- Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214 (”BCCI No 8“). The case was actually concerned with the doctrine of marshalling (the English equivalent to the Scots law of “catholic and secondary creditors“). The case is also interesting because the charges that were granted were third party securities: neither of the chargors had any personal liability to the chargee.
- BCCI No 8 at 226F–G.
- BCCI No 8 at 226H–227B. Cf RM Goode, “Charge-Backs and Legal Fictions” (1998) 114 LQR 178 at 179. Cf Goode's preface to the third edition of Commercial Law (2004).
- BCCI at 226H–227B: “There would be no merger of interests because the depositor would retain title to the deposit subject only to the bank's charge.” The Court of Appeal, in contrast, would have ignored the merger argument if there were no other basis on which to hold that the charge could be given effect to: [1996] Ch 245 at 262E–F: “If the reasoning in Re Charge Card Services Ltd led to the conclusion that charge-backs were invalid or ineffective to give security in the event of the chargor's insolvency then that reasoning would be suspect; and if it could not be faulted then we would be willing to sacrifice doctrinal purity on the alter of commercial necessity.”
- There is some authority for an assured to grant a legal mortgage of a claim under a policy of insurance in favour of the insurer: Sovereign Life Assurance Company v Dodd [1892] 1 QB 405 aff'd [1892] 2 QB 573, although it may be – the report is not particularly clear on the matter – that the mortgage was granted, not in favour of the insurer itself, but to the company secretary of the insurer as security trustee for the insurer. See too P Wood, Comparative Law of Security Interests and Title Finance (London, Sweet & Maxwell, 2nd edn, 2007), para 29–019.
- See eg Sir John Salmond and PJ Fitzgerald, Jurisprudence (London, Sweet & Maxwell, 12th edn, 1966), 64–65.
- The statutory exception, of course, was introduced by the Floating Charges (Scotland) Act 1961.
- The other three are mortgage, pledge and lien.
- One statutory exception is created by the Law of Property Act 1925, ss 85 and 86, which provides that the only security that may be granted over land is a “charge by way of legal mortgage” (the so-called “Legal Charge”).
- Companies Act 2006, ss 860ff (for companies registered in England and Wales, or Northern Ireland); ss 878ff (Scottish companies). Although it has been remarked that the word “charge”, in the sense of a security, is not a term of art in Scotland (Scottish & Newcastle Breweries Ltd v Liquidator of Rathburne Hotel Co Ltd 1970 SC 215 at 219–20 per Lord Fraser), the term “charge” is not entirely uncivilian: see eg Art 958 Code civil which speaks of “hypothèques et autre charges réelles“; and Art 637 Code civil, dealing with servitudes, provides: “Une servitude est une charge impose sur un héritage pour l'usage et l'utilité d'un heritage appurtenant à une autre propriétaire.” For a Scottish example of such a usage: see Solicitors (Scotland) Act 1980, s 62. The Code civil belge is in similar terms to the French Code Civil provisions. The Dutch translation of “charge” is “last”. A Scottish translation, in the case of land, might be “burden”.
- N Grier, Banking Law in Scotland (London, Sweet & Maxwell, 2001), para 4–38 suggests there is little difference between the various concepts that will be discussed below. I disagree.
- See generally WA Wilson, The Scottish Law of Debt (W Green/Sweet & Maxwell, 2nd edn, 1991), para 13–01ff and RG Anderson, Assignation (Edinburgh, Edinburgh Legal Education Trust, 2008), para 8–39ff.
- WM Gloag and JW Irvine, The Law of Rights in Security and Cautionary Obligations (Edinburgh, W Green & Sons, 1897), 58ff. The English equivalent is the doctrine of “marshalling”.
- Inveresk plc v Tullis Russell Papermakers Ltd [2010] UKSC 19 per Lord Rodger at paras [58], [71], [81], [89] and [107].
- Turner, Petitioner [1993] BCC 299; 1994 SLT 811.
