National Westminster Bank Plc v Spectrum Plus Ltd and Others
|LORD NICHOLLS OF BIRKENHEAD,LORD STEYN,LORD HOPE OF CRAIGHEAD,LORD SCOTT OF FOSCOTE,LORD WALKER OF GESTINGTHORPE,BARONESS HALE OF RICHMOND,LORD BROWN OF EATON-UNDER-HEYWOOD
|30 June 2005
| UKHL 41
|House of Lords
|30 June 2005
and others and others
 UKHL 41
Lord Nicholls of Birkenhead
Lord Hope of Craighead
Lord Scott of Foscote
Lord Walker of Gestingthorpe
Baroness Hale of Richmond
Lord Brown of Eaton-under-Heywood
HOUSE OF LORDS
Michael Briggs QC
(instructed by HM Revenue and Customs and Treasury Solicitor)
Gabriel Moss QC
(instructed by Allen and Overy LLP)
I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Hope of Craighead, Lord Scott of Foscote and Lord Walker of Gestingthorpe. For the reasons they give I agree that the decision of Slade J in was wrong and should be overruled.
The respondent bank had a second string to its bow. The bank contended that if the House considered Siebe Gorman was wrongly decided the House should overrule that decision only for the future. The bank submitted that the Siebe Gorman decision should continue to apply to all transactions entered into before your Lordships' decision in the present case, including the debenture under consideration on this appeal.
This submission raises a controversial issue of major importance concerning the power of your Lordships' House to give a ruling in this 'prospective only' form. The bank argued the House has this power. The Crown appellants were content to assume the House may have this power. At very short notice the Attorney General, on the invitation of your Lordships, appointed Mr Glick QC to assist the House by presenting the case against the House having any such jurisdiction. The House is indebted to Mr Glick, who was assisted by Mr Edmund Nourse, for his clear and comprehensive presentation of this case.
The starting point is to note some basic, indeed elementary, features of this country's judicial system. The first concerns the essential role of courts of law. In the ordinary course the function of a court is adjudicative. Courts decide the legal consequences of past happenings. Courts make findings on disputed questions of fact, identify and apply the relevant law to the facts agreed by the parties or found by the court, and award appropriate remedies.
The second feature concerns the wider effect of a court decision on a point of law. To promote a desirable degree of consistency and certainty about the present state of 'the law', courts in this country have long adopted the practice of treating decisions on a point of law as precedents for the future. If the same point of law arises in another case at a later date a court will treat a previous decision as binding or persuasive, depending upon the well-known hierarchical principles of 'stare decisis'.
The third feature is that from time to time court decisions on points of law represent a change in what until then the law in question was generally thought to be. This happens most obviously when a court departs from, or an appellate court overrules, a previous decision on the same point of law. The point of law may concern the interpretation of a statute or it may relate to a principle of 'judge-made' law, that is, the common law (which for this purpose includes equity). A change of this nature does not always involve departing from or overruling a previous court decision. Sometimes a court may give a statute, until then free from judicial interpretation, a different meaning from that commonly held.
The fourth feature is a consequence of the second and third features. A court ruling which changes the law from what it was previously thought to be operates retrospectively as well as prospectively. The ruling will have a retrospective effect so far as the parties to the particular dispute are concerned, as occurred with the manufacturer of the ginger beer in . When Mr Stevenson manufactured and bottled and sold his ginger beer the law on manufacturers' liability as generally understood may have been as stated by the majority of the Second Division of the Court of Session and the minority of their Lordships in that case. But in the claim Ms Donoghue brought against Mr Stevenson his legal obligations fell to be decided in accordance with Lord Atkin's famous statements. Further, because of the doctrine of precedent the same would be true of everyone else whose case thereafter came before a court. Their rights and obligations would be decided according to the law as enunciated by the majority of the House of Lords in that case even though the relevant events occurred before that decision was given.
People generally conduct their affairs on the basis of what they understand the law to be. This 'retrospective' effect of a change in the law of this nature can have disruptive and seemingly unfair consequences. 'Prospective overruling', sometimes described as 'non-retroactive overruling', is a judicial tool fashioned to mitigate these adverse consequences. It is a shorthand description for court rulings on points of law which, to greater or lesser extent, are designed not to have the normal retrospective effect of judicial decisions.
Prospective overruling takes several different forms. In its simplest form prospective overruling involves a court giving a ruling of the character sought by the bank in the present case. Overruling of this simple or 'pure' type has the effect that the court ruling has an exclusively prospective effect. The ruling applies only to transactions or happenings occurring after the date of the court decision. All transactions entered into, or events occurring, before that date continue to be governed by the law as it was conceived to be before the court gave its ruling.
Other forms of prospective overruling are more limited and 'selective' in their departure from the normal effect of court decisions. The ruling in its operation may be prospective and, additionally, retrospective in its effect as between the parties to the case in which the ruling is given. Or the ruling may be prospective and, additionally, retrospective as between the parties in the case in which the ruling was given and also as between the parties in any other cases already pending before the courts. There are other variations on the same theme.
Recently Advocate General Jacobs suggested an even more radical form of prospective overruling. He suggested that the retrospective and prospective effect of a ruling of the European Court of Justice might be subject to a temporal limitation that the ruling should not take effect until a future date, namely, when the State had had a reasonable opportunity to introduce new legislation: Case C-475/03, 17 March 2005), paras 72-88.(
United Kingdom practice
Prospective overruling has not yet been adopted as a practice in this country. The traditional approach was stated crisply by Lord Reid in , 898-899, a case concerning compulsory acquisition:
'We cannot say that the law was one thing yesterday but is to be something different tomorrow. If we decide that [the existing rule] is wrong we must decide that it always has been wrong, and that would mean that in many completed transactions owners have received too little compensation. But that often happens when an existing decision is reversed.'
