Topic 1 Flashcards

1
Q

what are the types of debt/loan capital a company may have?

A

Voluntary:

  1. Overdraft and fixed term loans
  2. Advances by assignment of debt
  3. Trading debt
  4. Paying for supplies in advance (customers can be creditors)

Involuntary creditors:
become owed money by company without agreement.
1. Tort victims
2. Tax authorities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is an overdraft/fixed term loan? difference between the 2?

A

Overdraft is where bank allows company to withdraw X amount over limit. Bank can recall the money at any time.

Fixed-term loan provided by bank to company, but can only be demanded back at fixed time, unless a clause in agreement allows otherwise.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is an advance by way of assignment of debts?

A

Money owed to company by creditors is generally termed ‘book debts’ and can be transferred to 3rd parties

  • Company assigns rights to debts owed to it to a third party (assignee) in return for cash advance
  • 3rd party collects debts itself/ company does it, in which case it remains indebted to assignee for amount of advance
  • Any collected funds will not become part of company assets but held ON TRUST for financier
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Trade debt

A

Supplying on credit terms –> Trading partners advance another less transparent form of loan capital to companies

  • company orders good/services from others
  • terms upon which supplies are made frequently afford recipient company a period of time to make payment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Involuntary creditors: Tax authorities?

A

VAT of customers used for short time by company until paid to hmrc

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Insolvency and “going into liquidation”

A

s247 IA
Insolvency–> includes the approval of a voluntary arrangement under part I, the appointment of an administrator or administrative receiver

Company goes into liquidation if–> passed a resolution for voluntary winding up or an order for its winding up is made by the court at a time when it has not already gone into liquidation by passing such a resolution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

When does corporate insolvency occur?

A

When a company has incurred more liabilities than it has assets to meet them, owing more than it owns.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How can corporate insolvency be dealt with?

A
  1. Individual creditors may go to the court to obtain judgment- eventually seizing the assets to pay the creditor who has obtained the execution order. (Brutal, aggressive, and some creditors prioritised over others)
  2. Winding up (collective procedure with all creditors participating).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Winding up procedure

A

A process of collective enforcement of debts for benefit of general body of creditors.

Voluntary procedure: Company passes resolution that it should be wound up, goes into liquidation. If it demonstrates that it cannot pay debts, court issues order.

Involuntary (compulsory): creditors can petition the court for a winding up order

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Re Lines Bros 1983 per Brightman J

A

Winding up may be
A) voluntary, in the sense that company members pass a resolution for its winding up.
B) Compulsory- creditors petition to court for winding up order to be made against company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the consequences of a winding up order?

A
  • Directors powers terminated,
  • Creation of statutory trust (company no longer beneficial owner of assets, holds them on trust for statutory purposes)
  • Retain legal interest
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Ayerst v C & K construction Ltd 1976

A

Suspension of individual rights against company upon winding up
- Principle of collectivity requires that individual action against company may be prohibited.
- s126, 127, 128, 130
although some creditors can exclude themselves from this rule (Re david lloyd)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How did winding up/liquidation work?

A

Liquidator collects the assets of the company “Warts & All”
He disposes of them to raise pool of £
Creditors all entitled to share this pool

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Corporate asset

A

Property law determines whether or not an asset of company in commercial sense is in fact an asset in legal sense.
(company may be in possession of assets that belong to 3ps under contractual agreement so not in legal sense theirs)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Assets subject to security interests

A

some corporate creditors will be unwilling to lend money or extend credit solely on basis of the company’s contractual obligation to repay the debt.

They may therefore take advantage of contract/property law to ensure the risk of lending is minimised.
–> Taking security over company assets

As a result, such a creditor has 2 sources of repayment

  1. Assets over which he has taken security
  2. company cash flow
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

security

A

Bristol Airport v Powdrill 1990 per Lord BW:

Security is created when a person (creditor) to whom the obligation is owed by another (debtor) by statute or contract, in addition to the personal promise of debtor to discharge obligation, obtains right exercisable against some property in which debtor has an interest in order to enforce the discharge of the debtor’s obligation to creditor.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

security interest

A

Interest in personal property or fixtures which secure payment/performance of an obligation.

