On May 26, the Court of Appeal handed down its decision on the appeal against the judgment of the Vice-Chancellor in National Westminster Bank PLC v Spectrum Plus Limited and others [2004] EWHC 9 (Ch) ("Spectrum").  In his judgment, the Vice-Chancellor had dealt with the issue of proper characterization of a charge over book debts in a manner consistent with the reasoning applied by the Judicial Committee of the Privy Council in Agnew and Bearsley v The Commissioner of Inland Revenue and Others, re Brumark Investments Limited [2001] UKPC 28 ("Brumark").  While the Court of Appeal, for reasons given by Phillips MR, overturned the Vice-Chancellor's decision on two principal grounds (namely, the specific facts of the Spectrum case and the fact that both the High Court and the Court of Appeal were still bound by Re New Bullas Trading Ltd [1994] 1 BCLC 485 ("New Bullas")), the Court of Appeal preferred the reasoning in Brumark, noting that there is little doubt that if and when the issue comes before the House of Lords, the House of Lords will hold that New Bullas was wrongly decided and that an unrestricted right to collect and make use of the proceeds of book debts is inconsistent with a fixed charge.

On the facts of the Spectrum case, the Court of Appeal considered that the Vice-Chancellor had been wrong to hold that the terms of the Spectrum debenture were insufficient to create a fixed charge on the basis that the book debts were under the control of and available for use by the company in the ordinary course of its business through their collection and the ordinary operation of its bank account.  The Court of Appeal disagreed with the Vice-Chancellor's view that Slade J, in his decision in Siebe Gorman  & Co Ltd. v Barclays Bank Ltd. [1979] 2 Lloyds Reps 142 ("Siebe Gorman"), should have reached the same conclusion on the basis of similar wording used in the debenture at issue in that case (which was held in that case to be sufficient to constitute a fixed charge and which has since been in common use for 25 years).

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