In , 137, Lord Wilberforce noted 'We cannot, without yet further innovation, change the law prospectively only'. More recently, in , 379, Lord Goff of Chieveley said the system of prospective overruling 'has no place in our legal system'.
The possibility of a change in this practice has been raised from time to time. In , 1015, 1026, Lord Diplock said this topic deserved consideration. Lord Simon of Glaisdale said the possibility of prospective overruling should be seriously considered. He expressed a preference for legislation, saying that 'informed professional opinion' was probably to the effect that the House had no power to overrule decisions with prospective effect only. Lord Simon repeated his plea in , 490. In the Court of Appeal in , 1058, Lord Woolf MR expressed the view that prospective overruling has much to commend it. In your Lordships' House this issue was left open: . Lord Slynn of Hadley, with his Luxembourg experience in mind, considered there may be situations in which it would be desirable, and in no way unjust, that the effect of judicial rulings should be prospective or limited to certain claimants: page 26. Lord Hobhouse of Woodborough was hostile to prospective overruling, describing it as a denial of the constitutional role of the courts: page 48. In the advocates' immunity case of the House departed from the earlier decision of the House in . The decision on the immunity point in the Hall case did not affect the actual outcome in that case. In that context my noble and learned friend Lord Hope of Craighead expressed the view that the change in the law made by the Hall decision should take effect only from the date of the judgment in that case: page 726. He said, at page 710:
'I consider it to be a legitimate exercise of your Lordships' judicial function to declare prospectively...
To continue readingRequest your trial
Gray & others v GTP Group Ltd
...on this point which culminated in the seven judge House of Lords's decision in the case of In Re Spectrum Plus Limited (in liquidation)  2 AC 680 (' Spectrum'). First, however, I shall deal with the much earlier case of In Re Cosslett (Contractors) Limited in the Court of Appeal. In t......
Re Beam Tube Products Ltd; Fanshawe and another v Amav Industries and Others
...is in control of the charged assets. ” 31In re Brightlife Limited  Ch 200 and In re Spectrum Plus Limited (In Liquidation)  3 WLR 58 illustrate that notwithstanding that the parties have chosen to describe the charge as fixed or specific if nevertheless the charge is properly ......
- Soh Poh Sheng v Malayan Banking Berhad
National Westminster Bank plc v. Spectrum Plus Ltd. et al., (2005) 338 N.R. 201 (HL)
...Cite:  N.R. TBEd. AU.017 National Westminster Bank plc (respondents) v. Spectrum Plus Limited and others and others (appellants) ( UKHL 41) Indexed As: National Westminster Bank plc v. Spectrum Plus Ltd. et House of Lords London, England Lord Nicholls of Birkenhead, Lord Steyn, ......
The Acquisition and Leveraged Finance Review – England and Wales
...certain circumstances, which could add other grounds for challenge. 15 National Westminster Bank plc v. Spectrum Plus Limited and others  UKHL 41. England & secured parties and features in most debentures, although the market’s increasing acceptance of exclusions to the scope of the f......
Acquisition Of Claims By Third Party Litigation Funders
...in the possession of the trustee, or previously received by the trustee and converted to his use. 2 See Re Spectrum Plus Limited  2 AC 680 3 Under Paragraph 71(1) Schedule B1 The content of this article is intended to provide a general guide to the subject matter. Specialist advice sh......
Administration appointment valid notwithstanding crystallisation of prior-ranking floating charge
...that: in accordance with the decisions in Re Yorkshire Woolcombers Association Limited  2 Ch 284 and Re Spectrum Plus Limited  2 AC 680, whether a security interest is fixed or floating depends on the construction of the instrument creating the charge. It does not depend on whet......
Lending & Secured Finance
...Ordinance (Cap. 23)). Following a series of cases culminating in National Westminster Bank plc v Spectrum Plus Limited and others  UKHL 41 (and confirmed in Re Harmony Care Homes Limited (in administrative receivership)  EWHC 1961 (Ch)) it has been held that a fixed charge may b......
...minority of Supreme Court judges have approved of prospective-only overruling). (144.) Nat'l Westminster Bank plc v. Spectrum Plus Ltd.  2 AC 680 (HL),  (appeal taken from Eng.) ("[Blackstone's declaratory] theory is still valid when applied to cases where a previous decision is o......
Security for performance
... SGHC 58 at , per Judith Prakash J. 355 Starelec (Qld) Pty Ltd v Kumagai Gumi Co Ltd  QSC 137; In re Spectrum Plus Ltd  3 WLR 58 at 95 , per Lord Scott. 356 Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd  NSWSC 880 at , per Cam......
The legal and commercial frameworks
...Developments Ltd v S&T (UK) Ltd  EWHC 123 (TCC) at , per Coulson J (airmed:  EWCa Civ 2448). 68 In re Spectrum Plus Ltd  3 WLr 58 at 63 , per Lord Nicholls. he Supreme Court (and formerly the house of Lords) regards itself as bound by its own decisions, unless the c......
The Need to Kill Off Zombie Law
...vLincoln City Council  2 AC 1 (HL), Miller vDickson  UKPC D4;  1 WLR 1615 ,In re Spectrum Plus Ltd (in liquidation)  UKHL 41;  2 AC 680, Deutsche Morgan Grenfell Group plc vInlandSjo¨lin 61 effect retrospectively.94Putting aside the declaratory theory does ......