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4 - The Story of the Scots Law Floating Charge: 1961 to Date
- Edited by Jonathan Hardman, University of Glasgow, Alisdair MacPherson
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- Book:
- Floating Charges in Scotland
- Published by:
- Edinburgh University Press
- Published online:
- 18 November 2022
- Print publication:
- 30 June 2022, pp 157-194
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Summary
A. INTRODUCTION
B. LEGISLATION: A BIRD's EYE VIEW
C. CONSULTATIONS AND REPORTS
(1) Introduction
(2) The consultations and reports
D. SOME PARTICULAR TOPICS
(1) The literature
(2) Enforcement – attachment – crystallisation – liquidation – receivership – administration
(3) Ranking and diligence
(4) Sharp v Thomson
(5) Publicity/registration
(a) Crystallisation
(b) The central bank exemption
(c) The strange tale of Part 2 of the 2007 Act
E. PERSONAL REFLECTIONS
A. INTRODUCTION
Three score years have passed, during which the floater has changed (one hesitates to write ‘developed’). Most of the changes have been in matters of detail, but there have been two major exceptions: enforcement, and ranking. As to the first there was the introduction of receivership by the Companies (Floating Charges and Receivers) (Scotland) Act 1972 (the 1972 Act) and its replacement, by the Enterprise Act 2002, by administration. As to the second, ranking, there have been two major changes, in 2002 and in 2020. The Enterprise Act 2002 effected: (a) a ranking downgrade, through the introduction of the ‘prescribed part’; and (b) a ranking upgrade through the abolition of Crown preference. This abolition was, however, reversed by the Finance Act 2020, so that the ranking of the floater is, from 2020, lower than it has ever been. In addition to these actual changes there have been some unimplemented changes and these too will be mentioned.
To list every actual or proposed change, however minor, would make dull reading, so what follows is selective, but, even with selection, a connected and engaging narrative is hardly possible. One of the difficulties (and not only a difficulty confronting the historian) is that the floater is not a neatly demarcated topic. It is an area of land co-owned by three neighbouring proprietors, all strong-willed, namely (in alphabetical order, so as to upset nobody) the Laird of Company Law, the Laird of Insolvency Law and the Laird of Property Law. And between this co-owned area of land and the estates of those three lairds can be found no stockproof dykes, hedges or fences.
Critics of the floater will find in this history not much of comfort; perhaps they will opine that after sixty years the floater is not much better than it was in 1961.
5 - Trusts without Equity
- from PART II - PATRIMONY AND THE SCOTTISH TRUST
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- By George L Gretton, Lord President Reid Professor of Law, University of Edinburgh.
- Edited by Remus Valsan
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- Book:
- Trusts and Patrimonies
- Published by:
- Edinburgh University Press
- Published online:
- 15 September 2017
- Print publication:
- 17 June 2015, pp 87-109
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Summary
Perhaps the greatest difficulty the civilians have in accepting the trust is caused by what I have come to regard as an English peculiarity logically detachable from the trust, namely, the distinction between the legal and the equitable estate. In Scots law, which, even if it did not invent and develop the trust for itself but took it over from England – the point is doubtful – has accepted it without inhibitions or reservations, no such distinction has ever been known. There the trustee becomes owner and the beneficiary acquires a contractual right against him.
INTRODUCTION
For the comparatist the trust is problematic. For this there are two main reasons. The first is that the slogan of modern comparative law – “compare function rather than form” – does not work for the trust. One cannot identify the function of the trust because there is no such function. The trust is functionally protean. Trusts are quasi-entails, quasi-usufructs, quasi-wills, quasi-corporations, quasi-securities over assets, schemes for collective investment, vehicles for the administration of bankruptcy, vehicles for bond issues, and so on and so forth. In software terminology, trusts are emulators. They are not even confined to private law. They can exist in public law, and can also straddle the private/public boundary.
