Re Beam Tube Products Ltd; Fanshawe and another v Amav Industries and Others
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE BLACKBURNE |
| Judgment Date | 17 February 2006 |
| Neutral Citation | [2006] EWHC 486 (Ch) |
| Docket Number | Case No: 7217 of 2005 |
| Court | Chancery Division |
| Date | 17 February 2006 |
[2006] EWHC 486 (Ch)
Mr. Justice Blackburne
In the Matter of Beam Tube Products Limited
And in the Matter of the Insolvency Act 1986
Case No: 7217 of 2005
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
MISS LEXA HILLIARD (instructed by Messrs. Blake Lapthorn Linnell) for the Applicant
MR. ROGER KENDRICK appeared In Person
DEFENDANTS (1), (3), (4) and (5) did not appear and were not represented
This is an application by the joint administrative receivers of the property of Beam Tube Products Limited (“the Company”) for directions pursuant to section 35 of the Insolvency Act 1986. The applicants were appointed joint administrative receivers under the terms of a Debenture (“the Debenture”) dated 10 March 2001. The directions concern the proper characterisation of certain security interests conferred by the Debenture and whether any and, if so, what security interest was conferred by the terms on which a particular bank account was set up and operated. Miss Hilliard has represented the applicants. The second respondent, Mr. Roger Kendrick, has appeared in person effectively on behalf of himself and his fellow respondents.
The background to the application is as follows. In March 2001 the first to fourth respondents advanced £600,000 to the Company on the terms of a Loan Agreement. The purpose of the loan was to enable the Company to acquire assets of Beam Tube Limited. The Loan Agreement is between the Company as borrower and the first to fourth respondents as lenders and the fifth respondent as agent. Under clause 17 of the Loan Agreement the fifth respondent was appointed to act as the agent of the first to fourth respondents in connection with, among other matters, the Debenture. It was a term of the Loan Agreement that the Company should execute the Debenture in favour of the fifth respondent as such agent. This duly occurred.
The Debenture is between the Company, as borrower and the fifth respondent as security agent for the benefit of himself and the other respondents. So far as material, the Debenture provided as follows:
“Clause 3.1 Fixed Charges. As a continuing security for the payment of the Secured Liabilities, the Borrower charges in favour of the Security Agent (for the benefit of itself and the other Secured Parties) with full title guarantee (but subject to any Permitted Security Interests) the following assets (or the Borrower's interest therein), both present and future, from time to time owned by it or in which it is from time to time interested;
(a) by way of first fixed charge, all interests in any freehold or leasehold property, including the buildings and fixtures (including trade fixtures) at any time thereon, all proceeds of sale derived therefrom and the benefit of all covenants given in respect thereof and all licences to enter upon or use land and the benefit of all other agreements relating to land;
(b) by way of first fixed charge, all plant, machinery, vehicles, computers, office and other equipment and the benefit of all contracts, licences and warranties relating to the same;
….
(e) by way of first fixed charge, all book, and other debts, revenues and monetary claims of the Borrower, and all rights and claims of the Borrower against third parties and against any security in respect of such debts, revenues or claims;
(f) by way of first fixed charge, all moneys from time to time standing to the credit of any and all its accounts with any bank, financial institution or other person ….”
I do not think I need read further into clause 3.1. I should say that the reference to “secured liabilities” is in effect all money and liabilities then or thereafter due, owing or incurred to the secured parties or any of them by the Company under the Loan Agreement. “Secured parties” means in effect the lenders and “permitted security interests” means in effect any mortgage, charge, pledge, lien or the like.
Clause 3.2 is as follows:
“Floating Charge. As further continuing security for the payment of the Secured Liabilities the Borrower charges with full title guarantee (but subject to any Permitted Security Interests) in favour of the Security Agent (for the benefit of itself and the other Secured Parties) by way of first floating charge all its assets and undertaking whatsoever and wheresoever, both present and future, not effectively charged by way of first fixed charge under Clause 3.1 or assigned by way of security under Clause 3.3.”