- Mycroft, Petr 1983 SLT 342; Melville Dundas Ltd v Hotel Corporation of Edinburgh Ltd 2007 SC 12 at para [24]. For some explanation of the doctrine, see GL Gretton, “Scotland” in W Swaddling (ed), The Quistclose Trust: Critical Essays (Oxford, Hart Publishing, 2004), 169, 172.
- This is important because in terms of Insolvency Act 1986, sch B1, para 4(6), the consent of the court or the administrator is required to institute legal proceedings against a company in administration. But there would be nothing to stop a defender pleading compensation where the pursuer is a company in administration. In Turner (supra n 15), Lord Kirkwood (Ordinary) rightly emphasises that the Scots law of compensation and balancing of accounts in bankruptcy shares little in common with its English equivalents.
- Anderson v Northern Bank of Scotland Ltd (1901) 4 F 49 at 55 per Lord M'Laren.
- See n 16 above.
- Cf Royal Insurance (UK) Limited v Amec Construction Scotland Limited 2008 SC 201.
- Cf Johnston v Johnston (1875) 2 R 986 at 997 per Lord President Inglis.
- For the background, see Anderson, supra n 12, para 8–43ff. There is nothing to prevent compensation being pled against a company in administration.
- For English law in this area, see P Wood, English and International Set-off (London, Sweet & Maxwell, 1989), ch 5; idem, Set-off, Netting, Derivatives and Clearing Systems (London, Sweet & Maxwell, 2nd edn 2007), para 3–021; R Derham, The Law Set-off (Oxford University Press, 3rd edn, 2003), 713; S McCracken, The Banker's Remedy of Set-off (London, Butterworths, 3rd edn, 2010), 221.
- Unless the parties ask the court to interpone its authority to a joint minute setting out the parties' mutual debts. In such a case the defender's payment obligation would be discharged by compensation (or, perhaps, by litis contestatio): A v B 2003 SLT 242 at para [15] per Lord Drummond Young (Ordinary): “When decree is pronounced by a court, that decree is obligatory in its own right, without reference to the contract or other legal ground on which it proceeded.” See, for similar statements in English law about a cause of action being “merged” in the court's judgment: Stein v Blake [1996] 1 AC 243 at 251 per Lord Hoffmann; Unilin Beheer BV v Berry Floor NV [2007] EWCA Civ 364 at para [50] per Jacob LJ.
- See eg Re Kaupthing Singer and Friedlander Ltd (in administration) [2009] EWHC 740; and, in Scots law, Redpath Dorman Long Ltd v Cummins Engine Co Ltd 1981 SC 370.
- In order for this to work on insolvency, composite guarantees between the affiliated companies are probably required.
- GJ Bell, Principles of the Law of Scotland (Edinburgh, Thomas Clark, 4th edn 1839), § 1432. Lien, in this use of the term, is not limited to corporeals: see generally, AJM Steven, Pledge and Lien (Edinburgh, Edinburgh Legal Education Trust, 2008), para 10–134.
- Laing v Lord Advocate 1973 SLT (Notes) 81 per Lord Keith (Ordinary).
- [1997] 2 BCLC 249 OH. It is curious that this important case was never reported in any major series of Scottish law reports.
- Bank of East Asia plc v Scottish Enterprise 1997 SLT 1213 HL.
- [1997] 2 BCLC 249 at 262c–d per Lord Penrose. Compare A v B 2003 SLT 242 at para [20] per Lord Drummond Young (Ordinary), who held that “set-off” used in a contract would not extend to a right of suspension of performance.
- WW McBryde, The Law of Contract in Scotland (Edinburgh, W Green, 3rd edn, 2007), para 24–08.
- A point made by the Court of Appeal in Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd [2009] EWCA Civ 1160. It is understood that the Perpetual decision has been appealed to the Supreme Court.
- Insolvency Act 1986, s 248(b)(ii) (definition of “security”): “in relation to Scotland, any security (whether heritable or moveable), any floating charge and any right of lien or preference and any right of retention (other than right of compensation or set-off)”. Cf Factors (Scotland) Act 1890, s 1(1).