Types: 
1. Real/personal security- in an asset or pool of assets, takes form of mortgage or charge or class of existing and future assets. 
  1. Possessory/non-possessory security
    - lien: secured party has possession of asset and can retain possession until discharge of debt
    - pledge- sell property in order to discharge debt
    - Mortgage/charge
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Company charges

A

Equitable property rights

Re BCCI (no 8): Equitable charge is a charge which is a proprietary interest granted by way of security. it entitles the holder to resort to property only for the purpose of satisfying some liability due to him.
A charge is a security interest created without any transfer of title or possession to beneficiary 

Company does not grant title but affords lender equitable prop rights.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Fixed charges

A

Security over SPECIFIC assets such as goodwill, property or shares.

  • Close to mortgage, but no conveyance of collateral.
  • It is a non-possessory form of security, as debtor retains rights over the asset.
  • The contract under which the charge is granted will prohibit the chargor (company) from dealing with or disposing of the collateral without lender (chargees) permission.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Illingsworth v Houldsworth 1904

A

A fixed charge is a charge that without more fastens on ascertained and defined property capable of being ascertained and defined

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Holroyd v Marshall

A

In fixed charge, debtor remains in possession of collateral. charge can be extended to both existing and future collateral according to contract and property law

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Floating charges

A

equitable charge on property which may CHANGE from time to time in the ordinary course of business (eg stocks)

This can be converted into fixed charge over assets later (crystallised)

Allows company to deal with assets whilst ever the creditor has not intervened.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Re Panama 1870

A

Re(Floating charge case)

Court confronted with a charge expressed to extend to entire undertaking of the company.

The charge expressed to extend “to the entire undertaking” was held to be valid, and became known as a floating charge.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Re Yorkshire Woolcombers association

A

Romer LJ listed the 3 characteristics needed for FLOATING CHARGE

  1. Charge on class of assets of a company present & future
  2. That class is one which, in ordinary court of business, would be changing from time to time
  3. If you find that by the charge is contemplated that, until some future step is taken by or on behalf of those interest in the charge, the company may carry on its business in ordinary way as far as concerns that particular class being dealt with.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Why is floating charge good for creditor?

A

In the event of insolvency, floating charge helps creditor by crystallization process

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Crystallization

A

Process whereby floating charge attaches itself to assets subject to the charge, becoming a fixed charge on those assets.
- Protects lender (chargee) in event of insolvency of chargor company

Triggered by:

  • Events specified in debenture
  • Onset of liquidation
  • Appointment of receiver
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Debenture

A

Document acknowledging a debt or charge

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Evans v Rival Granite Quarries

A

Specifies nature of crystallization: the point at which freedom to deal with assets is removed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Preferential debts

A

s175 IA: Paid for in priority to all other debts.
Have priority over the claims of holders of debentures secured by/ holders of floating charge created by the company, and shall be paid accordingly out of any property comprised in or subject to that charge.

30
Q

s251 Enterprise Act 2002- Abolition of Crown preference

A

The paragraphs from IA cease to have effect:
1&2- Debts due to Inland Revenue
3-5C- Debts due to customs and excise
6&7- social security contributions

(Preferential debts significantly reduced, Govt abolishing some of its own preferential status in generous act?)

31
Q

s176A EA

A

Presiding insolvency official (liquidator) must set aside out of the proceeds of property subject to a floating charge, an amount “prescribed part” to be distributed to company’s unsecured creditors.

Unless they
A) fall within ss3- property less than prescribed minimum and liquidator/admin/receiver thinks cost of making distribution to unsecured creditor would be disproportionate to the benefits.
B) came into force before 15 sept 2003

32
Q

Re Cosslett contractors 1998

A

Fixed or Floating charge?

Facts: Question of whether council had ownership rights in accordance with the contract. No- It merely had security interest in the machine arising by way of charge.

Held: CA looked to the extent of control over the machine (a badge of fixed charge). They couldn’t dispose of the asset without permission of chargee and had to keep machine on the site/permission to remove it.

But the control must be SUBSTANTIVE. Here, C could remove the machine with permission of architect.