The second reason why trusts have proved so problematic for the comparatist is that there is a widespread belief that they are a special product of the common law tradition and, in particular, of its law/equity duality, and thus intrinsically mysterious to the civilian tradition. Trusts are supposed to be an Athanasian mystery. The Hague Convention on the Recognition of Trusts tells us that “the trust, as developed in courts of equity in common law jurisdictions and adopted with some modifications in other jurisdictions, is a unique legal institution …”. The trust is unique because it is founded on the division between law and equity and the consequent division of property rights into legal and equitable. The Privy Council has said that “the distinction between the legal and the equitable estate is of the essence of the trust”.
22 - Up there in theBegriffshimmel?
- Edited by Lionel Smith, McGill University, Montréal
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- Book:
- The Worlds of the Trust
- Published online:
- 05 September 2013
- Print publication:
- 22 August 2013, pp 524-545
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Contributors
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- By Gregory S. Alexander, François Barrière, Alexandra Braun, Yaëll Emerich, Thomas P. Gallanis, Iris J. Goodwin, George Gretton, Lusina Ho, Adam Hofri-Winogradow, Rebecca Lee, Michael Lubetsky, Blandine Mallet-Bricout, Paul Matthews, Ben McFarlane, Aude Peyrot, Magda Raczynska, Robert H. Sitkoff, Lionel Smith, François du Toit, Remus Valsan, Reinout Wibier, Nurfadzilah Yahaya
- Edited by Lionel Smith, McGill University, Montréal
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- The Worlds of the Trust
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- 05 September 2013
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- 22 August 2013, pp viii-x
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9 - Fideicommissary Substitutions: Scots Law in Historical and Comparative Perspective
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- By George L Gretton, University of Edinburgh
- Edited by Kenneth Reid, University of Edinburgh, Marius de Waal, Reinhard Zimmermann, University of Regensburg
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- Book:
- Exploring the Law of Succession
- Published by:
- Edinburgh University Press
- Published online:
- 12 September 2012
- Print publication:
- 26 October 2007, pp 156-176
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Summary
INTRODUCTION
Fideicommissary substitution lies at the boundary between succession law and property law. It belongs to a European tradition that is both common and fragmented. Comparative study has been slight. Indeed, even within national systems much of the history is obscure. The present essay looks at Scots law from a comparative and historical standpoint.
The starting point itself is problematic. Does this institution even exist in Scotland? Open the books, and search the cases: you will find virtually no discussion of this institution. Ask a Scots lawyer and he will not know even what you are talking about. So the answer to the question seems to be no.
If that is right, Scotland differs from many other countries. Fideicommissary substitution survives, albeit sometimes in only a very limited form, in such countries as Germany (Vorerbschaft and Nacherbschaft), Spain (sustitución fideicomisaria), Italy (sostituzione fedecommissaria), Austria (fideikommissarische Substitution) and the Netherlands. France had it until the Revolution, when it was supposedly abolished. But in fact a weak form of it survives there, for the provisions abolishing it were narrowly construed by the case law. As for the mixed systems, Louisiana in its 1808 Code adopted the French prohibition, and has retained it. Quebec took over the pre-revolutionary French law, which was that substitution was permitted but limited in the number of generations. It survives in the Philippines. Sri Lanka received it in its Roman-Dutch form, and retained it until 1972. In South Africa it survives.
Case 4 - Basic insolvency situation
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven, Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Lionel Smith, James McGill Professor of Law, McGill University Montreal, Canada, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Book:
- Commercial Trusts in European Private Law
- Published online:
- 22 August 2009
- Print publication:
- 03 November 2005, pp 285-340
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Summary
Case
Alternative 1
Tom is a real estate agent. One of the immovables he is trying to sell is an apartment belonging to Samantha. Bill is interested in buying this apartment. To show his seriousness in entering into negotiations, Bill writes a cheque for €10,000 as a deposit, which is to be refundable if the sale does not proceed. On Tom's instructions, Bill makes the cheque payable to Tom, and Tom deposits this cheque into his own bank account. The negotiations between Samantha and Bill break off with no contract, and Bill tells Tom to refund the money. Tom, who has made no withdrawal from the bank account in the intervening time, has become insolvent. Does Bill's claim to his deposit have priority over competing claims, or is he treated as a general creditor? Would it make a difference if Tom were a practising lawyer?
