Company Security Interests (Consultation Paper) [2004] EWLC 176(4) (13 August 2004)

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URL: http://www.bailii.org/ew/other/EWLC/2004/176(4).html
Cite as: [2004] EWLC 176(4)

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PART 4

FINANCIAL COLLATERAL AND PROCEEDS OF LETTERS OF CREDIT

Introduction

In Part 2 we explained that in the CP we had proposed that it should be possible to perfect SIs over investment securities and bank accounts by taking 'control' of the collateral.

^[1]

^[2]

In this Part we explain in detail how our proposed scheme would work, and refer to the relevant draft regulations contained in Appendix A. The scheme is derived from the UCC (Articles 8 and 9 in their revised form). The draft regulations follow both this and the recommendations of a working group of the Uniform Law Conference of Canada, Civil Law Section, which proposed amendments to the Canadian Conference on Personal Property Security Law Model PPSA.

^[3]

^[4]

Financial collateral within the meaning of the FCAR comprises various forms of financial instrument, such as shares or bonds, and also cash held in an account. This is why this section also covers bank accounts, though the draft regulations dealing with these are separate. We think that our scheme should also cover other forms of collateral that are not financial instruments but that are held in book entry form and traded on markets: commodity contracts and commodity accounts. The UCC and the proposed Canadian scheme cover these, sometimes treating them together with investment securities as 'investment property' and sometimes separately, though the rules for the two are largely identical.

^[5]

In the UCC not all the relevant provisions dealing with investment property are contained in Revised Article 9; many provisions on investment securities, and particularly some crucial definitions, are in Article 8 (Investment Securities).

^[6]

^[7]

^[8]

We have found each of these documents to be of great assistance. The provisions seem to us, for the most part, to represent current understandings and good practice on this side of the Atlantic; they also seem to fit well with the provisions of the FCAR. Therefore we have followed the 'UCC model' fairly closely, departing from it only where we are aware that the legal context or practices in this country are different, and therefore different rules may be appropriate.

Types of investment securities

4.6

In what follows we will refer to different ways in which investment securities

^[9]

First, securities may be represented by a certificate. Certificated securities may be in 'bearer form' (a type of negotiable instrument) or 'registered form' (where entitlement depends on being entered on the issuer's books as the holder).

4.8

Secondly, particularly in the UK, many shares are wholly dematerialised ('uncertificated'). All settlement takes place electronically (through CREST) and those entitled are entered as the holders on the operator's and the issuer's registers. For UK companies it is the entry in the operator's (CREST) register that confers legal title.

^[10]

A person who holds a bearer certificate, a person who holds a share certificate and is registered on the issuer's books and a person who is entered as the holder on the issuer's register (or, for UK shares, the register of the settlement system (CREST)

^[11]

directly

indirectly

^[12]

There are thus three classes of investment security:

(1) certificated negotiable securities;

(2) certificated, registered (non-negotiable) securities; and

(3) uncertificated securities.

4.11

Each class of security may be held by the investor directly or indirectly. Examples of indirect holding occur when shares are certificated but immobilised; or if the intermediary who holds for the investor, or an intermediary higher up the chain, is registered as the holder in the issuer's or operator's register, or holds a negotiable security, but holds for the person (the investor or a lower-tier intermediary) shown in its books as the entitlement holder.

4.12

We will see that the scheme is not confined to investment securities. Other forms of property, in particular commodities and commodity contracts, may also be held indirectly and are included.

^[13]

^[14]

^[15]

The UCC also applies its notion of 'perfection by control' to the proceeds of letters of credit. At the end of this Part we provisionally suggest that we should do likewise.

Basic principles

4.14

Four basic ideas underlie the UCC model that we provisionally recommend our scheme should follow. We explain each in turn.

'Control' means a right to realise or appropriate the collateral

4.15

The first is that a secured party, or with investment property an outright purchaser, is treated as having sufficient 'control' to perfect its SI if it has taken all the steps that it reasonably can to give itself the right to realise the collateral, or to appropriate it in order to satisfy the secured obligation, without any further act on the part of the debtor or any court order.

^[16]

There are three ways for the secured party to gain this type of control:

(1) To have the financial collateral transferred into its own name.

(2) Where the collateral is represented by a certificate, to take possession of the certificate and any signed forms that are necessary to enable him to transfer the security. (This is termed 'delivery'.)

(3) Where the financial collateral is held on the books of an issuer or of an intermediary, or is in a bank account, to enter a 'control agreement' with the issuer or intermediary that it will accept its instructions to transfer or redeem the collateral without further reference to the debtor.

It should be noted that more than one secured party may have 'control' in the third sense.

4.17

When a party has gained control in one of these ways it will usually

^[17]

^[18]

^[19]

It may not be necessary to follow the UCC model of control precisely. Below we will discuss a situation involving certificated securities in which it might be thought that the SI will inevitably be obvious to enquirers even though the secured party does not have an immediate power of disposal.

^[20]

^[21]

Control trumps other forms of perfection

The second principle is that a secured party who perfects by control will take priority over an SI perfected by any other method (or that is unperfected).

^[22]

^[23]

The policy underlying this rule is to enable financial collateral to be taken without the need to search or make enquiries about other possible SIs.

A bona fide purchaser for value who takes control of investment property in such a way that no one else can also have control of it takes free of other interests

4.21

Under the UCC this third principle is expressed in two rules, one for certificated or uncertificated securities and the other for indirectly held investments. A secured party or other purchaser

^[24]

^[25]

^[26]

The aim of these provisions is to protect the transferability of investment property. A secured party or other purchaser who obtains control or, in the case of a security entitlement, has it transferred into its own name, for value and without knowledge of competing interests, has an indisputable title like that of a holder in due course. (Bank accounts do not have or need the same transferability

^[27]

On their face, the rules seem to apply different standards according to the nature of the investment property. Under the third principle, stated above, a secured party who obtains control will take free of interests not perfected by control. What about other interests that have been protected by control, for example by an earlier secured party reaching a control agreement with the issuer or intermediary? It is not immediately obvious why a later secured party who enters a control agreement with the issuer of uncertificated securities should take free of even a similar agreement made previously by the issuer with the earlier secured party,

^[28]

When this is applied to English law, however, the rule does make sense because CREST, which acts as the agent for issuers of uncertificated securities, will only enter what amounts to a control agreement (placing the securities into an escrow account controlled by the secured party) with one person at a time. Thus a party cannot obtain control if someone else has already done so. Nor under the CREST rules will any party be able to have securities that are held in escrow transferred into its name without the consent of the party who controls the escrow account.

^[29]

^[30]

As between SIs perfected by control, priority is in the order in which control is obtained

The fourth principle is that, as between SIs perfected by control, priority will (unless agreed otherwise) be in the order that the secured parties obtained control. In practice, for the reasons just explained, this rule will apply only to indirectly held investment property and to bank accounts.

4.26

There are exceptions to this rule. Under Revised Article 9, an SI taken by an investment intermediary over an entitlement or account with itself will have priority over SIs in favour of other parties.

^[31]

Provisional recommendation on basic principles

The four basic principles that we have identified as underlying the concept of control that is used in the UCC to govern the perfection and priority of SIs in investment property make taking control into a powerful mechanism. A party with control is in a very favourable position both to enforce its SI and in relation to other interests.

4.28

The principles underlying the UCC seem to us, from discussion that we have held with experts in this country, to reflect the common understanding of what is meant by 'control' under the FCAR and also good practice and reasonable commercial expectations here.

4.29

We provisionally recommend that our scheme for financial collateral should adopt as basic principles that:

(1) a secured party, or with investment property an outright buyer, should be treated as having sufficient 'control' to perfect its SI if it has taken all the steps that it reasonably can to give itself the right to realise the collateral, or to appropriate it in order to satisfy the secured obligation, without any further act on the part of the debtor or any court order;^[32]

(2) a secured party who perfects by control should take priority over an SI perfected by any other method (or that is unperfected);

(3) a bona fide purchaser for value who takes control of investment property in such a way that no one else can also have control of it should take free of other SIs; and

(4) otherwise, as between SIs perfected by control, priority should (unless agreed otherwise) be in the order that the secured parties obtained control.

Investment property

We now turn to the details of the rules on investment property. Bank accounts will be dealt with later.

^[33]

^[34]

Definition of investment property

There is a series of interlinked definitions. Unless otherwise stated these will be found in DR 2. The first is 'investment property' itself. This covers a 'security, whether certificated or uncertificated' (typically, shares and bonds), 'security entitlement', 'securities account', 'commodity contract' and 'commodity account'. Each element of that definition is also defined.

4.32

'Security' is defined broadly to cover both shares and obligations that are 'represented by a certificate in bearer or registered form', and those

the transfer of which may be registered in books maintained for that purpose by or on behalf of the issuer, or, where the primary record of entitlement to the asset as against the issuer is the register of the operator of a settlement system, on the operator's register… and…

…which - (i) is, or is of a type, dealt in or traded on securities exchanges or securities markets, or (ii) is a medium for investment and by its terms expressly provides that it is a security governed by these Regulations.

The definition used in the draft regulations is taken from the UCC.^[35] It would be possible to substitute the definition of 'financial instrument' used in the FCAR if that were thought to be more appropriate because of its familiarity; the two appear to us to cover the same ground.^[36]

Thus 'a security, whether certificated or uncertificated' includes 'certificated securities' that are represented by a certificate and 'uncertificated securities' that are represented by an entry on an issuer's or operator's register. In effect, for our purposes we are talking here of directly held securities; indirectly held securities will be held as 'security entitlements'

^[37]

'Securities accounts' are accounts with intermediaries in which 'financial assets' (which include securities) are credited, the intermediary maintaining the account treating the person for whom the account is maintained (the 'entitlement holder') as entitled to exercise the rights that constitute the financial asset.

