Re George Inglefield Ltd
| Jurisdiction | England & Wales |
| Date | 1933 |
| Court | Court of Appeal |
Company - Winding-up - Hire-purchase Agreements - Financing Agreement with Discount Company - Assignment of Goods subject to Hire-purchase Agreements - Whether Contract of Sale or Charge - Sale - Not invalid against Creditors for want of Registration -
A company carrying on a furnishing and drapery business went into voluntary liquidation in September, 1931, and its assets were insufficient for the payment of its creditors in full. A large proportion of its business consisted in letting out furniture on hire-purchase agreements, and for financing these agreements the company had entered into agreements with a discount company.
The agreements were made on a printed form, and provided that the discount company should purchase from the company (described as “the dealer”) any goods the subject of hire-purchase agreements which the dealer should offer to sell, and also the benefit of the respective hire-purchase agreements. The dealer was to submit to the discount company for their approval the hire-purchase agreement in the standard form supplied by the discount company and all information in his possession relating to the hirer. On approval, the discount company was to forward to the dealer a series of bills of exchange to be accepted by the dealer, equal in number to the instalments then payable by the hirer, and in aggregate amount to 75 per cent. of the purchase money payable. In respect of each offer accepted by the discount company the dealer was to send to that company a certificate of delivery of the goods to the hirer, and an acknowledgment of receipt thereof, an absolute assignment to the discount company of the goods and the hire-purchase agreement, a notice of the assignment signed by the dealer and addressed to the hirer (but not then to be used), and the series of bills of exchange. The purchase price on the assignment was to be the same as the total of the instalments of rent, 75 per cent. of which was to be paid forthwith, less an undisclosed amount described as a “finance charge” at the company's rate for the time being. The balance of the purchase price was to be paid by the discount company to the dealer in the form of instalments, equal in number to the instalments of rent payable by the hirer, and equal in amount to the difference between the instalment of rent and the amount of the bill delivered by the dealer. This balance was in fact retained out of the instalments of rent paid by the hirer. The dealer guaranteed to the discount company the payment by the hirer of his rent under every hire-purchase agreement assigned to the company, and by way of collateral security accepted and delivered the above-mentioned bills of exchange, the dealer retaining the difference between the instalment of rent and the bill on every payment. The discount company undertook not to give notice to the hirer of the assignment except in case of default by the hirer or the dealer. After the discount company had received payment from the hirer or the dealer in respect of all hire-purchase agreements comprised in any assignment of the full purchase price, with interest (if any) and costs, the discount company was to allow the dealer to retain all subsequent instalments of rent (if any) and other moneys, and was to account to the dealer for any sums in excess of the purchase price which it had itself received. If the hirer should fail to pay any instalments of rent due under his hire-purchase agreement within seven days after it became due or gave notice to the dealer of his intention to determine such agreement or made default in the observance of any of its terms and conditions, the dealer was forthwith to give notice to the hirer of the purchase by the discount company of the goods, the subject-matter of such agreement and the assignment to the discount company of such agreement, and to require the hirer to pay all sums thenceforth payable under such agreement to the discount company.
On a summons taken out by the liquidator claiming that all assignments of goods and hire-purchase agreements made under the above agreement were mortgages or charges of book debts and therefore void as against the creditors for non-registration under s. 79 of the Companies Act, 1929, and s. 93 of the Companies (Consolidation) Act, 1908:—
Held (reversing the decision of Eve J.), that the agreements entered into between the dealer and the discount company in the above form were for an out-and-out sale, and that the assignments made thereunder did not, therefore, require registration under either of the above sections.
SUMMONS in a winding-up.
The facts, which are more fully stated in the judgment of Eve J., were briefly as follows:—
The company, George Inglefield & Co., Ld., was incorporated in 1915 with a capital of 5000&L and carried on business as retailers of furniture and drapery goods at Dorking. In order to sell furniture on the hire-purchase system it had entered into a series of agreements with a finance company, the Industrial Discount Company, under which the goods the subject of any hire-purchase agreement were assigned, subject to and with the benefit of the hire-purchase agreement, by George Inglefield & Co., Ld., to the discount company. The assignment was expressed to be absolute, and not by way of charge; but the liquidator took out the summons asking for a declaration that all the assignments made under the general agreement or agreements between the parties were in fact charges on book debts or were otherwise within s. 79 of the Companies Act, 1929, or s. 93 of the Companies (Consolidation) Act, 1908, and not having been registered under one or other of these sections were void against the creditors in the winding-up.
The material clauses and effect of the principal agreemen are fully set forth in the judgment of the learned judge.
Clayton K.C. and Wilfrid Hunt for the liquidator. On the general construction of this document it is not an absolute assignment. No notice is to be given to the hirer except in case of his default. The discount company are precluded from making any profit out of the assignment except their finance charge, which is interest for the advance. There is a personal guarantee of the hirer, and clause 18 is a proviso for redemption. The agreement creates a charge on the future book debts of the company, and is void against the creditors. The language of clause 31 of the agreement implies that it is not a transaction of sale.
Cyril Atkinson K.C. and W. N. Stable for the Industrial Discount Company. The document is not a mere charge, but an absolute assignment. The bill of exchange to be given is only a collateral security for the payment of the instalment to the discount company. If at the end of two months the hirer returns the furniture, the bills come to an end, and the furniture becomes the property of the discount company. The object of clause 18 is to give the dealer the right to collect the instalments on his own account and not merely as agents for us. It is not an equity of redemption. The document does not create any charge. It is an out and out sale subject to a hire-purchase agreement. Future instalments payable under a hire-purchase agreement are not book debts: Manchester, Sheffield and Lincolnshire Ry. Co. v. North Central Wagon Co.F1; Helby v. MatthewsF2; Stacey v. Hill.F3 Debts do not include contingent liabilities: Ex parte KempF4; Blakey v. Trustees of Property of PendleburyF5, per Romer J. In In re IsaacsonF6 the facts and the agreement were somewhat similar to those of the present case. An assignment by way of mortgage of a piano and a hire-purchase agreement relating to the piano was impeached, and it was held as regards the piano that it was void as an unregistered bill of sale, but it was severable and good as regards the assignment of the agreement, therefore it was not wholly void. It has never been held that contingent liabilities are debts. Debts which only become payable in future are not debts at all. The case does not come within s. 79 of the Act.
Clayton K.C. in reply.
Feb. 16. EVE J. George Inglefield, Ld., was incorporated as a private company on August 13, 1915, with a capital of 5000&L in shares of 1&L each. It went into voluntary liquidation on September 24, 1931, and its assets are insufficient to pay its creditors in full.
Its business was that of drapers and furnishing and general warehousemen, and consisted largely in letting out furniture under hire-purchase agreements. In order to procure capital for the purpose of providing goods to be so let on hire the company from time to time entered into a series of agreements with the respondents, the Industrial Discount Company, Ld., and by this summons the liquidator seeks a declaration that these agreements are void as against him and the company's creditors for want of registration under s. 79 of the Companies Act, 1929, or s. 93 of the Companies (Consolidation) Act, 1908.
His case is that although these agreements may assume the appearance of being sales and absolute assignments, the transactions were in fact mortgages and charges, and to hold the contrary would be to ignore the substance and give effect to the form.
The respondents do not dispute that the substance of the transaction evidenced by the agreement must be looked at and not its mere words, but adopting the opening sentence of Lord Herschell's speech in Helby v. MatthewsF7 they maintain that “the substance must, of course, be ascertained by a consideration of the rights and obligations of the parties, to be derived from a consideration of the whole of the agreement.”
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