Alternative 2
Tom is a travel agent. He sells tickets from various airlines to his customers. The money paid for the tickets by his customers is deposited in a bank account in Tom's name. When Tom becomes insolvent, some customers already have their tickets and some do not (and those who do not have tickets have no contractual claims against the airlines). The customers who have not been issued tickets claim back their money. The airlines claim payment from the bank account for tickets that have been issued. Tom's general creditors also claim the money in the bank account.
Case 1 - Creation and termination of the management relationship; powers of the manager
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Lionel Smith, James McGill Professor of Law, McGill University Montreal, Canada, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Commercial Trusts in European Private Law
- Published online:
- 22 August 2009
- Print publication:
- 03 November 2005, pp 103-217
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Summary
Case
John is a professional investment manager. Sam decides to make use of John's services after learning that he is a skilful manager. In John's office, Sam signs a document granting John full investment powers over a capital value of €2,000,000. The terms of the document indicate that John's powers are to be irrevocable for the term of five years. These powers enable John, inter alia, to buy and sell any kind of asset, including immovables. The document also provides that John will credit all the income produced by the managed capital to Sam's bank account. It stipulates that John will be entitled to deduct an annual fee, calculated as a percentage of the capital value of the managed assets. Sam then writes a cheque payable to John for €2,000,000.
Alternative 1
In the second year of their relationship, Sam reads in a newspaper that John is implicated in the international trafficking of stolen works of art. He does not know whether the allegations are true but he decides to terminate their relationship. He communicates this to John. He demands restitution of the managed assets, as well as a full account of the investments that have been made. Upon John's refusal, Sam sues, asking for: (a) a judicial declaration that the relationship is terminated; (b) a remedy enjoining John from entering into any further transaction related to the assets; (c) a full audit of the previous period; (d) restitution of the managed assets; and (e) damages.
Case 8 - Pensions funds
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven, Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Lionel Smith, Professor of Law, McGill University Canada, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Commercial Trusts in European Private Law
- Published online:
- 22 August 2009
- Print publication:
- 03 November 2005, pp 431-455
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Summary
Case
A pension fund for employees of a company, that provides a specified benefit upon retirement, has been running for several years. Both the employer and the employees make contributions to the fund. The managers of the fund are of the opinion that there is a surplus of funds as a result of successful investments.
a. Can the employer suspend making contributions?
b. To whom does the surplus belong?
Discussion
AUSTRIA
An employees' pension fund that provides a specified benefit upon retirement, several years after the employer and the employee have made contributions to the fund, is not a ‘pension fund’ according to the Austrian Investment Fund Act. However, Austrian private law recognises alternative concepts that meet the requirements described in Case 8. These alternatives are based on a specific statute called the Betriebspensionsgesetz (BPG). There are basically three pension fund schemes under s. 2 BPG.
The first scheme is called Pensionskasse (s. 2 Z 1 BPG). This pension scheme is an insurance solution that allows the employer to organise the insurance entity. The insurance entity has its own legal personality based on a specific statute, the Pensionskassengesetz (PKG). Both the employer and the employee pay contributions to the insurance entity on behalf of the employee. The employees can claim benefits upon retirement, regardless of whether they still have an employment contract with the same employer.
The second pension fund scheme is a direct promise pension (direkte Leistungszusage) (s. 2 Z 2 BPG).
Case 7 - Choice of law
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven, Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Lionel Smith, Professor of Law, McGill University Canada, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Commercial Trusts in European Private Law
- Published online:
- 22 August 2009
- Print publication:
- 03 November 2005, pp 406-430
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Summary
Case
Jane manages property in the interest of her client, Monica. The property is located in your country, where both Monica and Jane live and are domiciled. In their agreement they introduce a clause stating that their relationship is a trust governed by Jersey law. Litigation arises between them. Jane claims the invalidity of the trust provision of the arrangement, and claims that local law should govern the relationship. What is the result?
