Plus Limited. The English High Court held that the control conferred by a Siebe Gorman-type debenture was deficient, whereas the English Court of Appeal took a completely different view. The issue of control concerning charges over book debts is therefore still unsettled. This article examines the control requirement in the light of recent cases.