National Westminster Bank Pic v. Spectrum Plus Limited

First ruling: 3)..........................

Ruling on appeal: 4)..........................

Significance: 5)...............

a The court held that the bank only had a floating charge over book debts.

b Since the specific wording of debentures had created a fixed charge for 25

years, this wording was reasoned to have acquired that meaning by

customary usage.

c The court held that the charge on book debts was a valid fixed charge.

d The decision was reversed by the Court of Appeal; it held that restrictions

imposed by debentures on book debt meant the bank had a fixed charge.

e This resulted in banks and creditors taking fixed charges on book debts.

26Complete these definitions of words or expressions from the article.

1 B d are the debts owed to a business, as recorded in

the business's accounting records. They are also known as 'accounts

receivable'. (paragraph 1)

2 An unsecured debt obligation which is issued against the general credit of a

corporation is known as a L c . (paragraph 3)

3 A promise given by a bank that it will repay the debt of another person if that

person does not pay the debt is called a b g . (paragraph 4)

4 A p creditor is a creditor who has the right to receive payments

distributed by a liquidator before other unsecured creditor. (paragraph 5)

27Which unsettled areas of the law in your jurisdiction are you aware of?

,

The last word on book debts1?

1 There have been court battles for more than a century over whether it is

possible to have a fixed charge on the book debts of a company. This is a

topical issue of particular concern to company directors, bankers, other lenders

and creditors.

2 The modern practice of lenders taking a fixed charge on book debts arose in

the UK from a court decision in 1979, in the case of Siebe Gorman & Co. Ltd v.

Barclays Bank Limited. In that case, Barclays Bank had taken a fixed charge on

book debts and a floating charge on other assets of the company. The judge

held that the charge on book debts was a valid fixed charge. He said that the

critical feature distinguishing a floating charge from a fixed charge was the

company's power to deal with assets in the ordinary course of business. He

interpreted the charge as meaning that the company was not free to draw its

account without the consent of the bank, even when it was in credit, and so the

charge on book debts and their proceeds was a fixed charge. The overall effect

of the Siebe Gorman case was to expand the practice of banks and other

lenders taking fixed charges on book debts.

3 In the most recent case of National Westminster Bank Pic v. Spectrum Plus

Limited, the court said that Siebe Gorman had been wrongly decided. It held

that the bank only had a floating charge over the book debts because the

company was entitled to collect its book debts and use the proceeds in the

normal course of business unless the bank intervened. However, the case went

to appeal, and the Court of Appeal reversed the decision and said that the

restrictions imposed by the debenture on the use of the proceeds of the book

debt were enough to give the bank a fixed charge.

4 What is significant about this case is that the Court of Appeal pointed out that,

for the last 25 years, debentures with the wording that had been approved in

the Siebe Gorman case had been used on the understanding that this would

create a fixed charge. The Court of Appeal said that banks have relied upon this

understanding and bank guarantees have been given on this basis. It also said

that even if the interpretation in the Siebe Gorman case had appeared

erroneous, it would have held that the wording had, by customary usage,

acquired the meaning which the Siebe Gorman case had attributed to it.

However, the case of Spectrum Plus Limited is going to be looked at by the

House of Lords, and it may very well reach a different conclusion to that of the

Court of Appeal.

5 But does all this really matter? Well, yes, it does, because the reason why there

has been so much conflict over charges is that book debts are often a very

significant part of a company's assets. If a company becomes insolvent, book

debts can become critical for a debenture holder. If the charge was a floating

charge only, then the book debts would go to the company's preferential

creditors - mainly the Inland Revenue, Customs & Excise and employees. That

said, the picture changed radically in September last year when, by legislation,

the Inland Revenue and Customs & Excise lost their rights as preferential

creditors in insolvencies. Now they are part of the body of unsecured creditors.

6 As time goes by, the number of such cases will fall away, but it is still a problem

for many debenture holders and for people who gave guarantees on behalf of

companies that later became insolvent. If a debenture holder is unable to be

paid from book debts, where possible, a claim will be made under a personal

guarantee instead.

1 (US) accounts receivable

Unit 13 Securedtransactions E

, !. r: e .1'1"'. d

Another unsettled area of secured transactions law concerns intellectual property (IP). In

recent years, lawyers and lenders have seen a significant increase in the importance of IP

as collateral. However, in the US,as in many other countries, rulings in this area remain

inconsistent, while the applicability of statutes is not yet always clear.

The continuing legal education seminar on the revised UCCin Listening 1 included a

presentation called 'Intellectual property as collateral'. Youwill hear two lawyers who

attended the session, Peter and Jack, telling a colleague, Tina, about it.

28.. ~ Listen to the discussion and choose the correct answer to each of these

questions.

1 What did Peter like about Mr Kellogg's presentation style?

a It was professional and factual.

b It was funny and personal.

c It was complex and international.

2 Why is Jack happy that the topic of Intellectual Property was covered in the

seminar?

a because it is an area of the law he knew nothing about previously

b because it is an area of the law which is so unsettled

c because it is an area of the law that is growing in importance

3 What does Jack say that he learned about perfecting security interests

internati ona Ily?

a He says it would be better to wait until the law has become more settled

before filing.

b He says that the main issue is knowing where something should be filed

in each country.

c He says it's best to have the help of local lawyers in the countries in

question.

4 What does Tina ask to be told more about?

a perfecting security interests in copyrights

b trade marks in Hong Kong specifically

c the Revised Article 9

29.. ~ Listen again and decide whether these statements are true or false.

1 Both Jack and Peter would probably recommend the seminar held by Mr

Kellogg to others.