^[38]

'Financial assets' is a wider class than investment property. It includes (i) securities; (ii) obligations and shares that are traded or used as a medium for investment and (iii) anything else held in a securities account if the intermediary and holder have agreed to treat it as a financial asset. Class (ii) and, by definition, class (iii) are investment property for our purposes only when held in a securities account. The definition of financial assets is included to make it clear that investment property is not limited to securities.

^[39]

But for the reference to a 'securities account', the definition of 'financial asset' would be wide enough to cover commodity contracts and commodity accounts, but these are separately defined for the reasons explained earlier.

^[40]

^[41]

We provisionally recommend the definitions explained in the paragraphs shown of:

(1) investment property (para 4.31);

(2) security (para 4.32);

(3) securities accounts (para 4.34); and

(4) financial assets (para 4.35).

Investment securities

'Control'

4.38

We have explained that, for investment property,

^[42]

Control is not only relevant to secured parties. Under the fourth of the general principles described above, a buyer of investment property who has taken control of it will often take free of any other SI. For this reason the draft regulations refer to a 'purchaser' taking control rather than a secured party doing so.

^[43]

Certificated securities

Certificated securities in bearer form

If the certificated security is in bearer form, a person has control of it if it merely has possession of the certificate.

^[44]

^[45]

The UCC scheme however seems to go slightly beyond preserving what we currently understand by 'negotiability' in English law. The special characteristic of negotiable instruments that is relevant here is that the holder in due course takes free of any defect in title of its transferor. A holder is only 'in due course' if it gives value (which would be the case in the situations we are considering) and takes without notice of the defect. We will see that the UCC applies this rule to buyers;

^[46]

^[47]

Certificated securities in registered form

If the certificated security is in registered form, the secured party has two methods of perfecting by control. One is to be registered with the issuer as the holder.

^[48]

^[49]

^[50]

At this point the UCC scheme contains a complication that we may need to replicate in our scheme. A secured party who takes delivery of the certificate but without a signed transfer form is treated as having perfected, but not by control. Perfection by taking delivery will mean that the SI will be effective in the event of the debtor's insolvency. Moreover, there is an explicit rule, creating an exception to the normal 'first to file or perfect' rule, to the effect that an SI over a certificated investment security in registered form which is perfected in this way (that is, by taking delivery of the certificate without obtaining the signed transfer form) will have priority over conflicting SIs perfected by any method other than control.

^[51]

The answer seems to be that this is an application of the UCC's principle that a secured party should be treated as having control only when it has done all it can to put itself into a position to dispose of the securities without any further proceedings:

It will be noted that we have followed the UCC and the Canadian model in referring to the secured party taking 'delivery' of the certificate rather than 'obtaining possession' of it. In most cases a person who takes delivery is simply one who obtains possession, either itself or through a third person who holds the certificate on its behalf. This sounds like using two words where one would do, and we were tempted to try to simplify the draft regulations by referring only to 'obtaining possession'. However we now think that is necessary to use a concept akin to what the UCC terms 'delivery' of a certificated security in registered form in order to avoid a difficulty that arises when a certificate comes into the possession of a securities intermediary.

4.46

The difficulty arises because a person who is the holder of a registered, certificated security (in the words of the relevant sections, a purchaser) may deliver the certificate to a securities intermediary for either of two purposes. One is so that the intermediary may re-register itself as the holder so that it can, for example, deal with the security. In this case the 'purchaser' now merely has an indirect holding – a security entitlement. The other is for safekeeping; the purchaser is to remain the direct holder. The UCC is careful to provide that when a certificated security comes into the possession of a securities intermediary who holds it for the purchaser, the latter has 'control' only if the certificate is still in the purchaser's name and has not been endorsed over to the intermediary (or in blank)

^[56]

The UCC also uses the word 'delivery' to describe the transfer of an uncertificated security into the name of the purchaser or someone who holds on its behalf. The Official Comments to the UCC note that this seems 'a bit solecistic' but follows routine usage.

^[57]

^[58]

Do consultees agree that it is unnecessary for the draft regulation dealing with control to refer to someone 'holding on behalf of' the purchaser?

Uncertificated securities

Uncertificated securities held through CREST

4.49

As we explained earlier, title to uncertificated securities in UK companies depends on the entry in the register maintained by CREST. A secured party may take control of an uncertificated security of this kind by having the security transferred into its own name

^[59]

^[60]

Uncertificated securities where title depends on the issuer's register

Title to uncertificated securities issued by companies outside the UK may depend on registration of the holder in the issuer's register. Since a company registered in England and Wales might own such shares, and SIs over them will need to be perfected under our scheme,

^[61]

^[62]

Securities held through an intermediary

With indirectly held securities there are two methods by which the secured party (or a buyer) may obtain control. The first is, again, to have the security entitlement transferred into its name.

^[63]

^[64]

The requirement that the intermediary must have agreed to the arrangement before there will be control may go further than is required by current law. It will be recalled that under the FCAR, 'control' is not defined. Under current law it seems that there are three ways in which a creditor may perfect a security over indirectly held investments. One is by an agreement between debtor, intermediary and creditor that the security entitlement will be transferred into the name of the creditor (a novation; this is the equivalent of our first method). Secondly, without the entitlement being nominally transferred, the intermediary may agree to hold for the creditor (an 'attornment').

^[65]

^[66]

^[67]

The reason that the UCC requires an agreement between the intermediary and the secured party is to ensure that the intermediary has agreed to accept the secured party's instructions to transfer or dispose of the security entitlement if necessary. Thus the secured party has taken all the steps that it reasonably can to give itself the right to realise the collateral, or to appropriate it in order to satisfy the secured obligation, without any further act on the part of the debtor or any court order, as required by the first of the principles underlying the UCC.

^[68]

^[69]

Do consultees agree that an agreement between the intermediary and the secured party, rather than simply a notice of assignment, should be a condition of 'control' and its consequences?

Security taken by intermediaries

4.55

It will frequently happen that an intermediary lends money to a client to purchase investment securities that are then held as an entry in the institution's own books, and are subject to an SI in the intermediary's favour. Many intermediaries are also ready to advance funds to their clients for other purposes against the security of the client's account. This is an efficient way to borrow at least in the short term and we do not wish to put any impediment in its way. In any event there is no need to require filing in order to alert enquirers. If the intermediary volunteers information or is required by the debtor to give it, the intermediary has an obvious interest in informing the enquirer of its own interest, since if it was asked to give information and failed to mention its own SI, the intermediary might be estopped from enforcing its interest. Thus the intermediary's SI is treated as perfected by control.

^[70]

Securities accounts

With indirectly held securities, the control may be over a particular entitlement;

^[71]

^[72]

(1) The attachment of an SI in a securities account is also attachment of an SI in the security entitlements carried in the securities account.^[73]

(2) Perfection of an SI in a securities account also perfects an SI in the security entitlements carried in the securities account.^[74]

(3) A person who has control of all security entitlements held in a securities account has control over the securities account.^[75]

Control of investment securities: a summary

We provisionally recommend that with investment securities, a secured party or other purchaser will have control:

(1) With a certificated security in bearer form, if it takes possession of the certificate;

(2) With a certificated security which is in registered form if it:

(a) takes delivery of the certificate with a signed transfer form made out to him or in blank, or

(b) is registered with the issuer as the holder;

(3) With an uncertificated security if:

(a) in systems in which it is entry in the register of the operator of the settlement system that determines legal title, either-

(i) the purchaser is entered in the register of the operator as the holder, or

(ii) the operator, on the instructions of the registered holder, has placed the security into a sub-account in the holder's own name but has given the purchaser a power of attorney over the security, or

(b) in systems in which it is entry in the register of the issuer that determines legal title, either –

(i) the purchaser is entered in the register of the issuer as the holder, or

(ii) the issuer has entered into a control agreement with the purchaser;

(4) With a security entitlement, if it-

(a) becomes the entitlement holder; or

(b) has entered into a control agreement with the intermediary; or

(c) is the entitlement holder's own securities intermediary, to whom the entitlement holder has granted an SI.

Control over a securities account amounts to control over the security entitlements carried in the securities account.

Disclosure of the control agreement

4.58

The existence of a control agreement is information that is confidential to the client and that the intermediary would normally refuse to disclose. However a subsequent potential lender may reasonably require a confirmation from the intermediary as to what, if any, control agreements already exist in relation to the account. For consultation purposes we have included a provision to that effect in the draft regulations.

^[76]

We ask whether the issuer or intermediary should be obliged to disclose what control agreements exist if required to do so by the registered holder or entitlement holder.

Security given by intermediaries

It can also happen that an intermediary creates an SI in favour of a third party over security entitlements. (It should do this, of course, only with the client's consent, or with entitlements that it holds 'in excess' in the sense that they do not represent holdings of its own clients but are held for itself.) As when dealing with any other debtor, the secured party may require that it becomes the entitlement holder. However, in this case the UCC permits an alternative. An SI in investment property created by a securities intermediary or by a broker is 'automatically perfected' on attachment.

^[77]

We understand that the two methods of perfection are designed to reflect two different market practices. The secured party taking an SI from an intermediary may require what the UCC refers to as a 'hard pledge' – for example, that the entitlements are placed into a special pledge account. That would be a form of 'control'. Alternatively, the secured party may rely simply on an agreement that it can treat the investment securities as its own when necessary. This is referred to as a 'soft pledge' and there is 'automatic' perfection without control or filing.

