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Part IV Priorities, 15 Authorized Dispositions »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter examines the situation where A disposes of assets in which B has an absolute or security interest to a third party C. The disposition may be absolute or by way of security. Normally, in this situation, the priority rules would determine whether B or C has priority. However, where the disposition is made with the consent or permission of B, then C will always take free from B’s interest. Similarly, where a third party takes an interest in an asset subject to a security interest and the grant is made with the authority or consent of the secured lender, the third party will take free from that security interest. The extent of the authority or consent may be made clear in advance in the security agreement or may be given at the time of the grant of the interest.

Part VI Conflict of Laws, 22 Conflict of Laws »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter details how, in respect of security in the narrow sense, as well as in the more extended sense that includes title-based financing, the law of secured transactions raises issues that may be either contractual or proprietary in nature. It deals with cross-border issues in two main areas: first, the choice of law rules for contract and personal property; and second, uniform substantive law pertaining to contract and personal property and located in international conventions. The chapter also shows how the characterization of an issue arising out of a transaction as contractual or proprietary in nature, for the purpose of selecting the appropriate choice of law rule, is not an easy matter.

Contents »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka

Part VII Criticism and Law Reform Proposals, 23 Criticism and Reform Proposals »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter discusses how aspects of law governing security over personal property, and especially the registration requirements for company charges and for bills of sale and the rules of priority, have been criticized for many years. There has been a series of reports recommending reform; some of these have recommended amendments to the Companies Act and the rules of priority of charges registered under the Act. Meanwhile, others have proposed more radical reforms that would replace both the Companies Act and the Bills of Sale Acts with a ‘notice filing’ scheme based on Article 9 of the United States Uniform Commercial Code and subsequently adopted, with slight variations, in many Canadian provinces and New Zealand.

Part V Enforcement, 19 Enforcement of Financial Devices Involving The Transfer or Retention of Title »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter demonstrates how financing devices that involve either the retention or the transfer of title, although performing an equivalent function to security interests, are generally not considered ‘security’ under English law. Hence, the general characteristics that security interests display when they are enforced, in particular the obligation of the secured creditor to account for any surplus and the obligation of the debtor to make good any deficit, do not rise. The financing devices, being straightforward commercial contracts, are enforced according to their terms, without the application of any of those ‘security’ principles. However, in so far as these devices perform a security function, their express terms often reflect these ‘security’ characteristics, with the contract often providing for a financial adjustment so as to preclude the ‘secured creditor’ receiving a ‘windfall’ or suffering a ‘shortfall’.

Part V Enforcement, 21 Enforcement of Rights not including the Transfer of Title »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter talks about the enforcement of rights in the case of quasi-security, which, apart from not being true security, does not involve the enforcement of a proprietary right. Non-consensual examples are few and far between. A former example of such a right was a landlord’s right, under section 6 of the Law of Distress (Amendment) Act 1908, to direct a sub-tenent to pay subrents directly to him in the event of a tenant’s failure to pay the rent. The landlord’s right was the equivalent of serving a third-party enforcement (formerly garnishee) order without having to go to court to procure the order. The only surviving example of a non-consensual right, it seems, is set-off.

Part V Enforcement, 20 Enforcement of Security in Insolvency »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter discusses the enforcement of security once formal insolvency proceedings have supervened. It deals primarily with liquidation, administration, and receivership but takes in also other procedures, such as schemes of arrangement, to the extent that they affect the rights of secured creditors. A key feature of English law, in contrast with numerous other legal systems, is that the onset of bankruptcy or company liquidation does not remove the power of a secured creditor to exercise proprietary remedies for the recovery of the secured debt. In addition to consensual security, namely, mortgage, charge, and pledge, liens arising by operation of law may be exercised against a liquidator or trustee in bankruptcy, who may not therefore obtain possession of the assets without discharging the underlying obligation.

Part V Enforcement, 18 Enforcement of True Security Interests »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter explains how a number of general issues arise in connection with the enforcement of true security interests that will be taken before particular enforcement issues are dealt with under the relevant head. True security interests consist of the four nominate types of security recognized in English law, namely, the three consensual securities of pledge, mortgage, and charge, together with the non-consensual lien. The obligation of a secured party to account for any surplus obtained is implicit in the nature of security. In the case of a pledge, this is consistent with the pledgor’s residual property rights. This obligation is also consistent in the case of mortgages. Charges and mortgages may be taken together, given that they are assimilated in drafting practice and in judicial treatment as alike in recognizing the borrower’s equity of redemption.

Part IV Priorities, 14 Exceptions to the Nemo Dat Rule »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter illustrates how a person who acquires a legal interest in good faith and without notice takes priority over the holder of an equitable interest. The person acquiring the legal interest must provide value and not have actual or constructive notice at the time that the interest was acquired. If, however, the interest, when acquired, was initially equitable, the holder of the interest can at a later date acquire the legal interest and gain priority over the holder of a prior equitable interest, despite the fact that at the time the legal interest was acquired, the holder knew of the prior equitable interest. This is the doctrine of tabula in naufragio.