- See text to n 60 below.
- In terms of the EU Insolvency Regulation (2000/1346/EC).
- J St Clair and Lord Drummond Young, The Law of Corporate Insolvency in Scotland (London, Sweet & Maxwell, 3rd edn, 2004), para 17–19.
- Cf R McCormick, Legal Risk in the Financial Markets (Oxford University Press, 2006), para 9–06.
- R Calnan, “Security over Deposits Again” [1998] Butterworths Journal of International Banking and Financial Law 125, 130.
- Insolvency Act 1986, s 248(b)(ii).
- Wilson, supra n 12, para 13.1.
- Professor Philip Wood QC labels this “current account set-off “: English and International Set-off supra n 23, 89 ff.
- R Zimmermann, The Law of Obligations (Cape Town, Juta & Co, 1990), 764ff; idem, “Aufrechnung” in J Basedow, K Hopt and R Zimmermann (eds) Handwörterbuch des Europäischen Privatrechts (Tübingen, Mohr Siebeck, 2009), vol 1, 109–13; idem, “§§ 387–396 Aufrechnung” in M Schmoeckel, J Rückert and R Zimmermann (eds) Historisch-Kritischer Kommentar zum BGB, vol II/2 (Tübingen, Mohr Siebeck, 2007), 2179, Rn 6ff; A Berger, Encyclopaedic Dictionary of Roman Law (American Philosophical Society, 1953), sv “Argentarii”.
- L Gullifer, Goode on Legal Problems of Credit and Security (London, Sweet & Maxwell, 4th edn, 2008), para 7–32.
- Ibid. Accounts opened by customers of German banks, or with the German branch of an international bank, are subject to the Allgemeine Geschäftsbedingungen Banken (2002 edn), § 14 of which confers on the bank a right of pledge (Forderungspfandrecht) in any claims the customer has against the bank.
- That being so, any case-law becomes important. I Fletcher and R Roxburgh, The Law of Receivership (Haywards Heath, Tottel, 3rd edn, 2005), para 9.28, n 3 cite an unreported opinion of Lord Hill Watson dated 21 July 1954: Bank of Scotland v Purvis Industries Ltd. But the process in the National Archives of Scotland does not contain an opinion of the Lord Ordinary. It may be that no written opinion was issued; or, if one was, it has not been preserved.
- Bell, supra n 27, § 1451. For discussion, see Robertson's Tr v Royal Bank of Scotland (1890) 18 R 12. For the caveat on appropriation, see Clydesdale Bank Ltd v Liquidators of James Allan Senior & Son Ltd 1926 SC 235.
- Gloag and Irvine, supra n 13, 370.
- Ibid, 371; James Kirkwood & Sons v Clydesdale Bank Ltd 1908 SC 20 at 24 per Lord President Dunedin: “the state of affairs between a banker and his customer as at any given time must be taken to be the state of affairs upon all accounts.” Combination can probably occur on notice. The right to combine was assumed in JS Cruickshank (Farmers) Ltd v Gordon & Innes Ltd (in receivership) [2007] CSOH 113. For other discussion of the doctrine in Scots law: see L Crerar, “Banking, Money and Commercial Paper” in Stair Memorial Encyclopaedia, Reissue (Edinburgh, Butterworths, 2000), para 102 drawing on DJ Cusine, “Banking and Financial Institutions” in Stair Memorial Encyclopaedia (Edinburgh, Butterworths, 1988), vol 2, para 1199; L Crerar, The Law of Banking in Scotland (Tottel Publishing, 2nd edn, 2007), 205–06 mentions only compensation – which, because it requires court action, is expensive and relatively unusual – but not contractual set-off or combination of accounts; D B Caskie, Wallace and McNeill's Banking Law (Edinburgh, W Green, 10th edn, 1991), 24.
