A lender obtained a registered fixed and floating charge to secure monies lent. Another creditor then obtained default judgment and an enforcement warrant to empty the borrower’s bank account. The question for the court was whether the lender’s floating charge over the debt gave it priority to the moneys in the solicitor’s trust account over the creditor.
The court found that the floating charge crystallised upon the borrower’s winding up and this created a security interest in favour of the lender over the moneys in the borrower’s trading account. Even though the money had moved out of the bank account and into a solicitors’ trust account– the moneys were held on trust for the lender and it did not constitute payment to the creditor for the purpose of completing the execution proceeding. The court noted that the lender’s claim to the funds was unaffected because:
A judgement creditor can only obtain what the judgment debtor can honestly give him.
The court found that the issue of a warrant, like a garnishee order, did not give the creditor any proprietary interest in the funds, only a right to recover payment and until the money is paid, no proprietary interest passes.
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