Table Of ContentPreface to the Third Edition
From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
Content type:Book content Product:Financial Law [FBL]
Published in print:08 March 2018 ISBN:9780198795568
The first edition of this book was entitled The Law of Personal Property Security. The second
edition was published under the current title, The Law of Security and Title-based Finance. The
change was made because the book is a genuine attempt to cover both security and quasi-
security in one exposition, and we felt that this wide scope was not properly reflected by the first
title. Despite the omission of the words ‘Personal Property’ in the new title, the book has not
changed in this regard; it covers all forms of property except land, which is dealt with incidentally
only so far as may be necessary.
The second edition also saw a re-ordering, the introduction of a number of new chapters and a
good deal of re-writing. We have had to make fewer changes for this third edition, and the structure
of the book remains much as it was in the second edition. We hope this will make it easy for
readers who are familiar with the second edition to find their way in the new edition.
Nevertheless, within individual chapters we have made significant changes to reflect new
legislation and new case law. Many of the developments are reflected in more than one chapter, so
it seems more helpful to list the principal legislation and cases with brief indications of the principal
point:
Legislation:
Companies Act 2006, new Part A1 (new scheme of registration of company charges)
Tribunals, Courts and Enforcement Act 2007 (implementation respecting the abolition of distress
and its partial replacement by commercial rent arrears recovery process; limitations on a landlord’s
right to intercept sub-rents; changes to enforcement of judgments)
Co-operative and Community Benefit Societies Act 2014 (charges created by registered societies)
Insolvency Act 2015 ss 251A et seq (on individuals, debt relief orders and moratoriums)
Small Business, Enterprise and Employment Act 2015 (on assignment of liquidators’ and
administrators’ causes of action)
International Interests in Aircraft Equipment (Cape Town) Regulations 2015
Securities Financing Transaction Regulation (Regulation (EU) 2365/2015, arts 12 and 13
Commission Delegated Regulation EU/2016/2251, art 20 (regulatory constraints on the right of use
of financial collateral)
Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in
financial instruments (MiFID II) art 16 (transactions with retail clients)
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Cases:
Akers v Samba Financial Group [2017] UKSC 6 (trusts in the conflict of laws)
(p. vi) Alpstream AG v PK Airfinance Sarl [2015] EWCA Civ 1318 (duties of mortgagee)
Bassano v Toft [2014] EWHC 377 (bills of sale; what conduct has the effect of determining a
pledge)
Bibby Factors Northwest Ltd v HDF Ltd [2015] EWCA Civ 1908 (assignment, particularly absence
of duty on obligor to notify assignee of cross-claims against obligee/assignor)
Cavendish Square Holdings v Makdessi and ParkingEye Ltd v Beavis [2015] UKSC 67 (penalty
clauses)
Chatfields-Martin Walter Ltd v Lombard North Central Plc [2014] EWHC 1222 (QB) (estoppel
against finance company that altered hire-purchase register)
Cukurova Finance International Ltd, Cukurova Holding AS v Alfa Telecom Turkey Ltd [2013] UKPC
2 (relief from forfeiture in relation to appropriation)
Eason v Wong [2017] EWHC 209 (Ch) (equitable liens)
Fons HF (In Liqudation) v Corporal Ltd [2014] EWCA 304 (meaning of ‘debenture’)
FSC v Lemma Europe Insurance Company Limited BVIHC (Com) No. 318 of 2012 (whether an
agreement creates a security interest)
Gillan v Hec Enterprises Ltd [2016] EWHC 3179 (Ch) (equitable liens)
JD Brian Ltd (In Liquidation), Re [2015] IESC 62 (Supreme Court of Ireland decision on automatic
crystallization clauses)
Jervis v Pillar Denton Ltd [2014] EWCA Civ 180 (expenses of the administration)
