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Triple cocktails

A crinkle in the English law of security has been more or less ironed out - but don't ask for an opinion on it yet. By Christopher Stoakes.

Mention the words "Charge Card" to a banking lawyer and he or she will know immediately what you are talking about. For the last decade, the English law of security has been blighted by the Charge Card case, decided in 1986. However, in Morris v Agrichemicals (also called BCCI No 8) at the end of October, the House of Lords restated the applicable law.

In Charge Card, Millett J (the judge) indicated that a bank (B) could not take a charge over money placed with it to secure the depositor (D's) liabilities (ie, a loan) to the bank. He said that such a charge-back was "conceptually impossible". The reason he gave was that you cannot have a proprietary interest in a debt which you owe someone else (a deposit with B being, technically, a debt owed by B to D) - even though B could take a charge over a deposit by D with another bank. Millett J thought he was doing banks a favour: after all, if they could take a charge, it would have to be registered at Companies House to take effect against other creditors of D. All charges over deposits would therefore have to be registered and could be void against a liquidator if they were not.

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