2 On the other hand, if the parties use the expression ‘floating charge’, then this would seem to be conclusive that the creditor intended to content himself with a floating charge, or the lesser form of security. In such a case, there would seem to no reason for the court to ‘look behind’ the language employed by the parties.
3 See, in particular, Agnew v Commissioner of Inland Revenue  710 (PC) and Re Spectrum Plus Ltd  2 AC 680 (HL). These cases arose specifically in the context of fixed charges over book debts, and they are therefore considered in more depth at para 30.04 below.
4 At the risk of a very significant over-simplification, this in many ways means that the arrangement must not be a floating charge which involves a sufficient authority for the chargor to deal with the assets in the ordinary course of its business: see para 28.06 below.
5 Such provisions are often seen in the context of real estate finance, or security over portfolios of listed or rated securities.
6 See for example, Re Queen’s Moat Houses plc  NPC 67.
8 See para 70 0f the judgment, and the further discussion of this case in the context of financial collateral arrangements at para 35.24 below.
9 The word ‘description’ is used rather than ‘definition’. It has been observed that the nature of a floating charge does not lend itself to an exhaustive definition: see Re Brightlife Ltd  3 All ER 673, at p 677. The present discussion naturally focuses on the security aspects of a floating charge. But it should be appreciated that the distinction between a fixed and a floating charge may have other consequences. For example, a building society may be able to create a fixed charge over its assets but a security interest classified as a floating charge (whether involving all of the assets of the society or part only) will be void: see Building Societies Act 1986, s 9B (as inserted by Building Societies Act 1997, s 11). Equally, a fixed charge over shares and certain other assets will not be subject to registration under Companies Act 2006, s 680(7), but if the arrangement is characterized as a floating charge, then registration would be required under s 860(7)(g). On that subject, see para 28.10 below. In addition, a floating charge is subject to various preferential and other claims: see paras 28.14–28.23 below.
10  2 Ch 284, at p 295 (CA).
11 In practice, security documents will frequently seek to take a floating charge over the entire assets and undertaking of the company, in addition to a list of specific, fixed charge assets.
12 Although some writers have occasionally put forward a different view, it is generally thought that a floating charge can only be created by a limited company.
13 The obvious example would be the stock in trade and finished goods of a manufacturing company.
14 This limitation should be carefully noted—the chargor’s authority is by no means unfettered, although it should be said that the expression ‘ordinary course of business’ was given a fairly extended meaning in Ashborder BV v Green Gas Power Ltd  EWHC 1517 (Ch).
15 See the discussion at n 4 above. The fact that the right to deal with the assets may in some way be restricted does not necessarily mean that the chargor has insufficient control over them for these purposes: see Re Cosslett (Contractors) Ltd  Ch 495 (CA).
16 Illingworth v Houldsworth  AC 355 (HL). A floating charge was vividly described (at p 358) as ‘…ambulatory and shifting in its nature, hovering over and so to speak floating with the property which it is intended to affect…’.
17 Government Stock and Other Securities Investment Co Ltd v Manila Railway Co  AC 81. The security nevertheless comes into existence at the point of time when the security is created—the charge does not amount to a contract to create security at a future date or as at the point of crystallization: Evans v Rival Granite Quarries Ltd  2 KB 979.
18 Agnew v Commissioner for Inland Revenue  2 AC 21 (PC); Re Spectrum Plus Ltd  2 AC 680 (HL). As a result of these decisions, it has been suggested (eg by Lingard, para 8.56) that cases such as Re Atlantic Computers plc  Ch 505 and Arthur D Little (in administration) v Ableco Finance LLC  EWHC 701 (Ch) may require reconsideration because they were based primarily upon the view that the key characteristic of a floating charge was its ambulatory nature.
19 Again, note the contrast with the fixed charge which attaches to the asset from the date of creation and, form that date, the lender must exercise a sufficient degree of control.
21 See Insolvency Act 1986, s 15(2).
22 On the few cases in which it remains possible to appoint an administrative receiver, see Insolvency Act 1986, ss 72A–72G, as inserted by the Enterprise Act 2002, s 250(1). The exceptions include (i) security created in respect of capital markets transactions in excess of £50 million, (ii) security given by a project company in respect of a public-private partnership, (iii) security given by certain railway and utility companies and urban regeneration projects, and (iv) certain financial collateral arrangements of the kind described in Chapter 36 below.
23 Re Compton & Co Ltd  1 Ch 954.
24 See Government Stock and other Securities Investment Co Ltd v Manila Railway Co  AC 81 (HL) and Robson v Smith  2 Ch 118.