33
Q

Fixed charge over book debts

A
Book debt (asset of company)
Companies often have own debtors via goods/services they provide to them. 

Preferable course is to capture by fixed charge so not vulnerable to preferential debts, prescribed parts etc.

Taking security over book debts desirable

Taliby v Official receiver: Charge over book debts recognised as valid, this charge can extend to future debts as well as existing debts.

34
Q

Siebe Gorman & Co v Barclays Bank 1979

A

charge drafted by bank, granted by company which required it to pay debts into bank account (blocked)

Company supposedly could only put money into account not take it out. (could not deal with book debts without permission of bank)

But appears account was freely accessible by company and bank retained only a contractual right to prevent withdrawals

–> FIXED CHARGE- validated idea of fixed charge over book debts

Courts can look to what happens in relation to blocked accounts. if there is a finding that the company can withdraw from the account, the entire charge rendered floating charge.

35
Q

Re Keenan Bros 1986

A

(Element of control in fixed charge)

Facts: Company required to collect debts owed to it, and pay them into account with chargee bank. Could not draw on that account without permission. there was a delay in opening the blocked account

Held: fixed charge- significant element of control, rendering charge fixed.

36
Q

Re Brightlife 1987

A

(element of control in fixed charge)

Fixed: Company free to pay debts into another account with chargee, could freely draw on that account.

Held: Floating charge due to control held by company- despite label of fixed charge in contract.

37
Q

Agnew v Commissioner of IR 2001

A

Facts: charge identical to New Bullas charge (fixed charge over uncollected debts- any debts company collected stuck in bank and any uncollected subject to fixed charge and take priority)

“Debenture so drafted that the company was at liberty to turn the uncollected book debts to account by its own act. taking relevant assets to be uncollected book debts, company left in control of process by which the charged assets were extinguished and replaced by diff assets which were not the subject of a fixed charge and were at the free disposal of the company … inconsistent with nature of fixed charge”

Looked to substance of agreement –> artificial.
Whether conceptually there was 1/2 charges, the company has freedom to collect in those debts (no restriction on company ability to collect debts)

New Bullas ignored

38
Q

Re Spectrum Plus 2005

A

Facts: Granted overdraft by Natwest, granted fixed and floating charges over its assets in return.

  • Clause: company shall pay into natwest account all moneys which it receives in respect of such debts, and shall not without prior consent of bank, sell/factor/discount or charge or assign the same in favour of any other person… company shall if called to do so, execute legal assignemnts of such book debts and other debts to the bank
  • Almost identical to Siebe Gorman.
  • Bank claimed charge fixed

Held:
1st instance- floating charge
CA: Fixed
HL: Overruled Siebe Gorman with immediate effect- charge was floating and impacted all SG type charges.

Principle: NOW POSSIBLE TO TAKE A FIXED CHARGE OVER DEBTS, BUT IN ORDER TO DO SO, CHARGEE MUST DEMONSTRATE THAT HE HAS NO CONTROL OVER THE UNCOLLECTED DEBTS AND PROCEEDS OF DEBTS.

–> In practice, hard to prove- if you completely block an account, you block company cash flow.

39
Q

Russell Cooke Trust v Elliot 2007

A

“control test” applied.

Facts: charge described as floating, characterised as fixed by Mann J

Reasoning for fixed: Restrictions imposed on borrower which prevented it dealing with/disposing of the charged assets, were inconsistent with the charge in question being floating.

40
Q

Re Harmony Care Homes 2009

A

Facts: charge expressed as a fixed charge over uncollected debts and in absence of directions form charge holder, floating charge on proceeds of debts on their receipts.

  • Charge holder required that collected debts be paid into a designated bank account over which it held mandate.
  • Produced evidence that the company could not draw on that account without written consent of charge holder (significant restriction)

Held: charge fixed- control over debts established as a question of fact by landlord. New Bullas type worked here.

41
Q

Gray v GTP Group 2010

A

Facts: GTP provided debit card service to F (laminating company). all the money paid by customers went straight into account managed by GTP (held on express trust for F)

  • GTP had control over the account, held balance on trust.
  • F could at any time call upon G to transfer balance UNLESS:
    should F enter insolvency, G could withhold payment of any sums in the account due from F to itself.