Discussion
AUSTRIA
Austria has not ratified the Hague Convention on the Law Applicable to Trusts and on their Recognition. Since both of the parties live and are domiciled in Austria, and the property is located there as well, the proposed relationship does not include any foreign element; this precludes the application of the Austrian conflicts law (IPRG). Therefore, the validity of the ‘choice of law clause’ between Jane and Monica is governed by the general rules of Austrian law.
Due to the contractual autonomy of the parties, the clause is legally valid and Jersey law governs the trust or fiduciary relationship. This, however, is only true as far as the default part of Austrian law is concerned; the parties cannot ‘contract out’ of the application of mandatory provisions of Austrian law. As a result, contractual autonomy permits the applicability of Jersey law regarding the contractual part of the trust, whereas the proprietary or real aspects of the relationship follow the lex rei sitae, which is Austrian law in this case.
Case 2 - Investment duties
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven, Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Commercial Trusts in European Private Law
- Published online:
- 22 August 2009
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- 03 November 2005, pp 218-246
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Summary
Case
John is a professional investment manager. Sam decides to make use of John's services after learning that he is a skilful manager. In John's office, Sam signs a document granting John full investment powers over a capital value of €2,000,000. The terms of the document indicate that John's powers are to be irrevocable for the term of five years. These powers enable John, inter alia, to buy and sell any kind of asset, including immovables. The document also provides that John will credit all the income produced by the managed capital to Sam's bank account. It stipulates that John will be entitled to deduct an annual fee, calculated as a percentage of the capital value of the managed assets. Sam then writes a cheque payable to John for €2,000,000.
Alternative 1
In the second year of their relationship, Sam learns that John has made very risky investments that have done poorly. As a result, he has lost 50 per cent of the value of the capital. Does Sam have any legal recourse?
Alternative 2
In the second year of their relationship, Sam learns that John does not use his own judgement to make any of the investment decisions. Instead John relies exclusively on the recommendations in a well-known monthly financial newsletter. Does Sam have any legal recourse?
Discussion
AUSTRIA
Alternative 1
The contract between John and Sam is to be qualified as a contract of mandate in accordance with ss. 1002 ff. ABGB.
Case 10 - Multiple debenture holders
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven, Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Lionel Smith, James McGill Professor of Law, McGill University Montreal, Canada, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Commercial Trusts in European Private Law
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- 22 August 2009
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- 03 November 2005, pp 486-504
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Summary
Case
A company, XYZ Ltd, wishes to raise money in the financial markets. It is willing and able to give real security to secure the debt. The transaction must be structured so that XYZ Ltd can issue secured debt instruments to multiple investors, in such a way that each investor holds the same kind of real security over the same assets, and so that the enforcement of the security will be practicable. How can these goals be realised?
Discussion
AUSTRIA
There exists in Austrian law an old statute which governs the transaction. This is the Gesetz vom 24. April 1874 betreffend die gemeinsame Vertretung der Rechte der Besitzer von auf Inhaber lautenden oder durch Indossament übertragbaren Teilschuldverschreibungen und die bücherliche Behandlung der für solche Teilschuldverschreibungen eingeräumten Hypothekarrechte. This statute deals with Teilschuldverschreibungen. These are bonds negotiable on the capital market, issued by the company in situations like those of Case 10.
Such bonds can be secured by a mortgage on the immovable property of the company issuing the bonds. The statute enacts special provisions for such a security. The mortgage is created by presenting a mortgage deed to the court responsible for the land register. This document deed has to be drawn up by the company issuing the bonds. The individual bondholder is not registered in the land register. Only the total amount for which the bonds are issued, the number of bonds issued and the dates at which they are to be paid are registered.
Case 9 - Collective investment schemes
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven, Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Lionel Smith, Professor of Law, McGill University Canada, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Commercial Trusts in European Private Law
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- 22 August 2009
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- 03 November 2005, pp 456-485
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Summary
Case
A financial services company wishes to launch a collective investment scheme. It hopes to choose a vehicle that will allow the free transfer of the interests of investors, and which will permit the rules governing the scheme to be changed where necessary.
