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THE UNIVERSITY OF HONG KONG

LLAW2012 Commercial Law
LECTURE OUTLINE: SECURED FINANCING (1)

General Reading:

Part Four of R. Goode & E. McKendrick, Goode on Commercial Law (Penguin, 5th
Edn, 2016)

A. Types of Loan

Bank – Customer Relationship

Overdraft
“On demand” loan
Term loan
Fixed Sum Credit
Revolving Credit
Debenture
Bonds

B. Terms in Loan Agreements

Conditions Precedent
Representations and Warranties
Events of Default
Covenants
Negative Pledge Covenants

Chapter 11 (Debt Corporate Finance – General Considerations) of Principles of

Corporate Finance Law (Ferran & Ho, Oxford University Press, 2nd Edn, 2014)

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C. Categories of Property

MA Clarke, RJA Hooley, RJC Munday, LS Sealy, AM Tettenborn, PG Turner,

Commercial Law: Text, Cases and Materials (Oxford University Press, 5th Edition,
2017), Pg. 54-56

Property

Real: land(except leases) Personal

Chattels Real (leasehold interests in land) Chattels Personal

Tangible Movables (Choses in Possession) (Goods)

Intangible Movables (Choses in Action) (eg. debt.)

D. Categories of Rights and Interests

Real Rights cf. Personal Rights

R. Goode & E. McKendrick, Goode on Commercial Law (Penguin, 5th Edn, 2016),
pg. 28-34

Real Rights

Personal Rights:
(Rights Ad Rem
Purely Personal Rights)

“pari passu”

Ownership cf. Possession

Legal cf. Equitable Interest

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THE UNIVERSITY OF HONG KONG

LLAW2012 Commercial Law
LECTURE OUTLINE: SECURED FINANCING (2)

E. Forms of Security

Personal Security

Real Security

Pledge
Lien
Mortgage
Charge

Pledge Pledgor Pledgee

Lien Lienor Lienholder/Lienee
Mortgage Mortgagor Mortgagee
Charge Chargor Chargee

Bailment
Attornment
Bill of Lading
Foreclosure

Official Assignee of Madras v Mercantile Bank of India Ltd [1935] AC 53

Keller v Ying Wah Tak Holdings Ltd [1997] HKLY 204
Bank of China (Hong Kong) Ltd v Kanishi (Far East) Ltd [2002] 2 HKLRD 52
Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584

F. Fixed and Floating Charges

Re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284

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Agnew v Commissioner of Inland Revenue [2001] 2 AC 710

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G. Order for distribution of assets in winding up

Assets subject to a fixed charge or mortgage

Assets subject to a floating charge
Assets available to unsecured creditors

Section 265 and 79 of the Companies (Winding Up and Miscellaneous Provisions)

Ordinance (Cap. 32)

H. Charges over book debts

Re Brightlife [1987] Ch 200

Agnew v Commissioner of Inland Revenue [2001] 2 AC 710
Re Spectrum Plus Ltd [2005] 2 AC 680

I. Crystallization of floating charge

a. De facto cessation of business

b. Termination of management powers
c. Chargee’s exercise of powers of intervention
d. Automatic Crystallization Clauses

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THE UNIVERSITY OF HONG KONG

LLAW2012 Commercial Law
LECTURE OUTLINE: SECURED FINANCING (3)

J. The Registration of Charges

Sections 333, 334, 335, 337, 344, 346, 351, 352 and 355 of the Companies
Ordinance (Cap. 622)

Re Far East Structural Steelwork Engineering Ltd [2005] HKEC 763

(Note also the decision on appeal in Re Far East Structural Steelwork Engineering
Ltd [2006] HKEC 1067.)

Bills of Sale Ordinance (Cap. 20)

J.L. Yap, “Amending the Statutory Framework for the Registration of Company
Charges” (2014) Statute Law Review (Oxford University Press), 35(3), 261-277.

Re Moulin Global Eyecare Holdings Ltd (2009) 12 HKCFAR 621

Section 267 & 267A of the Companies (Winding Up and Miscellaneous

Provisions) Ordinance (Cap. 32)

24 Feb 2005: debenture securing a loan by way of first floating charge was signed

25 Feb 2005: the loan sum was advanced.

6 May 2005: debenture was dated

7 June 2005: Charge was submitted for registration.

On 7 June 2005, the Registrar issued a certificate certifying that the debenture
dated 6 May 2005 was registered.

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K. Priorities in relation to Tangible Personal Property

Fixed charge vs Fixed charge

Fixed charge vs Floating charge
Floating charge vs Floating charge

Wheatley v Silkstone and Haigh Moor Coal Co (1885) 29 Ch. D. 715

Re Benjamin Cope & Sons [1914] 1 Ch 800

L. Priorities in relation to Debts

Dearle v Hall 38 ER 475

M. Constructive Notice of Registered Charges

Wilson v Kelland [1910] 2 Ch 306

J.L. Yap, “Amending the Statutory Framework for the Registration of Company
Charges” (2014) Statute Law Review (Oxford University Press), 35(3), 261-277.

N. Considering Codification

O. Other Legislation regarding Loans

Money Lenders Ordinance (Cap. 163), Sections 1-4, 6-8, 18, 24-25, 29
Pawnbrokers Ordinance (Cap. 166), Sections 2, 4, 5