Held: given that F could freely withdraw on account before clause being triggered, court held this arrangement was a FLOATING CHARGE.

(contrast re harmony)

42
Q

what is the purpose of the registration regime for company charges?

A
  • Response to single creditor’s ability to take global security
  • Transparency in system
  • Puts other creditors on notice that its assets are subject to charges.
43
Q

what caused the registration regime?

A

Legislature directed attention to mischief of “Ostensible ownership” (false wealth)
- Party dealing with company may evaluate risk of doing so by looking at base assets which may suggest company is low risk trading partner (assets to execute upon failure to meet obligations)

  • If all available assets were subject to charges, company would be less attractive so investors/dealers more cautious when dealing with company
  • Needed system for prospective unsecured creditors to know that this is the case, and make informed decision
44
Q

Why must charges be registered?

A

Most consensual non-possessory forms of security are subject to a registration regime, in order to protect them against 3rd parties and to notify those dealing with them

45
Q

Relevant provisions re charge registration

A

s859

A: charges created by company
F: extension of period allowed for delivery
H: consequence of failure to deliver charges

46
Q

Consequences of non-registration of charge?

A
  • Charge void as far as security it offers
  • chargee becomes unsecured- cannot enforce charge against property
  • charge void against liquidator/admin/creditor
  • all money secured becomes immediately payable
47
Q

Can court make exceptions for late registration of charge?

A

Yes: if 859 F satisfied.
can effectively allow late reg if satisfied that failure to deliver the docs was accidental or due to inadvertance or some other sufficient cause, or that its not of a nature to prejudice the position of creditors or shareholders of company

48
Q

Sale of Goods act 1979 (SOG)

A

s17: where there is a contract for sale of specific/ascertained goods, the property to them is transferred to the buyer at such time as the parties to contract intend it to be transferred
s19: where there is a contract for the sale of specific goods/ goods are subsequently appropriated to the contract, the seller may, by terms of the contract or appropriation, reserve the right of disposal of goods until certain conditions are fulfilled…

(comp/buyer and seller can agree that title to goods does not pass on delivery)

49
Q

How does SOGA 1979 assist sellers in the event of corporate insolvency?

A

It allows parties to impose condition that buyer does not become legal owner (title holder) until the seller is fully paid

50
Q

AIV v Romalpa 1976 (key case on transfer of ownership rights)

A

Facts: AIV supplied aluminium foil to Romalpa on standard form terms, included clause 13:

  • Ownership of aluminium foil would not pass to the buyer until price paid in full
  • If AIV so desired, the foil was to be stored separately from Romalpa’s general stock and to be maintained as identifiable.
  • Products made from foil to be kept separately by Romalpa as ‘fiduciary bailees’, and AIV to be ‘given ownership’ of these products
  • Romalpa to have power to sell products in the ordinary course of business, but being required to deliver the proceeds of sale to AIV, if so required.

Insolvency: company went into receivership owing AIV over 122k. Held 35k representing proceeds of sale of AIV foil and on its property was still 50k of unused foil.

Held: clause effective as to its terms. ownership of the foil supplied remained with seller until paid for in full. notwithstanding that buyer had extensive rights of dominion over the foil. Any unused foil was property of seller, escaped floating charge over its assets (not to other creditors)

(key case- v important)

51
Q

How useful is the retention of title clause (Romalpa)?

A
  • Retention of title can be v useful but to limited extent

- why isnt it a security interest if it looks and works like one?

52
Q

why is a retention clause not a security interest?

A

Under UK definition (Bristol Airport v Powdrill), security interest is:

“‘Security’ is created when a person (‘the creditor’) to whom an obligation is owed by another (‘the debtor’) by statute or contract, in addition to the personal promise of the debtor to discharge the obligation, obtains rights exercisable against some property in which the debtor has an interest in order to enforce the discharge of the debtor’s obligation to the creditor.” (per Browne-Wilkinson VC, at 1372, italics added).

