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On 5 June 2001 an extremely strong Privy Council, in an appeal from New Zealand, revisited the law on the proper characterisation of charges over a company's book debts (and when they are can properly said to be fixed, or merely floating): Agnew v IRC, just reported in [2001] 3 WLR 454.

Leaving to one side the fascinating commercial implications of Lord Millett's advice, the restitutionary question is this.

Suppose an insolvency practitioner, believing a bank's charge over receivables to be a fixed, rather than a floating charge (on the basis of the now discredited New Bullas Trading case [1994] 1 BCLC 485), pays the bank £1 million, when he should have been paying the preferential creditors (some govt debts and employees) first (under UK Insolvency Act 1986, s 40).

It seems to me that the prima facie claim based on Kleinwort Benson v Lincoln City Council/mistake of law is unanswerable. Any doubts about this? It seems defences would have to do the work. The bank would struggle to show change of position, I think. Are 'good faith purchase/debt validly discharged' and 'submission to an honest claim' (the scope of both of which defences is a matter for debate) robust enough to preclude such claims?

The question is currently preoccupying accountants, insolvency practitioners and banks up and down the UK.

The issues may seem recondite to those from jurisdictions which have reformed personal property security law along US lines.

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Gerard McMeel