What options are available to it?
Discussion
AUSTRIA
Austrian private law recognises one type of collective investment scheme, namely, investment funds that fall under the Austrian Investment Fund Act (InvFG). Austrian investment funds are open-ended funds that work on the principle of risk diversification and lend themselves to an open clientele. It is also possible to create special funds that only have a limited number of investors. All types of Austrian investment funds allow for changes of terms and conditions and for changes of investors, although there is no secondary market for trading the investment fund ‘certificates’. Under the Austrian Investment Fund Act, the investors have the right of redemption.
A change of the terms and conditions of an investment fund, under s. 22(3) InvFG, does not require the consent of the investors, but it must be made in their interest, must be approved by the supervisory board and must be published. Section 22(3) InvFG deals only with the public law of the modification.
Different supervision schemes apply for Austrian investment funds. Supervision under the InvFG includes a bank supervisor, a supervisory board, an investment company (a special bank) and the depository bank. The investment company manages the fund and makes the investment decisions.
Case 5 - Insolvency of investment manager
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven, Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Lionel Smith, Professor of Law, McGill University Canada, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Commercial Trusts in European Private Law
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- 22 August 2009
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- 03 November 2005, pp 341-368
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Summary
Case
Roberto is a professional investment manager. He manages assets in the interest of different clients, namely Simon, Rebecca and Ruth. The managed assets are bought with money transferred to him by his clients. Roberto offers different forms of services: (a) individual management services, under which he is to keep separate the position of each client; (b) participation in a collective investment scheme, whereby the assets managed for his clients are pooled and each participant in the scheme will share pro rata the returns on the collective investments; and (c) shares of an investment company (DEF Ltd) which holds investments chosen by Roberto.
One year after receiving the money from his clients, Roberto becomes personally insolvent. Which of his clients is better off: Simon, who chose option a; Rebecca, who chose option b; or Ruth, who chose option c?
Discussion
AUSTRIA
Option a
Professional investment managers, who offer the individual management services enumerated in s. 1 (1) ((19)) BWG, are not allowed to take over money from their clients. The managed assets are deposited in bank accounts in their clients' names. Professional investment managers do not carry out their services on a fiduciary basis, because they are obliged to act in the name and for the account of their clients. They are direct representatives, who are mandated and authorised by the clients to carry out specific investment services.
Case 3 - Conflict of interest
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven, Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Commercial Trusts in European Private Law
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- 22 August 2009
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- 03 November 2005, pp 247-284
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Summary
Case
Jacob is managing Esther's assets with full power to sell them. One of the assets he holds on her behalf is an undeveloped piece of land called Blackacre.
Alternative 1
While exploring investment possibilities for Esther, Jacob learns that the zoning rules for the area that includes Blackacre are likely to change in a way that will make land in that area more valuable. A month before the change is announced, Jacob uses his own money to buy Greenacre, an undeveloped piece of land in the same area. When the zoning change is announced, the value of both Blackacre and Greenacre increases by 100 per cent. When Esther becomes aware of what has happened, she seeks an amount corresponding to the increased value of Greenacre from Jacob. She claims that this increase is a wrongful gain from a transaction that created a conflict of interest and duty, since Jacob's duty involves using the information he acquires in managing Esther's assets for her benefit and not for his own gain. Will Esther's claim succeed?
Alternative 2
Jacob owns Greenacre, an undeveloped piece of land in the same area as Blackacre, in his personal capacity. Jacob sells Blackacre to Bill, a member of the zoning board responsible for the planning of the district including both Blackacre and Greenacre. The transaction is at market value.