- I do not know whether banks hold “current accounts” with other banks; if they do there would be a difficult question whether the bank qua account holder could exercise the right to combine accounts against the bank with which the account was held.
- Barclays Bank Ltd v Okenarhe [1966] 2 Lloyds Rep 87 at 95, following Garnett v M'Kewan (1872) LR 8 Ex 10.
- Gibb v Lombank Scotland Ltd 1962 SLT 288. This case has a couple of peculiarities: in the first place, it was not clear that the defenders were actually bankers; and, secondly, the claims relied upon by the defenders in their counterclaim were illiquid claims for damages arising out of an earlier transaction – in other words, a claim that did not fulfil the strict requirements of compensation.
- Steven, supra n 27, paras 17–27. We can ignore for present purposes the slow-burning issue for legal science of whether securities or other personal rights can be “owned”. For a persuasive views that they cannot, see GL Gretton, “Ownership and its Objects” [2007] Rabels Zeitschrift für ausländisches und internationales Privatrecht 801; idem, “Financial Collateral and the Fundamentals of Secured Transactions” (2006) 10 Edinburgh Law Review 209, 215, n 29; and, in the context of English law, A Pretto-Sakmann, Boundaries of Personal Property Law: Shares and Sub-shares (Oxford, Hart Publishing, 2005). I find the Gretton thesis persuasive.
- GJ Bell, Commentaries on the Law of Scotland (Edinburgh, T & T Clark, 8th edn 1870), II, 113 and discussion in Steven, supra n 27, para 17–28ff.
- We need not here enter into the difficulties of delivery; indorsement and delivery; and transfer, under Bills of Exchange Act 1882, s 31.
- Bills of Exchange Act 1882, s 27(3) supposes that the holder of a bill can also have a lien on it. As GL Gretton, “The Concept of Security” in DJ Cusine (ed), A Scots Conveyancing Miscellany: Essays for J M Halliday (Edinburgh, W Green, 1987), 126, 144, n 74 points out, this “seems quite impossible unless ‘lien’ has a special meaning in that Act”. Cf Companies Act 2006, s 879(4): The “deposit” of a negotiable instrument, given to secure the payment of book debts, is not a (registrable) charge of those book debts.
- Grier, supra n 11, para 4–38; Steven, supra n 27, para 17–27ff.
- And some liens may be barely enforceable at all, either in practice (because the articles, such as confidential papers held by a banker, cannot be sold) or as a matter of law (because the books are needed for the company's business: Insolvency Act 1986, s 246).
- See, for discussion of what amounts to a “lien” and which, for enforcement, would require the leave of the administrator or the court, Re Paramount Airways Ltd [1990] Ch 744; Re Sabre International Products Ltd [1991] BCLC 470; Re Cosslett (Contractors) Ltd (In Administration) (No 2) [2002] 1 AC 336.
- Integrated Building Services Engineering Consultants Ltd v Pihl UK Ltd [2010] CSOH 80 at paras [21] and [34] per Lord Hodge (Ordinary), pointing out that Lord Hope of Craighead's dicta in Melville Dundas Ltd v George Wimpey UK Ltd 2007 SC (HL) 116 at para [33], that a balancing of accounts is available only on bankruptcy or liquidation, were not intended to be definitive.
- Borthwick v Scottish Widows' Fund and Life Assurance Society (1862) 2 M 595 at 599 per Lord Mackenzie (Ordinary). I owe this point to Donna Mackenzie-Skene of the University of Aberdeen, “The Curious Case of Future and Contingent Debts in the Balancing of Accounts in Bankruptcy”, paper presented to the Centre for Commercial Law, University of Edinburgh, 3 December 2008.
- Scott's Tr v Scott (1887) 14 R 1043 at 1051 per Lord President Inglis.
- Secretary of State for Trade and Industry v Frid [2004] 2 AC 506 at paras [32] and [34] per Lord Hope of Craighead.
- Wilson, supra n 12, para 13.10 and authorities there cited.
