112 f r e d e r i q u e d a h a n a n d j o h n s i m p s o n

is considerable scope for the parties to structure the transaction in a manner which suits them and to agree on an arrangement which may avoid the need to notify Happyplay.

The position in the case of B’s insolvency depends on relevant insolvency rules but, provided -- as the Model envisages in article 31 -- that the charge remains valid, B’s bank would continue to have the same rights against Happyplay as it had prior to insolvency. It would have no right to sums paid by Happyplay to B or B’s administrator unless they were charged separately (e.g. by a charge over the bank account into which the payments were made). However, if B had given notice to Happyplay and Happyplay had failed to make payment as required by the notice, then B’s bank would have a claim against Happyplay.

In case 13, the facts are similar except that the claims that B wants to charge are future claims against unidentified future customers. In principle the Model Law allows a class charge over future claims generally described as long as the description is, or will be, adequate to identify the claims. The rights of B’s bank under the charge will be similar to those in the previous case and its right to collect the claims will depend on it giving notice to the debtor customers, once known, in the manner described above. Even prior to notice, the bank has a charge in the claims and therefore has priority against any unsecured creditor seeking to establish a right in the claims.

A charge of a claim under the Model is distinct from an assignment of claims, although it may share many features. Security over claims is often given by way of assignment and the Model does not prevent this continuing. However, a charge will reflect better the parties’ intention where the objective is to give security and should in many cases provide a preferable alternative.

The Model does not impose any limit on the amount of security that can be given for a claim; that is a matter for the parties to agree. However, article 33.2 provides a mechanism whereby a chargor or another chargeholder with a charge in the same asset can have the charge replaced by a charge over a deposit equal to 130 per cent of the secured debt.

Case 15 and a conclusion

Clearly case 15 is beyond the scope of a law on secured transactions, although insolvency law and general civil law should provide the right provisions to determine the rights of the parties in what is an obvious