Lehman Bros International Europe (No 4), Re [2017] UKSC 38 (provable claims and set-off)
Lehman Brothers International (Europe) (In Administration, Re) [2012] EWHC 2997 (Ch) (security
financial collateral arrangements)
Lutz v Bäuerle, Case C-557/13 (2015) (Insolvency regulation)
Metall Market OOO v Vitorio Shipping Company Ltd (The Lehman Timber) [2013] EWCA Civ 650
(payment of storage of goods subject to a possessory lien)
Pars Ram Brothers (PTE) Ltd v ANZ Banking Group Ltd [2017] SGNC 38 (whether a pledge
survives mixture of the pledged goods with other goods)
Private Equity Insurance Group SIA v Swedbank AS (C-156/15) (security financial collateral
arrangements)
PST Energy 7 Shipping LLC v OW Bunker Malta Ltd [2016] UKSC 23 (‘Bunkers’) (retention of title
clause)
Re Nortel GmbH [2013] UKSC 52 (expenses of the administration)
Ready Rentals Limited v Kaamran Ahmed [2016] EWHC 1996 (Ch) (whether a freezing order
creates a security interest)
Saltri Iii Limited v MD Mezzanine Sa Sicar [2012] EWHC 3025 (Comm) (duty of mortgagee)
(p. vii) Saw (SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001 (lightweight floating charges)
Secure Capital SA v Credit Suisse AG [2017] EWCA Civ 1486 (bearer notes in the conflict of laws)
Southern Pacific Mortgages Ltd v Scott [2014] UKSC 52; [2015] AC 385 (priority between
mortgagee and person claiming proprietary estoppel: Abbey National v Cann)
Your Response Ltd v Datateam Business Media Ltd [2014] EWCA Civ 281 (whether electronic
documents can be the subject of a possessory lien)
There is also coverage of two imminent reforms: the Goods Mortgages Bill, recommended by the
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Law Commission and announced in the Queen’s Speech in 2017, which would replace the Bills of
Sale Acts, and the Business Contract Terms (Assignment of Receivables) Regulations 2018 (to be
made under powers conferred by the Small Business, Enterprise and Employment Act 2015), which
are expected to be laid before Parliament in early 2018 and which would render ineffective
prohibitions on the assignment of trade receivables.
At the time of writing there is uncertainty over the impact that Brexit will have on English law that
implements or is based on EU legislation. The third edition has been prepared on the basis of the
current situation, namely that the UK remains a member of the EU; and we have not speculated on
the possible effect that withdrawal will have. However, it seems likely that the UK legislation most
dependent on EU legislation, the Financial Collateral Arrangements (No 2) Regulations 2003, will be
kept in force by virtue of the European Union (Withdrawal) Bill. Clause 2(1) of the Bill provides that,
in general, “EU-derived domestic legislation, as it has effect in domestic law immediately before exit
day, continues to have effect in domestic law on and after exit day.” The question of the extent to
which interpretation of that legislation by the Court of Justice, either before or after “exit day”, will
have to be followed by UK courts is yet to be settled.
As with the two previous editions, the four authors have collaborated closely on the whole of the
work and accept joint responsibility for the whole. However, it may be useful to record that principal
responsibility for the first drafts of various chapters was as follows:
Hugh Beale: Chapters 3, 9–11, 14(D) (part), 23
Michael Bridge: Chapters 1, 8, 14(E)–(F), 16–17, 18(A), 20–22
Louise Gullifer: Chapters 2, 4–6, 14(A)–(C), 14(D) (International interests in aircraft
equipment), 12– 13, 15, 18 (B)–(D)
Eva Lomnicka: Chapters 7 and 19
We are very grateful to the staff at Oxford University Press for their help and encouragement in the
writing and production of this book. Louise Gullifer would like to thank Wei Jian Chan, for his
excellent research assistance. She would also like to thank Universidad Carlos III de Madrid, where
she held Santander Chair of Excellence while completing this third edition.
