The House of Lords today overturned for good a decision made 25 years ago which has been governing the way creditors are paid in insolvency cases.
A seven-strong panel of Law Lords handed down a unanimous judgment in the case of National Westminster Bank v Spectrum Plus, finding that Mr Justice Slade had erred in the case of Siebe Gorman v Barclays Bank in1979.
In Siebe Gorman, Slade J held that a standard form debenture created an effective fixed charge over the book debts of insolvent companies, ensuring that banks recovered their money.
But in 2002 the Vice-Chancellor, Sir Andrew Morritt, decided that NatWest’s charge over the debts of Spectrum Plus was a floating charge – meaning it had to wait in line beind a queue of government creditors. He was using a Privy Council decision in the Brumark case as precedent.
The Court of Appeal overturned Sir Andrew’s ruling in June last year, but last week’s Lords decision reverses that judgment as well as cancelling out Siebe Gorman. It means that insolvency practitioners holding money in around 550 cases will now be able to distribute it.
However, there is not expected to be a rush of appeals relating to cases decided using Siebe Gorman, as the Crown will not challenge any distributions made before 2002.
Serle Court’s Michael Briggs QC acted for the Crown. Allen & Overy partners John O’Conor, Michelle de Kluyver and Ian Field represented NatWest, instructing 3/4 South Square’s Gabriel Moss QC.