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Marshall. However, The Story Starts Somewhat Earlier Than This With The Roman ...

Marshall. However, the story starts somewhat earlier than this with the Roman law concept of ‘Hypotheca'. The Roman's, similar to nineteenth-century England, had struggled with the constraints of the legal concepts of pledge and mortgage as the typical forms of security. However they developed their concept of ‘pignus', or pledge, so that the borrower could remain in possession of the pledged item and give the creditor a contractual right to take possession in the event that the borrower defaulted.
The hypothec was rejected by the English judiciary in the eighteenth century case of Ryalle v. Rolle. In that case the court had held that ‘If a man gives an hypotheca or pignus with a condition that, if the money is not paid at a day, the pawnee shall enjoy the goods at such a price, that is not in the nature of a pawn, but a sale'. It was felt that delivery of the item was essential to the idea of a pledge. The other type of security available was a mortgage but this required the particular assets to be identifiable and for the person to have an interest in that property. In a large corporation where assets were continually changing this was a near impossibility to achieve. Thus delivery is essential to pledge and actual and continuing ownership being essential to mortgage then preceding Holroyd there was no practically effective way of securing debt for corporations that were driving the industrial revolution.
The type of transformation that Roman Law had undergone, i.e. a modification of the concepts of pledge and mortgage, seemed unlikely because the judiciary was going through an era of extreme legal formalism, the authorities were extremely clear; both institutional writers such as Bacon and precedent in the courts made it clear that ‘title of future property would not pass at law without a new act of transfer by the grantor when it came into his possession'.
In Holroyd the facts were such that a debtor had assigned pieces of property from their mill into a trust in favour of the creditor. The purported remit of the trust was to have prospective force in that it attempted to cover any materials that might be brought onto mill which could then be used as security in addition to or substitution for the original items transferred. To modern writers this set-up will look strikingly similar to the arrangement under a floating charge. As we saw, strict law wouldn't allow this and at first instance and the first appeal the formalism of the common law was adhered to by then Lord Chancellor Lord Campbell. However, the second hearing of the appeal was after the death of Lord Campbell who was replaced as Lord Chancellor by Lord Westbury.

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