25 In any event, a provision in a floating charge to the effect that crystallization will occur when a moratorium is sought or obtained is void: see Insolvency Act 1986, Sch A1, para 43.
26 NW Robbie & Co Ltd v Witney Warehouses Co Ltd  3 All ER 613.
27 For the purposes of the Insolvency Act 1986, a charge originally created as a floating charge will continue to be treated as such, notwithstanding crystallization: see the definition of ‘floating charge’ in Insolvency Act 1986, s 251.
28 Save that, in accordance with ordinary principles, a mortgagee who takes a legal charge in good faith, for value and without notice of the crystallization will enjoy priority: see Ellinger, Lomnicka, and Hare, p 792, citing Business Computers Ltd v Anglo-African Leasing Ltd  2 All ER 741.
29 See Re Brightlife Ltd  Ch 200, approving the New Zealand decision in Re Manurewa Transport Ltd  NZLR 909, and the discussion in Lingard, para 9.28.
30 In consequence of the use of the words ‘as created’, the section will apply even if the floating charge has subsequently crystallized.
31 On the definition of ‘preferential debts’, see Insolvency Act 1986, s 396 and Sch 6.
32 Insolvency Act 1986, s 175(2); Re Christonette International Ltd  3 All ER 225.
33 On this point, see Lewis Merthyr Consolidated Collieries Ltd  1 Ch 498 and Re GL Saunders Ltd  1 WLR 215.
35 As inserted by Enterprise Act 2002, s 252.
36 On the calculation of the prescribed part, see The Insolvency Act (Prescribed Part) Order 2003 (SI 2003/2097). The maximum amount of the prescribed part is £600,000.
37 Insolvency Act 1986, s 176A(5). This power would presumably be exercised where the deficiency is so great that each unsecured creditor would receive only a very nominal recovery.
38 See Re Airbase (UK) Ltd  EWHC 124 (Ch).
39 Insolvency Act 1986, s 386, read together with para 8 of Sch 6 to that Act.
40 Re Nortel GmbH  UKSC 52.
41 Insolvency Act 1986, s 386, read together with paras 9 and 10 of Sch 6.
42 Insolvency Act 1986, s 386, read together with para 11 of Sch 6.
43 See, for example, the discussion in relation to competing security over shares at para 29.25 below and, in relation to mortgages over land, at paras 32.37–32.38 below.
44 Re Benjamin Cope & Sons Ltd  1 Ch 800.
45 Wheatley v Silkstone and Haigh Moor Coal Co (1885) 29 Ch D 715.
47 Wilson v Kelland  2 Ch 306; English and Scottish Mercantile Investment Co Ltd v Brunton  2 QB 700 (CA).
48 Manchester Trust Ltd v Furness Withy & Co Ltd  2 QB 539.
50 The present discussion ignores the effect of Companies Act 1985, s 711A (inserted by the Companies Act 1989) because this provision has not been brought into force.
51 In order to reach such a conclusion, a court would have to circumvent the decision in Wilson v Kelland  2 Ch 306, where the court held that registration of the charge involved notice of its existence but not notice of its contents. In the modern context, this approach seems unrealistic, especially where the chargee is a bank whose own standard forms of floating charge would include precisely the kind of restrictions at issue.
52 On intercreditor agreements of this kind, see the discussion at paras 21.57–21.58 above.
53 Biggerstaff v Rowatt’s Wharf Ltd  2 Ch 93 (CA); Business Computers Ltd v Anglo-African Leasing Ltd  2 All ER 741
54 On this subject, see Chapter 30 below.
55 A possessory lien arises when the person claiming it has provided services in relation to the goods entrusted to him, whilst a contractual lien is created on the date on which the parties entered into the contract: Lingard, para 9.9, citing Wiltshire Iron Co Ltd v Great Western Railway Co  2 KB 979 (CA); George Barker (Transport) Ltd v Eynon  1 KB 655; and Mac-Jordan Construction Ltd v Brookmount Erostin Ltd  BCLC 350 (CA).
57 Evans v Rival Granite Quarries Ltd  2 KB 979; Heaton & Dugard Ltd v Cutting Bros Ltd  1 KB 655.
58 Re Opera Ltd  3 Ch 260 (CA).
59 Cairney v Back  2 KB 746.
60 Re Roundwood Colliery Co Ltd  1 Ch 373. For an exceptional case, see Herbert Barry Associates v Inland Revenue Commissioners  1 WLR 1437 (noting that the landlord may be deprived of priority if he has been guilty of fraud or unfair dealing).
61 On this point, see Rhodes v Allied Dunbar Pension Services Ltd  1 All ER 1161, discussed by Lingard at para 9.11.