Agnew v Commissioners of Inland Revenue, more commonly referred to as Re Brumark Investments Ltd [2001] UKPC 28 is a decision of the Privy Council relating to New Zealand and UK insolvency law, concerning the taking of a security interest over a company's assets, the proper characterisation of a floating charge, and the priority of creditors in a company winding-up.

Fisher J held that uncollected debts were subject to a fixed charge, as the parties had agreed.

The Court of Appeal of New Zealand overturned this and held that the fact Brumark could collect the debts for its own account (and hence remove them from the bank's security) made it a floating charge.

Lord Millett held that Nourse LJ's approach in New Bullas based on freedom of contract was 'fundamentally mistaken'.

The process of construction required assessing what was intended, but this meant looking at the substance of the transaction, not its form.

He noted that in Siebe Gorman & Co Ltd v Barclays Bank Ltd[2] and In re Keenan Bros Ltd[3] the proceeds of the book debts were not at the free disposal of the company - that is why these were fixed charges - the proceeds were not available to the company as a source of its cash flow.

The question is whether the company's right to collect the debts and deal with their proceeds free from the security means that the charge on the uncollected debts, though described in the debenture as fixed, was nevertheless a floating charge until it crystallised by the appointment of the receivers.

First, the possibility of assigning future property in equity was confirmed in Holroyd v Marshall (1862) 10 HL Cas 191.

The principle was of general application and made it possible for future book debts to be assigned by way of security: Tailby v Official Receiver (1888) 13 App Cas 523.

He began by observing that, there being usually no need to deal with a book debt before collection, an uncollected book debt is a natural subject of a fixed charge; but once collected, the proceeds being needed for the conduct of the business, it becomes a natural subject of a floating charge.

Their Lordships regard this as unsound: one might equally well say that unsold trading stock is a suitable subject of a fixed charge.

Trading stock, that is to say goods held for sale and delivery to customers, and book debts, that is to say debts owed by customers to whom goods have been supplied or services rendered, are equally part of a trader's circulating capital.

His ability to carry on business depends upon his freedom to realise such assets by turning them into money and back again.

The question was therefore simply one of construction; unless unlawful the intention of the parties, to be gathered from the terms of the debenture, must prevail.

At the first stage it must construe the instrument of charge and seek to gather the intentions of the parties from the language they have used.

But the object at this stage of the process is not to discover whether the parties intended to create a fixed or a floating charge.

It is to ascertain the nature of the rights and obligations which the parties intended to grant each other in respect of the charged assets.

Nourse LJ rejected this, holding that it was not correct to say that the book debts could cease to be subject to the fixed charge at the will of the company; they ceased to be subject to the fixed charge because that is what the parties had agreed in advance when they entered into the debenture.

Their Lordships will return to this aspect after they have examined the other reasons given by Fisher J for following New Bullas in the present case.

In each case the commercial effect is the same: the charge holder cannot prevent the company from collecting the debts and having the free use of the proceeds.

Siebe Gorman and Re Keenan merely introduced an alternative mechanism for appropriating the proceeds to the security.

The proceeds of the debts collected by the company were no longer to be trust moneys but they were required to be paid into a blocked account with the charge holder.