Case 11 - Securitisation
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven, Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Lionel Smith, Professor of Law, McGill University Canada, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Commercial Trusts in European Private Law
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- 22 August 2009
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- 03 November 2005, pp 505-532
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Summary
Case
A company, ABC Ltd, lends money on the security of mortgages/hypothecs on immovables. It now wishes to raise money in the financial markets. It wants to use its portfolio of secured loans as security for the transaction. The goals will be that ABC Ltd will not itself become liable on the transaction, and moreover that investors will not be adversely affected by any subsequent insolvency of ABC Ltd. How can the transaction be structured so as to isolate the portfolio of secured loans from the general business of ABC Ltd?
Discussion
AUSTRIA
There are only a few articles on securitisation in the Austrian literature, and no court decision at all. The following remarks therefore have only a preliminary character.
In principle, Austrian law provides all the legal instruments required to structure securitisation transactions. First, it will be necessary to set up a new company, a special purpose vehicle (SPV). In a second step, ABC Ltd shall transfer its secured loans to the SPV. In exchange for them, the SPV shall pay a certain sum to ABC Ltd. To raise the money necessary for this payment, the SPV shall issue bonds to investors. If those investors are the only creditors of the SPV, then the security of the claims assigned to the SPV will also secure the investors' claims. As there is no direct relationship between the investors and ABC Ltd, this company will not be liable for the SPV's debts towards the bondholders.
Case 6 - Tracing
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- By Georg Graf, Professor of Private Law, University of Salzburg, Austria, Monika Hinteregger, Professor of Civil Law, University of Graz, Austria, Manuela Weissenbacher, Assistant to the Chair of Civil Law, University of Graz, Austria, Benoit Allemeersch, Doctoral researcher Catholic, University of Leuven, Belgium; Attorney-at-Law bar of Brussels, Belgium, Alain Verbeke, Professor of Private and Comparative Law, Catholic University of Leuven, Belgium, Merete Clausen, Attorney-at-Law, Denmark, Lionel Smith, James McGill Professor of Law, McGill University Montreal, Canada, Jarmo Tuomisto, Professor of Civil Law, University of Turku, Finland, François Barrière, Junior Professor, University of Paris II, France, Stefan Grundmann, Professor of Private Law European and International Private and Business Law, Humboldt University, Berlin, Germany, George K. Lekkas, Attorney-at-Law, Athens, Greece, Niamh Moloney, Professor of Capital Markets Law, University of Nottingham, England, Eoin O'Dell, Fellow, Trinity College, Dublin, Ireland, Antonio Gambaro, Professor of Comparative Private Law, State University of Milan, Italy, Michele Graziadei, Professor of Comparative Private Law, University of Eastern Piedmont, Italy, Steve Jacoby, Partner Kremer Associés & Clifford Chance; Lecturer, University of Luxembourg, Marielle Koppenol-Laforce, Attorney-at-Law Houthoff Buruma, NV, Amsterdam the Netherlands, Pedro Pais de Vasconcelos, Professor, University of Lisbon, Portugal, George L. Gretton, Lord President Reid Professor of Law, University of Edinburgh, Scotland, Sergio Cámara Lapuente, Professor of Civil Law, University of La Rioja, Spain, Cristina González Beilfuss, Professor of Private International Law, University of Barcelona, Spain, Torgny Håstad, Justice of the Swedish Supreme Court and formerly Professor of Private Law, Uppsala University, Sweden
- Edited by Michele Graziadei, Università degli Studi del Piemonte Orientale Amedeo Avogadro, Ugo Mattei, Università degli Studi di Torino, Italy, Lionel Smith, McGill University, Montréal
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- Commercial Trusts in European Private Law
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- 22 August 2009
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- 03 November 2005, pp 369-405
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Summary
Case
The facts are as in Case 5, except as detailed below. The following alternatives occur:
Alternative 1
Without authority, Roberto uses all of the money in Simon's account (€1,000) to buy a painting. When Simon learns of this, the market value of the painting has risen to €2,000. Roberto is still solvent. Simon wants to terminate the relationship and take the painting. Can he do this?
Alternative 2
The facts are the same as in Alternative 1. However, before Simon learns of the transaction the painting is destroyed. It is insured for its market value. By the time Simon learns of this, Roberto is personally insolvent. Simon wants to terminate the relationship and take the insurance claim. Can he do this?
