The court held that seeking to assert title to the subsequently worked goods had the effect of creating an equitable charge, which was void for non-registration under the Companies Act.

The company began to experience financial difficulties, and on 10 August 1981 Barclays Bank appointed receivers.

The receivers challenged the clause on the basis that the power to trace title into subsequent products meant that the arrangement was effectively an equitable charge, which was void for non-registration.

The parties acknowledged that these issues had come before the courts several times, most notably in the leading cases of Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676, Re Bond Worth Ltd [1980] Ch 228 and Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25.

He held that at law the manufacturing process essentially created a new species of property, and that an attempt to trace title into that property took effect as an equitable charge, and accordingly, that provision in the contract of sale was void for non-registration under the mandatory statutory provisions applicable to company charges.