^[78]

^[79]

We provisionally recommend that an SI in investment property created by a securities intermediary is treated as perfected when it attaches, without further steps being required.

^[80]

Debtor may retain right to deal with security entitlement

In the case of indirectly held securities, if the secured party makes a control agreement with the intermediary, it has control whether or not the entitlement holder retains the right to deal with the entitlement.

^[81]

When we first learned of this provision of the UCC,

^[82]

We provisionally recommend that a secured party may have control of indirectly held securities whether or not the entitlement holder retains the right to deal with the entitlement.

4.65

The UCC applies the same rule to control agreements with the issuer of uncertificated securities.

^[83]

Security agreement in writing

We have explained that, unlike the other schemes, our proposals do not require that a security agreement be in writing. With indirectly held securities, since the interests being transferred will always be equitable, arguably a signed writing would be currently required by the Law of Property Act 1925, section 53(1)(c) but, in cases covered by the FCAR section 53(1)(c) is disapplied and we have recommended that it be disapplied in any case covered by our scheme.

^[84]

The disapplication of section 53(1)(c) by the FCAR has the result that where the collateral-provider and taker are both non-natural persons, no signature is required, but it seems that an unsigned writing is still needed. Article 3(2) of the FCD states that its prohibition on formality, referred to above, is without prejudice to the FCD's application to financial collateral 'only once it has been provided and if that provision can be evidenced in writing and where the financial collateral arrangement can be evidenced in writing or in a legally equivalent manner'. We do not find this easy to interpret; it is not clear whether this imposes a requirement of writing, either as to the control or as to the security agreement, or merely allows Member States to require one. But in any event the FCAR disapply section 53(1)(c) only when there are 'security' or 'title-transfer' financial collateral arrangements, and each of these is defined in terms that require the arrangement to be 'evidenced in writing',

^[85]

^[86]

Therefore we provisionally recommend that control over uncertificated securities or indirectly held securities (that is, those covered by the FCAR) should not be effective to perfect an SI unless the security agreement is evidenced in writing.

^[87]

Right of use/on-pledging

We understand that it is common for a secured party who takes security over investment property to 'on-pledge'; that is, to use the collateral to create further SIs. This is certainly true of a 'repo';

^[88]

^[89]

(a) If a security financial collateral arrangement provides for the collateral taker to use and dispose of any financial collateral provided under the arrangement, as the owner of it, the collateral taker may do so in accordance with the terms of the agreement.

(b) Revised Article 9 provides that a secured party who has possession or control of collateral may create an SI in it.^[90] At least in relation to investment property^[91] we think it would be sensible to have a similar provision but one that explicitly allows the secured party to dispose of the collateral if that has been agreed between the parties.^[92] We provisionally recommend that a secured party that has control of investment property should have the right to create a further SI in it and, if agreed, to sell it.^[93]

An on-pledge will normally result in the 'on-pledgee' being given 'control', for example, by the intermediary entering the 'on-pledgee' in its records as the entitlement holder, or an intermediary accepting a control agreement. It follows that the first secured party (the 'on-pledgor') will no longer have control in the normal sense. This is why it is provided that an SI that is perfected by control will remain perfected even though the secured party itself relinquishes control, until such time as the debtor recovers the equivalent of control – that is, gets back the certificate, is registered with the issuer or is entered once more as entitled to the security.

^[94]

We provisionally recommend that an SI that is perfected by control should remain perfected even though the secured party itself relinquishes control, until such time as the debtor recovers the equivalent of control.

Priority as between competing SIs over investment securities

Control trumps other forms of perfection

The general rule is that an SI perfected by control has priority over any other SI (that is, an unperfected one or one perfected by some other means).

^[95]

^[96]

^[97]

Rules of priority for competing SIs over investment securities where both the SIs are perfected by control

As mentioned above, more than one secured party may have control over a security entitlement with an intermediary because the intermediary has made two 'control agreements'. The UCC provides that priority is in order of control.

^[98]

^[99]

Protected purchasers

As we explained earlier, under the UCC scheme a purchaser (who of course includes a secured party) who takes control by having the security or security entitlement transferred into its own name, for value and without knowledge of competing interests, has an indisputable title like that of a holder in due course.

^[100]

^[101]

^[102]

We provisionally recommend that a secured party

^[103]

who takes control of a certificated or uncertificated security or, in the case of a security entitlement, has the entitlement transferred into its own name, for value and without knowledge that the sale or acquisition constitutes a breach of the security agreement creating or providing for a competing SI, should take free of that SI.

SIs created in favour of intermediaries

Article 9 contains an exception to the general rule of priority according to date of control: an SI held by an intermediary in an entitlement or account maintained by the intermediary has priority over any other SI over the same assets.

^[104]

^[105]

^[106]

Do consultees agree that an SI held by an intermediary in an entitlement or account maintained by the intermediary should have priority over any other SI over the same assets?

SIs created by intermediaries

4.76

We saw earlier that an SI created by an intermediary over investment securities is treated as automatically perfected. It is conceivable that the intermediary might create more than one such SI, and the UCC has a priority rule for this case: they rank equally.

^[107]

We provisionally recommend that where competing SIs granted by securities intermediaries are perfected otherwise than by control they should rank equally.

^[108]

Buyers of investment securities

Under the general rules of our scheme, a buyer of assets that are subject to a perfected SI will normally take subject to it unless the disposition free of the SI was authorised or one of the exceptions applies (for example, the buyer of goods sold in the ordinary course of business). Thus a buyer will take subject to the perfected SI; the SI will have priority over a subsequent SI. This will apply to SIs perfected by control in the same way as to those perfected by other means. However, in order to preserve the ready transferability of investment securities the systems

^[109]

^[110]

UCC Section 8-302 deals with directly held securities. It provides that a purchaser of a certificated or uncertificated security acquires all rights in the security that the transferor had or had power to transfer (and that a purchaser of a limited interest acquires rights only to the extent of its limited interest).

Purchasers of security entitlements are dealt with by Sections 8-501 and 8-502.

^[116]

^[117]

^[118]

Thus a buyer of investment securities who takes control of a directly held investment, or who gets a security entitlement transferred into its own name, will normally be able to be confident that it will take free of any SI over it. This ensures the ready transferability of investment property. We have therefore followed the UCC approach.

^[119]

We provisionally recommend that a buyer who takes control of a certificated or uncertificated security or, in the case of a security entitlement, has the entitlement transferred into its own name, for value and without knowledge that the sale or acquisition constitutes a breach of a security agreement creating or providing for a competing SI, should take free of that SI.

Temporary perfection of SIs over certificated securities

4.82

Under the UCC, where a security is certificated, an SI is treated as temporarily perfected, without filing or taking possession,

^[120]

^[121]

We ask whether the draft regulations should include a provision to the effect that where a security is certificated, an SI is treated as temporarily perfected, without filing or taking possession, for 20 days, provided that new value was given.

The 'broker's lien'

4.84

A broker has a general lien over share certificates until the client pays up.

So that consultees can see in detail how the UCC provision works, we have included it in the draft regulations.

^[125]

^[126]

Do consultees think that it is necessary or desirable for the scheme we propose to include an automatic SI in favour of a securities intermediary who has credited the entitlement holder's account before receiving payment?

Commodities

4.88

We have noted that commodity contracts are also a form of investment property that may be held by intermediaries; and that to this extent they are within the scheme. They are frequently referred to separately in the UCC and Canadian schemes and we have preserved this although it may be possible to treat them simply as a form of indirectly held investment property.

^[127]

Thus in DR 2 there are definitions of commodity contract (a commodity futures contract, a commodity futures option or other similar contract

^[128]

^[129]

There are, in addition, rules on attachment,

We would welcome views on whether commodity contracts and commodity accounts should be treated separately, as in the North American schemes and the current version of the draft regulations, or should simply be brought within the definition of a financial asset. They would thus be covered by the rules governing SIs over what is currently termed a 'security entitlement'. (It would be possible to change the terminology to refer, for example, to an 'investment property entitlement'.)

4.92

We provisionally recommend that the scheme for SIs over investment property should cover commodity contracts and commodity accounts. We ask whether these should be treated separately, as in the draft regulations, or should simply be brought within the definition of a financial asset and thus within the rules governing SIs over what is currently termed a 'security entitlement'.

Bank accounts

4.93

We explained earlier that cash kept in a bank account is a form of financial collateral within the meaning of the FCD and the FCAR.

4.94

As we explained in the CP,

^[134]

^[135]

^[136]

Earlier versions of UCC Article 9 did not allow for perfection of security over bank accounts. Revised Article 9 now allows for the creation of SIs over bank accounts (termed 'deposit accounts'), but this can take place only if the secured party (which may include the bank itself) has 'control' over the account.

^[137]

In the CP we suggested that we should take a similar approach, so that an SI over a bank account could be perfected only by control.

^[138]

Why include bank accounts within the scheme?

There are a number of reasons for including SIs over bank accounts within our scheme for notice-filing and extending the notion of 'perfection by control' to bank accounts.

4.98

The starting point is that we think it important to facilitate the creation of SIs over bank accounts. For some companies cash in bank accounts constitutes an important form of asset. There are, for instance, many companies in the financial services sector that place large cash sums in bank accounts overnight. These accounts are a valuable form of collateral against which the company may wish to borrow.