Alternative 3
Without authority, Roberto buys a painting with all of the money in Simon's account (€1,000) and €1,000 of his own money. By the time Simon learns of this, the market value of the painting has fallen to €1,000 and Roberto is personally insolvent. Simon wants to terminate the relationship and take the painting. Can he do this?
Alternative 4
Roberto has an unsecured overdraft facility (revolving loan facility/line of credit) with his bank, in his personal capacity. He borrows €100,000 from this facility and uses it to buy a piece of land in his personal capacity. Later, without authority, he uses all of the money in Simon's account (€100,000) to pay the debt he owes to the bank.
Contents
- Edited by Eva-Maria Kieninger, Bayerische-Julius-Maximilians-Universität Würzburg, Germany
- Assisted by Michele Graziadei, George L. Gretton, Cornelius G. van der Merwe, Matthias E. Storme
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- Security Rights in Movable Property in European Private Law
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- 23 December 2009
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- 26 August 2004, pp vii-x
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Case 3 - Machinery supplied to be used by the buyer
- Edited by Eva-Maria Kieninger, Bayerische-Julius-Maximilians-Universität Würzburg, Germany
- Assisted by Michele Graziadei, George L. Gretton, Cornelius G. van der Merwe, Matthias E. Storme
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- Security Rights in Movable Property in European Private Law
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Summary
(Simple retention of title)
A sells a machine to B. The contract contains the following clause: ‘Title to the machine is reserved until the seller has received full payment.’ Before the price has been paid, C, who is an unsecured creditor of B, executes against the machine. In the alternative, B goes bankrupt. In either case, the machine is on B's premises.
Questions
(a) What is A's legal position?
(b) Is the clause stated above sufficient to be effective? Is there a more suitable or common wording?
(c) Do the parties have to agree on the insertion of a retention of title clause? Or could the seller stipulate one unilaterally?
(d) Is the point in time at which the parties agree that title should be reserved relevant?
(e) Do A's rights in respect of the machine depend on anything other than the inclusion of a reservation of title clause in the agreement: for example, compliance with certain formalities (e.g. agreement in writing, agreement having a ‘certain date’) or registration? Are such clauses efficacious if they are simply contained in the seller's general conditions of sale?
Case 11 - Bank loan for a wholesaler
- Edited by Eva-Maria Kieninger, Bayerische-Julius-Maximilians-Universität Würzburg, Germany
- Assisted by Michele Graziadei, George L. Gretton, Cornelius G. van der Merwe, Matthias E. Storme
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- Security Rights in Movable Property in European Private Law
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- 23 December 2009
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- 26 August 2004, pp 480-530
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Summary
(Security right in revolving stock-in-trade – security ownership – enterprise charge – actio Pauliana)
A, a financial institution, intends to make a loan to B, who is starting a business as a wholesaler of motorcar accessories. To avoid personal liability, B sets up a private limited company (C). A wishes to take a security right over the stock that will be present on C's premises. The nature of the business is such that the stock will continuously be sold and replaced. A does not, therefore, wish its security right to be confined to present stock; rather it wishes it to include the stock that will be purchased by C in the future.
Questions
(a) Is such an arrangement possible? Describe its main features and prerequisites, including any requirements that may exist as to form, registration, separate storage, etc.
(b) What rights would such an arrangement confer on the secured party (A) in the event of C's insolvency? Or if another (unsecured) creditor tried to execute against the stock?
(c) How common are arrangements of this kind in business practice?
(d) Are there any limits in respect of the value the collateral may have in relation to the amount of the secured loan?
Table of legislation
- Edited by Eva-Maria Kieninger, Bayerische-Julius-Maximilians-Universität Würzburg, Germany
- Assisted by Michele Graziadei, George L. Gretton, Cornelius G. van der Merwe, Matthias E. Storme
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- Security Rights in Movable Property in European Private Law
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- 23 December 2009
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- 26 August 2004, pp xxii-xlviii
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