the ordinary course of business

‘A company has not the restraint which the fear of bankruptcy imposes on an individual trader... [For] directors of a company... little or no personal discredit falls upon them if their company fails to pay a dividend to its trade creditors. It is, therefore, all the more important that the amount and manner of borrowing by a corporation should be upon a satisfactory basis... We do not consider that a company should have any greater facility for borrowing than an individual, and we think that while a company should have unrestricted power to mortgage or charge its fixed assets and should be allowed to contract that other fixed assets substituted for those charged should become subject to the charge, and the company should also be capable of charging existing chattels and book debts or other things in action, it ought to be rendered incapable of charging after acquired chattels, or future book debts, or other property not in existence at the time of the creation of the charge.’
Minority of the Loreburn Committee, Report of the Company Law Amendment Committee (1906) Cd 3052, 28

Especially as automatic crystallisation ceased to make floating charges an effective form of priority, the next step by businesses was to contract for fixed charges over every available specific asset, and then take a floating charge over the remainder. It attempted to do this as well over book debts that a company would collect and trade with. In two early cases the courts approved this practice. In Siebe Gorman & Co Ltd v Barclays Bank Ltd[69] it was said to be done with a stipulation that the charge was "fixed" and the requirement that proceeds be paid into an account held with the lending bank. In Re New Bullas Trading Ltd[70] the Court of Appeal said that a charge could purport to be fixed over uncollected debts, but floating over the proceeds that were collected from the bank's designated account. However the courts overturned these decisions in two leading cases. In Re Brumark Investments Ltd[71] the Privy Council advised that a charge in favour of Westpac bank that purported to separate uncollected debts (where a charge was said to be fixed) and the proceeds (where the charge was said to be floating) could not be deemed separable: the distinction made no commercial sense because the only value in uncollected debts are the proceeds, and so the charge would have to be the same over both.[72] In Re Spectrum Plus Ltd,[73] the House of Lords finally decided that because the hallmark of a floating charge is that a company is free to deal with the charged assets in the ordinary course of business, any charge purported to be "fixed" over book debts kept in any account except one which a bank restricts the use of, must be in substance a floating charge. Lord Scott emphasised that this definition "reflects the mischief that the statutory intervention... was intended to meet and should ensure that preferential creditors continue to enjoy the priority that section 175 of the 1986 Act and its statutory predecessors intended them to have."[74] The decision in Re Spectrum Plus Ltd created a new debate. On the one hand, John Armour argued in response that all categories of preferential would be better off abolished, because in his view businesses would merely be able to contract around the law (even after Re Spectrum Plus Ltd) by arranging loan agreements that have the same effect as security but not in a form caught by the law (giving the examples of invoice discounting or factoring).[75] On the other hand, Roy Goode and Riz Mokal have called for the floating charge simply to be abandoned altogether, in the same way as was recommended by the Minority of the Loreburn Report in 1906.[76]
Equivalents to security
Main articles: Title retention clause and Quistclose trust
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