''Agnew v Commissioners of Inland Revenue'', more commonly referred to as is a decision of the

Privy Council A privy council is a body that advises the head of state of a state, typically, but not always, in the context of a monarchic government. The word "privy" means "private" or "secret"; thus, a privy council was originally a committee of the mon ...

relating to New Zealand and

UK insolvency law United Kingdom insolvency law regulates companies in the United Kingdom which are unable to repay their debts. While UK bankruptcy law concerns the rules for natural persons, the term insolvency is generally used for companies formed under the ...

, concerning the taking of a

security interest In finance, a security interest is a legal right granted by a debtor to a creditor over the debtor's property (usually referred to as the ''collateral'') which enables the creditor to have recourse to the property if the debtor defaults in makin ...

over a company's assets, the proper characterisation of a

floating charge A floating charge is a security interest over a fund of changing assets of a company or other legal person. Unlike a fixed charge, which is created over ascertained and definite property, a floating charge is created over property of an ambulator ...

, and the priority of creditors in a company

winding-up Liquidation is the process in accounting by which a company is brought to an end in Canada, United Kingdom, United States, Ireland, Australia, New Zealand, Italy, and many other countries. The assets and property of the company are redistr ...

Facts

Brumark Investments Ltd gave security over debts to its bank,

Westpac Westpac Banking Corporation, known simply as Westpac, is an Australian multinational banking and financial services company headquartered at Westpac Place in Sydney, New South Wales. Established in 1817 as the Bank of New South Wales, it ...

. The terms were that its security was a fixed charge, but a floating charge when proceeds were collected (the same as drafted as in ''

Re New Bullas Trading Ltd ''Re New Bullas Trading Ltd'' 9941 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 ...

''). Brumark was free to collect debts for its own account and to use proceeds in its business. Brumark went into receivership. The receivers collected the outstanding debts. Fisher J held that uncollected debts were subject to a fixed charge, as the parties had agreed. So they were not subject to claims of preferential creditors. The NZ Court of Appeal overturned this and held that the fact Brumark could collect the debts for its own account (and hence remove them from the bank's security) made it a floating charge. So the preferential creditors had a prior claim.

Advice

The Privy Council advised that it was indeed a floating charge. It said the court's task is not to ask whether the parties intended to create a fixed or floating charge, but to ask what rights the parties intended to create, and then decide as a matter of law whether it is fixed or floating.

Lord Millett Peter Julian Millett, Baron Millett, , (23 June 1932 – 27 May 2021) was a British barrister and judge. He was a Lord of Appeal in Ordinary from 1998 to 2004. Biography Early life The son of Denis and Adele Millett, he was educated at Har ...

held that Nourse LJ's approach in ''New Bullas'' based on freedom of contract was 'fundamentally mistaken'. The process of construction required assessing what was intended, but this meant looking at the substance of the transaction, not its form. He noted that in ''

Siebe Gorman & Co Ltd v Barclays Bank Ltd ''Siebe Gorman & Co Ltd v Barclays Bank Ltd'' 9792 Lloyd's Rep 142 is a UK insolvency law case, concerning the definition of a floating charge. It was an influential decision for many years, but is now outdated as authority in light of the Hou ...

'' and '' In re Keenan Bros Ltd''

986 Year 986 (Roman numerals, CMLXXXVI) was a common year starting on Friday (link will display the full calendar) of the Julian calendar. Events By place Byzantine Empire * August 17 – Battle of the Gates of Trajan: Emperor Basil ...

BCLC 242 the proceeds of the book debts were not at the free disposal of the company - that is why these were fixed charges - the proceeds were not available to the company as a source of its cash flow.

Notes

{{reflist, 2 United Kingdom company case law United Kingdom insolvency case law 2001 in United Kingdom case law Judicial Committee of the Privy Council cases on appeal from New Zealand 2001 in New Zealand law

Facts

Advice

See also

Notes