Hugh Beale
Michael Bridge
Louise Gullifer
Eva Lomnicka(p. viii)
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Contents
From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
Content type:Book content Product:Financial Law [FBL]
Published in print:08 March 2018 ISBN:9780198795568
List of Abbreviations xv
Table of Cases xvii
Table of Legislation lxi
I Introduction
1. Introduction
A. Scope of book 1.01
B. Reasons for security 1.07
C. The contribution of equity 1.13
D. Categories of security interests in English law 1.17
E. Quasi-security: reservation of title 1.21
F. Form and substance and recharacterization risk 1.27
G. Statutory interventions on behalf of unsecured creditors 1.30
H. Creditors’ preferences 1.33
2. Use of Security and Quasi-security Interests in Debt Financing
A. Introduction 2.01
B. General map of debt financing 2.05
C. Use of security and quasi-security in general debt financing 2.10
D. Specialized financing 2.20
3. Financial Collateral
A. The Directive on Financial Collateral Arrangements 3.01
B. Forms of financial collateral 3.18
C. Key concepts of the FCARs 3.35
D. Charges over financial instruments 3.74
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E. Charges over ‘cash’ 3.91
F. Charges over ‘credit claims’ 3.103
G. Evaluation of the FCARs 3.111 (p. x)
II Description of Interests
4. Types of Interest
A. Security interests and absolute interests 4.01
B. Characterization of interests as security interests or absolute interests
4.13
5. Possessory Security
A. Pledge 5.01
B. Possessory lien 5.62
6. Non-possessory Security
A. Consensual 6.01
B. Non-consensual 6.142
7. Financing Devices Involving the Transfer or Retention of Title
A. General 7.01
B. Goods 7.07
C. Title transfer financial collateral arrangements 7.58
D. Receivables 7.75
8. Rights not Including the Transfer or Retention of Title 334
A. Non-consensual 8.01
B. Consensual 8.71
III Registration and Other Perfection Requirements
9. Registration and Other Perfection Requirements
A. Meaning of perfection 9.01
B. Purpose and significance of perfection requirements 9.04
C. Specialist registers 9.23
D. Registration of hire purchase agreements 9.25
10. Interests Created by Companies
A. Overview 10.01
B. Registration under the Companies Act 2006 10.07
11. Interests Created by Debtors Who are not Companies
A. Introduction 11.01
B. The Bills of Sale Acts 11.04 (p. xi)
C. General assignments of book debts 11.63
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D. Agricultural charges 11.64
E. Charges created by cooperative, community benefit, and building
societies 11.73
IV Priorities
12. Introduction to Priorities
A. Introduction 12.01
B. Registration as constructive notice 12.04
13. General Priority Rule: Nemo Dat (First in Time to be Created Wins)
A. The nemo dat principle 13.01
B. Priority between possessory security interests and non-possessory
security interests 13.03
C. Priority between the holder of possessory security interests and buyers
13.09
D. Priority between non-possessory security interests 13.10
E. Priority between the holder of non-possessory security interests and
buyers 13.27
F. Priority between financing devices involving the transfer or retention of
title and other security interests 13.29
14. Exceptions to the Nemo Dat Rule
A. Purchaser of legal interest 14.01
B. The rule in Dearle v Hall 14.09
C. Statutory exceptions to the nemo dat rule 14.21
D. Priority normally established by date of registration 14.31
E. Future advances and priority 14.83
F. Priority agreements 14.108
15. Authorized Dispositions
A. Introduction 15.01
B. Authority to make absolute disposition 15.02
C. Authority to create prior ranking security interest 15.19
16. Priority between Consensual and Non-consensual Security Interests
A. Introduction 16.01
B. Possessory liens 16.02
C. Lienholder and owner 16.03 (p. xii)
D. Lienholder and secured creditor 16.08
E. Statutory rights of detention 16.09
F. Equitable liens 16.10
G. Priority of maritime and statutory liens 16.11
H. Execution creditors 16.12
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I. Distress 16.19
17. Other Priority Issues
A. Priority between holders of security and absolute interests in assets
