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In an important judgment in Re Brumark Investments Limited, the Privy Council upheld the concept of fixed charges on present and future debts but held that Re New Bullas Trading Limited [1994] 1 BCLC 449 had been wrongly decided. In Re New Bullas the debenture was expressed to operate as a fixed charge over uncollected book debts with the fixed charge being released and replaced by a floating charge when the book debt was paid and converted into proceeds. If a charge over debts is to be fixed there must be a real restriction on the borrower's ability to deal with debt proceeds. If the book debts are able to be collected by the company with the company being free to use the proceeds in the ordinary course of its business, then the charge takes effect as a floating change only over the debt.
Their Lordships also commented that, in the leading cases on fixed charges on book debts, the company had been required to pay debt proceeds into a designated account and had not been able to draw from that account without the lender's special permission. They said that they "would wish to make it clear that it is not enough to provide in the debenture that the account is a blocked account if it is not operated as one in fact."
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