Debentures had been issued after 1 January 1901 secured by a floating charge. It was was not registered in time. The judge had permitted registration, with a proviso as contained in In re I C Johnson, and registration was completed. A compulsory winding up petition was then filed, and the company then itself resolved to wind up. Buckley J allowed the petitioning creditor to take part in an inquiry as to the priorities between the debenture holder and the unsecured creditors. In that inquiry, Joyce J gave the unsecured creditors equal priority with the registered debenture holders.
Held: The debenture holder’s appeal succeeded, though the intervention of winding up before registration created rights in all the unsecured creditors protected by the proviso.
Vaughan Williams LJ said that the registration (pursuant to the extension) meant that the debentures were ‘no longer void’, limiting the protective effect of the proviso to those who had acquired rights of, or against, the property the subject of the charge prior to registration. He said that Buckley J had expressed the matter too widely in In re Joplin Brewery if he had intended that the proviso protect unsecured creditors generally. He then referred to the dictum of Cozens-Hardy LJ in In re I C Johnson and made clear his view as to the effect of winding up: ‘Of course, that does not mean only creditors who individually have so done, [that is as Cozens-Hardy LJ in In re I C Johnson said: taken some proceedings to get a charge or security], but creditors who come within the operation and benefit of an order for winding-up giving the creditors a right to have such property administered for their benefit. That is the conclusion which I have come to in this case. I think that the intention of the Legislature, as appears by the statute itself, was, in a case where the omission to register was accidental and the extension of time was a just thing to grant, to place the debenture-holders in the same position as they would have been in if they had registered in due time. But of course the Legislature had to make provision for the rights of those who had obtained rights which existed at the time when the order for the extension of time was made. I do not think that the Legislature meant by that that an unsecured creditor, merely because he was an unsecured creditor at the time the extension order was made, should be allowed to say, ‘So far as I am concerned, that debenture which was not registered in due time, but which was registered under the order for extension, is a void debenture.’
Judges:
Vaughan Williams, Romer and Cozens-Hardy LJJ
Citations:
[1906] 2 Ch 697
Jurisdiction:
England and Wales
Citing:
Cited – Re Joplin Brewery Co Ltd ChD 1902
The applicants, owners of a solvent family business, sought to register a charge over the company’s assets out of time.
Held: Buckley J saw the application under s 15 of the 1900 Act as a similar application to the application to register out . .
Cited by:
Cited – Rehman v Chamberlain and Another ChD 6-Sep-2011
The claimant asserted as against the liquidator, a floating and registered charge over the company’s assets. The liquidator said that it had been granted within the twelve months prior to the onset of the insolvency, was caught by section 245(3)(b), . .
Lists of cited by and citing cases may be incomplete.
Insolvency, Company
Updated: 07 October 2022; Ref: scu.444535