- Atlantic Engine Co (1920) Ltd (in liquidation) v Lord Advocate 1955 SLT 17 at 20 per Lord President Cooper (Ordinary); Secretary of State for Trade and Industry v Frid [2004] 2 AC 506 at para [32] per Lord Hope of Craighead. The same point is made in the opinion of the Court of Appeal in BCCI (No 8): [1996] Ch 245 at 272–273.
- Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785 at 822D–G per Lord Kilbrandon.
- Re SSSL Realisations (2002) Ltd (formerly Save Service Stations Ltd) (In Liquidation) [1996] Ch 610.
- Evidence of Scots law was provided to the Guernsey Royal Court in Flightlease Holdings (Guernsey) Ltd v Flightlease (Ireland) Ltd [2009] GLR 38, but, as a result of the apparent lack of clarity on the point, the Lieutenant Bailiff decided that Guernsey law should instead develop consistently with English law.
- The rule in Cherry v Boultbee (1839) 41 ER 171, discussed by Chadwick LJ in Re SSSL Realisations above.
- See generally P Wood, Set-Off and Netting, Derivatives, Clearing Systems, The Law and Practice of International Finance Series, vol 4 (London, Sweet & Maxwell, 2nd edn, 2007), chs 7 and 19.
- Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (SI 1999/2979) reg 2(1), reflecting Settlement Finality Directive (1998/26/EC) Art 2(k).
- See the Financial Collateral Arrangements (No 2) Regulations 2003 (SI 2003/3226) reg 3.
- Settlement Finality Directive (1998/26/EC, as amended by 2009>/44/EC), implemented in the UK by the Financialsssss
- Markets and Insolvency (Settlement Finality) Regulations 1999 (SI 1999/2979) reg 13.
- Settlement Finality Directive, Art 3(1) (as amended by 2009/44/EC).
- Solicitors (Scotland) Act 1980, s 61(3): a “bank… at which a solicitor… keeps a special account for clients' money shall not in respect of any liability of the solicitor… to the bank… have or obtain any recourse or right, whether by way of set-off, counter-claim, charge or otherwise, against money standing to the credit of that account”.
- United Rentals Limited v Clydesdale and North of Scotland Bank Limited 1963 SLT (Sh Ct) 41; Cruikshank, Devron Potatoes Ltd v Gordon & Innes Ltd 2003 SCLR 103; JS Cruikshank (Farmers) Ltd v Gordon & Innes Ltd (in receivership) [2007] CSOH 113.
- Trusts (Scotland) Act 1961, s 2.
- The leading case is Fleming v Imrie (1868) 6 M 36. Although at least one twentieth-century decision holds that merger of debtor and creditor operates an ipso iure discharge, even then the court made it clear that this effect would not be extended to new cases: Healy & Young's Trs v Mair's Tr 1914 SC 893 at 902 per Lord President Strathclyde. The better view is that confusion leads to suspension whenever there is title and interest to maintain the underlying claim. Cf Whiteley v Delaney [1914] AC 132 at 151 per Lord Dunedin.
- 2002/47/EC as amended by 2009/44/EC.
- Financial Collateral Arrangements (No 2) Regulations 2003 (SI 2003/3226).
- See generally the devastating and readable critique by Gretton, “Secured Transactions”, supra n 53; and H Patrick, “The Financial Collateral Regulations: Some Scottish Issues” (2009) 3 Law and Financial Markets Review 532. English lawyers also appear dissatisfied with the directive's title transfer concept: H Beale et al, The Law of Personal Property Security (Oxford University Press, 2007), para 10.06. Problems are not peculiar to the UK. For the Dutch experience (where fiduciary title transfers for the purpose of security are otherwise prohibited) of implementing the Directive, see LPW van Vliet, “De financiëlezekerheids-overeenkomst, een tussenbalans” [2005] Tijdschrift voor Nederlands Burgerlijk Recht 190.
