Spectrum Plus in the House of Lords: The Victory of Substance over Form in Personal Property Security Law?

Abstract

Since 1978 it has been possible for lending institutions to secure their loans by way of fixed charges over the borrowing company's book debts. This has required the lender to prevent the borrower from disposing of book debts before collection and also to ensure that collected debts were not freely available for the borrower to use as working capital. The high water mark of this experiment in corporate lending allowed the creditor a fixed charge over uncollected debts without imposing any meaningful restrictions on the borrower's freedom to use the proceeds of collected debts in the ordinary course of business. The decision of the Privy Council in Brumark signalled the superior courts' disapproval of this arrangement and also cast doubt on the extent to which fixed charges over book debts were ever feasible. Spectrum Plus has finally ended this particular kind of fixed charge over book debts but still leaves unanswered the wider question of the precise circumstances in which a fixed charge over book debts is ever possible.