Validity of security—key cases

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Validity of security—key cases
  • Voidable transactions
  • Undue influence
  • Execution issues
  • Capacity of the borrower
  • Further advances
  • Contractual restrictions

Validity of security—key cases

This Practice Note sets out certain key cases and associated relevant content relating to the validity of security. The cases are divided by topic area and include:

  1. Voidable transactions

  2. Undue influence

  3. Execution issues

  4. Capacity of the borrower

  5. Further advances

  6. Contractual restrictions

Voidable transactions

Names of partiesJudgment dateCase summaryRelevant content
Re MC Bacon Ltd [1990] BCLC 32430 November 1989Security given by an entity to secure its own debt is not seen as depleting the value of the security provider's assets; the security provider does not lose any value by creating security, it only gives priority to some of its liabilities over others.
To show that a transaction was a voidable preference within the meaning of section 239 of the Insolvency Act 1986 (IA 1986), it was necessary to show that the company was influenced by a desire to produce the effect set out in IA 1986, s 239(4)(b).
See Articles: Transactions at an undervalue - a new departure? (2006) 22 IL and P 222

Preference - when is the decision made? (2011) 3 CRI 75

Preferences - when is a lender safe? (2014) 7 JIBFL 477

See Practice Note: Can a liquidator or an administrator challenge or unwind transactions entered into by the company before it was wound up or entered into administration?
Hill v Spread Trustee Co Ltd [2007] 1
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