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Lord Westbury, Giving The Lead Judgement, Stated In The Most Crucial Passage: ...

Lord Westbury, giving the lead judgement, stated in the most crucial passage:
‘If a vendor or mortgagor agree to sell or mortgage property, real or personal, of which he is not possessed at the time, and he receives the consideration for the contract, and afterwards become possessed of property answering the description in the contract, there is no doubt that a court of equity would compel him to perform the contract, and that the contract would in equity transfer the beneficial interest to the mortgagee or purchaser immediately on the property being acquired'
Pennington makes the point here that whilst Lord Westbury gave the lead judgement there was a slightly different attitude portrayed by the judgement of Lord Chelmsford, which achieved the same result but by a different manner. Lord Westbury's dicta, above, implies that a beneficial interest would be transferred in the event of specific implement in a court of equity. However, Lord Chelmsford's views were that ‘the moment the property comes into existence the agreement operates upon it' or in other words the act of acquiring subsequent property automatically creates a beneficial interest, the contract self-executes. The striking thing about the judgement is the surprising lack of rationale for why equity would allow this result, this clearly exemplifies that the courts were in effect creating new law to suit commercial interests which required the law to keep-up with the relatively newly created statutory creature; the corporation.
The effect of this decision is argued to have become a commercial reality almost immediately and earlier versions of what we would consider to be floating charges started to appear however it was not for a further 17 years and the decision of In re Colonial Trusts Corporation that the term ‘floating security' would come to be used by the courts and in the interim period the courts were not quick to entrench Holroyd. In King v. Marshall and Re British Provident Life and Fire Assurance Society, Stanley's Case the courts rejected the attempted securitisation of future property being respectively; calls to shareholder / trade debts and uncalled capital. This was not an isolated trend and there were a number of other such cases which seriously called into question the substantive effect of Holroyd.
However, the decision was followed in Re Panama, New Zealand and Australian Royal Mail Co. which built upon Holroyd but by way of distinguishing previous decisions the court concentrated on an interpretation of the wording of the debenture document. It found that a debenture which created a security over its ‘undertakings' was argued by Sir G.M. Giffard, L.J.

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