Vol 3 (2006) - Issue 1

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Fixed and Floating Charges over Book Debts - the Implications of the House of Lords' Decision in Re Spectrum Plus Limited [2005] UKHL 41, Part II

Introduction
Part I of this article, which appeared in issue [insert no.] of this publication, examined the history behind and the reasoning and implications of the House of Lords’ recent decision in Re Spectrum Plus Limited [2005] UKHL 41 in relation to the characterization of fixed and floating charges over book debts. This second part of the article, which should be read in conjunction with the first, explores the implications of the House of Lords’ decision in Re Spectrum Plus on the issue of ‘prospective overruling’.

Prospective overruling

As noted in the Case Summary which appeared in Issue 4 of this publication earlier this year, Re Spectrum Plus is the first occasion in English legal history on which their Lordships have collectively expressly considered that they would have the power to engage in prospective overruling of previous decisions in an appropriate case. Lord Nicholls of Birkenhead gave the leading Judgment on this issue, ultimately expressing the view that the House of Lords, in the exercise of its judicial function would not be trespassing outside its proper functions under the constitution if it decided in a particular case to depart from the normal principle of retrospectivity and engage in prospective overruling. Although there was some dissent regarding whether or not it would be permissible to exercise such a power in relation to questions of statutory interpretation, all of the Lordships expressly agreed with Lord Nicholls that the House would, in an appropriate case, be permitted to engage in prospective overruling.
However, Lord Nicholls considered that the situation in Re Spectrum Plus (25 years’ asserted reliance by banks and guarantors on the first instance decision of Slade J in Siebe Gorman) was ‘miles away’ from the exceptional category of cases in which prospective overruling might be appropriate. So when is such power likely to be exercised? Not unsurprisingly, no guidance was given by their Lordships as to when such a ‘wholly exceptional case’ might be considered to have arisen.