4.99

One possible source of loans is the bank with which the account is maintained. Until recently it was unclear whether a bank was able to take a charge over an account with itself, since the account (when in credit) is no more than a debt owed by the bank to the customer, and in order to protect its loan it has had to rely either on rights of set-off or on some kind of flawed-asset arrangement.

^[139]

^[140]

Third parties may also be prepared to lend against the security of cash held by a company in a bank account. It is true, as has been said to us, that often the bank itself will be a major creditor of the company and may have 'first call' on the account, so that there will be nothing in the account for anyone else. However, we understand that many companies do have funds in their bank accounts that exceed any sums they owe the bank. This cash might form simply one part of a company's assets that are subject to a general SI in favour of a third party, or the third party may be looking specifically to the bank account as collateral.

4.101

The question then arises of what steps should be required to create and to perfect an SI over a bank account. We deal first with SIs created by an agreement solely between the company and a secured party other than the bank, whether as part of a general SI over the debtor company's property or specifically relating to the bank account. Then we consider SIs where there is an agreement between the company, the bank and (where the secured party is not the bank itself but a third person) the secured party. We refer to the tri-partite agreements by the phrase used in the UCC, 'control agreements'.

SIs created without the agreement of the bank

4.102

We have said that, in the light of responses to our CP, we now think that it should be possible to take an SI over the bank account - for example, as part of a general SI over the company's property - without it being necessary to make an agreement to that effect with the bank as well as the debtor.

4.103

The question whether such an SI should have to be perfected by filing, or should be effective without filing, is more difficult. It was suggested to us that registration should not be necessary. It was argued that if SIs over bank accounts were to be left outside our scheme altogether, then priority over bank accounts would continue to be governed by the rule in Dearle v Hall.

^[141]

However, we think it would be unsatisfactory in three respects. First, it would be confusing to exclude bank accounts but no other assets

^[142]

Dearle v Hall

We provisionally recommend that SIs created over a bank account should in principle be within the proposed scheme of notice-filing (though filing would not necessarily be required in all cases) and priority of SIs.

SIs where there is a 'control' agreement

4.106

The next question is whether special provision should be made for SIs that, either when they were created or subsequently, are the subject of a control agreement between the company, the bank and (where the secured party is not the bank itself but a third person) the secured party. It has been suggested to us that no special provision for bank accounts is needed: filing should always be required. However, it is neither possible nor, we think, desirable to require filing in all cases.

4.107

To require filing is not possible because the FCD applies to bank accounts as much as it does to investment property held in the books of intermediaries. Thus where the secured party has taken 'possession or control' of the account, further formalities cannot be required.

^[143]

To require filing for all SIs over bank accounts is in any event not desirable. First, to require perfection by filing would mean that no secured party (whether the bank or a third party in agreement with the bank) could take an SI over an account without first searching; next, if it found on the register any financing statement covering a bank account, checking its coverage and possibly negotiating a subordination agreement; and lastly itself filing. That would be inconsistent with the aim of reducing impediments to financial transactions, expressed in the recital to the FCD.

^[144]

^[145]

It is true that if SIs over bank accounts may be perfected by 'control', unsecured creditors and (more realistically) credit rating agencies will find it less easy to discover them than if all SIs over bank accounts had to be perfected by filing. This is one of the situations in which the aim of providing publicity for SIs that will not be readily apparent has to be - indeed, by the adoption of the FCD, already has been - subordinated to the need to maintain the efficiency of the financial market. Moreover, charges over bank accounts are not currently registrable at all, so our proposals will not make things worse. In fact they make it somewhat easier for credit rating agencies to discover the existence of SIs over bank accounts, since (if our earlier proposal is accepted) those made without the bank's agreement will have to be perfected by filing. Moreover, if the company is seriously concerned to maintain or improve its credit rating, it may be prepared to authorise its bank to reveal to the credit rating agency the information it has about SIs over the company's bank accounts. The credit rating agency will be able to have confidence that there are no SIs other than those revealed by the bank or filed.

4.110

Thus we consider that there is a strong case for extending the notion of perfection by control, and its associated rule of priority, to encompass SIs over bank accounts, whether in favour of the bank itself or a third party creditor. We provisionally recommend that SIs created over bank accounts should be brought within the provision for perfection by control and the associated priority rules.

Basic principles

4.111

We set out earlier four basic principles that seem to us to underlie the UCC provisions on control over investment property. Three of them – (1) 'Control' means a right to realise or appropriate the collateral; (2) Control trumps other forms of perfection; and (3) As between SIs perfected by control, priority by order in which control obtained – seem to apply equally to control over bank accounts.

4.112

The fourth – (4) A bona fide purchaser for value who takes control of investment property in such a way that no one else can also have control of it takes free of other interests – applies in a way that is modified to the context. We will see that a secured party who becomes the account holder has stronger rights than one who merely enters a control agreement with the bank.

^[146]

^[147]

The scheme for bank accounts in detail

Definitions

'Bank account' is defined in the draft regulations as a deposit held on a person's behalf by a bank (but it does not include either investment property or a monetary obligation evidenced by an instrument). A 'bank' means the Bank of England and others authorised to accept deposits.

^[148]

We were told that on occasions investment intermediaries will maintain entitlements to sums of cash on their books (for example, after an entitlement has been sold and before the proceeds are reinvested) and that these should be covered by the rules for investment property. Preliminary further enquiries suggested that though the securities account might show a cash balance, that would normally be held in a separate account, possibly with a private bank in the same group as the broker or other intermediary.

^[149]

What amounts to control

It is possible that under current law a secured party will have 'control' over a bank account if it has merely given notice to the bank that the debtor has assigned the account to it.

Therefore in cases where the secured party is a third party, we think that either the secured party must 'become the account holder'

^[154]

^[155]

^[156]

Where the secured party is the bank at which the account is held, we think that the SI should be treated as perfected without any further steps being required.

^[157]

It will not matter that the debtor retains the right to dispose of funds in the bank account.

^[158]

^[159]

We provisionally recommend that a secured party should be able to perfect an SI over a bank account by 'control', by:

(1) becoming the account holder; or

(2) entering an agreement with the debtor and the bank that the bank will accept directions from the secured party without further reference to the debtor; or

(3) where the secured party is the bank at which the account is held, without any further steps being required.

There may be perfection by control even though the debtor retains the right to dispose of funds in the account.

Bank's agreement required for control

4.120

As 'control' of a bank account requires either an agreement that the bank may follow directions from the secured party as to the disposition of funds in the account without further reference to the debtor, or that the secured party 'becomes a customer' of the bank, it follows that the bank's consent is essential. The bank cannot be required to enter a control agreement even if the customer so instructs.

^[160]

^[161]

Disclosure of the control agreement

The existence of a control agreement is information that is confidential to the customer and that the bank would normally refuse to disclose. However a subsequent potential lender may reasonably require a confirmation from the bank as to what, if any, control agreements already exist in relation to the account. For consultation purposes we have included a provision that the bank should disclose this information if required to do so by the debtor.

^[162]

We ask whether a bank that has entered a control agreement with a secured party should have to disclose it to a third party if required to do so by the customer/debtor.

Priority

In accordance with the general rule for SIs perfected by control,

^[163]

^[164]

Under Revised Article 9, an SI perfected by control will also have priority over a claim to funds in the account as proceeds of collateral subject to some other SI. It will be recalled that if the SI over the other collateral was perfected, there will be an SI over the cash proceeds of that collateral so long as they remain as cash.

Priority between SIs perfected by control

^[169]

^[170]

^[171]

It is also conceivable that there may be a contest between two secured parties each of whom has a control agreement with the bank.

We provisionally recommend that as between competing SIs over a bank account:

(1) an SI perfected by control should take priority over one perfected by other means;

(2) as between SIs perfected by control, priority should depend on the date of control, except that where one of the secured parties is the bank itself, the bank should have priority unless the other secured party has become the account holder.

Transferability of funds

4.127

It is of course important that the transferability of money or funds drawn from the account should not be impeded, and we have already noted in Part 3 the protection given to transferees of money and other negotiable collateral.

^[177]

We note that in relation to holders of money and recipients of fund transfers from a bank account, the protection given by Revised Article 9 differs from that provided by our draft regulation.

Should a transferee be protected:

(1) unless it did not give value or it knew that the transfer was in breach of the security agreement, or, alternatively,

(2) whether or not it gave value or had knowledge, unless it colluded with the debtor?

Bank's right of set-off

4.130

The bank should, unless agreed otherwise, continue to have its normal rights to raise against the secured party defences and set-offs that it has against the debtor.

^[182]

^[183]

^[184]

We provisionally recommend that the existence of a control agreement with a third party secured party should not prevent the bank exercising defences and set-offs that it has against the debtor, but it should not be able to raise or exercise a right of set-off that it has against the debtor against a secured party who has taken control by becoming the customer of the bank.

Bank's obligations to debtor

Under the UCC, unless agreed otherwise, the bank will continue to have its normal obligations to the debtor, for example, to honour the debtor's instructions, despite the perfection of the SI by control.

^[185]

We ask whether consultees consider it necessary or desirable to include a provision in the draft regulations providing that, unless agreed otherwise, the bank will continue to have its normal obligations to the debtor despite an SI in the bank account perfected by control.

Proceeds of letters of credit

Background

4.133

The proceeds of letters of credit are not financial collateral in the sense in which that phrase is usually used. We deal with them in this Part simply because under Revised Article 9 the notion of perfection by control is applied also to SIs over 'letter-of-credit rights'. When a debtor assigns a chose in action either by way of security or outright, and the chose in action is not represented by a document,

^[186]

Under the UCC there are two major exceptions to this principle, both involving types of chose in action where any intending secured party or buyer is likely to check with the debtor. The first, for bank accounts, we have dealt with. The second is for what the UCC calls 'letter-of-credit rights'.