- J Perkins, “Registration of Charges over Intangible Assets” (2010) 4 Law and Financial Markets Review 360. This is the position adopted in HM Treasury, A Consultation on the implementation of EU Directive 2009/44/EC on settlement finality and financial collateral arrangements (2010), 2.13–2.18.
- Gretton, “Secured Transactions”, supra n 53.
- 2002/47/EC, Art 1(5). As George Gretton has pointed out, whether the “provision” requirement applies to TTFCAs only; SFCAs only; or to both TTFCAs and SFCAs, is not clear: the English definitions of TTFCA and SFCA suggest provision applies only to SFCAs. The German version suggests only TFCAs. The Dutch version suggests TTFCAs and SFCAs must both must be provided: see Gretton, “Secured Transactions”, supra n 53, 226.
- 2002/47/EC, Art 2(2).
- 2002/47/EC, Art 2(2) as amended by 2009/44/EC.
- 2009/44/EC.
- Companies Act 1985, s 462.
- A similar point is made by Mr B Stephen of Brodies LLP, “Scotland” in W Johnston (ed) Security over Receivables: An International Handbook (Oxford University Press, 2008), para 30.06: “In order for a security to be floating it must be stated as such. Documents which fall short of the formal requirements for creation of a fixed security under Scots law do not constitute a lesser form of security: they constitute no security at all.”
- Subject to national rules on good faith acquisition.
- Crystallisation occurs only on receivership or liquidation. Receivership remains permissible only with respect to pre-September 2003 floating charges, or those granted in relation to matters falling within sections 72B–72GA of the Insolvency Act 1986.
- See Gretton, “Secured Transactions”, supra n 53, 230. And it must be emphasised that, while a qualifying floating charge holder may appoint an administrator, there is no attachment of a Scottish floating charge by mere fact of the appointment of an administrator. (In practice the floating charge holder normally requires the company's directors to appoint the administrator). In certain circumstances, however, the administrator may bring about an attachment: Insolvency Act 1986, sch B1, para 115(3).
- Insolvency Act 1986, s 57(1).
- Gretton, “Secured Transactions”, supra n 53, 230; see too E Johansson, Property Rights in Investment Securities and the Doctrine of Specificity (Berlin, Springer, 2008), 21. This appears to have been the view too of Vos J in Gray v G-T-P Group Ltd, Re F2G Realisations Ltd (in liquidation) [2010] EWHC 1772 at para [61], noted by G Yeowart (2010) 4 Law and Financial Markets 549. One comparative comment on that case from a Scottish perspective suffices. Because Scots law does not recognise the equitable charge, or beneficial ownership, but it does recognise the trust, a Declaration of Trust under Scots law by a Scottish company has never amounted to a registrable charge.
- Bankruptcy and Diligence (Scotland) Act 2007, s 38. Only one registration will be required. The register of floating charges, however, reduces the difficulty of latent deeds having third-party effect.
- 2002/47/EC, Art 2(1)(d). Part of the German definition catches the crux of it best: vergleichbare Geldforderungen (held against a bank).
- FCD, Art 6.
- It is possible in Scots law to create judicial securities, by way of diligence (execution/Zwangsvollstreckung), over cash: weather by way of a money attachment (physical cash) or by way of arrestment (bank moneys).
- Gretton, “Secured Transactions”, supra n 53, 223.
- See eg Foskett v McKeowen [2001] 1 AC 102 at 127–28 per Lord Millet; C Proctor, Mann's Legal Aspects of Money (Oxford University Press, 6th edn, 2005), para 1.03; D Fox, Property Rights in Money (Oxford University Press, 2008), para 5.23.
- FCD, Art 6.
- FCD, Art 2(2) as amended.
- Quite why Financial Collateral Arrangements were thought to be so “special” that insolvency law should not apply as normal has never been properly explained. The FCD appears to be a result of what Martin Wolf of the Financial Times has called “special pleading – of which this pampered industry is a master”: “The Mouse that did not roar”, Financial Times, 14 September 2010.
