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Author: Nigel Cook
The Company had granted to a bank a debenture containing fixed and floating charges i.e. qualifying floating charges over its assets. An unsecured creditor had obtained a Freezing Order preventing the company from disposing of or dealing with those assets covered by the debenture. The Debenture included express power to appoint a Receiver to sell the charged assets and also to act as agent of the Chargor company. The Bank applied to the Court for an Order to vary the Freezing Order so as to allow it to appoint a Receiver.
The Court held that a secured creditor is entitled to enforce its security without a variation to the Freezing Order as long as it acts in good faith and not collusively with the debtor. The Court commended the bank on its application noting that the bank would not wish to place itself in a position of aiding and abetting a breach of the Freezing Order with potentially serious consequences.
It is perhaps surprising that the bank felt the need to make this application but the clarification by the Court is helpful and removes any doubt created by the decision of the Court of Appeal in Gangway v Caledonian Park which implied that a secured creditor might be in contempt of Court.