^[187]

[A] right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The term does not include the right of a beneficiary to demand payment or performance under a letter of credit.^[188]

Under the UCC, SIs over these may also be perfected by 'control'. We will see that this means that the issuing or confirming bank has agreed to pay the proceeds of the letter of credit to the secured party.

4.136

The UCC also treats this type of chose in action differently from most others: Article 9 does not apply to outright sales of letter-of-credit rights. This is because the Article applies to sales of 'accounts,…payment intangibles, or promissory notes' and letter-of-credit rights are not within the definition of either account or payment intangible.

^[189]

^[190]

A letter of credit is often a way of ensuring performance of another obligation owed by the party who opens the letter of credit – for example, the buyer's obligation to pay for the goods shipped. If the buyer's obligation is assigned, so normally will be the right to the proceeds of the letter of credit.

4.138

It is necessary to distinguish between transfers of the letter of credit and assignments of the proceeds. If the letter of credit itself is transferred, then the transferee rather than the original beneficiary will be entitled to present the documents necessary to obtain payment, and to demand the payment. If the proceeds are assigned, the original beneficiary is still the party to present the documents and who is entitled to demand that payment be made,

The letter-of-credit rights are what the UCC terms a 'supporting obligation'. In Part 3 we provisionally recommended that, when a right to payment is supported by a letter of credit, and an SI attaches to the right, an SI over the proceeds of the letter of credit should arise and attach automatically. Perfection of the SI in the monetary obligation would also perfect the SI in the proceeds of the letter of credit.

^[195]

The Revised Article 9 approach to letter-of-credit rights

Under Revised Article 9, an SI over letter-of-credit rights can be perfected as a 'supporting obligation' or by 'control'. In addition, an SI over letter-of-credit rights may be perfected on a temporary basis where it represents the proceeds of another form of original collateral.

^[196]

^[197]

Control

If the beneficiary of a letter of credit assigns its right to the proceeds of the letter of credit, that is, the sum payable by the issuing bank or the confirming bank, by way of security, and the secured party obtains the bank's consent to the assignment, the SI over the letter-of-credit rights is perfected by control.

^[198]

^[199]

These provisions seem to serve two purposes. First, it is possible that the assignee of the proceeds of the letter of credit has not perfected its SI over the principal obligation by filing, but has merely obtained the bank's agreement to the assignment of the proceeds. Under these provisions the SI over the proceeds will be perfected by the assignee's 'control' of the proceeds. Secondly, a principal obligation supported by a letter of credit might be assigned more than once. Although the second assignment may (because of the order of filing or other form of perfection) be junior, it is possible that the junior secured party will contact the bank and get its agreement that the proceeds of the letter of credit should be paid to it, whereas the senior might not have chosen to do this. In such a case the 'junior' secured party will gain priority. This is said in the Official Comments to the UCC to represent international practice.

^[200]

In accordance with the general rule, an SI over letter-of-credit rights that is perfected by control takes priority over one that is not.

^[201]

^[202]

Perfection as proceeds

In this case there is a partial exception to the rule that an SI over letter-of-credit rights must be perfected by 'control'.

Should we adopt the Article 9 notion of control over letter-of-credit rights?

On this point the underlying English law seems to differ from that of the US. In English law the bank need not consent to an assignment: a legal assignment requires notice to the debtor but not its consent.

^[208]

Dearle v Hall

^[209]

Other than that the bank's consent is not required, how in practice does the UCC rule differ from current English law? Under the rule in Dearle v Hall the order of priority will normally be governed by the order in which competing secured parties gave notice to the debtor. That seems very like the UCC rule. However there is one difference. Under the rule in Dearle v Hall a subsequent secured party cannot gain priority by being the first to notify the debtor if when it took its assignment it knew of the prior assignment.

^[210]

That seems to make the UCC rule rather more certain in its operation, and might justify bringing letter-of-credit rights within the 'control' scheme.

4.148

What other possibilities are there?

(1) One would be to allow perfection of an SI over letter-of-credit rights as supporting obligations but not to introduce 'control' as a method of perfection for this type of collateral. This would mean that the priority of an SI over letter-of-credit rights perfected by filing would depend simply on the priority of the SI over the principal obligation.

(2) Another one would be to allow perfection of SIs over letter-of-credit rights as supporting obligations or by control, and that 'control' trumps other methods, but to say that merely giving notice of the assignment to the bank amounts to control.

(3) A third would be simply to leave letter-of-credit rights outside our scheme altogether, so that the priority of competing SIs over letter-of-credit rights would continued to be governed by Dearle v Hall.

We do not think that option (1) above would be a sensible solution. It does not seem to us to produce results that a financier will reasonably expect. Nor do we favour option (3). That would mean, for example, that letter-of-credit rights might be subject to old-style 'floating' charges. Moreover, the scheme generally, and in particular Part 5 dealing with the statement of rights and remedies, would not apply to letter-of-credit rights. This would prevent the law affecting SIs over letter-of-credit rights being uniform with the rest. Therefore we think we should include them in the scheme.

4.149

We are tempted by option (2), since it seems to leave more of our present law intact. However, we suspect that the UCC, by giving priority to a party who has obtained the bank's agreement, comes closer to what is thought of as good practice in the UK. Therefore, the draft regulations include similar provisions to the UCC relating to control of letter-of-credit rights, together with associated priority rules, for the purposes of consultation. However, they refer to 'the proceeds of a letter of credit' rather than using the term 'letter-of-credit right'. We have followed the UCC approach to requiring the bank's consent to the assignment for the purposes of control. We would welcome views.

4.150

Do consultees agree that:

(1) an SI over the proceeds of a letter of credit should be regarded as perfected by control if the SP has obtained the bank's agreement to the assignment,^[211] and

(2) an SI over the proceeds of a letter of credit that is perfected by control should take priority over one that is not, and that SIs perfected by control should rank according to priority in time of obtaining control?

Ý
Ü Þ

Note 1    See above, para 2.138.     [Back]

Note 2    SI 2003 No 3226, which implement Directive 2002/47 EC of 6 June 2002 on financial collateral arrangements.    [Back]

Note 3    The working group’s report was in response to a proposal by the Canadian Securities Administrators (CSA) of a draft Uniform Securities Transfer Act (USTA) and proposed amendments to the Ontario PPSA and the Alberta PPSA (as representative of the CCPPSL Act in force in all common law jurisdictions other than Yukon and Ontario). The working group comments on the draft prepared by the CSA Task Force, and makes some counter-proposals. A consultation paper, Proposal for a Modernized Uniform Law in Canada Governing the Holding, Transfer and Pledging of Securities, and revised consultative draft of USTA were published in May 2004. The documents are available on the website of the Ontario Securities Commission: http://www.osc.gov.on.ca/HotTopics/ht_usta_index.jsp#expanded.    [Back]

Note 4    In New Zealand and Saskatchewan, perfection of SIs over indirectly held investment securities is by an extended notion of possession. Possession is defined as covering the taking of physical possession of a certificate or the recording of the interest of the person in the records of the issuer or intermediary, as the case may be: NZPPSA, s 18; SPPSA, s 2(5). The priority is the same as that given to buyers of documentary intangibles: that is, the purchaser (whether a subsequent secured party or buyer) will gain priority by taking control only if it gave value and acquired the investment security without (actual) knowledge of the SI. If the purchaser acquired the investment security under a transaction entered into in the ordinary course of the transferor’s business, the purchaser will take free unless it knows that the transaction is in breach of the security agreement. We think the ‘control agreement’ and the priority rules of the UCC scheme (see in particular below, paras 4.18 and 4.46-4.47) are an improvement on this and therefore we have not adopted the NZPPSA/SPPSA approach.    [Back]

Note 5    For an exception, see below, para 4.90.    [Back]

Note 6    1994 Revision.    [Back]

Note 7    The Financial Markets and Law Committee has established a working group to consider the need for legislation on indirectly held investment securities. The working group has recently publishedProperty Interests in Investment Securities: Analysis of the need for and nature of legislation relating to property interests in indirectly held investment securities, with a statement of principles for an investment securities statute. The report recommends enactment of a legislative scheme. The report and a number of background papers are available from the Financial Markets and Law Committee’s website, http://www.fmlc.org. We are very grateful to the group for providing us with a copy of their draft report as well as advice.    [Back]

Note 8    The working group in fact refers to the relevant sections of the Alberta PPSA. This is very similar to the SPPSA on which we have based our draft regulations.    [Back]

Note 9    In the draft regulations we use the term ‘security’ rather than ‘investment security’.    [Back]

Note 10    Uncertificated Securities Regulations 2001, SI 2001 No 3755 (USR), reg 24(6). CREST covers Irish, Manx, Guernsey and Jersey securities. For these, the pre-2001 system still operates and legal title is transferred when the entry is made in the issuer’s register.    [Back]

Note 11    As the result of changes introduced by the USR.     [Back]

Note 12    The UCC also contemplates a person who has a bearer share depositing it with an intermediary and thereafter having a ‘security entitlement’ credited to its account in the intermediary’s books. See Official Comment to Section 8-501.    [Back]

Note 13    See further below, paras 4.88-4.92.    [Back]

Note 14    Directive 2002/47 EC of 6 June 2002 on financial collateral arrangements.    [Back]

