Professional Documents
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Assignment 2
In Re Brightlife4 the court held that if the chargor was allowed to collect its book debts and
place them outside in a bank account that was not within the control of the chargee, then the
charge would be construed as a floating charge. This holding was evidence of movement
away from favouring charges over book debts as in Siebe Gorman. In Re Keenan Bros5, it
2 [1903] 2 Ch 284
4 [1987] Ch 200
The main issue in the Re Spectrum Plus case was whether or not the debenture granted over
book debts was secured with a floating or fixed charge. Most of its facts were on the same line
as the Siebe Gorman case. At first instance it was concluded that the charge was a floating
charge and that Siebe Gorman was wrongly decided. On appeal to the Court of Appeal it was
held that the charge was a fixed charge. On further appeal, the House Lords held that Siebe
Gorman was wrongly decided and should be overruled. The court concluded that the
overdraft facility could be drawn by the company at will and this was inconsistent with the
charge being a fixed charge. Accordingly, the debenture, although expressed to be a fixed
charge over the company’s book debts, had in law only granted a floating charge. The
essential point of all of these cases is that appropriate control must be exercised over the book
debts at all stages – prior to collection and post collection to maximize a finding of a fixed
charge.
The important judgment in Re Spectrum Plus finally clears up the long debated issue of book
debts and the certainty it creates is to be welcomed. The importance of the decision in the Re
Spectrum Plus case to Ghanaian Company law is discussed.
This case and all the many other cases surrounding it discuss into detail the concept of
creating charges over book debts and the effect of labelling these charges as either fixed or
floating. It is evidence that the courts will characterise a charge if deems it lawfully so. From
this case it obvious that the concluding factor in deciding what labels to be attached to a
charge over book debts depend on the element of control. A lender had to exercise much
control (as in the form of a blocked account) for his charge to be labelled a fixed charge.
Lenders in Ghana, especially the banks, are reminded through this decision that the charges
they may hold over book debts could in law be found to the floating charges despite the label
of fixed charge assigned to them. This is because Ghanaian case law and statute seem to be
quite silent on this topic and thereby if need arises a Ghanaian court would only have this
landmark English decision to follow. What lenders could do in order not to protect their
interest would be to renegotiate the terms of the securities so they can exercise better control
on the book debts granted to companies. In the alternative they may also insist that directors
give personal guarantees for future overdrafts
7 [2001] 2 AC 710
The expected effect of any of these suggestions is to make it quite undesirable for banks to
grant overdraft facilities to companies. The result of this would be that small companies
would have problems in raising capital and operating freely in their normal cause of business.
Though it may be argued that the Re Spectrum Plus decision is limited in value because it is
confined to a special set of facts dealing with creation of charges over book debts, it is still
invaluable as it an eye opener to Ghanaian company law.
Bibliography
1. Company Law in Ghana, Professor
P.E. Bondzi- Simpson
Second Edition
2. Mozley & Whiteley’s Law Dictionary
J.E. Penner
12th Edition
3. Spectrum Plus And Book Debts: The Final Chapter? James Hanlon
[2006] 1 WEB JCLI
4. The Spectrum Plus Case: Lauren Pogue
Fixed or Floating Charges over Book Debts in England?
North Carolina Banking Institute Journal.
Volume 9.
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