- It has been held in Australia that this contractual right to retransfer cannot amount to an “equity of redemption”: Beaconwood Securities Pty Ltd v Australia and New Zealand Banking Group Ltd [2008] FCA 594; 246 ALR 361 at paras [47], [50] and [53] per Finklestein J.
- FCD Art 8(2) assumes only a situation where the collateral-provider becomes insolvent.
- It is no coincidence that the security document is normally described as being over a deposit account.
- For which see A F Rodger [Lord Rodger of Earlsferry], “Pledge of Bills of Lading in Scots Law” [1971] Juridical Review 193 and the reply by GL Gretton, “Pledge, Bills of Lading, Trusts and Property Law” [1990] Juridical Review 23.
- See, Anderson, Assignation n 12, para 6–43.
- Fleming v Imrie's Tr s (1868) 6 M 363.
- DCFR IX-2:301(3).
- Insolvency Act 1986, sched B1, para 43(2).
- Re Charge Card Services [1987] Ch 150 at 175–76 per Millet J (charge-back not a “charge” but operates by way of set-off); Northern Bank Ltd v Ross [1990] BCC 883, a first instance decision from Northern Ireland by Lord Hutton: a deposit in a bank is not a “book debt”; thus the there is no registrable charge in terms of s 860(7)(f) (English companies) and s 878(7)(b)(vii) (Scottish companies). See too G McCormack, Registration of Company Charges (Bristol, Jordans Publishing, 2nd edn, 2005), para 4.19ff.
- Re Charge Card Services Ltd [1987] Ch 150 at 175 per Millet J.
- The style “Letter of Set-Off” set out in IM Fletcher and R Roxburgh (eds) Greene and Fletcher, The Law and Practice of Receivership in Scotland (London, Sweet & Maxwell, 3rd edn, 2005), appendix 17 bears to be granted “in security and for payment”.
- Insolvency Act 1986, sched B1, para 43(2). Para 43(3) prevents creditors repossessing goods to which they have retained title under conditional sale agreements (see the definition of “hire-purchase” under para 111(1)).
- Insolvency Act 1986, s 248(b)(ii). But for the provisions of the Act, it might be said that, all other things being equal, “security” would be sufficiently wide to cover a set-off agreement. Gloag and Irvine's classic description of “security“, for example, is “Any right which a creditor may hold for ensuring payment or satisfaction of his debt, distinct from and in addition to his right of action and execution against the debtor under the latter's personal obligation”: Gloag and Irvine, supra n 13, 2.
- RM Goode, Principles of Corporate Insolvency Law, Student Edition (London, Sweet & Maxwell, 2005), para 10–66: “The moratorium therefore does not cover exercise of a right of set-off or combination of accounts, a right to terminate or rescind a contract, accelerate monetary liability under a contract or give any other contractual notice.” The right to irritate a lease is covered: IA 1986, schedule B1, para 43(5). Cf I Annetts, “England” in W Johnston and T Werlen (eds), Set-Off Law and Practice: an International Handbook (Oxford University Press, 2nd edn, 2010), para 11.40. Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd [2009] EWCA Civ 1160 held, inter alia, that a resolutive condition in an IP licence which took effect on the insolvency of the licensee did not offend the so-called “anti-deprivation principle”. But compare Mayhew v King [2010] EWHC 1121.
- Even registration of the charge (and bank account charges are probably non-registrable) under Part 25 of the Companies Act 2006 may not be enough to place a transferee on notice of the Bank's prior interest under the account charge: see Gullifer, supra n 44, para 2–24ff. Cf J DeLacy, “Constructive Notice and Company Charge Registration” (2001) 65 Conveyancer 122.
- Cf Burnett's Tr v Grainger 2004 SC (HL) 19.
- As occurred on the facts of the BCCI No 8 case.
- McCormick, supra n 38, intro 1.17.
Law and Financial Markets Review
Volume 4, 2010 - Issue 6