(key is in the word rights exercisable against…)

53
Q

Clough Mill v Martin

A

Facts: ownership of yarn remained with seller, reserving right to dispose of yard until paid in full/until buyer effected a resale of yarn.

  • Buyer entitled to resell yarn or use it in manufacturing process
  • But seller had right to enter onto buyer’s premises to recover yarn not paid for
  • any products made from yarn before paid for, shall “be and remain with seller”

Buyer entered insolvency, seller claimed to repossess any unused yarn. Buyer argued that effect of retention clause was a charge created–> void in insolvency for non-reg

CA: NO this clause does not create a charge. Buyer does not by way of security, confer on seller an interest in property defeasible on payment of the debt so secured. On contrary, seller retains legal property in material.

confirmed retention of title clause is: If it works and seller retains ownership rights over goods, there are no rights exercisable against the property of the debtor (buyer)

54
Q

“All-moneys clauses”

A

refers to ongoing buy-sell relationships with continuing trade. As each payment is made in relation to each supply, the clause ceases to have effect as title passes.

Q: is it poss to provide that title will not pass until buyer has discharged ALL outstanding indebtedness to seller?

(Armour v Thyssen)

55
Q

Armour v Thyson

A

(All-moneys clauses)

Provision upheld as valid: this does not create registrable security interest. Gives some kind of security but not by virtue of any right over property conferred by buyer.

(retention of title clauses work)

56
Q

In retention of title case, who has burden of proof?

A

Seller must identify particular goods the subject of the clause and submit these to benefit from them (Blue Monkey Gaming v Hudson)

57
Q

Blue Monkey Gaming v Hudson 2014

A

Facts: C transferred on retention of title terms, large numbers of gaming machines for use in Ds premises.

Held: burden of identifying specific machines of clauses was on C - not for company/admin/buyer to go and extract sellers particular machines

  • Also presupposes that goods are identifable.
58
Q

Sandhu v Jet Start Retail 2011

A

Facts: the company in possession of goods under a retention of title clause entered an insolvency
- Administrator negotiated a sale of the goods subject to the clause.

CA: Under the terms of the clause, the buyer had an implied right to deal with goods even after it entered insolvency proceedings and, if that happened, it would mean that buyer of goods would be protected by Sale of Goods Act 1979 s25 - seller’s title to them was effectively extinguished (by virtue of the application of the Sale of Goods Act 1979 s.25).

Hence the seller was left with an unsecured claim for the price of the goods, and could not pursue the buyer (or its administrator) in the tort of conversion.

–> Want to ensure goods are kept identifiable
Right of disposal that buyer has at point of sale or contract will continue even after insolvency commences. Could deal with this as a seller by contract – entirely removing buyers right of disposal.
So both can be remedied. But unless and until use contract, sellers may remain at risk.

59
Q

Re Bond worth 1980

A

Retention of equitable title is an impossibility

60
Q

Westdeutche per lord BW

A

“A person solely entitled to the full beneficial ownership of money or property, both at law and in equity, does not enjoy an equitable interest in that property. The legal title carries with it all rights. Unless and until there is a separation of the legal and equitable estates, there is no separate equitable title.
–> Therefore to talk about the bank “retaining” its equitable interest is meaningless.”

61
Q

Hendy Lennox v Graema Puttick 1984

A

Facts: Engines supplied on ROT terms. incorporated into generators which were then sold.
could seller claim part of proceeds of sale on the basis of fid relationship between itself and buyer?

  • presumption of fid relationship- neutralised by agreement between parties that buyers should have credit for at least 1 month. Not easy to reconcile that with obligation to keep proceeds of resale in separate account
62
Q

Re Andrabell 1984

A

Travel bags supplied on ROT terms with buy having 45 day credit to pay for them.

  • No obligation on buyer to keep bags separate, or obligation to account for proceeds
  • during credit period, buyer wants to have full use of proceeds- inconsistent with seller having prop interest in proceeds

perhaps resort to express clause in contract stating buyer acts as fid?

63
Q

E. Pfeiffer v Arbunthnot factors 1988

A

Facts: supply of wine on reservation of title terms. All proceeds of sale of wine to be passed/assigned to seller on demand. Any claims against buyer from resale to be passed on to seller.
–> seemed clear buyer was transferring his own property to the seller.