Note 15    See paras 4.93-4.132.    [Back]

Note 16    It is worth pointing out at this stage that the notion of ‘control’ as used here and in the UCC is not the same as the ‘control’ that must be exercised by a chargee under current law if the charge is to be fixed rather than floating: compare the distinction between fixed and floating charges over book debts, see CP para 2.18 and Agnew v Commissioner of Inland Revenue [2001] 2 AC 710 (PC) and Re Spectrum Plus Ltd, National Westminster Bank plc v Spectrum Plus Ltd and others [2004] EWHC 9 (Ch); [2004] BCLC 335. As we will see below, paras 4.62-4.65, a secured party may have control in the UCC sense even though the debtor also has the right to dispose of the collateral free of the SI.    [Back]

Note 17    For exceptions see below, paras 4.49 n 60 and 4.109.    [Back]

Note 18    See CP para 4.15.    [Back]

Note 19    See above, para 2.142.    [Back]

Note 20    See below, para 4.44.    [Back]

Note 21    See below, paras 4.51-4.54.    [Back]

Note 22    Note that as between competing secured parties, knowledge of an existing SI is irrelevant; compare the position of buyers, below. This is a general feature of the UCC and PPSA priority schemes: see above, para 3.201. We are told the UCC adopted this rule ‘to protect the security of financing’.    [Back]

Note 23    For an example of automatic perfection, see below, para 4.59.    [Back]

Note 24    Thus this principle applies to buyers as well as secured parties. See further, paras 4.77-4.81.    [Back]

Note 25    See DR 2(1); UCC Section 1-201(44).    [Back]

Note 26    Consistently with the general approach of the scheme, this means actual knowledge, not constructive knowledge or notice.    [Back]

Note 27    We would welcome confirmation of our understanding of this.    [Back]

Note 28    This seems to be possible under Section 8-106(c)(2).    [Back]

Note 29    In some legal systems it is still the issuer’s register that is evidence of the holder’s right. See para 4.8 n 10 above. If a company registered in England holds shares in this way, for example, if it holds shares in a Guernsey company, the issuer may not be permitted take note of any SI: compare Companies Act 1985, s 360. Again, the secured party’s only option would be to have them transferred into its own name. This would also prevent anyone else gaining control of them.    [Back]

Note 30    The circumstances in which a purchaser should take free of some other form of ‘adverse claim’ are outside the scope of this project.    [Back]

Note 31    For the reasons see below, paras 4.55 and 4.74.    [Back]

Note 32    This is subject to the points to be discussed in paras 4.72 and 4.124 below.    [Back]

Note 33    See below, paras 4.92-4.132.    [Back]

Note 34    UCC Revised Article 9 also provides for ‘control’ over the proceeds of a letter of credit. We discuss whether we should include similar provisions below, paras 4.133-4.150.    [Back]

Note 35    Section 8-102(15).    [Back]

Note 36    FCAR, reg 3 provides that: ‘financial instruments’ means - (a) shares in companies and other securities equivalent to shares in companies; (b) bonds and other forms of instruments giving rise to or acknowledging indebtedness if these are tradeable on the capital market; and (c) any other securities which are normally dealt in and which give the right to acquire any such shares, bonds, instruments or other securities by subscription, purchase or exchange or which give rise to a cash settlement (excluding instruments of payment); and includes units of a collective investment scheme within the meaning of the Financial Services and Markets Act 2000, eligible debt securities within the meaning of the Uncertificated Securities Regulations 2001, money market instruments, claims relating to or rights in or in respect of any of the financial instruments included in this definition and any rights, privileges or benefits attached to or arising from any such financial instruments;    [Back]

Note 37    The principles developed by the Financial Markets and Law Committee’s working group (see above, para 4.4 n 7) refer to what we term a ‘security entitlement’ as ‘an interest in securities’ (pr. 2(a)); but that scheme deals only with indirectly held securities (pr. 1(a)).    [Back]

Note 38    The ‘securities account’ is in reality a shorthand way of referring to the assets held in the account; in that sense it is not an asset in itself but an SI can be taken over ‘the securities account’ so as to create an SI over the entitlements held in the account from time to time.    [Back]

Note 39    Or to ‘financial instruments’ within the meaning of the FCAR, reg 3.     [Back]

Note 40    See above, para 4.12.    [Back]

Note 41    See paras 4.88-4.92.    [Back]

Note 42    And bank accounts, see below, para 4.110.    [Back]

Note 43    DR 6.     [Back]

Note 44    DR 6(2). Section 8-106 refers to the ‘purchaser’ taking ‘delivery’. ‘Delivery’ is then defined in Section 8-301. As (with one exception that will be discussed below, para 4.46) delivery seems to mean no more than that the purchaser gets possession or is registered as the holder, this seems to add an unnecessary layer of complexity and our draft regulations use delivery only in relation to certificated securities in registered form.     [Back]

Note 45    See above, para 4.19.    [Back]

Note 46    See below, paras 4.77-4.81.    [Back]

Note 47    Para 4.72. This is an application of the general rule of the scheme: see para 4.19 n 22 above.    [Back]

Note 48    DR 6(3)(b).    [Back]

Note 49    Taking delivery in this case is simply another way of saying that the secured party has obtained possession, or that someone else has possession but holds the certificate for him: see DR 26(3). We will see that a person who obtains possession of a certificate does not always take delivery in the relevant sense: below, para 4.46.    [Back]

Note 50    DR 6(3)(a). The UCC refers to the certificate being ‘endorsed’. We understand that US share certificates commonly have a transfer form on the back of certificate itself.    [Back]

Note 51    Section 9-328(5): see Official Comment 6; WG s 35.1(3). Again this applies irrespective of SP2’s knowledge of the existing SI.    [Back]

Note 52    See above, para 4.15.    [Back]

Note 53    See above, para 4.18.    [Back]

Note 54    Gower and Davies, Principles of Modern Company Law (7th ed 2003) p 695 n 91.    [Back]

Note 55    A number of consultees pointed out that this is not a safe way of taking security because a duplicate certificate may be obtained. We do not see that this should prevent the SI from being treated as perfected by possession, and the risk seems equally great whether or not a transfer form is also demanded or delivered.    [Back]

Note 56    Section 8-301(a)(3).    [Back]

Note 57    Section 8-301, Official Comment 3.    [Back]

Note 58    DR 6(5)(a).    [Back]

Note 59    See DR 6(5)(a); compare Section 8-106(c)(1) and 8-301(b)(1).     [Back]

Note 60    See DR 6(5)(a); compare Section 8-106(c)(2), which is the nearest equivalent. (On ‘control agreements’ see further below, para 4.51.) CREST will act only on a properly authenticated dematerialised instruction (PADI); in this case the PADI is known as a TTE (Transfer To Escrow) and will mean that only the person nominated - the secured party or its nominee - may issue the instruction (a TFE – Transfer From Escrow) to release the holding from the escrow account. In the past, doubts have been expressed as to whether putting the shares in an escrow account is of itself enough to confer a proprietary interest (see CP para 2.71) but it seems to us that a security agreement could be implied from the circumstances and that there is no reason why, under the new scheme, an escrow should not amount to a security agreement. (Note that CREST will not reveal the existence of an escrow to a third party even at the registered holder’s request. We consider that this would create only a minor exception to the ‘publicity principle’. A secured party who is seriously concerned to have uncertificated shares as security can itself seek to escrow; it will then discover the existing escrow quickly enough.)    [Back]

Note 61    See above, para 2.148.    [Back]

Note 62    DR 6(5)(b).    [Back]

Note 63    DR 6(6).    [Back]

Note 64    DR 6(6) and (8). Note that a securities intermediary is required to confirm the existence of a control agreement to a third party if so directed by the entitlement holder: below, para 4.55.    [Back]

Note 65    Attornment is not often thought of as a form of perfection because in many contexts, for example, receivables financing, little is to be gained by framing a security as an attornment rather than an assignment. See F Oditah, Legal Aspects of Receivables Financing (1991) p 90; R Goode, Legal Problems of Credit and Security (3rd ed 2003) para 1.54 (p 38).    [Back]

Note 66    R Goode, Legal Problems of Credit and Security (3rd ed 2003) para 6-28 (p 224).    [Back]

Note 67    Ibid.    [Back]

Note 68    See above, para 4.15.    [Back]

Note 69    See above, para 4.18.    [Back]

Note 70    DR 6(9); compare Section 8-106(e).    [Back]

Note 71    In practice this will be no more than an entitlement to a proportion of the shares of that type held in the books of the intermediary; there will be no entitlement to particular shares.    [Back]

Note 72    See above, para 4.34 n 38.    [Back]

Note 73    DR 15(12); compare UCC Section 9-203(h); WG s 12(4).    [Back]

Note 74    DR 21(1).    [Back]

Note 75    DR 6(13).    [Back]

Note 76    DR 6(10); UCC Section 8-106(g); USTA s 34(2). CREST would not at present respond to any such enquiry even on the request of the holder.    [Back]

Note 77    Section 9-309(10).     [Back]

Note 78    See Section 9-309, Official Comment 6. We are told that this rule was adopted simply to make the market more efficient.    [Back]

Note 79    Whereas if the first SI were treated as perfected by control, it would retain priority even though the investment intermediary had failed to warn SP2 of the existence of the earlier interest.    [Back]

Note 80    See DR 21(4).    [Back]

Note 81    DR 6(6); compare UCC Section 8-106(f).    [Back]

