Allen & Overy (A&O) was in the House of Lords last week in a case that could have far-reaching repercussions for insolvency law.
A seven-strong complement of Law Lords was hearing the case of National Westminster Bank v Spectrum Plus, following a Court of Appeal decision handed down in June 2004.
National Westminster Bank (NatWest) applied to the High Court for a declaration that it had a fixed charge over the book debts of insolvent company Spectrum Plus and that the liquidators should pay the book debts to the bank.
In January 2004, the Vice-Chancellor Sir Andrew Morritt ruled that NatWest's charge was a floating charge, meaning that the bank would have its debts paid after the Treasury, the Inland Revenue and Customs & Excise, which enjoy preferential creditor status.
The Court of Appeal disagreed, putting the bank at the top of the creditors' queue. However, to have the decision affirmed it referred the case to the Lords.
Although of little monetary value, with NatWest claiming less than £200,000, the case is of vast importance as it could clarify the situation for the debts that insolvent companies owe to banks.
A&O partner John O'Conor acted for NatWest, instructing 3/4 South Square's Gabriel Moss QC and Jeremy Goldring. Philip Jones of Serle Court and Maitland Chambers' Catherine Addy were instructed by the Treasury's in-house solicitors.
Nick Pike, a litigation partner at Lawrence Graham, is representing the liquidators Grant Thornton, instructing Andreas Gledhill of 3/4 South Square. However, the liquidators' role in the case is neutral and it made no representation in the Lords.
The hearing concluded on 28 April and judgment was reserved.