Held: Phillips J- relationship of buyer-seller is creature of contract. where seller retains title by way of security before subsale but contract expressly/impliedly authorises buyer to effect sub-sales, no implication that the sub sales are to be affected by the buyer as agent for and for account of seller

–> interest arises by way of security

64
Q

Modelboard Ltd v Outer Box Ltd [1992] BCC 945

A

Facts:

  • Supply of card sold on retention of title terms
  • Buyer stated to be bailee of card
  • Buyer to store card separately from his own and keep it identifiable
  • Buyer ‘licensed’ to process the card on condition that ‘new’ product be kept separate
  • Buyer at liberty to sell new product, but as agent/bailee of the seller, proceeds to be held on trust for the seller and kept separate from buyers own general proceeds
  • So far, clause seems to jump over hurdles in previous cases. Final clause was fatal:
    Buyer was under obligation to pay for card within 30 days

Hart looked at outcome of contract – if it operated according to its literal terms.

Buyer remained under obligation to pay for card. Unclear commercially what would be in it for the buyer. So, the most compelling of ht edefinition of this interest is that it arises by way of charge and is going to be void as wont have been registered as such.

65
Q

Loss of Ownership by Operation of Law ?

A

Wherever a party makes uses of anothers goods in some forms of process so that it modifies them in some way, then any ownership interest is destroyed and ownership of new product vests in party that went through manufacturing process.

Under general property law the extensive modification of property will, more often than not, destroy any ownership interest in that property. This rule of law tends to locate ownership of any new product in the party producing that product, in this context the buyer.

66
Q

Borden v Scottish timber 1981

A

Borden supplied resin which was mixed with sawdust and woodchips to produce chipboard. The resin was supplied on retention of title terms. It was used in the manufacture of the chipboard.

“When the resin was incorporated in the chipboard the resin ceased to exist, the plaintiff’s title to the resin became meaningless … [because] The chipboard belonged to the defendants.” Per Bridge LJ at 36.

–>So extensive modification or alteration tends to destroy ownership of the product. Any clause giving ownership of the product to the seller has to arise by way of grant back.

67
Q

Hendy Lennox (products clauses)

A

The diesel engines could be removed from the generators and therefore no title had passed to the buyer.

Did ownership pass?

No because could be removed, disassembled from generator so title to the new product/engines themselves hadn’t passed to the operator/buyer.

68
Q

Pongakawa Sawmill Ltd v New Zealand Forest Products Ltd [1992] 3 NZLR 304

A

Logs were sawn into planks.

Question was if modification of carboard to boxes was extensive enough for rule of law to operate? Does sawing logs into planks alter the essential nature?

No. Retention of title clause allowed seller to reclaim the planks.

69
Q

Modelboard Ltd v Outer Box Ltd, supra

A

The cardboard was made into boxes. The cardboard was folded and stamped. Any rights in the new product had to arise by way of a grant by the buyer, as did alter.

70
Q

CKE Engineering Ltd (in administration) [2007] BCC 975

A

The company galvanised metal into molten zinc obtained from various suppliers of zinc ingots, the largest single supplier being CKE, the parent company of CKE Engineering. All the zinc was sold.

Despite the zinc being melted and mixed with other zinc the court held that CKE had an interest in the bulk (in proportion to its contribution). It was regarded as essentially the same material as that supplied (it could easily be reduced into solid zinc again, though this would be less pure and therefore less valuable).

Title hadn’t passed as though would be less valuable, could restore to original form. Court considered that all suppliers of the zinc retained interest in the bulk in proportion to interest in it.

71
Q

Clough Mill v Martin, supra

A

CA accepted and acknowledged that rule of property law wasn’t mandatory, open to parties to exclude operation by terms of the contract itself:

“Now it is no doubt true that, where A’s material is lawfully used by B to create new goods, whether or not B incorporates other materials of his own, the property in the new goods will generally vest in B, at least where the goods are not reducible to the original materials … but it is difficult to see why, if parties agree that the property in the goods shall vest in A, that agreement should not be given effect to.” (per Goff LJ 119)