Note 82    This goes further than the FCAR: under the FCD and the FCAR the collateral is to be regarded as in the possession or control of the collateral taker despite any right of the collateral-provider to substitute equivalent financial collateral or to withdraw excess collateral. We think such an arrangement would not prevent the charge being by a fixed charge under current law.    [Back]

Note 83    UCC Section 8-106(f).    [Back]

Note 84    DR 14(3). See above, para 3.80.    [Back]

Note 85    FCAR, reg 3.    [Back]

Note 86    Under FCAR, reg 3 it is not wholly clear whether the evidence in writing requirement refers only to the security agreement, only to the arrangement with the operator, issuer or intermediary or to both. We think reg 3 should be interpreted in the light of the FCD, art 1(5), which only requires that the financial collateral arrangement (ie, the security agreement) be evidenced in writing.    [Back]

Note 87    See DR 6(7).    [Back]

Note 88    For a discussion of ‘repos’, see CP paras 6.38-6.45.    [Back]

Note 89    Donald v Suckling (1866) 1 LRQB 585, though there may be residual doubts in some quarters: eg, J Benjamin & M Yates, Law of Global Custody (2nd ed 2002) para 4.22.    [Back]

Note 90    Section 9-207(c)(3). Further, Section 9-207(b)(4)(C) permits the secured party to use collateral of any kind ‘in the manner and to the extent agreed by the debtor.’    [Back]

Note 91    We consider the right to use other forms of collateral below, paras 5.44-5.46.    [Back]

Note 92    The Canadian proposals include such a right but it is limited: ‘not sell, create a security interest in or otherwise deal with the collateral on terms which might impair the debtor’s right to redeem it’: WG s 17.1(c). A similar limitation had been found in former Section 9-207. The CSA had proposed a right like that in Revised Section 9-207. At least in relation to investment property, which is normally fungible (or merely a right to a proportion of a particular issue), the debtor may not be at all concerned if the secured party has, for example, on-pledged the securities the debtor transferred for a greater sum or a longer period than covered by the security agreement between the debtor and the secured party; the debtor will expect the secured party to return equivalent securities. If it is willing to trust the secured party to do this we see no reason to prevent it, even if the FCAR did not dictate that the parties’ agreement must be respected.    [Back]

Note 93    See DR 17(5)(b) and (c). In Part 5 of this consultative report we discuss having a statement of rights and remedies in the draft regulations, and we explain that where collateral is in the secured party’s possession or control, in addition to having a right of use the draft regulation also provides that the secured party may hold as additional collateral any increase or profits (except money) received from the collateral. In the case of money received, the secured party must either remit it to the debtor or apply it to reduce the amount of the secured obligation. See UCC Section 9-207(c), and see below, para 5.43.    [Back]

Note 94    DR 27(2).    [Back]

Note 95    See above, para 4.19; DR 34 rule 1; compare UCC Section 9-328(1).    [Back]

Note 96    See Section 9-328(1), Official Comment 3.    [Back]

Note 97    See above, para 4.29.    [Back]

Note 98    See UCC Section 9-328(2). Because an SI perfected by control will trump one perfected only by filing, there is no need for a special rule for PMSIs over investment securities. A lender who finances the purchase of the investment security, and then takes an SI over it, can ensure priority by the simple expedient of taking control. See Section 9-328, Official Comment 2. Indeed the UCC limits PMSIs by definition to SIs over goods and software: Section 9-103. (To similar effect, WG s 1(jj) excludes investment property from its definition of PMSI. Our draft regulations do likewise: see DR 4(1)). (In fact this may not fully answer why there are no PMSIs with investment property. First, we have seen that in effect the intermediary who creates a PMSI has priority for it, and more (above, para 4.59). But what about the third party who provides the purchase-money for investment securities which are ordered through the debtor’s regular broker and placed in the debtor’s securities account, over which the purchase-money provider takes ‘control’ via a control agreement, only to find that SP1 has a control agreement already? We presume the answer to be (i) that such transactions will be rare – the broker will be as cheap a source of finance as anyone; and (ii) that the purchase-money provider should know better than to let the debtor hold the investments in its own name; the purchase-money provider should insist that the investments are in its own name, or obtain a subordination agreement with the intermediary.)    [Back]

Note 99    See above, para 4.25 and DR 34 rule 3. UCC Section 9-328(2) appears complex but this seems to be the result of repeating much of the wording of the Article that defines control, Section 8-106. We have avoided this.    [Back]

Note 100    See above, paras 3.229-3.236.    [Back]

Note 101    The question of when a purchaser should take free of other kinds of ‘adverse interests’ is outside the scope of this project.    [Back]

Note 102    See DR 32.    [Back]

Note 103    For other purchasers see below, paras 4.77-4.81.    [Back]

Note 104    UCC Section 9-328(3).    [Back]

Note 105    It is not easy to divine the purpose of the rule from the Official Comment, since in the example given the result stated would follow simply from the order in which the competing secured parties took control. It therefore does not tell us why a subsequent SI in favour of the intermediary should have priority over an SI in favour of another that was perfected by control earlier. We suspect that in part the rationale may be that the intermediary’s SI is likely to secure a loan to enable the entitlement holder to acquire the holding in the first place – in other words, to be a purchase-money interest. If this is so it follows from general principle that it should have priority. In addition, however, for a client to borrow from its intermediary against the security of its account is a quick and easy method of raising a secured loan (see above, para 4.55). That suggests that the intermediary should have priority even if the SI is not securing purchase-money. We would value advice on this point.    [Back]

Note 106    DR 34 rule 4.    [Back]

Note 107    Section 9-328(6).    [Back]

Note 108    DR 34 rule 6.    [Back]

Note 109    See also NZPPSA, s 97.    [Back]

Note 110    See above, paras 4.72-4.73.    [Back]

Note 111    UCC Section 8-302(a)-(b).    [Back]

Note 112    UCC Section 8-102(a)(1).    [Back]

Note 113    UCC Section 8-303(b).    [Back]

Note 114    Article 8 does not deal with acquisition by donees (and some others): Section 8-302, Official Comment 2.    [Back]

Note 115    UCC Section 8-303(a). On ‘control’, see above, paras 4.14-4.29.    [Back]

Note 116    The Official Comment to Section 8-502 explains the reasons for the separate but parallel provisions for indirectly held securities in Sections 8-502 and 8-510 (which deals with the case where the purchaser takes from the entitlement holder but does not become the entitlement holder).    [Back]

Note 117    This is the position as we understand it, and the draft regulations reflect this. However, we have since noticed that UCC Section 8-510 seems to give ‘protected purchaser’ status to a buyer who takes control without having the entitlement put into its own name. We will investigate the precise operation of this provision, and the draft regulations may need to be amended accordingly.    [Back]

Note 118    See also WG s 30(9) (securities) and (10)-(11) (financial assets).    [Back]

Note 119    See DR 32.    [Back]

Note 120    Or, presumably, control, though this is not mentioned.    [Back]

Note 121    Section 9-312(e).    [Back]

Note 122    Re London & Globe Finance Corpn [1902] 2 Ch 416; R Goode, Commercial Law (2nd ed 1995) p 669.    [Back]

Note 123    Section 9-206; compare WG s 12.1.     [Back]

Note 124    Section 9-309(9). This means that it will be subordinated to the interest of another secured party who takes control, see above, para 4.19.    [Back]

Note 125    See DR 16.    [Back]

Note 126    The mechanism would remain subject to the Financial Services Authority rules, see in particular CASS 2.3.2R(3), CASS 2.4.2R(3) and COB 7.8 of the FSA Handbook.    [Back]

Note 127    See above, para 4.11.    [Back]

Note 128    We would welcome advice as to whether the drafting of this particular definition is appropriate. We have retained the UCC’s phrase ‘subject to the rules of a commodity futures exchange regulated under…’. It might be more appropriate to refer to a ‘recognised investment exchange regulated under Financial Services and Markets Act 2000 (Regulated Activities) Order 2001’ (SI 2001 No 544); and possibly simply to define commodity contracts by reference to that Order, see arts 3, 83 (‘Options’) and 84 (‘Futures’). A European law definition may emerge if the proposed Directive on financial instruments markets is adopted: see Common Position (EC) No 9/2004, adopted by the Council on 8 December 2003, OJ C 060 E, 9 March 2004.    [Back]

Note 129    Again we would welcome advice on this. It might be better to refer to those who ‘are authorised and have permission to deal’.    [Back]

Note 130    DR 15(13), compare DR 15(12) for investment securities.    [Back]

Note 131    DR 21(2), compare DR 21(1).    [Back]

Note 132    DR 21(5), compare DR 21(4).    [Back]

Note 133    DR 34. Many of the paragraphs of this draft regulation apply to both investment securities and commodity contracts.    [Back]

Note 134    CP paras 2.73-2.75.    [Back]

Note 135    Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214, 225-228.    [Back]

Note 136    It may possibly be registrable as a charge over a book debt.    [Back]

Note 137    UCC Section 9-312(b)(1).    [Back]

Note 138    See CP para 5.51 n 95.    [Back]

Note 139    See CP para 6.49.    [Back]

Note 140    See above, para 4.94.    [Back]

Note 141    (1828) 3 Russ 1.    [Back]

Note 142    Save those for which there is a specialist register.    [Back]

