Charges, Contingencies and Registration

Abstract

The law draws a distinction between an agreement intended to create a present security and an agreement intended only to create security in the future. In the case of the former, an agreement for a mortgage or charge is treated in equity as a security interest where it shows an intention that the mortgage or charge should take effect immediately or as soon as the debtor acquires an interest in the asset. In the case of the latter, the agreement does not give rise to a security interest but is a mere contract. However, what is unclear is whether an agreement to give security on a contingency will, on the occurrence of the contingent event, give rise to the security interest stipulated. It has been argued powerfully that no security interest should arise. A fairly recent line of cases from Australia and Singapore suggest a different conclusion and it will be the premise of this article that there is no reason why contingent security arrangements should not have the effect intended by the contracting parties.