Debt and payment

Question 1

Tay Valley Joinery v CF Finance Services

Answer 1

1. Tay Valley (a company) granted a floating charge over all of the assets owned by the company to a bank
2. They then entered into a sub-participation (invoice discounting) agreement with CF Finance Services
3. The deal was that all the payments received in the future by the company would be passed to CF Finance
4. The company went insolvent
5. CF Finance purchased the debts of Tay Valley through the sub-participation agreement
6. The question was whether those assets were now part of the bankruptcy mass of the company
7. The court held that these assets, which were subject to a floating charge, were held under trust
8. By transferring their debts through a sub-participation agreement to the financial company, Tay Valley basically created a trust which was separate from the normal assets of the company

Question 2

Glasgow Pavillion v Motherwell

Answer 2

1. “No creditor is bound to receive payment of a debt due to him by cheque or otherwise than in the current coin of the realm. A creditor may even refuse to accept Scottish banknotes”