and unsecured creditors 17.01
B. Circularity 17.11
V Enforcement
18. Enforcement of True Security Interests
A. General issues in relation to true security interests 18.01
B. Pledge 18.10
C. Lien 18.14
D. Non-possessory security 18.19
19. Enforcement of Financial Devices Involving the Transfer or Retention of Title
A. Introduction 19.01
B. Goods 19.03
C. Title transfer financial collateral arrangements 19.43
D. Receivables 19.44
20. Enforcement of Security in Insolvency
A. General 20.01
B. Liquidation and bankruptcy 20.02
C. Administration 20.46
D. Receivership 20.67
E. Other insolvency procedures 20.83
21. Enforcement of Rights not Including the Transfer of Title
A. Non-consensual 21.01
B. Consensual 21.03 (p. xiii)
VI Conflict of Laws
22. Conflict of Laws
A. The applicable law 22.01
B. Security and the applicable law 22.53
C. International uniform security interests 22.146
VII Criticism and Law Reform Proposals
23. Criticism and Reform Proposals
A. Introduction 23.01
B. Reports recommending reform and reforms elsewhere 23.03
C. Proposed amendments to the registration and priority of company
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charges 23.25
D. Reform of the Bills of Sale legislation 23.62
E. Radical reform 23.91
F. Current prospects for radical reform in England and Wales 23.161
Index 877
(p. xiv)
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Part I Introduction, 1 Introduction
From: The Law of Security and Title-Based Financing (3rd Edition)
Hugh Beale, Michael Bridge, Louise Gullifer, Eva Lomnicka
Content type:Book content Product:Financial Law [FBL]
Published in print:08 March 2018 ISBN:9780198795568
Subject(s):
Assignment of credit — Mortgage — Pledge — Debt — Collateral agreement — Set-off
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(p. 3) 1 Introduction
A. Scope of book 1.01
B. Reasons for security 1.07
Theory and practice 1.07
Security and insolvency 1.10
Protection by other devices 1.12
C. The contribution of equity 1.13
D. Categories of security interests in English law 1.17
E. Quasi-security: reservation of title 1.21
Conditional sales 1.22
Finance leases and hire purchase 1.25
Discounting 1.26
F. Form and substance and recharacterization risk 1.27
G. Statutory interventions on behalf of unsecured creditors 1.30
Preferential and similar rights 1.30
Registration 1.31
H. Creditors’ preferences 1.33
A. Scope of book
Proprietary security and ‘quasi-security’ over personal property
1.01 This book is about proprietary security taken by creditors from debtors to support the
repayment of loans or, much less frequently, the performance of other obligations. The security will
normally take the form of a pledge, mortgage, or charge over the debtor’s property. The book also
deals with a number of 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: for example, goods that are leased to the debtor for their economic lifetime on terms that
require the debtor to pay their full cost plus the cost of the credit supplied. It will be seen that these
transactions involve what is often called ‘vendor credit’ as opposed to ‘lender credit’. These
devices that are ‘equivalent’ to security we term ‘quasi-security’. The book deals also with the
outright sale of ‘receivables’, i.e. debts (typically ‘book debts’)1 that are due to the debtor. If these
debts are assigned to, for example, a factor in exchange for an immediate payment at a discounted
rate, and the factor then obtains payment of the receivables from the various ‘account debtors’
when the debts fall due, this too may be seen as functionally similar to lending on the security of
the receivables. The sums collected by or on behalf of the factor, which exceed the discounted
value for the debts paid by the factor, are tantamount to the repayment of a loan of that discounted
value coupled with interest. 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 (p. 4) sub-
freights.2 In the interest of a comprehensive treatment of a complex subject, these too must be
included.
Companies, unincorporated business debtors, and consumers
1.02 The debtors who feature in the cases in the book, and to whom many of the statutes dealt
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