Part I Introduction, 3 Financial Collateral »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter discusses the significance of distinguishing between the various types of property over which security may be taken, or which may be the subject matter of a retention of title or other quasi-security device, since the same general principles will be applicable whatever the nature of the property. There are also differences between the various kinds of property, which will mean that the way the law applies in practice will differ. Thus, a charge over either ‘inventory’ such as stock in trade or raw materials will in practice usually have to be a floating charge rather than a fixed one; the chapter shows how it is very difficult to take and maintain a fixed charge over book debts or other receivables.

Part II Description of Interests, 7 Financing Devices Involving the Transfer or Retention of Title »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter discusses financing devices that, although performing an equivalent function to security interests, are not generally considered ‘security’ under English law. These devices fall into two main categories: those involving the retention and those involving the transfer of title. Such financing devices are often called ‘quasi-security’ interests, to acknowledge that their economic function, in ‘securing’ the performance of obligations, is the same as that of true ‘security’. The chapter also considers the characteristics that they normally display, dividing up the discussion by the nature of the collateral involved: goods, investment products, and receivables.

Part IV Priorities, 13 General Priority Rule: Nemo Dat (First in Time to be Created Wins) »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter explains how the basic principle of priority between all kinds of interest is that of nemo dat quod non habet. In the context of priority disputes this is often referred to as the principle that the first in time to be created wins. There are various justifications for this rule in addition to longevity. First, there is the intuitive idea that one cannot give what one has not got. If one owns an asset and gives it to another, one no longer owns it and has nothing to give to someone else. Second, one can argue that if the basic rule were not first in time, parties would normally so arrange their affairs in any case so that priorities, at least between security interests, operated on this basis.

Index »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka

Part III Registration and Other Perfection Requirements, 10 Interests Created by Companies »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter examines how, when a company creates a charge, particulars of it and a certified copy of any charge instrument must be delivered for registration within twenty-one days of the creation of the charge, unless the charge is exempt from registration either under the Companies Act 2006 itself or other legislation. The registrar must register the documents if they are delivered by either the company or by any person interested in the charge (typically, the secured creditor) within twenty-one days of the charge being created. The chapter also shows how clauses in floating charges that prohibit or restrict the company from creating further security that will rank equally with or ahead of the charge are now registrable.

Part III Registration and Other Perfection Requirements, 11 Interests Created By Debtors Who Are Not companies »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter talks about how there are perfection requirements for only certain types of mortgage or charge created by non-corporate debtors over their property. The perfection of mortgages and charges over goods by non-corporate debtors is for the most part governed by statute, principally the Bills of Sale Acts. General assignments of book debts must also be registered under the Bills of Sale Act 1878. In addition, there are separate provisions for agricultural charges and charges created by cooperative, community benefit, and building societies. The chapter also shows how, in the Queen’s Speech in 2017, the government announced its intention to reform the law on bills of sale pursuant to recommendations by the Law Commission, which in July 2017 published a draft Goods Mortgages Bill for consultation.

Part I Introduction, 1 Introduction »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This introductory chapter talks about propriety security taken by creditors from debtors to support the repayment of loans or, much less frequently, the performance of other obligations. The security normally takes the form of a pledge, mortgage, or charge over the debtor’s property. The chapter also considers transactions that on a traditional analysis do not involve the taking of security but that have a similar economic function, in that a party that provides credit retains property rights over assets that in practice are being purchased by the debtor with the credit provided. These transactions involve what is often called ‘vendor credit’ as opposed to ‘lender credit’. The equivalent of security may also be produced by a host of other contractual devices, such as priority agreements, contractual set-off, and liens over sub-freights.

Part IV Priorities, 12 Introduction to Priorities »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter provides a discourse of the nemo dat rule as the general priority rule, followed by discussions of the exceptions to that general rule. Nemo dat quod non habet is the general priority rule in relation to all interests, whether absolute or by way of security. Fully translated as ‘no one can give what they do not have’, the effect of the rule is that as between two interests, the one first in time has priority. The chapter, however, only considers priority between two or more security interests and priority between security interests and absolute interests. The only discussion of priority between absolute interests is where absolute interests are used as financing devices, either by means of the transfer or the retention of title.

The Law of Security and Title-Based Financing »

Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka

List of Abbreviations »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka

Part II Description of Interests, 6 Non-Possessory Security »

From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
This chapter analyses the nature of mortgage. It is a non-possessory security whereby the mortgagor transfers ownership to the mortgagee subject to an obligation to retransfer ownership on satisfaction of the underlying obligation. Since equity will enforce the retransfer, the right to it is not personal but amounts to an equitable interest called the equity of redemption. The actual right to redeem can be a legal right, arising expressly from the contract of mortgage: if that legal right to redeem is not exercised, an equitable right to redeem arises. However, since equity will enforce even the legal right to redeem against third parties, the mortgagor has an equitable interest called the ‘equity of redemption’ from the commencement of the mortgage.