Clauses 3.4 and 3.5 set out the circumstances in which by a notice served by the security agent the floating charge created by the Company may be converted into a fixed charge. Clause 3.6 sets out a series of specified events on the occurrence of which the floating charge is automatically converted into a fixed charge and clause 3.7 states that the floating charge should also crystallise on the occurrence of any event which under the general law causes a floating charge to crystallise.
Clause 7.4 is headed “Collection of Book Debts”. Paragraph (a) of that clause is as follows:
“The Borrower shall:
(i) open a Collection Account (as defined below) with a bank which has been previously approved by the Security Agent within 14 days of the date of this Deed; and
(ii) notify the bank with which the Collection Account has been set up pursuant to clause 7.4(a)(i) that the Borrower has charged the Collection Account in favour of the Security Agent by signing and delivering to such bank a letter in the form set out in Schedule 3.”
By clause (b):
“The Borrower shall:
(i) collect (as agent for the Security Agent) all book and other debts and all the other rights and claims (the ‘Charged Debts’) charged or assigned to the Security Agent under this Deed and pay into such specially designated account with the Security Agent or such other account with such other bank as the Security Agent may from time to time direct (the ‘Collection Account’) all money which it receives in respect thereof forthwith on receipt and, pending that payment, hold all money so received upon trust for the Security Agent;
(ii) not without the prior written consent of the Security Agent Charge, factor, discount or assign any of the Charged Debts in favour of any other person or purport to do so; and
(iii) where the Collection Account is not maintained with the Security Agent, procure that the bank with which the Collection Account is maintained has signed and delivered to the Security Agent a letter in the form set out in Schedule 3.”
By clause (c):
“Unless:
(i) the security hereby created has become enforceable; or
(ii) a Declared Default has occurred and is continuing unwaived or unremedied and the Security Agent acting on the instructions of the Lenders has issued written directions to the contrary to the Borrower,
any moneys in respect of the Charged Debts received by the Borrower and paid into the Collection Account in accordance with the requirements of Clause 7.4(b)(i) shall, upon being paid into the Collection Account, be released from the fixed charge created by Clause 3.1(f) and shall become subject to the Floating Charge created by Clause 3.2. Such release from the fixed charge over Charged Debts shall not affect, and shall be entirely without prejudice to, the continuance of the said fixed charge on all other Charged Debts of the Borrower outstanding from time to time.”
The expression “declared default” referred to in clause 7.4(c) is defined as meaning “any default at any time by the borrower in the payment by the borrower of any secured liabilities”.
The form of the letter set out in Schedule 3, to which clause 7.4 refers, when signed sent by the Company as borrower and signed by the lenders to whom it is addressed and countersigned by the security agent has the effect that the Company may make withdrawals from the accounts charged to the security agent until such time as the security agent should notify the bank in writing with a copy to the Company that permission is withdrawn. It further provides that the permission may be withdrawn or modified by the security agent in his absolute discretion at any time.
On or about 15 May 2001 the Company entered into an invoice discounting agreement with UPS Global Trade Finance UK Ltd. (“UPS”). The Company also granted a Debenture to UPS over all of its assets by letter dated 14 May 2001. The fifth respondent as security agent confirmed that he consented to the Company entering into these arrangements.
It is common ground that the Collection Account envisaged by clause 7.4 of the Debenture was not set up within the specified 14-day period or at all. Instead by a letter dated 25 May 2001 Mr. Kendrick wrote to Michael Green of the Company saying as follows. The letter is headed “Shareholders Loan —Debenture Arrangements
“In order to give good effect to the charge over the book debts in favour of Tony Groom” – and I pause to say that he is the security agent and the fifth respondent – “as the Trustee for the Debenture Holders we need to establish a Collections Account into which all funds drawn down from UPS are transferred and all other receipts are paid.
Inter account transfers between the Collections Account and the BTP current account to fund the business would then need to be authorised by the Debenture Holders.
I suggest that the signatories to the Collections Account are myself, Tony Groom and Stuart Harrison” – and he is another of the respondents – “as representatives of the Debenture Holders.
These arrangements are required to give good effect to the” – it says “first” I think what is meant...
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