2 Due to the revisions of Article 9 of the Uniform Commercial Code, the area

of Intellectual Property in secured transactions is particularly unsettled in

the United States.

3 Only registered copyrights are considered 'general intangibles' under the

revised law.

4 Jack tells Tina to look on the Web for more information on what was covered

in the seminar.

g e 2 *

ng I on

In the previous listening exercise, Tina asks her colleagues Jack and Peter to

tell her about the seminar which she was unable to attend. These are the

phrases she uses to request information.

Can you fill me in onwhat he said?

And what did he say about the situation internationally?

Can you give me an example?

And what did he have to say about perfecting security interests in the US?

I'm interested in copyrights. What can you tellme about those?

Where could I get more information onwhat was covered in the seminar?

The style of Tina's requests for information is informal, suitable for speaking

with colleagues with whom she has a friendly relationship. One way to make

requests of all kinds more polite and thus more formal ~including requests

expressed in writing - is to use the word could instead of can.

Could you help me with these forms?

Another way to make a request more polite and formal is to begin the request

with one of the following phrases:

I wonder if you could help me with these forms.

I was wondering if you could help me with these forms.

Wouldyou mind helping me with these forms?

30Rewrite Tina's requests for information so that they are more formal.

p ing=

.on

ng p

"

In9

31This task is intended to give you an opportunity to present information in the

course of a discussion and to make use of the phrases for requesting

information presented above.

v Gather information about one aspect of secured transactions in your

jurisdiction. You may want to choose a topic like perfecting a trade mark or

patent as a security interest, or the appropriate institutions, methods or

deadlines for filing, for example.

v Present the information informally to two or three others, as if you were

telling colleagues about a topic you are knowledgeable about in the course

of a discussion.

v The listeners should ask for further information about the points you raise

as you are speaking.

u Then switch roles and listen to another speaker. Ask about points that are

of interest to you.

D

{~\ Unit 13

To improve your web-based research skills, visit www.cambridge.orgjeltjlegalenglish.click on

Research Tasks and choose Task 13.

Unit 13 Secured transactions

E

LanguageFocus

1 Vocabulary:distinguishing meaning Which word in each group is the odd one

out? You may need to consult a dictionary to distinguish the differences in

meaning.

1~ security interest charge lien

2 indebtedness instalment obligation

3 to pawn to pledge to give as secUrity

4 contingent on unconditional subject to

5 hereby after this hereafter in fUture

2 Prepositions used with expressiol1s of time Complete the expressions of

time below from the security agreement in this unit using the prepositions

in the box.

debt

to attach

dependent on

1 this 11th day May

2 promissory note , even date hereWith

3 the happening of any of the following

4 assets not dissolved ,... thirty (30) days

5 thirty (30) days the date , which it is filed

6 ""'" .. default and any time thereafter

3 Collocations Match the pairs of words as they appear in this unit.

2 debenture

3 security

4 categorical

5 book

a debts

b description

c proceeding

d holder

e interest

4 Expressions with take Complete the sentences below using the words in the

box. Theycome from the reading texts in this unit.

care charge part place f}9&£~~ precedence

1 With a possessory interest, the creditor takes

which is the security interest.

2 In order to invoke consensual security interests against third parties,

perfection of the security interest must take , ,. .

3 Receivership is the situation in which, during bankruptcy proceedings of an

insolvent corporation or person, the court appoints a person to take

of all assets in order to preserve them for creditors.

4 I really think you should take in the seminar.

5 I'm sure you will agree that this court appearance takes over the

seminar.

6 Identify the debtor. Take " to identify precisely which person or

entity will be granting a security interest.

of the property

Formal verbsLegal documents such as legislation, agreements and legal

correspondence are characterised by the use of formal verbs not generally

found in everyday speech. Many of these verbs are of Latinate origin. Match

the formal verbs (1-15) with their more informal counterparts (a-o).

1 assist

2 commence

3 comprehend

4 deem

5 desist

6 endeavour

7 enquire

8 ensure

9 evince

10inform

11intimate

12peruse

13possess

14receive

15retain

a get

b stop

cask

d show

e tell

f look through

g sta rt

h have

i suggest

j think

k kee p

I try

mhelp

n make sure

0 understand

Writing: formal styleRewritethe emait below to make it more formal. Use the

words and phrasesi[)ithe box and verbs from Exercise 5. Add formal fixed

expressions used in correspondence where appropriate. Whereverpossible,

join two sentences to make a more complex one. Youmay choose to make one

or two active sentences passive.

verbs:assist, commences, ensure, enquired, inform (x2), peruse, possess

discourse markers:therefore, thus

adverb-verb collocations:strongly advise, firmly believe, highly respected,

sincerely hope

Hi everyone!

Several of our corporate clients hold the rights to valuable intellectual property

assets, and they have asked if we could help them with matters concerning

secured transactions and these assets. That's why I really think it's important

that we make sure that our knowledge in this area is up-to-date.

So I'm writing to tell you that I've arranged an in-company seminar on

perfecting IPassets as security interests. We'll have the seminar on Monday,

October 26 from 9 a.m. to 5 p.m. A very important expert will hold the seminar.

Please note: it starts at 9 a.m. sharp!

I've attached a list of topics for the seminar. Please look through it.

I really think you should take part in the seminar. So I suggest that you make

sure you have no other appointments that day. I really hope you can come. Let

me know!

Best

Martin Black

Unit 13 Language Focus

14,~/ ~"'"

Debtor-creditor

On c r

Date: 2015-12-11; view: 994