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Re New Bullas Trading Ltd
Court	Court of Appeal
Citation	1 BCLC 485
Case opinions
Nourse LJ
Keywords
Floating charge

Re New Bullas Trading Ltd 1 BCLC 485 is a UK insolvency law case, concerning the definition of a floating charge. It held, somewhat controversially, that it was possible to separate a book debt from its proceeds, and that it was possible to create a fixed charge over the book debt but only a floating charge over the proceeds. At the time the decision attracted a great deal of academic commentary, much of it hostile.

It is now outdated as authority, being first doubted by the Privy Council in Re Brumark Investments Ltd [2001] UKPC 28, and then formally overruled by the House of Lords in Re Spectrum Plus Ltd [2005] UKHL 41.

Facts

New Bullas Trading Ltd granted a charge over book debts in favour of 3i plc. It said this was a fixed charge over the uncollected debts and a floating charge over their proceeds, which went into a designated bank account (or another one that 3i could specify in writing).

Knox J held this was impossible. He said there was a floating charge throughout, so the company’s preferential creditors were entitled in an administrative receivership to priority under Insolvency Act 1986 s 40 with regard to uncollected debts.

Judgment

Nourse LJ overturned the decision. He held that a charge may be divisible, and the parties had unequivocally expressed their intention and ‘unless there is some authority or principle of law which prevented them from agreeing what they have agreed, their agreement must prevail’. In essence, he held that the wording did allow them to have such a form of security, the parties were free to make such arrangements. He said unless, unlawful, the free will of the parties would prevail.

Authority

Although the case remained good law for many years, it was doubted by Lord Millett sitting in the Privy Council in Re Brumark Investments Ltd [2001] UKPC 28, before finally being formally overruled by a seven-member House of Lords in Re Spectrum Plus Ltd [2005] UKHL 41.

See also

• UK company law
• Floating charge
• Voidable floating charge

Notes

1. Roy Goode, Charges over Book Debts: A Missed Opportunity (1994) 110 LQR 592; Sarah Worthington, Fixed Charges over Book Debts and other Receivables (1997) 113 LQR 562; Alan Berg, Charges over Book Debts: A Reply JBL 443.
2. Vanessa Finch (2002). Corporate Insolvency Law. Cambridge University Press. p. 307. ISBN 0521622565.

References

• United Kingdom insolvency case law
• Court of Appeal (England and Wales) cases
• 1994 in United Kingdom case law