Note 143    This means that we cannot follow the PPSA schemes as far as bank accounts are concerned. The NZPPSA specifically recognises that a bank may take an SI over an account with itself (s 17(2)) but neither scheme has any specific rules for the perfection of SIs over bank accounts. Thus, as a bank account is not a tangible item that under the common law system can be the subject of possession (see M Gedye, R Cuming and R Wood, Personal Property Securities in New Zealand (2002) para 41.4 (pp 162-164)), neither the SPPSA, s 24 (perfection by possession) nor the equivalent NZPPSA, s 41(1)(b)(ii) would apply. NZPPSA, s 18 has a special extension of the notion of possession to cover dematerialised investment securities but it does not cover a bank account.     [Back]

Note 144    See especially Recital 9.    [Back]

Note 145    Further we suspect that SIs taken by the bank itself will become increasingly common if not universal. To require all of them to be filed would be pointless.    [Back]

Note 146    See further below, para 4.124.    [Back]

Note 147    See below, para 4.125.    [Back]

Note 148    DR 2(1).    [Back]

Note 149    The holding of client’s money is subject to the Financial Services Authority rules; see CASS 4.    [Back]

Note 150    Compare the discussion of notice of assignment in respect of indirectly held investment securities, above, para 4.53.    [Back]

Note 151    See above, para 4.18.    [Back]

Note 152    We are also told that in practice giving notice of assignment is not sufficiently certain for either party – the bank may be uncertain as to its obligations after notification, while the secured party may find that the bank rejects a notice.    [Back]

Note 153    Above, paras 4.14-4.29.    [Back]

Note 154    Section 9-104 refers to the secured party becoming the ‘bank’s customer with respect to the deposit account’.    [Back]

Note 155    DR 7(3)(b).    [Back]

Note 156    DR 7(3)(a) and (4); compare UCC Section 9-104 and the provisions on investment securities, above, paras 4.51-4.53. This formulation differs slightly from what is required for a ‘control agreement’ accepted by an intermediary: the latter does not require the participation of the debtor, but it does require the debtor’s consent (see DR 6(8)), so in reality the two seem much the same.    [Back]

Note 157    DR 7(2) and DR 23(g).    [Back]

Note 158    DR 7(5). Again, compare investment securities, above, paras 4.62-4.63.    [Back]

Note 159    See above, para 4.15 n 16.    [Back]

Note 160    Section 9-342. The bank could of course give its consent in advance.    [Back]

Note 161    DR 7(6).    [Back]

Note 162    DR 7(7); compare UCC Section 9-332; compare above, para 4.58 (indirectly held investment property).    [Back]

Note 163    See above, para 4.19.    [Back]

Note 164    DR 35(1) rule 1; compare UCC Section 9-327(1). It will obviously have priority also over one that is not perfected at all.    [Back]

Note 165    See above, para 3.187.    [Back]

Note 166    This is not obvious from the text of Section 9-315 but is clearly stated in the Official Comments.     [Back]

Note 167    Section 9-332(a).    [Back]

Note 168    See DR 34 rule (1), compare Section 9-327(1).    [Back]

Note 169    Which seems an unlikely problem (compare UCC Section 9-327 Official Comment 3) but is a possibility that should be provided for.    [Back]

Note 170    This is the effect of Section 9-327(3) and (4). The position can of course be varied if a subordination agreement is made.    [Back]

Note 171    DR 35(1) rule 3.    [Back]

Note 172    Section 9-104; compare investment securities, para 4.25 above.    [Back]

Note 173    Section 9-327(2).    [Back]

Note 174    In the even less likely event of the bank and two other ‘control’ secured parties being in contest, the combination of this rule and the rules giving priority to the bank except over a ‘customer’ could produce a classic problem of circularity. If SP1 had a mere control agreement and later SP2 had become a customer of the bank, the bank would have priority over SP1, SP1 would have priority over SP2; and SP2 would have priority over the bank. However, this seems so unlikely that it is not something that concerns us.    [Back]

Note 175    By becoming a customer a secured party will be able to prevent the bank entering any further control agreements without secured party’s consent but they would not have priority in any event.    [Back]

Note 176    See above, para 4.72.    [Back]

Note 177    DR 38. See above, paras 3.229-3.236.    [Back]

Note 178    Sections 9-332(a)-(b).    [Back]

Note 179    Compare SPPSA, s 31(1)-(2).    [Back]

Note 180    R Goode, Commercial Law (2nd ed 1995) p 491.    [Back]

Note 181    R Goode, Commercial Law (2nd ed 1995) pp 499-500.    [Back]

Note 182    Compare Section 9-340(a).    [Back]

Note 183    DR 35(2); compare Section 9-340(b).    [Back]

Note 184    DR 35(2)(a); compare Section 9-340(c).    [Back]

Note 185    Section 9-341.    [Back]

Note 186    Documentary intangibles such as negotiable instruments may be the subject of possessory SIs.    [Back]

Note 187    A letter of credit is not a documentary intangible. Under English law the ‘letter’ is the right of the beneficiary to payment upon presentation of the stipulated documents, eg, the shipping documents, invoice and insurance policy; the letter notifying the beneficiary need not be presented and transferring that letter to another would not transfer any right to claim or give them the right to the proceeds. It may be that North American practice is different, as the SPPSA treats a letter of credit or advice of credit like a negotiable instrument, provided that the letter or advice states on it that it must be surrendered on claiming payment: SPPSA, s 2(1)(v)(iii) (‘instrument’): see then ss 24(1)(c) (perfection by possession) and 31(4). We have not replicated these provisions as far as letters of credit are concerned.     [Back]

Note 188    UCC Section 9-102(a)(51).    [Back]

Note 189    Nor are bank accounts, but these are not usually thought of as being sold.    [Back]

Note 190    See Section 1-201(37) (‘security interest’).    [Back]

Note 191    The assignee may present the documents as the agent of the beneficiary: R Goode, Commercial Law (2nd ed 1995) p 1023. If the letter of credit itself is to be transferred, there must be a novation under which the transferor is replaced by the transferee, at least so far as concerns that part of the credit that is transferred: ibid, p 1021. In practice the original letter of credit is returned and a new one, or new ones, issued: ibid, p 1016.     [Back]

Note 192    In practice payment will be made by a transfer to the assignee’s account.    [Back]

Note 193    In practice letters of credit are often transferable, but we are told that the transfer would not normally have a security purpose: it would usually provide a simple mechanism for the seller/beneficiary to pay its own supplier. In such a case the amount due to the supplier may be less than is due to the seller; then the credit will be transferred only in part.    [Back]

Note 194    Section 9-102(a)(51); and see also Section 9-107, Official Comment 4. There might however be cases in which the proceeds have been assigned and then the credit is transferred. Section 5-114(e) provides that in such a case the transferee’s rights prevail. We do not think we need an equivalent provision as part of our scheme. Official Comment 4 to Section 9-329 points out that a transfer might be taken by way of security. This suggests that this would not be within Article 9 but that the courts are invited to apply its provisions by analogy, so (for instance) to require the return of any surplus to the debtor. We too can leave this to the courts.    [Back]

Note 195    See above, paras 3.51-3.57.    [Back]

Note 196    Section 9-312(b)(2).    [Back]

Note 197    Sections 9-308(d) and 9-312(b)(2); and see Official Comment 4(d) to Section 9-101. At first sight, the opening words of Section 9-312(b) seem to suggest that other forms of perfection (eg, filing) may suffice when the letter-of-credit rights represents the proceeds of collateral that was subject to an SI but which has been sold. However, Section 9-315, which deals with perfection over proceeds, makes it clear that this gives only a form of temporary protection: at the end of the period the SI will become unperfected unless the secured party takes control, since that is the only permissible way of perfecting in such a case.     [Back]

Note 198    Section 9-107; Section 9-314. Unlike the case with investment securities, the SI will remain perfected by control only so long as the secured party itself has control over the letter-of-credit-rights: Section 9-314(b).    [Back]

Note 199    Section 9-329.    [Back]

Note 200    UCC Section 9-329, Official Comment 2.    [Back]

Note 201    Section 9-329(1). Note that this is subject to rule about transferees of the letter of credit (see above, para 4.139 n 194) even if the transfer is taken for a security purpose. See Official Comments 3 and 4.    [Back]

Note 202    Section 9-329(2).    [Back]

Note 203    See the opening words of Section 9-312(b).    [Back]

Note 204    Section 9-315(c).    [Back]

Note 205    Section 9-315(d).    [Back]

Note 206    The letter-of-credit rights in this type of case will not be a ‘supporting obligation’.    [Back]

Note 207    See Official Comment 4 to Section 9-107.    [Back]

Note 208    It would be possible for the bank to stipulate that the credit shall not be assignable, in which case it could insist on paying the original beneficiary. This would not prevent the assignment being effective as between the assignor and assignee; the assignor would have to claim payment and would then hold the proceeds for the assignee. See R Goode, Commercial Law (2nd ed 1995) p 1023.    [Back]

Note 209    (1828) 3 Russ 1.    [Back]

Note 210    See R Goode, Commercial Law (2nd ed 1995) p 705. Note that this rule applies even if the second assignment is a ‘legal’ assignment under the Law of Property Act 1925, s 136, as even a legal assignee takes ‘subject to equities’.    [Back]

Note 211    We have followed the UCC wording here. Given that in English law an assignment does not require the bank’s consent (compare UCC Section 5-114, above, para 4.138), perhaps it would be more appropriate to say ‘if the bank has agreed to pay the proceeds to the secured party’.    [Back]

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You are here: BAILII >> Databases >> The Law Commission >> Company Security Interests (Consultation Paper) [2004] EWLC 176(4) (13 August 2004) URL: http://www.bailii.org/ew/other/EWLC/2004/176(4).html Cite as: [2004] EWLC 176(4)