Lloyd's Maritime and Commercial Law Quarterly


SECURED FINANCE TRANSACTIONS: Key Assets and Emerging Markets. Edited by Paul U Ali, Associate Professor, University of Melbourne. Globe Business Publishing London (www.gplaw books.com) (2007) viii and 237 pp. Hardback £115.
This wide-ranging book examines the use of secured finance in transactions from various angles: focusing on key asset classes and on various emerging markets, but also considering recent developments in the law of secured finance, both legal and practical. The two main parts of the book are written almost entirely by practitioners specializing in the relevant areas, and this means that the contributions are up to date, reflect current practice and enable those not familiar with the relevant areas to obtain an overview. Comment is also provided by academics on recent legal developments in secured finance and on credit derivatives as an alternative to secured finance.
The first part of the book consists of three papers on areas of particular current concern. Robin Parsons considers the characterization of fixed and floating charges in the light of the decisions in the well-known cases of Agnew v. Commissioner for Inland Revenue (Re Brumark) [2001] 2 AC 710 and Re Spectrum Plus Ltd [2005] 2 AC 680. He initially says that he considers that the widespread concern among lawyers that charges which have been regarded as effective fixed security will be recharacterized as floating is misconceived. However, it is clear from his analysis of the application of the principles from these two cases to assets other than book debts that, in his view, many transactions will have to be redrafted to enable the chargee to have sufficient control for the charge to be fixed. This detailed and comprehensive analysis will be extremely useful to those advising on what is required to create effective fixed security, although some of his conclusions seem particularly cautious. For example, he takes the view that any right to substitute charged assets leads to the charge being characterized as floating (for a slightly more optimistic view see H Beale, M Bridge, L Gullifer and E Lomnicka, The Law of Personal Property Security (2007), 4.90—4.96; also S Worthington, “Floating Charges: Use and Abuse of Doctrinal Analysis”, in J Getzler and J Payne (eds), Company Charges: Spectrum and Beyond (2006) 29–30). He is also pessimistic about the effectiveness of a “two account” structure in relation to securitization waterfalls (see N Frome and K Gibbons, “Spectrum—an End to the Conflict or the Signal for a New Campaign?”, in Getzler and Payne (eds), Company Charges: Spectrum and Beyond ).
The role of a security trustee is a particularly topical issue given the current problems with sub-prime mortgage-backed securities and collateralized debt obligations. Paul Ali points out in his paper that one possible source of redress for investors is against the security trustee, but that the security trustee’s duties are often considerably modified by the terms of the trust. The extent to which trustees’ duties can be contractually modified has been recently considered by the Law Commission (Trustee Exemption Clauses , Law Com No. 301, 2006). It has also been the subject of judicial and academic consideration (J Getzler, “Equitable Compensation and the Regulation of Fiduciary Relationships”, ch 13 of P Birks and FD Rose (eds), Restitution and Equity, vol 1: Resulting Trusts and Equitable Compensation (2000); D Hayton, “The Irreducible Core Content of Trusteeship”, in A Oakley (ed), Trends in Contemporary Trust Law (1996); M Bryan, “Contractual Modification of the Duties of a Trustee”, in S Worthington (ed), Commercial Law and Commercial Practice (2003)). Some of this is discussed by Dr Ali, although it is a shame that he was not able to comment on the recent Court of Appeal decision in Citibank


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